My Lords, it is with the deepest regret that I have to inform the House of the death yesterday of Lady Park of Monmouth. On behalf of the whole House, I extend our condolences to her family and friends.

My Lords, in losing Lady Park of Monmouth, this House has lost a voice of great experience and wisdom; she was always listened to with affection and respect. Although we were not on the same political Benches, we were very old friends, having a shared political experience in government service. Also, as this House knows, we were quite often comrades in arms in battles about things that we cared about, such as interception and pre-charge detention. I have lost a very, very dear friend and the House has lost the valuable contribution of a very able and much loved lady.

To ask Her Majesty’s Government what progress they have made in constructing the new aircraft carriers HMS “Queen Elizabeth” and HMS “Prince of Wales”.

My Lords, first, I am sure that the whole House will wish to join me in offering sincere condolences to the family and friends of Serjeant Steven Campbell from 3rd Battalion The Rifles, who was killed on operations in Afghanistan this past week.

Turning to the Question, the contract for the QE class aircraft carriers was signed on 3 July 2008 and work is now under way in five UK shipyards—Appledore, Rosyth, Govan, Portsmouth and Tyne—with work due to start at the sixth and final yard, Birkenhead, in the next few months. In addition, equipment sub-contracts to the value of some £1.2 billion have been placed to date.

First, I enjoin these Benches with the earlier tribute. Combined annual Franco-British defence expenditure totals $130 billion, with significant duplication. Given that a carrier embraces the three elements of crew, escorts and aircraft, both fixed-wing and rotary, will not our two new carriers provide a unique opportunity to develop a joint Anglo-French naval force? Is it not time to show leadership and think outside the traditional box of national sovereignty, especially given the immense pressures on our defence budget?

My Lords, I see very little prospect of an Anglo-French naval force, but that does not mean that co-operation cannot take place. Indeed, the United Kingdom and France signed a memorandum of understanding in March 2006 with the aim of co-operating on carrier design. Indeed, the French have contributed to the design and have contributed money, as well as expertise, and they retain an interest in that design. However, the decision, which I understand will be made next year, on whether the French will go ahead with their carriers is for them. It has been an example of good co-operation, but I do not think that taking it further to an Anglo-French naval force is on the cards at the moment.

My Lords, we on these Benches also send our condolences to the family and friends of Serjeant Campbell of The Rifles. Turning to the Question, we know that the JSF programme, which is due to fly off the carriers, is delayed by 13 months. Can the Minister give the House some assurance that there will not be any further delays?

My Lords, the JSF programme is extremely important and significant progress has been made. There has been some reprofiling of the timescale, but it is important to recall two or three things. British pilots have now flown JSF, the STOVL variation has flown and, perhaps most important of all, the memorandum of understanding that we signed in 2001 means that the contribution to our programme has not changed. Therefore, approaching this contract incrementally was the right way forward.

My Lords, in today’s world scenario, what is the purpose of these aircraft carriers? Is it defence, or is it attack? If it is attack, who are we proposing to attack?

My Lords, the Green Paper that we published recently shows the changing trends in the world, the rise of Asia-Pacific and the threats from globalisation and climate change. We are facing many threats. The idea of having an expeditionary capability is thoroughly appropriate in the modern age.

My Lords, will the Minister confirm that the carriers will have a flexible role and not be confined to a fixed-wing strike role and that they are designed to be deployed not only for all-out combat but also for humanitarian operations?

My Lords, that is a very good example of the range of work that carriers can undertake. Those who are interested in rotary capability are also very excited at the prospect of the carriers.

My Lords, is it normal practice for such vessels to be named before they are named, if you follow me?

I do not think that this is the first time this has happened. The names that have been given are ones that should get the overall support of the whole House.

My Lords, it seems clear that there will have to be retrenchment in government expenditure. Would it not therefore be much better to have the aircraft carriers rather than new nuclear missile submarines?

My Lords, we have made it clear that the Green Paper and the Strategic Defence Review are not expected to revisit the decision that was made by Parliament in 2006 on nuclear deterrence. As for the future of the carrier, we do not want to pre-empt the Strategic Defence Review, but the First Sea Lord is extremely confident that it will confirm the need for the carriers, and the Secretary of State said recently, in answer to a PQ in another place, that he cannot foresee any outcome of the Strategic Defence Review that would lead to the cancellation of the carriers. We do not have such a clear commitment from other parties, and those who are threatening to revisit and to go clause-by-clause to find break clauses that could lead to the cancellation of the carrier are going down exactly the wrong track.

My Lords, does the Minister agree that it would be madness to engage in combat operations on land without appropriate air cover?

Yes, My Lords.

To ask Her Majesty’s Government why the target to halve the rate of teenage pregnancies is not on course to be met.

My Lords, our target is to halve the 1998 rate of teenage conceptions by 2010. Data for 2010 will not be available until February 2012. While we accept that we are currently behind the trajectory needed to achieve the target, real progress has been made in tackling our historically high teenage pregnancy rates. Between 1998 and 2008, the under-18 conception rate fell by 13.3 per cent to its lowest level in over 20 years.

I thank the Minister for that reply. Teenage pregnancy is indeed a complex social issue, on which the independent advisory board has made a lot of sensible recommendations. I would like to ask her about two of them. The first is for early identification of risk, followed by early intervention. Can she say how much money the Government have spent on that programme, and what are their plans for the long-term evaluation of its benefits? The second is for statutory sex and relationship lessons in school. Will she join me in urging parents to engage with schools so that they can satisfy themselves that this very sensitive subject is being taught appropriately and therefore refrain from withdrawing their children?

My Lords, I apologise to the noble Baroness; I shall have to write to her on her first question because I do not have that information with me today. However, I agree that early intervention is vital. That is why the teenage pregnancy prevention strategy the Government have been promoting for the past 10 years has worked to ensure that there are co-ordinated services and that PCTs are working with the education sector and so on. Since we relaunched our strategy, that has been very important.

On the question of parental involvement in schools, the noble Baroness is absolutely right. We must ensure that all schools have policies around sex and relationship education and that parents are consulted and involved. And, yes, while parents can at present withdraw children up to the age of 19 from sex and relationship education, we would like to see that limit lowered to 15. That is why the Children, Schools and Families Bill is so important.

My Lords, does my noble friend agree that this is indeed, as the noble Baroness, Lady Walmsley, said, a very complex issue? Does she further agree that it is clear from the evidence that, both in this country and abroad, girls who are encouraged to have aspirations tend not to get pregnant? Therefore, what will the Government do to encourage girls to have such aspirations in order to defer pregnancy?

My Lords, the noble Baroness is right in her analysis. We know that teenage pregnancy rates are highest in areas and wards associated with the lowest educational outcomes. As well as ensuring that we have the right of early intervention and that we continue to reduce the rate of teenage conception across the board, we must focus our efforts to enable all girls to attend the best possible schools. Where there is a risk of teenage pregnancy, we have to ensure that we intervene early, offer advice and support and do the best for all the girls of our country.

The Minister and the noble Baroness, Lady Walmsley, referred to early intervention. Can the Minister define what she means by early intervention, which she says is so essential?

My Lords, the teenage pregnancy strategy, which has six strands, has invested £246 million over the past 10 years. It is looking at the co-ordinated delivery of services for early intervention; at media campaigns to raise young people’s awareness of the value of avoiding engaging in early sex; and at driving up the quality of advice to young people and making contraception and other services more accessible to them. This is all early intervention. We also ensure that parents have access to information through helplines and so on in order that they, too, can be a key part of early intervention and provide confident advice to their children when they engage in such conversations.

My Lords, did the Minister wonder, as I did this week, about the quality of sex education in our independent schools when David Cameron, in reference to his wife’s pregnancy, said:

“Sometimes it takes a while before the stork pops one down the chimney”?

More seriously, can the Minister tell the House what measures the Government have taken to make teenage boys more responsible in their sexual activities? What steps are being taken to make them and their families support the babies they create?

Baroness Morgan of Drefelin: My Lords, the role of PSHE in ensuring that sex and relationship education becomes statutory is key, along with making sure that advice and information services are accessible to teenagers—not only to teenage girls but to teenage boys. Where boys engage in sexual relationships, it is vital that they do so when they are over the age of 16, or older wherever possible. Our strategy is always to encourage young people to delay engaging in sexual relations.

My Lords, given the complexity of communicating with young people about these issues and the importance of being effective, is the Minister concerned that more and more teachers are having shorter training? For instance, this weekend I spoke to a young woman who wants to train as a teacher. She will go to one school where she will be trained, rather than doing the postgraduate certificate of education and getting a range of placements. Will the Minister look at this and try to ensure that all our teachers get the very best and widest foundation for their teaching?

My Lords, part of this Government’s achievement in transforming the status of the teaching profession has been to transform the training opportunities for teachers, and we expect that teaching should in time become a Masters profession. Far from reducing the opportunities for training for teachers we are increasing them. There is a range of options for initial teacher training, but we are ensuring that PSHE becomes a much more focused, professional subject with the kind of initial teacher training that noble Lords would expect.

My Lords, will the Minister accept that the £280 million that the Government have spent on trying to tackle teenage pregnancy is just the tip of an iceberg on which they have wasted money, and that what they are really ignoring is our broken society?

My Lords, I was wondering whether I would get the opportunity to make reference to the Conservative analysis of teenage pregnancy. I will answer the question, because the suggestion is that the investment in preventing teenage pregnancy is not an effective use of resources. That investment has resulted in 42,000 fewer pregnancies in underage and teenage girls, which has led to an enormous saving of costs elsewhere in public services.

I do not trust Her Majesty’s Opposition’s analysis of the position regarding teenage pregnancy. Only recently, the Conservatives put out a document in which they completely missed the point, suggesting that 52 per cent of girls in poorer areas were falling pregnant as opposed to 5.1 per cent.

My Lords, it is clear that most people agree that teenage pregnancy is not desirable, but it does happen and some young people engage in their parental responsibilities very seriously. Can the Government say what is being done to support teenage couples who decide to take a responsible attitude to bringing up their child together?

My noble friend makes a very important point. For some young people it is a very positive choice to have a child. It is essential that all our services for children and young adults work to support these families. There is a whole range of services, such as family intervention services and nurse practices, which are designed specifically to support young people who opt for parenting.

To ask Her Majesty’s Government whether they have any legislative proposals regarding overseas-based persons making donations to United Kingdom political parties via personal or corporate channels.

My Lords, the Government recently legislated in the Political Parties and Elections Act 2009 to provide that individual donors who give or lend more than £7,500 must complete a declaration confirming that they are resident, ordinarily resident and domiciled in the United Kingdom for income tax purposes. Under the Act, a donation cannot be accepted from an individual if no such declaration has been made. The Government have no further legislative proposals regarding overseas-based persons making donations at this time.

I thank the noble Lord for that Answer. Was it not deeply shocking that in its report of 4 March the Electoral Commission had to admit that it had inadequate investigative powers to analyse completely the complex money flows that have now famously ended up as tainted money in marginal constituencies? Bearing in mind the Chancellor’s remarks yesterday, should not parliamentarians be obliged to answer fully questions from Select Committees and the public?

My Lords, it is right to point out that the commission found in its report on Bearwood that there was insufficient evidence to conclude that there was a breach of the rules in the PPER Act 2000. The commission therefore concluded that donations were acceptable. However, as the noble Lord rightly pointed out, the commission commented that it had sought to interview Conservative Party officials but that, for some reason, the request was declined. I cannot possibly answer why that request should have been declined.

My Lords, does the Minister agree that those in glass houses should not throw stones and that, when a party such as the Liberal Democratic Party accepts a gift of millions of pounds from a crook who is subsequently convicted of fraud, it should return the money to the creditors of that fraudster? Otherwise, does the party not risk being thought implicated in the fraud?

My Lords, this question-and-answer session can develop in one of two ways. Either we can indulge and have fun in terms of the forthcoming election by putting blame on one another, or we can have perhaps a slightly more serious discussion about this issue. It seems to me that no party in this House or elsewhere—except perhaps, of course, the Cross-Benchers—is perfect.

What about the Bishops?

I am most grateful to noble Lords for pointing out that the Bishops are of course absolutely perfect. It is a question of deciding which way we want to go.

My Lords, my noble friend will certainly have read yesterday that this country is going to conclude various tax statutes with different countries. In response to my noble friend’s suggestion that we should take this matter seriously, I propose doing so. What are we seeking from Belize and, if we get it, how will it enable the tax affairs of people who spend a lot of time in Belize but also spend a certain amount of time and money in this country to be more transparent? Will we learn more or will we not?

My Lords, I do not know the answers to my noble friend’s question. Double taxation agreements, one of which, as the Chancellor—famously now—announced, is to be with Belize, protect against the risk of double taxation where the same income gains or assets are taxable in two states. The exact outcome depends on which country is concerned and the terms of the agreement. Where a Peer or Member of Parliament has income, gains or assets in a state that has a double taxation agreement with the UK, they will be taxed in accordance with that agreement. The effect of the provisions in the Bill, which I think is what my noble friend is getting at, will be that MPs and Peers are to be treated like the vast majority of people in the United Kingdom who are resident, ordinarily resident and domiciled in the UK for tax purposes. As such, they will be subject to double taxation agreements in the same way as the majority of people in the UK. The new provisions do not override double taxation agreements.

My Lords—

My Lords—

My Lords—

My Lords, I think that we should hear from the Liberal Democrat Benches and then from the noble Baroness.

My Lords, does the Minister have any regrets about the Government’s failure 10 years ago to support amendments that I moved from these Benches that would have banned completely multimillion pound donations to political parties? Does he now recognise that they would have prevented the noble Lord, Lord Ashcroft, from spending the millions of pounds that should have gone to the taxpayer on trying to buy seats in Parliament for Conservative candidates in marginal constituencies?

My Lords, je ne regrette rien.

My Lords, I declare an interest as a former board member of Crimestoppers. Without the initiative, hard work and money of the noble Lord, Lord Ashcroft, Crimestoppers would not exist today, as I am sure other Members in this House who are on the board would agree. I think that it is quite extraordinary—and I ask the Minister for his reaction to this fact—that none of the newspapers has ever mentioned the association of the noble Lord, Lord Ashcroft, with Crimestoppers. Only once has his name been mentioned on the BBC in this context, by a Conservative Member of Parliament. I think that this country owes the noble Lord, Lord Ashcroft, a debt of gratitude.

My Lords, I have done my best in these eight minutes not to enter into the fun and games that all sides sometimes seem to want to have on this issue, particularly in this House. I am sure that the noble Lord, Lord Ashcroft, has done some wonderful things, but I also think that the way in which he has behaved over the past years is not so good.

My Lords—

I am afraid that our time is up.

To ask Her Majesty’s Government whether they plan to substitute identity cards for older people’s bus passes.

My Lords, there are no current plans to substitute identity cards for bus passes for the over-60s. However, an identity card is a convenient proof of age, and could be used by holders to prove that they qualify for age-related services, such as when they apply for a bus pass.

My Lords, I thank the Minister for that reply. Is he aware that, in a recent interview, the Home Office Minister in the other place said that some local authorities and transport groups were interested in replacing bus passes with identity cards? To date, the Government have persuaded just 10,000 members of the public to have identity cards. Since the Government are obviously struggling with this policy, would the Minister say whether either the Home Office or the Department for Transport would be tempted to follow this suggestion of using ID cards for bus passes so that they could compulsorily increase the numbers for the over-60s?

The word “compulsory” is not in our lexicon when it comes to discussing identity cards. They are entirely voluntary. We are looking at and are in dialogue about a number of public and private sector partners who could increase the services offered. Those, of course, are services focusing on the requirement of citizens to prove identity. There are no plans at present to involve the bus pass in that.

I think that the noble Baroness is being a little bit selective with the statistics. Over 8,000 ID cards have been issued, over 10,000 people have enrolled, over 70,000 people have requested application packs; and this is on a rollout which is restricted to certain parts of the country. We intend that rollout to continue. The major endeavour will be in 2012 when we will have biometric passports, and people have a choice of a biometric passport, an ID card, or both—or neither.

Will the Minister ask his colleague in the Department for Transport what progress has been made on introducing smart cards instead of the present identity cards, so that the revenue which is spent on concessionary bus travel may be fairly divided among the authorities that are spending the money?

I take note of the noble Lord’s question. I will refer that matter to my colleague in the Department for Transport.

My Lords, does my noble friend agree that the use of biometric passports, as suggested in the identity card system, would have gone a long way to preventing the forging of passports as used in the recent murder in Dubai?

My noble friend is correct. The aim of the identity card and biometric passport is to make them unique. Therefore, the ability to have several British passports would be avoided because the biometric information will prevent that. The rollout continues, and I believe that biometric passports will prove to be both popular and very effective. If we have, as we hope to have in the next Parliament, the opportunity to amend the Identity Cards Act 2006, it will of course provide this ability in 2012 for people to have a passport, to have an ID card which is a passport for Europe anyway, or to have neither or both.

The Minister in answering the question used the phrase, “compulsion is not in our lexicon”. Given that in the Identity Cards Act 2006 there is a provision that, from 2011 onwards, ID cards can be made compulsory by law, is he now assuring the House that, should the Government be returned at the election, they have absolutely no intention of exercising that power?

I can offer that reassurance to the noble Lord. It was given in the other place as recently as this month. When we are re-elected in the coming general election, the Government have no intention in the next Parliament of legislating for compulsion in this area. We have a situation here whereby the opposition parties are promising, if elected, to scrap the ID card scheme, under the illusion that money will be saved. It will not. If ID cards are scrapped, the income that comes with ID cards is scrapped. It is an ill thought-through policy which will only take away choice from British people. It will cost more to cancel them than to maintain them.

My Lords, I remind noble Lords that for the Questions to the Secretary of State there are five minutes per Question, so we need short questions and short answers.

To ask the Secretary of State for Business, Innovation and Skills what discussions he had with the Chancellor of the Exchequer before the Budget on reducing the tax burden on small businesses.

My Lords, the Chancellor and I regularly discuss how we can promote small business. Yesterday, the Chancellor unveiled a budget for growth supporting new, small and growing businesses. Announcements included a 12-month business rate reduction for more than half a million small businesses, a doubling of the annual investment allowance to £100,000 and a doubling of the threshold to £2 million for entrepreneurs’ relief on capital gains tax. He announced that Her Majesty's Revenue will continue with “time to pay”, which so far has involved £5.2 billion of delayed tax payment. So the Government are certainly not standing still in their support for small businesses.

I thank the Minister for that reply. Is he aware that half of all small businesses in this country do not claim the small business rate relief to which they are entitled because of the complexity of the process of applying and the complexity of the rules? As a result, small businesses are missing out on £400 million of vital support. Can the Secretary of State think of any reason why this payment should not be made automatically to all eligible small businesses, as we on this side of the House have proposed?

My Lords, I am very glad that the noble Lord, Lord Bates, has drawn this to my attention. I shall look at it and, if there is a problem with the administration, I shall see what can be done to simplify it.

My Lords, in the course of the noble Lord’s discussions with the Chancellor, did he also stress the importance of the provision of finance to small businesses? In that context, can he explain why, despite the process of quantitative easing, the actual figures for the growth in the money supply show a precipitous decline in the latest report from the Bank of England?

My Lords, the issue of small businesses’ access to finance has been at the forefront of my mind for the past 18 months. I am very glad that the Chancellor was able to announce yesterday the creation of UK Finance for Growth—it represents an overall £4 billion of funding for SMEs, including growth capital to meet the needs of those small businesses that seek to expand but cannot get hold of growth capital to the extent that they want—as well as further lending commitments between the Government, RBS and Lloyds. We also announced the creation of a small business credit adjudicator, which will work with SMEs struggling to secure finance to ensure that they are better treated by the banks. I know that all the small business organisations, as well as the CBI and the Institute of Directors, have given a very strong welcome to all these measures.

My Lords, does the Secretary of State realise that Her Majesty’s Revenue and Customs has required every book-keeper, on however small a scale the book-keeper operates, to register under the money-laundering regulations and to pay a £95 per year fee? Given that he has 1.7 million small businesses with fewer than five employees and more than 2 million small businesses with fewer than 10 employees under his care, and given that only 12,500 book-keepers have registered so far—and they are not the book-keepers but the bigger people—will he take steps to end this burdensome bureaucratic nonsense for small businesses?

My Lords this seems like an issue that is a good candidate for the Better Regulation Executive in my department and I will refer the matter to it.

My Lords, bearing in mind the well known views of the noble Lord, the Lord Sugar—who I am glad to see is in his place—that there is no difficulty of small or medium-sized businesses obtaining finance from banks, can he confirm that the noble Lord, the Lord Sugar, will not become the adjudicator he referred to?

No, the noble Lord, Lord Sugar, has other responsibilities and duties which he is fulfilling extremely well, working very hard across the country, much to the delight and encouragement of many small and medium-sized businesses in the country.

My Lords—

My Lords, other than bank finance, there is invoice discounting, pre-shipment finance and export credits. Has my noble friend taken those into account when considering finance for small companies?

Yes, my Lords. My noble friend raises important issues and these are precisely the sorts of paths we need to pursue and issues we need to examine. UK Finance for Growth, which will be taking on responsibility for the Government to oversee new funding arrangements for small businesses, will pick up precisely those matters that my noble friend has identified.

To ask the Secretary of State for Business, Innovation and Skills what action he is taking to encourage manufacturing in the United Kingdom.

The Government are fully committed to a strong future for British manufacturing, leading the world in new technologies and the transition to low carbon. We have earmarked almost £1 billion in investment to build key manufacturing capabilities in coming years, helping to turn UK research strengths in innovative technologies into commercial manufacturing opportunities.

My Lords, I thank the Secretary of State for that Answer. Given that since his party came to power in 1997, almost 1.7 million manufacturing jobs have been lost and that manufacturing has fallen as a share of the economy by the largest amount on record under any Government—9.3 per cent of GDP—why did the Budget make no specific mention at all of manufacturing, and why were any plans to make Britain more attractive to foreign investment in manufacturing put off until the 2011 Finance Bill?

My Lords, the noble Lord must have been listening to a different Budget yesterday. If I can simply point out to him that the British manufacturing sector did not in fact contract in absolute terms during the course of the last decade— before the recession that is—its output in both value and volume has remained stable despite the fiercest possible competition. China now defines the global economy in a way that it did not even a decade ago. What is clear is that competition is going to get a lot tougher in decades to come and therefore we all have to raise our game, including in the Government, in the support that we give to manufacturing in this country.

Does my noble friend think that the unilateral imposition of a levy on the banks will assist manufacturing in this country?

I do not know anyone who supports a unilateral imposition of a levy on British banks, apart of course from the Leader of her Majesty’s Opposition—although I notice that by the end of the day, following his speech on Saturday, even he is becoming decidedly wobbly on the issue.

My Lords, I am sure noble Lords will join me in congratulating the Minister on his new self-appointed title, which he announced at the UK Space Agency launch on Monday, of “Space Mandy”. Does he agree with the report from the Space Innovation and Growth Team on a strategy to expand the industry six-fold, which it is estimated would produce 100,000 manufacturing jobs over the next 20 years and create an industry of £40 billion a year, and are the Government committed to that strategy?

We are committed in principle to the strategy and adopting the measures recommended by the Space Innovation and Growth Team, which is why on Monday at the conference I announced government funding for the new International Space Innovation Centre at Harwell in Oxfordshire. We will be following up with other measures. If he does not mind my slightly correcting his pronunciation, it was actually “Space Man-dy”.

I am delighted to hear that Lord Pooh-Bah has accepted another title in life. Is he aware, though, that the late payment of bills has now reached a record £24,000 million, which is affecting manufacturing industry in particular? Is he aware that much of this is by government bodies, including HMRC? What is he going to do about it? Does he accept that we cannot possibly go on like this?

My Lords, the Government’s record is much better than that operating in the private sector. Since I challenged my central government colleagues to reduce their payment to a 10-day limit, most of them have successfully adopted that and are now operating it. The problem really lies in the private sector where there are many large companies which simply treat the companies that are supplying them as banks and insist on a 60, 70, 80 or 90-day payment period. That is completely unacceptable. I say to those in the private sector who are operating that sort of delayed payment system that they are putting in jeopardy the future of many businesses—small, medium-sized and somewhat bigger alike. I hope that they start revising their practice and approach in the payment of their invoices.

To ask the Secretary of State for Business, Innovation and Skills whether he undertook a cost-benefit analysis before deciding to reduce the funding of adult education in further education colleges.

My Lords, the decisions that have been taken in this area have, of course, been based on rigorous analysis of how to maintain a strong skills system that helps to get people into work, not least for adult learners, while finding the necessary efficiencies required to reduce the deficit. The Government are confident that we will continue to sustain a strong base of adult education in further education colleges.

I thank the Secretary of State. The importance of skills training has been emphasised time and again. It is concerning that my local college, Weston College, reports that £1.7 million is being taken away from the £6.7 million allocated to adult learners in the area. In addition, vulnerable adults over 25 and those with severe learning difficulties are not getting support at all. Surely this hits hard at the heart of the commitment to provide vocational training and jobs.

My Lords, the Government have a strong record of investment in further education and skills. The core investment remains high, at unprecedented levels. Despite efficiency savings, more funds than ever are going into post-16 education and training for this next financial year, including, I am glad to say, £8.2 billion for 16-to-18 learning and £3.5 billion for adult training places. I know that future adult learner reductions will be challenging for some colleges, but transitional funding arrangements will protect colleges from financial difficulty and I will make sure that that remains the case.

My Lords, is the Minister saying that these cuts will have no effect on outcomes? If not, what does he expect the effect to be?

No, my Lords, I am not denying that there will be an effect. All I am saying is that the modest reductions that we are proposing, in line with our commitment to reduce the deficit over the coming four years, require belt-tightening of this sort across the public sector. I cannot exempt FE colleges or adult learning courses from that, but this has to be seen in the context of the colossal catch-up investment that the Government have made available during the past 10 years, which we are not proposing to put into reverse.

My Lords, will the Secretary of State encourage the colleges to take on adult apprentices in the building industry? If we train adults to become electricians, plasterers and bricklayers, they can become self-employed very easily.

My Lords, the Government always insist on the value of training and adult skills for future jobs and growth and I underline that again today. Since 1997, we have expanded apprenticeships from 65,000 starts, which we inherited from the previous Government, to 240,000 starts in 2008-09, with the number rising since then. We are funding more apprenticeships than ever before in our country. In the financial year 2010-11 we will be investing over £1 billion. Of course, we can do better and we will seek to do so within the tighter financial climate that we are now entering.

Is the noble Lord aware that the number of those unemployed for longer than six months has now risen to 1.24 million and that there has been a substantial rise in the economically inactive to over one in five of the working-age population? Does he not agree that further education for adults provides people with an invaluable second chance in life? He has already enjoyed three chances in life. Will he continue to deny this second chance for others?

My Lords, it is true that I have been serving a long and recurrent apprenticeship for my current role. That is why, among other reasons, I am firmly committed to apprenticeship training for others. However, the figures that the noble Lord quotes about economically inactive people mask the fact that a rather large number of them are in full-time training and education, even though they may be registered as looking for work. While I strongly welcome the noble Lord’s support for further expansion of apprenticeships, training and further education, I hope that he will be able to have a word with his friend the shadow Chancellor to make sure that such activities are exempted from his plans for large-scale spending and investment cuts. The shadow Chancellor has made it clear again today that he has those in mind for the country should he ever be elected.

That the debate on the Motion in the name of Lord MacGregor of Pulham Market set down for today shall be limited to three hours and that in the name of Baroness Turner of Camden to two hours.

That Standing Order 41 (Arrangement of the Order Paper) be dispensed with on Monday 29 March to allow the five Motions relating to draft National Policy Statements to be taken before the Second Reading of the Crime and Security Bill.

That the order of 18 March referring the draft orders to a Grand Committee be discharged.

