Redundancy Fund Bill

HC Deb 18 February 1981 vol 999 cc281-336

Order for Second Reading read.

4 pm

The Under-Secretary of State for Employment (Mr. David Waddington)

I beg to move, That the Bill be now read a Second time.

This is a very short Bill, with a very clear purpose. It aims to raise the limits set by the Employment Protection (Consolidation) Act 1978 on the amount that can be borrowed by the redundancy fund from the national loans fund.

At present, the redundancy fund can borrow up to £16 million, and this can be raised to £40 million by order approved by both Houses of Parliament. The Bill will enable the fund to borrow up to £200 million, and will provide for this limit to be raised to £300 million with parliamentary approval.

As the House knows, the redundancy fund is used to pay rebates to employers who have made statutory redundancy payments to employees. At present the rate of rebate is 41 per cent. In addition, where an employer is insolvent, both redundancy payments and debts, such as arrears of pay or holiday pay, which are due under the insolvency provisions of the 1978 Act, are paid from the fund. The fund is financed by an allocation, currently 0.15 per cent. of salary, from employers' national insurance contributions.

As the House will recall, there have been a number of occasions during the life of the fund when it has been in deficit and when its borrowing limits have had to be adjusted. It is a sobering thought that the original limit set by the Redundancy Payments Act 1965 was £8 million, with a power to raise that limit to £20 million with parliamentary approval. With the use of the power, the limit was raised in August 1967 to £12 million, in April 1968 to £15 million, and in August 1968 to the maximum of £20 million. That order raising the limit to £20 million lapsed after two years, but in 1972 the borrowing limit was again raised to that figure for a two-year period. In 1975, as part of the Employment Protection Act of that year, the limit was raised to £16 million, with provision for extension to £40 million with parliamentary approval. This provision for extension has not been used since 1975.

I could not be accused of exaggeration if I were to say that over the past three or four years the fund has had a somewhat chequered history. The previous Government altered the rate of rebate in 1977 from 50 per cent. to 41 per cent. They had originally proposed to reduce it to 40 per cent., but the House took a poor view of that Bill and it was defeated on the Second Reading. I am told that that was the first time a Government had been defeated on the Second Reading of a Bill since 1888.

Of course, the right hon. Member for Chesterfield (Mr. Varley) may be tactless enough to point out that that Bill was defeated by only one vote. However, I am entitled to remind the House that if there had not been an unfortunate occurrence in Nelson and Colne in October 1974 the Bill would have been lost by three votes. I have carried out a little research and I have not used information that I gained as a result of my time in the Whips' Office. I gather that the Bill was defeated in 1977 because one or two Opposition Members were absent and unprepared. One of the absentees was the then Prime Minister, the right hon. Member for Cardiff, South-East (Mr. Callaghan). The other interesting thing about that 1977 Bill is that its purpose was to do that which Labour Members are constantly now telling us is tantamount to a heinous crime—to reduce public expenditure. At that time the fund was well in surplus.

I now come to last April. The fund was then substantially in surplus, and because of that surplus we reduced the employers' contribution from 0.2 per cent. of salary to 0.15 per cent. The surplus in the fund, which at the end of April 1980 stood at £144 million, then of course began to fall, but, unhappily, as the number of redundancies grew through the second half of 1980 the decline accelerated, and it was obvious that some action had to be taken.

Mr. Barry Jones (Flint, East)

Does the Minister know that in my constituency thousands of steel workers have been made redundant alongside many hundreds of textile workers, some Vauxhall car workers and some paper mill workers? The latter groups feel that their redundancy payments are nowhere near as high as those of the steel workers. Can the Minister indicate whether this measure will help them in any way?

Mr. Waddington

I am grateful to the hon. Gentleman for raising that point. In my constituency there is some misunderstanding about how the scheme works. We are discussing a statutory scheme that has been in existence since 1965. Under that scheme, redundancy payments are financed to a considerable extent by the Exchequer. It is always open to management to pursue an extra-statutory scheme. Indeed, that has occurred in many cases in both the public and private sectors. Schemes in the public sector have attracted most publicity in recent years, but it would be a mistake to imagine that such schemes have not existed in the private sector. One thinks immediately of the newspaper industry. I can only say that it is a matter for management. In the interests of the concern, management may decide to top up the statutory scheme with some extra-statutory action.

I turn to the situation that faced us when the surplus began to decline in the second half of last year. There were various things that we could have done. First, we could have reduced the scale of redundancy payments; secondly, we could have reduced the level of rebate paid to employers; thirdly, we could have increased the level of employers' contributions. We shall have to see, but I do not think that Labour Members will be saying in this debate that we should have chosen the first of those options and reduced the scale of payment to those unfortunate enough to have been declared redundant, because in the debate on the Redundancy Rebates Bill in February 1977 the right hon. Member for Doncaster (Mr. Walker) described such a course as "unthinkable". I agree that it would be wrong to pursue that course today. I am not sure what the Opposition will say about the other two possibilities.

In 1977 the Opposition were quite prepared to reduce the rate to employers to 40 per cent., and the Redundancy Rebates Bill, introduced later in 1977, which fixed the rebate at 41 per cent., actually contained powers to reduce the rate of rebate to 35 per cent. However, we do not think that it is right or sensible, in the depths of a severe recession, to reduce help to those employers who, by definition, are in the greatest difficulties, because they are having to declare workers redundant. Nor do we think that it is right to increase the burden on employers generally by increasing the level of contributions.

It is for that reason that we have decided to take the very different course of increasing the borrowing powers of the fund to carry it through this period of deficit, and, for the time being, to direct the whole of the employment protection allocation to the redundancy fund.

That makes sense, because the maternity pay fund is in substantial surplus and is clearly in growing surplus and can easily finance expenditure from its surplus for some time to come. The switching of the allocation will not detract in any way from the rights of those entitled to maternity benefit, and no order is required to make this switch. The Secretary of State has power to do so under section 40(5) of the Employment Protection Act 1975. I should say that my noble Friend the Minister of State is meeting members of the Advisory Committee on Women's Employment this afternoon and is explaining fully to them that this step will not have an adverse effect on women in employment.

I now turn to the clauses in the Bill. Clause 1 raises the lower limit on the amount which can be borrowed from the national loans fund from £16 million to £200 million, and the upper limit from £40 million to £300 million. Clause 2 contains the short title and restricts the Bill to Great Britain. This is because Northern Ireland has its own redundancy fund, and if any increase in its borrowing powers is required, it can be done by Order in Council.

I make no apology for the size of the increase in the borrowing powers. The forecasting of future demands on the fund is always extremely difficult. Many things can affect the number and the amount of individual payments from the fund over a given period of time. Levels of unemployment are an important factor, but only one. Many redundancies are caused by other factors, such as the long-term adjustment of industries to changes … in the industrial structure. Perhaps the most important factor of all affecting the amount paid from the fund is the level of individual payments, which depends in turn on the age, length of service and earnings of those made redundant. With all these variables, even although it is possible to draw heavily on previous experience over the life of the Act, it is impossible to do very much more than make rough-and-ready estimates of future demand. I say this without apology to the House. It is intended to be no more than a statement of fact."— [Official Report, 7 February 1977; Vol. 925, c. 1127.] Hon. Members will no doubt deduce from the length of that quotation that I have been using not my own words but those of the right hon. Member for Doncaster in the debate in 1977, when he explained fully the difficulties.

As to the limits chosen, all that we are asking now is to have sufficient margin of flexibility in the administration of the fund. The history books will remind us not so much of the fact that a Division was lost by one vote in February 1977 but that the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) came before the House on no fewer than three occasions in 1967–68 to seek further increases in the borrowing limits of the fund. That does not seem to show much wisdom or to provide a sensible precedent to follow. In short, we do not intend to repeat foolish mistakes.

I therefore commend the Bill to the House.

4.14 pm

Mr. Eric G. Varley (Chesterfield)

I think that this is the first time that the hon. and learned Member for Clitheroe (Mr. Waddington) has addressed the House as a Minister on a major measure. By any standards, the Bill is a major measure, although we do not intend to divide the House upon it. I congratulate the hon. and learned Gentleman not only on his appointment but on the way in which he introduced the Bill and his clear explanation.

In my judgment the need for the Bill is a final confirmation of the complete failure of the Government's economic policy. That is especially so when one considers the limits to which they have had to go. For example, on 8 December the then Under-Secretary of State for Employment—now the Minister of State, Home Office—told us that the fund was being depleted at the rate of £15 million per month. From a note that the Secretary of State kindly sent me last month I find that it is now being depleted at the rate of £20 million a month. The enormous increase in the borrowing powers of the redundancy fund is caused by the massive haemorrhage of jobs.

The Under-Secretary indicated that the Bill was intended to increase the limit of the fund and had nothing to do with average earnings or with increasing the amount of redundancy payments under the scheme, but we all know that the Bill must be introduced in anticipation of the new redundancies, possibly on an unprecedented scale, which have driven the Government to bring it forward now.

The explanatory and financial memorandum makes it all very clear when it talks about expected claims on the Fund which have grown rapidly during the last year and are expected to be high also during 1981. This information, by itself, is not sufficient, I want to know, as will other hon. Members, how many redundancies this new borrowing limit is expected to cover. The Secretary of State and the Under-Secretary must have this information available in the Department. The Treasury would never have agreed to the Bill without it, nor would the Chief Secretary have put his name to it. We also want to know how long the new borrowing limit is expected to last, and when the Secretary of State anticipates having to present to the House further legislation to raise the limit again.

This information must exist, since it would be required by the Department of Employment in discussions with the Treasury, if not for the Cabinet paper that the Secretary of State had to submit to get authority to proceed with the legislation.

The House also has the right to know what overall levels of unemployment will accompany the redundancies for which the Bill makes provisions. Here again, the Department of Employment must have made calculations about the ratio of the number of redundancies to the total level of unemployment. The House has a right to this information before granting access to these very large sums of money.

We need to know whether there has been a regional breakdown of the expected redundancies for which the Bill makes provision. We also wish to know in which industries these redundancies are expected. Does the Bill take into account, for example, the reductions in jobs that Mr. MacGregor is planning for the British Steel Corporation, or the reduction in jobs that the Secretary of State for Energy is planning in the coal mining industry?

This debate provides the opportunity for the Secretary of State to furnish the House with projections and calculations about redundancy and employment levels, which certainly exist in his Department but which so far have been concealed from Parliament and the country.

We also want to know exactly what are the Government's calculations about the cost of unemployment to the public sector borrowing requirement. Every day it seems that we get a new figure. The Prime Minister offers one ludicrous statistic. The Secretary of State supplies another. Every written answer on the subject seems to conflict with the previous written answer. So, once and for all, we should like the Government's definitive answer on this question as well.

An even bigger question than those that I have already asked and to which we must have answers is how and why the disastrous situation has come about that makes necessary the Bill and the high limits that are included in it. There have perhaps been three contributory factors. First, there is the high exchange rate of the £ sterling. Only weeks ago the Government were still claiming that this phenomenon, which is pricing so many of our efficient firms out of export markets, was some kind of uncontrollable act of nature, like a tidal wave or an earthquake. Now we are told that even the Prime Minister is nagging her advisers to find a way to bring down the exchange rate.

Firms that are managing to survive the exchange rate are stricken by continuing excessively high interest rates. These have become not so much an economic imperative as a political pawn. The recent reduction, though far from sufficient, was brought about in complete defiance of all the criteria that the Government and the Chancellor of the Exchequer had laid down for cutting interest rates. Thursday after Thursday, we wait for another reduction.

The general expectation is that the Chancellor is keeping a reduction of interest rates in reserve as a rabbit to pull out of the hat in the Budget, three weeks from now. There will be little else in the Budget, apart from a possible reduction of 2 percentage points in the minimum lending rate. No doubt the Chancellor will claim that the reduction is justified by the fall in the inflation rate while, practically in the same breath, he will announce measures that will push up the inflation rate again and possibly create even more redundancies.

Then, of course, there are the expenditure cuts. Neither the Secretary of State nor members of the Cabinet seem able to make what some of us can make—the logical connection between their proud claims that they are reducing the manpower in the public sector and the resulting unemployment and redundancy caused by these manpower reductions. We are living in a crazy economy, in which people doing useful jobs—bus drivers, dustmen, home helps and school dinner ladies—are thrown out of work by cuts in the rate support grant and then have to be compensated, inadequately in some cases, and also inadequately maintained by public expenditure and public borrowing, brought about by these self-same cuts. That is what the Prime Minister regards as sound government.

Excessive pay settlements or strikes are emphatically not responsible for increased redundancies. The Secretary of State told us in the Employment Gazette recently that the 1980 total of stoppages caused by industrial disputes was the lowest for 38 years. That is true. The redundancies that are taking place are not caused by strikes. Nor can pay settlements be blamed. The workers in the hosiery, footwear, textile and clothing industries who came to the House this week are hard-working, productive, peaceable, and, in the main, low-paid—all things to gladden the Prime Minister's heart and to ensure that their jobs will not be at risk.

Yet, with the possible exception of the construction industry, no group of workers has been harder hit by the Government's policies. They cannot even console themselves with the belief that their sacrifice and suffering are in a good cause. I shall have a word to say about the prospects for overcoming Britain's economic problems in a moment. Even if these economic problems are solved it will not be possible to claim that this is the result of the policies that have been pursued.

The moment that pressure is removed from the brake and applied to the accelerator there is a great danger that inflation will go up again, taking redundancies to even higher levels—in fact, to intolerable levels. In my judgment the Government-produced inflation in the pipeline will be directly responsible for making the Chancellor apply the brake all over again.

Mr. Barry Porter (Bebington and Ellesmere Port)

Nonsense.

Mr. Varley

The hon. Gentleman says "Nonsense". If he would like to intervene in the debate, we would be pleased to hear him.

Mr. Gerald Kaufman (Manchester, Ardwick)

The hon. Member for Bebington and Ellesmere Port (Mr. Porter) should resign his seat and fight a by-election on the basis of that remark.

Mr. Varley

My right hon. Friend says that the hon. Gentleman should resign his seat and stand in a byelection. I doubt whether the hon. Gentleman will take my right hon. Friend's advice. I would only refer the hon. Gentleman, who appears to want to intervene, to some of the price increases in the pipeline. As a result of what we already know we can prepare ourselves for some of the increases that the Chancellor will bring forward. There are, for example, the heavy rate increases. These will come about as a result of the inadequate rate support grant that the Secretary of State for the Environment has allowed.

Mr. Porter

Will the right hon. Gentleman give way?

Mr. Varley

I am glad that I have provoked the hon. Gentleman.

Mr. Porter

I am sure that the right hon. Gentleman realises that in the constituency where the right hon. Member for Manchester, Ardwick (Mr. Kaufman) wishes me to have a by-election the rate increase will be only 3 per cent.

Mr. Varley

That is an exception to the rule. I bet that some of the Tories in the Tory-controlled council there are frightened to death about the local elections and have deliberately arranged that rate increase. In the local authority where I live—also Tory-controlled—the increase will be much higher, and about the average throughout the country. These heavy rate increases will affect industry and those in work. They will create further redundancies.

