—Took the Oath.

My Lords, I beg leave to ask the Question standing in my name on the Order Paper.

My Lords, the number of people employed in manufacturing industries in Great Britain, including the self-employed, was 5·5 million in December 1983 and 5·3 million in December 1987. I have arranged for the full figures to be published in the Official Report.

My Lords, I am grateful to the Secretary of State for that Answer. Is it not a fact that there is still serious deterioration in numbers of people employed in manufacturing industries over the past 12 months, taken on an average monthly basis? Taking into account that our balance of payments for the manufacturing industries shows a deficit for the past 12 months of over £100 million each week, is that not a dangerous trend which we ought to be doing more to arrest in the interests of the economy as a whole?

My Lords, I accept that, for example, in the last six months of last year manufacturing industry showed an average decline of some 3,700 employees a month. However, between 1966 and 1974 the figure was 7,100 a month; between 1974 and 1979 the figure was 10,000 a month; between 1979 and 1983 (in the very difficult period when we were readjusting) it rose to 35,000 a month. Since then, it has, by and large, been under 6,000 a month. Indeed, averaging the period between 1966 and 1986, the average, including the difficult periods of constant and continual decline, has been 13,600 per month.

That would be serious if we were alone in the world. However, the shift in balance from manufacturing to service sectors is happening in most other industrial nations. The proportion of our citizens engaged in manufacturing as compared to service in the United Kingdom is roughly the same as that of Japan, France and Italy and is higher than that of Canada and the United States.

My Lords, as regards the effects on the balance of trade, is my noble friend in a position to say what the output per man has been over the past five years? Has that figure gone up or down?

My Lords, productivity growth in recent years has been strong. It rose by 6·3 per cent. in the three months to December 1987 compared with the corresponding figures last year. Today it is more than 40 per cent. above the 1979 level. What counts more than almost anything else is surely our degree of competitiveness.

My Lords, is the Secretary of State aware that most of the manufacturing industry in this country is north of the Watford Gap? That is another example of the North-South divide. Secondly, since this Government came into office, they have reduced drastically the major traditional industries of the North—namely, steel and coal—with a resultant increase in unemployment. In those areas where many people were employed in steel and coal industries, we now have unemployment figures of between 15 per cent. and 20 per cent. What will his new Department for Enterprise do in order to replace those basic industries with other major industries?

My Lords, whether or not major industries go to different parts of the country depends upon those industries rather more than upon my department. It is the actions of my department in past years which have contributed so much to parts of the region becoming a branch economy. Of course there are substantial manufacturing industries north of Watford Gap, because that is where the original Industrial Revolution started and where the great enterprise of our citizens made this country great. There has been and is continuing to be change. I am vastly encouraged by the resilience of those who live in the regions and by the way in which they are adapting to new technologies and new occupations. I can do no more than quote the Japanese Ambassador, who yesterday paid tribute to what our citizens can do in the North.

My Lords, is the Minister aware that one of the most encouraging trends has been the rise in the gross national product, which over the past few years has been of the order of 4 per cent. per annum?

My Lords, I think that we have to accustom ourselves to the fact that in the future the balance between industry and the service sector will not be the same as it has been in the past. What really counts is that the nation as a whole creates wealth. That we are certainly doing.

My Lords, the Secretary of State told us that there has been a great increase in productivity, which is very welcome news. Can he tell us how that productivity compares with that of our major competitors—for example, Germany and France?

My Lords, if the noble Baroness cares to put down a Question, I should be happy to supply the details. Our productivity is improving vastly. We had fallen a long way behind, and I suspect that we still have some way to catch up with Germany, although on the whole we are beginning to catch up with France and indeed show signs of overtaking them.

My Lords, despite the unemployment figures, can the noble Lord say to what extent he is now aware of shortages of specialist skills in manufacturing industry? Where are those shortages beginning to emerge, and what does he think the Government can do about it?

My Lords, unemployment is now standing at 9·2 per cent., which is somewhat below that for most of the other major industrial nations in Europe. There are considerable areas of skill shortage in our country. Over the past few years we have been taking steps to deal with those shortages. It is very much for the private sector to accept that it should be providing more training; and there is some evidence that that is now beginning to happen.

My Lords, is it not a fact that the decline of job opportunities in manufacturing industry is responsible for the very high rate of male unemployment as distinct from female unemployment? According to the latest figures, male unemployment accounts for 11·6 per cent. of the workforce compared with 7·2 per cent. for females. Should not something be done about that?

My Lords, that set of figures ignores totally the self-employed and, in doing so, unfortunately distorts the picture considerably. The number of self-employed in our land approaches 2·8 million; it could be even higher. It is not for the Government to create opportunities; it is for the Government to create the climate so that industry and the manufacturing and service sectors can expand and thus provide employment opportunities. There can be no greater evidence than the experience of the past two years to show that this has been happening.

My Lords, has the Secretary of State noticed that so far as concerns imports, far from a decline it is precisely the huge increase in manufactured imports which is pushing us into deficit?

My Lords, I am aware that our balance of payments is running at a deficit—from memory, I think, of some £2·7 billion. In many cases these deficits tend to be adjusted for the better in due course. However, the most important factor is that we are showing growth as great as, if not greater than, any other industrialised nation in the world. The British economy is doing very well; it is very strong. One sign of that strength is that we tend to import more. I hope that in the years to come we shall see the economy as a whole, including the service sector and the industrial sector, continue to grow and that we shall find the position rights itself.

My Lords, I accept and welcome the improvement as stated by the Secretary of State. But is it not a fact that if the present trend continues our manufacturing base will steadily diminish and a very adverse balance of payments will be shown for our manufacturing industry? Can the Secretary of State indicate the options available when the very lucrative revenues from North Sea oil run out in the foreseeable future?

My Lords, the industrial sector is not diminishing. It may well be that employment is declining as a result of new technology and increased productivity and efficiency. However, when I last saw the figures, industrial output was some 2½ per cent. above that for 1979 and rising strongly. I believe that that will continue to be the position. It is something of a red herring to talk about the situation when the oil revenues run out. Over the past 10 years we have achieved substantial reserves of £140 billion or £150 billion of UK net overseas investments. The dividends from that source last year alone amounted to some £5 billion, which was almost as much as the entire drop in oil proceeds when the price of oil halved.

My Lords, I beg leave to ask the Question standing in my name on the Order Paper.

My Lords, we deeply regret the need for some remand prisoners to spend long periods in unsatisfactory conditions in police cells not designed for that purpose. The police do the best they can in very difficult circumstances. We are making every effort to reduce the need for use of police cells for remand prisoners. We are also seeking to improve the unsatisfactory conditions in many local prisons and remand centres through the biggest prison building and refurbishment programme this century.

My Lords, is the Minister aware of the terrible facts of this case as disclosed at this inquest? Is he aware that here was a man of 32 years of age, charged with setting fire to a derelict building who was found dead with a sheet around his neck; that he was in police custody for 26 days during which time he was moved 16 times, once as far as Walsall in the Midlands; that he never had a full medical examination although one doctor suspected schizophrenia; that he had five days at Marylebone police station in a cell measuring eight feet by four feet, which was too narrow for him to stretch his arms; that he had no bed; and that he was not allowed out for exercise? Is the Minister aware that this constitutes a bigger crime by the state against this man than the man would have committed if he had been convicted of the crime for which he was charged?

My Lords, I am very aware that this is a most worrying and disturbing situation. However, the coroner made no criticism of Mr. Flynn's treatment at Brixton where he was medically assessed and located in the prison hospital. The prison service is considering the coroner's recommendation that prisoners admitted to prisons for medical reports should be returned to the same prison for completion of those reports after court hearings.

With regard to the Government's determination to improve prison conditions for remand prisoners, we are building new prisons. Our building programme will have provided some 22,000 new places by the mid-1990s. We are also modernising about 100 existing establishments including almost all local prisons. We are investing more resources. Expenditure on the prison service has risen by over 39 per cent. in real terms since 1978–79; and in the immediate term we are concentrating on getting every last measure of capacity out of the existing prison estate.

My Lords, can the Minister tell us when the promised bail hostels will come on stream and whether, in view of the kind of information we have had today, the Government will consider increasing the number of bail hostels to be provided?

My Lords, it is the intention of the Government to increase bail hostel places. I understand that there will be 200 new places by 1991.

My Lords, can I ask the Minister to return to the circumstances of this case? Is he aware that this is one of the most shocking examples that we have seen of what happens to an individual prisoner, convicted of no criminal offence, in the most unsatisfactory situation in which hundreds of these men are being kept in small police cells every night of the week?

Perhaps I may ask him this specific question. What form of inquiry will take place into the precise circumstances of this case by the chief inspector of prisons and the chief inspector of constabulary, given all the circumstances of this case? Is he aware that many of us find these general replies to the problems he has defined wholly unpersuasive? We want action, given the deplorable circumstances in which this man died.

My Lords, I can only stress once again the Government's very deep concern and worry over these circumstances. Of course, it is never desirable that this should happen. However, I would advise and comment on what the noble Lord has said. There is a problem here. The prison population has been growing at a quite unprecedented rate in recent years. The underlying rate of growth in the last year was over 4,500. The remand population has grown by 900 over the past 12 months. We are now therefore holding over 22,000 prisoners in local prisons and remand centres designed to hold only 15,000. In these circumstances, it is perhaps not surprising that there is some overspill into police cells of prisoners for whom there is no room in prison.

My Lords, can the noble Earl say what steps are being taken to reduce the size of the prison population? How many remand prisoners are now being held in police cells?

My Lords, we are making every effort to reduce the number of prisoners held in police cells. However, the situation is exacerbated by industrial action in some London prisons.

In answer to the noble Lord's second question, last Friday, 19th February, 1,260 prisoners were held in police cells, most of them on remand. Of these prisoners, 1,258 were locked out of prisons in the South-East. Of those, 31 were female prisoners.

My Lords, is the noble Earl aware that we have been pressing the Government on this point for over three years? During that time not only has the position not improved but it has become steadily worse. Is he aware that we are rather appalled at the reply he gave to the first Question, suggesting that building more prisons had anything whatever to do with the problem? It will have had an effect by 1995 but not in relation to this year or next year. I should like to ask the Minister to press upon his colleague in another place that the situation cannot continue, with matters not only not improving but becoming steadily worse.

My Lords, in the circumstances I can only suggest to your Lordships that I shall pass on the comments of noble Lords to my right honourable friend the Home Secretary.

My Lords, is the noble Earl aware that in a number of remand prisons—I am not speaking of police cells, but I speak from personal knowledge—young persons who have never been convicted of any offence, and are by definition innocent in this context, are held together with other remand prisoners with many convictions behind them? This causes very great moral distress and moral damage to such persons. As a matter of urgency can the noble Earl take steps to prevent that state of affairs occurring?

My Lords, I take serious note of the question by the noble and learned Lord.

My Lords, will the Minister recognise that if he wishes to see barbaric conditions for prisoners, all he needs to do is to visit Brixton, Wormwood Scrubs, Pentonville or Wandsworth Prisons? As a result of staff shortages he will see there conditions where prisoners are unable to ask for, and get, a bath or a clean shirt once a week.

My Lords, I must take note of the noble Lord's comments on this.

My Lords, does the Minister detect the feeling of absolute horror throughout this House at the facts of which I informed the House and which the Minister has in no way contradicted? Will he accept that our Government are expected to be a civilised government and the conditions in police cells, as I described to the House, are not fit for any remand prisoner? Will he therefore, as a matter of urgency, ask his right honourable friend to see that conditions are made available for remand prisoners other than those that I outlined to the House?

My Lords, I accept most readily and with great sensitivity the comments that the noble Lord has made, and indeed his suggestions.

My Lords, cannot more use be made of sentencing young offenders to compulsory community service rather than sending them to gaol?

My Lords, with respect, in these circumstances I think that is a little wide of the Question on the Order Paper.

My Lords, I beg leave to ask the Question standing in my name on the Order Paper.

My Lords, the Licensing Bill, which we debated last week on its Second Reading, contains provisions in respect of on-licensed, off-licensed and wholesale premises which strengthen the law prohibiting the sale of alcohol to people under 18. By putting greater responsibility on licensees and their staff we anticipate that it will become more difficult for young people to purchase alcohol. In addition to these changes in the law, the ministerial group under the chairmanship of the Lord President recently agreed a package of measures directed at drinking by young people generally.

My Lords, I thank my noble friend for that full and interesting Answer. Will he be good enough to tell the House why the Government have not made it an absolute offence to sell liquor to someone under 18?

My Lords, the proposed change in the law is intended to make licensees take their responsibilities seriously in this area. The Government recognise the difficulties which a licensee can face in determining beyond any doubt that a customer is over 18, particularly if that customer is intent on deceiving him. In these circumstances it would be unreasonable to penalise conscientious licensees.

My Lords, will the noble Lord agree that some television programmes encourage young people to drink? In fact in the most popular one "Coronation Street", nearly all the characters spend most of their lives in the Rover's Return. Does this not encourage young people to drink?

My Lords, I regret that I have not been to the Rover's Return but, equally I am aware that there are many other television programmes in which alcohol also appears.

My Lords, is the Minister aware that among ethnic groups there are drink-related problems? Will the Government help them in that regard by providing counselling services, because it can be a serious inner-city problem?

My Lords, the Alcohol and Research Council has been asked to undertake research into the needs of ethnic communities. The working group's report suggests that more information is needed about the matter and the ministerial group decided that it would be best to start there.

My Lords, in fairness to the average publican, how can he tell whether a person is over or under the age of 18 unless he produces a birth certificate?

My Lords, I do not believe that it would be right that the publican should produce a certificate. I believe that it would be fairly obvious if the person were of an age to drink—that is, over 18 years of age.

My Lords, is the Minister aware that the question of frequent television advertisements arises in addition to television programmes? The Government have banned cigarette and tobacco advertising; should they not consider banning alcohol advertising?

My Lords, research has been carried out into the effects of a total ban. The main evidence comes from a study undertaken following a ban on alcohol advertising in British Colombia. It showed that the ban had had no significant effect on consumption. Other research into the likely effect of bans and restrictions has reached similar conclusions.

My Lords, does the Minister agree that if supermarkets were to sell alcohol on shelves outside the main cash desk, as some already do, there would not be so great a crush and it would be easier to check on those buying the alcohol?

My Lords, I take note of what the noble Lady says about that matter.

My Lords, can the Government persuade the manufacturers of non-alcoholic lager to keep down the price and not price it so that young people cannot afford to buy it?

My Lords, with respect, I believe that that is a matter for the pricing structure of the manufacturer.

My Lords, does the noble Lord remember how many Members of your Lordships' House were guilty of drinking under age?

My Lords, I think that it would be preferable if I did not give too much thought to that question.

My Lords, I beg leave to ask the Question standing in my name on the Order Paper.

My Lords, the Government have no intention of accepting any proposals for VAT harmonisation which would extend VAT to food, gas, electricity or young children's clothing and footware.

We therefore have no plans to institute an inquiry on the lines suggested by the noble Lord.

My Lords, is the noble Lord aware that, notwithstanding what he has said, efforts will continue to be made by the commissioner concerned (the noble Lord, Lord Cockfield) to pursue this matter to the extreme? If it becomes necessary, will the noble Lord fortify himself by examining a recent publication of the Institute of Fiscal Studies which proves conclusively that the harmonisation of VAT is not a significant ingredient in the distortion of competition; that its effect on fiscal frontiers is absolutely minimal; and that the whole case is bogus?

My Lords, this is a rare, almost unique, occasion on which I find myself in total agreement with the noble Lord, Lord Bruce of Donington.

My Lords, with the leave of the House, I should like to say a word about the short debate standing in the name of the noble Lord the Leader of the Opposition, to which your Lordships have agreed to apply a five-hour time limit. It is not strictly necessary to apply a time standard this afternoon because, on the principle that the mover is allowed approximately 20 minutes and that the Minister should rise to reply not less than 25 minutes before the scheduled end of the debate, all other speeches should be limited to a strict upper limit of 18 minutes. However, if any noble Lord were to speak at greater length than that unusually generous ration, he would be doing so at the expense of later speakers, to say nothing of the rest of the House.

rose to call attention to the developing disparities in opportunity and income and to the case for policies to reduce divisions in the community; and to move for Papers.

The noble Lord said: My Lords, I beg to move the Motion standing in my name on the Order Paper. Before proceeding I should like warmly to welcome to the debate the noble Lord, Lord Jenkins of Hillhead. We are very much looking forward to hearing his speech.

I suppose that one of our defects as politicians is that we are so preoccupied with immediate events and crises that we are not left with the time to take an objective look at the way in which matters are developing in the world around us. That applies especially to the effect of government policies upon our community. We are constantly reminded by Ministers that their policies have transformed Britain and that they have achieved a great success. I am glad that one of the Ministers in the front line of that claim, the noble Lord, Lord Young of Graffham, is to speak in the debate.

Whether the claim of transformation and success is justified depends when and where one makes it and to whom one makes it. Policies cannot be called successful if they benefit some and disadvantage others. We may argue endlessly about the management of the economy; economic theories and numbers; whether interest rates should be higher; whether public expenditure could be higher; whether monetary policy could be tighter or looser; whether sterling is at the right level; or about the burden of taxation. At the end of the day economics should not merely be an intellectual argument. Economics and budgets make sense only if they are about people and the daily working lives of people throughout the length and breadth of Britain. All noble Lords present are concerned not merely with economic principles and dogma but with the kind of society resulting from the economic policies that emerge from governments. This Motion is concerned with people and the communities in which they live.

I should like to make one point about this Government. Over the past nine years Ministers, especially the Prime Minister, have talked a great deal about getting government off the backs of the people. They have scorned economic management and said that everything must be left to the free working of the market. The Government must face the fact that over the past nine years the two Chancellors of the Exchequer and the Prime Minister have actively intervened in our economic management. They have had a profound effect on the working of our economy and, therefore, on the nature of our society and the everyday lives of people in Britain.

Markets are not neutral, fair or benign. They respond to the power of demand just as, from the start, the Government have bent their policies in favour of those with the power of wealth and property.

I shall not this afternoon indulge in a detailed argument about the Government's policies. In fairness I must say that they have not always been entirely wrong. Several areas of our economy have benefited from the injection of a greater competitive spirit. Inflation here, as in the rest of the world, has been controlled with the help of greater monetary discipline. In that regard we must give credit to my noble friend Lord Callaghan, under whose administration that process began.

My purpose in the debate is to stress the overall effect on our society of the relentless, doctrinaire and, if I may suggest, authoritarian thrust towards a competitive society concerned almost wholly with material values. Ministers in the Government, for example, Mr. Hurd, the Home Secretary, and Mr. John Gummer, have been making speeches about spiritual and moral values. They have a perfect right to do so. However, they should direct their attention in the long term to the consequences of their own Government's policies upon these values. The policies have divided our nation geographically, concentrating wealth on the already prosperous South and leaving the deprived North and parts of Scotland and Wales even more neglected. Whole industries have been closed down, as we heard during Question Time. The living heart has been torn out of many communities.

Once again, the economic argument may point to the contraction or elimination of the coal, steel and shipping industries and now even of hill farming. Who knows what may follow over the next few years? However, the social and human arguments about not driving whole communities into poverty and depression point to a more compassionate approach and to managing our economy in relation to people as well as the economic doctrine about which we hear so much.

Some noble Lords opposite may argue that these divisions are exaggerated. The noble Lord, Lord Young, has told us many times about the success of Consett in the North-East. Of course, we are all delighted to hear of the developments there. But, unhappily, Consett does not reflect the general state of the North-East. I read recently the reflections of a distinguished journalist, Mr. Robert Chesshyre, on his return to this country after four years in the United States of America. He writes:

"The people of the Durham coalfield, tucked away in grimy villages where no stockbroker has ever visited, helped lay the foundation of Britain as a prosperous society. Every City whizzkid, as he climbs into his BMW and heads for dinner in a Chelsea restaurant, ought to say a prayer of gratitude to the people of such regions and to those people's forefathers: The miners' legacy is back-to-back colliery houses, a closed Co-op store and the worst health in Britain. Would today's Concorde trips to New York, Porsches for sale in Central London for £83,000, cashmere dresses and Italian boots, fine art auctions and booming wine sales have been possible without the generations of riveters, miners, steelmen and platers?"

That is the reality of life as he saw it after an absence of four years.

While some mobility of labour is defensible—and I understand that that is one of the objectives of the Government—I say to the noble Lord opposite that large-scale transfers of population are not acceptable in this country. I well remember the tens of thousands of unemployed Welshmen who marched out of Wales between the wars and I do not want to see that happening again. Britain today is also divided within families. The Prime Minister, Mr. Hurd and others have spoken about their support for family life. I believe profoundly in the importance of family life. Perhaps I may say to Ministers that certain aspects of government policy divide and destroy family life. Moral values cannot be separated from the way politics and the economy are conducted.

I greatly hope that noble Lords opposite will be prepared to face up to the problems which are partly of their creation and will not try to deny their existence. I shall not go into great detail but I wish to refer to the Government's own reports. The 1988 edition of Social Trends underlines the growing disparity in wealth and job prospects between the affluent South and the depressed regions. The figures on the shift of wealth, on relative spending as between the South and the rest, and on output per head and employment opportunities make very depressing reading.

I am not satisfied that the Government have really begun to face up to this widening gulf or its consequences. Some noble Lords will question my arguments and will vigorously reject the charge in this Motion that there is a North-South divide or that the gulf between sections of the community is widening. They will say that matters are improving, as the noble Lord, Lord Young of Graffham, tended to argue during Questions today. I find that deeply depressing.

Let me give some examples from the Government's own statistics to illustrate the drift which is now taking place. First, in the area of homelessness, the number of households in temporary accommodation in Britain at the end of 1986 was double that at the end of 1983. More recent data show that the numbers of homeless in England have continued to rise. Secondly, on job opportunities, for every vacancy registered at a job centre in the South-East of England, there are five registered unemployed people. For every vacancy in Greater London there are eight unemployed people; in Wales there are 12 unemployed people; and in the North of England, there are 15. If I may say so, in 1988, against the background of what Ministers have said, that is an extremely serious development.

Let us now look at taxation where the Government claim that they have done well. The fact is that between 1978–79, the Government's favourite year, and 1986–87, the tax burden for a one-earner couple with two children on half average earnings rose by 36 per cent. while a similar couple of twice average earnings have seen their tax burden fall by 4 per cent. In the forthcoming Budget let us see if the Chancellor remembers those in the lower brackets.

This is an appropriate moment, while the Chancellor ponders his Budget, to say a brief word about the National Health Service which has been uppermost in people's minds over the last few months. As noble Lords know, we have had several exchanges on that subject especially during Question Time over the last few weeks. The old arguments about extra expenditure by this Government cannot be sustained any longer. The fact is that all the independent academic reports which have been published make it clear that the so-called extra money, to which Ministers frequently refer, has been absorbed by inflation and demographic demands. Real spending on the National Health Service has been progressively squeezed. We have been seeing the results of that almost every day on television and indeed hearing about it from noble Lords here.