To call attention to the state of the United Kingdom economy; and to move for Papers.

My Lords, the economic outlook is grim, and yesterday’s Budget makes it grimmer still. It was pure fantasy land: the last gasp of a spent Government. Much of it will not be implemented. It has been variously dismissed as pie-in-the-sky, irrelevant and so on, and has had a pretty substantial panning.

The Minister was recently reported to have said that every bank needs a dour Scot; since his recent experience has been in the Treasury rather than the City, perhaps he was really referring to the Treasury. There are two types of dour Scot: the one who is genuinely not prepared to spend beyond his means, and invests for the future; and the other, who is dour only in manner. I have much sympathy with the genuinely dour Scot, the present Chancellor. He inherited an appalling legacy from the other dour Scot, his predecessor, and has largely fought off the “forces of Hell” from Downing Street, which had been, if not authorised, then at least not discouraged by the Prime Minister, who was still last summer clinging to the absurd belief that this election would be all about Labour investment versus Tory cuts, and who created on the back of an envelope the Personal Care at Home Bill, with the huge black hole in its financing so ruthlessly exposed by your Lordships’ House. No doubt the dour Scot the Chancellor has had to fight hard for even the Budget, against the profligate tendencies of the dour Scot the Prime Minister.

The Budget was also a failed attempt to get credit for clearing up the messes which this Government, and especially the former Chancellor, have themselves created. I must briefly refer to the background. In 1997 they inherited the legacy of a strong economy—a £6 billion budget deficit, compared to £167 billion today. As a demonstration of this, the UK was then ranked seventh in the world for competitiveness, while it is now 13th; and fourth in the world for tax and regulation, while it is now 84th and 86th. For the first two and a half years, with prudence at his side, the then Chancellor retained control over spending, though pensioners will not forget that one of his first acts with regard to advanced corporation tax has since drained tens of billions of pounds from pension funds and has, in part, contributed to the serious decline in pension provision under this Government.

All hell was then let loose. With the benefits of an internationally benign economy and economic environment; lower inflation, not least because of the impact of widespread cheap imports from the Far East and China, in particular; overdependence on financial services for tax revenue; and, above all, fuelled by huge government and personal borrowing, the then Chancellor was able to spend money as if there was no tomorrow or any reckoning on debt. I used to be alarmed, Budget after Budget, by his monotonous churning out of new public sector schemes, proclaiming loudly the large expenditure programmes attached; and by the extent to which capital expenditure then was off balance-sheet. This was all without regard to the rise in government borrowing. Dour in demeanour and, no doubt, prudent with his own spending, he loves spending everybody else’s money, and so the huge fiscal deficit grew.

I pay particular attention to the waste. So much of this extravagant programme has been unnecessary. Billions have been wasted to no good effect and no lasting benefit—indeed, often no benefit at all—to the citizen by, for example, the identity card project; the National Health Service IT projects; the Rural Payments Agency fiasco; and the £1 billion revealed by the National Audit Office to have been incurred in reshuffling Whitehall departments to give a false impression of dynamism and to satisfy certain ministerial egos. A huge number of quangos have been set up to administer this, regulate that and advise on the other—a huge bonanza of public sector jobs for the boys and girls. I believe I recently saw a figure of £43 billion for quangos. Vast sums have been spent on management consultants and other advisers for work that, in many cases, civil servants should be doing. Billions have been lost in fraud on the tax credit schemes.

There was a £7 billion cost to the taxpayer of Gordon Brown’s decision to sell Britain’s gold reserves at the bottom of the market, against the advice—so press reports suggest—of the Bank of England. We will know the truth shortly, as a result of the Information Commissioner’s decision that the Treasury should release the details. I could go on. It is no wonder public spending now makes up 52 per cent of GDP, compared to 40 per cent when Labour came to power in 1997. Yet it is the private sector which is the engine of growth and profitability. That is an indication of the huge public expenditure incurred by this Government.

To conclude by looking back, the golden rules—easily manipulated—have been consigned to the dustbin. The proud and oft-repeated boast that this Government had conquered boom and bust is dead and buried, but not forgotten. The verdict of history will be harsh.

Time and again yesterday, the Chancellor put the blame on the international crisis. I do not blame this Government for the international banking crisis, though in retrospect the removal from the Bank of England of macro-prudential control over the financial sector did not help. However, I do blame the Government for making our economy one of the weakest among the G20 to face the crisis when it came, and one of the slowest to recover from the recession. This was the consequence of the overspending, the overdependence on the City, the decline in manufacturing, which the noble Lord, Lord Mandelson, was boasting about a short while ago, by over 9 percentage points—the largest fall in history with almost 1.7 million manufacturing jobs about one-fifth of UK manufacturing firms disappearing and the huge increase in borrowing, even before the crisis and the bailing-out of the banks. That is the charge.

The Chancellor tried to claim credit—modest, I grant you—for the small decline in the borrowing figures compared with the pre-Budget statement. He was clutching at straws, for the overall figures are still huge. They are dependent on growth forecasts over the next few years which most outside commentators regard as wildly optimistic, including the Governor, who said the other day that the recovery will be more painful and longer than most people are prepared for. Even Anatole Kaletsky declared them as “not worth the paper they are written on”, rather like the Government’s Fiscal Responsibility Bill.

The Government’s argument that they should not be cutting expenditure now because of the recession is a false excuse—a cover-up for their unwillingness to face the facts and take action before the election. That is so clearly revealed by their decision to put off the Comprehensive Spending Review until after the election. But as the Institute of Directors has pointed out as an example of the need to take action now, in the first three years of the Labour Government, total public spending fell by 4 per cent of GDP and the public sector deficit tightened by 5 per cent of GDP, yet GDP growth was faster over those years than at any other time in the Labour Government up to 2009.

All we have had in terms of action and savings programmes is a great emphasis on efficiency savings—not very encouraging when the Government have achieved only £10 billion of the £35 billion on efficiency savings sought in the last Comprehensive Spending Review. Speaking as an ex-dour Scot, or a dour ex-Scot, and as a former Chief Secretary, I absolutely subscribe to the view that efficiency savings will only achieve so much. The Government are, in a number of cases, trying to deliver the efficiency savings twice. In the Personal Care at Home Bill, they left a black hole for local government to fill in terms of spending on that Bill and they said it could be achieved by efficiency savings, when they had already achieved all the efficiency savings that they possibly could. So there is a great limit on efficiency savings.

I regret the failure of this Government always to seek value for money in government spending—there are so many government spending programmes when they simply have not sought value for money—and their constantly erasing the test of affordability. One example of this is the Norwich and Norfolk order that we debated earlier this week. The Government went ahead with it, ignoring the fact that the Permanent Secretary in the department had said that it failed the tests of value for money and affordability—both key tests. So the Government have failed heavily on that front. Every government programme should be subject to these tests.

When government spending needs to be reduced on the scale now required, whole programmes sometimes need to be rejected. Sometimes the only response can be—I have had to say this as Chief Secretary—“It is a nice idea, but I simply have not got the money”. The Government have not been prepared to do that. I was described in the headlines when I was Chief Secretary as “Mac the Knife”, which was a reference to a current pop song at that time. But sometimes ruthlessness has to be applied and I regret to say that the Government have failed to do this in their massive overspending on programmes. Just before the election in 1987, when the Labour Party was in opposition, I costed the party’s programme and all its commitments. It was quite clear that it had no idea of the cost of those programmes and it became a major issue in that election.

After all this, the Government’s target is for a fiscal deficit quite close to that which existed when the noble Lord, Lord Healey, had to go to the IMF for loans in 1976 after the four years of so-called reductions in the fiscal deficit. He had to go because he had run out of lenders elsewhere. That brings me to the nightmare scenario which I have raised in this House before—that the international financial community is casting a very sceptical eye over the reality of the fiscal deficit. Sterling has already declined recently against the dollar by 22 per cent, and the international lenders upon whom we depend are wholly unconvinced by the Government’s position and await the outcome of the election.

I have only two questions for the Minister. First, what proportion of gilts is now held by overseas investors? I am quite sure that it is many more than in 1976, although there is a much greater risk. Secondly, what are the Government’s plans for coping with the ending of quantitative easing—the further unloading on to the market of up to £200 million in gilts? The nightmare scenario would be further declines in sterling, which would include the effect on domestic inflation, and the need to push up gilt yields, including interest rates, to secure the lending—with consequent further misery for all, increasing the cost of mortgage borrowing, and a whole host of other things. The other consequence would be that the costs of debt interest would outstrip even the largest of all departmental spending programmes. Debt interest is already £35 billion and is estimated to increase by 2014 to £71 billion, even if the Government achieve all their objectives.

This Government have for years been spending beyond their means. That is what the fiscal deficit implies and, just like any family that does that, the day of reckoning comes. I come back to where I started. Yesterday’s Budget was unreal. The real work will have to start after the election.

My Lords, I congratulate the noble Lord, Lord MacGregor of Pulham Market, on initiating this debate. As a not-quite-so-dour north Londoner, my views are very different from his.

The aim of Labour economic policy is to reconcile economic efficiency with social justice. In pursuit of this end, since 1997 a whole raft of policy initiatives has been introduced. The initiatives include active labour market policy—protect the worker, not the job— and provide retraining as workers move between jobs. That is very important in an era in which job destruction is much higher than it was 20 years earlier. The initiatives also include heavy investment in education and skills training, which is necessary in an economy that has become much more skewed towards symbolic occupations than manufacturing ones. That will not be reversed too far, whatever happens to reinvestment in manufacturing. There has been strong investment in family-centred policies, including the setting up of day care centres thereby making it possible for a substantial proportion of mothers—including single mothers—to be in the labour force.

These policies have been successful. As an economist, I know that the best way to look at the economic health of a society is by looking not at the unemployment rate, but at the employment rate. The UK employment rate for 2007 was 75 per cent. Moreover there has been a decent and increasing minimum wage. Compare that with, for example, Germany, where the employment rate in 2007 was only 66 per cent, or France, where it was only 64 per cent. These achievements accompanied important achievements on the level of social justice. If anyone still wants to talk about the, to me, somewhat risible notion of the “broken society” they should look at the book that is about to come out by Jane Waldfogel, an American academic, which compares Britain’s anti-poverty strategies with those of other industrial countries and finds that Britain has done better than virtually any other industrial country in limiting poverty. It has, in fact, done better than some of the Scandinavian countries where poverty, including child poverty, has actually increased over this period. The combination of those successes in Britain is a considerable achievement.

Do these policies still have bite in a period of recession and on the point of recovery from recession? You bet they do. On the most recent unemployment figures, unemployment has started to decline, but it is much more important to note that throughout the recession employment remained above, and is still above, 72 per cent. These policies make it possible for this country to recover much more effectively from recession than many industrial competitor countries.

Against the backdrop of financial crisis, it is obvious that we need policy reorientation. I am not a Labour tribalist and I am sure that the Government have made mistakes along the way, but a policy reorientation is clearly necessary and it has to have three key elements. First, I think it is clear to everyone that more regulation of financial markets, both nationally and internationally, is imperative to do two things: first, sharply to reduce system risk; and, secondly, to reduce inequalities that have become socially destructive. This is not an easy balancing act, because it has to be achieved against a background of ensuring that markets can function in such a way as to draw on their creative and innovative properties. Markets have the qualities of innovation and creativity that Governments do not by and large possess. The further work that is needed to stabilise both the national and global economic system will have to balance these things out, but the Prime Minister has displayed very able leadership on the world scene, as has the Minister.

Secondly, there has to be a return to industrial activism. Industrial activism should not be equated simply with the re-stimulation of manufacture. Against the background of energy security, climate change policy and other areas, it is important, and indeed possible, for the UK to recover competitive manufacture in certain poor areas. However, industrial policy will also have to cover a range of other industries because we will still live basically in a post-industrial economy for many years to come. Therefore, the stimulation of the creative industries, for example, is very important, and, despite what was said about the Budget, there were a number of very important innovations in it, including a green investment bank to help to re-stimulate active industrial policy.

Thirdly, there has to be a return to long-term policy. Deregulated markets do not provide long-term policy. This has been plain in the background to the economic collapse, but it is also plain if you look at various industrial sectors such as the energy industry. It is quite interesting that Ofgem has now accepted that deregulated energy markets do not provide the long-term investment that is needed for the future or a long-term planning framework.

I repeat that I am a sociologist and an economist and not really a Labour tribalist, but when I look at current Tory economic policy, which is based on continuing deregulation—this in turn is based on rolling back the state in an era, and in all these areas, in which we need more activism on the part of an intelligent state, not an overbearing one—it is impossible for me to see how it can cope with these new demands.

My Lords, we in Britain have a lot of which to be proud. We are still one of the 10 largest economies in the world, and four or five of our universities continually rank among the top 10 universities in the world. Yet we must not delude ourselves. We are a small nation, we have dreadful weather, we have little landmass, and we have few natural resources, although I hope that we strike oil in the Falklands. In fact, our main asset—our only asset—is our people. With the odds stacked against us, it is crucial that we maintain a sense of balance in our country and our economy, and here we have been failing abysmally.

As a small country, we can flourish only if we have the right economic environment to attract inward investment and the best brains and create a highly skilled, highly creative, value-added economy. How can we possibly achieve this with a top tax rate of 50 per cent, one of the highest in Europe, the forthcoming 1p rise in the national insurance rate and the non-dom levy? This kind of tax burden is anticompetitive, and if we lose our competitive edge, we will fall into oblivion, especially given the rise of India, China and Brazil. I could go on.

Not only is excessive tax a burden on business, a disincentive to entrepreneurship and a burden on the consumer, but it is a disincentive for overseas talent. We are driving people away. As the noble Lord, Lord MacGregor, said, not that long ago we were one of the five most competitive countries in the world when it came to tax. Now we are nowhere near that. Why are we in this position? The reasons behind these elevated and anticompetitive tax rises are disheartening, to put it lightly. As the noble Lord, Lord MacGregor, said, in 1997, government spending accounted for 40 per cent of GDP, similar to that of the United States. That figure rose to 52 per cent last year, and is expected to rise by another percentage point this year. We are pouring our life's blood into a bloated and inefficient public sector, while watching our dynamic private sector suffer.

Let us not make the great recession the excuse; government spending increased from 40 per cent in 1997 to 47.5 per cent before the recession in 2008. The public sector is not delivering, yet it is overpaid and full of jobs for life and gold-plated pensions. This is not fair. It is not a balanced economy. This is in addition to government borrowing because we did not save for a rainy day; this is in addition to trillions of pounds of funding for the financial sector; this is in addition to UK personal debt at close to £1.5 trillion, public sector debt at £848 billion—53 per cent of GDP—and 8 million inactive people of working age in a population of 60 million.

I thank the noble Lord, Lord MacGregor, for securing this crucial debate at this crucial time: the day after the Budget and before the election. If the election is going to be decided on one subject, it will be the economy. I welcome some good moves in the Budget. The Chancellor mentioned £35 million for university enterprise capital and £270 million to fund 20,000 university places in science, maths and engineering. This is great. We have some of the best higher education, but as a function of GDP we spend less than half of what the United States spends on higher education. Are we rewarding our excellence in higher education? Any cuts in higher education spending would be cutting off our nose to spite our face. Because of our success in higher education, we attract 60,000 students from the European Union. How many of our students study in the European Union? It is a small fraction of that number, yet we contribute £6 billion to the European Union. Is this fair? Is this a sense of balance? Thanks to not being in the euro, we have not been straitjacketed and we are not suffering as badly as the PIGS countries. It may be that the IMF will bail out Greece.

I welcome the £4 billion extra spending for Afghanistan. We have troops fighting two wars, yet defence spending is less than half the percentage of GDP that it was 30 years ago at the time of the Falklands war and the Cold War. We have been fighting wars non-stop for nine years now. Is what we are spending fair? Are our troops getting the best equipment, welfare, support, care and employment after they stop serving? What about the families, the widows and the wounded who are not receiving the care that they deserve? Where are the Government's spending priorities? Is this a sense of balance? The winter of discontent is swiftly becoming the spring of discontent—look at British Airways. This is déjà vu; this is Groundhog Day.

I welcome the measures for small businesses. I hope that the banks will lend £94 billion and that growth capital will be provided to small firms, which make up nearly 60 per cent of private sector employment and generate 50 per cent of private sector turnover. Small firms desperately need help. From everything I still hear, I gather that they are not getting the funding that they need. As the noble Lord, Lord MacGregor, said, manufacturing as a proportion of our economy is far smaller now than it was 12 years ago. It is no excuse to point to India and China and the developing of the east. We have continually to invest in higher value-added manufacturing, at which we are good.

We cannot change the past. We cannot reverse the decisions that were made leading to the crisis—the FSA being asleep on the job, the Bank of England being stripped of its powers, and Britain lagging six months behind the United States and Bernanke in dropping our interest rates and being straitjacketed by inflation targeting when we should have been looking at the economy as well. When we did it in October 2008, it was too late; we should have done it earlier. However, we can decide the future. Like a business, it is possible for us to survive by cutting costs, but you cannot progress by doing that alone. We need to sell. We need to go out into foreign markets much more than now.

We have a lot to be proud of—our great history, our great institutions—and we cannot let this country down. Once again, we have projections for growth that are not substantiated and, once again, the Opposition and the Government do not seem to be able to articulate clearly what the British people really want: a clear vision and path for our country. That is desperately needed. This Government are feeding the monster with low cuts and high taxes. We have to get lean; we have to get keen. We need to restore a sense of balance and fairness. We need to encourage and enable business through a competitive tax regime and to return public spending to 40 per cent of GDP. We need the politics of aspiration, not the politics of envy. That is going to take leadership, vision, and guts.

My Lords, I thank my noble friend Lord MacGregor for initiating this debate, which is important coming as it does just after the Budget and just before a general election. I too was going to compliment the noble Lord, Lord Myners, on his remarks last week about dour Scotsmen. Certainly it is important that dour Scotsmen—I emphasise “dour”—should be present in every bank. I can think of no better example than the progress that HSBC made under the undoubted leadership of Sir William Purves. I am also interested in what the noble Lord, Lord Giddens, had to say, but I have certain reservations about economists. After all I remember that, when my now noble and learned friend Lord Howe of Aberavon was at the Treasury, a letter was sent by a lot of economists to the Times. I am delighted that he took no notice of what they had to say.

I return to my remarks in the debate here on 4 February, at col. 307 of Hansard, when I deplored the fact that one in four people in Scotland was employed by the state. That situation has reared its head again. It is not a good omen for sorting out the massive deficit and giving the market the right message. The most depressing headline in the press recently read “Relentless march of state spending”, and the article stated that the private sector now made up less than half the economy. I cannot do better than quote the OECD economist who said that the 52 per cent figure “definitely” signified that something was wrong. That was last week. Now we come to the morning after the day before, and what do we see as a headline? The verdict of the City on the Budget was “swift and damning”. The article stated that,

“shortly after lunchtime … the gilt market … crumpled. Investors around the world started selling British government bonds”,

and the market closed last night with the pound at a two-week low against a dollar level of $1.49.

No doubt the Minister is sick of hearing—he has heard it already today—about Denis Healey and the IMF, but these recent acts, not by politicians but by the marketplace, are deeply disturbing. It saw a Budget that failed to address any concrete plans beyond this year for addressing the deficit, together with projections that are very, very optimistic.

Those of us in business do appreciate the help given to us in concessions on capital allowances and other measures, but I ask whether the Government are fiddling while Rome burns. After all, Portugal’s credit rating has just been downgraded and our deficit is two times the size of that country’s. I hope that in his reply the Minister will assure us if he possibly can—and I am not sure that he can—that our credit rating is beyond doubt.

As I go around, I hear constant grumbles about the new 50 per cent tax on high earners and other taxes affecting not just high earners but middle England and, dare I say it, middle Scotland as well. However, if we are to retain high-flying executives, this measure will have to be reversed as soon as possible. As an employer, I sincerely hope that the next Government, while taking tough actions to tackle the £160 billion-odd deficit, will not introduce the tax on jobs due next April.

I conclude by using the well known word of my noble friend Lady Thatcher, whom I see sitting in her place. If we are the next Government, we must not be frit to tackle this situation.

My Lords, I emphasise that in this debate there are many positive features about the high-technology and industrial aspects of the UK’s economy and its future prospects. Many of these result from government measures focusing on manufacturing and technical services, as well as continuing to work with the City, which provides a very important component of the UK economy that contributes to manufacturing as well. I declare my interest as the chairman of a small consulting company and a former head of the Met Office.

I endorse the remarks of my noble friend Lord Giddens: the UK is a remarkable example of a dynamic population and Government. As I visit other countries, including in Europe and the United States, I am much struck by how perhaps 60 or 70 per cent of young people in the UK still have an ambition to form their own company. The figure is very much lower on the continent. The United States, in contrast with the UK, is finding it extremely difficult to make adjustments to its own governmental and bureaucratic agencies to deal with the issues of climate change and energy shortage. The way in which this Government have, albeit slowly, come round to making very profound changes is, I think, an example of where the economy will benefit in future.

The specific point that I should like to make is that the European Union is, as I hope all noble Lords will agree, central to the development of the UK as a strong economy and that this will be threatened if the next Government withdraw their involvement. The UK Space Agency, which has already been mentioned today, was launched to ensure that the UK’s expenditure on space projects in Europe leads to greater UK participation and success. Over the past five years, the UK space industry and our scientific activities have already been very effective in utilising our EU framework project funding, but I regret that there are other examples of where EU research programmes have not led to the UK’s industrial involvement, and that is something at which the Government must work very hard. This will require a Government who are positive about the EU. It would be nice to think that we were going to have a Government who finally had the courage to fly the European flag over their Parliament building, as they do in all other countries in Europe with the exception of, I believe, the Czech Republic.

The other feature is that this Government have moved away from the very curious views of the previous Government. I was a chief executive working for that Government in the 1990s, when it was suggested by many of the chief executives of government agencies that the investments by those agencies were not being used as effectively as they might be to encourage UK business. I was told at the time that that is the kind of thing they do in France but not in England. That sort of attitude has gone with the coming into power of the present Government, and we have had very effective methods of using public procurement to help UK business.

There are still ways in which this could be considerably improved. The overseas representation of the UK could be more proactive on behalf of UK business—one hears this comment made over and over again. The UK could encourage its government agencies to have overseas branches. For example, there is a branch of the Environmental Protection Agency of the United States in Beijing, in what will be one of the largest countries in the world for an environmental market. The Environment Agency in Britain would not be allowed to do that. Other European countries use their overseas aid and development programmes to help their businesses. Those countries are always very surprised that the UK overseas development programme is not used as effectively as it might be to work with UK industry. This approach has broad-based support in the UK, and I am not convinced by the DfID approach of apparently favouring so many overseas suppliers of goods and services which one knows very well can be provided by the UK. That might be something that a different Government would change.

If the UK is to contribute in future to the enormous tasks of helping vulnerable countries with growing populations and climate change, this will require very long-range collaboration between Government, industry and the scientific community. Such countries have enormously growing populations and huge areas of water shortage. If you go into the main offices of Mitsubishi in Tokyo, you will see displayed in front of you all the kinds of new industrial projects that they are working on in those countries to help energy and desalination. This will be an enormous industrial and economic project for the future. There is mass migration to coastal cities in Africa and Asia, which will require very innovative and large industry. This requires collaboration on a very long timescale between businesses and government. The kind of approach we have at the moment needs to be changed.

I endorse again the point made by my noble friend Lord Giddens that in the UK, industry and business could work more closely with Government on energy, if we moved away from the idea that you can change your electricity supplier every couple of weeks, which is the current policy. You cannot have combined heat and power, which would almost double the efficiency of the use of fuel, unless you have an agreement between the user and the provider that may last for 20 or 30 years. It is very good that Ofgem is moving in this direction.

The interventionist approach of Government is essential. We have seen the successes of that, but it has in no way led to a diminution of interest by university students, or by plumbers and plasterers, at all levels of Britain, who want to participate and to generate new industries and companies. I see this in many examples. My noble friend Lord Giddens referred to his origins. I come from a very classical family of professionals, most of whom had absolutely nothing to do with business and forming companies. The number of my friends, colleagues and relatives who have formed companies in Britain over the past 30 years is quite extensive, but hardly any of my friends on the continent have done so. That is a measure of how Britain is moving in a positive direction, and this Government have greatly helped.

My Lords, I congratulate my noble friend, Lord MacGregor, on introducing this debate, not least because his timing appears to be impeccable. We need to broaden the debate a bit beyond the Budget. Before I concentrate on the question of the overall management of the economy, I would like to deal with one particular problem which has always been my concern—namely, the question of pensions. Having represented for many years the constituency of Worthing, about which it is said that people go there to die but forget what they came for, I think this is a crucial issue. If we compare the situation now with the situation in 1997 when this Labour Government came to power and when I had the privilege of entering this House, we see that the deterioration in the position on pensions is absolutely appalling. At that time, we had a massive system of final salary schemes in existence, where the amount invested in the UK was greater than in the rest of Europe put together. Over the past 13 years, that system has virtually disappeared, to the tremendous loss of all those who might otherwise have benefited from it.

There is also a serious tactical problem for existing pensioners. The recent uprating was dependent very much on a particular moment in time, as far as the relevant index is concerned. The figures have changed since that decision on uprating was mentioned. Having said that, we underestimate the catastrophic effect on many prudent pensioners who were relying on their savings and on the return on those savings. With interest rates of less than 1 per cent as far as the Government is concerned, their return is impoverishing them in their late years, in a way which has never happened previously.

I turn to the question of the overall management of the economy. What used to be called the Red Book, though it is no longer red, is very much preoccupied with forecasts. There is a very simple fact about debt. If the forecast is for an even greater increase in debt, and the actual amount of debt is less than that, that does not mean that the actual amount is not horrific. The fact that the forecast was even worse is neither here nor there. The Government forecasts on growth, of 3 to 3.5 per cent in 2011, are overoptimistic. They have said that these are partly because of easier credit conditions, and I will come back to that in a moment.

I also have a technical point about the way the Government look at the economy, and in particular what they describe as a growth-cycle approach, which compares the trend level of economic growth with cyclical movements and the so-called output gap. It is very clear from the figures in chart B3 in the Red Book that we are now forecasting a very large output gap indeed, but this way of looking at it is, in many ways, misguided. I much preferred the older system, where one looked at the proposed growth in productive potential and then compared it with the growth in demand. The way this looks at it ignores, or smoothes out of consideration, the fact that we have lost a massive amount of productive capacity as a result of the recent economic crisis. Therefore, to look at it in terms of trends, rather than what is happening, is inclined to be misleading.

I turn to the crucial point I have in mind on monetary policy. The noble Lord, Lord Myners, and I have exchanged views on this before. I will try not to repeat what I said previously too much, or I will apparently appear on his blog with a critical comment, although how he finds time to write a blog I cannot imagine, given his many other duties. The problem is that there is a gap in organisation between the Bank of England and the Debt Management Office as a result of the change Mr Gordon Brown introduced in 1997. The Debt and Reserves Management Report 2010-11 is a huge volume setting out the objective of the policy, which includes being consistent with monetary policy. However, there is no mention whatever in the report of how it is being made consistent with monetary policy. There is a lack of co-ordination between the Debt Management Office and the Treasury, on the one hand, and the Bank of England on the other.

The figures show that, despite quantitative easing, what has been happening to the monetary supply is quite extraordinary. The leaders in the Times seem to think that it has gone up as a result of quantitative easing. However, I refer the Minister—and I hope also the noble Lord, Lord Mandelson, who was in earlier, because it is crucial to implementing the proposals for small businesses—to the latest Bank of England statistical release. It shows that growth in M4, and in particular credit lending, has been plummeting for a long time. Quantitative easing, so called, was introduced, but the reality is that the actual money supply and growth of M4 lending, which is the broad measure of money supply, has plummeted. The tables are very disconcerting because they show that Government’s plan for recovery cannot operate if the money supply is behaving in the way it is. It would seem that the Monetary Policy Committee is underestimating the effect of this and the fact that quantitative easing does not appear to have had the effect the Government intended. This is a very serious matter for the management of the economy and I hope that it will be taken into account by a future Government under the Conservative Party.