Other contributors to inflation will be the highest rent increases ever known, not to mention the gratuitous increase in gas prices for which no one understands the reason, the Secretary of State for Energy least of all. Even by the Government's own criteria this economic policy is failing. Every time the Secretary of State for Industry rises in his place these days, the hon. Member for Knutsford (Mr. Bruce-Gardyne) sinks lower in his. Government borrowing seems completely out of control. The individual personal sacrifices that make up this increase in borrowing power for the redundancy fund will all have been in vain. What is more, the latest evidence suggests that the situation will get much worse.

The Charterhouse group forecast this week that the fall in output is likely to be substantially greater than that during the 1929 to 1932 slump. It expects that production could be falling by 20 per cent. over the three years to 1982, compared with just under 12 per cent. 50 years ago. It points out that recovery in the 1930s was brought about by, among other things, expansion in house building, yet the house building market can expect no more than a modest increase at best, while the council house building programme has almost been wiped out. The Charterhouse group says: The recession is broadening into a general slump and an end to stock reduction later in the year will be merely a false dawn. The Secretary of State should have included in the Bill proposals to strengthen employment and special employment measures for the unemployed, measures to bring about a stronger Manpower Services Commission, with adequate resources to aid those declared redundant, and measures to support employment and growth in the economy.

A headline in The Times last Saturday read: Manufacturing slump one of the worst this century". The article went on to say: In the coming year, lower investment, weaker export performance and higher imports, encouraged by the strong pound, are likely to take over from destocking as the most important factors depressing output, with no early end to the recession in prospect". The Government's policies have lacerated and mangled Britain's economy. This, in some respects, pathetic Bill seeks to apply a poultice to these almost fatal wounds. We shall not vote against the Bill. We shall not table any amendments in Committee. The Bill, however, is simply a cure for a symptom of an awful disease that the Government are doing nothing to prevent.

4.30 pm

Mr. Hal Miller (Bromsgrove and Redditch)

The right hon. Member for Chesterfield (Mr. Varley) will forgive me if I do not follow his argument, as he hopped for a paragraph at a time on to every one of the bandwagons that are still in the dusty old garage of Labour policies. It is a bit ripe to be lectured by him about the exchange rate. If there was one Government who knew how to bring down the exchange rate it was certainly the one of whom the right hon. Gentleman was a member. My goodness, as he knows perfectly well, we had complaints from everyone about the results, so I take what he says on that matter with a large pinch of salt.

I hope that my hon. and learned Friend the Undersecretary of State will forgive me if I proceed to test him slightly. I assure him that it is no mark of distrust of him personally. Indeed, I welcome him most warmly to the Dispatch Box. I congratulate him on his promotion and I am delighted to see him in this sensitive post, which I know he will fill with distinction.

I should be grateful if, in winding up the debate, my hon. and learned Friend would clarify one or two of his remarks. We are told in the explanatory and financial memorandum, and I understood my hon. and learned Friend to say, that there will be no direct effect on expenditure. But this will be achieved only by transferring money from the maternity fund to the redundancy fund. I hope that I understood him correctly. It seems to me that there has been a direct increase in expenditure, and that money that would otherwise not have been spent is to be spent.

Mr. Waddington

Perhaps I can help my hon. Friend. I was trying to say that at the moment there is an employment protection allocation that is divided as to 0.15 per cent. to the redundancy fund and as to 0.05 per cent. to the maternity fund. It is merely a book-keeping exercise, in a sense, to see that the 0.05 per cent., which would in normal circumstances go into the maternity fund, goes straight into the redundancy fund. That is what I was saying in that regard.

Mr. Miller

I am grateful to my hon. and learned Friend for clarifying the matter, but I must say that I do not think the point is quite answered, in that money that would not otherwise be spent because there is a surplus is now to be spent. I am grateful to my hon. and learned Friend for clarifying the way in which that extra expenditure is taking place.

The point that I wish to come to in my brief remarks is the distinction in the minds of the public, and more particularly and much more painfully in the minds of those who are being made redundant, between the scales of redundancy payments available under the Act and those available on other terms. My hon. and learned Friend very fairly referred to the fact that some private employers were able to give more generous terms outside the statutory scheme. What is of great concern to myself, and, I think, to a number of my hon. Friends, is that in the nationalised industries there are more generous terms than there are under the statutory scheme, and that is a drain on the Exchequer.

My hon. and learned Friend suggested that the more generous payments were not an Exchequer charge. I do not wish to anticipate the debate later today when we shall discuss iron and steel, but, if one could take an example from there, the scale of redundancy payments available to employees of the British Steel Corporation is very much more favourable than any that can be afforded in the private steel sector with which the nationalised British Steel Corporation is competing, at times most unfairly by cutting prices.

We are faced with a situation in which there is excess capacity in both the public and private sectors. Therefore, it is necessary to reduce that capacity. Whereas British Steel is able to do that at the expense of the taxpayer, the private firms are having to fall back on their own resources for the purpose, plus the contributions from the Government through the fund, but the scale of payments is different. On inquiring of a private firm involved in this situation today I was told that its average redundancy payments are in the neighbourhood of £3,000, which compares very unfavourably with the £10,000, or even more, that we have heard about from the British Steel Corporation.

I realise that there are differences in length of service, and in rates of pay perhaps, but I suspect that behind those figures there is a great difference in the treatment of comparable employees in terms of service and skill. This is one matter that makes private sector steel firms so suspicious, I regret to say, of the Government's policy and intentions in respect of the steel industry, and it can be followed through into other industries, such as the car industry. Perhaps my hon. Friend the Member for Bebington and Ellesmere Port (Mr. Porter) will speak later about other industries with which he is familiar. This problem has to be faced. It is not clear from my hon. and learned Friend's comments today that the Government have taken any position on the issue.

Perhaps I might put the matter into context. British Steel employees number roughly 140,000, compared with about 57,000 in the private sector, so we are not talking about a small number of people who have no cause to be worried or to feel aggrieved. There is a large body of people who are suffering severe discrimination. There is a suspicion—I put it no higher—in the minds of the private firms that there are no better terms available to the private sector to introduce these reductions in capacity and redundancies because the Government are anxious that the British Steel Corporation should take over some of these operations and that the money should be paid to the private firms by that route on an asset basis. That is no comfort to the workers who have been made redundant in those operations. It explains partly the great concern that is felt in many areas, in the West Midlands in particular, and the resistance that is building up to the Government's proposals.

I want to go on briefly to ask my hon. and learned Friend whether he can give us any guidance on whether the Government attempt to make any comparison between the cost to the Exchequer of extending the temporary short-time working compensation scheme and redundancy. Is any consideration being given to keeping the industries involved in the making of defence material—or what I would describe as the strategic base of industry to guarantee our independence and to sustain our minimum national requirement—going on a temporary short-time working compensation scheme basis, rather than making those concerned redundant? Perhaps my hon. and learned Friend could tell us the comparative costs involved and whether any conscious decision is being taken on that matter, which is of concern to many Members.

With those few remarks, I conclude by expressing the hope that my hon. and learned Friend will not tempt us, in any reply that he makes, to repeat the unfortunate events of 1977.

4.40 pm

Mr. Bob Cryer (Keighley)

It is not surprising that there should be some adjustment to the redundancy fund. In reply to a written question tabled by my hon. Friend the Member for Glasgow, Maryhill (Mr. Craigen) the Undersecretary of State for Employment stated that he had been informed by the Manpower Services Commission that the number of workers involved in redundancies of 10 or more so far confirmed as due to occur in England, Scotland and Wales from May 1979 to January 1981 is as follows:

• England—520,692
• Scotland—84,169
• Wales—55,209."

—[Official Report, 17 February 1981; Vol. 999, c. 93.] We know that small firms with fewer than 10 employees are going to the wall in increasing numbers. That is an indication of the remarkable and saddening rate of unemployment and redundancies that has been caused by the Government's policies.

I obtained figures quite recently of those in my constituency who are dependent on the temporary short-time working compensation scheme, which has been cut back by the Government. Over 1,400 of my constituents in the Keighley travel-to-work area are dependent on the scheme. That means that there are 1,400 jobs potentially at risk. Although the scheme was introduced by the Labour Government and was designed to rescue jobs, 1,400 jobs are potentially at risk in my area. Since May 1979 unemployment, and hence redundancies, in Keighley have increased by over 140 per cent.

The Minister might say—this is the stock reply of Conservatives—that unemployment increased under the Labour Government. That is right. We accept that unemployment was too high under the Labour Government. We should have taken measures to reduce it. Nobody argues about that. However, I am talking about redundancies that have occurred under the Conservative Government. Redundancies in the Keighley travel-towork area have increased from slightly over 4 per cent. to over 10½ per cent. The increase in the number of redundancies amounts to over 140 per cent. It is a serious matter. The House was reminded of the issue last Monday when there was a demonstration of almost 3,000 textile, footwear and clothing workers, many of whom are covered by the scheme and who are worried sick about their jobs.

I take the view that the creation of unemployment is a part of Conservative Party policy. It is part of its attack on the trade union movement. Conservatives say "That is nonsense. We are terribly sympathetic to the unemployed." That is not how it appears outside. Conservative Government policy is seen as deliberately creating unemployment, and the people cannot understand buckets of sympathy being expressed while more and more workers are joining the dole queue.

I talked to some of those who took part in the demonstration. After a meeting in the House, one of the textile workers said to me "I am 60. I have been made redundant. I reckon that I will not get a job for the rest of my life." He is not the first to express that view to me.

I attended the annual dinner of the Huddersfield cricket league. My abiding memory of that dinner is that at the end of it a 56-year-old Huddersfield man said "I am now too old to have much chance of getting a job." In the ordinary circumstances of life he would have nine further years of useful working life. However, he found himself redundant and arguing with his firm about redundancy payments. I told him to see his Member of Parliament to try to get the issue sorted out.

There is a saddening and tragic picture of workers making calls on the redundancy fund. Those who are approaching middle age are horrified by the prospect of having no opportunity for work until they reach retirement age at 65 years. The Secretary of State has talked about his antagonism to closed shops. I remind the right hon. Gentleman of the dispute at Denbys, at Shipley, many years ago. The firm said that anyone who was in a union could not work for it. It exercised a lock-out against the trade unions. Some of the workers had to shift from the factory on their doorstep to Airedale Dyers in my constituency. They could not get a job a Denbys and they were locked out. Airedale Dyers has now closed and one of the members of the delegation on Monday was made redundant several months ago when that factory closed. He says that he has little chance—he is in his late fifties—of getting a job. That is all too characteristic of the present industrial climate.

What is the cost of redundancy? On 16 February 1981 I asked the Chancellor of the Exchequer what is the cost of unemployment pay and loss of tax receipts for a married man earning £80 per week made redundant? My hon. Friend the Member for Coventry, North-East (Mr. Park) asked a similar question. The Chief Secretary to the Treasury replied: February's economic progress report gave estimates of the cost to the Exchequer of an increase in registered unemployment. The level of earnings assumed was £4,320, or slightly over £80 per week, and the cost to the Exchequer in 1980…81 was estimated at £3,500 per additional unemployed persons. That applies to benefits paid out and tax and national revenue forgone. The right hon. Gentleman added: This figure excludes redundancy payments, but a note at the end of the article explained that the average payment from the redundancy fund for the first three quarters of 1980 was £400."— Official Report, 16 February 1981; Vol. 999, c. 46.] That means that if someone receives slightly more than the average redundancy payment he will equal the total cost of unemployment per individual as reckoned by the Treasury. The cost of unemployment is about equal to the level of earnings.

It is absurd for the Department of the Environment to cut back on public expenditure through local authorities because all that that is doing is making a transfer payment of the same public expenditure to the Department of Employment for redundancy payments and dole payments. Those payments amount almost exactly—this is certainly so for a man earning £80 a week—to the cost of employing someone. We are taking money away from local authorities, putting people on the dole, and paying out almost the same amount of money. When it comes to higher redundancy payments, the sums are larger than those that have been made redundant would have been earning had they stayed in work.

That is indefensible. Unemployment is growing like a canker through the nation. Conservative Members shake their heads, but I have quoted the figures given to me by the Treasury. It is clear that the public sector aborrowing requirement is growing, not because of increased public expenditure on measures to improve investment in industry, but because of the weight of unemployment resulting from the Government's policies.

Monday's demonstration about unemployment in the textile industry was a measure of the concern felt by those in the industry. They do not want to receive a contribution from the redundancy fund. They want to stay in work. The Prime Minister says that industry has to be competitive and that we must have co-operation. The textile industry has co-operative trade unions. It has new working practices that have been accepted by the textile unions. Shift working has been accepted along with investment in the wool textile industry, for example. There has been a massive amount of investment aided by two successive wool textile industry schemes, which has largely modernised the industry. We are talking not about antique firms but high investment, high productivity, co-operative trade unions and a co-operative work force.

What do the unions have for their co-operation and understanding? They have a lengthening dole queue and claims on the redundancy fund, the Bill being designed to amend the fund. That is all that they have for their pains. It is a shameful and tragic reflection on the Government's policies.

What about measures to avoid redundancies so that there is no necessity for any increased redundancy payment facilities? I have no doubt that the Secretary of State will talk about the youth opportunities programme, which by and large means short-term jobs. These are the sorts of job that the Conservative Party was saying before the general election were not proper jobs. It said that it would provide proper jobs. That was said in conjunction with the Saatchi and Saatchi advertising campaign that carried the claim that Labour was no longer working. That is what Conservatives said in 1979.

When the Conservative Party took office, the Labour Government had only recently introduced the temporary short time working compensation scheme. It was designed to provide 75 per cent. of a person's earnings on the days when he was not working. It was to last for 12 months. The Conservative Government immediately cut it back to six months. They have now altered it and extended it to nine months. The scheme will provide 50 per cent. of the earnings of the person on short time.

In many firms where there are low earnings those in receipt of unemployment payments are receiving more than would be offered to them from the temporary short-time working compensation scheme. A firm in my constituency drew my attention to this fact and explained that no one in its employ was earning more than £80 a week—that is the national average sometimes quoted—and indeed that the top earner was in receipt of about £75 a week. It informed me that some of its employees would be better off on the dole. That is absurd. I hope that Ministers will bend their minds to that, because we want to avoid calls on the redundancy fund. We want a scheme which is appreciated and which will generate jobs which can be retained.

The Government, allegedly to save money—that has not happened, as I have amply demonstrated—cut back the job retirement scheme from 62 years of age, the age introduced by the Labour Government. That has now been increased to 64 years of age. Many people, especially in the onerous and heavy industries, looked forward to that retirement opportunity. Many hundreds of people in the Keighley travel-to-work area were taking advantage of the job retirement scheme. At a time when we have 2½ million unemployed, climbing to 3 million with a rapidity which has taken the Government's breath away—hence the Bill—the Government would be wise to think again about this matter.

The suggestion has been made, not only by me but by Conservative Members, that the job retirement scheme should be extended. In a recent answer the Secretary of State said that that is being considered. I hope that it is because many people wish to take advantage of the scheme. The scheme would transfer people from the dole to full-time employment.