The solution is not extra private health insurance to help people to jump the queue; it is extra public funds to prevent the NHS being compelled to send home people including small children who need urgent surgery. In these circumstances, I find it hard to believe that the Government will ignore this just cause in favour of tax cuts in the Budget. They cannot plead that the money is not there. From day to day in the newspapers we are informed that the Chancellor has a Budget surplus of about £12 billion which he will use to cut the top rate of tax by 33 per cent. from 60p to 40p. All of us who pay taxes like to see a cut in taxation. But the great majority of the people in this country have shown that they have priorities and compassion. That majority are ready to forego tax cuts if the Government are prepared to spend more on the National Health Service.

Therefore, I say to noble Lords opposite that it would be a grave error and a monstrous wrong if, in this Budget, the Government neglect the sick, the old, the ill-paid and the poor in favour of tax cuts which would, in the main, help the much better off. It would underline once again that the values which matter most to the Government are material success achieved through individual enterprise and that it is better to be rich than to be good. Those were not the values, as I recall, of Winston Churchill, of Harold Macmillan in the speeches he made in this Chamber, of R. A. Butler, or of the many that I could mention who spoke from the Benches opposite.

This is a dangerous philosophy. It says, in fact, to the young people of our country, "Climb the material ladder on the necks of your less competitive neighbours" and "Personal success matters more than social responsibility". On that basis, the poor and homeless can be ignored and the social services deprived of resources. People can be left to sink or swim. "All the prizes must go to the strong" is the philosophy, and it is a tawdry one.

The question therefore remains: what should the Chancellor of the Exchequer do in his Budget? The answer is that he should not seek short-term popularity by tax cutting, which would only increase the divisions to which I refer. Instead, he should concentrate on the longer term and on the healing of those divisions. He should prepare the nation for the economic difficulties which most assuredly lie ahead as North Sea oil revenues decline and our balance of payments deteriorates.

The Chancellor should help industry to invest more in research and development. He should give greater priority to the regions than is planned in the noble Lord's new policies. He should reduce the crippling burden of high interest rates which stifle manufacturing industry. Lastly, but not least, he should accept that our public services need a proper level of public funding. If the Chancellor takes those actions we can begin to feel that the Government are moving back on to a sensible road.

We believe—and I think this is the sense of many noble Lords opposite—that society is more than a mass of competing individuals with the weak falling to the bottom of the pile. Economic policies must never be based on expediency. There must be a social and an ethical base. We shall judge the Chancellor's Budget from that wider and deeper standpoint. I beg to move my Motion for Papers.

My Lords, because of pressing government business I will not, alas, be able to listen to the whole debate but I hope to hear as much as possible and for that part I miss I will read the Official Report.

I am grateful to the noble Lord, Lord Cledwyn of Penrhos, for introducing this debate because at least it gives us an opportunity of affirming once more, if such affirmation is even necessary, that the Government are committed to encouraging a society in which wealth is created; and not only a society in which wealth is created but a society in which wealth creation benefits all its citizens. We are committed to a society which offers equality of opportunity to its citizens and a society in which the Government are concerned to ensure that our people are better off, that they continue to enjoy rising standards of living and continue to enjoy better health and better education.

However, that does not mean that we have a uniform society in which there can be no differences. Since Adam and Eve left Eden there have been differences in our society. Differences are bound to exist, but those differences will change as the economy itself changes. It will always be the case that at any given moment in time some industries in some areas may prosper and develop more than other industries in other areas. Over any given period of time, earnings in some occupations will rise more than others because skills and talents in limited supply will be rewarded more highly. However, differences are not the same as divisions, and those who try to elevate the differences which exist into divisions within our society are doing that society a grave disservice.

The noble Lord opposite referred to a number of statistics making comparisons between different groups. I believe that such comparisons, and indeed the very basis of the questions put, are fundamentally flawed. First, they are flawed philosophically. I am sure that no Member of this House would see complete uniformity as a desirable aim. Once we accept that uniformity would be wrong then differences become both inevitable and, indeed, desirable. For example, differences of income have a purpose in themselves. They encourage people to develop the skills which are in demand and they provide incentives. Once that argument is accepted, there can be no certain basis for saying that one set of differences is acceptable and unchanging but another set is not.

Secondly, these comparisons are flawed in a practical sense. The question of distribution of incomes around society is largely an academic exercise for individuals. What matters for individuals is their own lifestyle and whether their particular needs can be met. We cannot assume that changes which lead to wider differences are always harmful. Such changes may be beneficial to everyone in society—and I stress everyone—simply because national wealth and income is raised and everyone can share in that growth.

My Lords, I thank the Minister for giving way, but as he is unable to attend the whole debate perhaps he will forgive me for asking whether he accepts that there should be a limit to those disparities in income to which he referred.

My Lords, I gladly accept that there should be a lower limit but I refuse to accept for one moment that there should be an upper limit on which incomes actually stand.

My Lords——

My Lords, I am referring to incomes in society and not artificial structures for minimum wages, which only have the effect of stopping growth.

My Lords——

My Lords, perhaps the noble Lord will permit me to develop my argument.

The noble Lord, Lord Cledwyn, spoke eloquently about the faster earnings growth of the better-off. Indeed, the quotation he gave demonstrated more eloquently the politics of envy than it explained how this country could actually do better. If we look at the percentage changes in real take-home pay, it is true—and I accept it—that between 1978–79 and 1987–88 (I take the same years as the noble Lord opposite) men on twice average earnings enjoyed real increases in pay faster than those on half average earnings. For single men it was an increase of 26 per cent. compared with an increase of 21 per cent. for those on half average earnings. Therefore, to that extent it is true that divisions increased. However, that has been an increase and there has been a remarkable increase at each and every level of earnings.

That applies not just for those in work, because pensioners enjoyed an 18 per cent. increase in real incomes between 1979 and 1985. Perhaps noble Lords opposite will think that single people on half average earnings preferred the situation between 1974 and 1979, when they did do better than those on twice average earnings. Yes, they did do better. In that time they lost only 1 per cent. in real take-home pay while those on twice average earnings lost 4 per cent. The important point is not the comparison between the two but to find out how each individual is doing. Everyone at that time was getting poor but the low paid were getting poorer just a little more slowly. Those are the important comparisons. They show that people have had higher incomes and better opportunities. Real take-home pay has risen substantially at every level of earnings.

The noble Lord argued that tax cuts are benefiting the rich rather than the poor. The less well-off have benefited from tax changes, from the cut of 6 percentage points in the basic rate and the increase of 22 per cent. in real terms in main personal allowances. The introduction of reduced rate national insurance bands in 1985 benefited all those earning below £105 a week.

What is true is that the growth in real earnings has been so significant that people can pay more in aggregate in taxes and still be better off. We recognise that some element of redistribution is needed, and the progressive nature of income tax and the existence of capital taxation shows that. We recognise that society must provide for the minimum needs of people.

If we return to the period between 1945 and 1950 when we constructed the first welfare state, the very model that William Beveridge provided was to ensure that there would be a safety net for the less fortunate in our society but ladders of opportunity for people to climb. What successive decades actually did was to take that safety net and to put it on top of the ladders. There are dangers if pressure for a more equal distribution weakens the process of wealth creation.

What has experience shown us? It is the poor who lose. Emphasising state intervention concentrating on redistribution was a characteristic of the United Kingdom in the 1970s. Then year after year after year we came bottom in the growth league in the European Community. Therefore I refute almost completely the argument of the noble Lord, Lord Cledwyn.

What I offer is an alternative. There are three main ways to help those who are the poorest in our society. First, encourage individuals to create wealth itself. Secondly, spread the ownership of that wealth more widely. Thirdly, tackle inflation and provide the conditions in which unemployment will fall. Encouraging individuals to create wealth is not simply a matter of tax incentives. Above all else it needs a shift towards an enterprise culture in which creating businesses and creating jobs is regarded as a socially—perhaps I may even say morally—acceptable occupation. For the Government, this imposes an obligation to look hard at education and training and to encourage the growth of new businesses. We are seeing a considerable change of attitude.

In a recent sample survey, 82 per cent. of 3i customers agreed that there was a new enterprise culture in this country. We have to spread those positive attitudes to enterprise more widely in our society. The enterprise message is for all. It offers challenges; it offers opportunities and it is certainly not limited to any one section of our society.

Secondly, spreading the ownership of wealth has been encouraged by selling council houses—more than one million since 1979—and so encouraging more people to own their own homes. Wider share ownership has been encouraged by privatisation, which has benefited employees and small shareholders in particular, and by the Government offering tax incentives for share option schemes. Over one and half million employees have benefited or will benefit from all employee share schemes established or improved under this Government. Under this Government, too, individual share ownership has trebled; and the fastest growing group of shareholders is manual workers. The wider the ownership of assets is spread the safer and better our society will be.

One of the consequences of privatisation and wider ownership is that people are given more control and more individual responsibility both to look after their homes and to participate in the companies for which they work. This is giving people real opportunity.

Finally, tackling inflation has been the first priority of this Government. Inflation is now back to the levels of some 20 years ago. The way in which inflation destroyed wealth in the past was insidious and unrelenting. We must never forget or underestimate the evil effects of inflation on society. People's savings, built up over a lifetime, are lost. The old become embittered and the young lose all their hope. Inflation causes untold anxieties and undermines personal independence. Its effects have been random, as, for example, those patriotic people with war bonds found to their cost. Cutting inflation has reduced real divisions in our society and tackling inflation is vital to reducing unemployment.

There is a clear correlation between the reduction of inflation and investment in industry—no correlation with the amount of interest but very much with the rate of inflation. The poorest of our society are the unemployed, and here it is poverty of spirit as much as a lack of wealth which strikes them so hard. Tackling unemployment requires low inflation; tackling unemployment requires enterprise. The results of both of those are coming through stronger and stronger today because we have seen unemployment fall by 647,000 since July 1986. That is not only more than in any other major industrialised country, but it means that we have one of the lowest levels of unemployment of the major nations in Europe.

The noble Lord opposite has said a thing or two about the North-South divide. It is a great over-simplification. Unemployment has fallen in every region in the past 18 months. I have no doubt that it has been said in your Lordships' House before that it has fallen fastest in Wales, the West Midlands, the North-West and the North itself. If we take 1979 as a marker—noble Lords opposite have accused me at times of not always adopting that year—the North's share of unemployment in the land was 69 per cent. Today it is 68 per cent. That shows a great deterioration in the North-South divide.

About half the steep rise in self-employment has been in the North, where more than a third of the additional jobs created since March 1983 have been found. If I have one plea for this debate in your Lordships' House this afternoon, it is that we should not place great emphasis upon the North-South divide. I believe it has done the North a grave disservice. It has perpetuated the cloth-cap and black-spot image that is wholly undeserved. In my book, the North has a great deal to offer. Time after time foreign investors have responded to its advantages. Even the image that noble Lords put forward is sometimes wrong. Recently I saw an analysis of the quality of urban life and out of the top ten towns in the United Kingdom seven were in the North.

I am not standing here today arguing that everything is just right. Indeed it must be evident to all Members of your Lordships' House that we are pursuing radical changes to widen opportunities, to increase choice and to give individuals greater control in key areas of their lives such as housing and education.

There is a moral point to this debate. It is about moral values; it is about responsibility. Running throughout all our policies is the emphasis upon individuals, on their responsibilities and their opportunities. We have not abandoned the concept of a safety net but we are not going to make that safety net a smothering blanket of state controls. That is the key difference betwen the underlying ideas expressed in the Motion and the policies of Her Majesty's Government. The Motion talks about opportunity. We should never forget that opportunity comes from responsibilities and challenges. It comes from self-help in the market and not from spoon-feeding by the state. The will to help yourself is crucial. Of course it needs encouragement and development but the emphasis must be on self-help.

We do not seek to elevate differences to divisions within our community. We strive to encourage individuals to make and create their own opportunities in the hope that it may bring greater diversity. It will certainly bring more growth and more challenge. That kind of diversity is to be welcomed and not opposed. That kind of diversity will increase the wealth of all of our citizens.

My Lords, before the noble Lord sits down, on Friday I raised what the noble Lord himself recognised as the important issue of local pay settlements as a means of minimising the discrepancy in prosperity betwen the various regions. The noble Lord said that he would prefer to deal with it today, to which I naturally assented. I wonder whether the noble Lord can say anything about that matter.

Yes, gladly, my Lords. My noble friend the Leader of the House will deal with it in reply to the debate today.

My Lords, today is the second occasion on which I have made a maiden speech in this Chamber. This is far from being an unique experience. Anyone who has come up to this House after being elected to the other place between 1941 and 1950, unless singularly silent in his early years of parliamentary service, will have had the same experience. Looking along the two Benches to my left, I see five noble Lords, including two former Prime Ministers, in that category, and at least three noble Lords on the other side of the House on the former Ministers' Bench. I am, however, perhaps the only person whose two first appearances on this stage have been separated by almost exactly 40 years, but for a few weeks. However, that is no more of a distinction than holding one of those obscure cricketing records: like being the only seventh wicket down batsman to have made 28 for Glamorgan at Ebbw Vale on a Tuesday afternoon in May when the temperature was below 45 degrees.

That speech 40 years ago was delivered from a spot approximately where the noble Lord, Lord Lloyd of Hampstead, is now sitting and was followed most generously, considering how strongly he must have disagreed with almost every word I said, by Sir Arthur Salter, who soon afterwards came to your Lordships' House and survived here until the age of 94. What is perhaps more to the point is that my first maiden speech was on a theme not vastly different from that of today. It was indeed in support of one of Sir Stafford Cripps' budgets. I was perhaps more controversial than I shall endeavour to be today and the change will only be partly due to the difference between this House and the other place.

It will also owe something to the fact that in regard to fiscally-induced equality—how shall I put it?—my certainties have perhaps become a little less angular over the passage of four decades. Undoubtedly, looking back, we nearly all allowed ourselves, for decades, to be frozen into rates of personal taxation which were ludicrously high. I say "nearly all of us", for it is remarkable how small were the changes which were made by the Conservative Governments of 1951 to 1964 and 1970 to 1974. We had become a little like rabbits transfixed in the headlights of a car: not content with our position but lacking the will or the ability to move away from them. That frozen framework has been decisively cracked, not only by the prescripts of Chancellors but in the expectations of the people. It is one of the things for which the Government deserve credit. Nor is that change likely to be quickly reversible. I cannot see any government trying to lead us back to marginal rates of tax of 90 per cent. or more.

However, even beneficial revolutions have a strong tendency to breed their own excesses. There is now a real danger of the conventional wisdom about taxation, public expenditure and the duty of the state in relation to the distribution of rewards, swinging much too far in the opposite direction. I take three separate and almost disparate points: first, the fact, now wisely and widely accepted, that taxing enterprise into the ground is not the best way of increasing prosperity should not preclude a continuing duty on the part of the state to lean against inequality. A rigid tax-induced equality would no doubt be stultifying of enterprise and destructive of traditions and institutions of value. Let us be equally clear that a totally untrammeled distribution of rewards, with the state merely whipping on the contestants, like promoters at a cock fight, will inevitably produce such excesses of disparity as to be both offensive and destabilising. Nor do I believe that it would produce a society which was respectful of established values or institutions or protective of either God-made or man-made beauty.

Secondly, I put in a strong reservation against the view, gaining ground a little dangerously I think, that the supreme duty of statesmanship is to reduce taxation. There is certainly no virtue in taxation for its own sake. There is no doubt considerable vice in vindictive taxation. But a decent fiscal rectitude is a great deal preferable to a Gadarene rush to tax reductions at all costs. The experience of the United States over the past seven years ought to be salutary in this respect. At the beginning of the decade it would have seemed almost inconceivable that the world's greatest and richest economy could so quickly have reduced itself to the world's greatest debtor, incurring vast liabilities for the future, able to finance itself only by constant transfusions of the savings of poorer countries; unwilling to pay for its own expenditure and consequently, so far as concerns its budget deficit, stuck on a ledge halfway up a cliff, unable to move one way or the other.

The British problem is a different one. We have been building up, not dissipating, overseas assets. The question is whether, while so doing, we have been neglecting our investment at home and particularly that in the public services. There is no doubt, in my mind at any rate, about the ability of a low taxation market-oriented economy to produce consumer goods, even if an awful lot of them are imported, far better than any planned economy that ever was or probably ever can be invented. However, I am not convinced that such a society and economy, particularly if it is not infused with the civic optimism which was in many ways the true epitome of Victorian values, is equally good at protecting the environment or safeguarding health, schools, universities or Britain's scientific future.

And if we are asked which is under greater threat in Britain today—the supply of consumer goods or the nexus of civilised public services—it would be difficult not to answer that it was the latter. Therefore I welcome the fact that the noble Lord, Lord Cledwyn, has put down this Motion today and I thank your Lordships for having had the courtesy to listen to me. I hope that inasmuch as I may have advanced a few controversial propositions, it has not been done in too partisan a way.

My Lords, it gives me great pleasure to be the first to congratulate the noble Lord, Lord Jenkins of Hillhead, on his maiden speech. He has been a major figure in our public life for many years and we look forward to his many further interventions in the deliberations in your Lordships' House. I must also say how much I am looking forward to the maiden speech of the right reverend Prelate the Bishop of Chester who will speak immediately after me.

We have had many debates in the past week which have enabled us to clarify and differentiate our views on fundamental economic and social matters. In that connection this is probably the most important debate of all. Even to people like myself who believe in persuasion and consensus, it is helpful to confront those who take instead an all-or-nothing approach to these issues. Especially—although he is no longer in his seat—may I say how indebted we are to the Secretary of State, the noble Lord, Lord Young, for the forthright way in which he put forward his views. However, I am bound to say that I could not disagree with them more. His views on income and inequality seem to me to be most unattractive and, more generally, his attitude on those matters is much the same.

Those of us on this side of the House who have different views about such matters do not have them because of our, as it were, commitment to the politics of envy; we have those views because of our commitment to the politics of compassion.

The delineation of the lines of the debate must be about growth of inequality in our society and economy which we observe along every dimension. We observe it regionally; we observe it by household types; and we observe it by income distribution in the normal way. Almost everywhere we look in the 1980s we see growing inequality. Curiously enough, on the Government's figures—imperfect though they are—and despite the privatisation moves and the alleged democratisation there, it is also the case that wealth is no more equally distributed today, than it was 10 years ago. We see growing inequality and poverty.

Statistics have already been quoted—I am not one ever to deny their value or validity—but they do not, and never can, tell us the whole story. For those of your Lordships who really believe that our country is a better place today than it was 10 years ago, I merely suggest that you take the opportunity to walk around London, or any of the other cities, and just observe what is to be seen there—the dereliction, the drop-outs and the homeless—and explain, given what you have seen, how you can possibly say that there has been a tremendous improvement in the state of our nation.

The great rise in unemployment in the 1980s must be central to our discussion. It rose more in this country than in most other countries and it is still the case, despite certain remarks that I have heard in the House during the last hour. Unemployment as a percentage is still higher in this country than it is in most of the leading countries in the world; for example, the countries quoted in the department's Employment Gazette.

On this side of the House we differ from the Government in our view that neither the scale nor the persistence of the rise in unemployment was inevitable. We also believe that more could have been done, and that what was done could have been done earlier, to reverse direction. Of course we welcome the fact that a reversal has occurred, although, again, we may differ from the Government in our estimate of the true scale of the reduction. Further, we are fearful of how long the reduction will persist. But we are delighted that a major recession has not followed the stock market crash—or, at least, not yet. There are, however, some black clouds on the horizon, as the noble Lord, Lord Cledwyn, pointed out. I should add that we might also worry that undue pessimism about a possible rise in the rate of inflation may in due course this year cause policy again to be reversed, thus making it unduly contractional.

The whole point about unemployment, apart from the sheer waste involved, is that it is intrinsically inequitable. When the unemployment percentage is 10 per cent. or 12.5 per cent. that does not mean that during the course of the year everyone—all of us—are out of work for one-tenth or one-eighth of that time; what happens is that most people experience no unemployment at all. The unemployment is concentrated on a minority of the population and their families. By its definition it is especially concentrated on the chronically or long-term unemployed.

There are people who take the view that unemployment is not due to the mismanagement of our affairs or, even if it is, that there is nothing much that we can do about it, now. There are others who believe that it is desirable as an essential ingredient in our economic policies. According to them, the nation as a whole has gained from the unemployment experience of the past few years. I do not believe that. However, let us consider that point of view. Let us ask ourselves: should it be true, would it not then follow that, if we are now doing as well as we are told we are, the time has come to compensate those who bore the cost? First that would mean giving the highest priority to reducing unemployment and, secondly, using any available funds to raise benefits, especially those that help the families of the unemployed. That means, in my view, the need to add significantly to child benefit which is the best and most direct way to help the poor. It does not mean cutting direct taxes which help the employed and especially those who are better off within that group.

I shall refer to another matter which is sometimes put forward with regard to our economic condition; that is, that somehow our problems, especially the problems of the unemployed, are attributable to their greed and excessive demand for wages. Nothing could be further from the truth. I shall draw your Lordships' attention to the statement of one of the greatest economists of our country who referred to,

"the cry of the master manufacturers and merchants for low wages to enable them to find a market for their exports".

by saying:

"If a country can only be rich by running a successful race for low wages, I should be disposed to say at once, perish such riches".

The economist concerned was not Karl Marx it was the Reverend T. R. Malthus, the close friend of David Ricardo, and one of the ornaments of our country's intellectual history.

This is an important time in our economic history. The Chancellor of the Exchequer is supposedly in a position of considerable budgetary buoyancy or affluence. He is expected to cut taxes. He would do far better to take a wider and more humane view and concentrate on the condition of the people, especially those in need.

My Lords, I am delighted to be able to make my maiden speech in this debate, not only because it is the debate in which the noble Lord, Lord Jenkins, made his maiden speech, which was a great pleasure to hear; but because the diocese of Chester, which stretches from the Pennines to the Wirral and contains a large part of Merseyside, is a focus for the theme of the debate. In that diocese, we have great disparities in opportunity and income. It has highly successful growth industries and business parks, with unemployment down to 6 per cent., and areas struggling to overcome deprivation with about 45 per cent. male unemployment. It has parishes where, instead of the offertory plate being passed around, it may be more appropriate to pass around a credit card machine with the words, "That will do nicely".

The diocese has parishes where, on £8,000 a year, the clergymen are among the highest earners. In some parishes, the clergyman is the highest earner. As I move across the different social areas of the diocese day by day, one thing emerges—the need to build bridges of understanding between those of different backgrounds, education, colour or class. Some Members of your Lordships' House who live in Cheshire are remarkable for their deep concern and personal care in deprived areas. Their policy to reduce divisions is to be involved.

The Church has a unique opportunity to express care, interest and support across those differences. The advantage of a body such as the Church of England is that it has all political views within it, and people of all different classes; thus, in a sense, it has a special opportunity to help people share and understand. The twinning of parishes, which frequently happens, is not merely a matter of patronising, but rather is of benefit both ways to the different communities.

Recently, we have begun a £1 million appeal to reach into inner-city areas, and especially to the churches in those areas. One well-heeled parish was sceptical about the need. Its members paid a visit on a Saturday to one of the churches in Birkenhead that we want to help. They were stunned by the circumstances and by the cheerfulness of the people whom they met. That type of meeting and crossing of boundaries is something that the Church can do. In the needy areas of my diocese, a number of young men from places such as Sevenoaks and Bath have given up one, two or three years of their lives through organisations such as Care Force to share in the needy areas of our land. That is crossing the barriers and reducing divisions.