Finally, when often in the past I spent many weeks or months in the preparation of a Budget, I thought I understood what it was all about. However, I never really understood it until I saw the headlines the following morning. In that respect, I do not think the Chancellor of the Exchequer can be very satisfied with the response he has produced.

My Lords, I participate in the Lord Speaker’s outreach campaign. This means that I go to conferences and schools and explain who we are and what we do in your Lordships’ House. Last Friday, I spoke to about 60 A-level students at a school in Dagenham. At question time, one student told me that he has local politicians who say that they do not want him—Dagenham has got BNP councillors—and national politicians who run down the country, politicians who are themselves a bit dodgy. His question to me was why he should bother with politics. This encounter set me thinking. Surely this bright young person has everything to look forward to. However, he was accusing us of saying otherwise—that he has no future—and, listening to some of the things that are being said, I think he has got a point. Some of us are talking down our future, particularly our economic future.

Of course the situation is difficult; of course we have a lot of debt; of course we need new jobs; of course the economy was in recession—but if you talk down our ability to win through with phrases such as, “These problems are not solvable by a Labour Government”, or, “We will end up like Greece”, of course people will wonder if it is worthwhile bothering. Most people do not know that this is just rhetoric. What they do know is that this talk can affect their jobs, their quality of life, their homes and, yes, their future. We know that we are in a fragile situation and that if we talk ourselves down like this we can help precipitate a sterling crisis and deter inward investment.

On Tuesday in this House, yet again, Members on the Tory Front Bench insisted that the lights would go out; that we would run out of electricity. How can they be so certain? We know that this is political scaremongering, but think about its effect on the confidence that the noble Lord, Lord Bilimoria, said was so important. Think about its effect on the confidence of someone planning the future of a business in these difficult times. Do you ride out the storm or do you prepare for the worst? Do you cancel investment plans and make compulsory redundancies or do you ask everyone to tighten their belts and for a while defer investment? I know what decision I want them to make, and running down Britain will not help them to make it. What will help them to make the right decision is the temporary cutting of business rates, doubling investment allowances and doubling entrepreneurs’ capital gains tax relief, as was announced in the Budget. There is a line between being a prophet of doom and being constructive. I believe some have crossed that line.

It is not all doom and gloom: we have low inflation; we have low interest rates; job losses are less than expected; and prospects are looking up, especially in the car industry. We are better off than we thought we would be 12 months ago. We still have to be careful not to precipitate a double-dip recession, and yet the shadow Chancellor writes and speaks of his concern about a sterling crisis and a government default on our loans. One way in which he can reduce the likelihood of that happening is to stop talking Britain down.

So what did I reply to that young student in Dagenham? I said that some may be running us down for their own political ends but that most of us were concerned that we should have a strong and fair economy when he starts work. We are not going to let the past bury the future. We believe that we can change society and save it from itself. This is what the debate should be about—policy reorientation, as my noble friend Lord Gidden put it.

A picture is emerging. In recent weeks, Ministers have indicated that the Government would like us to concentrate less on ownership and more on stewardship. Why? Because we have learnt that some of the activities in the financial sector have benefited the few at the expense of the many; that the single-minded pursuit of share price benefits the few but not the many; that what the few call financial engineering, the many consider dishonest cooking of the books. Taking a bigger share of the pie benefits the few; increasing the size of the pie benefits us all. This new knowledge helps us to draw the picture of our new economy—a fairer economy. The proposals that Ministers have made during these past weeks in regard to corporate governance, the management of salaries, fiscal policy and regulation chime exactly with this new vision.

I thank the noble Lord, Lord MacGregor for moving the Motion. His timing is perfect. Budget time is the one time of the year when the economy really has the nation’s attention.

I started by pointing out the dangers of talking Britain down. Not only is it dangerous but it is also untrue, a point made by other noble Lords. So let us not talk ourselves down. Let us be positive; let us be fair; let us be reassuring that we are going to work our way out of this recession and pay off our debts, and that we do not need a change in Government to do it.

My Lords—

My Lords, I join other noble Lords—

My Lords, it is the turn of the noble Lord, Lord Bradshaw.

I am sorry.

My Lords, we were treated by the noble Lord, Lord MacGregor of Pulham Market, to a speech that led me to believe that the world began in 1997, when the wicked Labour Government marched on to the scene. The fact is that he was responsible beforehand for some things to which I wish to draw your Lordships’ attention.

Privatisation is described variously as selling the family silver, if you are Harold Macmillan, or creating a workforce of shareholders, if you are the noble Baroness, Lady Thatcher. The problem with selling the family silver is that it cannot be done again. Companies in the public sector that had low debts were sold cheaply in an unsophisticated marketplace. Most small shareholders sold out very quickly. The newly privatised companies geared up their balance sheets immediately, paying out huge, unearned dividends to their shareholders. They then told the regulators, some of whom were pretty toothless, that there was insufficient money in the coffers to upgrade their networks. Then they turned to their customers to pay for repairs and upgrades. In other words, taxation was transferred from the Government taxing people to the newly privatised companies raising prices to take money from people—at a level, of course, that would never have been allowed had those companies remained in public ownership. All this was overseen and encouraged by the noble Lord, Lord MacGregor of Pulham Market, in his role as Chief Secretary to the Treasury, together with his friends the finance men and corporate lawyers in the City. The taxpayer was robbed.

It gets worse. When the noble Lord was appointed Secretary of State for Transport, he presided over the privatisation of the railways. I went to see him with the late Robert Adley and pleaded with him to adopt a better model. My advice was swept aside and, instead of listening to professional railwaymen, he preferred to listen to clever lawyers and merchant bankers, who once told me that you could privatise any business, however weak, if you provided potential investors with sufficient returns—in other words, bribes. Was this what the noble Lord who introduced this debate intended when he was in office? Is this the sort of thing that we can expect from the Conservative Party, in the unlikely event—in my estimation—of its being returned to office?

My criticism of the Labour Party is that it allowed this robbery of the ordinary citizen to continue when it should have taken steps to stop the rape of industry and the demutualisations of institutions and building societies. Alas, it was still in thrall to the City and its manipulations. Even when Railtrack deservedly went into liquidation, Labour created an almost unaccountable successor, Network Rail, which spends taxpayers’ money extravagantly and with totally inadequate checks.

We do not think that public ownership and mutualisation are bad. We are certainly against grandiose bureaucracies, the creation of quangos and the centralisation of decision-making, but we believe that many changes could be made in spending plans that would both save money and create jobs in Britain.

The cupboard of things to sell is now almost bare. As the Conservatives say that they are averse to tax rises, we can expect their agenda to contain cuts upon cuts. As far as possible, to quote the Daily Telegraph this morning, they will choose to avoid the middle classes.

As a result of these policies, many of our industries are now controlled by foreign owners whose interests are unlikely to be influenced by their effects on Great Britain. The cost of regulation is vast, both in itself and in the money spent by companies in trying to obstruct the regulators, and, as the noble Lords, Lord Giddens and Lord Haskel, said, it does not reflect the longer-term priorities that are essential in any large infrastructure industry.

We could have a railway to challenge those of Europe—a power industry where there is no mention of the lights going out. Whatever arrangement succeeds the present Government as the outcome of the forthcoming election, it should concern itself with satisfying the end customer and not with placating greedy people in the City.

My Lords, I must apologise to the noble Lord, Lord Bradshaw, for getting up too quickly; I must have been too keen. I congratulate my noble friend Lord MacGregor on introducing this debate and managing such excellent timing. I say to the noble Lord, Lord Haskel, that I was the candidate in Dagenham a very long time ago, although I did not win, as one might imagine. I would say to his schoolboy that he would be slightly less disillusioned with politicians if he got the truth from this Government.

At the moment we are involved in a complete phoney war. This Government are trying to spin a narrative that Labour would avoid cuts in the short term and that the Tories would cut at once and pitch the country into a double-dip recession. That is not true at all. I do not think that the public expenditure review promised by Labour in the unlikely event that it was to win the election would happen; I suspect that, like the Conservatives, it would have an emergency Budget after 50 days, when the serious issues as to how we are going to bring this deficit down would be tackled.

The only thing that could go wrong is that there could be a hung Parliament, in which case all the critical decisions would be deferred—the first 50 days would be spent trying to form a Government rather than tackling the whole question of the public finances. The Government who emerged might well represent the majority of Members of Parliament in another place, but they would not give any voter anything that he voted for; manifesto commitments would be binned as discussions took place about how a coalition Government should go ahead. I am quite convinced that a hung Parliament would be the very worst solution for this country, for the simple reason that everybody would anticipate another election coming up shortly and therefore they would not want to have their fingerprints on hard decisions. I suspect that the IMF would be round very shortly afterwards to tell us how to run our economy.

Government spending is being reduced as we speak. I am amazed that the Chancellor yesterday came out with this extraordinary statement:

“I know there are some demanding immediate cuts to public spending. I believe such a policy would be both wrong and dangerous”.—[Official Report, Commons, 24/3/10; col. 255.]

I suggest that he walks across the road to the Foreign and Commonwealth Office, where he will find that it is cutting expenditure as we speak. That is, of course, because the pound has devalued so much against foreign currencies that the Foreign Office is running out of money. I know that the Treasury Minister will say that the sterling amounts going to the Foreign Office have not changed, but I do not think that the Foreign Office will see it that way. A noble Lord who formerly ran the Foreign Office has told me that, in past times when there were exchange movements, either the Foreign Office paid money back to the Treasury or the Treasury compensated it for any loss of money, so that it did not suffer as a result of movements in the exchange rate.

If you look now right across the public sector, you see signs of people cutting expenditure with recruitment bans and so forth. I was talking to somebody the other day who is on the finance committee of a London borough; he says that they are working now on the basis of 15 per cent cuts, which will of course be brought about by cuts in government support to local government. This is taking place at the moment. I therefore find great difficulty in aligning the Chancellor’s saying that cuts will somehow be avoided during the next 12 months with what is actually happening. It is all very misleading.

There was an interesting vignette in Questions yesterday. Noble Lords will remember my noble friend Lord Selborne asking whether funding would come through for Ordnance Survey so as not to threaten its handing out free maps. There was tremendous support for Ordnance Survey carrying on as it has done for so long. I was rather cowardly; I did not want to find myself, like somebody in a Bateman cartoon, getting up and saying that if it was the Government’s proposal—as I am sure it is—to cut the Ordnance Survey grant, I suspected that it was just the start of something that would happen with quangos across the country during the next 12 months. It would be very surprising if Ordnance Survey got away without some reduction in its grant and I believe that the same will happen to a large number of other organisations. As they, too, are very well represented in your Lordships’ House, I am sure that we will hear a cacophony of complaints during the next 12 months as everybody says that this is end of civilised life as we know it. This will be the world that we have to get used to.

We have a major problem to tackle. We have already seen the yields on 10-year gilts rising from about 3.6 per cent to more than 4.1 per cent. An independent economist said the other day that, had it not been for quantitative easing, 10-year gilts would have had to pay out another 1 per cent. We face very serious problems, which, regardless of who wins the election, must be tackled. My honourable friend the shadow Chancellor of the Exchequer, George Osborne, said on the “Today” programme this morning that he saw reductions in public expenditure having to take 80 per cent of the burden of closing the deficit and taxation taking 20 per cent. The position of my party on this is one of honesty. I wish that I could say the same of the Labour Party.

My Lords, when I have been asked to give advice to small businesses, I often tell them that they should take a step back from the day-to-day mêlée and try to see the wood for the trees. Coming half way in this debate, I say that we, too, should take a step back and look at how the UK economy got to where it is today and at the real cause of the financial crisis that started just over two years ago.

The financial mess that we have experienced was not, as some might say, the fault of the UK Government, any more than it was the fault of the US, French or German Governments. It was caused in part by the creation of immoral financial products by our American cousins, who went on to package them up and sell them to banks, including many British ones, falsely labelling them as AAA instruments. An influx of foreign banks came to play in the UK market and, together with British banks, irresponsibly dished out vast sums for highly overvalued assets such as real estate.

There was a fast-buck culture: hedge funds and individuals manipulating markets by spread betting and short selling, artificially depressing values of banks and hurting real investors. People made millions without doing anything productive. Sitting in front of computer screens, they never produced anything or created employment; they simply preyed on the misfortune of others. It was morally wrong. It was a worldwide problem, not exclusive to the UK.

Now that I have got that off my chest, perhaps we should turn to what has been done about it. Despite a time of great uncertainty, the Prime Minister and the Chancellor stepped up to the plate and made the right decisions. Not a single retail investor lost their deposit and the banking system did not collapse. The UK’s actions to rescue the economy and shore up the banks have been copied all over the world. Can others honestly say that they would have done anything differently? There have been a lot of “I told you so” comments. The honourable Member for Twickenham in the other place, for example, seems to have powers of clairvoyance, claiming that he saw all this happening. Well, it is easy to say that in hindsight.

Noble Lords should correct me if I am wrong, but I understand that the leader of the Opposition opposed the action taken on Northern Rock. If Northern Rock had been allowed to go bust, private savers would have lost their money. That would have created a run on all the other banks. It was simply unthinkable. Again, if I have interpreted things correctly, the leader of the Opposition and the shadow Chancellor are now threatening to choke off recovery by cutting support to the economy. Surely this would lead to a decade of low growth and austerity.

Despite the dire predictions of some, we have managed to avoid the mistakes of the recessions of the 1980s and 1990s. Repossessions are half what they were back then and only half as many businesses have gone under. The rate of job losses is four times less than if we had replicated what we experienced in the last recession.

Since my appointment, I have talked to real businesses and real banks. I do not rely on surveys and headlines that skew the message to fit certain agendas; I concentrate on the facts and make my own judgment. My message today remains the same as it always has been. Banks are now, quite rightly, returning to proper lending practices based on balance sheets, profits and collateral. That is how it was when I started out; that is how it should be; and that is how we will get this economy to recover. In fact, I hear from some banks that they have a lack of demand and are concerned about nervousness among their clients.

I am encouraged by the announcement in yesterday’s Budget that the Government will build on their financial intermediary service and set up a national credit adjudicator for small businesses to ensure that they are treated fairly by banks when attempting to raise finance. I have been similarly encouraged in the recent Q&A seminars that I have carried out during the past three weeks with more than 1,600 SMEs in Bolton, Birmingham, London and Newcastle. I will not say that they were all jumping up and down with excitement, but they had digested and understood the climate that we find ourselves in. They are reorganising and rethinking their strategies positively.

I am pleased that the Government are now offering entrepreneurs further encouragement, such as doubling both the entrepreneurs’ relief threshold on capital gains tax and the annual investment allowance on capital expenditure. At the same time, they are ensuring prompter payment to those people by government.

The quickest and cheapest way to get the economy back on track is to endorse the words of my noble friend Lord Haskel and stop talking things down. Believe it or not, we need some help from the media; they should start reporting some of the good news out there. I have met hundreds of businesses that are doing well. They are expanding; they are taking on more people; they are selling more goods and services. We need to hear more of this, at least to encourage the others to think positively.

There are indeed important economic issues to discuss, but I urge your Lordships to reflect and look objectively at the period that we have come through. It has been tough, but we have come through it thanks to the actions taken. There is a brighter future ahead of us. The numerous initiatives that have been put in place in the past year and in yesterday’s Budget are evidence that the current Government are best placed to take us forward.

My Lords, we owe a debt of gratitude to my noble friend Lord MacGregor, first, because it is the right moment to talk about the economy and the Budget and, secondly, because it has given the government party a great opportunity to stand up in this House and defend effectively what it has been doing. It has been quite disappointing to hear the rather few noble Lords from the government party who have spoken at all.

I agree with what the noble Lord, Lord Sugar, said at the beginning of his speech, but not about those three things that you would do about economic problems that seem to have echoed from the Labour Benches. One is that you blame the previous Government. But that was 13 years ago—surely it is a little difficult to talk about that. There were, of course, some echoes from the past. The noble Lord, Lord Giddens, rather reminded me of Messrs Balogh and Kaldor with his reference to what he called the “symbolic activities”. I wondered whether he was about to recommend the reintroduction of a selective employment tax. On taxation—I am sorry he is not here, but he can read this—I was surprised that he did not talk again about the wealth tax because the last time he spoke in your Lordships’ House, he recommended the reintroduction of a wealth tax. We all remember what happened to Denis Healey’s attempts to do that in 1976—I remember it very well. The problem was that they never could find a way to avoid raiding the cash flow of small companies. I think the noble Lord, Lord Sugar, would probably agree that that is a non-starter.

Then we heard from the noble Lord, Lord Hunt. I love his idea that he would like the European flag to fly over Victoria Tower. I actually thought, from the earlier part of his speech, what he would really like is a flag with a floating polar bear on it.

Nor is it enough to say that we must not talk Britain down. It is not about what people say, it is about what is actually happening, which is serious. You cannot blame the media. What is happening in Greece is more serious. However much people try to conceal it, Greece is in a hell of a state. It could bring down the euro, and that could bring down the whole European endeavour, an endeavour which I strongly support.

I want to talk specifically about an issue which I believe to be important. The noble Lord, Lord Myners, knows that I am going to talk about it. I refer to credit card debt. According to the Bank of England, total interest-bearing credit card debt at January this year was £61.5 billion. That is a huge sum by any measure. The average rate of interest being charged is 17.8 per cent. Of course, for any bank, credit card lending can be wonderfully profitable—provided that the interest is paid and the debt is eventually repaid—just as sub-prime mortgages were very profitable and were even given the imprimatur of that one-time god-like figure, Alan Greenspan. Noble Lord should look at what he said about sub-prime mortgages in his book The Age of Turbulence, published too soon for his own record.

The rates charged for credit card debt vary between 12.5 per cent and 35 per cent. That means that the total interest liability on £61 billion is more than £900 million of interest per month. We do not know how much of that is actually being paid, but I would guess that it is a pretty small proportion.

There are some 66 million credit cards in the UK. Credit card spending is about £10 billion a month—about £120 billion a year. Therefore, credit card debt is about 50 per cent of turnover. That is an enormous figure by any business standards. Many people have more than one credit card. I understand that some 60 per cent of all credit card holders pay off their credit cards each month and do not enter a debt situation. That means that the debt is shared between about 26 million credit cards. That is roughly a debt of £2,000 per credit card, which works out at interest of about £7 a week for each cardholder. For some, that is viable; but for many, it will be a dark shadow over their lives.

In general, credit cards have been losing out to debit cards, the use of which has been increasing rapidly; indeed, the total number of plastic cards reached 169 million by the end of 2008, yet the debt on credit cards rose by some £8 billion during 2009. We know that a number of the credit card lenders have been securitising their debt, moving it on to the books of associated companies located outside the UK—our old friends, the special purpose finance vehicles, or SPVs. In effect, it means that the debts are handed over to debt collectors. Some £9 billion of credit card debt has been securitised in that way, but it is still shown as part of the £61 billion by the Bank of England. However, I understand that the rate at which this credit card debt of £9 billion has been sold off is between 10 and 20 pence in the pound. I assume—although perhaps I should not—that the asset value of that credit card debt in the bank balance sheets has been reduced

I ask the Minister a crucial question: what has the remaining £50 billion of credit card debt on the banks’ balance sheets been valued at? If it is still valued at 100 pence in the pound, I would suggest that that represents a heavy burden of potential toxicity which could imperil, again, the financial system.

I congratulate the noble Lord, Lord MacGregor, on securing this debate. I also welcome the wise contributions that he and other speakers have made. I declare that I am chief executive of London First, a not-for-profit business membership organisation.

In talking to businesses in the capital, I detect a little more confidence and optimism than a year ago; yet that confidence is fragile. London has fared better than many parts of the UK, but that does not mean that the recession has not bitten deeply.

I will give noble Lords just a few statistics to give an indication of the depth of the recession. UK electricity demand in the first three quarters of 2009 was down by 6 per cent on the equivalent period in the year before. In the construction sector, there was a 20 per cent drop in orders, with a reduction in actual activity of around a quarter. Central London had 22 million square feet of vacant office space in mid-2009. Finally, retail and leisure businesses tell of a consumer in search of value, premium quality, and yet reducing peripheral expenditure. In London especially, overseas visitors, helped by the exchange rate, have bolstered both footfall and sales volume.

Looking forward, growth is by no means assured. After predictions of V-shaped recessions, W-shaped recessions and even a saxophone-shaped recession, the current preoccupation is with the prospect of a corrugated roof-shaped recession. However, it is the UK's strength in the service sector—including retail, logistics, creative industries, lawyers, accountants and, yes, bankers, and led by London—which has the potential to provide the growth to steer us clear of recession.

Successful business is fundamental to national economic well-being. However, the past few years have seen a decline in the willingness of the Government and the Opposition to acknowledge this fact to the electorate. The credit crunch and recession have coincided with a steep decline in the quality of the relationship between national politicians and the business community, and all three major parties have sought to position themselves as antipathetic to the wealth generators. This is economically, and thus ultimately politically, unsustainable.

After the election, there will be an onus on both business leaders and the Government to work together to restore their relationship and to build a successful and sustainable economy. After all, the wealth created by the private sector is the only means by which public services, from schools to bin collection, from hospitals to defence, can be sustained.

As the shadow Chancellor has been heard to say, we are all in this together. That means that the unloved bankers are on the same side as the rest of business and as the voters. Bankers fulfil services which businesses and consumers need and value. The voter wants businesses to succeed, for their employment and for the taxes they pay. But it goes wider than that. If we assume that UK growth can come from trading with ourselves, on this small island, we are much mistaken. It will not even be sustainable to hitch our fortunes to Europe. The real growth in the next decade will be in Asia; we must hard-wire London and the UK into that Asian growth. We must make it easy and attractive for Chinese and Indian companies and individuals to build their businesses and careers here in the UK and for companies to export their advice as invisible exports to these growing economies. That means that we cannot make tax policy or regulation in isolation; we have to remain competitive and compatible with overseas markets and other international cities. We cannot separate the interests of London and the UK from the international environment in which they operate. Monetary and fiscal policy has also to support international confidence in the UK's ability to tackle its debt. A run on the pound is the last thing we need.

On yesterday's Budget, a good point was that there were no surprises. The Strategy for National Infrastructure, announced alongside, has much to recommend it. In particular, the National Infrastructure Framework, while a long time coming from this Government, is good news indeed as a way of prioritising the most crucially needed investments. A similar approach would work well in determining where spending cuts could be made more widely across government. I also welcome the planned review of why construction costs of major infrastructure in the UK are higher than in neighbouring countries. I hope that both these initiatives from Infrastructure UK can carry on beyond the election, whoever is in power.

It is clear to everyone that the Budget that really matters will be the one after the election. What does business want from the post-election Chancellor? It wants a coherent plan for tackling the deficit. The Government have mapped out targets that any Government will find ambitious; many have strong views on whether it should be addressed more quickly or slowly. My point is that it should be tackled wisely, with clever cuts, both from efficiencies and from stopping those programmes which provide the poorest return. I stress that the Government should not cut those programmes and projects which are politically easiest to cut, but those which offer the poorest return. The new Government must make evidence-based judgments in a consistent way to deliver on this agenda.

I agree with the proposal that action to address the deficit should be made up roughly of 80 per cent spending cuts and 20 per cent taxation. But even in this order of magnitude, tax rises should be broad based, rather than at the margin, which could further compromise our competitiveness. Such changes should be clearly signalled. Rabbits out of hats such as the 50 per cent higher rate, the non-doms provisions or the changes to pension allowances create uncertainty, leading internationally mobile, highly talented people to reconsider whether the UK is the right place to be. The spending which must be protected is that which builds economic capacity—infrastructure in general and transport in particular. Crossrail and Tube upgrades are not a matter of comfort for London commuters but of necessity, to them and to the UK economy. After all, 70 per cent of UK rail journeys begin or end in London.

My final point is that the primary objective is not to get elected or cut the deficit or to increase or reduce taxes or to improve public services. The goal is to achieve sustained UK economic growth. The Government's role is to do all that they can to create an internationally competitive business environment which can support that growth. All other objectives depend on success in that goal.

I thank my noble friend Lord MacGregor for securing this timely debate. At present, we have one of the largest budget deficits in the developed world. I am deeply concerned about the state of British finances and the impact of the national deficit on our GDP. Government debt currently stands at more than 50 per cent of GDP, and the deficit this year will be £167 billion, which is a record high. According to the Government's own projections, they will be borrowing £734 billion over the next six years, taking our national debt to £1.3 trillion. The level of national debt has risen so drastically that next year we will spend more on debt interest than on education. These figures are extremely worrying.

We need to look at how this dire situation came about. The present crisis came to light because the banks were reckless in their lending and the regulatory authorities failed in their duty to ensure that proper practices were being undertaken. The situation was compounded by the fact that the Government had borrowed excessive amounts, no adequate controls were exercised on spending and there has been a considerable wastage of the country's resources. Furthermore, the Government failed to take appropriate actions to generate revenue in different channels. With regard to expenditure, in my own business operations I have always believed that my expense ratio should not exceed an acceptable percentage of the revenue. Now that we are in a state of crisis, we need a clear plan to steer us out of this unfavourable situation and put us on a path to recovery.

The glaring failure of financial regulation must be adequately addressed, to the extent where a similar bailout by taxpayers of institutions becomes a distant possibility. I am in favour of plans to give the Bank of England greater responsibility concerning financial regulation. The economic downturn exposed the failure of the current system. We should seek international agreement on banking reform and the application of levies, if need be on a limited national basis. We now have a lower credit rating than other highly industrialised countries such as Germany and USA. We need therefore to safeguard Britain's credit rating with a credible plan to eliminate a large part of the structural deficit.

At this juncture, I declare that I am the chairman of an insurance broking and financial services organisation. We need to maintain and strengthen our role in promoting Islamic finance, which is based on mutuality, ethical behaviour, transparency and the acquisition of assets which give it more stability. Growth in the Islamic banking sector globally is nearly 30 per cent per annum. Therefore, there are further opportunities for our country's involvement. Had the financial institutions undertaken a greater volume of Islamic products, the financial problems we are facing would probably have been less severe. We must, of course, promote our financial services industry, but it is also imperative that we manufacture and export specialist goods such as precision machinery and pharmaceutical products. We have the expertise and resources to produce and export such goods. We need to have a balanced economy and encourage ideas which will further promote our manufacturing sector.

A large number of opportunities are presented by the improvement in the standard of living in countries such as India and China. We should be increasing our exports of high-value goods and financial services to these millions of potential new customers. It is important that our future economic strategy recognises the importance of small businesses, entrepreneurs and innovation to our recovery. Small and medium-sized companies play a vital role in job creation; it is therefore essential that those enterprises are not burdened by excessive bureaucracy. Cutting waste and reducing the layers of bureaucracy in our public services is vital to increasing efficiency in our industries.

The 1 per cent increase in employers’ national insurance contributions will impact small and medium-sized businesses the most. The national insurance increase is estimated by the Federation of Small Businesses to cost 57,000 jobs. Furthermore, it is imperative that the banks increase their lending to small and medium-sized enterprises. The increase of tax to 50p will affect businesses as well as entrepreneurs who generate wealth for the country and create jobs. The tax is therefore counterproductive.

The level of youth unemployment is now one of the highest in Europe. Young people have the potential to make a vital contribution to our economy and society. It is the responsibility of those in government and commerce to work together to develop a strategy that will help our young people to weather the economic storm. Independent scrutiny of our fiscal policy is vital to repairing the fragile economy and building trust among the public, a large number of whom contributed to the recent bank bailouts. For this reason, I support the proposal of the shadow Chancellor to create an independent office for budget responsibility if the Conservative Party forms the next Government.