The fourth employment measure of importance to manufacturing industry—the basis of our prosperity—was the small firms employment subsidy. It was a direct cash support from the Department of Employment. It helped to avoid redundancies and was directed to small firms in manufacturing industry employing fewer than 200. Over 50,000 people were taken from the dole queues as a result of that scheme. It was a success.

The Department of Employment did not introduce the scheme in a bald way. It ran a pilot survey in a special development area to see whether such a scheme would be cost-effective. After running the pilot survey and giving it close scrutiny, it was decided that it was cost-effective and the scheme was extended to all the assisted areas and even wider. It was progressively introduced. Small firms welcomed it. It was a direct inducement to small firms which both parties said that they wanted to encourage. But when the Conservatives came into office the scheme was scrapped. That measure produced 50,000 jobs. My guess is that the Government would give their right arm for a measure that would reduce the dole queues by that number of people.

There are opportunities, if the Government will only take them, to reduce the lengthening dole queues. But of course—and the Secretary of State is only part of this—it is the Government's economic policies that are creating the unemployment.

The hon. Member for Bromsgrove and Redditch (Mr. Miller) said that under the Labour Government the exchange rate has shrunk. That was right.

Mr. Hal Miller

And the International Monetary Fund was brought in.

Mr. Cryer

I agree that the IMF was brought in. We had a crisis, but we overcame it. We were moving towards an improved economic position. There is no question but that investment in manufacturing industry was increasing. There were not the numbers in the dole queues that there are now. We face a much bigger crisis. One of the aspects of the crisis is that the high exchange rate is inhibiting the ability of our firms to meet competition from abroad. Industrialist after industrialist will agree about that.

Another factor is the high interest rates. Industrialists will comment that high interest rates are inhibiting investment. Stock levels are being reduced to the minimum necessary to survive so that industrialists do not have to finance anything over and above that which is necessary. But, in turn, that is reflected on other manufacturing concerns because they have to hold stocks so that the next manufacturer in the chain can call immediately upon that stock to keep production going. That problem is biting at each section of the manufacturing process. Many industrialists are deeply concerned, as are trade unionists, about the potential effects of increased redundancies and redundancy payments arising from the Bill.

We should be discussing not a Redundancy Fund Bill but an investment fund Bill so that we can begin to invest in manufacturing industry, develop job opportunities and create jobs. Even those Conservative Members who support their Government avidly must have had it borne in upon them that the Government's policies are not working. The entrepreneurs who in June 1979, after the Budget, were promised incentives to get the country moving again and to create jobs, no longer exist. The jobs have not arrived; they have diminished.

We are now talking about increasing and improving redundancy payment facilities. We should be talking about cutting interest rates to bring down the exchange rate. We should be talking about investment in manufacturing industry either through more industrial schemes or through some general investment scheme such as that which the Department of Industry introduced under the Labour Government which produced many industrial investment opportunities for a small amount of priming money. We should be talking about increasing public expenditure, not cutting it.

The reduction in the rate support grant announced by the Secretary of State for the Environment has meant that local authorities—

Mr. Hal Miller

It is only 1 per cent.

Mr. Cryer

The hon. Member says that it is only 1 per cent., but where local authorities are prepared to capitulate to Conservative diktat, that 1 per cent. can mean a loss of jobs and people on the dole. We should be talking about higher public expenditure. It is nonsense to cut back on local authority public expenditure on, for example, housing.

This morning an excellent demonstration by Labour Members took place outside the Secretary of State's monolithic block to try to move his monolithic mind. We handed in letters about the various cuts in public expenditure. The cuts mean that in my area of Bradford 800 planned housing starts will not now take place in 1981–82, which in turn means that building workers will be joining the dole queues. It is a daft economic system that results in council house waiting lists in every local authority lengthening, and the demand for mortgages for house purchase not being met. Young couples want to buy or rent houses. Every week in my advice surgery I hear sad stories about, for example, married couples not being able to live together. They are under strain, but the local authority cannot help them because it is not being allocated money to begin its new housing programme.

In some cases, the housing programmes are at workingdrawing stage, but the Government have cut back on the money that would allow local authorities to get cracking. As a consequence, building workers are on the dole. There are two large woodworking factories in my constituency. If there is a diminution in housing starts, there is a diminution in the demand for doors, window frames and the other wooden components for a house. That means that short-time working will be imposed in those factories. It does not make sense to continue such a policy.

Conservative Members shake their heads and say that public expenditure will not solve the unemployment problem. They do not say that about defence expenditure. Instead, they say that defence expenditure helps both to keep and to create jobs. They are besotted with defence. They think that the Russians will invade Britain next week and that we shall be taken over. They say that we must have defence expenditure and that, in any case, thousands of jobs depend on it. I want to see a switch from expenditure on defence to expenditure on peaceful purposes. The argument for defence expenditure is the same as that for any other public expenditure. It creates, develops and expands jobs. I want to see less reliance on redundancy, and more hope and opportunities for employment both for youngsters and for the remainder of our nation.

Unemployment is creeping across the length and breadth of Britain like a canker. The Government should not be considering this Elastoplast legislation to prop up the redundancy system. They should be introducing legislation for the creation, retention, and development of real job opportunities.

5.3 pm

Mr. Barry Porter (Bebington and Ellesmere Port)

As I listened to the lengthy peroration of the hon. Member for Keighley (Mr. Cryer), I wondered what the Bill was all about. While I regret its necessity, I welcome its realism. Opposition Members have taken the opportunity to use this simple Bill as a substitute Opposition Supply day motion on the economic activities and strategies of the Government. I see lurking on the Opposition Benches the hon. Members for Huddersfield, East (Mr. Sheerman) and for Workington (Mr. Campbell-Savours), who will no doubt, at length, offer us their views on the economic strategy of the Government.

It is sad that there is unemployment. It is sad, too, that there is a necessity for the Bill. It has been pointed out that it was necessary for the Labour Government to increase the borrowing capacity for the same purpose. It makes me slightly tired—I am being as reasonable as I can—to realise that the Opposition think that unemployment has been invented during the past two years. I could go back for many years, and spend many minutes—indeed, hours—talking about the way in which unemployment has arisen. However, I do not wish to bore the House, or those who come to listen to its deliberations, on that subject.

When dealing with this sort of subject the Opposition always miss the point about what should be provided for those who are unemployed in the short term. They seem to think that if we use the money to prop up jobs that are no longer economic that will, in some way, cure the unemployment position. That is precisely what it will not do. It is better and more sensible to provide generous redundancy payments for people in uneconomic jobs. That is much more sensible than trying to pretend that the jobs should remain.

I hope that it is obvious that I do not represent one of the plush and lush Home Counties seats—

Mr. Barry Sheerman (Huddersfield, East)

The hon. Gentleman could have fooled me.

Mr. Porter

I trust that I shall continue to fool Opposition Members for some time. I represent a constituency that has had more than its fair share of unemployment. My constituency gets unemployment not in dribs and drabs but in huge lumps. The constituency includes the Bowater factory, which laid off 1,500 or 1,600 workers, not because of the Government's policies but for other underlying reasons that are no part of this debate.

Mr. Sheerman

It was the energy crisis.

Mr. Porter

Not at all. Vauxhall will probably lay off 3,000 workers. Having listened to yesterday's debate, I do not feel that it is right for me to indicate whether 3,000 workers should be laid off during the next few months. My constituency also includes the firm of Lucas-Girling, which proposes to lay off 900 workers. Not many constituencies receive hammer blows such as that time and time again.

If Vauxhall can remain competitive in Ellesmere Port if it employs 6,000 people but cannot remain competitive if it employs 9,000 people, is it not right, sensible and obvious that the 3,000 workers being asked to leave—I emphasise the word "asked"—should be provided with money under the powers of the Bill? Of course it is. I agree with my hon. Friend the Member for Bromsgrove and Redditch (Mr. Miller) that Vauxhall can well afford—and will afford—to top up the statutory redundancy payments. I expect that Lucas-Girling will do the same. Bowaters can also afford to do so. But other workers, both in my constituency and throughout the country, feel extremely bitter that they did not receive anything more than the statutory redundancy payments.

I do not know what can be done about that. We saw what happened in the steel industry—I should be grateful for clarification on this point—where top-ups for statutory redundancy payments were obtained from European sources. I understand from articles appearing in the newspapers that if the planned redundancies in the coal industry take place funds will be found magically from somewhere to top up the statutory redundancy payments. Someone asked me to explain that to him. I said that there were social consequences in the disappearance of pit villages and societies that were dependent on the coal industry. He said "I know what you mean—they have got muscle". I am afraid that one is driven to the conclusion that certain parts of industry have muscle, and that muscle means money.

Mr. Roy Hughes (Newport)

The hon. Gentleman is showing a fundamental misunderstanding both of coalmining and of coalmining communities. He should realise that coal must be mined where it is found. It was often found in the most inaccessible valleys. When a pit closes, the valleys are left derelict. That is the real social consequence that we are discussing, and which the Government, I presume, want to try to alleviate.

Mr. Porter

That was the point that I was making to my constituent about the social consequences for a community that was dependent on one industry. My constituent accepted that to some extent. He also seemed to think that the National Union of Mineworkers had some industrial muscle. I am afraid that that must be right as well. I hope that the Government will consider the individuals involved who do not have either the social sympathy of the nation or the industrial muscle. These small people have to rely entirely on the statutory provisions. They are badly off in comparison with others, and they feel badly off.

I am sorry that the right hon. Member for Chesterfield (Mr. Varley) has departed for his tea, because—

Mr. James Hamilton (Bothwell)

My right hon. Friend has left to attend another meeting.

Mr. Porter

I withdraw that statement. Apparently the right hon. Gentleman is at a vital meeting, no doubt about the future policy of the Labour Party.

The right hon. Gentleman was selective in his quotations from The Times—not a splendid organ to dictate economic forecasts. He also referred to the Charterhouse group. Had he been here I should have asked him to refer to the indications given by Professor Patrick Minford of Liverpool university in The Sunday Times last weekend, which disagree with his prognostications today. I should have asked him to refer also to the City column of The Daily Telegraph this morning—it was not an editorial. I make those points because it is easy to select for debate that quotation that happens to accord with one's political view.

Mr. John Grant (Islington, Central)

We are not being unduly selective. Does the hon. Member recall the editorial of The Sunday Times two weeks ago, the headline of which was: Wrong, Mrs. Thatcher, wrong, wrong, wrong"?

Mr. Porter

I am glad that the hon. Member brought that to my attention. In The Sunday Times last weekend Professor Patrick Minford said: Right, Mrs. Thatcher, right, right, right". The debate has strayed into wide economic issues, and we have dealt with high interest rates. It was suggested that high interest rates were a terrible thing. It is only recently that interest rates have become positive. It is only when they become positive that they mean anything. There has been much breast-beating, heart-searching and head scratching about high interest rates, but they have not had the consequences suggested by some Oppositon Members.

The strength of the pound has also been referred to. Its effect depends on what one does. In my constituency, the firm of Van Den Berghs and Jurgens, which makes Stork Margarine and other products, is having a splendid time because of the strength of the pound. It is making more money than it has ever made before. It is keeping up its employment It would be upset if the value of the pound were to fall.

Mr. James Hamilton

Does the hon. Gentleman recognise that it used to be said in my part of the country that if one could not get butter one had to buy margarine? That is appropriate to the point that he is making. Is he aware that there are now record liquidations of small companies, not only in Scotland, but throughout the United Kingdom? Is he also aware that the only people who enjoy the strength of the pound are the holidaymakers? Industrialists are finding it almost impossible to compete abroad because of the strong pound and high interest rates. The minimum lending rate is 14 per cent., but in many instances industry is paying as much as 17 and 17½ per cent. to borrow.

Mr. Porter

I am obliged for the hon. Gentleman's economic lesson. I was making the point that interest rates matter only when they become positive. Certain industries which import their raw materials do well because of the strength of the pound. Those are facts. I suppose that if one chooses to ignore them it makes one sleep better because there is no possibility of doubt, but there must always be doubt.

We are debating the Second Reading of a one-clause Bill with which everyone agrees. One might wonder why I am here. I am here because my hon. Friend the Member for Sowerby (Mr. Thompson), whose elevation to the Whips' Office I appreciate and applaud, found me and said that the Opposition might vote against the Second Reading, and therefore he was looking forward to a contribution from me in terms of length rather than quality. That is what he has got. I am sorry that he has gone for his tea and has not bothered to stay for my peroration. That will teach him never to ask me again.

The hon. Member for Keighley, my hon. Friend the Member for Bromsgrove and Redditch and I will be followed by the lurking duo from the Opposition who will give their views on something that could have been disposed of in five minutes flat. Some people, whom I am not supposed to mention, who listen to our deliberations might think that we could treat this matter in a more businesslike manner, rather than merely offer our views about everything in sight because we have a peg on which to hang our hats. I am now taking my hat off that peg. I am grateful for being given the opportunity to speak and for the interest that has been shown by Opposition Members.

5.13 pm

Mr. Stan Thorne (Preston, South)

The previous speaker, the hon. Member for Wirral, I think—

Mr. Porter

There is a slight difference in majority. Mine was 486 and that of my hon. Friend the Member for Wirral (Mr. Hunt) was 25,000.

Mr. Thorne

Hon. Members will be aware that Bebington is in the Wirral. However, I accept the correction by the hon. Member for Bebington and Ellesmere Port (Mr. Porter).

The hon. Member complained that my hon. Friend the Member for Keighley (Mr. Cryer) had staayed wide from the Bill. I assume that you did not intervene during the speech of my hon. Friend, Mr. Deputy Speaker, because you rightly believed that when the House is called upon to authorise an increase of this proportion—£16 million to £200 million and £40 million to £300 million—in a redundancy fund, it is possible and right that Opposition Members should ask whether the House would have its priorities right if it were to agree to the Bill.

We have not heard much about public expenditure increases from the Government. My hon. Friend the Member for Keighley was right when he suggested that we should be discussing an investment fund Bill. Surely if the Government are opposed to public expenditure the last thing they want to do is to increase public expenditure which will create no productivity. It will not create employment. In certain circumstances, it is a response to their policy of cutting public expenditure.

The House is faced with an amazing situation with regard to the Bill. Certain questions arise. What percentage of unemployment do the Government envisage in regard to the Bill? Workers do not want redundancy pay. They want work. Had the Bill concerned attracted work to various areas with borrowing powers of £300 million, it would have met with acclaim. We do not know how many unemployed people are likely to receive redundancy pay under the provisions of the Bill. When will it be necessary to present a further Bill to obtain more money to supplement the redundancy fund? A year ago it was forecast that 3 million people would be unemployed in 1981. The Government called that a gross exaggeration. However, it has come about. We are already hearing forecasts of 4 million to 5 million unemployed by 1984–85.

The Government's ideology may not be relevant here, but I wonder whether a Bill to change the terms of the Employment Protection (Consolidation) Act 1978 and to provide improved redundancy payments can be far away. With the current rate of inflation and the general economic situation, in spite of its being said that several thousands of pounds may be paid in certain circumstances, the existing arrangements may be inadequate when we consider the period of unemployment of many skilled workers.