The clergy are on the spot. When five years ago I first visited one of the toughest parishes in Merseyside, I was asked, "Is this now to be a no-go area for the Church of England?" One person went so far as to say, "Why doesn't the Church of England pull out of this area?" To that, the answer was of course "There can be no such thing as a no-go area for the Church of England. Every inch of this land is within an Anglican parish".

In some of the disadvantaged parishes—I can speak of this from my diocese—the only professional living in the area is the clergyman, with his family. The doctors, police, social workers, teachers and magistrates live elsewhere. The concerns expressed by those clergy are not motivated by politics, but by compassion arising from experience. They share being burgled. Earlier last year, the Rural Dean of Birkenhead was burgled four times in two weeks. I asked whether he wanted me to pull him out. He said, "No, I am here to serve. I am committed to this parish and to this area".

The clergy share the health and education problems; they share sitting up at night seeking to sort out the different social problems that occur. Those men are gold dust. The Church of England often comes in for stick. I know that on the ground, especially in such areas, we are served by magnificent men who are totally committed to God and to other people.

In view of today's debate, I asked some of those men to express their views. First, there was enthusiastic approval of the vast sums of government money that have been poured in to sort out the Ford estate, one of the most notorious areas of Birkenhead. Three years ago, it was described as Britain's Soweto. It is known locally as "Giro City" because of its unemployment rate. The transformation caused by the input of government money has been outstanding. I want to pay tribute to it. Such policies, when applied in other areas, can only benefit the community. Plans to transform the Birkenhead docks are warmly anticipated. At a meeting of 100 businessmen hosted recently by the dioceses of Liverpool and Chester, all acknowledged that the tide was turning in Merseyside and in the North-West. That is good, because it is impossible to say to someone in Merseyside, "Go and find work in London". Brand new, detached, two-bedroom, centrally heated houses are available in Bidston in the Wirral for £19,000. If one owns one of those, one cannot move to the South.

Secondly, I find that although people are deeply concerned that in many ways living standards are better than they were in the 1930s, the powerful "get more" media advertising by which we are all influenced constantly produces people who spend more than they can afford. There is a lowering of morale because what is offered to them in lavish advertising is outside their reach.

That also leads to one of the growing problems—not drugs or crime, for they are certainly with us—against which I hope your Lordships' House may encourage legislation; that is, the activities of loan sharks. Two companies in Birkenhead offer people in some of the most depressed areas of Birkenhead loans of £100 to be repaid in 12 weeks at £150 (200 per cent. interest) or £150 to be repaid at £240 within the same period. A few weeks ago, a couple from one of our churches accepted a newspaper offer of an immediate loan of £1,000 to wipe out their debts. They were stunned by the first month's payment. They went to the incumbent. He asked, "What rate of interest are you paying?" The response was, "What is interest?" All levels of society must understand basic finance. People feed on that ignorance. Just before Christmas a free coach trip was offered to a toy warehouse in Merseyside. It was arranged by the loan companies. They canvassed in the poorer areas. When the people were on the coach, they were offered a loan of £100 in cash to buy toys in the warehouse. Can such activities be stopped?

The churches and others have begun credit unions. They have been highly successful in Nelson, Skelmersdale and other parts of the country. The scheme is off the ground in Birkenhead through the initiative of the local Roman Catholic Church and other churches. It enables people to save and to borrow, repayable at 1 per cent. per month. People have shares, not savings. Wirral Borough Council has supported that scheme. After seeing the great help the scheme is, the council is spreading it across the area. I want your Lordships to know about that. It is a real step to try to stop depravity going further when people are caught in the trap of debt. The Cambridge-based Family Debt Trap Action is also doing great work in this field.

Thirdly, they wanted me to say (and I share this view with them) that people in these areas feel undervalued, not treated with respect at health centres or at the DHSS, seldom getting a GP to make a home visit, not listened to very often by the police because the police are overworked with the amount of crime. As one man put it, "The pain of poverty is in being despised, not in having only two shirts".

It is not uncommon for my clergy to visit someone in the afternoon and find men still in their dressing gowns because there is no point in getting up. That is called, I believe, the death of motivation. The truth that every human being is of equal value, made in the image of God, is a vital truth in Britain as much as in South Africa. The spiritual vacuum which has allowed greed to grow in one area allows despair to grow in others. The Churches have an essential role everywhere, if I may quote the report, "Not just for the poor; to bring people in every area of our society to dependence on God, confidence in ourselves as men and women and care for each other". I venture to say that this is not opium for the people, but hope for the people. This is not subduing the spirit but liberating it.

Your Lordships will, I hope, be encouraged to know that several churches in the worst inner-city part of Merseyside, in my diocese, are growing strongly and vigorously. I find people now prepared to stay because they have a new family, new friendships. As one person put it the other day, "Jesus Christ has given me a new hope, a new life, and a new purpose for living".

So in this debate on policies to reduce divisions in the community, I, like I am sure the whole House, do not want to discourage enterprise and initiative. We are thankful for it and for all the ways in which we benefit because of it. But I want to discourage greed, tunnel vision for what one can get, and care-less-ness. I hope that we can encourage the building of the bridges of understanding, care and compassion, support and encouragement for those most closely involved in helping others in the neediest areas of our country.

I am grateful to the noble Lord, Lord Cledwyn, for initiating this debate. I hope it will create not confrontation but co-operation for the benefit of this great country. In the spirit of William Blake's famous words, which I adapt:

"Together we will not cease from mental fight,

Nor shall our sword sleep in our hand,

Till we have built Jerusalem,

In England's green and pleasant land".

My Lords, I feel truly privileged to follow the right reverend Prelate the Bishop of Chester and to congratulate him on his quite splendid maiden speech. I thought it was a model of moderation, of practical observation and of constructive proposals, all the more welcome to me for not looking exclusively to government for solutions. Above all, he was on the whole cheerful amid many difficulties. That is a great bonus on a day like this. I congratulate him on behalf of the whole House, but I have special pleasure personally, as another grammar school boy and as a humble member of the Anglican community who is sometimes perplexed and less cheerful, in following a bishop.

I want to refer to what I thought was another remarkable maiden speech last Friday, in which the noble Lord, Lord Joseph, told how he had entered politics, no doubt like many others, to try to do something about poverty. With typical candour, he confessed that he had started out as what he called an "unreflecting statist". I understand that it was then quite a common ailment and we should congratulate the noble Lord, Lord Joseph, on his truly remarkable recovery. He went on to say how he had now joined the growing numbers who acknowledge the central, indispensable role of private competitive enterprise in spreading prosperity, property ownership and choice.

The noble Lord, as always, was perfectly fair and even-handed. He did not deny that there continued to exist a worrying extent of poverty. Nor do I, but I must say that I do not believe that it is an extent or depth of abject poverty of the kind which I recall from my youth in working class Tottenham. If I have any criticism of the noble Lord, Lord Cledwyn, it is only after acknowledging that it is always a joy to hear his Welsh cadences, even when he puts on a bit of a show of indignation or anger which is not wholly in character. But my regret was that he did not devote at least one purple passage to acknowledging the transformation of the homes, the leisure and the working lives of almost all British families in our lifetime.

I thumbed through the latest copy of Social Trends, which has just come out, and I reflected again on what a boon it is that 90 to 100 per cent. of homes have now dispensed with mangles, the old wireless and flypapers. They now have washing machines, television sets and refrigerators. It turns out that over 80 per cent. also have deep freezes and telephones. I really cannot understand why such progress seems to bring no flush of joy to the wan cheeks of those whose perpetual obsession appears to be with continued inequality.

Notwithstanding the views of the noble Lord, Lord Peston, I make no apology for being pretty uninterested in the confined ceiling of equality. Ever since I used to lecture on the early pioneers of poverty studies like Booth and Rowntree, my concern has always been with the adequacy of the floor of minimum standards and the springboard of opportunity for all to make more of their own lives. I must say that I believe that this is a different but worthy ideal which does not merit the contempt which outside this House at any rate, some self-righteous party demagogues direct at it, especially when we notice that their boasted compassion so often conveniently coincides with their political self-interest.

On minimum standards, I agree with the noble Lord, Lord Peston, to the extent of saying that two of the most grievous deprivations which remain are access to tolerable housing and access to acceptable education. On both I should have to say that I regard the Labour Party as the chief, if unreflecting, culprit, first through its hatred of grammar schools and secondly through its vendetta against private landlords. I believe that the Government's critics in all parties seem to start off by exaggerating the extent of the remaining poverty and then they compound the mischief by raising false hopes that another billion or two here, there and everywhere else will lead to that lasting solution which has so far evaded us. The critics, especially on the Bench of Bishops, clearly feel very deeply on these matters. My complaint is that they do not always appear to reflect equally deeply.

On standard market analysis, unlike the noble Lord, Lord Peston, I would argue that the case against higher taxation is that it would be doubly damaging. In the first place the raising of taxes increases the incentive to avoid paying them. Secondly, the distribution of tax revenue in higher benefits reduces the incentive available for able-bodied people to join the ranks of taxpayers by working and earning for themselves.

An American social scientist, George Gilder, has said that high and progressive income tax does not redistribute incomes so much as redistribute taxpayers. Thus it diverts taxpayers away from paying taxes into leisure or, increasingly today, the underground economy. It diverts entrepreneurs away from expanding their businesses into tax avoidance. It diverts the rich from productive investment into fancy tax shelters sometimes hidden deep in the forests.

I agree with those who say, "Very well, let's close the loopholes", so long as we reduce the level and the rates of progression at the same time. I recall a cautionary dictum of Milton Friedman that an overburdened economy breathes through the loopholes. If we do not reduce taxes along with loopholes, there will always remain one loophole which can be closed only by stopping people from going abroad.

I refer to the United States example of reducing the top rates of tax, which is already being followed by our European competitors as well as by Labour governments in New Zealand and Australia. I believe that we shall increasingly see the phenomenon of governments competing for taxpayers in a freer world market for the most productive people who have portable talents and high earning and employing capacity.

If raising taxes damages wealth creation, as I have argued, their disbursement in higher benefits to able-bodied people undoubtedly further damages incentives to employment. In a timely tract from the London School of Economics, Hermione Parker has recently shown that the Fowler reforms have done little to reduce the evil combination of social benefits and taxation on work incentives. Millions are still caught in the poverty and unemployment traps.

Take a married couple with two children and earning £110 a week. If their wage increased by as much as £30, they would be only £5.70 better off in disposable income. Reflect about a Ford worker and consider that, to achieve a net increase in this case of around 5 per cent., such a worker would have to go for a gross wage claim of 27 per cent., such is the impact of taxes and of the simultaneous withdrawal of benefits as earned income goes up. Now consider the plight of an unemployed man with a wife and two children living on full benefit. Mrs. Parker shows that he would have to find a job offering something near to average earnings of £180 a week to end up £30 better off in net spending power for a full week's work. The plain truth is that taxes are already too high and are increasingly widely avoided and evaded.

I say in conclusion, therefore, that, if Labour are truly the listening party, I urge them to stop behaving like well-meaning but primitive doctors before the dawn of modern medicine. Let them put away the leeches and stop thinking that the remedy for all social ills is to bleed the taxpayers still more. If I may so express it, we have already suffered enough from the bleeders. Like Mr. Gorbachev, Labour leaders are beginning to show more respect for market pricing. Very well, let them understand that high taxes plus social benefits have price effects that impair incentives to work. They already encourage idleness, avoidance and evasion. I have no doubt that lower taxes would be good for us all.

My Lords, the Motion is eminently suitable for debate in your Lordships' House at this time. I welcome it because it enables us to put taxation back on the agenda for debate in the House. For historical reasons the House has been very timid about taxation for many years; but we are getting bolder, and I am glad that we are. I see no reason why your Lordships should not have a point of view about taxation even though we may be denied full responsibility for its content and its administration.

In reviewing the general perspective of government policy and of the nation's sense of direction, I think that it is as well to look at some of the elements and to examine just how important they are to the whole. There is no doubt that taxation has an important influence on many of the aspects of social and economic policy. I think that it affects the relations between groups and communities and vocations and individuals. What is more, I should say that in the taxation system a very large volume of moral values of society today probably undergo more strains and stresses in that field than in many others. In the time available, I want to look at what I believe to be the appalling weaknesses of our present taxation system.

It is not enough to talk of tax cuts in the sense of something right across the board which superficially seems to be fair as between one taxpayer and another. I think that one has to look underneath and see whether the beetles are in the stretcher of the taxation system. If there is unfairness—and gross unfairness at that—below the surface of the standard rates, then the standard rates themselves become unfair.

In the situation today there can be least doubt that we are about to undergo a serious perversion of housing policy. One aspect of that relates to the way in which house purchase and home ownership are treated for taxation purposes. We are heading for an even more serious distortion of the housing market than we have at present and that is serious enough. The nation will be divided between those who are able to take advantage of artificial incentives to home ownership and those who are left to find what they can in a housing famine with a diminishing stock of municipal housing and extortions in the small supply of accommodation to rent.

This situation is exacerbated by the unfairness of the tax system and worsened by the prospective abolition of the rating system and its replacement by the poll tax. Each home buyer with a mortgage can at present save up to £575 of his tax burden on average. The higher income taxpayer on a 60 per cent. rate of tax can save up to £1,800 a year from his tax burden.

Those are tax incentives for home ownership. Mortgage interest relief, coupled with the failure to tax capital gains on main residences, has increased the attractiveness of housing relative to other assets. At the present time we are investing enormous sums in home ownership. That must have an influence on house prices. We are told that house prices have risen again by 5 per cent. within the past three months. Some of the prices being asked and paid for housing appear hideous to those of us who have had experience of housing costs at some reasonable level.

Since the housing loan is the largest item in the budgets of so many people under the age of 40, that has an influence upon demands for remuneration and wage increases. The proposed abolition of rates means that the incentive for home ownership will be increased. We shall soon abolish the only remaining tax on property values. I believe that that requires us to compare or contrast the position of those home seekers without the means to buy and those with the beneficial conditions of home ownership which are so great for those who can afford it.

There is capital appreciation on the value of a house purchase going on all the time. It is being paid for by money borrowed at current values and repaid in a diminishing currency. There can be no better investment for the private individual than home ownership. But the benefits from the taxation system are far too great and the consequences on house prices and the squeeze on personal credit are very undesirable. That is grossly unfair.

I worry that mortgage interest tax relief has become a politically motivated tax concession. It is unprincipled by any consideration of ability to pay. It never began like that. Interest on mortgages began as a relief set off against the income of the property. It was one of the burdens on land ownership, along with tithe rent charge, which merited tax relief as a charge on that property.

When we abolished the tax on the imputed value of property at the time of Selwyn Lloyd when the famous or notorious Schedule A was abolished, we increased the unfairness of the use of a relief created for an entirely different purpose as part of the mass movement towards property ownership. One might say that there ought to be, if a sense of fairness is to be returned to the situation, a return to Schedule A. We might say: "Come back; all is forgiven. We realise that there should be a tax on the imputed value of property in order to keep the balance between the property owner and others".

I believe that we should urge the Government to examine the situation carefully. At the present time, mortgage interest tax relief is a charge on the Revenue of over £4½ billion. The longer that goes on as it is, the more intractable the problem will become and the more unfair the incidence of taxation will become. It will require a major upsurge of tax reform to adjust an increasingly entrenched situation.

We cannot abolish income tax relief on mortgage interest in one go. Obviously property values would come crashing down, personal budgets would be upset and there would be considerable hardship and a great deal of unrest. However, steps should be taken to curb the growth of that relief, to curb the rise of the concession and to lay the foundations for some retraction.

For example, tax relief should be confined to the lower rate of tax. In my view, it is quite unfair that high rate taxpayers should be getting appreciable capital gains out of tax-assisted mortgage payments. Also, the anomaly which currently restricts a married couple to one maximum loan of £30,000 which may qualify for tax relief but allows two persons living together to get a limit of £30,000 each for their qualifying mortgage for interest purposes should be rectified. There should be no increase in the upper limit of the mortgage which qualifies for tax relief.

Another matter which I believe is in need of change (and which has been discussed in your Lordships' House in a debate concerning a report by the Select Committee under the chairmanship of the noble Baroness, Lady Serota) is the taxation of married women. What will be done about that matter? There is not the slightest doubt that there is unfairness when a two-earnings couple can get 2½ times the single person's relief, whereas a one-earning couple (if it is the husband who is the earner) can only get 1½ times the single person's relief. That problem is a perennial headache for tax reformers. Shall injustice be removed by extending some concession to everybody which will swallow up any sense of injustice? Or shall the objective be achieved by taking away from those who have occupied—many of them for a very long time—a preferential position?

The system of taxation for married women got into a mess during the war when there was an attempt to encourage married women to go out to work. For that purpose, a special married women's earning relief was created. It has lasted to this day. That is how a tax change brought about for a specific purpose which was basically unrelated to ability to pay became so entrenched in the tax system and how gigantic grievances can grow up and become intractable problems for the Chancellor of the Exchequer. He simply does not know what to do about the reform of the married women's tax because of the complications which now arise and the vested interests which exist.

The complete and principled solution to that problem would be to treat married persons as separate persons for taxation purposes and let them all have the single person's allowance. However, that would be very expensive. It would cost over £4 billion to apply that on the basis of raising the relief for the married couple to the level of that now enjoyed by the two-earnings couple with their relief which is 2½ times that of the single person. That is a dilemma. It could mean an increase of 28 per cent. in the single person's allowance to raise it to the level where the removal of anomalies between the earning married couple and the non-earning married couple could be attended to. I think that we should expect something to be done in the Finance Bill about the taxation of married women.

There is a third aspect of taxation which is in urgent need of attention; namely, the enormous concessions given to private occupational pension funds. I believe that the Chancellor once attempted to remove some of those preferences but failed to persuade the Government to his point of view. There is no reason why over £4½ billion of tax relief should be granted in preferential conditions for investment income from private occupational pension schemes. They are awash with money, a good deal of which comes from the benefit from tax concessions. That situation needs attention.

One feature of human nature is how prone we are to get used to injustice so long as we put up with it for long enough and to become unaware of injustices which beset us in our daily lives. I think that there is a prescription for measures which would remove a sense of injustice and make the tax system fairer. The Chancellor has room to manoeuvre at present and he should take the opportunity.

I shall end on an important matter relating to the position of the House. It may be that this year the Chancellor of the Exchequer will wish to implement some of the recommendations of the Keith Committee on the enforcement provisions in the tax system. Those recommendations have been implemented as far as the Government found them acceptable. They have already been implemented with respect to VAT. As I have already described to your Lordships, Customs and Excise now have a private code of law of their own. Enforcement provisions were removed from common law and statute law and handed over to Customs and Excise under entirely different conditions of application from those which apply under normal criminal proceedings. In the case of income tax, in 1970 there was a very long and comprehensive Taxes Management Act. From the point of view of your Lordships' House, the important point about that Act was that it was not a money Bill for the purposes of the Parliament Act 1911; all the provisions governing the rendering of tax forms, penalties, conditions and rights of appeal, and the administrative and equity side of taxation were dealt with in the Taxes Management Act.

I see that the blue book issued by the Inland Revenue, which sets out clauses which might be included in the Finance Act 1987, mentions on page after page changes in what is referred to as the Act of 1970. Those are proposed changes to the Taxes Management Act 1970 and those amendments, embodied in a Finance Bill, will be protected by the Parliament Act as a money Bill. Your Lordships' House will not be free to deal with any of those provisions because they will be outwith the jurisdiction of this House on that account. Yet in 1970 such matters were open to decision and review by this House. I think that they should be again.

I urge the Chancellor, as he drafts his Finance Bill, to beware not to include in it a large slab of provisions relating to tax administration which hitherto have been covered by the Taxes Management Act and open to full review by your Lordships' House. That is my final justification for rising to speak in this debate. I am a self-appointed defender of the rights of the House of Lords.

My Lords, one of the endearing characteristics of the noble Lord, Lord Houghton, is that whenever he exposes something that he thinks is wrong he does it very well: he also generally explains that it will be very difficult, if not impossible, to put right. He has put his finger on some problems, and he has also very honourably shown us the difficulties of any Chancellor in trying to deal with them, at least summarily.

I am at one with those in the debate—the noble Lord, Lord Cledwyn, the right reverend Prelate the Bishop of Chester, and the noble Lord, Lord Jenkins—who have expressed concern about much of the present state of affairs. I share entirely some of their anxieties. However, I venture to think, with diffidence, that though their concern is justified, their remedies, both explicit and implicit, are off course. I shall try to show why I think that that is true.

I am one—and I expect many of your Lordships have the same view—who wants both better standards of living for all and better public services. However, I think that it is naive to imagine that more expenditure will necessarily by itself produce better public services where those services are under criticism. I know well from my own experience at the Department of Education and Science that more money distributed simply to support current teachers and the current curriculum with current examination systems would not have made things better. We need a change in the curriculum. We need more effective and, I believe, appraised teaching. And we need a new examination system which in part we have. None on its own will make things perfect. Together they may make something better. But unless there is parental support in the home, we shall not get the better schooling for our average and below average ability children that we all want.

Similarly, with the National Health Service, more expenditure without many other changes will not suffice to reform the system. I draw your Lordships' attention to a short article in the Financial Times today, written by two people whose analysis I strongly respect, that shows some of the different kinds of problems in different parts of the health service which money alone will not cure.

I turn now to homelessness. We—politicians in successive governments—have only ourselves to blame for homelessness. We have created homelessness by classic means in the rented market. We have subsidised demand and penalised supply. We have subsidised demand through council rents and now, to some extent, through housing benefit. And we have penalised supply by adhering to rent controls long after we should have tip-toed—by all-party agreement—out of them. The people who have suffered are generally those who are least capable of bearing suffering.

I ask those who have already spoken, if they want extra resources for various public services, to consider where those resources come from. They know that the answer can only be from a relatively prospering society. If we were in grave economic trouble, as we were under a previous Labour government—and under previous Conservative governments at times—there would be no question of extra money for public services. The noble Lord, Lord Cledwyn, will remember the traumatic experience of 1976–77 when a Labour government, much against its will, had to cut public services sharply in response to the International Monetary Fund.

I ask your Lordships to recognise that inasmuch as they are needed, more resources for public services can only come from a relatively prosperous society which means, in the terms of the noble Lord, Lord Cledwyn, to some extent a materialist society. It seems to me that it ill becomes the noble Lord, Lord Cledwyn, from the Labour Party, to reject materialism. I think he failed to point out the means by which materialist wishes—to the extent that we all have them—require the materialist urge to be harnessed. I shall come to that point later.

I believe that the people who have done ill service to the nation for decades are those—in particular, intellectuals—who have denigrated if not ignored the role of wealth creators and the role of productivity. Because until recently both parties with experience in government had, for too long, ignored those factors, we are giving the country some sort of a shock. It is a transition stage until those factors become widely recognised as elements of relative salvation. I do not believe that people in general yet understand where jobs come from. They come from consumers. And those who seek to satisfy consumers at home and abroad in the interest of profit but also in fear of loss are the entrepreneurs for whom we do not even have a word in the English language.

The noble Lord, Lord Peston, who is not in his place at the moment, seemed to criticise any question of tax cuts for those who earn high sums. Other noble Lords made the same point in various ways. I ask them to recognise that entrepreneurs do not tread a one-way street. There is a risk factor. In my maiden speech last week I ventured to mention that in my view there was a need for more millionaires and more bankruptcies and that was because the competitive market is a risky business.