The Budget delivered by the Chancellor of the Exchequer was in fact a long political statement that lacked substance and constructive thinking. The Chancellor did not give us enough indication about what his party will do to tackle the present crisis. The Government wasted the years when we had economic prosperity and failed to make hay when the sun was shining. We need to rescue the economy from the dire state it is in by implementing the eight clear and transparent benchmarks suggested by the Conservative Party. In addition, it is imperative that we take remedial action immediately, rather than delay taking the strong medicine which will cure our illnesses.

The plan put forward by the Conservative Party to right 13 years of wrongs committed by Labour is one that will have Britain up and running again and will maintain our position as one of the leading nations in the world.

My Lords, I thank the noble Lord, Lord MacGregor of Pulham Market, for securing this debate. He took one view of the British economy under the Labour Government’s stewardship and will appreciate that I do not share that view. In fact, I take the opposite view—more like that of the noble Lord, Lord Giddens.

Labour has made many mistakes, but on balance, it has got most things right. I mention as examples expansion of education, social justice, mild redistribution, the reduction of child poverty, the National Health Service, development aid and so on. When I contrast this with Tory policies, I begin to see the fundamental limitations of the Tory policies. To start with, the Tories have not quite worked out what the role of the state is in the economy, especially in a period of recession. Deregulation is hardly the answer. Talking about spending cuts does not really help us much because often they are not costed, or if they are, they are wrongly applied and can easily create a grave and social and political crisis. The Tories were wrong to oppose the bank nationalisation, and they were also wrong to oppose the stimulus package to restart the economy.

I could go on, but my concern here is not to engage in a party political debate; rather I want to concentrate on one specific area, which has not been talked about and which will have to be addressed by whichever party comes to power. I want to speak about how the recession has impacted on the ethnic minorities. The unemployment rate among white men is 8.3 per cent. Among ethnic minorities, it is 18.2 per cent. If you take those between 16 and 24 years of age, it is 20 per cent among the white population and 48 per cent among the ethnic minorities. This is stark, striking and very disturbing and if we are not careful, it could easily generate a cycle of permanent unemployability.

Why has this happened? Unlike previous recessions, this one has impacted disproportionately on ethnic minorities. There are three or four reasons for this. The public sector is no longer as sheltered as it was in the earlier stages of the recession. Most ethnic minority workers work in manufacturing industries and these have been hardest hit. There is high incidence of discrimination when redundancies take place, as many reports have shown. The Government pledge last year to shield ethnic minorities by targeting support at disadvantaged groups has not been fully implemented. This was one of the major findings of the IPPR report a few weeks ago.

It is not just a question of unemployment among ethnic minorities. Ethnic minority businesses have also been hit harder than other businesses. The gap between the amount of business finance they seek and the amount they receive from banks and lending agencies is much greater than with other communities. They are more likely to be rejected for loans. They are also significantly more likely to feel discouraged from applying and they pay higher rates of interest than many other businesses. This again has been confirmed by several reports that have recently come out.

Now some of these discrepancies between ethnic minority business and the rest of the population can be explained in terms of business risk, limited collateral assets that the ethnic minorities have and the financial track record of these communities. However, these factors do not fully explain all the differences. This has been shown by the Runnymede report and, more recently, by the report from the Department for Business, Innovation and Skills. I think we need to be very careful in exploring how banks and building societies give out loans and whether their policies are discriminatory.

What then should we be doing so far as ethnic minorities are concerned—both business and workers? I will end by suggesting three or four ideas at the rate of one a minute. First, the Government introduced the Social Fund budgeting loan scheme to help poorer people access credit. This could be extended to include those not on benefits, including ethnic minorities. Secondly, the Government might consider increasing the number of job placements in disadvantaged areas through which the Future Jobs Fund scheme creates jobs for young people. Thirdly, billions of pounds are spent on procurement—that is, on buying from the private sector. The Government should ask for the details of the diversity of workforces before contracts are offered. They should also think in terms of addressing the barriers that the ethnic minority businesses face, not just in terms of lack of information, but also in terms of lack of bidding skills and the way in which business contracts can be executed.

In this connection, I was disturbed to hear about the way in which the Olympic Games have impacted on ethnic minorities. One had hoped that the fact that our society is diverse and multi-ethnic had played an important part in our winning the Olympics. But if you look at the way in which the contracts have been awarded, or the way in which the workforce has been employed, one begins to see that ethnic minorities have not had their share of either the contracts or the employment.

For all these reasons, I think an ethnic audit is crucial. More money needs to be spent on Jobcentre Plus and other employment agencies in areas with high ethnic minority populations. James Purnell, when Work and Pensions Secretary, floated this idea and it was heavily criticised on the ground that he was arguing for discrimination in favour of ethnic minorities. I do not think that was the intention of the proposal. The idea was to concentrate resources on those whose disadvantages are greater.

Finally, the Government should think in terms of helping to tackle asset inequalities. If you are going to tackle these, ethnic minorities should be made aware of their eligibility for existing saving schemes, especially ISAs, Premium Bonds and saving gateways. In all, what I have been trying to argue is that although we are in a recession and the Government are slowly negotiating their way out of it, they need to take a multifocal view, not just an abstract view, and concentrate on those pockets of the economy where the impact is disproportionately felt. I wanted to draw attention to the ethnic minorities.

My Lords, when my noble friend Lord MacGregor called for a debate on the economic state of the nation, I thought, with his background as Minister of Agriculture—I remember those days extremely well—that he would accept, and that your Lordships would be prepared to consider, the important contribution that agriculture, food production, forestry and rural development make to the economy of this country. I declare my farming interests.

With the magical capabilities that my noble friend has, which many others have had the pleasure of witnessing over a few years, he could certainly pull a rabbit out of a hat. As he indicated in his opening address, though, clearing the country's debt might take a little longer.

The total farmed area of land in England is more than 9 million hectares—20 million acres, in my language. It continues to increase in value—the best arable land is now around £13,000 per hectare—but it is not immune from the recession that we have been going through. The noble Lord, Lord Bilimoria, spoke of the small land mass that we have in this country, but I remind him and your Lordships that the workbench of the land area is one of the largest industries that we have producing goods for this nation.

While there has been growth, banks have been very accommodating over many years, but facilities for overdrafts now amount to some £63,000 per farm on average. That is an incredible hangover that farmers are facing. Trade in food and drink does not help our economy as much as it should or could, showing an accrued trade gap of minus £4.3 billion. Sadly, production is declining when it should be increasing. We need to do more than pay lip service to food security. Yet the Minister, who I am delighted to see in his place dealing with agricultural questions, may remind us that 2008 was a record-breaking year for exports of food. The weak pound is making us more competitive. We are exporting one-third of our lambs, mainly to France, enabling farmers to build strong relationships for high- quality products.

The continuing decline in dairy herds is a concern. They have halved in the past 10 years. There is the incredible situation where we are slaughtering 40,000 cattle every year because of bovine TB, as we have done for the past three or four years. We know, and the Minister knows, that the disease is still spreading like a prairie fire. The result is that we are importing well over £1 billion of dairy products into the United Kingdom when we should be increasing our production from our excellent pastures.

As we now face a hungry world, continually talking about feeding a population of 9 billion in the not too distant future, and endeavour to increase production of both food and energy, I hope that the Government will do more to help by removing some of the barriers of the costs of administration. If anyone thinks that I am calling for more subsidy and grants to famers, I am not. Farmers are prepared to face the market. My noble friend referred earlier to existing quangos. I remind noble Lords that the National Audit Office published figures showing that the administrative cost of processing the single farm payment by the Rural Payment Agency is, on average, £1,743 per farm. That amount is more than the cheques that many of those farmers received, and compares badly with the figure of £285 for Scotland.

Defra funds the rural development agencies. Among eight different agencies interpreting European legislation, eight steering groups and eight communication plans, we get multiple newsletters and multiple confusion. There are no drivers for efficiency in rural development and I submit that there is a lot of overlap and duplication inherent in the system.

According to the Bank of England, lending to agriculture increased by 5.7 per cent last year but credit facilities shrank by some 13 per cent. Lending remains strong, favouring core farming activities rather than farm diversification, but I hope that the next Government will encourage growth in rural development and do everything possible to remove red tape and burdensome regulations. We have to cut costs by cutting wasteful administration and by the better use of waste generally through encouraging the use of anaerobic digesters to produce energy from products that currently pour into our infill sites.

Change is inevitable and demands a considerable increase in research and development. British agriculture can respond, help the economy and meet the demands of consumers. Our colleges are full of enthusiastic and optimistic future farmers. We cannot let them down.

My Lords, I thank the noble Lord, Lord MacGregor, for giving us the opportunity to discuss his arguments, especially because I recently wrote a letter to the Financial Times disagreeing with exactly those arguments. That letter was signed by three former deputy governors of the Bank of England or the Federal Reserve and a number of other distinguished thinkers.

We made two simple points, both of which are in support of the existing government strategy. The first was that this is not the time for further squeezes on public expenditure. The recovery is still weak, and it would have been non existent without the fiscal injection that we have had. This injection was opposed by the Conservative Opposition but supported by all reputable organisations like the IMF and the OECD. The argument for it was taken from a standard first-year economics textbook: if the private sector cuts its spending, as now, in order to reduce its level of debt, the public sector should act to maintain a level of demand and prevent intolerable rises in unemployment.

That is what you read in every introductory economics textbook, and it is exactly what has been done. We had the private sector worldwide, in order to deleverage, cutting its spending. That is the cause of the world recession, and it leads to a collapse in tax receipts. The reason for the deficit that everyone is worrying about is the collapse in tax receipts that happened as a result of the world recession, with a small contribution coming from the policy-induced fiscal injection on top of that.

Now, though, what is the right way to correct the deficit that we have got into as a result of the fall in output? It is, simply, a growth in output. That is what will correct the deficit because it will increase tax receipts. So the strategic question facing any Chancellor is how to be sure of achieving the growth. The answer is that you can be sure of achieving the growth only if you maintain the fiscal injection long enough to be sure that the growth is under way—and we cannot yet say that. Everyone connected with business knows that the private sector has a lot more deleveraging to do, which is why it would be madness to follow the Conservative Opposition and have further cuts immediately. There is no convincing evidence that that would increase growth, and plenty of evidence that it would decrease it. It would make it even harder to get back to a good fiscal balance because we would not get the rise in tax receipts. That is a disaster for employment, for which we of course need growth, but it is also not good for the future of the public finances.

My second point concerns the debt. As we know, the rating agencies are threatening to downgrade our debt unless we do what the noble Lord, Lord MacGregor, proposes. What are the facts about our debt? First, relative to GDP, our debt is the lowest in the G7 except for Canada’s. Even when it reaches its peak, which it will in 2014, it will still be below the G7 average and below its level, relative to GDP, during most of the past 200 years.

Secondly, there is absolutely no problem with rolling over our existing debt. People seem to be unaware of this. Our debt has over twice the time to maturity of the debt of any other G7 country. For example, our average time to maturity is 13 and a half years, which compares to four and half years for the United States.

Thirdly, unlike some countries, which are, of course, in trouble, our debt is denominated in our own currency, mostly owed to our own citizens. There is actually no possibility of a default by the British Government. It is as simple as that. Does any sane person think that the British Government could default on their debt? I do not believe so. It is also extremely unlikely that the Bank of England would allow sustained UK inflation to be above inflation elsewhere, which would reduce the relative value of our debt.

So what are the rating agencies doing when they make these remarks? They would be astonishing if it were not for the agencies’ even more astonishing ineptitude over the past five years. We should simply take no notice of what they say, and opposition politicians who join their chorus are simply damaging our country. Nobody would want to be in the position that we are in, but we have the right strategy to get out of it and now is not the time to talk it down.

My Lords, like other noble Lords, I am grateful to the noble Lord, Lord MacGregor of Pulham Market, for initiating this debate. It is unusual for this House to have the opportunity to discuss the Budget the day after it is announced, but nevertheless extremely welcome.

The economic background to the Budget is depressing. The Labour Government inherited a strong and growing economy in 1997 with very little debt and a competitive tax regime. Initially they stuck sensibly to Conservative spending plans. Then they started to come up with stealthy ways to raise extra money. This began with the raid on pension funds. It was followed by selling a considerable part of the gold reserves at rock-bottom prices, losing £7 billion. Then they decided to go on a spending spree in health and education, which sadly has produced much less than it should have done. They introduced fiscal rules—the golden and sustainable investment rules—which they proceeded to manipulate and then break when times got difficult.

Even before the banking crisis, our finances were in a weak state. To make matters worse, the Government encouraged a huge growth in public sector employment so that 6 million people now work for the state. State spending amounts to 53.4 per cent of GDP, and no fewer than 25,000 people earn £100,000 or more. Thus it is wrong to blame the world economic situation for all our troubles, as we were already in a difficult situation before disaster struck. It is extraordinary that the Government are taking credit for solving the economic crisis that they played a large part in creating.

Turning to the Budget, I start, as always, by praising certain measures. I am in agreement with David Frost, director general of the British Chambers of Commerce, who said that,

“the Chancellor has clearly recognised the need to place business at the heart of this Budget. Doubling the annual investment allowance, help with business rates, and allowing entrepreneurs to keep more of their gains will prove especially popular”.

I also welcome the increase in the ISA limits to £10,200 and the stamp duty relief to first-time buyers below £250,000, although I disagree with the means of paying for it.

Commentators are on the whole less kind to the Budget speech itself. Ben Broadbent of Goldman Sachs commented:

“We recently highlighted the clear pattern in the historical data that significant fiscal corrections are better for the economy, and better for debt reduction, if they occur through reductions in current spending rather than cuts in public sector investment or hikes in tax rates. On this score the Government's pre-existing plans did not measure up well. Today's budget does nothing to alter that, nor does it offer any detail on where cuts in current spending, such as they are, will fall”.

Michael Saunders of Citigroup commented:

“The UK's fiscal plans remain relatively unambitious compared to other high-deficit countries. Moreover, the Budget has no proper medium-term public spending plans and, without those, the UK cannot claim to have a credible plan to return to fiscal sustainability”.

The Chancellor delivered the Budget Statement in an ultra-calm manner disguising the terrible figures, in particular, of the budget deficit. It is not surprising but staggering that he failed to mention that Britain’s national debt is going to rocket to £1.4 trillion by 2014-15, more than twice the level of just a year ago. I suppose we should rejoice that the borrowing figures have gone from the truly horrific to the simply terrifying. This year they are £11 billion lower than forecast at the Pre-Budget Report and £14 billion lower for the next financial year. However, the absolute level of borrowing is still horrendous.

The Government forecast that they will halve the deficit over the next four years, but this still relies both on spending cuts which have not been properly detailed and, almost certainly—as other speakers have mentioned—on overly optimistic growth forecasts. I accept the 1 to 1.5 per cent growth forecast for 2010, but the 3 per cent forecast for 2011 seems much too high, as does the 3.25 to 3.75 per cent figure for 2012 and beyond. I ask the Minister what the debt figure would be if growth only managed to be 2 per cent in 2011 and 2012.

It is all very well for government departments to spell out their cost savings, but it is difficult to put them into context when we do not have the absolute spending figures of each department in a Comprehensive Spending Review. Table 1.2 in the Red Book tells us that there is a relatively small total net increase in government spending of £1.4 billion for 2010-11, balanced by an £850 million net inflow over the next two years. The largest spending increases are the extra £600 million additional winter fuel age-related payments to pensioner households and the £550 million fuel duty phased increase. Can the Minister tell me what the £230 million savings labelled “reprioritised spending” from BIS and DfT are, as well as the £475 million “reprioritised spending” from DWP? It is interesting that the largest revenue gainer over the next three years is stated to be the Liechtenstein disclosure facility, which is said to bring in no less than £500 million over the next three years. Is this based on known tax avoidance moneys there?

Of course, there had to be a stealth tax lurking in the Budget and, after careful research, it turns out to be something that the Chancellor failed to mention. Personal allowances were frozen but, with the latest inflation figure at 3 per cent, will the Minister confirm that the revenue gain to the Exchequer would be about £1.8 billion in 2010-11 and £2.2 billion in 2011-12?

Overall we have far too little information on how the deficit is going to be reduced—I await publication of the IFS analysis later today—except that, in the next four years, the £78 billion to be saved will consist of £19 billion extra taxes and £38 billion cost savings, of which only £11.8 billion have been identified. Where are the rest of the savings coming from? In the Pre-Budget Report, government departments were asked to find savings of £11 billion without damaging front-line services.

Finally, there seemed to be an answer to where spending cuts might fall, but even a cursory examination of yesterday’s departmental press releases reveals questionable figures. For instance, how can the Department of Health save £550 million from staff sickness absence in the NHS? A key difficulty that any Government must face is predicting tax revenues in the next few years. For instance, financial services provide 25 per cent of corporation tax revenue. I am sceptical that it can recover from £36 billion to £42 billion in 2010-11 in such a difficult economic climate.

My final thought on the Budget again focuses on what was not said yesterday. Rises in national insurance will hit those on incomes of just £20,000, and firms face an annual bill of £4.5 billion from the increase in NI payments. A six-pronged attack will see the NI rises; the freezing of personal allowances; the threshold for 40 per cent tax frozen; 50 per cent tax rates for those earning £150,000 or more; personal allowance withdrawn for those earning more than £100,000; and withdrawal of pension tax relief. This, according to Deloitte’s, amounts to a £15 billion raid on the middle classes by 2012. Is this the message to encourage business and economic recovery, and to enable us to compete with other countries?

My Lords, it is always a pleasure to take part in economic debates in your Lordships’ House. This is the latest in a series that we have had in recent months. It is beginning to have a Groundhog Day quality. The arguments being advanced across the political divides have not changed at all in that period.

In terms of how we got to the current position, yes, the Government overspent in the good years. It was irresponsible to ratchet up deficits when growth was at an historically high level. Yes, the Government fiddled their own rules to enable them to get away with it and, yes, when the crisis broke, the size of the financial services sector meant that the impact on growth and the public finances was particularly severe. However, the Government moved swiftly to recapitalise the banks and to give a significant fiscal boost and, yes, that boost had a positive impact on unemployment levels and repossessions. There is a major fiscal tightening happening this year. The IFS has shown that this amounts to some £23 billion in terms of the ending of the temporary fiscal boost that the Government gave in 2009, so it is incorrect to say that this is a standstill year under government plans for the overall fiscal position.

For the future, it seems that there are two linked questions. How quickly should we reduce the deficit? More important, what kind of economy do we want to see in the future? We should start by recognising that the balance of the world economy is shifting rapidly eastward. I agree strongly with the comments of both the noble Baroness, Lady Valentine, and the noble Lord, Lord Sheikh, about this, not least, with what the noble Lord said about the need to develop the Islamic finance capacity in London.

There is agreement about the kind of economy that we want: it needs to be rebalanced away from financial services. Everyone is agreed in extolling the virtues of the manufacturing sector to achieve that. If we are to have a stronger manufacturing sector, we will need more concerted government action. Simply leaving this to market forces, along with tweaking tax rates, whether corporate or personal, will not have a big impact. We need a bold vision for how to rejuvenate manufacturing. The place to start is where the Government have started: with infrastructure. The Institution of Civil Engineers has demonstrated a need for around £400 billion of infrastructure expenditure over the next decade if the country is to be at the leading edge in its infrastructure. There is a particular pressure and impetus for infrastructure expenditure because we need to rebuild the energy sector and move towards a low-carbon economy.

The Government have, in the Budget, made a tentative first step in this direction with their plans to establish a green investment bank, for which they are looking for a fund of £2 billion. That is probably rather less than 5 per cent of the amount that we need for infrastructure expenditure. Therefore, although this is a good first step, I would welcome any thoughts that the Minister might have about how the Government could build on it. More generally, when it comes to rebalancing the economy, the Government make the right noises but are too timid. The Conservatives, too, make the right noises but have, as far as I know, no specific policies to achieve what they claim they wish to do.

On the deficit, the Budget has changed nothing. There was nothing significantly new in it and the arguments advanced on all sides are ones that we have heard for some time. Not surprisingly, our approach to deficit reduction has not changed as a result of yesterday’s activities and announcements. We have set out criteria for determining the point at which the deficit should begin to be reduced. We judge that now is too soon. We have identified an initial £15 billion of expenditure cuts and several areas—for example, public sector pensions—where costs have to be reduced over the longer term. We have set out how the banking sector could be required to increase its lending to small and medium-sized businesses. Although we welcome some of the initiatives that the Government announced yesterday, their track record to date in persuading the state-owned banks to lend to small businesses is not encouraging.

We have also set out a package of tax changes that would create a fairer system in that those earning less than £10,000 a year would not need to pay any income tax. We have suggested that, as part of the Comprehensive Spending Review process, we should follow the Canadian example of consulting widely with the population at large and stakeholders with a big economic interest so that we can, we hope, tap into ideas that others have, rather than those of the parties on their own. We have suggested that the parties should seek to agree, in consultation with the Bank and the FSA, a timetable for and scale of deficit reduction.

We simply do not believe that, with the major rebalancing of the public finances that we are going to see, a single party—possibly elected on less than 35 per cent of the popular vote—should be able to force through its policies on its own. Although I am sure that this will pain the noble Lord, Lord Hamilton of Epsom, recent polls show that many people believe that it would be in the country’s best interests if no single party formed the next Government. Many more people who will vote in six weeks’ time take that view than believe that the Conservative Party should form a majority Government. We look forward to the election with great anticipation.

The Government are committed to big public expenditure cuts from 2011. However, we have no idea at all how they are to be achieved. They have said what they are not going to cut—popular big items such as education, health, the police and international development—but nothing whatever about whether they mean that other areas of public expenditure should be cut in real terms by 15 to 20 per cent. As far as the Conservatives are concerned, they use language designed to make your flesh creep but are totally silent on what they will do. They have been much clearer about which taxes they will cut. They will cut inheritance tax and stamp duty on share sales. They will cut taxes for those who are married and remove the proposed national insurance increases. These are big additional expenditure items, but on the other side of the balance sheet there is total silence.

Given that both Labour and the Conservatives clearly intend to give no indication before polling day of how they are going to bring public expenditure under control, voters are not going to be able to decide how to vote by comparing detailed expenditure plans. Instead, they are going to have to ask themselves which of the parties’ economic teams they most trust to sort out the public finances and the economy in general. That is why we approach the next election with such confidence.

My Lords, I congratulate my noble friend Lord MacGregor on securing this debate within 24 hours of what we hope will be the last Budget from this Government. I also congratulate him on a marvellous opening speech. Yesterday we had an empty Budget, containing nothing of substance to show how our country’s finances will be put on an even keel. On that, at least, I agree with the noble Lord, Lord Newby. Predictably, the Chancellor aimed his darts at those whom he considers rich, but even he cannot escape the fact that millions of people who are not rich will be worse off in the next financial year as personal allowances are frozen.

As many of my noble friends have pointed out, 13 years ago the Labour Party inherited an economy that had been growing for five years, with public finances moving strongly in the right direction. The UK was a competitive place in which to do business and, as my noble friend Lord Higgins pointed out, we had a pensions system that was world-beating. All of that has been squandered by wanton economic management. We have just emerged from the longest and deepest recession since 1921 and the past 10 years have seen the weakest decade of growth since the Second World War. We were the last country to emerge from the recession and our recovery looks as if it will be one of the weakest. Debt is forecast to rise to 70 per cent of GDP; the small amounts shaved off the forecast yesterday have not changed the overall picture. In the competitiveness league tables, the UK’s overall ranking is now down to 13th and, on tax and regulation, as has been pointed out, we come in at a dreadful 84th and 86th. My noble friend Lord Plumb talked about the way in which the farming industry is weighed down by regulation, but that is the story throughout the whole economy. Of course the UK suffered from the global financial crisis, which has tipped economies the world over into recession, but the policies pursued by the Prime Minister made the UK particularly vulnerable.

The Chancellor kept saying yesterday that the Government had made the right decisions when the crisis occurred. Even if that were true, and I shall not get into that, he conveniently ignored the fact that bad economic decisions were made consistently by his predecessor. In the years of plenty, the Prime Minister could not resist the temptation to borrow, in the reckless belief that he could spend today and taxpayers could, and would, pay later. My noble friend Lord MacGregor reminded us that much of that spending was wasteful. We went into the recession with one of the highest structural deficits in the developed world. The Prime Minister was a past master of creative accounting. The golden rules, as we have heard, were routinely abused and many liabilities stayed out of sight, Enron-fashion. Not content with government borrowing for ever increasing public expenditure, consumers were encouraged to borrow, thus creating the myth of healthy economic growth. Personal debt levels rose to above the value of GDP in the UK. I hope that the Minister will be able to answer the penetrating question from my noble friend Lord Marlesford in relation to credit card debt. The Prime Minister’s vain boasts about economic prudence, about abolishing boom and bust and about golden rules were just that—boastful and vain.

What this country needs now is a credible plan to reduce the deficit. That is what the Governor of the Bank of England, the IMF, the OECD, the CBI and the European Commission have called for. Without a credible plan, we may well go the way of Greece and Portugal. As my noble friend Lord Hamilton suggested, markets are already pricing in the fact that our credit rating is under pressure. I say to noble Lords opposite that we do not talk the country down—the markets are doing that—but we do talk this Government down, since they are responsible for much of the mess that we are in.

The universal judgment on yesterday’s Budget is that it does not represent a credible plan. First, a plan has to be based on credible assumptions. The Government are sticking to growth forecasts beyond 2010 that are 50 per cent higher than the consensus. I hope that the Minister will answer the question asked by my noble friend Lord Northbrook about the effect of using a lower, 2 per cent growth figure in 2011.

Secondly, we have to show that the deficit will be eliminated and debt will be brought down as rapidly as possible. The Government have a structural deficit in their plans until 2016-17, which, at the very least, lacks ambition. Public sector debt increases until 2014-15 and, after that, reductions look tiny. After the Pre-Budget Report, the Institute for Fiscal Studies estimated that it would take until around 2030 for debt to reduce to the Government’s former prudent limit of 40 per cent of GDP; I doubt that the Budget has improved much on that.

Thirdly, we believe that we must make a start on reducing the deficit as quickly as possible—I was grateful for the support of my noble friend Lord Sheikh on this. It is not enough to say, “We will be good, but not yet.” Starting does not mean cutting savagely and it certainly does not mean making cuts that harm our recovery from the recession. Demonstrating real commitment by making hard decisions today, rather than talking about it, is a part of credibility.

Fourthly, we must be transparent about how the deficit is to be eliminated. The Institute for Fiscal Studies has in the past hour quantified the gap in the Government’s own figures at £46 billion annually, or £26 billion if full credit is given for the Government’s £20 billion of savings, about which the IFS has considerable doubts. Will this gap be found from expenditure or even more tax increases? The PBR had already taken the contribution from taxes to deficit reduction beyond the 20 per cent point at which evidence suggests it will be harmful. Credibility demands transparency about the sources of deficit reduction.

Fifthly, we need a Comprehensive Spending Review so that departments consider carefully how they will deliver expenditure reductions. The Government’s decision, using uncertainty as the most flimsy of excuses, to defer a CSR until the other side of the election was cowardly. Even the Labour-dominated Treasury Select Committee criticised that. A CSR will help to demonstrate that plans to cut expenditure are credible and not just fantasy, like most of the Government’s efficiency targets.

Sixthly, we have to reform our public services, which means a lot more than playing at office relocation and having yet another shot at better procurement. It is already a tragedy that under this Government public spending now accounts for more than half of GDP on the IMF’s figures. Inefficient and unresponsive public services are part of the problem and not part of the solution. A plan that ducks reform lacks credibility.