Is another Bill being considered to reduce the rights under the Employment Protection (Consolidation) Act in view of the Government's attitude to social security benefits and other public expenditure? I hope that the Minister will answer those questions.

Over the past year unemployment in my constituency has doubled. A parade of small factories has closed and we have experienced major closures, such as 3,000 people being made unemployed by Courtaulds. British Leyland is trying to get voluntary redundancy agreements for 1,383 employees, which will involve large sums. Some speculate that in the months ahead another 2,000 BL employees are likely to become a drain on the redundancy fund, because of the fall in demand for trucks.

Are we seeking to borrow money for the right purposes? The TUC put forward a £6,000 million reflationary package. That is a more realistic approach to our economic and employment problems. Is it the best solution to authorise borrowings up to £300 million to provide redundancy pay when we should be providing employment opportunities? In my constituency workers at Seddon Atkinson, Thorn Lighting and in engineering factories and textile mills would welcome a more positive contribution by the Government to halt the growing malaise that is felt more strongly in certain parts of the country, especially in the North-West.

5.25 pm

Mr. Kenneth Lewis (Rutland and Stamford)

I apologise for leaving the Chamber for a minute or two. I expected to be away for longer than I was at a meeting in another part of the building that was to be addressed by Professor Alan Walters, the economic adviser to the Prime Minister. Unfortunately, he did not come. I hope that he has not already been made redundant. That would be expensive. I wanted to find out whether he had made a U-turn. I suspect that since arriving here he has somewhat modified the advice that he would have sent from across the Atlantic. He was born not far from my constituency and brought up in Leicester. He has only to visit Leicester and the East and West Midlands to concentrate his mind and to change some of his preconceived monetarist ideas.

This is a small Bill, but it provides for a large amount of expenditure. The front cover states that the Bill will have no direct effect on expenditure. We should not need the Bill if it was not intended to have any effect at all. The expenditure proposals are considerable. We should all have been better pleased not to have needed a Bill. We do not like redundancy. When I first came to the House we had no redundancy payments. Both parties have helped to make redundancy payments available to those who, unfortunately, find themselves out of work. Any redundancy Bill could be said to be concerned with the price of putting people on the scrap heap.

Mr. Sheer man

Nonsense. The Government have increased unemployment in my constituency by 180 per cent. We have no record of strikes. My constituents are hard-working and skilled people.

Mr. Lewis

I did not mention strikes. I do not wish to be drawn, but the strikes in recent years will not have helped the situation. However, that is not the main reason for having to bring in such a Bill as this.

The cost of the Bill is heavy both to the employers and to the Exchequer. In dealing with a Bill of this kind we must remember that the employer has a considerable amount to pay. Employers today are worried about how many people they may have to make redundant, and how much it will cost them.

By and large, few young people get any advantage out of redundancy. They have not been employed by the firms for very long and do not qualify for very high payments. A Bill of this nature, therefore, is really designed to provide assistance and support for middle-aged people, or older men approaching retirement.

Governments and Ministers become rather immersed in the affairs of today or the day after and have not very much time to look ahead. Sometimes it is not easy for hon. Members to look ahead, let alone for Ministers to do so. Governments therefore have to introduce Bills of this kind in order to deal with situations that are already pressing upon them. While recognising the need for the Bill and the necessity for redundancy payments, we must look a good deal further ahead and consider what we shall have to do over the next 10 years to deal with redundancy in a quite different way from that which we now adopt and which is laid down in this legislation.

At present, in their economic policy the Government have to have regard to the fact that we are suffering a world recession, which they did not expect would become so great when they came to office two years ago. Unemployment is high and is getting higher. We hope that when it passes 3 million it will start to fall. But I hazard a guess that, over the next 20 years unemployment will not fall back to the low level at which it has been in the past 20 years, since I have been in Parliament. This will happen whichever Government come to office, because something is now coming on stream in addition to the world recession.

The hon. Member for Keighley (Mr. Cryer)—unknown to himself when he said it, perhaps—was almost encouraging this situation. He said that he wanted more and more investment. I cannot disagree with that. He spoke of new technology coming into industry. I suggest that at some time in the next five to 10 years, as we begin to get unemployment down when the world recession disappears, it will become more difficult to bring it down any further, and it may even rise, because of the new technology coming on stream.

Mr. D. N. Campbell-Savours (Workington)

The hon. Gentleman referred to escalating unemployment over the next 10 or 20 years. Can he tell the House what he would do about the people who will be displaced from work? Would he devote public expenditure to resolving their problems?

Mr. Lewis

I am coming to that. On the hon. Gentleman's last point, I believe that a certain amount of public expenditure on capital works in certain situations is a good thing. But the effect would be minimal in terms of the number of people employed in relation to the amount of capital expenditure. An increase in capital work on the railways, in the nationalised industries, and so on, would be helpful, but the effect would be minimal. If the hon. Gentleman really thinks that even under a Labour Government large-scale unemployment could be cured by massive capital works, I must tell him that that is not so. Just as manufacturing industry has new technology, so have the contracting industries. The number employed in both areas is, therefore, smaller today than it was five years ago, and in five years' time it will be still smaller.

My right hon. Friend the Secretary of State and his hon. Friends—and Labour Members in due course—will have to bring their minds to bear on what we are to do about retirement in the age group to which I referred. People between 50 and 65 years of age are the most heavily affected by redundancy. It costs us more to pay the redundancy awards to those people than to any other group. Much of the capital sum that is thus paid out could be turned into an early pension.

My right hon. Friend and the hon. Member for Keighley spoke of looking at the job retirement scheme again. I believe that we must go wider than that. On a number of occasions we have asked for and obtained figures from the Treasury. The Treasury will say, of course, that we cannot afford to retire everyone at 60. I accept that. Indeed, I go further. I believe that it would be quite wrong to retire everyone at the age of 60. There are certain people with skills whom one needs to keep beyond the age of 60. There are even some people with skills whom one needs to keep beyond the age of 65. I have to say that, as I am not sure that I shall not be in Parliament beyond that age myself. Nevertheless, there is a case for looking very soon at the whole question of the way in which we pay retirement pensions and how redundancy is dealt with, so that we can in some way marry up the redundancy fund with the payment of pensions. We may then selectively—not on a minimum scale, but on quite a large scale—pay pensions at an earlier age than 65.

This is even more important when one considers the effect of new technology. We hear a great deal said by the Prime Minister, the Minister for Industry and Information Technology and others about the new industries, such as the micro-chip and computer industries, which will develop over the next few years. All of those industries are low labour-intensive. All of them employ the minimum number of people. Many of the big industries that are declining and that we are having to reduce in size are heavily labour-intensive. We are therefore exchanging industries that employ many people for industries that employ few people, and we must have regard to that fact.

The Government must now turn their mind to what will happen in the next 10 years and thereafter, otherwise we shall run into a situation in which not only will unemployment escalate, but it will never be possible to bring it down.

5.39 pm

Mr. Barry Sheerman (Huddersfield, East)

I wish to make my short contribution to the debate not in a negative but in a positive spirit. In a situation in which the Government have to come to the House in order to raise the money to be paid out of the redundancy fund, it is surely in the best traditions of the House that we have the chance to debate that necessity in this Chamber.

As my right hon. Friend the Member for Chesterfield (Mr. Varley) said in his opening remarks, the Bill treats the superficial aspects of a grave underlying problem. I am reminded of what a headmaster in my constituency said last Friday. He said that in West Yorkshire—one could generalise this for the rest of the country—people now go to school to learn a different kind of three "Rs"—redundancy, recession and redeployment. Often they must learn those facts of life early in their young lives.

Today we are talking about people whom we all meet. We all have the painful experience of talking to men and women in their mid-fifties who see themselves as being written off from the labour market.

I apologise to the hon. Member for Rutland and Stamford (Mr. Lewis). I thought that he talked about a strike fund, but I think that he meant a scrapheap of human labour. There is one thing that we have in common. If we have any humanity at all, we all deplore the fact that men and women should psychologically be reduced to feeling that they are no longer of any use to the community. Today we are talking about a tragedy that derives partly from a lack of positive response by the Government to the problems that they face.

Unemployment is a tragedy for my constituency. As I said earlier, voting for this Government has resulted in a 180 per cent. increase in unemployment in Huddersfield. That has meant an increase from 3.6 per cent. unemployment in May 1979 to 10.8 per cent. unemployment now. That is a vast increase in a town that is traditionally wealthy, that manufactures and sells goods abroad, and that has a tremendous dependence on the export markets that we have won during the last 100 years.

I plead with the Secretary of State to think about unemployment in a different way. The Prime Minister constantly tells us that the Labour Government increased unemployment. Many marginal concepts are used in economics. I ask the right hon. Gentleman to use a marginal concept when considering unemployment. We all know that it is easy to achieve the first 500,000 unemployed. It is a little more difficult to reachmillion unemployed. As the process continues, the marginal effect becomes more and more decisive, and we start biting into the marrow, muscle and vital parts of our economic and social life. It is true that the most marginal worker is thrown out of work when the chill wind of recession comes along. The same applies to less skilled workers or to those with less marketable skills. That is a fact of economic life.

In my constituency highly skilled first-class craftsmen are now without jobs. They have tremendous skills, which create exports and goods that people want all over the globe, be it Japan or the under-developed countries. We are now starting to bite in to the most highly skilled sector—those with the most marketable skills. No longer are we knocking off the marginal firm that was teetering along in the good times, making a profit, but when the chill wind came could not batten down the hatches and survive. Such firms have long gone. The firms now going out of business in West Yorkshire are those that have been there for generations. They are highly competitive. They should not be going to the wall. Those firms will never come back. The skills that they use will never be put together again.

It is not a question of all being well in a few months or few years' time. Those skills will be gone for ever. The firms will be gone for ever. My hon. Friend the Member for Workington (Mr. Campbell-Savours) recently tabled an early day motion that pinpointed the dreadful scandal of up-to-date texile machinery being flogged off to Egypt, Italy and our other competitors. That machinery will not return. It represented new investment over the last few years.

Indeed, one of the tiny bright spots in my own constituency relates to a firm that crates up the machinery and sends it abroad. It is doing quite well. I do not blame that company. However, it is sad to think that mills are closing down and that great factories are experiencing redundancy problems.

The Secretary of State may say "Oh, it is the textile industry again." I have the largest IC1 plant in the country in my constituency—the Dalton organic chemical works. I was astonished to learn last week that ICI will be offering no permanent jobs to any of the apprentices in the Dalton works. ICI is the premier employer in the country. People used to think of it as a blue-chip investment, and that they were set for life if they got a job there. It is a firm that has had good industrial relations and a good productivity record, yet that is the truth about ICI today.

Of course we must pass the Bill. It is a necessity. It tackles at a rather superficial level the disease that has threatened to engulf our country. I believe that the Secretary of State and some Conservative Members understand the problem. I am sure that some of them would like to introduce imaginitive and bold plans to stop this terrible shame. People read of the oil coming from the North Sea and ask why the revenue from it is being poured into redundancy pay and unemployment benefit. Surely common sense tells us that that oil revenue should be used to create jobs, investment and new initiatives.

The one great thing about the Labour Government of 1974–79 was that to deal with unemployment they introduced a whole range of initiatives in respect of which there is no reason to be ashamed. They were bold and far-reaching, and the right kind of initiatives for young people, the unemployed and those who wanted early retirement.

Mr. Campbell-Savours

My hon. Friend was elected to this House at the same time as I was. Does he recall coming into the Chamber and listening to his first Employment Question Time and, indeed, Prime Minister's Question Time? Does he recall Conservative Members, when referring to the special measures of the Labour Government, talking in terms of "non-jobs"? I remember that phrase distinctly. It is significant that over the last 12 to 18 months Conservative Members have increasingly recognised that a major problem has arisen in terms of escalating unemployment. They have now rephrased the term "non-jobs" and have come to understand that such measures were vital if young people and others were to be provided with some form of occupation. I am sure that my hon. Friend will wish to comment on that, because it is a major change in the attitude of Conservative Members.

Mr. Sheerman

I recall that dramatic period very well. The phrase "non-jobs" was soon dropped by the Government. In fact, they no longer use it.

I come back to the argument. The time has come for a package of bold new initiatives. The Secretary of State will have to persuade some of his Cabinet colleagues, including the Prime Minister, of the merit of those initiatives. When the hon. Member for Beeston (Mr. Lester) was a member of the Government he was considering the implementation of some interesting initiatives. Unfortunately, he is no longer on the Front Bench. I do not know why. Many of us deplore the fact that a person with imagination and initiative should be dropped. Perhaps he was considered to be too wet. We must take bold initiatives before it is too late, and before the process of what I describe as the biting into the vital organs of our economic and social life goes too far.

My hon. Friend the Member for Keighley (Mr. Cryer) spoke about textiles, and I do not want to go over that subject at length. On Monday we had a demonstration and lobby by textile workers. I was surprised that many Conservative Members did not have the courage to be here on Monday. After all, the Government owe their existence to many of the marginal seats in Lancashire and Yorkshire. It was a shame that so few Conservative Members were either in the Chamber or in the Lobby to meet constituents who have lost their jobs since the Government took office.

The textile workers who were here on Monday were not talking about redundancy. They accept redundancy if it is inevitable. They do not even believe that the textile industry should necessarily be kept alive. They were saying that if the textile industry is to be written off by this Government, if the Common Market, with the accession of Greece, Portugal and Spain, will mean the end of the industry, if there has been a secret agreement by the Government to write off the industry, the Government must say so. They want the Government to provide initiatives for replacement jobs in the prime centres of the textile industry. They are not asking for the textile industry to be maintained. They are asking for the Government to take an initiative to provide new jobs.

There was one good thing to be said about the Roosevelt Administration in the 1930s—at the depth of a world depression, not recession. It has been argued by many historians, including economic historians, that Roosevelt did not do much in terms of getting the American economy back on its feet. What Roosevelt did was to give the ordinary working man in the United States the psychological impetus to believe that someone did care and that somebody would do something.

I believe that that is what people need today. They do not believe that the Government have any direction, any answers, or any belief in themselves other than the barren and arid slogan of monetarism. I think that I am sophisticated enough to understand that there is a difference between monetarism as an economic policy and monetarism as a description of a Government. Perhaps one can take the parallel of the attitude towards Fascism and Nazism in the 1930s. Historians today suggest that there were two types of politicians at that time—those who wanted to act in a positive manner and to give away any concession to Germany and Italy and those who wanted to do the same thing but in a modified fashion.

I suggest that the true monetarists in the Cabinet who believe in a doctrine that has been shown to be ineffective and unworkable should be the minority there, and that people like the Secretary of State should take their courage in their hands, give people hope, and assure them that there will be a better future. Redundancy is not what people want. They do not want redundancy payments. They want a future, they want to work and they want to work for the future of their children. I believe that the Government have a duty to see that they can do so.