If we are to have more entrepreneurs, there will be risks and there should be reward when those risks are successfully run. I do not think that 60 per cent. is the proper rate of taxation on high earners. It is less of a burden than the earlier 98 per cent. which the noble Lord, Lord Jenkins of Hillhead, in my view correctly, stigmatised. However, it is still too much, and it is more than most of our competitors pay.

I believe that we need to have more entrepreneurs if we are to satisfy the wish of all of us to reduce unemployment. We need them particularly in the North where a culture of dependence seems to have grown up on the expansion of large firms based elsewhere.

The noble Lords, Lord Cledwyn and Lord Peston, spoke about the rise of unemployment in this country since 1979. The noble Lord, Lord Peston, said that the rise in unemployment was higher than that in many countries of North-West Europe. Surely noble Lords recognise that for decades our firms were seriously overmanned, which reduced our prosperity and our standard of living compared with our neighbours and in relation to what it should have been. If we were to become competitive, we needed to reduce overmanning.

I was much blamed as a Minister for presiding over the halving of labour in the nationalised steel industry. If the government of the day had not accepted the halving of labour we should have lost not 50 per cent. of labour in the industry but 100 per cent, because the steel industry would have gone out of existence in that British users of steel would have had to buy from abroad on account of differential prices. So we need entrepreneurs and we need them in abundance.

I believe that the noble Lord, Lord Jenkins, is quite sufficiently robust to allow me, when praising his maiden speech, to take exception to one phrase. I believe that his recommendation that we should "lean against inequality" would lead us down a wrong track. I very warmly join with him in urging that the country should lean against poverty wherever it is identified. If we lean against inequality we shall no doubt inadvertently discourage people from taking jobs, reinforce the poverty trap and regret our action in terms of unemployment, competitiveness and standard of living.

I hope that serious study will be given to the examples given by the noble Lord, Lord Harris of High Cross, about the effect of our tax system on people out of work or those who are wondering whether or not to take a job. He gave most dramatic examples of the discouragement at the interface between our welfare system and our tax system and of the damage that the poverty trap does.

I think that it was wrong of the noble Lord, Lord Cledwyn, not even to mention in his speech the role of productivity in keeping this country much poorer than it need be. Compared with North-West Europe, we have abysmally low average productivity. If one considers how high productivity is in some of our firms and industries, then consideration must also be given to the abysmally low levels that must obtain in most other firms. Because of low productivity there are low earnings, and because of low earnings there is low taxable capacity. So we come back to the standard of living and the standard of public services.

I join with the noble Lord, Lord Peston, in wanting a high earning economy, but I venture to correct the noble Lord when he leaves his prescription at that. We want a high earning, low cost economy. That means equal emphasis must be given to productivity, which is primarily a task for management with, I hope, the co-operation of trade unions in their own interest. I ask your Lordships to accept my agreement with much that has been said today but also to understand my wish that in the dramatis personae of this debate the entrepreneur on the one hand and productivity on the other should be recognised. I share the concern but I think that the remedies so far ventilated will not cure the problem.

My Lords, I have always had a considerable affection for the noble Lord, Lord Joseph, and in another place I occasionally agreed with him. He will not be too surprised when I tell him that I occasionally agreed with him today too, but not a lot, as the rest of my speech will make clear.

I should like to begin by congratulating my noble friend Lord Cledwyn on having introduced the Motion and on the way in which he presented it. In my view it is not overstating the case too much to say that we must get right the policies to which the Motion refers. Those policies are vital to the well-being of us all and to the creation of a decent and civilised society in this country. Perhaps I may say to the noble Lord, Lord Harris of High Cross, who has just left the Chamber, that one welcomes the considerable improvements that there have been in living standards for vast numbers of our fellow citizens. Of course one welcomes that, but one would have to be blind not to recognise that some very considerable disparities in both income and opportunities still remain in this country. Indeed, the noble Lord, Lord Joseph, recognised that fact.

I do not want to bore noble Lords by citing any more facts; they were well presented by my noble friend Lord Cledwyn. However, I was absolutely astonished by a remark made by the noble Lord, Lord Young, whom I know to be a highly compassionate man, when he said that the differences of statistics were "academic"—I noted the term. That remark utterly astonished me. It is a pity that he was not present to hear the very moving maiden speech of the right reverend Prelate the Bishop of Chester and his description of some of the problems among the poorest families in his diocese. If the noble Lord had heard that speech I do not think that he would have referred to there being very little statistical difference. It would be quite astonishing.

The Secretary of State may be surprised to learn that I agree with him and with the noble Lord, Lord Joseph, on at least one aspect of their remarks—what they have said and what they would say on any occasion; namely that there is a need adequately to reward entrepreneurial skills. Of course it is crucial to creating the total amount of wealth, without which we can do nothing. Indeed, it was the lack of a larger cake to share—and the noble Lord, Lord Joseph, touched on this point; I remember those days of 1976 and 1977 only too well because they are seared deeply into my soul—that was the cause of our problems, and I certainly agree with him entirely about that.

As the Motion states, and as the noble Lord admitted, despite all that has happened in the last nine years, with the growth in incomes since 1981 and before, there is still a major disparity.

I make it quite clear that I do not argue for Utopian equality; indeed to have equality of incomes would not be Utopia. However, the sheer size of the disparity, which was referred to in the speech of the right reverend Prelate today, is the issue in this Motion. It should be of enormous concern to all in your Lordships' House, and indeed everywhere else. A civilised society does not deserve to be described as such while there remain large numbers of our fellow citizens living in the kind of poverty that we know exists, despite the growing wealth in our society.

It is impossible for our society to call itself civilised when there remain large numbers of our fellow citizens—for whatever reasons, or whoever's fault it is—still living in slums or near-slums while there is comparative affluence and huge affluence, much of it flaunted on the television screens of our country in front of the very people who are desperately in need. That level of disparity is surely a recipe for the divisions in our community, to which the Motion refers.

Some in those kinds of families can and will break out; they will get on their bikes—to use the famous phrase. But for the vast majority there is no opportunity to get out, as we have heard from some of the contributors to this debate. There never will be equal opportunity either. Any of us who grew up in those areas where there was a great deal of poverty will know that a boy or girl growing up in an inner city simply cannot have equal opportunities with those brought up even in a middle-class suburb, let alone in more affluent areas. Those families, and the children of those families, will never have the same opportunity as the rest of us. That must concern us all.

The real problem is to obtain and achieve a higher level of economic growth. I applaud the fact that last year this Government had the highest rate of growth historically than we have had for many years. With that extra wealth so created we have a better chance of helping the deprived in our community. To reward enterprise we must ask ourselves these questions. Do we need the current level of disparity that exists? We should reward enterprise and skill. While we reward those people whom we need to increase the wealth in our society, do we need to reward them even further? That will widen the disparity.

I thought I heard the Secretary of State say that, while he is concerned with the bottom end of the income scale, he is not concerned to put a top on it. In other words, people can earn as much as they like. It cannot be right that there is a level of disparity that leaves a comparatively small number of people with huge incomes while a considerable number of our fellow citizens live in the kind of poverty about which we have heard.

In the depression of the 1930s the classical argument of any leading free-market economists was that nothing could or should be done about the problems of that time. I do not quote the economists exactly—anyone will be able to look up what they have said. However, they felt that the poison had been accumulating in the system and only hardship (someone else's of course) could solve it. They said it in America before Roosevelt became president. Some of my noble friends, and certainly some in another place would accuse this Government of deliberately creating that hardship of unemployment. I do not make that accusation. However, I must say that everything the Prime Minister has ever said about the failure of previous governments—including the one in which she served—leads one to believe that she was as convinced as those in the 1930s that hardship was inevitable for a variety of reasons, although she did not wish deliberately to create the hardship. To use her phrase—the Tina phrase, as it is called—there is no alternative. There had to be that hardship because trade unions would not co-operate, they could not get an incomes policy, and so on.

These are matters for an economic debate. This is not an economic debate in that sense, and I therefore cannot accept or believe that the only way out of the economic difficulties that this country has faced, is through the hardship that has been created, and the divisions in the community that have been created.

The debate on this Motion today is not about whether there should be policies to reduce those divisions. As the noble Lord, Lord Joseph, said, this Government have introduced policies to help the low paid. I do not say for a moment that they have not. However, I do not believe that they have done anything like enough. But the Government cannot argue that we should not be helping the low paid, because they have tried. They have found resources. The right reverend Prelate the Bishop of Chester gave some examples of what has been done for inner city areas, and one applauds those efforts. But when one considers the disparity of income one cannot deny that not enough has been done. There are still these huge disparities about which much has been made in this debate.

I turn to the opportunities now available to the Chancellor in the Budget in a couple of weeks' time. There has been much said in this debate about tax cuts. I agree with all that was said about 98 per cent. being too high a rate of tax, although I very much doubt whether any of the people about whom the noble Lord, Lord Joseph, spoke paid anything remotely like 98 per cent. Another 15 per cent. was investment income and the entrepreneur was not paying investment income tax. However, leaving that aside, I do not believe that any evidence has ever been adduced that a cut in income tax—direct taxation—of the levels about which we are talking will have any incentive effect anywhere.

One could argue—and indeed arguments have been advanced—that there is a disincentive effect. I have seen statistics about workers in the clothing industry in the North-West. Their motives were simple. They knew how much they wished to earn. When the tax rates came down they worked fewer hours. For large numbers of people in this country there is no opportunity to work harder or longer hours. The tax incentive is therefore at best not proven. It is certainly not proven that if the higher rate of tax were to be cut from 60 per cent. to 50 per cent. or 40 per cent. these brilliant young entrepeneurs—who have done so much in the past nine years to create a conservative society—would have done more. I do not believe that one bit of evidence exists for that proposition.

My Lords, the point is that we need many more entrepreneurs if we are to absorb the unemployed and in particular if we are to raise productivity, as we hope.

My Lords, I do not disagree with that. However, the noble Lord was not disagreeing with the point that I was making. I do not believe that these entrepreneurs require a lower rate of tax than 60 per cent. Certainly when most of them start they do not pay anything remotely like 60 per cent. in tax.

Leaving that argument aside, whatever economic, financial, or tax incentive case can be made, it surely cannot be argued that, if the money that is available to the Chancellor in this coming Budget were used in tax cuts, it would do anything but widen the disparities of income within our society. That is the point. The Chancellor is probably the luckiest chancellor this century. He has billions of pounds available. To use that money in a way that does not help to reduce the disparities in income in our society would be a disgrace. In my view any large-scale tax cuts across the board could only exacerbate those disparities. As I have indicated, they would do little, if anything, for the entrepreneur, who is already more than adequately motivated, to achieve the extra profits and earnings that he rightly wishes to see.

What are the alternatives? In the days when we had no money I was never in favour of throwing it about. However, the situation is now very different, particularly in respect of the forthcoming Budget. We have problems of which the Chancellor should take note. He should take note of an issue about which his right honourable friend the Home Secretary recently spoke; it is the need to consider social cohesion in our society. The Home Secretary was right to make clear the fact that it is not merely a matter of money. As he said, there are rural areas in this country where young, affluent people are creating problems of social cohesion.

Can anyone doubt that extra money and resources spent on the poorest families in the inner-city areas would not do something to reduce the disparities and that that needs to be done in the current circumstances? Can anyone say that that is not necessary? Now that the money is available, and with the existence of such disparities and divisions in our communities, surely there can be no greater case than that for tax cuts.

I believe that some tax cuts, particularly in national insurance at the lowest end of the incomes scale where it hits at low levels, will help some of the lowest income groups in the country. I should not oppose such cuts and would very much support them. However, one of the reasons why the Chancellor will not use the billions of pounds now available to him is a real, genuine and growing concern among many about fuelling a consumer boom. An even bigger balance of payments deficit will therefore be created and there will be the need to increase interest rates, with its consequences for inflation.

Bearing in mind the Home Secretary's comments about social cohesion. however coded was his speech, such policies of providing more for the inner-cities, for our hospitals, for capital investment and for those suffering real hardship, must be the right way to spend whatever resources are available. The Chancellor now has a unique opportunity to create, in the terms of the Motion, a better and more civilised society. It would be tragic if he threw it away.

My Lords, I agree with the noble Lords, Lord Harris of High Cross and Lord Barnett, that in recent years there have been great improvements in certain areas. However, I also agree with what the noble Lord, Lord Barnett, said about the present situation and its impact upon the Chancellor. The Motion is not about productivity but about divisions in our society. It was most ably moved by the noble Lord, Lord Cledwyn of Penrhos, who pointed out that the disparity cannot be ignored, whatever the level of prosperity or unprosperity; that it causes great unhappiness and is very divisive.

I have the good fortune to live in Orkney. That is still a community, but it is the sense of community which has been lost in many parts of this country. I believe that this admirable Motion can be treated in two parts. First, there is the disparity between the relatively prosperous areas and the dispirited areas—largely between the North and the South. I remember the noble Lord, Lord Sandford, pointing out that many areas in the South are badly in need of rehabilitation. Secondly, there is the division between the rich and the poor people of this country.

I am slightly surprised by the amount of attention which is now being paid to the need to have enormously rich people. We should all like to be enormously rich but as the noble Lord, Lord Barnett, has said, it has not been proved that by failing to tax the rich one will encourage them to get up earlier and work even harder. One of the great advantages in Orkney, which I regard as a satisfactory community, is that there do not exist the great differences between rich and poor.

A great deal of emphasis has been put on productivity and entrepreneurs. We have entrepreneurs and we have people who have made a great deal of money, but surely what matters is how they have made the money and the kind of entrepreneurs they are. I cannot believe that making vast sums of money by financial manipulation in the City, not to say financial cheating, is either a desirable example or adds much to the wealth, welfare and reputation of this country.

Those who are entrepreneurs are people such as inshore fishermen. Living close to me is a man who started as a fisherman and who now has shares in oilfields in the North Sea and a research vessel. He has achieved that not by taking over companies but by his own ability and raising his own money. I can assure the noble Lord, Lord Joseph, that the risk of being a successful inshore skipper is very much greater than the risk involved in being a stockbroker. It is one of the most notable features that even the firms which have come a cropper in the City appear to be able to pay their management very satisfactory salaries. There seems to be no great correlation in the City between the amount of money one earns and the amount of extra productivity generated for the people of this country. While I am wholly in favour of encouraging enterprise, I believe that what matters is the kind of enterprise that it is. I also believe that that is not the only factor which makes a decent society.

Some years ago I organised a conference to consider the state of some of our cities and districts in Scotland. It took place prior to all the discussions about inner-city troubles. The conference was attended by the then head of a government statistical office. He pointed out that in every way—in education, health, employment prospects and the likelihood of getting on in the professions—a child born in the North-East of England was infinitely worse off than a child born in Bournemouth or in the South-East of England. That was the case even then. It cannot be a satisfactory society if, through no fault of their own, people born in such places are subjected to all kinds of handicaps. We also heard from the right reverend Prelate the Bishop of Chester that such cases still exist. Not only do they still exist but they are becoming worse.

The first lesson is that more money must be spent on education, housing, health and so forth in areas which have been deprived of them. It is the state of the community which hampers children in those areas from the beginning. Secondly, one must involve the people in those areas in improving them. They must not be put in the position of being clients or poor relations to whom charity is handed down.

Several years ago I visited the city of Bologne, which for a long time has been controlled by communists. It has extremely good and interesting social services because it encourages local people to run them, including those who benefit from the services. When one visits old folks' homes one will find many old people behind the bar running a successful bar and dances which all the local people attend and contribute towards their upkeep. That attitude is somewhat foreign to this country. We have not encouraged local enterprise, but we are discouraging it more and more. When one looks at recent regulations one sees that they are draining away all the powers from local authorities to make their own decisions. Only yesterday Britoil was taken over and will now be run from London, in spite of the fact that the Government have a golden share. I must confess that the noble Lord, Lord Young, did not seem to be aware of that because he said that there are no such shares in independent British exploratory oil companies. The Government have that share and they could have used it.

It is quite clear that one of the reasons for such a discrepancy between the different communities in this country is that the ablest and most enterprising people have been drained away from the North of England, Wales and Scotland to London. The professions and all that goes with decision-making have also centralised in London. Therefore it is essential to improve services in the deprived parts of this country, although that is not enough. One must also ensure that life flows back to them, that the community is maintained and that enterprising people have scope there for their talents. Unless that is done, this country will end up with a peasant economy over the whole North of England, Wales and Scotland. All enterprise and talent will be drained off to London.

To my mind, apart from the results in the deprived areas of this country, the situation will not be satisfactory anywhere. It has struck me that although London is enormously prosperous and is said to be the headquarters of the new enterprise society, it is deeply unhappy. I do not believe that the people who are making fortunes in the City are either contented or happy. As has been said before, they are discontented partly because however rich they are they want to be richer. They are bombarded by advertisements saying: "If you already have a Porsche, you should have a bigger Porsche. If you have a swimming pool, you should have a heated swimming pool with a jacuzzi in it". It is a wholly unsatisfactory form of society even for those who benefit from it.

I cannot accept that it is right that these days there should be enormous discrepancies in personal welfare unless they have been justified by contributions, not to making money and building empires but to expanding the real wealth of the country. It seems to me that enterprise culture is in grave danger of being exaggerated and being a misnomer. It is not a culture at all. Culture is something quite different from making enormous amounts of money; but that is what it seems to be taken to be.

One of the great divisions in the country is between people in the Government and all the people who are on the old-boy network and rising with prosperity for the top, and the rest of the population. You will see this absolutely clearly with regard to public transport. No top man ever uses public transport. No Minister would dream of going on the Underground, but if one did he would find out what the Underground is like. I went to lunch not so very long ago with the people who run the London Underground. There, they were telling us that we must all use public transport, but not one had come to work that day on public transport. They came in chauffeur-driven cars. I see that Mr. Gorbachev is now insisting that those who work for the state in Russia come to work on public transport. Three cheers for Mr. Gorbachev.

The rich are contracting out everything. They contract out the health service. It is immaterial to them how badly off the health service is, because they do not use it. They have holidays abroad. They do not have to use the main services of this country at all. They educate their children privately. It is no wonder that the public services of this country are going down hill. It is because the top people do not mind; they do not use them. They have perks. That is another division in this country. I went to lunch in a restaurant yesterday and I was the only person who paid for my lunch with notes. I was given two copies of the bill. Why? It is because the second copy either goes into my firm or assists me in some way to fiddle taxation. That is routine now. Again, the right reverend Prelate is right to say that people are not only allowed to borrow beyond their means and encouraged by these wicked credit-pushers but are encouraged by the banks. Banks which have lost many millions of pounds are advising students to entrust their financial affairs to these geniuses in the banks in the City of London. It is no wonder that there is trouble.

It may be appropriate on the occasion of the maiden speech of my noble friend Lord Jenkins of Hillhead—an excellent maiden speech on which I congratulate him—to mention that rather forgotten man the late Lord Gaitskell. Silence descends over the Chamber. He believed in equality. That is now a dirty word which everybody repudiates. Of course human beings are not equal either in ability or sex and that sort of thing, but they should be equal in esteem and all should have an equal right to some opportunity and some basic advantages in life.

Perhaps we should change the word to "fair". Do we have a fair society? The overwhelming answer will be, no. The trouble with our present society is that it may lack wealth and entrepreneurs but it is not fair. That is what shocks a great many people in this country. Our business is to use the wonders of modern technology, not so that the Stock Exchange prices in Tokyo can be read two hours sooner in the City of London—that sort of matter is apparently considered an enormous triumph—but for the benefit of ordinary people who even if they cannot make fortunes have a right to basic public services and to run their own communities with freedom. In the North of England, Scotland and Wales they should have freedom to develop their own way of life, which to my mind is as good as, if not better than, anything they will get from centralised London.

My Lords, in a few weeks' time on 24th May, His Royal Highness the Prince of Wales will visit Merseyside to open the new Tate Gallery at the Albert Dock. If we are talking of disparities in opportunities and incomes, he will have an excellent opportunity to see one of the most oustanding disparities that perhaps exists in this country today. I refer to a place called Kent Gardens, a five-storey block of flats within a stone's throw of the Albert Dock. For the last 10 years both Liberal and Labour administrations of the city council have tried to improve the area but they cannot. Where 250 families lived, there are now only 68. Some Members of your Lordships' House may well have seen the article in the Independent. I say again that it is within a stone's throw of the Albert Dock.

Within Albert Dock, flats will be constructed on Liverpool's waterfront which will be sold at 100,000 each. The disparity is there. I hope that His Royal Highness will have the opportunity to inquire as to why that disparity exists because the money that has been ploughed into the Albert Dock comes from central government funds. The money is not there for the Liverpool City Council, which is of two different political persuasions, to improve Kent Gardens. It has been taken from them by means of a rates cut imposed by this Government. If that is not a terrible discrepancy, I have never seen one. Within one mile in one of the most deprived areas of the United Kingdom we have government policy showing a disparity among people to whom the noble Lord, Lord Cledwyn, referred when he opened this debate.

We then go on to the question of discrepancies and differences and the general debate. I am almost getting tired of saying—and I am sure that Members of this House who are unfortunate enough to hear me are tired of hearing me say it—that the greatest disparity of them all is that roughly between the South and the North. I am not dividing it strictly geographically. I am merely saying that, generally speaking, as a recent economic survey indicated, the affluent areas are in the Midlands and the South and the poor areas are in the North and the West. It has been mentioned many times. I am beginning to wonder whether or not Government spokesmen—in this House anyway—accept that there is that division. Of course, there are discrepancies inside the two areas.

The problem of housing in London is perhaps one of the worst that exists in a civilised country. I refer to the developing London dockland. For every £1 of public money spent, £8 of private money is invested, whereas in Liverpool for every £1 of public money spent in the docklands, only 80 pence is invested by the private sector. That gives some idea about the opportunities presented by those two developments. The position is that London docklands is making people homeless. By creating flats costing up to £150,000 the housing situation in London is becoming considerably worse than it was when the project started. So there is a discrepancy there.

However, when one examines the disparity, the needs of the homeless and those without homes, the reason is the same. It is due to the congestion in the South-East. Without that congestion there would not be the demand for housing, for transport and for nurses. If that congestion were removed, life would be much better and more civilised in the South-East. Can we hope that the Government will do anything? Do those on the Government Front Bench in this House understand the problem? I do not think so.

When my noble friend Lord Cledwyn was opening the debate I noticed that whenever he mentioned vacancies—which are an indication of the opportunities available for the unemployed—the noble Lord, Lord Young, was shaking his head as if he had never heard of them; probably because it was not in his brief! When, later, the right reverend Prelate the Bishop of Manchester took the noble Lord, Lord Young, off his brief we had a slight glimpse of his thinking. He believes that there should be a minimum income for all people. When he was challenged to say that he believed in a minimum wage, oh no, he ran back to his brief. I shall read Hansard tomorrow with great interest to confirm that the noble Lord, Lord Young, believes that there should be a minimum income.