Lastly and most importantly, credibility demands a commitment to growth and jobs. The noble Lord, Lord Bilimoria, and the noble Baroness, Lady Valentine, spoke broadly on this theme. We need a Government who are passionate about enterprise and wealth creation, not about state intervention. The Budget made some gestures towards business, but the Government had already defined the future in terms of a 1 per cent hike in national insurance for both employers and employees. This has been universally condemned by British business. It will lead to increased unemployment and reduced growth. I can assure my noble friend Lord Sanderson that my honourable friend George Osborne places the highest value on being able to avoid as much of this as possible.

The Budget is not a credible plan. The fact that financial markets moved downwards yesterday but did not crash merely shows that they are focused on what will happen beyond the election. Markets will be really spooked if they think that there is any chance that the current Government will remain in charge of the economy or, I say to the noble Lord, Lord Newby, if there is any chance of a hung Parliament with the Liberal Democrats holding the balance of power.

All Labour Governments eventually run out of other people’s money. It is the destiny of Conservative Governments to come behind the messes that Labour Governments make of public finances. In Norse mythology, Ragnarök is the final doom of the gods. A series of disasters and battles leaves the earth laid bare and most of the gods killed. That is what the past 13 years have been like—battles, destruction and disasters. We take comfort from the fact that the doom of this Government is now near at hand and we hope that it will be final. In the story of Ragnarök, after the final doom, the surviving gods bring renewal, hope and abundance. That is what our country deserves and, if we are allowed to form the next Government, we will strive mightily for it.

My Lords, I thank everyone for their contributions. In particular, my special thanks go to the noble Lord, Lord MacGregor of Pulham Market, for securing today’s debate. I was not aware that the noble Lord, Lord MacGregor, had been known as “Mac the knife”. I remember the words of the song. They do not make a great deal of sense, they are somewhat circuitous and they are very repetitive. One can understand why this descriptor might have been used. There is a reference which states:

“And now MacHeath spends like a sailor

Could it be our boy’s done something rash?”.

Surely these were not the words that would have been applied to the noble Lord. Perhaps we should be thinking of someone else in “Mack the knife”. Certainly, as I listened to some of the observations from the opposition Benches, particularly those which decried the achievement of our economy and the strength of our people, the name of Sukey Tawdry sprang to mind.

Last year, the global economy contracted for the first time in 60 years, following a succession of severely damaging shocks, including the worldwide financial crisis. All countries have been affected, and the impact has been felt by households and businesses across the world. The economy showed a huge shock and contracted by around 6 per cent during the recession, but latest data have shown that growth returned at the end of 2009. The Government’s support for the economy, along with action from the Bank of England such as interest rate cuts, have prevented the recession turning into a severe depression.

The claimant count of unemployment is much less than economists would have predicted, given the severity of the downturn. Unemployment has risen markedly in a number of other countries, compared with our own experience. Financial support and advice have helped 330,000 homeowners stay in their homes and limited the number of repossessions to 46,000 last year—a figure significantly lower than the 75,000 forecast by the Council of Mortgage Lenders. More than 200,000 businesses, employing more than 1.4 million people, have been helped with cash flow by spreading the payment of their tax bills.

This year, the economy is forecast to grow between 1 per cent and 1.25 per cent. However, reflecting the weaker outlook for the euro area, the growth forecast for next year has been revised down a little to 3.5 per cent. The noble Lord, Lord Northbrook, who is normally very flattering in his comments about the Bank of England, expresses some doubt about these numbers. I should point out that these are the Bank of England’s own growth forecasts.

We have to be wary. The world economy is still in a period of great uncertainty. It is clear that a strong and lasting recovery depends on continued support, and for this reason the budget actions required to meet the critical challenges ahead—the challenges of securing the recovery and of bringing down debt while still protecting front-line services, and of promoting sustainable growth and creating job opportunities—will be fundamental for our future prosperity.

Government action has played a critical role in helping limit the impact of the recession on families, households and businesses. They have also demonstrated their resilience in weathering the storm. Nevertheless, the global economic recovery is still in its very early stages. Withdrawing support too soon could jeopardise this recovery. That is why we have made the choice to continue support for the economy.

For young people, every 18 to 24 year-old will have access to guaranteed work or training after six months out of work. In the Budget, we extended this guarantee until March 2012. This has been funded as a direct result of unemployment turning out to be much lower than forecast.

For homeowners, we have made the decision to maintain help through support from the mortgage interest scheme until June. For first-time buyers, we announced yesterday a doubling of the stamp duty limit from £125,000 to £250,000 this year. To fund this, we have had to increase the stamp duty on mansions worth more than £1 million.

For business, the Time to Pay scheme, which has helped businesses spread £5 billion worth of tax payments over a timetable that they can afford, will continue. This is much welcomed by people in the business community.

The downturn has led to increased pressure on the public finances. Last year, in the Pre-Budget Report, the Chancellor forecast that borrowing in the 12 months to December would reach £178 billion. However, as a result of supporting the economy, in December, January and February tax receipts have been higher than forecast. This means that this year the borrowing forecast has been revised down by £11 billion to £167 billion, and in the following year borrowing will be even less than that, at £163 billion. As the economy recovers, together with the revenue from tax increases already announced, borrowings will fall progressively to £74 billion in 2014-15. As a share of GDP, borrowing is forecast to be 11.8 per cent in 2009-10, but will subsequently fall to 5.2 per cent in 2013-14, and thereby will have more than halved over the four-year period. This addresses the bulk of the structural deficit. By the end of the forecast period in 2014, borrowing, as a percentage of GDP, will have fallen to 4 per cent.

Our plan to halve the deficit over the next four years is the most ambitious deficit-reduction plan in the G7 countries, and we are firm in the belief that the pace of consolidation is correct. To start consolidating too early, as the noble Baroness suggests, could risk the recovery. To go too fast when there is still such global uncertainty would be foolhardy in the extreme—playing games with the lives of British families, British workers and British small businesses. That is possible to contemplate from a position of privilege and wealth, but is not salient to the lives of most people in our population or those who will be thinking how to vote in the forthcoming general election.

We have already outlined tax measures that will reduce borrowing by £19 billion in 2014, with the biggest burden falling on those who can afford it most. We are determined to continue our successful drive to prevent avoidance and evasion. Measures in this Budget will bring in additional tax receipts worth half a billion pounds each year, while protecting £4 billion in revenues by 2012-13, including tax agreements such as that already signed with Liechtenstein. We are now ready to sign tax information exchange agreements with three additional countries—Dominica, Grenada and Belize.

I am sorry to interrupt the noble Lord. I am a bit puzzled about the arrangement with these countries in Latin America. The noble Lord is now referring to it as a tax information agreement; yet earlier today we were told that it was a double-taxation relief treaty. Can he explain exactly what it is?

I do not recollect saying “double- taxation relief treaty”.

The noble Lord, Lord Bach, said it.

I apologise. I was not in the House for Questions.

Tax information exchange agreements are critical to ensuring that residents of this country with bank and other investment arrangements in another territory properly report that information to our tax authorities. That is very separate and different from double taxation agreements.

I note the Minister’s and the Chancellor’s emphasis on this. It strikes one as astonishing that a very minor achievement, which is aimed apparently at one person only, should be given such prominence in the national Budget.

I am conscious of time and that many questions need to be answered, including from the noble Lord, Lord Marlesford, but I want to make it absolutely clear to the House that nothing in the tax information agreement is aimed at the noble Lord, Lord Ashcroft, at least as far as I know. Of course, if those on the Tory Front Bench know anything further about his affairs, that may be relevant, but I assure the noble Lord, Lord Marlesford, that this proposal, which after all was volunteered by the Government of Belize when entering into this agreement, is not targeted at the noble Lord, Lord Ashcroft, alone.

My Lords—

I am sorry. The noble Lord, Lord Trimble, did not speak in the debate, and I need to press on and respect the wishes of the House that one should not overrun. If the noble Lord wanted to intervene in this speech, he should have participated in the debate rather than come in at this rather late stage.

As I said, we have already identified significant opportunities for cuts and efficiencies of £20 billion to help us to meet our goals. Long-term sustainable growth will also be crucial to reducing borrowing, and it will be key for the future strength of our economy. The first component of our growth strategy will be to support small businesses to grow and to create jobs, and, as we emerge from the debris of the crisis, a flow of safe and reliable credit will be indispensible. Businesses rely on finance for investment and expansion. In the past 12 months, RBS and Lloyds have provided £79 billion in new loans to small and medium businesses, and for the coming year further agreements are now in place to provide for a total of £94 billion of new business loans, with nearly half going to SMEs. To ensure that the tax system does not discourage investment decisions during the recovery, we deferred the planned increase of corporation tax for smaller companies to April 2011, which will help a further 850,000 businesses.

The Budget also announced a temporary cut in business rates for small businesses to reduce their fixed costs, which will help them to make the most of opportunities as the economy returns to growth. We also made important commitments to invest in infrastructure—a point that was highlighted by contributions from a number of noble Lords, including the noble Baroness, Lady Valentine. Infrastructure UK, the body that we have set up to advise on our long-term infrastructure needs, published a strategy yesterday that sets out how to deliver the infrastructure that is needed for the transition to a greener, low- carbon economy. We will provide up to £1 billion of investment from the sale of infrastructure-related assets, and seek to match this with at least £1 billion of private sector investment to fund the new green investment bank.

The last aspect of our strategy for growth will be to foster a climate of research and innovation. This will mean developing new skills for growth through the £270 million modernisation fund, which will enable universities to identify and deliver efficiencies and to fund 20,000 extra undergraduate places. We also want to remain an attractive place for innovative industries and to support high-tech and high-value British business. Measures such as the patent box, which will provide a reduced rate of corporation tax on income from patents, will help us to achieve this.

Overall, our growth package will cost £2.5 billion, which will be funded partly by switching resources from existing budgets and by revenue from our tax on bankers’ bonuses, which turned out to be more than twice as high as forecast. By investing in growth now, our economy will be in better health in years to come and will continue to reap the rewards.

One final area is financial services—a sector that has been the centre of attention for the prominent role that it played in the global crisis. While many feel that it has been both the devil and the victor of strong and stable industry, it is nevertheless vital to the economy. The Government intervened to protect savers and to underpin the banking system. That was the right decision. As the Chancellor said yesterday in the other place, we will sell our shares in RBS and Lloyds, as well as in Northern Rock, in a way that maximises value for the taxpayer and recoups fully and more the money that we have invested. We have prioritised building a more resilient financial system that is properly supervised and regulated.

A competitive and profitable financial services sector will generate sustained wealth and jobs, but we will have to do more to strengthen the global banking system, which is why we are working with G20 countries to introduce new capital and liquidity rules by the end of the year. Yesterday, we proposed an internationally co-ordinated systemic risk tax so that financial sector activities reflect and pay for the systemic risks that they present to society. It will be crucial to get international co-operation, however, as we would risk harming the UK economy and UK employment if we acted alone.

The Budget also announced steps to improve governance, the oversight of remuneration and competition in retail banking, and measures to improve access to banking services for those who have traditionally been excluded from mainstream financial services.

My noble friend Lord Giddens said that he was not tribal, but he made a very thoughtful contribution to the House’s deliberation on the debate secured by the noble Lord, Lord MacGregor. He highlighted three challenges: first, the need to address the regulation and supervision of financial markets, which is clearly a high priority for us; secondly, a return to industrial activism, of which my noble friend Lord Mandelson is a clear advocate; and, thirdly, the return to long-term planning and policy, particularly on areas such as infrastructure, to which we have already spoken. My noble friend Lord Davies of Abersoch was sitting with me on the Front Bench while my noble friend Lord Giddens was speaking, and he is very committed to infrastructure development.

The noble Lord, Lord Bilimoria, made an interesting speech from the Cross Benches. I could see that he made it from the Cross Benches; it was less easy to conclude that from listening to what he had to say. It was sad that he was not in the House when the noble Lord, Lord Sheikh, made his speech. Perhaps he would like to look at the noble Lord’s speech, because it had some interesting insights both into national economic management and into the management of private businesses. I was sure that people could agree with certain parts of his speech, but I found it more difficult to believe that people could agree with the whole of it, as he seemed to talk first in terms of increasing expenditure on defence, education and a number of other areas but then immediately coupled that with a call for a rapid reduction in public expenditure.

On taxation, let me remind the noble Lord that the UK has the lowest corporation tax rate and the lowest capital gains tax rate in the G8 countries. We have just doubled the entrepreneurs’ relief on new business creation, and we have business and tax rates that are below the average of those of the EU’s G15 developed economies, so we are competitive on those issues. However, we must recognise that individuals and companies are mobile, and we must ensure that we remain competitive.

We have today—I suspect that the noble Baroness, Lady Noakes, has not had a chance to read this—published the tax framework for business, which sets out six key principles that will drive our decisions on corporate tax decisions. I suspect, however, that she was rather pleased to have been handed details of the IFS’s report during the debate. I heard the shadow Chancellor on the “Today” programme this morning, and I thought he sounded remarkably hesitant and unsure of his ground. It was not a convincing performance at all in the hands of Mr Evan Davis. The shadow Chancellor was waiting for the IFS review rather than having the knowledge and self-confidence to reach his own conclusions. Perhaps that is also why the shadow leader of the party contemplated introducing crowdsourcing as a new net-based method of trying to understand the Budget. My noble friend Lord Hunt of Chesterton also spoke about the need for industrial activism.

The noble Lord, Lord Higgins, made, as always, a thoughtful intervention. He raised a number of questions on pensions. I would prefer to write to the noble Lord to give him a full and complete explanation. He referred to lower interest rates and the impact on the savings of those who retire. We must remember that when we had very high interest rates under Conservative Governments, it was because we also had high, uncontrolled inflation. The real rate of interest is important, and for many savers, it is positive, unlike the circumstances that prevailed for at least part of the time that the noble Lord was a Treasury Minister.

Perhaps I might write to the Minister about the point he has just made. Will he explain why the latest Bank of England figures show that M4—the measure of broad money lending—decreased by £5.3 billion in February? Does he think that is consistent with the policy of economic growth?

The Bank of England does not target monetary aggregates. That went rather out of fashion when it failed as a policy instrument in the 1970s and early 1980s. In respect of assessing QE, the Bank of England has said that it has a preferred monetary aggregate: the rate of lending into the private economy of broad money excluding interbank transactions. The noble Lord, Lord Higgins, is shaking his head, which always fills me with alarm because I know how well informed he tends to be. Taking out interbank transactions and transactions within the financial sector may well be the explanation for the phenomenon he described. If it is not, the noble Lord can rely on me to respond to him.

I am aware that I am at the 20-minute point, but there were a couple of interventions, so I shall take advantage of the House and speak to the allotted time. My noble friend Lord Haskel made a powerful speech about the danger of talking down the economy and having a negative impact on business confidence. Those who relish talking down the economy must do so with great care because of the damage that they are doing. My noble friend talked about the great successes that the Government have had in terms of job losses, business failures and repossessions compared with previous Tory recessions.

The noble Lord, Lord Bradshaw, made a focused contribution on privatisation and the role that financial market players’ values have played in the crisis. It was a thoughtful and helpful speech.

The noble Lord, Lord Hamilton of Epsom, spoke about the gilt market, among other things. I had to go back and remind myself what gilt yields were when he was a Minister because he warned us that they are about to go up, conceivably to 4 per cent. I am sure that the House will be pleased to hear that the average three-year yield is now 1.88 per cent. The average equivalent figure during the period of the noble Lord’s service as a Minister, which I believe was from 1988 to 1993, was 9.5 per cent. We are grateful to the noble Lord for reminding us of how the cost of borrowing can spiral out of control. The memory must be painful to him, but it is clearly not painful to us.

The noble Lord, Lord MacGregor, asked about foreign ownership of gilts. We should be pleased that people want to buy sterling assets. In an open market with professional leadership of the DMO, we should be pleased that sterling continues to be a very attractive currency for international investment.

My noble friend Lord Sugar reminded us of an inconvenient truth for the Opposition: that the recession has been global. There were five contributions from the opposition Benches before there was any acknowledgement that this is a global recession. My noble friend reminded us of the real danger of the Tories choking off recovery.

I shall wind up very shortly. The noble Lord, Lord Marlesford, asked a number of interesting questions. I was alerted to the fact that he was going to ask questions about the credit card default experience. Credit card companies are reporting quite large losses at the moment. I need to check with the FSA about whether I can answer some of the detailed questions he asked, but our major banks are required to comply with international accounting standards and their accounts are regularly reviewed by their auditors, their audit companies and the necessary and relevant regulators. I have no reason to believe that our banks are knowingly and intentionally in some way concealing under-reported liabilities in respect of credit cards.

If I had more time, I might ask the noble Baroness what her party would have done to restrain the growth in credit extended to the private sector. This was surely a matter of free choice. I agree with the noble Lord, Lord Marlesford, that many people appear to be using their credit cards recklessly, and we have introduced measures to limit some of that danger, but we must recognise that people should be free to make their own decisions.

I have already referred to the excellent contribution by the noble Lord, Lord Sheikh. My noble friend Lord Parekh spoke about the vulnerability of ethnic minorities. He made a very helpful speech, and I will make it my job to become even more informed on this subject. It speaks to the financial inclusion agenda that the Government have been acting on. The noble Lord, Lord Plumb, reminded us again that agriculture is an important industry and that we must do everything we can to ensure that British farmers and British produce remain among the best in the world and that we must not burden that industry—or any industry—with unnecessary regulation.

The noble Lord, Lord Northbrook, mentioned Liechtenstein. I queried the figure because it looks large, but I am assured that HMRC offered it with confidence. I am delighted that the noble Lord referred to the increase in ISA limits. Due to the noble Lord, Lord Lee of Trafford, raising the issue in the House some time ago, we are now looking at whether AIM shares will qualify. As always, the noble Lord, Lord Northbrook, gave a namecheck to Michael Saunders, for which I am sure he will continue to be most grateful. I found it rather easier to agree with the views of the noble Lord, Lord Newby, than with the views expressed from the Conservative Front Bench.

The economy has returned to growth, but there is still a risk that we could slip back into recession. It would be reckless, extreme and insensitive to the people of this country if we took premature steps to withdraw vital public support for the economy as we emerge into growth and prosperity in the future.

My Lords, we have had a wide-ranging and—I think all noble Lords can agree on this point—timely debate. I am grateful to all noble Lords who spoke. I particularly thank my noble friend Lady Noakes for her response to the debate, with which I agree, and my noble friend Lord Plumb. Time prevented me from commenting on agricultural matters, except the Rural Payments Agency, but coming from a rural area, I agree with his remarks on the dairy sector and on some of the bureaucratic costs inflicted on farmers.

I thank the Minister for his response. If he had not spent so much time just repeating the Chancellor’s speech, we might have had a slightly shorter response. I never knew the words to “Mack the Knife”. It was merely a phrase used by the media to reflect in their headlines the efforts that I was making to get value for money for the taxpayer. I did not know that the Minister is a pop fan, but I congratulate him on his memory or his research.

Time prevents me making any further comment, and it would be superfluous because I am sure we will return to these matters after the election. I therefore beg leave to withdraw the Motion.

To call attention to the Government’s measures in recent years to assist older people and to the challenges for the future; and to move for Papers.

My Lords, I am pleased to have the opportunity to open this debate on older people and their rights. I should perhaps begin by declaring an interest: I am myself an older person. Why is the subject so important? As everyone knows, we are all now living a lot longer. Fortunately, because of improved healthcare, we are also much healthier. This should all give much pleasure, but there has been a lot of discussion about problems that can arise.

Of course, much of that has centred around additional costs. Pensions have often been discussed in this House. Until relatively recently we had one of the best pension schemes in the world, but those of the generation benefiting from employer-provided schemes based on final salary provision have been the fortunate ones. Nowadays, if employers provide a pension at all, it is not based on final salaries. Those in the main have been discontinued for new employees, and sometimes for existing employees, and replaced by other less beneficial arrangements. The Government have introduced a new scheme involving compulsory payments, from which it is possible for employees to opt out. The employer has to contribute, and there is a contribution from the Government via the tax system. However, that has occasioned some criticism, as the eventual benefits from it do not appear to be much in excess of what a non-contributor could gain from simply relying on the benefit system. It is not yet in operation, but the intention of the whole scheme is good—to get people to save for retirement. We shall have to see how it works in practice.

So far as the state scheme is concerned, the Government are increasing the basic state pension with effect from April. In addition, pension credits are available on a means-tested basis, but many older people resent means-testing and not all who should claim do so. I always advise people to claim if I think that they are eligible. Those who do so are grateful for the extra support provided. Another concern arises in relation to women pensioners. Despite some recent adjustments in the qualifying conditions, many still feel that women would benefit more from a scheme based on a residential test than from the present one. It looks as though arguments in that connection are likely to continue.

A number of much valued benefits have been made available to older people. In London and other cities, free travel permits are made available to elderly people and the disabled. I benefit from that scheme. Pensioners over the age of 75 no longer have to pay for a TV licence. The Government have introduced the payment of additional grants to enable older people to improve home heating arrangements, so that fewer old people suffer from inadequate heating in their homes during cold weather. From the reports of the recent Budget Statement, I gather that that will also be increased. Many local authorities have excellent schemes to support older people, particularly the increasing numbers who now live on their own. All those excellent schemes should be supported and maintained.

Further issues arise. Many older people want to continue to work. Who is an older person? Someone over 50? Is it right that 65 should be regarded as the age at which it is right that people have to retire? Many older people do not think so. I was interested in the manifesto recently produced by Saga Magazine after consulting its readership. That monthly magazine is devoted to the interests of older people. As a result, it is pressing for an end to the compulsory retirement age and to put in its place a flexible, phased approach to retirement. That is also is the view of the Age and Employment Network—TAEN—which is part of Age Concern. I have often spoken to briefs provided by TAEN in this House, in support of its view that the default retirement age should be discontinued. I understand that the Government intend to review that in 2011.

Of course there are many occupations where early retirement is necessary, possibly for safety reasons, in which event alternative, lighter work should be made available for those who wish for it. One such occupation is the construction industry, which incidentally has a high level of industrial accidents. Obviously an earlier retirement age is appropriate in that kind of work. But many people welcome involvement in a work environment. There is evidence that the social involvement of working with other people leads to better health. Unfortunately, a widespread view discourages the employment of older workers. The research conducted by TAEN reveals that many people made redundant over the age of 50 find it very difficult to get alternative work. After failing to get interviews, many simply lose confidence. One such individual said that,

“age is the new discrimination”,

and that all one has to look forward to is “a bleak old age”.

That is not the view of the Government, as I understand it. The new Equality Bill includes age as one of the protected characteristics. The Government understand that the changing demographic agenda requires us all to rethink work, training, retirement and pension provision. The employment White Paper sets out proposals for helping the over-50s. These include additional training for jobcentre advisers to support unemployed people over 50. There are arrangements to provide for specialist back-to-work support, widening access to additional training. The over-50s will be added to the list of those eligible for fast-tracking if they are judged to have significant barriers to work. The White Paper also says that the Government will introduce a working tax credit for those working part-time past retirement age, which seems a good idea. Many older people would like the opportunity to work part-time if they could afford to do so. A working tax credit would encourage that, and perhaps encourage employers to provide such employment.

TAEN welcomes a number of other suggestions, which it says make up a positive agenda that must be rolled out effectively and quickly. The Equality and Human Rights Commission has also advocated a radical overhaul of employment policies to benefit older workers. These proposals include abolishing the default retirement age, the extension of the right to request flexible working to all, overhauling employer recruitment practices to prevent discrimination, and improved training and development. It seems that there is an increasing understanding of the need to change our view about ageing. The Saga manifesto refers to the need for ageism to be abolished. It is interesting to note that the Minister of State for Pensions and the Ageing Society, my honourable friend Angela Eagle, has called for the media to tackle what she calls the outdated stereotypes of age. She says:

“We need to see a balanced image of later life which will help tackle ageism in our society and our consultation has shown us that there is real demand for this”.

I am sure that this is a call that will have a positive response in this House. We can all do without media stereotyping of what elderly people are supposed to be like.

We should all welcome the opportunity to live longer and to do so in a happier and healthier way, but we need to make the necessary social provision for that to occur. There is a further problem surrounding ageing to which the Government have recently been paying attention. As I said earlier, if people can do work that they enjoy, they are likely to remain healthier for much longer. However, many people will need social care. We have recently been discussing the personal care Bill, which the Government introduced as a first step in what is intended to be a national scheme designed to ensure that elderly and disabled people who need care—both nursing and personal—should receive it at home for as long as possible.

The Bill was designed to provide care at home for free in the case of, first, the most needy people. I regret that the Bill has not, in its original form, received the support of this House. It has been carried but with substantial amendments. Whether we like it or not, the care of an ageing population is going to cost money. It is no longer possible to rely on family members to provide the care required. Children no longer live around the corner. Many of them have accepted the advice of previous Governments—particularly that of the noble Lord, Lord Tebbit—to “get on their bikes”, and some have got on their bikes and gone miles away for jobs. Sometimes the jobs have been abroad. As a result, many older people live entirely on their own, although some local authorities do provide a support service for such people.

Care homes are expensive and do not always provide an acceptable level of care. There is a case for a more stringent system of inspection. As already indicated, many older people want to stay in their own home. The idea that they may have to sell their home in order to pay for care home fees is distressing for many elderly people. However, where families care for elderly relatives, a greater level of support for those carers is required, and I believe that the Government are committed to providing that. I was a carer myself several years ago and I know how much I would have welcomed the sort of support that is available through the Personal Care at Home Bill, which we have recently discussed in this House.

What is certain, however, is that all this will cost money. There is a need for consensus between the major parties about the way in which this should be provided. A number of differing propositions have been made, but a long-term plan to which there is general agreement must eventually emerge. The older generation, whose needs must now be met, have themselves been taxpayers for many years and in some instances are part of the generation that helped to win the last Great War. They certainly deserve our support. However, we also have to plan for future generations of pensioners.

Work, pensions, retirement, care—those are the issues to which I have referred and all of them are important to old people, but not ageism, because none of us wants that. The Government have already taken a number of steps to support older people and it seems that further steps are under consideration. I therefore await with interest what the Minister has to say in response to this debate. I beg to move.

My Lords, I thank the noble Baroness, Lady Turner, for bringing forward this debate. My subscription to Saga Magazine was paid some years ago and I feel well qualified to speak on this subject.

There are two factors which cannot be disputed. First, we know about the ageing of our population and we know that a large number of older people need assistance in one form or another We also know more about the black and minority ethnic communities—the BME communities, as I shall refer to them. Nine per cent of England’s population are from BME groups and 3 per cent are aged 65 and over. There are differences within ethnic groups but one pattern is clear: there is rapid ageing among this population and so we will see more and more older people from minority ethnic groups in our daily lives. We also know that the UK’s ethnic minority groups have a much younger age structure than the white population—a reflection of migration and fertility patterns.

Why is that so? I shall explain. Immigration from the Commonwealth countries started in the late 1940s and early 1950s. Let us not forget that at that time the Tory slogan under Harold Macmillan was, “You’ve never had it so good”, and I am sure that most of us wanted to enjoy some of the benefits. We then saw the migration of people from the peripheral margins of the Empire to the metropolitan centre itself. The first migration figures were published in the White Paper Immigration from the Commonwealth, in September 1965. It demonstrated that a substantial number of migrants were economically active and that women were of child-bearing age. We took little note then that a large-scale economic migration in such a short period would result in a substantial increase in older people in 50 years’ time. That time is now.

There is “no return back” for most of the BME elders After all, they are British, having contributed much in their younger lives to the economy, and now in old age many are involved in care or caring. We know that like majority elders, BME elders too have a range of experiences, resources and needs. We know that poverty has an ethnic face. Although we live in one of the rich OECD countries, we have to face the facts: 17 per cent of white households live in poverty compared with 43 per cent of Pakistani/Bangladeshi households; the figure is 29 per cent for Indian and Black Caribbean/Black British and 30 per cent for Chinese households. There is almost a doubling of poverty among BME elders, and with increasing poverty comes a greater need for care and support.