5.56 pm

Mr. James Hamilton (Bothwell)

I want to tell the Secretary of State for Employment that I shall not vote against the Bill. I realise that it is an absolute necessity. Nevertheless, it is a travesty of justice that a Bill of this kind should be required, bearing in mind that the sophisticated word '"redundancy" means unemployment for many people in the United Kingdom as a whole, and especially in Scotland.

We should bear in mind that it was a Labour Government who introduced the Employment Protection (Consolidation) Act 1978. I should have thought that we could make some progress, in that workers would wait 32 weeks instead of 104 weeks before receiving redundancy payments. My criticism is that workers are now accepting redundancy as a way of life. That is what I find in my constituency, where there have been many closures and so-called redundancies. The workers are at first prepared to fight against redundancy, but when they find out how juicy the carrots are they accept it. Consequently, jobs are lost, and those are jobs that will never again come to our part of the country. That is a matter to which the Government should give serious consideration.

My hon. Friend the Member for Huddersfield, East (Mr. Sheerman) referred to North Sea Oil revenues. We in Scotland have our trials and tribulations with North Sea oil. The Scottish nationalists say that North Sea oil should be used to regenerate Scottish industry. I do not subscribe to that point of view, because I recognise that many of my brothers and sisters in the North-East and North-West of England and in Wales are in the same situation.

I hope that the Secretary of State for Employment will pay particular attention to one matter. The Prime Minister said in a statement to the House that £2,300 million a year of the revenue from North Sea oil went to pay unemployment benefit. That is a sad reflection on the policy of the Government. That figure is not my figure; it is the figure that the Prime Minister herself gave at Question Time.

Unemployment is a disease. It means that many people lose their self-respect and the respect that they have in their own locality. Their own children do not respect them any longer, and that for a reason that is beyond human comprehension.

With more than a quarter of a million people in Scotland unemployed, and in my county of Lanarkshire 17.7 per cent. of the insurable population unemployed, I must express myself strongly. I do not intend to take the same line as the Minister of State, Department of Industry did last night, when he made one of the most disreputable speeches ever made from the Government Dispatch Box. We were debating the loss of 4,800 jobs at Linwood, in Scotland; something that is unforgivable.

I have some respect for the Secretary of State for Employment. I congratulate him on the courage that he showed when he addressed the Young Conservatives last Saturday. What he said was very much in accord with what the trade union movement is saying. Anyone who is prepared to disregard the thoughts, desires and expressions of the trade union movement is doomed to failure. I hope that many more members of the Cabinet will express themselves as the right hon. Gentleman did.

One of the burning problems of today is the steel industry, part of which is in my constituency. The Ian MacGregor corporate plan for steel will mean the loss of 640 jobs in Scotland. I have been with Mr. MacGregor, and to show that there is some truth in politics I can state that I have a high regard for him. I think that his intentions are honourable. What is wrong is that, whether we like it or not, the matter is not simply one for the British Steel Corporation; it is also a matter for the Government, who have a responsibility to the steel industry.

What we find nauseating and disgusting is that there is a difference of opinion about the redundancy payments to be made in the various regions. Unless we can achieve a proper balance, the rancour that prevails in the country at present is bound to continue.

Redundancy seems to be the pattern—an accepted fact of life. Those of us who are trade unionists and are sponsored by trade unions cannot tolerate the present position. I accept that there is a world recession; we cannot get away from that. But the Government's policies were not adopted because of that recession. Many of the public expenditure cuts are unnecessary. If some of the Opposition's policies were adopted, the Bill would be unnecessary. Instead of our using North Sea oil revenues to pay unemployment benefit, we would find that many people would be at work and contributing to taxation and national insurance payments. More important to ail of us, they would retain their self-respect.

I have said many times that there are Conservative Members who have honest and sincere intentions. Many will express themselves as I do tonight. We are not prepared to tolerate unemployment of 2,419,000 in the United Kingdom as a whole and over 250,000 in Scotland.

I hope that the Opposition will support the Bill, for reasons that are honourable, because it is necessary. If we have a declaration from the Minister that it is his honest endeavour to eliminate the present scourge of unemployment, I am prepared to give my support.

6.6 pm

Mr. Ray Powell (Ogmore)

We are considering a very small Bill, a one-page Bill, but it contains a number of matters that the House should consider.

First, why do the Government want to increase the amount of money involved? I thought at first that the increase from £40 million to £300 million was quite large, but, having realised the extent of the redundancies created by the Government's policies, I appreciate that they need substantially more.

I represent a constituency with four collieries. One, Coegnant in Maesteg, was the first to go on strike over the weekend. I read on the front page of the Daily Minor this morning that a secret document had been considered by the Secretary of State for Energy. It re ealed that the National Coal Board and others would like massive colliery closures within the very near future. It suggested a redundancy payments scheme to pay miners with long service about £28,000. Eighteen of the 34 pits in the South Wales coalfield were earmarked for closure. The Government have more or less devastated the steel industry. If they now close that number of pits in South Wales, 10 in Scotland, and 13 out of 24 in Durham and Northumberland, even the £300 million will be inadequate for compensation and redundancy payments for those who will be put out of work in the coalmining industry alone.

I refer particularly to the mining industry because I represent a mining constituency. At the Coegnant colliery in Maesteg the National Union of Mineworkers' lodge secretary, Mr. Verdon Price, and his colleagues are very moderate miners. The decision to go on strike, which they took last Saturday, was not peculiar to that lodge.

Coegnant colliery is one of the seven pits in Wales that are to be closed. In Maesteg that closure will cause great disruption and will mean that after 20 months and 11 days of this Tory Administration redundancies will have increased by 100 per cent. Last Saturday, at the meeting in the colliery lodge, the chairman suggested that serious consideration should be given to the possibility of taking action. To a man, they decided to withdraw their labour. The workers are incensed, because only the other week the management of the National Coal Board praised colliery lodge officials for the work that had been accomplished in Coegnant colliery. Indeed, in the past 10 weeks a new seam has been opened that contains coal to the value of £1.6 million, and yet colliery closures have been suggested.

I am the son of a miner. I was brought up in the Rhondda and lived in a mining community. I am well aware of the battles that miners have fought over the years. Last night I re-read the history of South Wales miners. It reminded me not only of my predecessor who represented Ogmore, the right hon. Vernon Hartshorn, and of the work that he did for miners, but of people such as Arthur Homer and A. J. Cook and their struggles.

History is repeating itself. As a result of the Government's policies, unemployment in my constituency has reached a level that has not been seen since the 1930s. People are living from hand to mouth. Last Saturday the Prime Minister made a ridiculous suggestion to the effect that redundant workers should use their redundancy pay to set up businesses. I know business men in Ogmore who used their demobilisation money in 1945–46 to set up businesses. They have struggled and worked hard for 35 years, yet their businesses have crashed after 20 months and 11 days of a Tory Government. Their workers have lost their jobs and have had to claim redundancy and dole money. It would have been more appropriate if the Prime Minister had suggested a policy change that ensured the survival of those small businesses.

During Welsh debates and at Welsh Question Time the Secretary of State for Wales has consistently told us that the Government are providing factories on the Bridgend industrial estate, which lies in my constituency. The mere provision of new factories is insufficient. We want work. Factories that have been established on the estate during the past 30 to 40 years now stand empty.

I am particularly concerned about the NCB's announcement of the redundancies to be made both inside and outside Wales. Welsh miners have said that they are not prepared to sell out their jobs. They say that they want alternative work. Unemployment has doubled in the last 12 months. The jobcentre has no vacancies in Maesteg and Bridgend. Every week more unemployed workers are added to the register. Young men and young women cannot find jobs. The whole town has been desecrated and destroyed by the Government's policies.

There are 428 miners in the Coegnant colliery. The average age is 39. That work force is one of the youngest in the South Wales' coalfield. The miners have suffered from several of the Government's policies. The BSC decided to cut the work force at Port Talbot, which is only 8 miles away. There have been redundancies at the Revlon factory. In Maesteg a clothing factory has closed, with the loss of 600 jobs. As a result, the miners have decided that it is time to fight. A 39-year old man may be given redundancy money, but it does not mean that he will find a job. It is no good offering jobs to 16 to 18-year-olds in Maesteg under the youth opportunities programme, because after six months they will not be able to continue in that employment. There is no possibility of finding a job or of a new factory being created. As in the 1930s and afterwards, young people must look beyond Ogmore and the borders of Wales for new jobs.

Jobs are not freely available. It is not worth going to Finchley, the Prime Minister's constituency, for work. Even in her constituency unemployment has reached 9 per cent. Therefore, the miners realise that if they sell their jobs there will be no work in the future. Some steel workers have been redundant for 12 months, and like them the miners realise that redundancy money soon disappears. In no time at all redundant workers find that they have only unemployment benefit to live on.

I hope that a settlement will be reached at tonight's meeting between the Government, the NCB and the miners but I trust that—contrary to the suggestion in the Daily Mirror—there is no conspiracy between the NCB and the Government to bribe, or attempt to cajole, the miners into submission. The workers are more sophisticated than they were at the time of the Tonypandy riots. They are more prepared to fight, and in a different way.

I warn the Prime Minister, the NCB, the press and the public that the miners are fighting for their jobs. They are fighting to work down mines, because that is the way of life that they have chosen. They are courageous, hardworking, and comradely. They are led by leaders who will go down in history as having been the soul and sanity that the country needed in the 1980s.

This treacherous Government bribed their way to power. They bought off some of the trade union opposition with extra redundancy payments. But at last the miners—the cream of the free trade unions and the Labour movement—have called a halt. Twenty months and 11 days of butchering the industrial and economic base will come to a stop. The CBI, the TUC, economists, past Tory Prime Ministers, and die-hard Tory business men are all begging and pleading desperately for sanity, moderation and reason. But no, the lady is not for turning. The right hon. Lady stated defiantly and adamantly, in that sweet, likeable, adorable manner for which she is so well known: You turn if you want to". The miners have turned. They will turn the right hon. Lady, her Government, and her mad monetarist policies. The public will back the miners. Even some of the right hon. Lady's Ministers will back them. Once again the miners will go down in history as having saved this country from the Prime Minister and her policies. I am proud that this move has started in my constituency. I hope that it will gather strength, and that it will not be prolonged.

6.19 pm

Mr. D. N. Campbell-Savours (Workington)

I shall be particularly brief, Mr. Deputy Speaker, because I am hoping to catch your eye during a debate later this evening on the Iron and Steel (Borrowing Powers) Bill.

I congratulate the Secretary of State on taking time off from his duties today to spend so much time in the House—if only to answer a couple of questions that I should like to put to him in my intervention and that arise from events in my constituency following the suggested closure of the Distington foundry.

There was a report in theFinancial Times of Saturday 7 February 1981 which suggested that the Government, in the forthcoming Budget, may well introduce taxation changes relating to the payment of redundancy payments. I should like to quote the article, in the hope that the Secretary of State will reply directly to the statement made in it so as to allay the rumours that circulate in my constituency and, it appears from my conversations with other Opposition Members, in other constituencies. These may well stem not only from this article but from similar articles in other newspapers.

Under the heading of "Family and Finance—Redundancy and Tax" the article says: the rules are likely to be changed in the spring Finance Bill. Now that it has been confirmed that the Budget Day is to be March 10 it is possible that the new rules (whatever they may prove to be) will take effect from that day, and not merely from April 6. It is likely to be better (from the angle of tax on any ex gratia payment which your employers may decide to make—after you have left, of course), therefore, if your employment ceases before March 10. What is being implied in another article that I have seen in the same journal is that in the next Budget Statement the Government may be intending to introduce tax changes whereby people's redundancy pay will be taxed. I am told that at present the threshold on severance payments is £10,000. In other words, people do not pay tax on severance payments that are less than £10,000, although there were changes relating to social security benefit payments in the Social Security (No. 2) Act of last year.

I hope that the Secretary of State will try to reply to that rumour and allay the anxieties of many people in this country, certainly in my constituency, who are now faced with the prospect of settling on the basis of redundancy payments. In the case of the British Steel Corporation's projected closure in my constituency, rumour is hot in Workington—although there may well be no foundation in it—that the BSC is using this article as a way of exerting pressure on people to come to terms with the need to negotiate with the BSC on the question of redundancy.

I turn to another area in which there is disquiet. From my conversations today with a number of smaller companies, it seems that there are conditions in which smaller companies do not apply for the return that is available to them, they having contributed 0.15 per cent. of their national insurance employer's contribution to the fund that is under discussion this evening. In return for that 0.15 per cent., they receive 41 per cent. of the statutory redundancy payment, which is paid by the Department.

My information is that due to the statutory 14-day requirement—perhaps the Secretary of State will clarify the position if I am wrong—whereby firms are required to inform the Department of employment 14 days in advance of their making redundancies that they are about to claim, where the trading and industrial activities of small companies fluctuate rather rapidly from day to day, and where they are required to take quick decisions on the question whether they are able to retain labour, some small firms are not applying for what is their statutory right.

I think that I should resume my seat at this stage. I have asked a few questions simply for the sake of clarification. I have sought to do so in this debate because I felt that if I were to write to the Department and delay the reply by a week, or if I were to table a parliamentary question that would be replied to in the same way as many parliamentary questions are increasingly replied to by the present Government, it would delay the answer that is so precious to my constituents and to those of other Opposition Members.

6.25 pm

Mr. Roy Hughes (Newport)

This is a little Bill with a big meaning. As I see it, it is essentially an indication of the difficult economic times in which we live. We all know that about 2½ million of our people are unemployed. Many thousands more have not even bothered to register as unemployed, because they know that there is no chance of obtaining work. We also know that all reliable forecasts point to the fact that the figure of 2½ million will increase shortly to about 3 million, and that it could escalate even further. There have even been suggestions that the figure could eventually reach about 5 million. The issue of unemployment is an indication of the difficulties that we are now experiencing.

Charity begins at home. In their speeches this evening, many hon. Members pointed to their own constituencies and to the redundancies that they have experienced. In Newport, we have had our fair share. For instance, the Llanwern steelworks has lost 5,000 jobs recently, but smaller steelworks, such as Whiteheads, the Orb works, and the Alpha private steelworks, have also had major redundancies fairly recently. Engineering establishments in our area have been similarly affected.

Redundancy on this scale casts a blight over the whole area. What we experience in practice and what we hear from our surgeries and postbags is that, essentially and very soon, redundancy payments become inadequate. They look rather large at the outset, but families soon find that their standard of living declines. They have difficulties over the payment of bills for essential services, such as gas and electricity. What I have noticed in Newport very recently is the trouble being experienced over the payment of rent. The borough treasurer has recently pointed out the huge debt that now obtains in Newport. All of this relates to the difficult industrial situation and the thousands of redundancies that have taken place.

A particular matter that has affected many of my constituents concerns those who have been made redundant and who have then signed on for various retraining courses. In this instance, their pay was to be made up, apparently, from EEC funds, but there has been a long delay in the making up of these payments. Apparently there have been difficulties in Sheffield, from where they are administered.