There are many people in this country who are denied a decent standard of life because they do not have a minimum income. The noble Lord later stated that the low paid were getting poorer but rather slower. I must say that that is not much consolation. He referred to the poor and the unemployed. Let me tell the noble Lord that the poor are not only the unemployed; the poor are also people who are managing on a very low wage; the poor are single-parent families who do not even have the buffer of waiting for a week. They know that if they spend their income for the week there is nothing left and if something happens to the income for the following week they are destitute. The poor also include a large number of old age pensioners.

The noble Lord, Lord Young, referred to William Beveridge only wanting to provide a safety net. William Beveridge did not. He and his supporters wanted to establish a society of which people would be proud to be members. We have not yet achieved it and the more we speak about the enterprise culture the further we get away from it.

The Government want to encourage people to own their own homes and to become shareholders because that gives the Government more control; and I quote from the Government Front Benches. Try telling that to a person who has become unemployed through no fault of his own and who tries to control his destiny in regard to housing. The building societies will see to that and he will be out on his ears. Try telling some of the shareholders in Britoil that they are in control of the company! Try telling the shareholders of British Telecom!

A much better example exists because the shareholders of British Gas are also the users. What has been happening to them since the industry was privatised? The number of disconnections has risen. Of course that will happen because the company is following the time-honoured rule in business that what matters is the welfare of the company, that it is not the company's job to look after the social welfare of gas users. Of course not, because that is the enterprise culture that noble Lords on the Government Benches appear to be supporting.

We were treated to a statement by the noble Lord, Lord Harris of High Cross, congratulating the people of this land because they even had washing machines. That took my mind back 60 or 70 years to the era of Victorian values: the poor man had his garden gate and the rich man had his castle and that is what should be put up with. That is the attitude portrayed by the noble Lord, Lord Harris of High Cross.

I claim, and will continue to do so, that there is no need to throw money at the problems of the North. There is no need to throw money at the problems that exist in the Wirral and on Merseyside or the north bank of Merseyside, which have been so graphically outlined. We should give people the opportunities they need. Nobody should criticise Merseyside for not having enterprise. You can criticise Merseyside for not having opportunities because that is not its fault.

One of the reasons that the Tate Gallery is being sited on Merseyside in Liverpool is because we led the way in encouraging modern art through a Liverpool-born son—John Moore. The people of Liverpool, including the Labour-controlled Liverpool City Council, helped him to establish his name, so we do not have to thank anyone else for showing enterprise.

In referring to the enterprise of individuals in Liverpool I advise a visit to the Albert dock to see who are occupying the small shops created by the Liverpool Dockland Development Corporation. They are scousers, and that is the language you will hear. They are people who have taken it upon themselves to take chances and get into small businesses.

Fundamentally, the Government are saying and have been saying ever since 1979 that economic forces must be given a free rein in order to establish a more profitable society which will drag us all up with it; that there is no need to pull ourselves up by the bootstraps and that private enterprise culture will do it for the country and make the country great. The Conservative Government came into power on the basis of a false prospectus. They employed actors to play the part of unemployed people and their slogan at the time was "Britain is not working under Labour". It has a hollow ring about it now. How long do the Government want before they get rid of the unemployment problem, or must we wait another 20 years?

I do not believe that the Government are serious about reducing unemployment or about levelling out the opportunities in this country. It is fortunate that these debates are occurring more often each month because we can follow the development of the Government's thinking from the Front Benches. The noble Lord, Lord Young, and the leader of the House, for whom I have a very great respect, have sympathised with the idea that we should start devolving Civil Service jobs from London in order to provide opportunities and a basis for growth in places like Liverpool. All have paid tribute to that, and over and over again they have expressed sympathy with my point of view. They are very concerned and I can give quote after quote, though I shall not weary the House by doing so. In any case, some noble Lords will have heard it all before. I am sure that the Leader of the House will admit that he has sympathy for the idea.

Nevertheless, sometimes one is at a loss to understand how the Government make up their mind about policy. It is not long ago that I put down a Question for Written Answer asking how much public expenditure was carried out in the South-East of England—I drew a line—during various years. The amazing reply I received was that the Government could not tell me because that is not the way in which they do their accounting or work out the figures. If the Government cannot tell me in a Written Answer I do not understand how they can even begin to understand the problem of congestion in the South-East. I still have a copy of that Answer and I am thinking of framing it.

I asked another Question, having heard, many times, the Government tell me that they were sending civil servants here and there. Only last week the noble Lord, Lord Young, told me that I would be pleased to read the White Paper proposing the Department for Enterprise because in it I would see that people were being moved out of London to the regions. I was interested and I read it. I found that the Government are going to open more offices in the region. We are talking about unemployment of between 20 and 30 per cent. in the areas to which I want the jobs to go. But who are the people involved? Will they he London-based civil servants, or will there be recruiting in the regions? We have not been told; my guess is that the Government will be moving London civil servants.

I asked a pertinent question. When the London civil servants are moved to the regions, do they still get their London weighting? I bet they do. The Civil Service is working behind the Government. It will be very careful before it surrenders any power or privileges. I am saying that the Civil Service jobs should be moved out of London. We should enrol people in the North, in Wales and in Scotland.

Finally, I come to what we are going to do about it. I am interested at the moment only in the northern parts of England. Wales and Scotland have development agencies. We have nothing. I was not surprised last week when the noble Lord, Lord Young, told me that because of his belief in the decentralisation of the Civil Service and his success in the past, he was moving 600 people. Where did they go? To Newport. The Secretary of State for Wales is having a job to prove to the Welsh that he is a credibly-appointed officer. I am sure that there is a connection between that fact and the movement of some civil servants to Newport. Does anyone even begin to believe that the needs of Newport—almost hang on top of the M4—are as great as those of Liverpool?

Even more amazing, in pursuit of their firmly-held belief in dispersal, the Government moved some jobs to Birmingham. Now, there is a nice place which is very hard up. It has the same disabilities as other areas in this country. I should like to know what are the criteria for moving civil servants. The Government have not got any; they have not got a policy. The biggest disparity of all, the major one between North and South, is one that this Government have no intention of tackling because they are frightened to tackle the Civil Service.

We have had a letter from the Government. The noble Lord was written to, and the Minister agreed that I should have a copy of the letter he wrote. The dispersal policy of the Government finishes this year. They boast about the fact that they have moved 6,000 civil servants out of London and the South-East. The Government do not say where they went. That is 6,000 civil servants out of almost 600,000. And the Government believe that is doing something! It is disgraceful that they should say it and still express sympathy with the idea that jobs should be moved.

I say, not to the Government but in the forlorn hope that my words may find their way back to Merseyside, Manchester and Cumbria and all the other places being denied their fair share and fair opportunities, that we need in the North of England to be a little more awkward. We should begin to get really angry and awkward and compel the Government to do something to redistribute resources. Such a policy may well save this country from a tragedy of great magnitude. If something is not done, if we do not set up a development agency or have a Minister for the North, sooner of later the cancer that is growing in the North will threaten the whole body politic in this country. I have made these remarks previously; and I make no apologies for repeating them.

My Lords, in days of old when knights were bold we used to have an organisation known as the Prices and Incomes Board. It tried to secure some fairness in the distribution of resources. Although there may be differing views about its effectiveness, the chairman, after he had finished this work, wrote a book, and a passage from it is, I believe, relevant to the debate we are having this afternoon.

Aubrey Jones said this:

"The imitativeness in wage and price increases is due partly to the imitativeness of human nature, partly to the quest for equity in a society in which all, nominally at any rate, enjoy political equality, the quest now being undertaken not only by white against white, but also by coloured against white, and by women against men. This quest for equity in a society of political equals is characteristic of all modern societies and is likely to intensify rather than abate with time".

I believe Aubrey Jones was right. The search for equity or fairness is something which has gone on. It is not going to go away. It is going to intensify. Yet far from trying to move towards a policy to secure greater equity or fairness, so often we seem to move away from it. I believe that is what is happening in our country today.

Let me hasten to say that this is not a party political point. I believe that many people who were in previous governments would admit that we were not too successful in securing redistribution of wealth during those years. I believe also that it is a point for the trade unions to consider too. We have had cases where the more powerful and better-paid unions have pressed claims without being sufficiently aware of the effect of those in a wider context. We saw something of this in 1978–79.

The disparities within our country have been increasing. They are well documented in Social Trends, the current issue of which has already been referred to during our debate. We welcome improvements which have taken place in recent years and which have benefited all people in Britain, such as a reduction in inflation. Comment has already been made about this. We also welcome money which has been put into inner cities and deprived urban priority areas in our country by central government.

That has been heavily counterbalanced by rate capping and all that has flowed from it. Very often when people talk about extravagance on the part of local government and the need to reduce it, what are being talked about are things like old people's homes, child care and provisions of this nature. I will just mention one fact from the current issue of Social Trends. In 1985 the wealthiest 1 per cent. of this country owned 20 per cent. of the marketable wealth of the UK. We are a country with enormous disparities both of income and even more of wealth.

In many quarters, it seems to me, these gross disparities are accepted with a degree of equanimity. The noble Lord, Lord Young, and I believe also the noble Lord, Lord Joseph, who has just entered the Chamber, seemed to me to be very complacent about the kind of disparities which we have today in British society. The view has been expressed that it does not really matter how wealthy some people get so long as we look after the poor and increase our national resources. I do not accept that view. I believe that the fair distribution of resources within a nation is vital to its spiritual health. I believe it to be utterly wrong and misguided thinking to imagine that one can have a nation which is spiritually healthy when one has large numbers of millionaires.

This is the trickle-down theory. The same problem can be found on the international scene when people say that the way to help the poor countries of the world is for the rich countries to grow ever richer still. Both on the international and on the domestic scene our real problem is not just the problem of the poor; it is the problem of the rich.

One of the most influential books published since the end of the war was by E. F. Schumacher, who was at one time with the Coal Board. In the book, Small is Beautiful, he wrote this:

"The message to the poor and discontented is that they must not impatiently upset or kill the goose that will assuredly, in due course, lay golden eggs also for them. And the message for the rich is that they must be intelligent enough from time to time to help the poor. because this is the way by which they will become richer still".

This is a doubly attractive theory because it completely bypasses the whole question of ethics. There is no need for renunciation or sacrifice.

Last year we had one of the most memorable quotes of the year when the discredited financier Ivan Boesky in the United States said this:

"Greed is all right. I want you to know that. You can be greedy and still feel good about yourself".

I believe there are real dangers that Britain is becoming a more greedy and a more selfish society. I do not think that I am in any way inferring that things were all that good in years gone by, but the credit card boom, to which reference has already been made this afternoon, is one example of this.

Great dangers are building in some of the deprived areas of this country. This accounts in part for the passion behind the words of the noble Lord, Lord Sefton, to us a few minutes ago. One of our inner city clergy to whom I was speaking last week said to me, "I want to come and see you urgently. I am very fearful for the future. The pressures on people in this part of the world created partly by the new arrangements over the social fund and partly by mentally handicapped people coming back into the community without adequate resources are damaging our communities." I am afraid that it was only a passing call and so I had no time to discuss it. I hope to see him and a group of inner city clergy shortly to discuss precisely what that means.

I know that there is another side to Britain today. People can be extraordinarily generous. Sometimes the finger is pointed at the amount which is given to countries where there is a disaster and many refugees.

This shows that basic generosity is there. But no society can survive without serious damage to its social fabric if self-interest is encouraged at the expense of other values. That is what is happening now. William Temple once said that the art of government is bringing self-interest into line with what justice demands. He was not saying that one should neglect self-interest altogether—he was too realistic a man and too Christian to say that. After all, Christianity has been said to be one of the most materialist of all religions. That applies to the Judeo-Christian culture, which takes the world and money very seriously.

Self-interest has a part to play. It is recognised that there must he some disparities in income and in wealth. In an imperfect world it is impossible to avoid this. I felt that the noble Lord, Lord Barnett, expounded this splendidly, so perhaps I can cut short what I was going to say at this point. We have after all our disparities in income among the clergy and the bishops of the Church of England. Perhaps I should confess it with shame. We need some incentives. We need something which helps towards wealth creation. But the argument really is how great these disparities should be and what encouragement should be given to increasing disparities in our country at the present time.

The impression is also given that money is the only incentive. If it is really believed that money is the only incentive, where would that go for many of the jobs and professions in modern society which cannot be paid on a basis of results or profits? In fact, these differences should be kept to a minimium in any properly ordered society. We should be continually struggling towards this end. There should be a greater sharing of resources. The corollary of more millionaires and perhaps also more bankrupts may often be that crime increases among those sections of the population which have little opportunity to produce millionaires.

It is quite obscene that some people in modern society are paid more than £1 million a year on the results which they have secured from some profitable country while at the same time student nurses are expected to subsist on less than £5,000 a year. What kind of society is that? Poverty, we need to remember, is a relative concept and not an absolute concept. You feel poor in relation to the community round about you.

I submit to your Lordships that the matters we are discussing this afternoon are spiritual matters. In support of that, I should like to quote from the encyclical letter of Pope John Paul II which was produced last week and has received some publicity. Pope John Paul said this:

"A disconcerting conclusion about the most recent period should enlighten us. Side by side with the miseries of underdevelopment, themselves unacceptable, we find ourselves up against a form of superdevelopment, equally inadmissible, because like the former it is contrary to what is good and to true happiness. This superdevelopment, which consists in an excessive availability of every kind of material goods for the benefit of certain social groups, easily makes people slaves of possession and of immediate gratification with no other horizon than the multiplication or continual replacement of the things already owned with others still better. It is a civilisation of consumption, of consumerism, which involves throwing away and waste. All of us experience first-hand the sad effects of this blind submission to pure consumerism—in the first place the crass materialism and at the same time a radical dissatisfaction, because one quickly learns, unless one is shielded from the flood of publicity and the ceaseless and tempting offers of products, that the more one possesses, the more one wants, while deeper aspirations remain unsatisfied and perhaps even stifled".

In that encyclical letter Pope John Paul is talking about the enormous disparities between the so-called developed and developing worlds. I believe that these are relevant to the subject we are discussing: disparities within Britain. He warns about the dangers of subjecting human personality and people's deepest needs to the demands of economic planning and selfish profit.

Strong words are used in this encyclical—stronger words than perhaps I have used this afternoon—about the way in which a society of that kind can be deeply unsatisfying and even contemptible. The Anglican report Not Just for the Poor, which was produced last year, has similar words about extremes of wealth and poverty. It says that these,

"are a consequence of sin, and witness to the conscious or unconscious capacity for injustice of the rich and powerful, and the consequent disintegration of society".

Do not imagine for one moment that what is being said here means that we do not need to make good use of our resources in Britain. We do; but this idea that you make good use of resources simply by allowing some people to become as rich as they can will not do. The disparities must be controlled. The dangers of a disintegration in society are shown clearly by a story which was quoted on Radio 4 last night. The Hibberd lecture, the fourth to be broadcast, was given by Andrew Phillips, who is a solicitor in the City of London. What he had to say supported in many ways the picture of the City of London that was given a few minutes ago by the noble Lord, Lord Grimond.

Mr. Phillips described how he was sitting at a City dinner next to a wealthy insurance broker who was earning ten times as much as his wife, who was nurse. I do not mean the wife of the insurance broker; I mean Andrew Phillips' wife. They were talking about whether there was any justification for those income disparities. The insurance broker said, "Look at it this way. It is as though your wife really lives in a different country. She's living in a developing country. I'm living in a developed country". What kind of foundation for society is it if people can be said to be living in different countries? That is precisely the point which was alluded to by the noble Lord, Lord Grimond, when he said that if you have a society in which many of those who control the decisions are going private in all kinds of ways, like health and education, they can live in completely different worlds.

It is sometimes argued that equality of opportunity is what we strive for and that therefore great disparities between income and wealth can still be allowed. However, it is not quite like that, is it? You cannot secure equality of opportunity without a great deal of basic economic equality too. That is why common standards in education, health care and social provision are so vital in our country today.

The noble Lord, Lord Young, at the start of the this debate, spoke about having a proper emphasis on individuals. I think all in this House would agree with that concept. Individuals and families have a right to a certain degree of freedom to make the best they can of their lives. But individuals must also be seen in community. That is not the only value that matters. In Christian understanding and in the Jewish Christian tradition—I believe in other religions too—there are matters of love and of community and of care for each other which deeply affect the subjects that we are discussing today.

The great disparities in income and wealth cannot be dealt with by taxation alone. However, I think that the state should, as the noble Lord, Lord Jenkins of Hillhead, said, lean against inequality in society. It is only by fostering that type of climate of opinion that we can hope to use the wealth that we are creating in better ways in the years ahead.

My Lords, I much enjoyed the speech of the right reverend Prelate the Bishop of Chester and also that of the noble Lord, Lord Jenkins of Hillhead. I shall refer to the remarks of the right reverend Prelate later in my speech. As regards the noble Lord, Lord Jenkins of Hillhead, the only slightly discordant note that struck me was when he referred to "obscure cricketing records". I must say, as the holder of one such obscure cricketing record, I should not like them to be disparaged. The first over that I bowled for the Lords' and Commons' cricket team was hit for 26 runs. I was assured by Sir Eric Bullus, as I came off the field, that it would go into the club records as the worst performance up until that time.

The subject we are discussing today is about standards in society. The formative years of my childhood were spent in the West Riding of Yorkshire before the war. That experience, together with the influence of my parents, has had a profound effect on my thinking ever since. It was my father who coined the phrase that,

"the Labour Party owes more to Methodism than to Marx".

That effect has remained with me all my adult life.

When we look at the problems of unemployment and deprivation, the South-West of England is a microcosm of the national picture. The Secretary of State was right when he said that to refer merely to the North-South divide is a great over-simplification. It could be put in another way—in direct ratio to the distance from London. Wiltshire has an unemployment rate of some 6·5 to 7 per cent.; but when one reaches Cornwall it is some 16·5 per cent. So the South-West reflects the disparity.

During the debate in your Lordships' House on devolution, I drew attention to the increasing magnetism of the South and the South-East which I said would be exacerbated by the opening of the Channel Tunnel and free movement within the EC in 1992. The large-scale development of high tech industries and housing along the M.4 corridor leading west from London shows that this pull is worsening.

In Devon and Cornwall there is the problem of seasonal employment. The area is very dependent upon the holiday and tourist industry. A large amount of casual labour is available during the summer season—but is only seasonal. Often, people are driven back to rely on their own resources in the winter months. It is true that everyone, including the tourist authority, try their best to extend the season with special offers of holiday breaks and so on. But it is essentially a seasonal occurrence and therefore we have yet to solve the problem.

The city of Bristol, which I had the honour of representing for some time, exhibits the same phenomenon. On the north side, if we regard the city as being divided by the River Avon, it is comparatively prosperous. On the south side, it is a different story. In some electoral wards on the north side, the unemployment rate is 2 per cent. In the ward where I still live in Bristol the male unemployment rate hovers around 28 to 30 per cent. Therefore, you have this enormous disparity in one city which is regarded, throughout the country, as being one of the more prosperous areas. That is the problem we have to tackle.

When the Labour Party were in government, I tried to encourage some thinking towards linking the amount of regional grant to the number of jobs created. A great deal of money was being put into capital-intensive industries such as the chemical industry. Large resources were being spent; but the number of jobs created for local people was minimal. It is true that during the building of the infrastructure and the actual building work, there were jobs for local people. But once the chemical complex was complete, most of the available jobs were taken by people who moved in from other parts of the country. In terms of jobs created for the locality, it was virtually a complete waste of money. I welcome therefore the flexibility that the Government are showing. However, I ask that they should bear in mind the points raised by my noble friends from the Front Bench in this and in other debates about making the best possible use of this money by creating jobs.

The right reverend Prelate the Bishop of Chester, in his maiden speech, struck two strong chords with me. He said, "Look at where people live". In my former constituency of Bristol, the Wills tobacco company moved a factory to Hartcliffe, which is in the heart of a large housing estate. At a meeting with local councillors, they said, "If we move this factory to Hartcliffe, how can we best help the local population?" A dear late colleague of mine, Councillor Wilmott, said, "Get your management and top executives to come and live here". They were all very polite about the invitation but none came to live there. When the noble Lord, Lord Joseph, as Secretary of State, was steering through the reorganisation of the health service in the early 1970s, on Second Reading on the Bill, I gave the example of Bristol with three hospitals, Frenchay, South Mead and the United Bristol Hospital complex, where there were some 34 people on the managing and governing bodies, 11 of whom lived in what was then south Gloucestershire and north Somerset. The other 23, who lived in Bristol, all came from the north-west quadrant of the city. In other words, three-quarters of the population of Bristol were not considered worthy of producing one person who was eligible to join a governing or managing body of those hospitals.

I do not believe in the class war in the terms of H. M. Heinemann speaking in Hyde Park or anything along those lines. But if one plots the distribution of people on the map of a big city, and one looks where the magistrates live, one finds the same pattern. I am afraid that the opinion-formers in society know how to organise petitions for their locality. They know how to look after their interests and how to lobby councillors and Members of Parliament. Therefore it really is:

"Unto them that hath shall be given",

because they know how to work the system.

The noble Lord, Lord Harris of High Cross, made an interesting speech. I remember many years ago hearing the noble Lord, Lord Diamond, at a Fabian meeting in Bristol, say that he always assumed that anyone who questioned him was acting from the best motives. During my political life, I have always taken that as my creed. The noble Lord, Lord Harris of High Cross, castigated us on these Benches as self-righteous party demagogues or leeches. I assume that in due course he will be equally scathing about the other side of the House. I notice that he sits on the Cross-Benches, and so he must feel that he cannot ally himself with one side of the House or the other. As our side of the House has taken its dose of punishment, I look forward to hearing him dish it out to the other side.

The noble Lord mentioned grammar schools. At one time, the Labour-controlled council in Bristol decided to withdraw free places from the direct grant grammar schools. I received a number of complaints about that. I obtained the figures from the local authority. I discovered that over a period of five years, 92 primary schools were eligible to submit children for free places. I found out where the free places were and I put them on a map. I am a fairly simple chap and I like to picture things. I discovered that 56 per cent. of the free places came from five schools. The five schools were in places such as Westbury, Westbury Park and Stoke Bishop; in other words, middle-class parents were having the best of both worlds. If the child failed to obtain a free place, the parents could still pay. That reinforces the point made by the right reverend Prelate the Bishop of Chester about the importance of where people live.

The point made by the right reverend Prelate about credit sharks attracted me. During my expiring moments in the other place, I initiated a debate on the Consolidated Fund and drew attention to the gross abuse committed by loan companies and to how ignorance on big housing estates is played on and how people are conned into taking out loans. I also drew attention to the merciless and intimidatory ways that the repayments are enforced. If the right reverend Prelate does not mind being tainted by being associated with a Member on this side of the House, I should be pleased to tell him how he might further prosecute his campaign.

The Central Statistical Office has produced a survey on economic trends which shows on page 101 the GDP by county. The M.4 corridor is clearly defined as being in the highest one-fifth. There is some interesting information because we find that the lowest one-fifth of GDP includes Kent and East Sussex. East Sussex includes places such as Haywards Heath, which is stockbroker country. Even within areas that we regard as prosperous, by definition there must he serious pockets of poverty and low standards. The same applies in places such as Cornwall. We have pleasant holiday memories of such places, but there are whole areas with high male unemployment. A civilised country should not countenance that.