Many health and social care organisations are funded by the taxpayer, together with long-established large voluntary age organisations that meet older people’s needs. However, many of these organisations have not fully adjusted their services to reflect the multi-ethnic client base. So what do you do if you come from a BME background? If you are fortunate, you may find self-help organisations that BME communities—sometimes elders—have set up across the country to reflect an ethnic minority population base. It is not their desire to be ethnically separate; it is simply that, in the absence of culturally responsive mainstream services, they have had to organise care and support themselves.

Is it true that we know more about BME elders today because they have been a government priority? I am afraid that the picture is rather different, perhaps with the exception of the Department of Health, which has done much to support developments. Last week, on 18 March, I had the pleasure of chairing a conference to celebrate 12 years of a unique organisation called PRIAE—Policy Research Institute on Ageing and Ethnicity. I declare my interest as a trustee and vice-chairman of this body, although my only involvement is voluntary, not financial. It is an international independent organisation that has spearheaded research, information and developments in the ageing of minorities. It has, by itself, generated some £7 million grant income and created more than 50 specialist jobs in the 12 years.

PRIAE’s track record is such that when I chaired a session at the European Parliament in Brussels some years ago, many attendees thought that the organisation was government-funded and wanted the same in various parts of Europe. This is because PRIAE is credited for research, learning and service developments in employment, care, housing and citizenship. Why, you may ask, is it the first of its kind? The answer lies in the fact that, until this organisation was established, there was a vacuum in policy, targeted research and engagement of BME elders in developments that concern them, including increasing their capacity to be policy-active. In 1998 when PRIAE began, there was no national study on dementia and BME elders. Now there is, and next week educational resources in this area will be launched with the University of Central Lancashire and the National Mental Health Development Unit, as we know that one in five will have dementia at the age of 80-plus, and much of the care for such people falls on the family.

Similarly, we now have extensive data to design and develop responsive services that BME elders can use and be supported with. These data are on the health, social care, housing, minority organisation providers and family networks of some 26 ethnic groups. This is as a result of Europe’s largest research study in the area called MEC—minority elderly care—conducted by PRIAE. I am very proud of this for two reasons: first, no longer can policymakers and providers of services say, “We do not know what to do because there is no research”; and, secondly, this was the first time that a small charitable organisation had been funded by the European Commission in this area in its 26 years of history, and it was a first for a BME organisation It is satisfying to know that all this is being led from our country, the United Kingdom, for the benefit of many across Europe.

The question is, how much support are the Government providing to this sort of organisation? Due to this research, there is now a credible set of results, perfectly suited to the Government’s personalisation agenda. Have the Government informed themselves of this work and used it to make sure that minority elders are integral to the personalisation agenda? If these research results are implemented, it could make a big difference to BME elders’ well-being. MEC research shows that minority ethnic elders experience a range of health conditions, services and professional barriers, and remain largely invisible in care policy and practice agendas. Health and social care services are underused due to a range of factors including lack of knowledge, language difficulties, income and inappropriateness of services. When you examine the veneer of much of this policy, there are also considered to be some discriminatory assumptions and complexities within the health system which separate them out from others. However, when they are accessed and used, minority ethnic elders show clearly what their expectations are. Services must be quality-based, and not just culturally appropriate. This is an important finding, since for too long the issue of ageing and minorities has been limited to a focus on cultural and linguistic adjustments.

Health and social care professionals are key in assisting older people. In the research in the 10 countries, such professionals generally accept that minority ethnic elders have different needs, and that services should be culturally responsive. They regard minority ethnic elders’ knowledge and cultural factors as affecting access to services, rather than as added issues relating to organisational customs and practices.

Minority and voluntary organisations are increasingly supplying various supporting services such as home care, day care, social support and housing in a few cases, as the research has shown. In this sense, they are acting as primary providers of specialist care, rather than complementing mainstream services. What prevents their growth is finance and infrastructure, and collaboration with the mainstream is often very problematic.

One can cite a number of examples in relation to the expectations of minorities. When you hear comments of this nature from the people for whom PRIAE provides services, particularly those who have lived into their 70s, 80s and 90s, and are not in the same comfortable situation as the vast number of old people in this country, you cannot but be stirred into wanting to create policies that will serve them well in their old age. We must do this urgently.

I welcome the personalisation agenda, and I ask the Government how they intend to personalise BME elder issues so that they are on the same ladder as everyone else. BME elders’ housing needs are often lost in the discussion of “they look after their own”, but choice must prevail. What has the national strategy on housing in an ageing society achieved regarding funding of specialist BME extra care housing?

In the mean time, with historical neglect and a growing BME elder population with multiple and complex needs, BME age organisations are struggling to maintain their operations. Some have disappeared due to the funding crisis. We are reminded that BME communities are part of British society. BME elders are British, yet we see the dangers of parallel but unequal services developing, with different organisational lifespans and funding. Let me illustrate this with a quote from the founder and director of PRIAE, Professor Naina Patel, from her report produced at the request of the Royal Commission on Long-Term Care of the Elderly. She said:

“In the late 1990s, the Government’s own inspection survey … point to the inadequacies of mainstream providers and the compensatory effect of minority ethnic organisations who continue to act as ‘primary providers’ in the post-community care era … Given this continuity of mainstream neglect and/or indifference, we can state that this constitutes de facto racism. In other words, the mainstream services by default are structuring the segmentation of care to minority ethnic elders into a long-term solution. Our concern here is not that the location of services is in BME elder care centres. Rather that such location tends to be inadequately supported, neither maintained nor expanded. This makes the development of comprehensive services and an ability to reach all sections of BME elders (disabled, frail for example) problematic”.

This was stated about a decade ago. In spite of several welcome capacity-building measures that the Government have introduced, we are here today, a decade later, asking what support BME age organisations have experienced so that they do not remain impoverished. Our central recommendation, consistently made, is that these organisations should be better resourced and supported through mainstream funding, not as an alternative but as a vital mainstream part of services. This is beginning to happen through some government programmes, for which they should take credit, but they interpret “mainstream” a little differently.

Let me add a word of caution. In the interests of mainstreaming, white voluntary organisations are encouraged and financed to support BME organisations. We welcome learning and transfer opportunities, but we must ask, is this what is happening? Are benefits flowing in both directions? BME organisations are rightly concerned that this opportunity may gear white voluntary organisations to be more competent in multicultural care, but leave BME organisations as second best. Such possible unintended outcomes require that the Government implement their mainstream programme with care and concern. How do they intend to use the expertise generated by these organisations? We have seen little evidence to give us hope. I hope that the Minister will be able to deal with some of these issues when he responds.

My Lords, I congratulate my noble friend Lady Turner of Camden on securing this debate on a matter that is close to our hearts. Being over the retirement age, I, too, declare an interest. In Building a society for all ages, the cross-department strategy paper of July 2009, the Government called for a major culture change, where,

“people are no longer defined by age and everyone is able to play a full part”.

This was one of the many welcome signs that government policies across the board are increasingly reflecting and coming to grips with the challenge of a rapidly ageing society. However, the very title of this debate today, in singling out the need to assist older people, points out how far we as a society have yet to go in meeting that aspiration.

In their strategy paper, DWP, DCLG and the Department of Health call for better planning for later life, support for families across generations, encouragement of businesses to adapt to a changing workforce, and for public services and local communities to embrace and be accessible to people of all ages. We are very far from achieving this vision of the ageless citizen and that is why we need special measures.

Nowhere is this more important than in efforts to raise the income levels of older people so that they are included in the mainstream of society. In the pension credit we have seen a measure that has made significant inroads on poverty among the old. DWP figures show that net incomes of pensioner households increased by 25 per cent between 1998-99 and 2007-08 compared to a real earnings growth of 11 per cent. Obviously such an increase from a low baseline is not enough, and there is still a substantial minority of retired people living in poverty. However, it has been a positive step along the way, on which the Government are to be congratulated.

In reflecting on the Government’s many measures to assist older people and on the challenges that remain, I should like to focus on housing, which is one of the most urgent policy issues facing the next Government. Housing has a major impact on the health and welfare of older people, who have long been overrepresented in poor housing—particularly the older old—with private tenants proportionately the worst housed, followed by older owner occupiers. A recent report by the Building Research Establishment and Warwick Law School estimates that poor housing in England is costing the National Health Service in excess of £600 million a year. Given the significant use of health services by older people and their prevalence in poor housing, it is clear that investment in housing has the potential to make major savings in the cost of healthcare, as well as promoting the well-being of older people.

I should like to discuss what government action has done to ameliorate the present housing situation of older people and what it can do about housing that is no longer defined in relation to age, is barrier free and accessible to all ages. Older people have benefited from positive housing measures such as the Decent Homes programme. This £40 billion programme was aimed at transforming the quality of our housing stock, which had been appallingly neglected when this Government came to power. The programme set out to ensure that all social housing would be of a decent standard within 10 years. It has been rolled out through the country—visibly so for anyone walking around their neighbourhood in recent years—and its implementation has been described by the recent Select Committee inquiry into housing standards, Beyond Decent Homes, as having involved a significant change to the landscape of the social-housing sector. As the Chartered Institute of Housing said in its evidence to that committee, the programme,

“can be regarded as a major success story”.

As 26 per cent of householders over the age of 65 are social-housing tenants, the Decent Homes programme will have made a positive impact on the well-being of older people of which this Government can be very proud.

Like the Forth Bridge, however, a housing stock as old as ours will always need more work. Care & Repair England has drawn attention to the pressing need to move on from these major improvements in the social housing sector to the sector where far greater numbers of older people live—in owner-occupied and private-rented housing. There are 5.3 million owner-occupied non-decent homes compared with 1.1 million social-rented and 0.8 million private-rented. Eighty-six per cent—that is 865,000—of older householders in houses in serious disrepair live in private sector housing. As Care & Repair England says, there are now more low-income home owners than low-income social-rented tenants, but they get little or no housing help. Growing numbers of low-income older home owners are struggling to repair and maintain their properties, and expecting them to do this out of equity release is unrealistic. Beyond Decent Homes recommends that the Government should set a target to bring all private sector housing up to a decent standard, and I hope that the next Government will act swiftly on this.

As we all know, properties need maintenance, and as we get older we find it more difficult to do simple jobs around the house, which can lead to a bad effect on our health. In 2008, the Government invested £33 million in what are known as handyperson services, with part of this money going to housing advice services. This was a welcome infusion of funding into a simple but necessary service for older and disabled home owners. Handypersons carry out small essential repairs, including carpentry, plumbing and roofing, as well as adaptations such as ramps, handrails and lever taps. They can also fit new locks, chains and key safes to enable safe access by health and social care professionals. This government funding sent a clear message to service commissioners that such schemes should increasingly be considered as part of the mainstream.

Whether our housing is in good repair is not enough if its design makes it increasingly difficult, or even impossible, to continue to live in it as one grows older. There are significant costs to the health service and the social care budget when housing is no longer suitable for the changed needs of frail older people, who cannot be discharged from hospital or who have to go into residential care because of it. An important means of redressing such problems is the disabled facilities grant, which this Government have increased significantly since its inception; 2008 spending is projected to increase by nearly one third by 2011. The average grant of around £6,000 has made a real and significant difference to older peoples’ ability to do the simple but essential things like shower, access a loo or get upstairs.

Central government matched funding has historically provided a ring-fenced grant to all local housing authorities as a contribution towards the cost of DFGs, but I am afraid it still falls far short of being enough to meet demand in many areas. This will provide a major challenge for the next Government if they hope to reduce the cost of social care.

From April 2008 this matched-funding arrangement ended, and local authorities are now free to choose how much they put into local DFG budgets relative to their national funding allocation. Sadly, evidence is starting to emerge of wide local variation in adaptations: while some local authorities are continuing to match the national funding, others are either freezing or reducing their contribution. Long delays in the provision of an adaptation can easily result in major costs for health and social care authorities, such as home care services, residential care or hospital in-patient expenditure, which can be many times the adaptation cost. It makes investment sense to prioritise home adaptations, even if they are funded by transferring resources from the National Health Service. An ageing population in an ageing housing stock needs bold and joined-up measures or we will pay the costs even more expensively in another part of the welfare state.

However, in many cases existing housing cannot be adapted to the needs of old age. We have the historical problem of a housing stock that was not designed to make questions of age an irrelevance in the way that the report, Building a Society for All Ages, called for. Barrier-free design, which accommodates all the changes of a lifetime, is perfectly possible and deliverable. It makes absolute sense, and it is not “too expensive”, as developers are fond of saying. On the contrary, we cannot afford not to deliver it.

In Lifetime Homes, Lifetime Neighbourhoods, the national strategy for an ageing society, this Government recognised that ageing,

“poses one of our greatest housing challenges”.

As a refreshing future-proof vision based on inclusiveness, the strategy noted the interdependence of housing, health and care. Public service agreements were put in place to set,

“housing and older people at the heart of local government services”.

Besides announcing the measures for repairs and adaptations I have already mentioned, the strategy undertook to ensure, via a mandatory part of the Code for Sustainable Homes, that,

“all public housing will be built to Lifetime Homes Standards by 2011”,

with an aspiration that all new housing will be built to these standards by 2013. This commitment was one of the highlights of recent government policy, a far-seeing and thoughtful contribution to the construction of a barrier-free society. Sadly, it has been reneged on with the announcement that Government will not make the Lifetime Homes standard a mandatory requirement of level 4 of the Code for Sustainable Homes. In 2008-09 only 13.8 per cent of the National Affordable Housing Programme was built to Lifetime Homes standards. This sets a major challenge for the future.

In relation to specialised housing for older people, the recent report by the Housing our Ageing Population Panel for Innovation (HAPPI) represents a welcome legacy from the Lifetime Homes strategy, and sets an inspiring benchmark for what we should be doing. The Homes and Communities Agency, commissioned by the Department of Communities and Local Government in partnership with Department of Health, set up this innovation panel, chaired by the noble Lord, Lord Best, to ask:

“What further reform is needed to ensure that new build specialised housing meets the needs and aspirations of the older people of the future?”.

It has documented a range of European good practice and has lifted our sights to what attractive living environments are possible in terms of design. I sincerely hope that this report’s strong recommendations will find an active and enduring response at every level of the next Government.

The HAPPI report included some very interesting examples of where older people themselves have, alone or assisted by public policy, developed collaborative communities to sustain themselves through old age. It recommends that the HCA,

“promotes self-help and mutual housing projects for older people, drawing on the successful co-housing models from continental Europe”.

Co-housing is the name given to small, intentional neighbourhoods where individuals and families choose to live as a group. They sometimes eat together and share activities, but each household has its own self-contained home.

I have spoken a number of times about co-housing, which represents a clear example of how thinking needs to change if local and central government, housing associations, builders and developers are to meet the challenge of our ageing society and the cost of social care. These intentional neighbourhoods are such an obvious solution to the loneliness and isolation that blight the lives of too many older people in our society. Co-housing, across generations or of older people together, has struggled to get a foothold in this country, yet, in offering a healthy, self-help alternative to isolation, it is surely a model that has much to contribute to modern living, especially for older people.

The Lifetime Homes strategy recommended co-housing as a creative response to lifestyle changes and the expectations of baby-boomers. The Homes and Communities Agency prospectus contains a commitment to fund co-housing schemes. However, the HCA needs to give much more active encouragement if local authorities and housing associations are to respond to the challenge of enabling older people to work together for independence. I should most definitely declare an interest here, as my partner is currently trying, with the Older Women’s Co-Housing group—known as OWCH—to gain the support of a north London borough in developing a self-managing and mutually supportive community on a brownfield site purchased for it by the Hanover Housing Group. This initiative, if the local authority can only make the necessary creative leap and think outside the box, will blaze a trail nationally. It will establish older people's co-housing as a model to meet not only older people’s wish for continued autonomy and independence in their own homes but also their need for an age-proof environment and for companionship.

Single living in old age is one of the greatest challenges of an ageing future, a challenge which all levels of government need to address and one which I have every hope that this Goverment will meet.

My Lords, I congratulate my noble friend Lady Turner of Camden on initiating this debate. It is a shame that so few noble Lords saw fit to contribute; I guess that there cannot be too many older people in your Lordships’ House.

Old age is the subject of many jokes, some of them funny, some quite unfunny—especially as one ages oneself. Old age is when you get out of breath playing chess. Old age is when you are cautioned by the doctor to take things more slowly, rather than by the police. George Burns said when he was 93, “At my age, you don’t even go out and buy green bananas”.

In truth, however, there has been in the past few decades a large-scale transformation of what old age means. We quite rightly now speak of “older people” rather than “pensioners”, which suggests a kind of welfare-dependent category. I do not like the term; I like even less the term “senior citizens”. “Older people” is the right term.

I think that it is generally agreed by those who specialise in the field that the ageing society should be seen not as a problem but as an opportunity. It is surely one of the great achievements of industrial civilisation to have prolonged life in such a way as to transform the demographic structure of our societies. When I used to write about these issues a few years ago, I used the term the “youthing society” rather than the “ageing society”—even though it is not especially grammatical—because older people now entertain the same diversity of lifestyles and want the same range of opportunities as do younger people. They should have those opportunities.

The Labour Government can boast of many achievements in improving the lives and, more important, the opportunities of older people. They include the minimum income guarantee, improvements in pension allowances and the winter fuel subsidy. However, the Government’s greatest and most significant achievement is in lowering rates of poverty among older people. Nearly 30 per cent of people over 60 living on pensions were in poverty in 1994-95. By 2007-08, that proportion had dropped to 18 per cent. In a recent commentary on this issue, looking back to the preceding Tory era, the journalist Julian Knight wrote:

“It was a national scandal that in the 1980s and 1990s, under Tory rule, we had pensioners dying because they couldn’t afford to heat and feed themselves properly. The plight got so bad one winter that a Danish charity sent over food parcels and blankets to some of our pensioners”.

I am pleased to say that the situation is radically different now. In the previous debate, on the economy, I mentioned that the Government have made a big impact in reducing poverty, and the biggest impact has been in reducing poverty among older people.

Of course, further progress is needed. The recession has seriously hit those living off investment income. I would welcome any comments that the Minister would like to make on that. Long-time care of the elderly, as we all know, is a very testing issue, about which intensive debate continues, and, as politicians like to say, there are no easy answers. Perhaps one of the most important issues is that we are still on a collision course between the affordability of pensions and the increased proportion of over-60s in the population. This is visible in all countries. The only way around it is to get and keep more over-60s in work and to recast that in opportunity terms as far as possible.

I will make three points about this, one of which continues the point made by my noble friend Baroness Turner. First, older people should have the right to work under exactly the same conditions as anyone else, determined only by competence. There should be, therefore, no compulsory age of retirement. I echo what my noble friend said about the default retirement age. It is not right, in my view, that employers in the UK can still force retirement at age 65. The struggle against that continues, led by Age Concern and other organisations. The Government have promised to review it, but I think that it should be scrapped. By the way, it was scrapped a long time ago in American universities, where there is no federal age of retirement. That has not had a disastrous impact on those universities. There are plenty of people of a certain age who are marvellous teachers and marvellous researchers; they should have the right to work in universities in this country, too.

If you abolish a formal age of retirement, does that inhibit the job chances of the young? No, it does not. You can see that if you look across other industrialised countries. In fact, the opposite is the case. Those countries that have a low functional or formal age of retirement, such as Spain, Italy or Greece, have by far the highest levels of youth unemployment. Therefore, that premise does not follow and it is not an objection to abolishing a formal age of retirement. I repeat: people should have the right to work at any age as long as they want to do so and demonstrate the capacity to do so in a competent way.

Secondly, we know that, in getting more people into work and dealing with the looming pensions crisis, an active labour market policy makes a big difference. We have examples of this from a range of countries. As usual, one or two of the Scandinavian countries seem to be in the forefront. In Finland, for example, only 37 per cent of over-55s—let alone over-60s or over-65s—were in work in 1997. This has now been upped to 57 per cent, at least by 2007, the year of the recession. That was achieved by bringing in a flexible retirement age between 63 and 68 and allowing people to go on beyond that age as they wish. It was based on providing a bonus for those who stay in work. It is worth mentioning that those affected who are now in work beyond what was the standard functional legal retirement age include a substantial proportion of disabled people and women. These are important categories of individuals who should have not just the right but the capability to work. An active government policy can surely help with that.

Thirdly, and finally, we should promote a balanced idea of retirement and work. Retirement was a concept introduced by the Bismarckian welfare state and became seen as a sort of right and a defining principle of the good life. However, it is not necessarily a defining principle of the good life, as many people discover when they retire. There is no doubt that retirement can bring many benefits and generate many freedoms, especially if one retires from an onerous physical job, for example. But it also creates many problems, which are well known. They can include aimlessness, a feeling of lack of worth and a loss of sense of value to the wider society. If you have a rigid notion of retirement, you tend to produce ghettos for old age, separating off older people from younger people.

In conclusion, this is something that we should fight strongly to avoid. There should be social justice between the generations. There should be an effective contract between the generations. Older people who work are more often in contact with younger people. It makes sense to promote intergenerational social justice as an important aspect of social justice and inequality. Just to show that I am not party political, some of these interesting ideas, problems and issues around the relationship between the generations are discussed in David Willetts’s book, which is a very interesting contribution to this overall subject.

My Lords, I congratulate my long-standing and noble friend Lady Turner on moving this Motion about ageing. Like other noble Lords, I am both qualified and experienced to speak in this debate. She is right to raise this matter. In this country, 8.2 million people are aged over 65 and, on average, men expect to live until 82 while women have a life expectancy of 85. Thanks to the advantages of medical science, not only can we live longer but we can enjoy more active and healthier lives—the kind of lives that my noble friend Lord Giddens described.

Without doubt, ageing will move up the political agenda. I was very interested that the noble Lord, Lord Dholakia, spoke about minorities looking after their older people. Of course, one of the largest and finest old people’s homes in this country is Nightingale House, which is of course run by the Jewish community.

As some noble Lords know, I visit Florida. Because many Americans retire there, it is possible to have a glimpse of how life might be organised with an ageing population. The average age of Palm Beach County is 67. It is a population with a disposable income, so many activities and events—concerts, theatres, ballet, recitals and talks—start at three o’clock in the afternoon so that people can go home in daylight. There is ample accommodation designed for older people in various states of health. Because they are less mobile and there is very little public transport, transport is provided to shopping and medical centres, banks and other places. Indeed, there is co-housing, about which the noble Baroness, Lady Wilkins, spoke. The community has adapted to people’s needs, so that there is no stigma and no inconvenience to others attached to being elderly and frail. Probably the most popular adaptation is the “early bird”. No, that is not some easily digested chicken; it is an early meal. Virtually every restaurant offers meals between 4.30 and 6 pm at a very modest price, so all the elderly people eat out. Rumour has it that, when they sit down, they look at each other, they sigh and they say things like, “Goodness gracious”, “Dear me” and “My goodness”. When there is a pause, somebody says, “Well, now we’ve discussed the children, let’s get on with eating”.

One of the reasons why I know about this is that my sister retired there and she suffers from dementia—the noble Lord, Lord Dholakia, spoke about this. After 50 years of living in New York, she went to Florida, where she can live easily and well with dementia, although that is because she has private insurance. For those without private insurance, life is very different and very difficult. I hope that the new healthcare law in America will change that. Without insurance, people in America who require social care depend entirely on friends, family or charity. Even with insurance, a big hurdle is the argument with the insurance company over whether you are covered. That is why we should value what we have here—not only the care, but also the pensions, the credits, the winter fuel allowances, the free travel, the free television and all the other things that my noble friend Lady Turner told us about.

I know that the social care Bill has become a bit of a political minefield and, yes, there is uncertainty between local councils, primary care trusts and social care organisations. However, we do have care in the community. If somebody thinks that their spouse or parent is becoming frail or is in the early stages of difficulties with memory or reasoning, they can get help.

Of course things can be improved, but the Government seem to be taking ageing seriously. When preparing for this debate, I noted the report issued by the Public Accounts Committee on 16 March about the five-year dementia strategy. Yes, it spoke of unacceptable regional variations, but it also spoke of strong leadership. However, it also referred to the inappropriate and excessive prescribing of antipsychotic drugs. That is because of staff issues in care homes and it is a worry. Will the Minister tell us how the Government are going to tackle this?

What should the policy be towards ageing? Government policies should be directed towards what I call “successful ageing”. Help the Aged and Age Concern have their views and I am sure that they have carried out extensive qualitative and quantitative research. However, may I give your Lordships my guide to successful ageing? It is my guide to accepting that you have reached a later stage of life—my qualifications for speaking in this debate. The key is to move away from stress-centred activities—largely economic—and carry out human-centred activities. Deal with people, but on your own terms.

I try to do five things, ironically inspired by the New Economics Foundation. First, be active. I cycle a lot and, yes, I now have a small electric motor on my bike to help me up those steep hills. Secondly, I try to connect with people every day—friends, colleagues and family. Your Lordships’ House is invaluable for this. It is also invaluable to my third task, which is to make an effort to take note of and learn new things, unusual things and ideas, not to be left behind. I try to keep mentally active by trying something new or rediscovering something old. Finally, I try to look outwards—look outwards by giving. I try to give the benefit of my experience or I help a person, an organisation or a charity with encouragement or with money. Of course I keep an eye on my pension and on my diet, but by now there is not much I can do about all of that. This is what works for me and I would think works for most of us. It seems to me that, if government policies are directed towards successful ageing, by facilitating the activities that I have described, those policies will be right.

My Lords, I thank the noble Baroness, Lady Turner, for introducing this debate—the last party debate of this Parliament, I believe. We all owe her a debt of gratitude for her work over many years, seeking to raise matters in this House to make the lives not just of older people but of working people of all ages as good as possible. She is an example to us all.

This has been a short but interesting debate. There has perhaps been a slight hint of electioneering, but not as much as I thought there might be. By concentrating on measures that have been taken to assist older people and the challenges that these pose for the future, the noble Baroness has focused on a key issue. I am tempted to use the word “battleground”, but that would send a rather undignified message.

Politicians who are determined to deny any good policies to their political rivals in government do themselves no favours. I am happy to acknowledge that this Government have certainly made life better for many older people in several respects, although other opportunities have been missed. The phrase “older people” sounds a bit vague, although it sounds better than “pensioners”. It is difficult to know at what age this stage starts.

My noble friend Lord Dholakia made a powerful contribution about the needs of what we now call the BME community. As he said, many of those who originally came to this country after the war now fall into the age range that we are talking about. I hope that the Government heed what he says about support for organisations and BME elders who are trying to address the needs of this older cohort.

The noble Baroness, Lady Wilkins, concentrated on housing, which, we should remember, is always the issue that people write most to their MPs about. It is often hived off into specialised ghetto subjects, but it should be in the mainstream. She has brought an important element into this debate.

I shall be referring mostly to pensioners in my comments, and shall start with pensioners themselves before turning to the retirement age. I shall also touch on long-term care for the elderly, winter fuel payments and bus passes.

There is no question but that pension credit, which started only in 2003, has given many poor pensioners more money in their pockets. A more cynical way of looking at this is that pension credits are a more complicated way of giving pensioners back what would be rightfully theirs if pensions had kept with the cost of living. It is reckoned that as many as 1.7 million pensioners do not claim pension credits, although they would be eligible to do so. This was mentioned particularly by the noble Baroness, Lady Turner. Whether that is through ignorance or because they are unwilling to go through the means-testing process is unclear.

Age UK reckons that 18 per cent of pensioners live below the Government’s poverty line. In other words, they have less than 60 per cent of median income—after housing costs. The Minister will understand that I had to get those three little words in. The situation is worse in isolated rural areas, where take-up is significantly lower. One reason might be the lack of social housing in many rural areas, so that pensioners are not in touch with the benefits system.

There is also the fact that many pensioners living in rural areas are often fiercely independent and may not want to fill in complicated forms for means testing. Whatever the problem, this lack of take-up, whether in town or country, must be urgently addressed as the basic state pension is not generous—something I shall come back to in a moment. It also has implications for cold weather payments because those receiving pension credit qualify automatically.