On a number of occasions I have written to Mr. Ian MacGregor, chairman of the British Steel Corporation, about the matter. I am, however, still receiving protests. The most recent came from the students union of Cardiff university, where certain workers have been taking courses. They have presumably protested through the students union. Those protests, in turn, have been directed to me.

I understand from Mr. George Henderson, national secretary of the building and construction section of the Transport and General Workers Union, that an important member of the EEC Commission is arriving in London tomorrow to discuss payments in regard to readaptation schemes. I wonder whether the Government will make suitable representations to this gentleman to speed up the payments to many of my constituents who are getting into severe financial difficulties because of non-payment of moneys.

I have also been asked to bring to the notice of the Minister the problem of these additional payments through EEC funds as they apply to opencast coal workers. Representations should, and apparently will, be made to the EEC representative to ensure a square deal for this group of workers.

To many people in industry, redundancy payments have been a sort of treacly inducement to sell their jobs. It has been found ultimately that these treacly payments leave a bitter taste in the mouth. For the Government to say that they can do nothing about present industrial difficulties would be to leave matters to the law of the jungle. Massive intervention is required by the Government, and the sooner the better. I have never accepted the inevitability of unemployment. People are entitled to a job by right.

To stimulate the economy, the Government could start with the building and construction industry. Many schemes could be undertaken. The homeless could be rehoused by the building workers who now stand idle in the dole queues. New roads are badly needed, especially in South Wales. There is a need for power stations, hospitals, and so on. We shall be told that if money were pumped into the economy to the extent that I advocate, this, in turn, would suck in imports and knock the balance of payments out of alignment.

Along with stimulation of the economy, I feel that we need import controls of a selective character. This would not restrict trade; it would increase it. The case has been argued comprehensively for several years by a distinguished group of Cambridge economists.

My message is concerned not so much with the Bill that we are debating as with the need to get people out of the dole queues. That would be better than all redundancy Bills. This legislation is only an indication of the predicament in which the Government have got themselves.

6.34 pm

Mr. Robert C. Brown (Newcastle upon Tyne, West)

My constituency and the Northern region from which I come have more than played their part in making it necessary for the Government to introduce the Bill. I think of major closures in my constituency such as those at Tress Engineering, involving over 500 workers, at Vickers Scotswood plant, involving over 750 workers, at Vickers armaments division, Elswick works, involving 350 workers and several hundred more in shipbuilding. In addition, there have been countless closures of small firms. My constituency, I am sorry to say, has played an important part in creating the need for the Bill.

In the city of Newcastle there are well over 15,000 unemployed, many of them the victims of redundancy. Male unemployment is now in excess of 15 per cent. In parts of my constituency unemployment must be running at 30 to 40 per cent. among males. I think especially of the Low Scotswood area and the Cowgate and Blakelaw areas.

I have in my hand a publication to which I intend to refer at some length. It is called "Roundabout". It is the Blakelaw, Cowgate and Fenham community newspaper. Much of the credit for its production must go to the Blakelaw school within my constituency. It is produced in the upper school of this comprehensive school in an area of my constituency with more than its share of problems.

The journal states: Economic depression is nothing new in Newcastle. That is the understatement of the century. Heavy industry upon which we have relied has been in decline for decades and high unemployment levels have been with us for just as long. The future looks bleak. In this edition of 'Roundabout', as well as the usual news and views of our community, we, with the assistance of 'people in the know', look at the distressing youth unemployment in this area. We've spoken to people in the community and in positions of authority and responsibility; we've spoken to those who, through their community groups, seek to alleviate the boredom of life of the young unemployed. We've spoken to Tish Murtha, a community photographer, who knows what it's like to be young and unemployed. She has produced a startling dossier of photographs which document youth unemployment in West Newcastle. The journal asks: Do you feel discarded by society? How do you view the future? What do you think could be a solution to the problem? How can schools, churches and government depts help you? I shall have something to say in the next issue of "Roundabout" in response to some of those questions.

The journal contains a major feature, from which I wish to give some quotations, on youth unemployment. It states: Tish recounts the case of Pat D., a 20 year old local girl, who worked on a temporary scheme painting and decorating with Community Industry. 'Since the scheme ended,' Tish reports, 'the struggle to support herself and her young child has forced her to take the one course of action open to females in her position—Prostitution.' Tish Murtha, who was for a while based in Blakelaw School Community Room while she prepared the photos for our Christmas Special, worked throughout 1980 on recording life on the dole for the young unemployed of the West End of Newcastle. Her photographs and accompanying text are all to be exhibited in Bristol for a month beginning 14 February. I hope that the citizens of Bristol will view that exhibition and reflect on the misery of so many of our young people in Newcastle and the North East generally.

The article adds For most of this century high levels of unemployment have been a feature of life in West Newcastle, but Tish identifies an alarming new feature—an increase in the level of youth unemployment. What is most disturbing about this is the lasting effect it has on these young lives. Last Friday evening I was talking to a youngster who has just turned 19. He has had the misery of receiving redundancy payments on no fewer than two occasions in his short working life. He is now unemployed for the third time since he left school. This is a youngster who is desperately keen to have a job to support himself..

The article goes on: She tells of many youngsters' experience on the Government's Youth Opportunities Programme, such as that of Carl M. who left school in 1979 with some qualifications and an excellent reference. He received a card which informed him that 'an exciting opportunity has arisen.' He was told 'to report to the City's Cleansing Department, where he was officially introduced to the joys of sweeping Newcastle's streets. Believe me, there are many thousands unemployed in my area of Newcastle who would only be too delighted to get such an opportunity.

The article continues: Few, if any, are fooled by the Youth Opportunities Programme. What the youngsters feel about it is often 'unprintable', says Tish, and is succinctly summed up in her photograph of the resigned expressions of the YOP street cleaners on the shopping centre bench. That is a reference to the photograph. Tish feels that 'the Youth Opportunities Programme is a diversion from the real issue of permanent unemployment, creating long-term jobs for the 'officials', while forcing young people to participate in short-term, low-paid and futile labour, which keeps them temporarily out of the statistics'. Most of them, she says, 'return to the realities of inflated dole queues, bleaker job prospects, and the severe financial strain of Social Security'. Unfortunately, that is abundantly true of the city and the area that I represent. The scheme is a palliative, but I am glad that we have it. At least it gives the young people something to do for the few months that they have the opportunity of participating in it, rather than hang around street corners.

The article goes on to say: Just as damaging is the attitude of people like ourselves who treat these youngsters as skivers and nag them to go out and get a job—when there aren't any. On the whole, reports Tish, the only generation who understand these youngsters are pensioners, perhaps because they remember the Depression years. That is a fair comment that there is a generation around today that has not suffered in the same way as our pensioners did. Although I have never experienced unemployment myself, I have suffered the misery of unemployment, because my father was unemployed for 12 years. I lived in a street of 24 terrace houses. When I was a youngster, I recall only two dads in that street having jobs, so it is nothing new in my part of the world.

Finally, Tish gives a warning because she reminds us that 'there are barbaric and reactionary forces in our society, who will not be slow to make political capital from an embittered youth. Unemployed, bored, embittered and angry young men and women are fuel for the fire'. The distressing fact is that many of today's young unemployed are tomorrow's adult unemployed. Ahead of them lies a life of boredom and deprivation. That is a warning that we must heed, because one has only to look at football grounds to see how the evils of extreme Right-wing groups are being preached to youngsters who seek some diversion from the misery of unemployment.

Mr. Campbell-Savours

By reading that article my hon. Friend went to some pains to criticise to some extent the operation of the youth opportunities programme. He was not saying that it was wrong. What he was saying was that it did not resolve the long-term problem. Is not the real problem that many local authorities have failed to understand that they should be far more imaginative and adventurous in introducing these schemes? If they were more adventurous a strong lobby would develop among local authorities to put pressure on the Government to extend the schemes into areas into which to date they have not been willing to venture. If that were to happen we might well have a youth opportunities programme and a STEP programme—although it is the community enterprise programme that is being changed—which would be meaningful and which could aid greatly in solving the problems and helping those who are suffering unemployment.

Mr. Brown

I am grateful to my hon. Friend for that intervention. I want to be more than fair to my local authority. Newcastle upon Tyne has endeavoured to make the youth opportunities programme a worthwhile scheme. As I said, I am extremely glad that we have got it. There is nothing else for the foreseeable future. As well as a Bill of this type, we need from the right hon. Gentleman, whom I am glad to see in his place on the Front Bench, a greater extension of opportunities for the youth who are unemployed, as my hon. Friend the Member for Workington (Mr. Campbell-Savours) has said.

I was in the middle of making the point that it is at our peril that we ignore the final warning in this article in Roundabout, the Blakelaw School magazine, that young idle hands are often easily captured. I should hate to think that any of my young unemployed constituents could end up marching around with the thugs of the National Front.

6.47 pm

Mr. Allen McKay (Penistone)

It is regrettable that such a Bill as this should have to be brought before the House. Redundancy is in all aspects unemployment; it is an extension of the unemployment that we have seen since this Government came into office. In my constituency, although I have not had the traumatic experience of some of my colleagues who have seen thousands in their areas made redundant at one time, nevertheless when the area is analysed and we see the number of redundancies which have taken place we realise that a creeping paralysis is going on throughout the constituency.

Gradually over the last two years David Brown of Penistone has shed roughly two-thirds of its work force. Hepworths factory near at hand has shed hundreds of people a few at a time. In the same area British Rail is contemplating the closure of a line, again with about 100 or 200 people likely to be made redundant, although British Rail says that it can employ them elsewhere. What it does not say is that in a few years the effect of the closure of this line will flow down to the marshalling yards nearby, with employees there being made redundant.

Ransomes and Rapier over a period has shed its employees in fifties or hundreds. I received a letter from the management of that firm outlining the problem which affects one of our industries. We have talked to this Government time and again about the results of unemployment which have been caused purely and simply by the high interest rates and the high pound about which the Government could have done something

We have different standards in this country from those in Europe. In regard to the car industry, we have heard that France, rather than put on quotas, makes it difficult to import cars; they are left on the docks for a considerable time and then are sent back because they are not fit for sale.

The management of Ransomes and Rapier writes to me saying: British companies seeking to export cranes and lifting appliances to other EEC markets usually have to comply with national standards of the importing countries and documentation and calculations have to be provided to official organisations to demonstrate conformity, which is costly and time consuming". In the case of a foreign manufacturer importing cranes or lifting appliances into the United Kingdom there is no such approval requirement". Ransomes and Rapier was facing unfair competition because of different standard requirements. The firm asked for help. It contacted the relevant federation, the Health and Safety Executive, and the Secretary of State for Trade.

Shortly after I received the firm's letter I received a letter from the shop stewards. It informed me that 69 of the 250 hourly paid workers had been declared redundant. It is not 12 months since there were 50 redundancies in that sector. A short distance up the road from Ransomes and Rapier is a work force of 600, and 50 percent. of that work force has been informed that it must accept the benefits of the temporary employment subsidy or go. There is a paralysis creeping across the landscape that is bringing enormous problems.

We now have the colliery closure programme. The sad feature of the programme is that it need not have been brought forward. If a colliery has been suffering from exhaustion of reserves, the miners have created no problem about closure. If a colliery has become exhausted, the miners have accepted the facts presented to them. However, there has been an understanding for many years that no colliery will close because of economic reasons.

That is the basis of the present trouble. It seems that 50 collieries were earmarked—they were supposed to have been earmarked, or that was the rumour—by the Government for closure arising from economic reasons. The collieries would have died out naturally over a period. The miners cannot understand why about 8 million tonnes of coal is being imported while about 8 million tonnes of British coal is being left in the ground. If the importation of coal were stopped, there would be some leeway. The Under-Secretary of State shakes his head to indicate his dissent. I contend that if the importation were stopped there would be some leeway while the collieries died out naturally. That is why I said that the present trouble need not have arisen.

We warned the Government time and again in oral and written questions and especially during the passage of the Coal Industry Bill that the financial restrictions set out in that measure would bring about the trouble within the mining industry that we are now facing.

When we talk about redundancies, it is the principle that is important and not so much the number of collieries. We can no longer trust the Government to keep their word on colliery closure programmes. They are now talking of redundancy payments of about £28,000 for a long-serving mineworker. We must remember that the coal industry has slimmed down drastically over the past four or five years due to its early retirement programme.

Most of the men aged between 60 and 65 years have probably retired already. If the industry is to be slimmed down still further, we are talking about men aged between 45 and 55 years. Those men realise that if they become redundant they will possibly have no chance of working again.

The Government must bear in mind the traumatic effect on a person who is made redundant. If a person is made redundant for the first time—he has probably worked all his life and has probably been a good worker—he thinks that he will soon get another job. After five, six or seven weeks have passed he realises that his first impression was wrong. He then realises for the first time that it will not be easy to get another job. After he has visited the employment exchange on numerous occasions and has made numerous calls on various firms in his area, he suddenly realises that someone of 50 or 55 years is put on the scrapheap through no fault of his own. That is the start of the depression stage.

It has been proved by the medical profession that once that stage is reached a person will suffer from ill-health and traumatic experiences. This has an effect on the whole family and on the moral fabric of society. The Government are destroying not only the industrial side of society but the moral side.

Recently the Government stopped paying the earnings-related supplement. The supplement was introduced by a Government who bore in mind the traumatic experience of a person made unemployed for the first time. It was an attempt to cushion the effects of unemployment. The Government have recently provided that a person cannot claim supplementary benefit until he has less than £2,000 in the bank. He is given a lump sum but he is told that he has to spend it before he can claim benefit. That must be set against the argument that those in receipt of redundancy payments should invest the money.

A person aged under 65 years may claim unemployment for about 12 months. When 12 months have elapsed, those payments cease and he is entirely on his own. We must discuss not only redundancy payments but the way in which they are paid. As I have said, we are talking about £28,000 for long-serving mineworkers. In the event of redundancy, a young man will probably feel that he can cope with such a payment in the hope that he will obtain employment later. However, 50-year-olds are told point blank that they are too old to work. Are people in that age group ever to obtain employment again?

Will the Government's policies work? The unemployment statistics tell us that about 2½ million are unemployed. We know that in fact there are about 3 million unemployed. We are also told that unemployment will increase. If the Government's present policies are continued, I think that we shall never see anything like full employment again. The Government realise this. It is time that they came clean. They have a duty to say what effect their policies will have on employment. If we are unlikely to see full employment again, it is time that we considered redundancy payments in the long term.

It is all very well giving a person a large lump sum and saying "Goodbye, chum, that's it. You manage in the best way you can". The Government have taken away the earnings-related supplement and his unemployment pay. He will not be able to claim supplementary benefit because he will have more than £2,000. In other words, the Government have taken away his financial stability and his dignity and all that that means in family life.

It was only recently that I saw a grown man cry. That happened because he had no work. He had to tell his son, who came from school asking for something, that he could no longer afford to buy the things that he used to buy for him. I ask the House to recognise the feelings of a person who has to tell his son for the first time that no longer is he able to support him in the manner that should be possible.