There may be pressures which will worsen the position. Many people are being coaxed away from London to the regions to take part in the rejuvenation of the inner cities. They are offered London salaries and standards. They can sell a house in the London area and buy a house much more cheaply in another area. They have a substantial capital balance with which to play. They have more money than the indigenous inhabitants. The Government should look at that, because it might result in pressure which will further distort the situation.

I wish to refer to the European Commission's ruling on VAT on optical charges. If ever I saw one, that is the thin end of the wedge. If the European Community has established its supremacy on that issue, we shall move on from optical charges to VAT on food and children's clothing, the very things about which the Prime Minister has made a stout defence. If such charges are conceded, they will fall most heavily on the people with whom the debate is primarily concerned.

My noble friend Lord Peston mentioned homelessness. I spoke a few weeks ago in your Lordships' House about homelessness. I suggested that the problem would be helped if students in higher education lived at home. The silence that greeted that suggestion was deafening. I think that I know why that was, but I shall not weary your Lordships with that matter. It would be a simple way in which the ablest and most gifted in society could contribute. They could forgo the pleasure of moving away from home to study and allow that accommodation to be taken up by someone else.

I ask the Government to look at each region on a smaller scale; to look at the problems in individual localities and to realise that average figures may hide a serious situation. They should see what flexibility they can introduce to cope with the problems. Above all, despite all the propaganda put out by Right-wing and reactionary sources, they should understand that those who are out of work want to have a job and contribute to society.

My Lords, this has been a wide-ranging debate, movingly and cogently introduced by the noble Lord, Lord Cledwyn. It has fallen into roughly two parts. One is a dummy run for the Budget and the debate on the Budget, and the other is the debate on the discrepancy in prosperity between individuals and between regions.

I intend to devote myself almost entirely to the second aspect. However, on the first, I say that the noble Lord, Lord Houghton of Sowerby, not for the first time, taught me a great deal about fiscal matters. He went beyond the Budget debate and introduced his own Finance Bill. What was important was that the points he raised were genuine points of fiscal anomaly. I hope that the Chancellor will manage to cope with them over the years.

We all can and do enjoy ourselves spending any money that is available. We have our own priorities. I shall not enter into the dummy run on the Budget debate except to say that all taxation is an invasion of liberty; it is an arrogation to itself by the state of the choice of the individual as to how he shall spend his income and capital.

Of course it is quite true that, where sums of money are laid out on welfare, some but by no means all increase the liberty—the field of choice—of the individual recipient. However, while the process of distribution goes on, there is a very considerable loss through administrative "friction". Bureaucracies are erected to deal with the process of redistribution. So on the whole it seems to me that one should bear in mind that taxation, although a necessary evil, is evil in that it is an infringement of liberty, the liberty of the individual to decide how he himself shall spend what he has earned or accumulated or inherited.

The other point I would make on this part of the debate is that in so far as we borrow money, we are spending at the expense of those who come after us. Obviously, that is justified to the extent that the expenditure will endure for their benefit. But it does not always do so. Those of us who very much enjoyed the maiden speech of the noble Lord, Lord Jenkins, should remember that he was the last Chancellor who introduced a balanced budget. The public sector borrowing requirement, if it is positive, should be viewed in the light of the creative financing of the local authorities. In other words, there should be a demand that it be justified by showing that it will lead to the benefit of those who ultimately have to pay for it—in other words, our successors.

The last point on this subject is that I myself believe that the disruptive effect of income disparity, although it undoubtedly exists, can be mitigated by a sense of community. I agree, as I generally do, with what the noble Lord, Lord Grimond, said about that. Moreover, the disruption caused by large individual discrepancies in income is, to my mind, nothing like so divisive as the preaching of policies of envy and the distrust of those who have succeeded or who are more fortunate in any other way.

I turn now to what first brought me into this series of debates. It is something which is very much the interest of the noble Lord, Lord Sefton—namely, in my case, the sense of the plight of the area with which I was formerly electorally concerned. If I may criticise the noble Lord, Lord Sefton, it would only be to the extent that he seems to think that the whole of the North of England lies west of the Pennines. It is quite true and has been repeatedly said that the concept of a North-South divide is an over-simplification. Indeed, it is a dangerous over-simplification because it may cause one to lose sight of the matter to which the noble Lord, Lord Cocks, drew attention, that there are pockets of extreme deprivation in the South and there are pockets indeed of comparative affluence in the North. Nevertheless, it is broadly true that there is a general division in which the South is more prosperous than the North.

I do not think that the Government are to be criticised for tackling the matter, initially at any rate, broadly in that way and concentrating primarily on the inner cities. The North-South divide is dangerous in two ways. One is morally. In the first of these debates I ventured to quote the famous lines from The Deserted Village:

"Ill fares the land, to hastening ills a prey,

Where wealth accumulates, and men decay".

It is particularly dangerous when the accumulation is in one part of the country and the decay is in another. What struck Goldsmith when he wrote those lines was the wealth accumulating in the new manufacturing towns which are now the inner cities which we so much lament, and the men decaying in the villages which were deserted for those towns. It is a serious moral problem.

There is also the economic danger that any economic measure which is likely to be advantageous to the prosperous South is almost certain to be dangerous and indeed calamitous to the stagnating North. In the summer we had the increase in interest rates. That was obviously because the Chancellor feared that there were signs of overheating in the economy. But that overheating was limited to the prosperous South. I think there is again a danger of that. The noble Lord, Lord Bruce of Donington, who will be speaking after me, will be able to correct me if I am wrong, but I think the City is anxious at the moment because there are already signs of inflation in the economy. The classic response to that is the raising of interest rates, which can only be damaging to the manufacturing industries in the deprived areas.

There is another aspect: the areas of deprivation represent a great economic waste. Only last week your Lordships heard at Question Time the discussion about the overcrowded runways in the South. The noble Lords, Lord Underhill and Lord Gisborough, both pointed out that in the North there were many under-used runways. That is true, generally speaking.

In these days of the telex, the telephone and electrified railways, there is no reason why everything should be concentrated in the metropolis. On the contrary, when the electrification to the North-East gets under way, Doncaster will only be 70 minutes from London. When it reaches York, York will only be one-and-half hours from London. So there is every reason to relocate industry and government activities in those areas. I shall not repeat what I said last Friday about the advantageous aspect of local wage settlements and local salary settlements because I understand that the noble Lord, Lord Belstead, will deal with those matters. As is his usual custom, he has remained throughout the debate.

Like the noble Lord, Lord Sefton, on a previous occasion, I should like to deal with the relocation of government departments. In Yorkshire and Humberside, only 5.6 per cent. of civil servants work in the area, whereas the home population is 8.9 per cent. There is no reason why departments should not be hived off to areas where it is cheaper to maintain them.

I was dismayed when the noble Lord, Lord Belstead, in a previous incarnation, wrote to me to say that the relocation programme was coming to an end this year. That has been corrected, I think, by a subsequent letter that I have received from the noble Earl, Lord Caithness. I hope that the noble Lord, Lord Belstead, will he able to tell us, first, what the current, now ending, phase of relocation has done; and, secondly, what is proposed in the next stage.

I do not minimise the difficulty of the Government. It is very difficult to move a government department, for the reason mentioned by the noble Lord, Lord Sefton of Garston—namely, London weighting. The noble Lord, Lord Belstead, when he wrote to me, justified that as being necessary for recruitment and retention considerations in London. It would surely he much more economical, sensible and advantageous to the nation generally to move the department, or part of it, to an area where recruitment and retention are easier. On this aspect I am sure that the House will be waiting to hear the response of the noble Lord the Leader of the House.

I mentioned last time—I shall mention the point only in passing now—local wage settlements. I do not underestimate the difficulty for the trade unions in agreeing to that kind of regime, because all their history is founded on a repugnance towards local pay settlements which would merely result in one employer managing to supplement the output that was denied to another employer. Nevertheless, I am convinced that their adoption would be most advantageous to those who wish to see a resuscitation of the deprived areas of the North and elsewhere. I hope that the trade unions, with the Government as employer giving the lead, as they have to, will consider that as a proposition.

My Lords, it gives me great pleasure to congratulate the noble Lord, Lord Jenkins of Hillhead, on his maiden speech. His movements and mine seem to have been inextricably linked over the past 40 or so years. I sat in this place in 1945 in approximately the same geographical position as the noble Lord, Lord Barnett. Two and a half years later I was able to welcome on the same Benches the noble Lord, Lord Jenkins of Hillhead. In 1975, some little time later, I had the honour to represent your Lordships' House in the European Parliament and, lo, within a comparatively short time, the noble Lord, Lord Jenkins of Hillhead, became President of the European Commission. I am glad once again to precede him. I see that he has now followed me into your Lordships' House. This makes for a philosophy of discourse over the next few months when we shall doubtless have a series of contributions from the noble Lord dealing with economic policies, Treasury matters and matters of high public moment during which the noble Lord will be able to trace the points from when his philosophy suddenly deviated from mine in the passage of time. We shall certainly welcome the contributions of the noble Lord in the House.

We listened with great pleasure also to the maiden speech of the right reverend Prelate the Bishop of Chester. He referred to certain matters of moral moment which have been echoed in other parts of the House, as indeed in the speech of the right reverend Prelate the Bishop of Manchester. I noted in particular the observations of the right reverend Prelate the Bishop of Chester on loan sharks. As one who was engaged in the original technical work on the Moneylenders Act 1927, it was a matter of great regret to me, as undoubtedly it will be to him, that the protections offered to the borrower under that Act unfortunately were not left in place when the Act was replaced by the Consumer Credit Act. This is a matter of great regret to us all.

My noble friend Lord Cledwyn of Penrhos moved the Motion to call attention to the developing disparities in opportunity and income. I think that he did so with devastating accuracy. I do not think that anybody from any part of the House has been able to deny that great disparities in opportunity and income have developed. I am sure that the House will appreciate that he put forward the case for policies to reduce divisions in the community in a moderate and, indeed, convincing fashion. That undoubtedly commended itself to those Members of your Lordships' House who were not fanatically committed to economic policies which in essence denied that such divisions could ever conceivably exist.

I was particularly disappointed at the initial response of the noble Lord, Lord Young of Graffham. I am sorry that, no doubt for proper reasons, he has been unable to stay to hear the debate and to absorb some of the observations that would otherwise have been addressed to him personally. However, we welcome the noble Lord, Lord Belstead, the Leader of the House and trust that he will reply suitably to the points that have been made.

We on this side of the House have never contended that there should be no disparities among people in opportunity or in income; it is, as I think the right reverend Prelate in Bishop of Manchester pointed out in a question to the noble Lord, Lord Young of Graffham, a matter of degree. I do not think that there can be much doubt that some of the disparities that exist today are quite incompatible with any concept of justice and fairness between individuals within our socity. We all come into the world the same way and we all go out of it the same way. Chemically, we are all nine buckets of water and a bag of salts.

A table of top salary packets appeared in The Sunday Times of 24th January. It referred only to salaries and not to income from other sources such as property or dividends. The recipient of the top salary, even though he would be assumed to pay 60 per cent. tax on the lot, should take away some £19,230 per week after tax. Even the recipient of the bottom salary within the 100 top salaries should take away a total of £1,285 per week after tax, assuming that he was liable on that entire range, which he would not be in practice because of the other rates and because of allowances.

By contrast, we are speaking of individuals at the bottom end of the scale who are getting anything between £45 and £100 per week. Those extremes should, in our current circumstances, be regarded as having nothing to do with the provision of incentives and nothing to do with the creation of wealth in any meaningful sense of the term; for example the supply of goods and services to the people of this country.

It should always be borne in mind that discrepancy occurs in the ownership of wealth. The top 50 per cent. of the adult population of our country own 93 per cent. of all personal wealth. The bottom 50 per cent. of the adult population own 7 per cent. of the total wealth of our country. Surely that means that wherever formal power lies within the democracy and wherever representation in the meaningful democratic sense lies—perhaps once every four years in a general election and slightly more frequently in local authority elections—real power, in the sense of economic power, lies at the top.

Disparities of income and their continued existence have been proved very adequately by my noble friend Lord Cledwyn. However, he also considered opportunities. It was his case, as it is mine, that opportunities have also decreased for the greater part of the population. In the case simply of opportunities for work it is obvious that even after all the figures—including the doctored figures; I say that quite deliberately—have been put forward, there are still at least 2½ million people unemployed as compared with 1 million fewer unemployed in 1979. So the opportunities for work have diminished.

However, we are not concerned only with opportunities for work. We are also concerned with opportunities for living. Sometimes I think that when noble Lords speak from the Government Benches on the subject of opportunities they do not apply to the mass of the people of this country the same vistas as they have for their own lives. When they say "opportunities", they mean opportunities for work and not opportunities for living. For the poorer sections of our population, which are numbered in millions rather than in hundreds of thousands, the opportunities for living in any acceptable cultural sense have been progressively diminished.

For example, noble Lords and those who are better off take for granted the facilities for travel. It is commonplace and taken for granted that we can spin off in the car on a Sunday for 20 or 30 miles to visit friends, or we can have them visit us. That pleasure is denied to millions of our people, partly through lack of funds and in some cases by the absence of proper transport facilities since the deregulation of public transport.

There is also the restriction on the poorer person of having any kind of social life that measures up to what we who are better off accept as quite normal—friendly social intercourse between people and the absence of the tension that is caused by extreme poverty. The internal family tensions that arise from having no money are the daily lot of such people, together with the internal tensions that arise from having an empty life in the sense that there is no vista of the future for them to look upon, no achievable ambition for them to retain and no purpose on which to fix their consciousness and their minds and gain pleasure from doing so. That is the emptiness created by the absence of opportunity and the presence of tension and poverty. It is not only the absence of opportunity but also the most vital, deadly and corroding erosion of freedom—freedom of the human spirit, freedom of the human mind and freedom of movement itself.

Those are the matters which my noble friend drew to the attention of the House. The response of the noble Lord, Lord Young of Graffham, in accusing us of adopting or believing in the policies of envy was rather misplaced and, on reflection, possibly a bit unworthy of him. We on this side of the House believe that there has to be a certain morality in public life. There must be a certain morality within society. Just as whatever religious faith in which we may believe imposes certain obligations upon us as individuals in our individual lives, so it also imposes the necessity for morality within society as a collective. It is not confined to the individual. It is astonishing that the right honourable lady the Prime Minister should—according to the Daily Telegraph—have to call a meeting of the bishops (some eight of them) in November last to reprove them about alleged deficiencies in their approach to the vexed subject of morality in this country.

My Lords, having been present at that meeting, perhaps I may correct the noble Lord. She did not lecture us on that subject at all; we talked about many other things and it was a constructive gathering.

My Lords, I am very much obliged to the right reverend Prelate for having corrected the Daily Telegraph report of 15th February last. Nevertheless, Mr. Douglas Hurd referred to the meeting in a speech on 11th February, which I do not think will be corrected. He referred to the general disorderly state of society and the prevalence of crime. He said:

"The only moral principle to which they respond is the comradeship of the jungle".

Coming from a politician within a party that believes in essence in the operation of free market forces—which is indeed the law of the jungle—on this side of the House we find that remark surprising.

My Lords, as a newcomer I am diffident about interrupting a winding-up speech, but I find it extraordinary that the noble Lord imagines that the jungle is subject to competition and the law, to which free enterprise is, however, subject.

My Lords, I am very grateful for the observations of the noble Lord and look forward to frequent exchanges with him on this subject. But I think that anybody who can say that at the present time free market forces operate within the law is considerably stretching his imagination in view of the number of cases that are now under consideration.

My Lords, the noble Lord is being unfair, because where actions are against the law and a conviction is obtained against the perpetrators, they will be sentenced accordingly.

My Lords, unfortunately that is not so. It is only some two or three months since the noble and learned Lord, Lord Hailsham of Saint Marylebone, who was then on the Woolsack, explained to the House that in many cases the Government could not afford to bring prosecutions because the other side in such cases was so powerful that it would necessitate the engagement of no fewer than 30 counsel. Before the noble Lord intervenes on matters of that kind he should study them rather more thoroughly.

We are dealing with a question of morality. With a surplus in the Exchequer of £4 billion or £5 billion—and some put it higher—I wonder whether it is morally right to resist the proper financing of the National Health Service. I played a very minor part in another place in the introduction of the National Health Service, which was a very socialist concept—I spell that if necessary with a small "s". It was founded on the principle of "from each according to his ability (paid out of direct taxation), to each according to his need" at the time that it was required. I am very surprised that there should be the slightest question at this time that if spare funds are available, they should not go to support this one institution, which, although politically pointed like a dagger at the Prime Minister's ideology, has nevertheless proved to be one of the most successful measures introduced in this country since 1945.

Also, I think that with so much money at the Government's disposal it is not very moral to reduce social security benefits which are payable to the very poor. In particular, as the noble Lord well knows, after April 1988 the measures in relation to child benefit will reduce the income of a single mother with two children aged between four and six by no less than £13.59 per week.

That is the kind of meanness that goes very hard with prostestations of morality. Is it moral, fair, or just to consider—as anonymous government spokesmen suggest from time to time—imposing charges for the borrowing of library books from local authority libraries? With so much affluence and disparity in incomes is it necessary to make charges for music lessons in state schools? Is it necessary to claw back that amount of money into public funds?

One also learns from the press that consideration is being given to privatising the Royal parks. Is there to be an insistence that for the population to be able to enjoy its recreation somebody has to make some private profit out of it? Is that really necessary, in view of the disparities that have been discussed? Is it moral, in the sense of fairness and justice, to introduce a poll tax?

Those are issues that have to be judged not merely in their economic context but in their moral context. The noble Lord, Lord Peston, has already dealt with the economic arguments and effectively demolished them. But the moral argument remains. Is it not the case that we, whose life span is after all limited—and if we reach the age of my friend the late Lord Shinwell it can be set at a maximum of 100, or shall we say 105, years—are essentially life tenants on the earth? Why therefore should we try to behave as freeholders? Is it really necessary to amass vast sums, to make the drive for personal wealth beyond anything that one can reasonably spend, a driving force of life?

On this side of the House we think not.

We are fortified by the fact that, according to recent polls, for example, 67 per cent. of the population would be quite prepared to pay increased taxes in order properly to fund the National Health Service. We are also conscious of the fact that there is a growing realisation that the mere accumulation of wealth for its own sake is not a satisfactory propellant for any economy. It has all been tried before. Those of us who lived through the 1930s know quite well how the same thing was tried then and failed. It is now being tried again in a vamped-up form, but it will fail again.

There has to be some return in our country to a consciousness that we are all part of one another, that none of us has all the supreme virtues and that many of us have defects. We must try to live together, work together and, so far as is possible, understand one another. But understanding cannot endure while such cankers of inequality and repression of freedom of the poor continue to exist. For our part we shall do our best with all men of goodwill from all parties to try to secure the progressive removal of those injustices.

My Lords, the noble Lord, Lord Cledwyn, has introduced what has been a wide-ranging debate. I join other noble Lords in thanking him for opening the discussion. I also thank the noble Lord, Lord Bruce of Donington, for winding up the debate and congratulate the noble Lord, Lord Jenkins of Hillhead, and the right reverend Prelate the Bishop of Chester on the speeches that they made today.

I realise that the noble Lord, Lord Jenkins, as well as being a distinguished politician is also a very skilful writer. Among his many publications, one which has caught my eye—I think the noble Lord wrote it some 25 or more years ago—is Mr. Balfour's Poodle. I must tell the noble Lord that over the years things have changed. He will probably have noticed on arriving in your Lordships' House that there is not much of the poodle about the House of Lords today, and the House is none the worse for that. Nonetheless the noble Lord came to us today as a politician. He gave us a very fine speech which was enjoyed by all parts of the House.

The right reverend Prelate also has publications to his name, including one which I believe he produced some six years ago entitled, Corinthians II: A Spiritual Health Warning to the Church. Today the right reverend Prelate has warned us of some of the needs and problems which he sees at first hand in his own diocese and in other parts of the north of England. I for one should be very foolish if, on behalf of the Government, I did not listen carefully to what the right reverend Prelate said, and I have done so. I very much hope that he and the noble Lord, Lord Jenkins, will return frequently in the future to take part in our proceedings.

At the beginning of his speech, the noble Lord, Lord Cledwyn, said that he believed we ought to direct our policies at the real needs of people. That was a view not dissimilar to one expressed nearly 40 years ago by Sir Winston Churchill, when he said that we ought to have a ladder up which all may climb but a net through which none can fall. Of course one is as important as the other, for if the ladder is removed then those who seek to climb are prevented from contributing to the economy and there are less likely to be enough resources to provide a strong safety net for those who are in need.

That is one of the reasons why I believe it is important that the Government have concentrated for the past nine years on rebuilding a sound economy, without which all other policies become mere aspirations. We are now in the seventh year of steady economic growth, which has meant that real personal disposable incomes are at a record level while the fact that inflation is low and under control surely means that people on fixed incomes and pensions can once more look ahead with some feeling of security. The restoration of the economy has also meant that we have been able to sustain a well balanced programme of public expenditure and try to make proper investment for the future.

The noble Lord, Lord Cledwyn, spoke somewhat critically of the Government's part in responsibility for the National Health Service. However, we have been able to maintain a substantial capital expenditure programme on hospitals and, I contend, to deal fairly with the nursing staff inside those hospitals. As I listen to the exchanges that take place in your Lordships' House every week about the National Health Service, I sometimes think a little ruefully that we were not left much of a legacy by our predecessors. As my noble friend Lord Joseph very fairly said in his speech, although it was entirely against their wishes it is nonetheless a fact that the Labour Government cut capital spending on health by 31 per cent. in real terms between 1973 and 1978–79. I am glad to be able to say that since then capital expenditure on health has increased by 36 per cent. Again it is the case—entirely against their wishes, I know—that the Labour Government cut nurses' pay in real terms in four out of five years over the same period. I am glad to say that since 1979 pay has risen by nearly 30 per cent. in real terms. I mention those points not because this is a political issue but because in the context of today's debate they are important. Money spent in the health service brings benefits that are available to all and are used by all.

At the same time, our policies have tried to emphasise that people ought to have the opportunity wherever possible to exercise more responsibility for their own lives. Today 63 per cent. of homes in Great Britain are owner-occupied, and that figure is growing. There has also been dramatic growth in share ownership, which means that nearly one in five adults now has a direct interest in British firms. Lest it be claimed that this is simply a preoccupation with a particular group or class of people, let me repeat the point made by the noble Lord, Lord Young of Graffham, at the beginning of the debate, that the fastest growing group of shareholders in this country consists of manual workers. Over 1½ million employees have benefited or will benefit from all employee share schemes and there are around 1,400 such schemes in operation now compared with 30 in 1979. I believe that that is social ownership in the true sense of the words.

The same principles of trying to extend choice and opportunity lie behind some of our major Bills this session. The Education Bill, which will soon be coming to this House, is designed to extend the choice of parents in education. That is a principle which is fundamental to the hopes of many parents for their children. We believe that the Bill will give parents more say in how schools are run, and of course a wider choice between schools will also help to raise standards.

In his speech, the noble Lord, Lord Houghton of Sowerby, suggested that people in rented accommodation are being disadvantaged at the expense of those who own their properties. I have just spoken about the growth of owner-occupied housing in this country as a result of policies which we have put forward and which in particular give those who wish to own their own council houses the opportunity to buy them.