Another worrying fact about pension credit is that in 2008-09, 36 per cent of all pension credit cases were incorrect. That is over 900,000 cases: 581,000 were overpaid and 401,000 were underpaid, due to a combination of fraud, official error and customer error. Does the Minister agree that these figures are unacceptable?

I must mention here the scheme for women who are approaching retirement to buy back extra years of national insurance payments that they missed after giving up work to raise families. This was a welcome addition to the last Pensions Act after a long campaign spearheaded by the noble Baroness, Lady Hollis. However, that small step for some women does not do anything for those who retired just before this measure was introduced, those who have fewer than 20 years of national insurance contributions, or those who cannot afford any “buy-back”. Nor does it do anything for those single pensioners with no other source of income who have to rely on pension credit after means-testing.

Pensions have fallen so far behind wages because, of course, of the breaking of the link with earnings by the Conservative Government back in the 1980s, which has not yet been restored. I know that both the Government and the official Opposition have said that they will restore the link with earnings, but it is not at all clear when this will be. My party is pledged to restore immediately the link between the basic state pension and earnings, using increases in average earnings, prices or 2.5 per cent—whichever is higher—to determine the increase in the state pension. We would also scrap the rules that compel people to buy an annuity for personal pensions when they reach the age of 75. In the spirit of the debate, I should also mention the Government's welcome announcement in last year's Budget that grandparents of working age who are looking after their grandchildren for more than 20 hours a week will qualify for national insurance credits towards the basic state pension from next year.

Our tax plans will give older people who pay income tax more money in their pockets. We would make sure that no one pays tax on the first £10,000 of their income, including pensioners who pay tax. Paying tax on modest pensions is something that many pensioners resent.

On the retirement age, I note that the Chancellor of the Exchequer said in his Budget speech yesterday that the Government were going to “look at” the national default retirement age of 65; the noble Baroness, Lady Turner, mentioned this, and the noble Lord, Lord Giddens, spoke about it a great deal. It is not, of course, a new announcement. They have already said that they were going to review it. I was going to ask the Minister whether that review has taken place, but it has obviously not yet done so.

My party would scrap the default retirement age, with workers and employers having to agree that, for an employee to continue working after the age of 65, it is to their mutual advantage. A recent survey to assess the impact of the current rules on older workers found that around 100,000 people were forced to retire at or after 65 last year. and that employers of four in 10 employees over 60 use forced retirement. The number of people forced to retire last year is far higher than even the highest estimate at the time when the default retirement age was introduced. It seems that older workers are being forced out of the workforce during the recession as a cheap alternative to redundancy, some in their late 50s. These forced retirees find it almost impossible to re-enter the workplace at this age, and are left dependent on the state. The majority of workers over 50, both women and men, in fact want to continue working beyond state pension age, which is something that the noble Lord, Lord Giddens, also mentioned.

Some firms, such as B&Q, have made a virtue of their willingness to keep on older employees. This is welcome and we hope it can be extended, with older workers being offered part-time and flexible working. The announcement about working tax credit for older workers is welcome. It has long been a puzzle to me why the Government can legislate for increasing the pension age in the future on the one hand, while not doing anything about the national default retirement age on the other. It is a thoroughly inconsistent position to take.

Turning now to social care, this House has been grappling with the Personal Care at Home Bill, so the policy for long-term care of the elderly is in the forefront of our minds at the moment. The Government’s Green Paper on the subject, published recently, set out options. They were consulting on those options when they suddenly decided to pre-empt matters with the Personal Care at Home Bill, which was heavily amended last week in this House. We believe that the only way forward is for a cross-party commission, like the Turner commission on pensions, to take place and report within the year to arrive at a consensus on this vital subject. The uncertainty surrounding the future of long-term care of the elderly must surely be resolved as a matter of great urgency.

While on the subject of long-term care for the elderly, there is a growing view that the status of carers needs to be strengthened and put on a much higher footing. There should be a more structured career path, with recognised qualifications for carers, so that Britain is ready for whatever plans are put in place for the future.

The winter fuel payment was brought in for pensioners by the Labour Government in 1997. It is now payable to all those aged over 60, with more for those aged over 80. My party has just announced that we would raise the age at which older people receive the winter fuel payment to 65 immediately to fund extending those payments to disabled people on disability living allowance, who have higher fuel costs in view of their impaired mobility. However, the Government cannot be responsible for the weather. The very cold weather that we have experienced has left many pensioners heavily out of pocket, even with the winter fuel payment, because of higher fuel prices. The Government have tried to urge fuel companies to be more socially responsible in their charging policies, but to no avail. We would mandate energy companies to reverse the charging regime so that the first units of energy consumed are at the lowest price. This will reward those who use less energy and encourage investment in energy efficiency. We would also tackle the problem of who is eligible for a social tariff by making energy companies introduce mandatory social tariffs that are lower than their other prices to protect vulnerable people on means-tested benefit from higher fuel costs.

Many pensioners found that the best of keeping warm this winter was to travel on buses. The free bus pass scheme for off-peak travel for pensioners and disabled people has been one of the Government’s most popular initiatives, although some local councils in major tourist destinations have found that the scheme is proving almost too popular and local council tax payers are having to subsidise it. However, I hope an incoming Government will not have second thoughts and will keep the scheme going.

There are other matters on each side of the Government’s balance sheet. It is a good thing that older people are eligible for more health checks than before, so that they can keep fit and healthy for longer. The noble Lord, Lord Haskel, spoke about this. Here, I urge the Government to pay more attention to recognising the need for psychiatric services for older people. Depression can hit people at any age and should not be ignored just because a person is retired. If health checks are a good thing, a bad thing is that many of the adult education classes that older people enjoyed in the afternoons or early evenings are no longer available, as I believe they are in Florida. Engaging the brain is perhaps the best way of keeping healthy, as most of us here find. The closure of many post offices, which older people rely on, in both urban and rural areas is unwelcome. I hope that the recent announcement on the extension of banking services offered through the Post Office might stem the flood of closures.

Talking of closures, I turn, in ending, not from the sublime to the ridiculous but from financial practicality to an everyday practicality. We need more public conveniences in towns all over the country. I know the lack of public loos cannot be laid explicitly at the Government’s door, but they could spearhead a campaign to ensure that there are enough of them.

I thank the noble Baroness for this debate and look forward to the Minister’s reply.

My Lords, despite all the sound and fury on measures for older people, the sad fact is that on the central measure of pensioner poverty used by this Government—not the same measure used by the noble Lord, Lord Giddens, earlier—there has been no reduction in numbers at all. Let me provide the latest figures from the Households Below Average Income report, which takes us up to 2007-08. That was before any impact from the financial crisis this Government have plunged us into. These figures show that the number of pensioners on below 60 per cent of median income was 2.5 million. That is exactly the same figure as in 1997-98. In percentage terms the figures are better by a smidgen, and I define a smidgen as being down from 25 per cent to 23 per cent. I am using the before-housing figure and the relative, not absolute, performance figure in line with the figures that the Government cleaved to in the Child Poverty Bill which we have just finished debating.

Some one in five pensioners lives in poverty. We have some of the poorest pensioners in Europe, with only pensioners in Bulgaria, Latvia, Cyprus, and Estonia more likely to fall into poverty. The income of the poorest 20 per cent of households has been falling for the past three years and is now £7 a week lower in real terms that in 2004-05. At the same time, fuel poverty has quadrupled among pensioners. The official figures for 2007 show 1.5 million households in England containing someone over 60 in fuel poverty. Using the Government’s own projections for how fuel poverty has increased since 2007, it is estimated that there are as many as 2.4 million such households today—almost one pensioner household in every three. Fuel poverty is such an important issue because it is so closely linked to cold-weather deaths. In the winter just gone there were no fewer than 36,700 deaths in England and Wales. That is an increase of 49 per cent on the previous winter. Of course, it was an unusually severe winter. Nevertheless, that figure is simply not acceptable. These figures are for those who still have their own home. It is estimated that around 48,000 elderly people currently in residential care have had to sell their home to pay care fees.

The overarching concern on pensioner poverty is that this disappointing performance took place in a booming economy at a time when the number of pensioners rose by a modest amount from 10 million to a little over 11 million. We are now facing a much more difficult economic period and the number of pensioners is scheduled to rise to nearly 15 million by 2030, according to DWP forecasts. Before I go into some of the specific problem areas, I would like to take this opportunity to nail some of the misinformation about Conservative plans for older people. I have been genuinely shocked to learn about some of the things that desperate Labour candidates have been saying and publishing about our plans in this area. Jon Trickett, MP for Hemsworth, has claimed that pensioners would lose their winter fuel allowance or free TV licence under the Conservatives. Phyllis Starkey in Milton Keynes South West has claimed that pensioners would lose free bus fares under a Conservative Government. Let me state unequivocally that the Conservatives would not cut the winter fuel allowance, would not cut free bus travel, would not cut the free television licence, and would not cut pensions or pension credit. These statements by Labour are quite simply lies. I am amazed that the Prime Minister has not done more to set the record straight and keep his candidates in line. I would appreciate a statement today from the Minister to that effect.

Let me turn to the Government’s track record. Here I shall concentrate on outcomes, not inputs. One of the central problems of Labour’s period in government is that it has confused energetic initiative-itis with performance. It has poured money into many programmes, but this is nothing to be proud of if the outcomes are inadequate. While the Minister may boast of this programme and that spending, I will concentrate on the underlying results. Some of them are pretty unpleasant.

Our hospitals are dangerous places. The older people are, the more vulnerable they are to catching infections while in them. It has been reported that a quarter of health trusts failed to meet standards over hospital infections while five were warned over blood-spattered walls and mouldy instruments. What are the Government doing to clean up Britain’s wards since their previous programmes obviously are not working?

There is too much malnutrition. A recent survey by the British Association for Parenteral and Enteral Nutrition found that 90,000 of the nation’s malnourished people resided in hospital, and, even more concerning, 150,000 resided in care homes. Can the Minister update the House on the progress of the nutrition action plan of 2007 to end malnutrition in hospitals?

Provision for dementia has been falling, despite the increasing numbers. There are now 821,000 dementia sufferers in the country. The number of care homes able to care for sufferers has fallen by 9 per cent since 2004 and the number of places has reduced by nearly 6 per cent. Can the Minister give an indication of when the programme of memory clinics, outlined in the dementia strategy, will be fully rolled out? Upwards of 120,000 people are being inappropriately treated with anti-psychotic drugs designed for those with schizophrenia, according to the All-Party Parliamentary Group on Dementia. What action will the Government take to stop this serious misuse of pharmaceuticals in dementia care? Can the Minister also tell the House what the Government are doing to ensure that the Care Quality Commission’s regulation is working in the best interests of care home residents?

There has been no granting of freedom to people to look after themselves and make their own decisions. When will the Government end the effective obligation to buy an annuity at the age of 75? Labour plays fast and loose with disability living allowance and attendance allowance. Does the Minister agree that the current speculation over the fate of attendance allowance, disability living allowance and other disability benefits in the Green Paper is causing great anxiety among those who rely on this money to get by? We the Conservatives will protect disability living allowance for the over-65s and attendance allowance for disabled pensioners to give them the chance to have independent lives with the freedom to tailor their care to their needs.

The Government have turned one of the best private pension systems in the world into one of the worst. I will not dwell on the sad sequence of events that has brought us to this pass—initiated by the £100 billion tax raid on dividends. Up to £5 billion of means-tested benefits that should rightly go to older people in Great Britain are unclaimed each year. Many pensioners simply cannot understand the Government’s complex system. What are the Government doing to solve this unacceptable situation? To coin a phrase, we cannot go on like this.

The noble Lord produces a doom-laden account, but does he accept the idea that ageing is an opportunity, that having an ageing society is an achievement and that we must support opportunities and have a newer and much more positive view of what ageing means? If so, what is Tory policy on those issues?

I join the noble Lord, Lord Giddens, in congratulating David Willetts on his book The Pinch, which goes through many of these issues in great detail. The most interesting facts in that book are that, despite the ageing of the population and the assumption that that means that people are more ill, in practice the period for which people are unhealthy has been contracting even as people have been getting older. I quote the facts, which he quoted, to the noble Lord. I welcome many of those trends, but they are general trends right across the western world, so one can hardly congratulate a particular Government on them.

My Lords, I congratulate my noble friend on securing this debate and on her steadfast support for securing justice for older people in particular. She ranged comprehensively over issues associated with work, pensions, retirement and care. The noble Baroness, Lady Thomas, said that she detected only a slight hint of electioneering—I think that that was before the previous contribution—and we have learnt one or two acronyms, such as OWCH and HAPPI, this afternoon, which I will come on to.

Tackling pensioner poverty and improving financial security for older people was a key priority for this Government on coming to office, and remains a key priority today. The Government’s strategy since 1997 has been to target support at those who need it most through measures such as pension credit. It is an approach that has delivered significant progress; 900,000 fewer pensioners are now living in relative poverty than in 1998-99 after housing costs, and pensioners today are less likely to live in relative poverty than the population as a whole. As my noble friend and others have mentioned, the Government have introduced winter fuel payments, free off-peak bus travel, free TV licences for those over 75, free eye tests and free swimming. All these things make a real difference to the lives of millions of older people in this country every day.

This Government have also recognised the importance of providing additional support to pensioners when they needed it most. During the recent downturn, this included: increasing winter fuel and cold weather payments; a £60 payment alongside the Christmas bonus; and, from April last year, an above-indexation increase in the pension credit guarantee and a 5 per cent increase in the basic state pension.

The Government have continued to provide additional support. From October last year, ISA limits for those over 50 were increased to £10,200. From November, the capital disregard in pension credit, as well as housing benefit and council tax benefit, was increased from £6,000 to £10,000. This means that 88 per cent of pension credit recipients will have all their capital ignored when their entitlement to means-tested benefits is calculated.

This year, pensioners will again receive an additional payment alongside the winter fuel payment, making their winter fuel payment worth £400 for the over-80s and £250 for those aged 60 to 79, and those on pension credit will benefit from increased cold-weather payments, which will increase £8.50 to £25. From April this year, pensioners will benefit from above-indexation increases in the basic state pension and the pension credit guarantee. The Chancellor has also confirmed that the additional payment on top of the winter fuel payment will be retained next year.

Today, we also have a pension protection regime which ensures that people can have confidence to save for their future. Thanks to the safety net provided by the Pension Protection Fund and the Financial Assistance Scheme, people need no longer lose their pension when their employer becomes insolvent. As my noble friend Lord Giddens said, we have made much progress, but, like my noble friend, the Government recognise that there is more to do. However, significant progress has been made over the past decade in tackling pensioner poverty.

Let me remind noble Lords that in 1997, the poorest pensioners, who lived on income support, lived on £69 a week, which is £98 in today’s prices. Today, pension credit means that no one aged 60 or over needs to live on less than £130 a week or £198.45 for couples. This represents an increase in income of almost a third in real terms, and many of those on pension credit will be entitled to receive additional support through housing benefit and council tax benefit.

The noble Lord, Lord Freud, referred to our comparative position in Europe on pensions. I remind him that it is misleading to focus on the state pension alone because the recent OECD report shows that replacement rate for the average earner taking account of private pension income, an important source of income for UK pensioners, rises to 70 per cent, which is well above the OECD average. He also referred to issues around fuel poverty. I remind noble Lords that in the winter of 1997-98, less than £60 million per year was spent on helping pensioners to meet their fuel bills. We now spend £2.7 billion each year on winter fuel payments. This year, the Government will run an energy rebate scheme that will provide up to 250,000 of the poorest pensioner households with an £80 rebate on their electricity bills in 2010. I believe the Government have a good record on tackling fuel poverty.

Noble Lords will be aware that we are living through an enormous demographic change with UK life expectancy continuing to grow. In 2007, for the first time in history, there were more pensioners than children in the UK. Of course people living longer is a cause for celebration. It is a testament to improvements in healthcare and occupational safety and in delivering the modern welfare state. Nevertheless, it will reshape our society, and we must adapt to make the most of it.

The Government are putting in place the foundations which will help us rise to this challenge. Our response was published in Building a Society for All Ages, our strategy for an ageing society, and is two-fold. It is to help those people in later life and to help people prepare more effectively for their later life. That will not by itself ward off the spectres of long-term sickness and isolation, which is why we have taken measures across the whole of the Government to help people prepare for their longer lives. To ensure that people can find the information that they need, we have introduced “Planning Your Future—Get Set for Retirement” as part of DirectGov. That brings together information about areas such as money, health, careers and home, to help people in mid-life plan ahead for a better later life. It will provide a link to key services such as the NHS mid-life check, which supports people to live healthier lives.

However, we know that preparing for an ageing society is not just about the people who will get old tomorrow. It is also about people who are older today. I have already shared with noble Lords our achievements in combating pensioner poverty, and in supporting pensioners during the recession. A number of noble Lords touched on the default retirement age. Across government, I believe that by 1 April every department should have made it clear that it will disregard the current default retirement age. Beyond that, we also expect businesses to play a role—to recognise ageing in their employment policies. That is why we have brought forward the review of the default retirement age to 2010, and last year called for evidence on retirement ages to be submitted by the beginning of February this year. We are assessing that evidence, along with major research we have commissioned, and are developing options for the future of the default retirement age. Those will include raising the age, removing it, or reforming the legislative framework to strengthen the position of the employee. The evidence examined to date, along with the views of stakeholders, suggests that a default retirement age of 65 is not the best way forward so we will not include that as an option in the consultation.

The issue is not just about older people as employees, however. It is also about older people as a growing proportion of consumers. That is why we are working with institutions such as the Royal College of Art, to support inclusive design.

In terms of extending working lives, we are committed to increasing employment opportunities for older people. My noble friend Lady Turner was particularly focused on that. We need to do it to meet their needs, and to maintain a productive economy and a sustainable pension and benefit system in the light of an ageing population. I remind noble Lords that the number of people in employment aged 50 to state pension age has gone up from 65 per cent in 1997 to 71.3 per cent in 2009, with almost 1.4 million people now working past state pension age. The Chancellor announced in the Budget that, from April 2011, those over 60 will be able to access working tax credits if they work 16 hours or more a week, rather than the 30 hours that is the current arrangement; noble Lords were pleased about that, which pleased me.

While doing all that, we recognise that age discrimination is one of the most prevalent forms of discrimination, and it is right that the Government legislate to make it illegal to discriminate on the basis of age in the provision of goods and services. Age discrimination is no more acceptable than any other form of discrimination. It is a success that people are living longer, but it is important that their later life is healthy. That is why the Department of Health launched in 2009 the prevention package for older people. That will help to promote independence by focusing on what can keep people well and alive.

We also know that local services are very important for older people. That is why our Good Place to Grow Older programme will help local authorities to improve their services in a way adapted to the needs of their local community, and embed what we have already learnt. That also means including older people in the design and delivery of services, because older people know best what works for them.

My noble friend Lord Haskel talked about the importance of physical activity towards people staying healthy. He looks a sprightly older person himself, if I may say so, and seems to have his life very much together from what we heard. He is right about the benefits of being active. Older people can extend the number of years that they remain free from disease and help to maintain their independence and quality of life. However, there is some way to go: only 20 per cent of men and 17 per cent of women aged between 65 and 74 meet the Chief Medical Officer’s recommendation for physical activity. We are committed to helping to increase these levels of activity for the entire population, including older people. We have invested £140 million over three years to allow those under the age of 16 and those over 60 to swim for free.

The ageing population means that more older people are living in their own homes, and this number will continue to rise. The right homes and neighbourhoods can prevent people needing care and can support people to live more independently at home, rather than requiring residential or hospital care. That is why, as we heard from my noble friend Lady Wilkins, we published Lifetime Homes, Lifetime Neighbourhoods. This has seen the introduction of services providing support to people so that they can live independently in their own homes.

Nevertheless, with an ageing population, more older and disabled people will need care and support and, without radical reform, we know that the current social care system will be unsustainable in the future. We are fully committed to building cross-party consensus to develop a new funding and delivery system for care and support. This will help us to ensure that all older and disabled people are able to live independently, with dignity and with the maximum quality of life.

As we have heard, we have also introduced reforms to improve the way that we support older people with care needs. As noble Lords are aware, we are working to put in place legislation that will provide personal care in the home free of charge to 280,000 people with the highest needs and provide re-ablement support to another 130,000. In our Green Paper, Shaping the Future of Care Together, we set out our vision to build a national care service that is fair, simple and affordable for all adults in England.

Therefore, we are committed to reforming the care and support system. We have undertaken a consultation and will feed that into the White Paper. People should expect prevention services, a national assessment of care and support needs, a joined-up service, information and advice, personalised care and support, and fair funding for a national care service.

My noble friend Lady Turner referred to the role of women and how they are dealt with under the state pension system. As I have outlined, the Government are taking forward radical reform of the pension system which will narrow the pension gender gap, deliver fair outcomes to women and carers, and significantly improve women’s state pension coverage.

The noble Lord, Lord Dholakia, made a very interesting and pertinent contribution. I should like to spend more time reading the record of his speech, but I recognise much of what he described from my own experience in Luton, which has a very diverse community. The ageing population is a challenge for all society, and individuals, families, businesses and government, as well as communities, will be required to address it. However, we recognise the challenges that BME communities face, and it is important that we bear these in mind in the delivery of our public services. During our consultation on our recent ageing society strategy, we held specific events to ensure that the voices of BME communities were heard, although we recognise that that has not always been the case.

A number of noble Lords, including my noble friend Lady Turner and the noble Baroness, Lady Thomas, talked about benefit take-up. We are committed to ensuring that pensioners receive the support to which they are entitled, and that is why we have already simplified the claim process. Since November 2008, it has been possible to make claims for housing benefit and council tax benefit alongside pension credit in a single phone call. We are rolling out a targeted regional marketing campaign across selected regions which is designed to engage with the local pensioner population using channels of communication and organisations that they are likely to be familiar with—for example, Mecca Bingo, voluntary organisations and so on. We are conducting around 13,000 home visits a week for vulnerable customers to ensure that they are receiving all the benefits and services to which they are entitled. We are planning to run a pilot this year to look at ways of making better use of the data that we hold on individuals from both our own administrative records and those of HMRC to see whether we can find an approach that improves take-up of pension credit in particular.

My noble friend Lady Wilkins made a very powerful contribution concerning housing, stressing how important it is to older people. I very much agree with her. Lifetime Homes, Lifetime Neighbourhoods sets out our national strategy. The measures include, as she said, the expansion of the Handyperson service, whose success was celebrated yesterday with the first national conference; maintaining independence by adapting homes as people grow older; and £460 million allocated over three years to enable more people to adapt their homes by, for example, installing stairlifts, walk-in showers and wider doors.

The DCLG is funding FirstStop, a new advice and information service for older people, their families and their carers. Specifically in relation to our commitment to lifetime homes, the Government remain committed to ensuring that the new housing responds appropriately to the needs of older and disabled people, but this must be done in a proportionate way that balances those needs with the need to increase housing supply overall. My noble friend referred to the Housing our Ageing Population Panel for Innovation, and we agree with many of the findings of the HAPPI panel, but in the current economic climate we have to ensure that the measures we take forward are proportionate and deliver best value for money.

The noble Lord, Lord Freud, raised issues around the use of anti-psychotic drugs and dementia, as did my noble friend Lord Haskel. The review of anti-psychotics which the Government commissioned has highlighted the need to improve the quality of care-home care. We have appointed Professor Alistair Burns as the new national clinical director for dementia, and he will be responsible for driving these changes, reducing the use of anti-psychotic drugs for people with dementia, thus improving the quality of life for people with dementia in care homes.

The noble Baroness, Lady Thomas, referred to grandparents and to the work that is going on there. To complement our Budget 2009 pledge to introduce in 2011 national insurance credits for grandparents providing childcare, the Government have also announced, in the Green Paper Support for all: the families and relationships, a new service designed specifically for grandparents, more support for children’s centres, and a commitment to improve the information available about legal and other options after parents separate.

The noble Lord, Lord Freud, posed several questions, and he supported the abolition of annuitisation at the age of 75, as did the noble Baroness, Lady Thomas. I am glad to say that we are simply apart on that issue, but I remind noble Lords that only about 5 per cent of people currently annuitise after the age of 70. This is something which, if at all, would only be of benefit to a small fraction of the population, and those with bigger pension pots.

The noble Lord made reference to what he termed the Chancellor’s tax raid. I thought that we had put that one to bed and dealt with it a number of years ago. It seems to just keep cropping up. It is to do, as the noble Lord is probably aware, with the restructuring of the corporation tax system. The abolition of payable tax credits removed a distortion in the tax system that had encouraged companies to pay out their profits as dividends, rather than retain them for reinvestment in the business. The key drivers of the changing difficulties for defined benefit provision, as I think everyone now recognises, are what is happening with longevity and demographics, and with perhaps more realistic expectations of stock market returns. Those two factors did more than anything else, including, if I may say so, some of the pension holidays that were driven by legislation that we inherited, which did not help.

The noble Lord raised issues around malnutrition strategy. I will write to him on that. In terms of dementia funding, we are investing record sums, rising to £173 million a year over the next three years, in psychological therapies: £33 million in 2008-09, £103 million last year and £173 million for the year we are just about to enter. Within that programme we have asked PCTs to look at the particular needs of older people who develop anxiety and depression alongside a long-term condition, and at the demands of caring for a loved one in failing health.

The clock is moving on. I have tried to deal with as many points as I can. I will look at the record and write further if that is appropriate. The Government are making and will continue to make important changes to help people prepare for later life and be financially secure, independent, healthy and active. However, as I have already mentioned, this is not a job which can be done by government alone. It has to be done by individuals, businesses, public services and communities. If we are to build a society for all ages, all of society must help us to build it. I thank my noble friend for organising this debate.

My Lords, I thank everyone who has participated in this fantastic debate. I have been amazed at the degree of expertise and knowledge displayed by so many contributors—in particular, the noble Lord, Lord Dholakia, who made a remarkable reference to minorities and issues that I had not even thought about. I thank him for that. I will make one exception, however. One of my colleagues described the contribution of the noble Lord, Lord Freud, as somewhat doom-laden; I, too, think that it was doom-laden.

I am grateful for the way in which the Minister dealt with most of the issues. In particular, he referred to the position that the Government are now in with their strategy for an ageing society. It is a strategy in which we all have to participate. It is a matter not only for government but for everyone; we all have to revise our attitudes towards the employment, work and general lifestyles of older people. I agree wholeheartedly with the Minister when he says that age discrimination is no more acceptable than any other form of discrimination. That is exactly my view. I look forward to reading the debate, which will be well worth study for the future. In the mean time, I beg leave to withdraw the Motion.

That the draft regulations laid before the House on 3 February be approved.

Relevant Document: 9th Report from the Joint Committee on Statutory Instruments.

My Lords, as your Lordships are aware, the Financial Assistance Scheme is a result of the Government’s ongoing commitment to help those hit by the collapse of their occupational pension schemes. FAS is an important lifeline to those who have worked hard and saved for their retirement only to lose their pension when the employer hits hard times. It provides financial help to members of qualifying pension schemes who face significant losses because their scheme was underfunded when it began to wind up.

As noble Lords may be aware, FAS was first introduced in 2004. Since that time, we have continually expanded and broadened the help that it provides. The extensions to FAS announced in December 2007 were the outcome of recommendations made in the Financial Assistance Scheme review of assets—a review undertaken by Andrew Young of the Government Actuary’s Department—which examined options to generate the best value from assets remaining in FAS-qualifying schemes. Young recommended that the remaining scheme assets be transferred to government.

Implementing this recommendation fundamentally changes the structure of the FAS and the way in which it operates. With these regulations, the FAS moves from a scheme that provides only top-ups to reduced scheme pensions purchased as annuities into a system that, in some cases, is responsible for the payment of the whole pension.