For a long time the redundancy payment system within the mineworkers' pension scheme has provided a lump sum and for three years 90 per cent. of the worker's take home pay. That was fine for a man made redundant at 62 years of age. It meant that he would receive 90 per cent. of his take-home pay until 65, when he would receive retirement pay. The board made provision so that a man of 60 had no need to claim supplementary benefit. Unemployment benefit was equivalent to the pension scheme. If we are to have long-term redundancies—it is regrettable that the Government have caused them to be necessary—we should so devise schemes that a man may be assured of an income if he suffers compulsory redundancy.

The Government should be looking at ways of providing meaningful employment. The way they are going about it will not work. Labour Members know that it will not work and Conservative Members also are beginning to realise that it will not work. The effects of high unemployment take up the public sector borrowing requirement.

There is one way in which the Government could reintroduce employment. Local authorities have plenty of work to do provided that the Government give them the money to do it. They could help to provide work along the lines of the idea suggested by the Sheffield city council which with other authorities could employ the youths unemployed with the unemployment benefit paid to the council and the remainder of the wages provided from the rates up to the wage for the job, providing the Government give the money to the council.

The Government must stop their attack on local councils. They must stop cutting their requirements. Those matters must be considered. I want to hear the Government's answers.

7 pm

Mr. John Golding (Newcastle-under-Lyme)

I apologise to the Ministers for not hearing their speeches. I was chairing the Select Committee on Employment, and regret not being here

The Bill is an irony. The fund was established because economists and statisticians thought that there would never be unemployment again. When it was introduced the assertion of politicians was that full employment had come to stay. The major problem facing society was that of workers not being sufficiently mobile in terms of moving from one job to another. They did not move, because there was full employment. The redundancy fund was established to encourage workers to transfer from one job to another. The fund was not designed as the life-line that it has now become. We have to take that into account in everything that we say.

The optimism that existed at the time the fund was introduced has now turned to deep depression and demoralisation. I do not share that total demoralisation, and I take issue with one of my hon. Friends who suggested that full employment might not return. We have to return to full employment. In no way must we accept the idea that, as politicians, we cannot provide the conditions in which men, women and young people can find work if they want it. Full employment is not something over which we have no control. The question whether we have full employment will be determined by our skill as politicians in creating the conditions for full employment.

Mr. Robert C. Brown

I take second place to no one in advocating a return to full employment. My hon. Friend the Member for Newcastle-under-Lyme (Mr. Golding) misunderstood me. I am sure that he would not wish to misquote me. I was talking about the foreseeable future. With the Government digging the pit deeper and deeper, there is no way in which we can return to full employment in the foreseeable future. That is why I suggested that it was vital to extend the youth opportunities programme to make it more meaningful and worthwhile for young people.

Mr. Golding

I was referring to my hon. Friend the Member for Penistone (Mr. McKay).

Mr. Alien McKay

I thought that my hon. Friend the Member for Newcastle-under-Lyme (Mr. Golding) was referring to me. I said that under the Government's policies there was no way which we shall return to full employment. Under the: policies that we envisage, there will be a return to full employment.

Mr. Golding

I agree with that. I apologise to my hon. Friend the Member for Newcastle upon Tyne, West (Mr. Brown).

I am distressed when I hear the Prime Minister at the Dispatch Box saying that the cause of unemployment is to be found in our failure to achieve lower unit costs of production. I am distressed when she blames management and unions for our present problems.

As a member of the Labour Government, I spent much of my time as Under-Secretary of State for Employment travelling round the country. I went from one area to another seeing the terrible problems in Liverpool, the distress in Cornwall, the great problems in Hackney and the enormous problems faced in the North-East and Newcastle upon Tyne. I travelled from town to town and was faced with substantial problems. When returning on Friday nights to my constituency of Newcastle-under-Lyme, I was always glad to see a vacancy board on which many vacancies were advertised at RISTS, part of the Lucas complex. The problem with which I was faced in my constituency in 1978 and 1979 was that of the shortage of skills. The problem was how to find sufficient people to train, and not the level of unemployment. I remember when the unemployment level was 3.4 per cent. I was distressed when it reached 4.1 per cent. That was under the Labour Government.

Not only my constituency but the Potteries were prosperous. The general level of unemployment was low, and there was a general air of contentment. Sometimes there would be arguments. The local union would argue for the diversification of the Potteries and the managers at Wedgwood would argue against it on the ground that there was already over-employment in the Potteries, and that to bring in further work would aggravate the problems of the employers.

There are different problems today. One thing is certain. In North Staffordshire no one—neither management nor worker—is saying that the present recession is due to high pay, to industrial disputes, or to low productivity. In 1976, 1977, 1978, and 1979 the Potteries were prosperous. Wage levels were reasonable. The number of industrial disputes was low. Managements took great pride in the effort they put into selling British pottery abroad through special marketing schemes. We used to point to the Potteries as the ideal. The unions were reasonable and progressive. Management was imaginative and far-sighted, and was investing and selling. We had prosperity until May 1979.

The current position is very different. The unemployment level is 9.7 per cent., and for men alone it is more than 10 per cent. That total devastation of an area has taken place since May 1979. When I talk to managements—not unions—about the problem, they blame only the Government. In an area where fuel costs are important, they point to the price of gas. In an area where exports are essential, they point to the value of the pound. In an area where investment and stock levels are important, they point to the level of the interest rate. They are now beginning to point to the cuts in public expenditure, which are harming many of our basic North Staffordshire industries.

My hon. Friend the Member for Newcastle upon Tyne, West said that those were matters for which the Government must accept responsibility. In other parts of the country where unemployment existed before May 1979 the Government may be able to blame other people, but in North Staffordshire the unemployment is so demonstrably due to the Government's policies that they can find no scapegoat. The unemployment position has been caused by the Government. The vacancy board has disappeared.

When dealing with the unemployed in my constituency I call on the knowledge and experience that I gained in the Department of Employment. I am no longer preoccupied with skill shortages. I have to tell myself that I should still be interested in training and retraining to meet the future needs of employers. I have to face all the problems of the unemployed and those about to be declared redundant.

I shall come later to the youth opportunities programme. I disagree strongly with many of the remarks about it made by my hon. Friend the Member for Newcastle upon Tyne, West. First, however, I want to say how sorry I am that the Secretary of State has lost his battle with the Treasury over the job release scheme. Whatever he may say from the Dispatch Box, I remember the reasonable—indeed, almost warm—reception that he gave to the job release scheme when it was introduced by the Labour Government. Even when he first came to office and had a sceptical approach to the youth opportunities programme—which he has since expanded—he spoke about the job release scheme as being the best available scheme.

I regret the fact that the Secretary of State has so obviously lost his battle with the Treasury to restore the job release scheme to what it was under the Labour Government, and even to expand it. I speak sincerely. I do not think that the Secretary of State needs to come round to that idea. I think that he is already there. I wish him success in his battle with the Treasury. I wish him well when he tries to persuade the Treasury to do what he knows is right, namely, to reintroduce the job release scheme so that men can retire at 62, the disabled at 60, and women at 59. He should think of going beyond that.

It does not make sense for older people who have worked hard all of their lives still to be working when they are tired from their physical exertions or are under mental stress because of pressures of work. It does not make sense to force them to work when youngsters are being condemned to total idleness. It does not make sense for people who can retire from work in dignity still to be working when, by 1983, there will be 600,000 people forced into unemployment for more than a year. Let the job release scheme be reintroduced.

I hope that the Minister will achieve better results from the Treasury on the question of short-time working compensation. That is a good scheme. It was introduced not necessarily to deal with redundancy but to ensure that when orders for our factories dropped the pace of work was not lowered. It was based on the principle that if orders are reduced it is better for people to work at normal speed and, when they have done the available work, to go fishing—which I would prefer—to read books or to do gardening rather than to stay in the factory and reduce the tempo of work. The introduction of work-sharing because of reduced orders has proved to be one of the major contributory factors in the loss of productivity in Britain. There is good reason for retaining the short-time working compensation scheme, whether or not we are faced with redundancies. It is worth while having that scheme to cope with the present redundancy position.

When the Minister came to office he succumbed to Treasury pressure. The scheme that we introduced provided 75 per cent. of pay for 12 months. Under pressure from the Treasury, the Government cut the period from 12 months to six months. They are now having to increase the period from six months to nine months—but at the same time they are having to reduce the payment from 75 per cent. to 50 per cent.

I understand partly why the Government have done that. They found that the cost of unemployment has rocketed. It costs more to support the unemployed than it costs to create work. Last week we examined the supplementary estimates for short-time working compensation. Last year, the Government expected to pay out £40 million. In the winter they had to come to the House and ask for an additional £200 million because they had underestimated the demand on the short-time working compensation scheme.

I understand that there is to be another substantial increase in the estimate. Perhaps the Minister could tell us about that. That and the rising cost of unemployment—and now the additional cost of the Redundancy Fund Bill—are the reasons why the cost of unemployment is rocketing. I understand that a Treasury document show that the cost of unemployment is about £3,500 per person per year. With additional sums taken into account, some commentators believe that the cost is as high as £5,000. Should not the Government be thinking of using the £3,500 towards the creation of regular, ordinary work?

I shall not fall into the trap of saying that all the special measures are a mere palliative and waste of time. I put a lot of effort into the youth opportunities programme. I spent a lot of time talking to youngsters and others in the YOP, which is a very good scheme. It has done much to build up the confidence of youngsters and to give them a better start in adult life than they would have had otherwise. In many areas, the YOP has made up for the deficiencies in the education system, and for the failure of schools to provide a meaningful education for many youngsters between the ages of 14 and 16, particularly those to whom I refer as the "rough-and-tumble". There is great merit in that scheme.

I have spent much time in Newcastle upon Tyne. I bitterly regret any innuendo that the YOP is designed to provide jobs for officials, and that it is not useful for youngsters. Those officials are dedicated people. The Ministers who have put effort into the YOP have done so for honourable motives. I have attacked Ministers for ignoring other aspects of unemployment, but it only harms the youngsters to deride the YOP so much that it is brought into disrepute.

There are two reasons why the media are producing programmes that knock the YOP. First the level of substitution has become too high. It is 30 per cent. We must tackle that problem. It is no reason to throw the baby out with the bath water. We should sit down with the CBI and the TUC to discuss how to avoid that substitution.

The second reason why there is growing cynicism about the YOP is that the numbers of youngsters leaving the schemes and obtaining regular work are dropping fast. The Secretary of State should come clean and tell us how fast those numbers are dropping, because Ministers are still quoting figures from the Department of Employment which are more than 12 months out of date. It is anecdotal that the level is down to about 50 per cent., or even below that in certain areas.

Failure to obtain regular work is distressing many careers officers. The answer to that is for the Government seriously to consider the reintroduction into their armoury of the youth employment subsidy, which my right hon. Friend the Member for Barrow-in-Furness (Mr. Booth) and I ended. We got rid of it because we were persuaded by careers officers that in those circumstances YOP would be a better use of the money. They are now adamant that we need the return of a youth employment subsidy, so that youngsters from schemes can obtain regular work. If we are going to save money on unemployment benefit and on all the other benefits to which those youngsters are entitled, that would be money well spent.

I apologise for the length of my speech. It is essential that the Department of Employment should assert itself more strongly than it is doing now. I wish that the Secretary of State had spent more time dealing with unemployment and in fighting off the hawks in the Government than he has spent on industrial relations. My criticism of him is that he has spent too much time on his Green Paper, the codes and the so-called Employment Act, which dealt only with industrial relations. He has so absorbed himself in those problems, which have come to be irrelevant, that he has not had the time, the will or the energy to devote to the central issue of unemployment. May he change course.

7.27 pm

Mr. J. W. Rooker (Birmingham, Perry Barr)

Like my hon. Friend the Member for Newcastle-under-Lyme (Mr. Golding), I apologise to both Front Benches for not being here to listen to the opening speeches. I have the honour—which is probably dubious, and I shall not volunteer to do so again—of serving my hon. Friend for Pontefract and Castleford (Mr. Lofthouse) on a Private Bill Committee for several hours a day, several days a week. Therefore, I was not present at the beginning of the debate. It is good experience to be on such a Committee, but once is enough.

I wish to raise a constituency matter. I represent part of Birmingham. My constituency has less industry within its boundaries than has any other constituency in Birmingham, including the few seats represented by Conservative Members. The overwhelming majority of my constituents work in the city centre and on the large industrial sites around the city, but not in the constituency. They are suffering greatly. Birmingham is bewildered by the present rate of unemployment in that city, which is close to 12 per cent. It is worse in some parts of the city, such as Handsworth and particularly so in the inner parts of the city.

Of those companies that are situated on the boundaries of my constituency, there is one which until last week employed about 270 people. It manufactures bicycle components. Those are not very exciting products to industrial commentators and supporters of the Government, but when people cannot sell bicycles because of the way the economy is run, they are thrown out of work. That is what has happened to T. D. Cross and Sons of Shady Lane in my constituency.

That firm has had a period of short-time working, as have many companies in the West Midlands. The catastrophic increase in unemployment will continue. We know that because of the number of extra companies that have started a short-time working scheme since this time last year. The signals for the future are grave. This company went on short-time working in October or November last year. That was probably a little too late. It tried by every means to search for orders and to be the entrepreneur that the Government wished it to be.

The Government have put through massive tax cuts for the owners of industry. This is a family company of long standing, but without success, unfortunately, because one day last week 128 people were made redundant, leaving 143 employees. There were 128 redundancies, two of those concerned having served for over 40 years with (he company. Many of the people are between the ages of 45 and 55. What hope is there for people of that age, some of whom will have gone through a second redundancy because they had served for only a few years?

Some hon. Members on the Government Benches talk about redundancy benefits as if the average worker who is made redundant leaves with a barrel full of money—tens of thousands of pounds in some cases. For the average person, it is not like that at all. Many people are experiencing their second or even third redundancy since the Government came to power. They have no chance to accrue length of service or job property rights that will allegedly be compensated by the redundancy fund. I hope that the public will not think that, because the House is debating the Redundancy Fund Bill, which seems to be putting more money into the system, those who are made redundant will receive greater benefits. That could not be further from the truth. As my hon. Friend the Member for Penistone (Mr. McKay) said, many of the other benefits have been cut by the Government. They are planning to cut them even further by a Bill that is to come before the House next week.

In the explanatory and financial memorandum the Government state that the only reason why the Bill is needed is that claims on the fund have grown rapidly during the last year and are expected to be high. Did they not know that claims would grow rapidly as a result of the policies that they began in May-June 1979? Was it a surprise that the claims grew to such an extent that we needed the Bill? They knew from Day One what the result of their policies would be. When unemployment rose under the previous Government, the Secretary of State, then in Opposition, had all the answers. He has learnt a few lessons.

The purpose of the massive increase in unemployment under the Government is to solve industrial relations problems. The Secretary of State does not need his Green Papers and Acts. It is ironic that we should be debating this Bill when the tripartite meeting of the mining industry is taking place. Seven years ago tonight we had no lights throughout the country and 3 million people were out of work because a Tory Government could not get their industrial relations policies right. This time they have found a new mechanism—jacking up the level of unemployment as quickly as possible. It is being done deliberately. It does not need legislation. The Government's whole economic policy has brought about the rise in unemployment.