The Government are also trying to bring help to those who live in the rented sector. The Housing Bill, which will be put before your Lordships before very long, contains provisions aimed at increasing the amount of rented accommodation that is available both in the private sector and through housing associations. As such, it will be a major step in helping to provide housing for those who are currently homeless—a subject which was opened up by the noble Lord, Lord Cledwyn, at the start of the debate—or who are in unsatisfactory accommodation. We also propose to establish housing action trusts offering hope for those who live in some of the worst areas of local authority housing in this country, and we intend to provide an opportunity for local authority tenants, if they so wish, to transfer to new landlords in either the private sector or a housing association, or maybe to join a co-operative of the tenants themselves. This will be a radical step but for those who transfer the prize will often be a long overdue improvement in the quality of life at home and in the local community.

The noble Lord, Lord Peston, felt that while those in work are undoubtedly sharing in the benefits of increased incomes and an improving economy, those benefits do not extend to the unemployed. In his speech the noble Lord made very clear that the reduction in unemployment had to be an absolute priority. I contend that not only are our general economic policies succeeding in bringing down unemployment, but that it is also important to emphasise that since 1975 we have more than doubled in real terms the investment of taxpayers in training. The new adult training programme published in last week's White Paper represents a massive £1.4 billion investment to bring long-term unemployed people back to employment. It draws its inspiration from the success of the youth training scheme, which in recent years has transformed prospects for young school-leavers who are now receiving up to two years of initial training in basic skills. Most of them achieve a vocational qualification, and—I emphasise this—most of them go on to obtain a job. These are solid achievements.

The noble Lord, Lord Peston, spoke of the level of unemployment here compared with levels in our other major industrialised countries. Youth unemployment is now at about half the level of five years ago. It is below the average of our European Community neighbours and is coming down. I believe that the new adult training programme will spread the benefits of that approach to long-term unemployed adults. I think that the new programme is a practical and realistic step to expand opportunities throughout the population.

A number of noble Lords have spoken about disparities of wealth between different parts of the country—the North-South divide, as your Lordships have called it. I was very glad that the noble Lord, Lord Cocks, and the noble and learned Lord, Lord Simon of Glaisdale, both made the point that this is an oversimplification. I am also glad that the picture in all regions of the country is an improving one and that unemployment has fallen in every region during the past 18 months. A significant statistic is that almost half the steep rise in self-employment between 1979 and 1987 has been in the North; and nearly a third of all additional jobs since March 1983 have been located there.

Towards the end of his speech, the noble Lord, Lord Bruce. criticised the Government on moral grounds for changes that we are seeking to introduce. Perhaps I may mention one change that I believe has a good moral and practical basis. The Local Government Finance Bill—which I hope will be in your Lordships' House not too long after Easter—contains a provision that I think will help the North in particular. If the national non-domestic rate, which is part of that Bill, is set at the national average poundage as the Government intend, then business rates will fall in the high-rated areas where local spending is high, and increase in the low-rated areas. This will mean that business rates in many parts of the North will it is assessed fall. Examples are some 32 per cent. in Newcastle-upon-Tyne, nearly 37 per cent. in Manchester and almost 31 per cent. in Liverpool. It is assessed that, together with a revaluation of non-domestic property in 1990, businesses in the North will stand to be better off by some £700 million a year. This will be a very major shot in the arm for our traditional industries and will act as a powerful stimulus to new industry in those areas.

My Lords, will the Minister give us an assurance that the costs in the South-East which will increase as a result of the provisions of the Bill will not be subsidised and reduced by government action?

My Lords, that is a matter that we must consider when the Bill arrives. All that I have said this evening spells out good news for the North of a kind that we have not seen, and cannot see, under the present rating system. I believe that all I have said will be good for the inner city areas, not only for those places that I have picked out, but for many other areas with difficult inner city problems.

My Lords, may I— —

My Lords, I think that I must continue. Perhaps I may answer some of the individual points that noble Lords have raised. The noble Lord, Lord Jenkins, accepted in his speech that there must be a balance in the pursuit of an enterprise economy. Nonetheless both the noble Lord, Lord Grimond, and the noble Lord, Lord Jenkins, felt we could be in danger of becoming a society that can produce its consumer goods but perhaps cannot sustain its educational system or its health service. I hesitate to cross swords with either of the two noble Lords with their enormous experience. But the public expenditure totals that we are currently sustaining are, I am advised, some £147 billion. We plan to increase that figure to £176 billion by 1990–1991. That will be some 41 per cent. of gross domestic product. I do not think that that is an indicator of an uncaring society. I like to think that it will provide some assurance to both noble Lords. I quite understood why they raised the issue in their speeches.

The right reverend Prelate the Bishop of Chester gave a moving account of the work of the Church in tackling inner city problems. I should like to make it absolutely clear that the Government fully share the concern of the right reverend Prelate for those problems. We agree that it is essential to bring the benefits of new prosperity, where they are to be found, to inner cities. We are already spending £500 million a year on urban development corporations, the urban programme and a range of urban grants. But the Government believe that the private sector can provide the further investment, expertise and leadership that is needed in the inner cities. That is why in the current year we are expecting to see private sector development, as a result of initiatives by the Department of the Environment, investing some £1,300 million. That is why the Department of Employment continues with the work of its small firms service. That is why the Department of Trade and Industry has funded over 250 projects through its task force services.

The noble Lord, Lord Barnett, supported by the right reverend Prelate the Bishop of Manchester, made some play with the need to reduce disparities, and, in particular, the noble Lord said, to put a top on the ladder—in other words to look at the very high earners. The Government feel that by penalising the top earners one does not help the lower earners. I must not stray into tax matters for reasons that the noble Lord, Lord Barnett, will know far better than I, and for another reason that the noble Lord, Lord Barnett, does not know. I am not particularly numerate. Indeed, like Mrs. Malaprop, I have a supercilious attitude to accounts. But we firmly believe that one does help the low earners by having a successful economy, and that one needs wealth creators to ensure that success.

I was grateful to the noble Lord, Lord Cocks, for the points about oversimplification of the concept of the North-South divide—points which the noble Lord made very well indeed. I hope that we are not taking a dirigiste approach to the economy but are trying to create the climate in which enterprise can flourish, in particular with regard to the small businesses which we believe are so enormously important for jobs.

The noble Lord, Lord Sefton, spoke about the Civil Service. He was a little scathing about what had been achieved with regard to locating the Civil Service around the country. I felt that the noble Lord neglected this point in his speech: four out of five civil servants are already located outside London.

The noble Lord quoted various examples of dispersal outside the North. However, he did not mention the Manpower Services Commission in Sheffield, the DHSS and the Inland Revenue computer centres in County Durham and Newcastle and the location of part of the Customs and Excise VAT collection machinery in Bootle. Those are some examples and they show that there is not so much between the noble Lord and the Government as I thought when listening to the noble Lord.

The noble and learned Lord, Lord Simon of Glaisdale, asked the question which first arose during questions on the Statement on the Civil Service White Paper made a week ago. The noble and learned Lord wanted to know the intentions of the Government as regards regional pay. We strongly support moves towards greater regional variations in pay as an important contribution to a more flexible labour market. We believe that pay should be responsive to the needs and circumstances of individual enterprise and not excessively constrained by external factors such as the going rate in the economy at large or what is prescribed by national agreement. We realise that that also means taking account of differences in local costs and labour supply and demand. In practice experience over the year has been that, apart from Greater London and to a lesser extent the rest of the South-East, the average earnings in the different regions are tightly bunched despite differences in living costs and unemployment.

However, there are encouraging signs of change. Many employers are moving away from national agreements towards more decentralised bargaining and also developing geographical pay variations within national arrangements. That is part of a trend making for greater responsiveness to local requirements. As an employer in the different regions, the Government are naturally concerned to tackle their recruitment and retention problems. We are currently looking at ways in which they can be effectively dealt with.

The noble and learned Lord also asked me to say a word about any continuation of the dispersal programme. It is the case that the Government's dispersal programme is nearing completion. Departments continuing to operate wider location policy, regulating location of new and relocation of existing work——

My Lords, I should like to ask the noble Lord whether I was wrong in reading the letter from the noble Earl, Lord Caithness, as meaning that a new location programme is just starting?

My Lords, I was about to answer the noble and learned Lord's point. The Government are preparing, and will announce in due course, a policy to succeed the Government's dispersal programme, which is nearing completion. In essence, that is the answer to the question put to me by the noble and learned Lord. We hope that the policy will reflect in the localities concerned the potential benefits to the Civil Service of locating work in areas where labour supply, conditions and costs are favourable. I do not think that I can go further than that this evening.

Finally, I should like to repeat my comment that this has been a valuable debate. I was particularly pleased to note that the noble Lord, Lord Harris of High Cross—whose difficult questions about social security I did not manage to answer—approved of the opening speech made by my noble friend Lord Young of Graffham. The noble Lord said that it looked on the bright side and took a positive view. I also thought that the speech made by my noble friend Lord Joseph was enormously important because, in commenting on the speech made by the noble Lord, Lord Jenkins, he pointed out the dangers of, as he described it, leaning against equality but also stressed the importance of leaning against poverty. That difference is crucial to today's debate and I am grateful to my noble friend for pointing it out so pithily.

The Government believe that the best way to tackle many of the issues which have been raised this afternoon is through positive measures. We have worked to develop a competitive and thriving economy to protect the value of people's incomes through the control of inflation and to target help on those in need. Our policies are aimed at achieving those objectives and it is those policies that we are determined to continue to pursue.

My Lords, I feel sure that noble Lords throughout the House will agree that this has been an interesting and balanced debate and that it has been most valuable. I am extremely grateful to noble Lords and right reverend Prelates for taking part in the debate. I am sure that I shall be allowed to mention once again the most valuable maiden speeches of the noble Lord, Lord Jenkins of Hillhead, and the right reverend Prelate the Bishop of Chester. He is my near neighbour and knows my problems as he knows those of his own diocese.

The noble Lord the Leader of the House made a most persuasive speech but it did not deal with the problems that I raised in speaking to the Motion. However, I should like to ask him to ensure that his right honourable friend the Chancellor of the Exchequer has a copy of Hansard. If he wishes he may ask the Chancellor to disregard all the political speeches but to pay particular attention to the speeches of the right reverend Prelates the Bishop of Manchester and the Bishop of Chester. They were outstanding in their quality and appeal. If the Chancellor of the Exchequer can be persuaded to read the speeches, I believe that if the right reverend Prelates say a prayer or two between now and the Budget we may get somewhere. I beg leave to withdraw the Motion.

rose to ask Her Majesty's Government whether they are satisfied with the effectiveness of the arrangements for representing the consumer interest in the telecommunication and gas industries since privatisation.

The noble Baroness said: My Lords, I have tabled the Question about the arrangements made for representing consumer interests in telecommunications and the gas industry since privatisation because I believe it to be timely. I am grateful to those noble Lords who are taking part in the debate. By way of background I should like to remind your Lordships of the arrangements and also to comment on how the structures are working from my own investigations and research.

Noble Lords will remember that in August 1984 British Telecom became a public limited company. The regulatory body, Oftel, was established at the same time as the National Advisory Committee on Telecommunications in Scotland, Wales and Northern Ireland. The Director General of Oftel also set up two further committees to advise him on telecommunications matters relating to small businesses and elderly people. In 1986 the Gas Act set up British Gas. The independent regulatory body, Ofgas, was established, as was the Gas Consumers' Council to deal with complaints.

The arrangements for the protection of consumers against monopolies were different for each industry. For British Telecom there was a solo model afforded by Oftel. For the gas consumer there was a twin model of the Ofgas regulator and the Gas Consumers' Council. In looking at the performance of the two different systems the first question is directed to which has been the most effective.

Dealing first with British Telecom, I should like to consider the problems suffered by consumers and how well Oftel has succeeded in dealing with them. I believe it is generally agreed that professor Bryan Carsberg has given Oftel excellent leadership. However his dual role of regulating the industry while at the same time dealing with complaints has been impossible. How can a regulator show that he is pro-consumer and at the same time hold the reins? From the point of view of the consumer it appears that Oftel has not been entirely successful. For a start, it is reported that few consumers even recognise that Oftel champions their cause and in many cases they do not know how to contact Oftel.

What is the nature of the complaints about this particular service? First, one must mention price. In July last year a MORI survey showed that over 50 per cent. of consumers thought telephone charges were unreasonable. When asked whether British Telecom's performance had improved since privatisation they said that they were more dissatisfied with British Telecom than they were with gas, water or electricity. Therefore, that already shows a high level of dissatisfaction.

I now turn to the second area; namely, that of contract. As the National Consumer Council has pointed out, British Telecom, like other private sector companies, is free to impose any contract terms it likes. However, what is not so good is that, as it has a monopoly for many of the services it provides, consumers are a captive market and have no option but to accept the conditions imposed by British Telecom or go without those services. Therefore, the potential for abuse is obvious and it is clearly demonstrated in the terms set out to customers by British Telecom. For example, quality of service standards should be set; a fixed period for faults to be repaired and soon should be included. The urgent repair service has been abolished and customers whose telephone represents a living—and that is very often those small businesses which are so admired by this Government—suffer very much indeed. They have no redress. There is an increasing number of self-employed people who depend on an answering service for their living and when the telephone is out of order, their living is very seriously affected.

The third area I have to mention is call boxes. Here again Oftel's own figures show that as many as 48 per cent. of people wanting to use a call box were unable to find one that worked. That is quite a remarkably high rate of failure.

On all three counts—price, contracts and call boxes—so far British Telecom has a pretty dismal record. Indeed, it reflects how badly and unfairly the consumer can be treated when an essential service is in the hands of a private monopoly.

There is no doubt that Oftel is engaged in a series of actions aimed at removing the cause of such a high level of complaints. The introduction of competition in call boxes from Mercury might help in that particular area, but we must bear in mind that telephones are not there only for social reasons. When they represent one arm in the creation of a living then it is very worrying indeed that at present dissatisfied customers have no redress and no way of improving that service.

To move to gas consumers, Ofgas and the Gas Consumers' Council are complementary in a number of ways. Ofgas deals with gas up to the outlet of the meter and the Gas Consumers' Council takes over from that point dealing with service, complaints, appliances and so on. Ofgas has legal powers and the Gas Consumers' Council has none. Ofgas, whose contact with British Gas is described as one of "creative tension", deals with matters such as information provision, meter break-ins, tampering, tariff rates, connection charges, prepayment meters, and so on. The Gas Consumers' Council represents the interests of 17 million domestic, commercial and industrial consumers and one of its responsibilities is to monitor gas disconnections; it also monitors adherence to the code of practice.

The statistics published yesterday by the council were very alarming. Between 1985 and 1986 the rate of disconnections increased by 25 per cent. However, this upward trend showed a marked acceleration during 1987 when in the first nine months there was a further 35·3 per cent. increase in domestic disconnections when compared with the same period in 1986. That percentage represents 45,263 customers disconnected and that is a most terrifying figure when related to the anxiety and anguish that the family or the individual suffer.

It is quite clear that the proportion of disconnections varies in different areas. Before I say anything else, it must be remembered that this very great increase coincides with a downturn of disconnections in electricity. British Gas say that this has nothing to do with privatisation. Indeed, they blame poverty, the growing problem of debt and the effect of unemployment as being major causes of disconnection. I believe there are signs that they play a very great part.

Perhaps I may mention one or two other pointers which show why disconnections have gone up. First, in the past few months the number of prepayment meters has been reduced so fewer customers have prepayment meters. Another area is the repayment of arrears arrangements which do not seem to be very effective. Repayment arrangements break down because they are set at levels which the customer cannot afford. They are described by the Gas Consumers' Council as being a waste of time and money for British Gas and being of no help at all to the customer.

The major statistic which I find really disconcerting is that half of the disconnections happen when there has been no contact between British Gas and the customer. I can imagine the scene of a husband walking out and leaving the wife holding the baby and, in this case, the gas bill. She is quite terrified when the doorbell rings. It may often be a representative of British Gas who will try to work out some system but she is too frightened to open the door. There is no communication and the matter ends not only with disconnected gas but a broken door. Therefore, there seems to be a very great urgency to create better communications with the customer and to create better communications with British Gas and families that are obviously hard-pressed.

I must admit that a few minutes before I came into the Chamber I was given a letter from British Gas which states that British Gas is launching a major new advertising campaign dealing with customer service which it hopes will help set up better communications between itself and those families who find it difficult to pay their bills.

The last matter I mention is that the Gas Consumers' Council has changed very much since privatisation. As noble Lords know, before privatisation it was a very broadly-based organisation. It had district and council members, watchdogs and a code of practice and indeed, there was communication between the gas service and the customer. Perhaps I may just give an example of obvious reductions. In the North Thames area there used to be a district office with 80 council and district members who could be contacted independently as their names were published. There now remain only 18 panel members to serve the same number of customers and, furthermore, the names of those 18 panel members are not displayed in the showrooms. That means that all complaints are channelled through the council. That very often means that the telephone is blocked and that a panel member will not receive details of the problem until a few days later by which time there has been a great deal of suffering. Therefore, although British Gas says that it is adhering to the code of practice for domestic consumers, I feel that there are not enough volunteer watchdogs to monitor that this is the case.

The noble Baroness, Lady Masham, wanted to speak in this debate but is unable to do so. She asked me to inquire whether British Gas offers special help for disabled people. The noble Baroness has suffered a number of problems with the gas supply to her home, and she asked me to put that question to the Minister.

I conclude by making the following points. First, it would seem that the structure of dual bodies set up for the gas consumer is more effective than the single body for British Telecom; except of course for the unacceptably high rate of disconnections which have taken place. Secondly, there should have been real safeguards in the legislation governing both industries which could be said to protect the quality of service given to customers. As your Lordships know, there is no reference to quality of service in the licence conditions. Thirdly, both regulatory bodies do not have enough teeth. The Gas Consumers' Council needs a larger and more wide-ranging network of volunteer watchdogs to keep in contact with consumers.

Finally, I believe that in the light of the plans for privatisation of the water and electricity industries the experience of consumer representation in the telecommunication and gas industries should be examined in detail. I suggest that the Government should, as a matter of urgency, undertake a comprehensive study of how complaints are administered by those bodies which I have mentioned and that such a study should encompass the effectiveness of complaints procedures, the level of satisfaction achieved and perhaps, very importantly, the degree of awareness among consumers of where to go with a complaint.

As I said at the beginning of my speech, I am very grateful to noble Lords who are speaking in this debate. This is an important moment when the Government are clearly looking forward to further privatisation, and they should not make the same mistakes concerning consumer interests as they have in the two services covered by the debate.

My Lords, we are indebted to the noble Baroness, Lady Ewart-Biggs, for introducing this debate at this time, particularly as there has been a great deal of publicity concerning the service from both industries. As she rightly said, we are entering an entirely new era in certain basic industries. The privatisation of telecommunications and gas, creating either monopolies or virtual monopolies in the private sector, has raised in a new form the ways in which consumers should be protected.

The issues of regulation and consumer protection are interlinked; it is very difficult to consider the one without the other. The first question that is bound to be raised is how the right balance will be achieved? For telecommunications, as the noble Baroness rightly stated, a particular solution has been tried whereby the regulatory body is also the consumer complaint body.

I was interested to learn from information provided by Oftel that the number of complaints received by the previous consumer organisation—the Post Office Users National Council—amounted to 6,000 in 1983. In 1987 Oftel received 24,000 complaints. Whether that is due to the fact that more publicity has been given to the whole issue or whether it is due largely to the increased amount of dissatisfaction with the service is, of course, difficult to ascertain. I imagine that it is a mixture of both. However, it indicates that there is a problem connected with consumer dissatisfaction in this area. Therefore, it suggests that the whole question of dealing with these matters should be looked at again, following the experience we have had since 1984.

I join with the noble Baroness in paying tribute to the work of Professor Carsberg and his team. There is not the slightest doubt that Oftel has vigorously identified and brought to the notice of the public a number of major issues. For example, it has drawn attention to the callbox question, to which the noble Baroness referred. It has examined the directory inquiry service. It has drawn attention to the whole range of services in general. More recently it has intervened in the teenage talkabout service, to major effect.

Therefore, I believe that we must accept with satisfaction that the regulatory body is doing a good job within the limits of the powers conferred upon it. The question, as the noble Baroness rightly stated, is whether it should also be dealing with complaints. I believe that there is an opportunity for reviewing this because the BT licence comes up for renewal in the middle of next year. Already a consultative document has been issued by Oftel drawing attention to the various issues involved. It has raised some valuable points in relation to services. As the noble Baroness rightly pointed out, in the existing licence there is no obligation relating to service. Oftel has raised the question of whether there should be, but I believe that at the same time as the renewal of the licence is being considered the whole issue of how consumer complaints are dealt with could be reconsidered.

The noble Baroness was right to point out that for gas the situation concerning complaints is different. At least the two systems have the merit of enabling one to make a comparison between their relative effectiveness. I have no doubt that the Government will be carefully considering the experience of the two sorts of consumer bodies in advance of further privatisation of essential services.

In the gas industry we have a situation that is not only different from telecommunications in that the two aspects are separated—that is, the regulatory and the consumer aspects—but we have a much lighter regulatory system. That is a point to which attention was drawn during debates which took up a considerable amount of your Lordships' time during the Committee stage of the Bill.

One aspect which must be considered seriously when the licence is due for renewal is whether there should be more powers for the regulatory body. The powers of the regulator in the case of gas are effectively limited to the domestic market which we are, of course, primarily concerned with. But there are also industrial consumers—the so-called contract market. There has been mounting dissatisfaction in that market. I have found it odd that complaints in that market, instead of going to the regulator—Ofgas—go to the Office of Fair Trading and, through it, to the Monopolies Commission for investigation. That seems a rather odd arrangement. Perhaps that matter could be considered when the licence is renewed.

In the case of the domestic market, the complaints procedure is very carefully and clearly laid out in the first annual report of the new Consumer Council. That report explains that the council has tried hard to deal quickly with complaints and to obtain action on an effective basis.

One of the main problems, as the noble Baroness rightly said, is the question of disconnections. I had the opportunity of talking to some of the officials of British Gas today in advance of this debate because I thought it would be helpful if I were to hear directly from them how they viewed this problem which has excited a certain amount of public disquiet. They explained to me that they are very concerned about the difficulties they have with certain customers who have problems over payment and who fail to make contact with them. I am convinced that British Gas generally wants these people to talk to it. The purpose of the campaign to be mounted from next Monday aims to do that. I very much hope that British Gas is successful and that it will find ways of dealing sympathetically and effectively with these cases so that people are not deprived of essential supplies of energy.

The effectiveness of the procedures for protecting consumers in both these industries raises the underlying question of whether it is right that we should have essential services transferred to the private sector in this form. I do not believe that it is going to be possible to get effective protection with, on the one hand, a very powerful monopolistic or near-monopolistic supplier having enormous resources at its disposal and, on the other hand, what are bound to be relatively limited regulatory and consumer protection organisations.

I conclude by saying that I believe this to be the underlying issue of the whole problem. With the noble Baroness, I very much hope that the Government will seriously reflect upon this aspect of the problem before proceeding with the further privatisation of essential services.

My Lords, before the noble Lord sits down, may I ask him to go back a little. He used the word "complaint" on two occasions in relation to both British Gas and British Telecom and the various services. I am the former chairman of a consumer council. We would differentiate between the person who had a genuine grievance or complaint and the person who was making a genuine inquiry. In the figures that the noble Lord has given, is there any breakdown between the two, or have all the figures been lumped together?