Since the 2007 announcement, we have increased the proportion of expected pension covered by FAS from 80 to 90 per cent. We will increase in line with inflation those payments derived from post-1997 service, subject to a 2.5 per cent a year limit. We have also increased the cap on payments and allowed for this cap to be protected against inflation. We have provided early access to FAS payments for those who are unable to work due to ill health and we have made special provision for people who are in severe ill health. We have extended payments to survivors to include certain partners and dependent children. Finally, we have also extended the FAS to include certain schemes that have wound up underfunded where the employer is still solvent.

As at 28 February, FAS is paying assistance to more than 14,000 people and has paid £87 million in assistance. Around a further 136,000 people will be helped in years to come as they reach retirement age. In addition, these regulations will allow around 20,000 individuals whose shares of scheme assets would be worth more than the 90 per cent assistance to be paid through FAS. Last year, we also conferred management of FAS on the board of the Pension Protection Fund, a body that has, since 2005, developed considerable expertise in winding up pensions.

The draft regulations before the House today complete the implementation of the Young review’s recommendation that the assets remaining in FAS-qualifying pension schemes should be transferred to government to part fund the increased assistance promise. There are four key aspects to the draft regulations that I will focus on in this debate.

First, as part of the process to transfer the remaining estimated £1.7 billion of assets of relevant schemes to government, the draft regulations provide for assets to be valued before transfer. This valuation will also establish the share of assets relating to each relevant beneficiary so that members receive appropriate payments from FAS. Noble Lords will note that details of how this valuation should be conducted are not set out in the regulations. This actuarial guidance will be published separately, as is usual for such material. Draft guidance was published for consultation on 28 January. The consultation was primarily aimed at pension industry professionals and others with an interest in defined benefit occupational pension schemes. This consultation has now closed and we intend to publish final guidance as soon as possible after the draft regulations come into force.

The second key area to be introduced by the draft regulations relates to the way in which assistance payments will be calculated for members whose schemes will be transferring assets to government. These calculations are, I admit, very complex. Noble Lords will note that the regulations before them are significantly larger than those published for consultation. They have been expanded in response to consultation comments that the draft regulations might not capture all the sets of circumstances in which beneficiaries might find themselves when they move to FAS. In addition, it has been necessary to replicate the reconciliation provisions in each of the payment schedules to ensure that individuals receive the correct amount from their scheme and FAS, whatever their circumstances on transfer.

Where members are already receiving a pension from their scheme above standard assistance levels, we have sought to ensure that, wherever possible, payments will not go down once the scheme transfers full responsibility to FAS. Where members with high asset shares are not yet receiving payments from their scheme, assistance will be in line with standard FAS rules, but to the full value of their asset share. We considered paying all these members in line with normal assistance rules to provide a consistent approach to calculating all FAS payments. However, this would have meant that some members already receiving a pension from their scheme might have seen their payments reduce when FAS took over—this may have been where the scheme was paying a flat-rate pension but FAS would be providing a lower payment with some indexation. Stakeholders made strong representations to us that this was not acceptable. Therefore, the regulations provide for payments to those members already in receipt of a pension from their scheme to be made in line with scheme rules so that, wherever possible, payments will not reduce when FAS takes over.

Where members are not entitled to payments from their scheme when these regulations come into force, their FAS entitlement will be structured in line with the normal assistance rules. Furthermore, where the member is not receiving a scheme pension before their scheme’s assets transfer to government, the draft regulations will enable a qualifying member to commute part of their assistance for a lump sum. The amount that can be taken as a lump sum will be broadly in line with tax rules, though ultimately restricted to the amount of the member’s share of scheme assets.

The third key change relates to the reconciliation of FAS payments. The draft regulations amend existing provisions to enable the FAS manager to take into account all pension payments made from the start of wind-up and to make corresponding adjustments to FAS payments where necessary. This will ensure that all beneficiaries receive the correct amount from their scheme and from FAS from the start of wind-up onwards.

Fourthly, modifications have also been made to the FAS information, review and appeal provisions to accommodate the changes to assistance that I summarised earlier. To reduce the administrative burden on trustees and insurers, the FAS manager will now be allowed to waive any information required where they consider it appropriate. In addition, the draft regulations allow HMRC to share certain information with the FAS manager and its commercial provider, where that information is both relevant and necessary to FAS work.

Finally, we have made changes to statutory deadlines for the provision of information and to deadlines relating to applications for reviews of decisions. These changes take account of our experience to date in delivering FAS.

The draft regulations before your Lordships are the last legislative step in the delivery of the considerable extensions to FAS announced in December 2007. They will allow the transfer of an estimated £1.7 billion of remaining assets and expand the number of people who will be paid by FAS by some 20,000. The draft regulations represent an important part of the commitment that the Government have made to protecting members of pension schemes. They are compatible with the European Convention on Human Rights. I commend them to the House.

My Lords, I thank the Minister for introducing the draft regulations. As he noted, they are extremely long and complicated, and contain some very impressive formulae for valuations in every conceivable circumstance. I am glad, therefore, not only that there is a comprehensive Explanatory Memorandum but that the Joint Committee on Statutory Instruments has reported on the regulations and that they were debated yesterday in another place.

One point has been highlighted by this scrutiny: it is clear that FAS is to end up in a very different place from where it started. Some of the developments that we have observed during the past year were anticipated, as the Minister pointed out. When the primary legislation establishing the scheme was passed, it was clear that there would be some level of operational flexibility in order to respond to the challenges that the liquidised schemes were likely to throw up. However, as the Joint Committee’s report makes clear, we are now looking at a final scheme that is right on the acceptable edge of that flexibility.

The Government have gone to some pains to demonstrate that the regulations are empowered by the original Act, and I accept their concern that any more delay to the provisions might harm the pensioners whom the scheme was always intended to help. Since the end result of the regulations is the implementation of the Young review, hopefully ensuring not only that pensioners receive their entitlement but that assets are maximised to offset taxpayer liability, I will not stand in the Government’s way. However, I thank the Joint Committee for raising the matter. So much statutory legislation passes through this House—indeed, we seem to have considered a never-ending flood of statutory instruments in recent days—that it is very hard to perform the necessary checks and scrutiny that they deserve. The Joint Committee on Statutory Instruments and our own Committee on the Merits of Statutory Instruments do a sterling job of handling all these orders, and they were quite right to raise the matter.

The Minister in another place yesterday suggested that the regulations were the final piece of the jigsaw—the Minister here made the same point just now—and that, once they had been implemented and any minor changes made, it would be time for a consolidation of all the relevant legislation. Can the Minister expand a little on when he expects such consolidation to be possible? Pension regulation is always complicated. The matter is made much worse when it is scattered across multiple Acts and statutory instruments.

How will the regulations impact on the government account book? It appears that the total pension liability of affected pensioners is in the region of £3.5 billion, and that an estimated £l.7 billion of assets remain in the schemes to be used to offset this cost. How will these remaining assets be accounted for by the Government? Public sector net debt conveniently does not include future liabilities—something for which this Government must be rather grateful, given their inability to bring public sector pensions under control. Will these assets therefore be counted against the mountain of debt that this Government have built up, while the liability is to be consigned to the accounting equivalent of a black hole?

Finally, I note that, after several years of debate, the Government have finally accepted the last of the strong recommendations made by these Benches for the FAS to be rolled up into the PPF. On 6 June 2007, my noble friend Lord Skelmersdale, who was then the opposition spokesman for this department, won a vote on a large group of amendments to the Pensions Act 2007. The Government rejected those amendments when the Bill went to another place. There was a vigorous process of ping-pong, but we were unable to keep those changes in the Act.

The amendments not only guaranteed pensioners under the FAS 90 per cent of their liability—rather than the considerably smaller proportion the Government were offering—but also suggested the obvious good sense of rolling the FAS into the PPF and putting it under the management of the PPF board.

The Government accepted the 90 per cent figure a few years ago, and I am very pleased that the second of the recommendations in those amendments has now been accepted.

My Lords, I, too, thank the Minister for explaining this extremely complex instrument, I, too, note that the regulations are the last in a long list of changes and amendments that have been made to the Financial Assistance Scheme since it was established by the Pensions Act 2004. Their purpose, as I understand it, is to bring in the rest of the legislation that makes the FAS more generous in its payouts than was originally intended. As the Minister said, the main provision is for the transfer of defined benefit assets to the Secretary of State from about 450 qualifying schemes that have not yet completed wind-up, using the same kind of provisions that are used to transfer assets in PPF qualifying schemes to the PPF board.

We welcome these changes, which boost the level of support that people will receive under the FAS and bring it into line with PPF levels. We also welcome the Government's commitment, following their consultation on these regulations, to ensure that the FAS scheme manager provides details of members’ asset shares, together with a forecast of assistance and lump-sum entitlement to individuals shortly after their scheme assets transfer to government, with forecasts of assistance annually thereafter. It is important that scheme members finding themselves in this position are given an idea of the levels of assistance they are likely to receive to help them plan for their retirement.

One of the main concerns of the Pensions Action Group members and other FAS recipients is the level of compensation that they are likely to receive. The then Minister, Peter Hain, said in a Statement in another place in December 2007:

“All scheme members will be guaranteed 90 per cent. of their accrued pension at the date of commencement of wind-up, revalued to their retirement date”.—[Official Report, Commons, 17/12/07; col. 100WS.]

That is a point that the noble Lord, Lord Freud, just mentioned.

In addition, Mike O'Brien, as Pensions Minister during the Pensions Bill in 2007-08, said that,

“we guaranteed to provide a higher level of assistance, which was broadly comparable to the compensation paid by the Pension Protection Fund”.—[Official Report, Commons, Pensions Bill Committee, 19/2/08; col. 508.]

However, it is clear that most people affected do not get anything like 90 per cent; so should the Government's language not reflect this in order to avoid raising people's hopes?

The impact assessment says that,

“costs that a trustee incurs in providing information are likely to be recovered by the trustee from the pension scheme assets prior to their transfer to government”,

which means that,

“members’ asset shares may be reduced, however in many cases this will be offset for the member by an increase in FAS assistance (to a maximum of 90% level, subject to the FAS cap)”.

Concerns were raised in the consultation that in such small schemes the costs of preparing the assets for a transfer may erode funds to such an extent that there would be no additional value to be gained by transferring the assets. The impact assessment says that the Government do not hold detailed information on the numbers that might be affected. Will the Government monitor this issue, specifically to ensure that some people do not end up with smaller payouts under the new system?

I have just two more areas of concern. The first is about tax-free lump-sum payments, which will be limited to those who have accrued scheme benefits in their own right and have an asset share allocated to them that was “higher than nil”. It is available only if they were not being paid a pension already before the scheme assets were transferred to government and would be offered only when assistance first started to be paid. This lump sum would be a maximum of 25 per cent of the capital value of the pension and lump sum received, in line with the general tax rules for taking a tax-free lump sum from a private pension pot on retirement and converting the rest into an annuity. HMRC is to bring forward regulations to provide tax relief along these lines. However, this sum would be limited to the amount of the individual’s asset share. Most people responding to this question in the consultation thought that the FAS should allow for a lump sum to be taken at 25 per cent of the payment due, regardless of the individual’s asset share. The general feeling was that it was unfair to treat individuals differently based on the level of funding in their scheme. The Government decided to make no changes in this area, in spite of the strong feeling of the consultees. Will the Minister say why? Have estimates been made of how much of the cost would be brought forward if this were to be implemented? After all, the tax-free lump sum on retirement is very popular, particularly to pay off mortgages.

Finally, will the Minister elaborate on the report from the Joint Committee on Statutory Instruments on these regulations? The committee was unpersuaded by the department’s assertion that these arrangements fall clearly within the options set out by the Minister during the debates. I should be very grateful for a reply on that point.

My Lords, I am grateful to both noble Lords who have spoken in support of these proposals. The noble Lord, Lord Freud, referred to the work done by the JCSI and the Merits Committee. I support what he says, although sometimes it is a little painful to receive their reports if you are dealing with matters that are the subject of their scrutiny. But it is a valuable and important process and part of our proceedings.

The noble Lord asked about consolidation. We would not have wanted to consolidate these regulations until we had actually ceased to make all the changes. In a sense, the changes took place at various stages, because we wanted to proceed as quickly as we could as the policy developed to ensure that those changes that were most beneficial were dealt with first. That is why the sequence has taken place as it has. Now we have completed implementing the 2007 announcements, we will look to consolidate in the near future.

The noble Lord asked about the impact of what we are doing on government finances. We expect some schemes to be transferred soon, after the regulations come into force, in cases where full actuarial valuations are not required. However, we do not expect substantive assets to start transferring until early autumn. This is because in order to ensure accuracy the full valuation process will take some time—perhaps six months. We expect a good proportion of scheme assets to be transferred to government within two years. Completing the transfer of all schemes is expected to take around four years. Assets transferred will reduce government borrowing because they are transferred into the Consolidated Fund. The payments that are then made in successive years become a cost charged in those years. Those are the broad consequences of these proposals.

The noble Baroness, Lady Thomas, reverted to the issue around what 90 per cent means. There has been a misunderstanding about this, but I believe the Government have been clear throughout. The Government have guaranteed that FAS will provide 90 per cent of a member’s expected pension, subject to a cap. The expected pension is the member’s accrued pension as at the date wind-up starts, revalued at a standard rate to the member’s retirement date.

In some cases, this will not be the same as 90 per cent of what members would have expected at retirement. First, had the scheme not wound up, further contributions may have been due to the scheme before the member reached retirement. Secondly, the FAS applies its own revaluation rates from the date of wind-up to the member’s normal retirement age and these rates may be lower than those which would have been applied by the pension scheme, so differences could arise. In addition, the statutory indexation provided by FAS may not be as generous as that which would have been provided by the scheme. We have never said that it would replicate precisely 90 per cent subject to the cap of what members would have got had the scheme continued and remained in operation until their retirement.

The noble Baroness made reference to small payouts. The regulations are designed to ensure that no one gets less from FAS than they would have got from their scheme if it had wound up conventionally. Obviously, if there are examples of that which noble Lords come across, we would be happy to review that.

The noble Baroness talked about lump sums. Let me be clear that any FAS scheme member with a share of scheme assets who is not receiving a scheme pension when the scheme assets transfer to government will be able to take a lump sum upon retirement. The lump sum available will be broadly consistent with the normal tax rules, as the noble Baroness suggested, on a pension commencement lump sum. However, the amount will be restricted by the member’s asset share as it would be where a scheme in wind-up is underfunded. The FAS will not offer the opportunity to commute any payments to members who retire before their scheme transfers assets; where funding levels and legislation allow, their scheme should already have offered them the opportunity to commute part of their scheme pension when they reach retirement age.

As far as paying lump sums to everyone is concerned, the FAS will pay lump sums only where the assets of the pension scheme are sufficient. We have considered the arguments for allowing all FAS beneficiaries to access a lump sum in return for lower assistance payments. However, while in the long term this would be cost neutral, in the short term it would bring costs forward, and therefore there is an important consideration for the Government in that, which is why we have not gone down that route.

The noble Baroness made reference to the 450 schemes that are likely to transfer assets to government. I think that is the figure identified by the Young review and is the most up-to-date figure that we have. It might be helpful for noble Lords to have an update on scheme data. As at the end of January this year, 925 schemes are qualifying pension schemes for FAS purposes, 314 of them have wound up completely, 611 are in winding-up and another 192 are pursuing FAS qualifications. I think that is something like 1,100—perhaps a few less—which is broadly consistent with some of the earlier estimates that were made.

The noble Baroness made reference to the question of valuations on lump sums. The cost of FAS valuations will be broadly in line with the cost that schemes will incur if they were winding up normally, and we intend to provide lump sums in line with those that would have been available from an annuity.

The noble Baroness and the noble Lord, Lord Freud, made reference to unusual use of powers. The issue was put on the record in another place but I am happy to repeat it here. Perhaps it is appropriate that I do. It is a little complicated, but here goes:

“Section 286(1) of the Pensions Act 2004 confers wide power on the Secretary of State to make regulations to provide a financial assistance scheme. Section 286(3)(j) provides the power to apply parts 1 and 2 of the 2004 Act with modifications to the FAS. Section 161 in part 2, along with schedule 6, includes provisions in relation to transfer of assets to the board of the PPF. The draft regulations modify section 161 and schedule 6 for the purpose of the FAS to allow transfer of scheme assets to the Secretary of State”.

It continues:

“The JCSI set out in its report that that may be an unusual or unexpected use of the power, because section 286(3)(c) confers an express power for regulations to provide for the transfer of property rights and liabilities to the scheme manager”.

As noble Lords are all aware, the FAS scheme manager is now the PPF, not the Secretary of State.

“The report suggests that to fall within the powers in the primary legislation, assets should be transferred to the scheme itself. However, unlike the PPF there is no scheme fund in which assets are held and then used to pay assistance … Instead, the FAS sets out who qualifies for assistance and how payments should be calculated. Funding for those payments is provided by the Secretary of State, directly out of the DWP budget. It is therefore appropriate that any funds brought in should be transferred to the Secretary of State and not the scheme manager. In practice, the funds will be transferred to the consolidated fund that the Government hold”,

as I outlined a moment ago.

“We took the view that the list in section 286(3) of the 2004 Act illustrates and amplifies how the power in section 286(1) could be used and it is not intended to be restrictive. When the clause was debated”—

in relation to the 2004 Act—

“it was not clear how the FAS would be delivered”.

The noble Lord, Lord Freud, made that point; it has evolved over a number of years.

“It was made clear then that there were a number of alternatives that would need to be considered. The clause was, therefore, widely drafted … and subject to an affirmative resolution … to allow additional scrutiny by Parliament when proper consideration had been given to … the matter ... Transfer of the assets to Government was one possibility, as was making the PPF the scheme manager. The provisions made in these draft regulations … sit squarely within that and we consider that they clearly fall within the provisions of the 2004 Act”.—[Official Report, Commons, Delegated Legislation Committee 24/3/10; col. 18.]

We therefore consider that the use of the modification power in this way could not be considered to be unusual or unexpected.

The noble Lord, Lord Freud, reminded us of a bit of the history of this with the debates that we had regarding the final destination of FAS. He is right that it was hotly contested; I was on the receiving end of some of that. However, I think we have ended up in a good place, and on that basis I am grateful for noble Lords’ support for the regulations.

That the draft regulations laid before the House on 16 March be approved.

Relevant Documents: 11th Report from the Joint Committee on Statutory Instruments and 14th Report from the Merits Committee.

With the leave of the House, I shall speak also to the draft Conditional Fee Agreements (Amendment) Order 2010.

The Damages-Based Agreements Regulations 2010 prescribe the regulatory requirements for these agreements in employment matters. The Conditional Fee Agreements (Amendment) Order 2010 seeks to reduce the success fee in some “publication proceedings” to 10 per cent of the base costs. Both of these seek to make changes in limited circumstances to protect the public interest. I will deal with the two instruments separately.

The Damages-Based Agreements Regulations are made under Section 58AA of the Courts and Legal Services Act 1990 and prescribe certain requirements for damages-based agreements relating to employment matters. Section 58AA was inserted by Section 154 of the Coroners and Justice Act 2009.

A damages-based agreement is a type of contingency or “no win, no fee” agreement, under which a representative agrees to act for a client in return for a percentage of any damages recovered by the client. If damages are not awarded, the representative is not paid. These agreements are of course different from conditional fee agreements, or CFAs. CFAs are typically used in court proceedings, and allow for an uplift or success fee on top of the representative’s normal fee.

I emphasise that damages-based agreements are not permitted in court proceedings or litigation and that the regulations will not change this. They are, however, commonly used by solicitors and claims managers in proceedings before the employment tribunal. The Courts and Legal Services Act 1990, as amended, controls the use of damages-based agreements to claims that are capable of being heard by the employment tribunal. As I say, these agreements are commonly used in employment tribunal cases. We are concerned that many claimants do not understand these fee arrangements, which sometimes include unfair terms. The Government therefore believe that it was necessary to regulate damages-based agreements in employment tribunals to ensure that claimants are protected from unfair agreements. Noble Lords will recall that Section 154 of the Coroners and Justice Act 2009 gave the Lord Chancellor the power to regulate these agreements. This is the first set of regulations made under that power.

The regulations specify for the first time certain requirements with which the agreements must comply in order to be enforceable damages-based agreements. The key emphasis is on the provision of clear and transparent information for the client before the agreement is signed. The regulations require that a—

I hope that the Minister will forgive me. Can he clarify one point? He said that these regulations were for use in employment tribunals. What happens if there is an appeal? Appeals could go to the Court of Appeal or now the Supreme Court.

Perhaps I can answer the noble and learned Lord a little later.

The regulations require that a representative, usually a solicitor or a claims manager, must, first, inform the client about alternative means of resolving the case or financing the proceedings, such as legal expenses insurance or though trade union membership. Importantly, the representative must inform the client about the services offered by ACAS before the agreement is signed. Secondly, the representative must give an estimate of all costs and expenses for which the claimant may be liable. Thirdly, the representative must also explain to the claimant why he or she thinks that the percentage fee they are charging is reasonable.

The regulations also prescribe that the payment to the representative cannot be more than 35 per cent of the claimant’s damages, including VAT. This will protect claimants from unscrupulous representatives who may seek to take an unjustified proportion of their damages in fees. The legislation requires us to prescribe a cap. We originally consulted on a 25 per cent cap, excluding VAT. However, we listened to concerns expressed by those responding to the consultation and increased the cap to 35 per cent. This is inclusive of VAT, but excludes expenses such as counsels’ fees. Although the cap is the prescribed maximum, there is a risk that the cap could become the norm, a risk that we have seen realised in CFAs where, in some cases, 100 per cent has become the norm; I will turn to that later. The higher the cap, therefore, the greater the risk of detriment to individuals who use damages-based agreements. We therefore believe that 35 per cent sets a fair level in respect of damages-based agreements in employment tribunals.

Finally, the regulations set out some conditions to be complied with if the agreement is terminated. I should first make it clear that the provisions relating to termination are without prejudice to any right of either party under the general law of contract to terminate the agreement. I am aware that there have been some concerns about the conditions relating to termination; for example, the Law Society considers that the provision does not go far enough in protecting representatives. The Bar Council, on the other hand, considers that there should be no restrictions on the client’s right to terminate at all. What we have attempted to do in these regulations is to take the middle ground between the two opposing views.

DBAs are different from ordinary retention agreements between lawyers and clients. The client is agreeing to pay a percentage of their damages if the claim is successful. Therefore, it is only right that the representative should be entitled to that percentage if the claim is successful.

DBAs are founded on the premise that if the representative upholds their end of the bargain and the claim is successful, he or she is entitled to receive the agreed percentage of the damages. I reiterate the point I made earlier: these provisions are without prejudice to any right of either party under the general law of contract to terminate the agreement.

We are grateful for the consideration given to these regulations by the Merits Committee. We have carefully considered the points raised in the committee’s report, published on 18 March. My right honourable friend the Lord Chancellor and I discussed the committee’s concerns at a meeting with the chairman, the noble Lord, Lord Rosser, and the noble and learned Lord, Lord Scott of Foscote, who is a distinguished member of the committee. We have taken on board their concerns in revising Regulation 6(5). I strongly believe that these regulations are necessary and proportionate in achieving their objective, which is to put in place specific statutory protection for claimants using these agreements in employment tribunals. As I have said, we have tried to balance carefully the views raised in consultation and believe that the regulations represent the best way forward.

The House will know very well that on 14 January Sir Rupert Jackson delivered his wide-ranging report, Review of Civil Litigation Costs. Among 109 formal recommendations, he recommends that contingency fees are permitted in civil litigation with appropriate regulation. However, I emphasise that fresh primary legislation would be required, should the Government decide to implement that recommendation. The Government are actively considering Sir Rupert’s recommendations, and will set out the way forward in due course. I assure the House that any proposals on extending the use of contingency fees to litigation would be subject to full public consultation and legislative scrutiny by Parliament.

Before leaving this regulation, I will respond to the noble and learned Lord as best I can. DBAs, as I understand it and am advised, cannot be used on appeal in either employment appeal tribunals or the Court of Appeal. I understand that legal aid is available for representation on appeal.

I turn now, briefly, to the Conditional Fee Agreements Order 2010, which is made under Section 58(4) of the Courts and Legal Services Act 1990. The order amends the Conditional Fee Agreements Order 2000 to set a new maximum success fee percentage of 10 per cent for CFAs relating to some publication proceedings. Publication proceedings for the purposes of this order are within the meaning of Rule 44.12B of the Civil Procedure Rules 1998. The definition covers defamation, malicious falsehood or breach of confidence involving publication to the public at large. For ease, I shall refer to them as defamation proceedings.

As noble Lords know, conditional fee agreements, or CFAs, allow lawyers to take on a case on a no-win no-fee basis. If the case is lost the lawyer does not get paid. However, if the case is successful the lawyer can charge his normal base costs as well as an additional uplift or success fee. The success fee is currently recoverable in full from the losing side. The Conditional Fee Agreements Order 2000 prescribes the maximum success fee that lawyers can charge at 100 per cent in all categories of case. That 100 per cent maximum was intended to allow lawyers to cover the costs of those cases which were lost with a success fee from those which were won. However, the Government have been concerned about high legal costs in defamation cases. These high legal costs are exacerbated by 100 per cent success fees, which may have a harmful effect on freedom of expression. This affects the media, in particular those with limited budgets, such as the local media and publishers, but also scientific and academic debate. Specific concerns have been expressed to the Government by members of the scientific community and others that the current law on libel, including the high costs involved, is having a harmful effect on freedom of expression in the context of scientific and academic debate. Noble Lords will be aware of the announcement of the reform of the law of libel by my right honourable friend the Lord Chancellor on Tuesday this week. This change should be seen in that broader context.

Previous attempts to control success fees in defamation cases have proved unsuccessful, even though there is widespread and urgent concern about their impact. In January this year the Government therefore consulted on a specific proposal to reduce the success fees to 10 per cent in defamation cases. Some of the respondents to the consultation who disagreed with our specific proposal accepted that 100 per cent recoverable success fees should not continue.

Where did the figure of 10 per cent come from? Did the Lord Chancellor not consider 30 per cent or 25 per cent? Where was this 10 per cent plucked from?

I will answer the noble Lord in the course of what I have to say in the next few minutes. I am grateful for his question.

While the Minister has been interrupted, I want to raise another matter which would assist me. I regret to say I do not know the answer to this, but I was under the impression that the success fee was capable of being taxed down if the taxing master thought it was excessive. Is my impression right or wrong? Because that would seem to be a solution if it is correct.

If the noble and learned Lord does not know the answer to his question, I certainly do not. I will take some advice on that and come back to him.

I have mentioned the Jackson report published earlier this year. It is a remarkable and substantial report. I think we can all agree on that. He recommends complete abolition of the recoverability of success fees and after-the-event insurance in all cases where CFAs are used. As I said earlier, we are actively considering the report and will set out the way forward in due course. The Culture, Media and Sport Committee in its recent report, Press Standards, Privacy and Libel, suggests that the recoverability of success fees be limited to 10 per cent in defamation cases. The Government will respond to the Committee’s report shortly.

I hope the Minister will forgive me for interrupting again. My understanding is that that recommendation did not limit the success fee; it simply suggested that that was the maximum that could be recovered from the other side. Any balance that was agreed, assuming taxation on the costs would allow it, would come from the opposing party. That is my understanding of what the committee said.

Again, if the noble and learned Lord will forgive me, I will find out and come back with an answer to his point.

There is a substantial body of opinion that 100 per cent recoverable success fees should not continue in defamation cases. Reducing the maximum success fee to 10 per cent through this order is an interim measure so that the specific concerns around high costs in defamation cases can be addressed urgently while the Government consider other options for longer-term reform. Of course, I am aware of the concerns raised by the Merits Committee.

Defamation-related proceedings form a discrete category of case where special considerat