My Lords, there is a breakdown in the annual report prepared by the Gas Consumers Council. It gives a breakdown and of the total figures quoted about half are general inquiries and the rest are detailed complaints.

My Lords, as I sat here I kept thinking of the Harrow song "Forty Years On", where the lines occur:

"Being feeble of foot and rheumatic of shoulder, Shorter in wind as in memory long".

Well, I have a long memory. I am short of wind, so I shall not be long. The fact is that I have considerable concern over this matter. I was encouraged to jump in by the noble Baroness.

Years ago, telegrams were abolished and the telemessage was substituted. It seemed to me that the telemessage as defined and as used in practice was something which was discriminatory. It is very difficult for poor people to manage. If your Lordships recall, the telemessage costs £4 for 50 words. As you know, in the good old days you could go into the post office and send a telegram for a bob. I started asking questions, and I apologise to my noble friend who is going to reply. I pestered him like anything. Nothing really happened because—if my noble friend will forgive me—this was at a time when there was a period of transition after my noble friend Lord Lucas of Chilworth was speaking from the Front Bench defending the Post Office.

As time went by, the Post Office was hived off and my noble friend found himself in the position of having to attack the Post Office. This is the case today. I feel that one of the few constructive ways in which I can contribute to this debate is to say that we in this House should realise that we are the public supporters against the private authorities. We do not want to support them. We want to tell them what they are doing and what they ought to do. When the matter was reduced to a number of Starred Questions which my noble friend had to answer, he gave replies which were really rather old hat dating back to the time when this Front Bench was defending the Post Office.

I tabled a Motion in the short debates list on 24th July last year. The months have rolled by and the ballots have rolled by. In my recollection, there were five or six of them, but my Motion has never come out of the hat. I do not conceal from your Lordships that I have been quite dismayed because it seems to me that this House ought to be in a position, as the noble Lord, Lord Ezra, said, to refer to some regulatory body which one can get hold of. I believe the noble Baroness made that point. What do you do about it? I put down a Motion about telemessages in July last year but it has not come out of the hat yet.

I do not complain now because I am well informed that the authorities are looking into it. That is nonsense. I feel that the Back-Benchers in this House ought to be in a position to do something about these matters. I have been asked, "Why don't you put down an Unstarred Question?" I have been had like that before. Once I put down an Unstarred Question to come on at half-past eight. There was a Statement in the middle of the day. There were 10 Peers who were going to support me but the Unstarred Question did not come up until 10.15, by which time my 10 Peers had disappeared. What would have happened today? Suppose there had been a good, rousing Statement in the middle. The noble Baroness was able to rise somewhere near eight o'clock. If there had been a Statement, the time would have been more likely to be near nine o'clock. It makes a nonsense of it, and I appeal to your Lordships to bear this in mind. As I say, I have reason to believe that the matter is being looked into.

Among the replies I received about this enormous charge of £4 for 50 words, I received a great deal of support from the other side of the House. The best support I had was from the noble Lord, Lord Glenamara, who pointed out that the telegram used to be used for a simple social message; for example, "Auntie died yesterday; funeral Wednesday". That is the kind of message that "Grannie up the glen" wants to send. It is no use talking about sending a telemessage at £4 for 50 words when we only want to use 11.

Your Lordships may remember that in the old days I was always on about "Grannie up the glen" and the absence of the ability to communicate without telephones. I was asked, "Why don't people go to the telephone box?" Many of the telephone boxes are vandalised. Few of them have slots for a pound coin, and in order to send a telemessage you have to put in four quid. That is all very well, but I remind your Lordships that the pound coin is not common currency in Scotland. My local postmaster says that if he gives pound coins in change people say, "No thanks; give me a pound note". It is not possible for people to send telemessages from call boxes. That is out in Scotland.

When I put down my Unstarred Question ten months ago I felt that it would be an opportunity for suggesting that the balance of the telemessage would be greatly improved if the charge was £1 for 20 words so that ordinary poor people who do not have a telephone could afford it. At the moment only people with telephones can send telemessages. "Granny up the glen" cannot go to the post office and say that she wants to send a telemessage. People will ask why she cannot use the coin box. She cannot use the coin box because it has been vandalised.

I think that I have said as much as I can say to contribute to the noble Baroness's debate. What the noble Lord, Lord Ezra, said is right. We must have a better regulatory body. I wrote a long letter to Professor Carsberg. I had an acknowledgement, although I do not think I had a reply. I asked him the very questions which I have been putting to your Lordships, and they are jolly difficult to answer.

I have been in touch with POUNC. I understand from my local sub-postmaster that an enormous number of sub-postmasters—and there are 4,000 of them—would be glad to have money coming in from people who go into the post office to send a short telemessage. I have never heard a roar of laughter in this House like the one that went up when I read to your Lordships a letter from the Post Office which said:

"This is not a matter for us. This is a matter for British Telecom".

I wrote to British Telecom and I received a letter back saying:

"This is not a matter for us. Apply to the Post Office".

It has been going on like this since time immemorial. Let us hope that my Motion will be successful at the next ballot. I have given up hoping. Indeed, I say.

"shorter in wind as in memory long".

I support everything that the noble Baroness has said and I hope that I have been able to express my concern that the difficulties of poor people are not properly realised. It is all very well to pick up the telephone and send a telemessage to Australia. However, if you do not want to send a telemessage to Australia but you want to send a telemessage to Paisley, it costs four quid for 50 words.

My Lords, I should like to thank noble Lords who have taken part in the debate and especially my noble friend Lady Ewart-Biggs for introducing it. I begin with some of the general principles. We must all agree that, ultimately, in judging the performance of any industry the consumers' interests must be dominant. Even where the industry's customers include firms, the cost of overcharging such firms or providing them with poor service will be passed on to their customers as well. It is entirely right to take the consumer's attitude as central to this matter.

Secondly, it is my view, and the view of most people who have looked at these matters, that regulation or not, that whether or not we have the Office of Fair Trading, the Monopolies and Mergers Commission, or what have you, the best protection for the consumer is competition, by which we mean an alternative source of supply. A great problem arises here because in the two cases we are discussing there is not in most activities an alternative source of supply.

In my view—and this follows from what has already been said—in the case of British Telecom it is not to late to reduce its monoply power. One obvious area is in the provision of call boxes. There is absolutely no reason why British Telecom should have anything resembling monopoly power in the provision of call boxes. The noble Lord, Lord Ezra, and my noble friend Lady Ewart-Biggs have reminded us that the licence is coming up for renewal. In the case of British Telecom it is time to scrutinise all its activities to see whether the provision of call boxes could be, as it were, partially or wholly taken away from it so that competition could be introduced.

In the case of gas it is quite clear that at the time of privatisation insufficient thought was given to the way in which it would be done. It was my view, and it still is, that it could have been privatised on a much more competitive basis and a great many of the problems would not have emerged. I do not know whether it is too late to do anything about British Gas but it is not too late—and this is where the noble Lord, Lord Ezra, and my noble friend have guided us—to learn lessons for the future. I do not want to introduce a political element into the debate but the lesson I learnt from this is that we should not privatise electricity. Equally, if one is determined to privatise it, one really has to give overwhelming weight to consumer protection and competition.

As regards the position of British Telecom with Oftel, one may want to say that Professor Carsberg is doing as good a job as he can. I shall come to the point of the noble Lord, Lord Ferrier, in a moment. An examination of costs with, one hopes, full access to data, and an examination of pricing policy to see that it is non-discriminatory and that the prices are not excessive in relation to cost and matters of that kind fall quite reasonably within Professor Carsberg's ambit. However, when it comes to dealing with complaints it is much more sensible to have a separate body. In regard to complaints two matters must be looked at. First, there is what the individual person feels when making a complaint; namely, is his complaint being dealt with; is he being fairly treated; when he rings up to say that his telephone is not working, is he getting a courteous reply and some encouragement that something will be done about it reasonably rapidly? Then there is the general principle of consumer complaint in regard to what will happen to call boxes in general. What will happen on directory inquiries? It may well be that these general questions could still be dealt with by the regulatory body but it is not obvious to me that such a body is suited to dealing with the individual.

I shall deal in a moment with gas, but the noble Lord, Lord Ezra, raised the privatisation issue in an important way. He said, looking at the underlying forces, that he is pessimistic and that, although we can think up imaginative schemes about how to protect the consumer, in the end he was doubtful whether they would work. He said that we have to go back and look at privatisation on that basis, and he may well be right. This leads us to the issue of the national interest. When the noble Lord, Lord Ferrier, and others have introduced subjects such as telemessages and call boxes being out of order and they are told that it is the business of the individual enterprise—British Telecom or the Post Office—to deal with it, we have to ask, "Is there no national interest here?"

As regards the telegram, what has always worried me is that everyone, but especially poor people, has an interest in having a reliable means of rapid communication. As I understood it, that is the point that the noble Lord, Lord Ferrier, was making. It may of course be argued that he was a little outside the central issue of this debate, but I am bound to say that I agree with him on the general principle of what ought to be done. We are indebted to him for introducing the matter.

I turn now to the subject of gas. Here I join with others in my concern about the disconnection problem, but I can see both sides of the argument. Clearly, a nationalised industry or a private enterprise must behave in a businesslike manner and would obviously like to receive the sums that it is owed. There is no doubt about that. We do not suggest that the wrong is all on the side of the gas industry or that, when it was disconnecting—even though there were fewer disconnections when it was nationalised—it was entirely erroneous to say that people ought to pay for what they had taken.

Nonetheless I have been bothered for many years, and the latest report bothers all of us a great deal, about the damage that is done to deserving, as opposed to undeserving, cases. It is hard, however, to distinguish between the two in practice. I am not sure whether my noble friend Lady Ewart-Biggs was saying that she was reassured by the letter she received from British Gas, but I did not feel reassured, because I did not hear anything practical. British Gas merely said that it would like to do something and sought to blame all the social and economic forces that we discussed in the earlier debate this afternoon for causing the problem. Therefore, I think we have a difficulty there.

To conclude, my view is that the twin regulatory bodies—Ofgas, and the Gas Consumer Council—are probably the way to deal with the matter if we are going to do it at all. However, my worry is, first, whether that is particularly reassuring and, specifically, whether Ofgas has enough powers, or access to sufficient information, to exercise such powers. Secondly, I wonder whether the Gas Consumer Council is independent enough and confident enough to carry out the tough job of protecting consumers' interests. Those who represent consumers must be cordially disliked by the industry with which they are dealing. They must not be in the pocket of that industry. In my view they must not even be in the same building as the industry about which they are complaining. They must be demonstrably independent, and financed separately from the industry. It is not obvious to me that that is the situation in this case.

My final comment is more general. Consumer issues are not confined, and should not be, to the cases that we have mentioned. They apply to British Telecom. telemessages, the Post Office, gas and onwards to electricity and, finally, to water, when the time comes.

There are at least two other consumer bodies in society. The NCC seems to me to have gone extremely quiet of late. One would like to feel, since it is a public body, that it would be taking a rather more active interest in those matters. The other is the Consumers' Association, which does take a positive and active interest, but one would like to see it pressing rather more in those areas.

I repeat that this is an extremely serious matter. We look forward to hearing from the Minister on the points raised and we shall return to the subject in the future.

My Lords, let me say to the noble Baroness, Lady Ewart-Biggs, at the outset that the Government have given high priority in ensuring that adequate arrangements exist to protect the consumer interest in privatised industries which have monopoly of power. However, there is no single pattern which can be applied in all cases, and the needs vary from industry to industry. For example, the problems faced by gas consumers are of a different nature from those faced by telephone users.

I should like, first, to deal with telecommunications and the arrangements set in place under the Telecommunications Act 1984. This Act, which provided for the privatisation of British Telecommunications, also established the office of the independent Director General of Telecommunications. Professor Bryan Carsberg, the director general, and his staff at Oftel play a crucial role in considering the consumer interest in telecommunications.

The role and duties of the director general have formed a key feature of the new telecommunications regime since 1984. Essentially, the director general is responsible for the monitoring and enforcement of the public telecommunications operators' (PTOs) licences. These were granted by the Secretary of State for Trade and Industry. The main PTOs are British Telecommunications and its competitor, Mercury Communications Ltd. BT's licence includes a number of detailed conditions relating to, for example, the provision of public call boxes, 999 services and the price formula governing some of BT's prices. The licence also contains more general provisions of key interest to the consumer, such as universal service and general business practice. The Director General is responsible for ensuring that BT lives up to those requirements.

In exercising his functions, the director general must take into account his duties, which are set out in Section 3 of the 1984 Act. These duties include in particular the promotion of the interests of consumers, purchasers and other users in the UK (including those who are disabled or of pensionable age) in respect of the prices charged for, and the quality and variety of, telecommunication services provided and telecommunication apparatus supplied. I know that the director general considers his duty towards consumers to be of major importance.

In carrying out his functions, the director general has powers which are independent of Ministers and exclusive to the director general. In particular, those powers give the director general the right to require information from BT and other telecommunications operators and the power to seek amendments to their operating licence. These amendments can be made either by agreement with that operator or by referring the matter to the Monopolies and Mergers Commission. The director general has not asked for any further powers and I believe that he is content with the powers he has to perform satisfactorily his functions of monitoring and enforcing the licences, to the benefit of the consumer.

In his work, the director general is aided by the work of the Advisory Committees on Telecommunications (ACTs), which were established under Section 54 of the 1984 Act. Those ACTs are established both on a geographical basis, where there are separate committees for Scotland, Wales, Northern Ireland and England, and also for particular groups of consumers: thus there are separate ACTs for small businesses and for the disabled and elderly people. All those committees meet quarterly to consider representations in their particular area and they also meet bi-annually with the director general in order to provide feed-back on problems that may have arisen.

The director general is further assisted by local telecommunications advisory committees which exist to deal with complaints locally and to provide a "grass roots" input to the director general on telecommunication matters. There are about 200 such committees in the United Kingdom which have been established for that purpose.

In addition to these statutory committees, the director general has also established a non-statutory telecommunications forum which meets bi-annually and which provides an opportunity for an exchange of views between Oftel, all sides of the telecommunications industry and the user groups to exchange views. That, then, is the underlying structure for representing consumer interests. How does it work in practice? It may be helpful if I take some specific examples.

Given that one of the director general's duties is to promote the interests of all consumers, the director general is careful to consult as widely as possible before taking major decisions. Earlier this year he issued, for example, a consultative document on BT's pricing formula, the RPI-3. The formula, whereby prices are not allowed to rise higher than three percentage points below the retail prices index, applies to exchange line rentals and direct dialled calls in the UK. That formula lapses in 1989, if it is not replaced or extended, and the director general has now widely issued a consultative document to gauge consumers' views of how long any new rules should last, whether the services covered by this formula should stay the same, and, if the formula should remain as a percentage link between the retail prices index and prices, what that linkage should be. I should add that since privatisation, that so-called basket of prices has fallen by 14·5 per cent. in real terms.

The director general's consideration of consumer complaints is a great help in the exercise of his functions. When several complaints are received on one issue, the director general can consider whether the long-lasting remedy lies in a licence modification or in persuading the operator to change his ways. For example, the largest category of complaints received by Oftel concern bills issued by BT. Customers who receive itemised bills seldom have similar complaints. The director general therefore pressed BT for the early introduction of itemised billing and eventually, in December last year, BT announced a rolling programme starting last month for its introduction—well ahead of its original plans.

Those are just two examples of the work the director general carries out in support of the consumer and in response to consumer representations. The Government's view is that the functions and duties of director general, as set out in the 1984 Act, provide for an independent statutory body with wide-ranging powers to ensure that the consumer interest is best served. As I have said, the director general has not expressed any need for greater powers in this area, and the Government's view is that this watchdog, as it is popularly known, has plenty of teeth to tackle any difficulties that arise.

I welcome the recognition by the noble Lord, Lord Ezra, of the good job that Oftel does in its regulatory role. The expertise gained by the director general and his staff in enforcing and monitoring operator licences is of great value in his consideration of consumer representations. His wide knowledge of the quality, variety and prices of services and apparatus from his contacts with companies provides a valuable industry-wide view which helps the director general more effectively to consider complaints by consumers. Because of his regulatory functions, the director general also has a more active role with consumers, as shown by the consultative document that he has issued on the RPI-3 price formula. Finally, because of his wide-ranging powers, the director general can take action himself when a specific problem is raised by a number of consumers.

I should make it clear to the noble Lord, Lord Ezra, that BT's licence does not come up for renewal next year; it is the RPI-3 formula which is time-limited and expires in 1989 if not extended, as I have already said.

Where a problem has arisen which is of concern to consumers, the director general may propose an amendment to the licence. Such an amendment must be agreed with the operator, in this case BT; or, if that is not possible, the director general may refer the matter to the MMC. That indicates the strength of his powers and his ability to support consumers. I should tell the noble Baroness, Lady Ewart-Biggs, that I understand the concern over the introduction last year of charges for priority fault repairs. New charges are never welcome, but previously the service was not without cost. It was available to particular organisations or individuals only, but everyone had to foot the bill. Those who require the option of a quicker response can now subscribe to the enhanced level of service. I know that the director general has been keen to establish with BT that those extra services will not affect the level of the standard fault repair service. Furthermore, he is examining the level of the charges to see that it is justified by the costs that BT incurs.

I say to the noble Baroness and to the noble Lord, Lord Peston, that in common with many members of the public the director general became concerned last summer that too many of BT's public payphones were out of order. In addition to requiring BT to improve its service, the director general concluded that the consumer would be best served by the introduction of competing services offering a choice of facilities, tariffs and locations. He has granted Mercury the determination it needed to allow it to provide a public callbox service, and that is expected to start in the summer. That indicates the speed with which the director general has responded to the many complaints that have been raised in your Lordships' House and outside.

Oftel is determined that the general public, as well as industry, should be aware of its role and powers within the liberalised telecommunications regime. Oftel seeks to reach the ordinary telephone customer by maintaining a high profile on all telecommunications issues, especially those which affect the generality of users. Reports in the media on telecommunications issues frequently refer to Oftel's role in the matter.

Where complaints and inquiries about specific problems are concerned, Oftel seeks to ensure that the customer knows when and how to contact it. For example, those details are contained in the code of practice for consumers which is printed in all BT's telephone directories. The growth in the number of representations made to Oftel from about 14,000 in 1986 to over 24,000 in 1987, shows that those measures are succeeding in raising the general level of the public's awareness of Oftel.

Finally on telecommunications. I think that I should make the point that Oftel should be the last resort for complaints. Oftel is not a surrogate for British Telecom. BT should operate an efficient consumer service which deals with its customers' problems. Only if BT's arrangements fail should Oftel be brought in. A company should be capable of dealing satisfactorily with its customers. If BT's procedures appear to be failing consistently in any respects, the director general will press BT to improve the arrangements.

I shall now turn to the gas industry, where the domestic consumer is protected by clear, objective regulatory arrangements and by an independent Gas Consumers' Council, both of which were set up under the Gas Act 1986. The regulatory arrangements, which in themselves create strong pressures for efficiency to the benefit of customers and shareholders alike, are policed by the Director General of Gas Supply, Mr. James McKinnon, and his team at Ofgas. The price formula came into full operation last April, and the first price change under it was the 4.5 per cent cut in tariffs, which took place last July.

The independent Gas Consumers' Council complements the work of Ofgas to protect the consumers' interests. It is a unitary body with Miss Sheila Black as its chairman and a current membership of 18. It is supported by professional staff, the majority of whom are regionally based in the 11 regional offices located throughout Great Britain.

As with telecommunications, importance is attached to arrangements for grass-roots liaison and voluntary participation, and under the terms of the Act the council has powers to appoint persons in particular localities to assist it in the fulfilment of its duties. I must emphasise that those arrangements for local representation are for the council to decide and, while the existing arrangements are only in their second year, I believe that the council is satisfied that they are working well.

Following privatisation, the council has been given a specific duty to investigate complaints, and has powers to obtain the information from British Gas necessary for that function. Those are set out in Condition 8 of the British Gas authorisation. With Ofgas, the GCC monitors the code of practice on disconnections and has a right to make representations to British Gas about its operation.

Since privatisation, the Gas Consumers' Council has also been given a role in looking after the interests of industrial gas customers who buy from British Gas on negotiated contracts. The GCC was responsible for submitting evidence to the Office of Fair Trading before the pricing policies of British Gas were referred to the MMC. Your Lordships will however understand that I cannot anticipate the outcome of the MMC inquiry and it would be wrong for me to express a view on how British Gas has conducted its industrial sales until the MMC has reported.

I would say to the noble Baroness that I am aware that domestic gas disconnections in the first nine months of 1987 increased by more than 35 per cent. over the same period in 1986. The Gas Consumers' Council which has a responsibility for monitoring the code of practice on disconnections has carried out an investigation into this increase; it published its findings yesterday. The council, while expressing concern about the rate of increase, could not identify any single explanation for it but pointed to a number of possible contributing factors. For example, the council found that disconnections were taking place in respect of smaller debts and after a shorter length of time in arrears.

The council acknowledges that it is beneficial to speed up the debt collection process so as to minimise the size of debt before it becomes unmanageable. I agree with the noble Baroness that other possible factors are the gradual phasing out of coin payment meters except in cases of hardship and the failure of the customer to make contact with British Gas. This obviously is a difficulty and British Gas is fully aware of that. The council has suggested measures on how these problems may be overcome. When the noble Baroness suggests that unemployment is a factor in the increasing number of disconnections, I would say to her that statistically the unemployment figures are going down while the number of disconnections is going up.

My Lords, that was not my statement. It was the Gas Consumers' Council which said that unemployment might have been one of the reasons for the disconnections. That appeared in its statement yesterday.

My Lords. I am grateful to the noble Baroness. I was pointing out that there seems to be some inconsistency; whether it is right or wrong is probably a matter of opinion.

I would say to the noble Lord, Lord Ezra, that the reason for the complaints by contract customers going to the Office of Fair Trading and the MMC is that contract customers, at the time when the Gas Act 1986 was being passed, opted to stay out of the regulatory system and to deal with British Gas direct. It was a decision those customers took. It is not a position forced upon them.

My Lords, if the noble Lord will permit me to intervene, perhaps he could indicate in what form that was done. Was it done through the CBI, or were all contract customers consulted? I must say that although I sat through the Committee stage of the Bill. I was not aware that that had emerged.

My Lords. I cannot tell the noble Lord tonight. He may have sat through the Committee stage of the Bill. It was before I came to your Lordships' House so I do not have knowledge of that. But I shall find out and let him know.

I was about to say to the noble Baroness that the Gas Consumers' Council has only recently completed its first full year of operation. We are currently reviewing that first year to try to estimate how successful the council has been. I accept that some concern has been expressed at the extent of local representations. This is one of the matters we shall consider in our review.

Finally, I should like to say to the noble Baroness that the Government have made clear that consumer protection will be a top priority in a privatised electricity industry. In deciding on the most appropriate consumer arrangements, the Government will certainly look at the experience of gas and telecommunications. I hope that I have been able to assure the noble Baroness and all noble Lords that the arrangements introduced to protect the interests of gas consumers and telecommunications users are appropriate to the industries to which they relate and, more importantly, they are effective.