T. D. Cross is not known as a company that pays high wages. I am criticising the company, but I do not believe that it would claim to be a leader in the earnings stakes in North Birmingham. I have never heard any complaint about the company having an unco-operative work force that will not work shifts or is involved in demarcation disputes. Workers are constantly criticised by the Tories and made scapegoats for their economic policies. Most work forces are co-operative. T. D. Cross still has not sold its bicycle components, because bicycle manufacturers are suffering from the recession. One-third of the company's market has been taken by imports. Many of my hon. Friends also complain that firms in their constituencies have to face unfair competition from overseas. The company hoped to solve its problems with the Christmas boom, but the managing director told me this morning that his warehouses are chock-a-block with bicycles. That hope was the reason why the company did not go to short-time working or make redundancies earlier.

The managing director also told me that the redundancies had chopped in half his family's company, which had been operating for a few generations. When redundancies occur, there are normally complaints about custom and practice not being followed, about a lack of consultation and about the wrong people being made redundant. In this firm the redundancies have run throughout the company, including directors and members of the family. Half of a viable company has gone almost without warning. The company was on short time and the statutory notice had been given. The payments in lieu were made, but no notice was worked out. Part of the factory will have to shut and be put into mothballs.

The company has specialist gear-cutting machinery. When the upturn comes, which the Government tell us is round the corner because the recession is bottoming out, many of the partially closed factories will have no equipment left for the re-employed workers to use. The Government are trying to encourage redundant workers to set up on their own with their redundancy pay, but there will not be the equipment for them to buy to do that. It is being snapped up and moved out of the country at great speed. When the upturn comes we shall need to set a new trend in hand-made goods from Britain. The British machine tool industry will not be able to cope.

My hon. Friend the Member for Newcastle-under-Lyme pleaded with the Government to change their policies. I ask them to revert to what was happening when they came to office. That is not being negative. Last week the Prime Minister was asked about new policies for the unemployed and about letting people retire early. She had the gall to say that the Government have a scheme for people to retire early so that someone can be taken off the unemployment register. When the Tories came to power, people nearing retirement could leave work at 62 years of age if someone could be taken off the register. Within weeks of coming to power the Government put the age up to 64. Almost every policy change that they have introduced has made matters worse.

We had almost a mini-debate about whether we should ever get back to full employment. The labour force is growing annually by about 200,000 to 250,000, and that trend will continue for the next four or five years because of the age structure of the population. To stay where we are we have to find that number of additional jobs each year. We need a more radical policy to prevent further inroads being made into the redundancy payments fund, given only that one simple fact.

There is no possibility of merely regenerating manufacturing industry to reduce unemployment substantially. Frankly, it is not the function of manufacturing industry to create jobs. Its function is to create wealth. It is the job of Parliament to ensure that the resources created by that wealth are devoted to providing meaningful employment for all our citizens who want it. The Government must therefore adopt a more radical approach in order to reduce the dole queue and to make it unnecessary to have Redundancy Fund Bills each year.

If, as my hon. Friend the Member for Newcastle-under-Lyme suggested, it means making radical changes at the end of people's working lives, we shall have to do that. If it means introducing a policy of sabbatical periods for all working people so be it. That is not wasted labour. That is building a society that is more alert, compassionate and informed, and not based on the old ethos of clocking on and off every day from the age of 15 to 65 and then retiring. We have to look for far more radical changes than the Government even consider.

Britain cannot opt out of the technological race. It is just not possible to do so. Therefore, we must compete. There is no point in simply hoping that a regeneration of manufacturing industry will solve the problem. We need Labour-intensive public services and a highly labour-intensive construction programme—preferably not motorways, but hospitals, schools and houses. That is not wasted production. It means capital assets for this country which will be used by future generations.

As my hon. Friend said, recent figures which were first handed out in another place and have since been published by the Treasury, show that the cost of unemployment would more than pay for such a public works programme—that is if one takes the full cost of unemployment and not just the cost of unemployment benefits. It is not beyond the bounds of possibility to raise such a radical programme, because the citizens of this country need it. The Government are turning rather more than a blind eye to the present position of the unemployed. The situation is frightening. It is no good the Government telling the House that the Select Committee on Welsh Affairs was scaremongering when it raised the question of what might happen in South Wales, given the increase in unemployment. Since that Committee reported, I believe that five mine closures have been announced in South Wales.

My own constituency is normally very placid. No one could argue that the Birmingham or West Midlands area has a fantastic reputation for sending firebrands to this House, or a reputation such as that of Merseyside or the North of England. But I must tell the Government that the normal, moderate, resilient citizens of Birmingham, because they now see no hope either for themselves or for their children—and that is the factor that has made them change—are telling me in the privacy of my weekly surgeries or in the privacy of correspondence that, if a situation arises in which they have to go beyond the law to protect their families, they will do so. The Government have forced them into that position. It will be no good the Government saying to the police or the Army "Go up there and keep that lot quiet". There will not be enough police or soldiers to maintain public order if the present trends in unemployment are allowed to continue.

Does not the Secretary of State have nightmares about the possibility of 4 million unemployed people in this country with time on their hands, with no hope and with bitterness in their hearts, seeing themselves forever at the bottom of the income heap, while at the same time seeing the good life painted before them? Does he not have nightmares about such a situation arising? If he does not, he should. I hope that the reality will never come to pass. But let him consider just one company in my constituency, which has hardly any manufacturing industry within its boundaries. Having fought for as long as it could, that company has not just announced 10 or 20 redundancies. It has been chopped in half. My constituents employed there will have signed on by now, and they will add to the extra redundancy payments required by the Bill.

Subject to what the Minister says in winding up the debate—and I shall, of course, do him the courtesy of reading his opening speech—I hope to be able to give those people some hope for the future. That remains to be seen. At least I shall give the Minister a fighting chance to give me some hope to take back to my constituents.

7.45 pm

Mr. John Grant (Islington, Central)

It is shameful that the Government have had to come rather wretchedly to the House with this pitiful little Bill. But it is a graphic first-hand example of the grotesque cost to the nation of the misguided, inappropriate and, I think one can say, callous policies that the Government have pursued, are pursuing and—if we are to accept the view of the Prime Minister rather than that of the new Leader of the House—will continue to pursue relentlessly, regardless of the irreparable damage that they are doing to the nation. One may perhaps hope that the Leader of the House will have some mitigating effect in view of his recent remarks. On the other hand, we all know what happened to the former Leader of the House when he ventured to step a little out of line.

Many of my hon. Friends have spoken of the human costs of the Government's policies. All of those human costs are directly related to redundancy or, to put it less politely, "the sack". That is what we are really talking about. We know about the hardship, the strain and the tension caused to whole families and indeed to whole communities. We know of the hopelessness that the search for new jobs involves for sacked workers and for the thousands of young people seeking employment for the first time.

We are talking about a scandal of immense and devastating proportions. On merit, the Bill deserves to be thrown out by the House as a censure upon the Government's performance in just 20 months, during which time they have been exposed completely, for their phoney election bribes and promises, but especially for the indignity and suffering that they have imposed upon more than 1 million people who have been thrown on to the industrial scrapheap in that relatively short time. But we know, too, that within a few months the redundancy scheme would be bankrupt without the assistance offered by the Bill. Clearly we cannot allow that to happen, because that would mean ratting on working people at a time when their need for the fund's resources is growing fast.

It is not unusual for the fund to be in deficit. I certainly recognise, as the Under-Secretary of State said, that it is not simple to forecast the fund's needs very far ahead with any accuracy. The number of people made redundant is the major factor, but it is only one factor. It is hard to predict the age, length of service and take-home pay of those who will become redundant. I therefore accept the inevitable need for some temporary borrowing to cover deficit periods.

The present situation, however, is unprecedented. At the end of the year, the fund was £69 million in surplus, but the pace of unemployment is increasing so rapidly that we know that, without adequate borrowing powers, the fund would be in the red by Easter and that from then on the situation would be one of unmitigated disaster.

It is, of course, possible to alter the situation in another way—the Under-Secretary of State made some reference to this—either by raising the amount financed by employer's national insurance contributions or by reducing the statutory payments made to employees. The House must be told unequivocally tonight—and, with respect to the Under-Secretary of State, his speech was a little less than unequivocal—whether the Bill is only the first instalment; whether the rising number of redundancies will be financed indefinitely by increased borrowing powers of the kind that we are discussing today; whether in due course industry's burden will be increased by higher contributions for employers, with all the additional implications of that, not least for employment itself; or whether, worst of all, redundant workers are to be hit directly by receiving less compensation to ease their hardship while they search, almost inevitably without success in most cases, for other jobs.

The Under-Secretary talked about switching funds from maternity benefit payments—a sort of juggling of the books. We understand that, but he used the phrase "for the time being". He will have to pardon some suspicion on our part. Having asked the House to approve this measure, it will not be good enough for the Government to come along at a later stage with another set of proposals which, if we had them tonight, would probably affect the attitude of hon. Members to this Bill.

We understand from what the Minister said that both higher contributions and lower payments have been rejected so far. But we are not unduly confident that that position will be maintained. We know the Government's attitude towards other benefit levels. We know that they will go ahead with their plan to cut the uprating of social security payments by 1 per cent. That will include unemployment benefit as well as pensions.

Earnings-related benefit was always given priority over redundancy payments by the Conservative Party when in Opposition. The Conservatives used to say that earnings-related benefit was more important. We know that that benefit will be scrapped. They have made a great fuss about that order of priorities. We are entitled to firm assurances tonight, and I hope that when the Secretary of State replies he will go rather further than the Under-Secretary was able to go.

In Opposition, the Conservative Party agreed—I think that there was general agreement on it at the time—that redundancy payments should aid labour mobility. The Prime Minister herself has recently expressed pious hopes about that subject, although we have not heard much about it tonight from Conservative Members. Perhaps they have at last got the message that the jobs are simply no longer there to move to, and that on those rare occasions when they can be found there is usually an acute shortage of places in which to live. Again, that has been acutely intensified as a result of Government policies.

Incidentally, I noticed that when speaking during the statement on coal yesterday the hon. Member for Folkestone and Hythe (Sir A. Costain) suggested that unemployed Kent miners could perhaps be switched to digging the Channel tunnel.

Mr. Cryer

Perhaps my hon. Friend will take note that the miners' militant action is preventing a lot of miners from being unemployed. Clearly the miners have won game, set and match. According to the tapes, the pit closures have been withdrawn and more money is to be provided. Is not the real answer to Bills of this sort that the trade union movement should get organised so that we do not need any of these Bills?

Mr. Grant

I have only just heard the same piece of news, and it is difficult to comment. However, my hon. Friend has made a fair point. If that is the case, it is a remarkable U-turn in a remarkably short time. It seems to illustrate the fact that sometimes a bit of muscle works with a Government who do not seem to have very much respect for those who do not have muscle.

I mentioned the miners and the suggestion of the hon. Member for Folkestone and Hythe that the Kent miners should be switched to digging the Channel tunnel. The thought occurred to me that if we employed all the potentially unemployed miners on digging the tunnel it would probably come out in Casablanca instead of France. That is perhaps one way out. The truth is that the whole idea of labour mobility is now a sick joke. It is noticeable that the Prime Minister has stopped talking about it.

The Government, when in opposition, also talked about coupling redundancy payments with a massive expansion of training. That was the sort of language they used in those days. They talked particularly about adult training. Yet we know that they are currently on course to wreck much of the training in British industry through their employment and training legislation, by scrapping training boards and by undermining industry's training efforts. Redundant workers can expect less help—not more—with training and retraining. It is essential that there should be no move to cut payments to redundant workers. At the very least, such payments should be maintained in real terms.

It is right that we should look at the way in which the fund fits into the overall cost of unemployment. It is hardly surprising that Government borrowing jumped by nearly a half in the last 10 months and that the Chancellor of the Exchequer will be hopelessly above his borrowing limit of £11,500 million for the tax year.

I should like to refer to a few of the key figures relating to unemployment. Notified redundancies of 10 or more employees made to the employment services division of the Manpower Services Commission in 1980 were two-and-a-half times the number in 1979. The rate of notification is still rising rapidly. Wales had the highest rate. It is no small wonder that the Welsh miners have been particularly angry in the present circumstances. The North-West and Scotland were also hard hit. However, we know that the plague of unemployment is spreading everywhere.

The Secretary of State will correct me if any of my figures are wrong. If one calculates the cost of lost taxes, national insurance stoppages, the cost of unemployment and social security benefits, the increased eligibility for rent and rate rebates, and the additional cost of the unemployment benefit and social security offices handling the extra burden, there is no trouble at all in reaching a total bill of £8,500 million. But that is far from all.

On top of that there is the cost of the MSC's extended special programmes. Like my hon. Friend the Member for Newcastle-under-Lyme (Mr. Golding), I do not begrudge any of that money at all. However, like others of my hon. Friends, I well remember that when we introduced those schemes the Opposition sneered about the need to creat real jobs or, as my hon. Friend the Member for Workington (Mr. Campbell-Savours) put it, the need not to creat "non-jobs". The Government have been forced to expand those schemes. They are now spending millions more on them. Despite that, they will be nowhere near to matching the growing demand from Britain's workless.

I want to touch briefly on some of the other things which are not usually thrown into the equation when talking about the cost of unemployment. What about the cost of short-time working? The temporary short-time working compensation scheme will have cost £400 million by the end of this financial year. There is also the enormous amount of tax loss from the vast number of people who are now on short time.

In the week ended 5 May 1979—a reasonably significant political date—32,000 workers were on short time and 414,000 working hours were lost. By mid-February 1980, 119,000 workers were on short time and 1,726,000 hours were lost. The latest available figure from the Department of Employment is for mid-November, which shows that 528,000 workers were on short time and nearly 7,500,000 hours were lost in a week.

We have gone from 414,000 working hours lost to 7,500,000 working hours lost—a staggering increase. I started to calculate it in percentage terms, but thought that it was not worth the bother because it was so huge as to be virtually meaningless. Clearly it has soared since then. I make the cautious estimate that at least another £250 million in tax will be lost this year as a consequence of the increase in short-time working. If the Secretary of State has a more accurate figure, I shall be happy to hear it.

Precisely the same applies to the huge reduction in overtime working. In May 1979, 15,500,000 hours a week were worked. By February 1980, the figure was down to 14,200,000, hours. By mid-November—again the latest figure from the Department—the total was just over 9 million hours. It is still dropping month by month. One can certainly add another £200 million or so in lost taxes.

I do not know whether comparable figures are available for losses in company taxation. I assume that the Treasury must have some figures. Whatever they are, they must add another huge whack to the tax loss to the Exchequer. One does not need to strain very much to see that the total bill to the nation in respect of unemployment and Government-created recession matches, and even outstrips, the borrowing limits which the Chancellor hopefully set for himself.

The Chancellor is probably unique in his ability to talk in his sleep at the Dispatch Box, and probably to turn even a monumental crisis into a bore, but even he should be sufficiently awake to recognise that he is now trapped in a vicious circle of spending cuts, most of which are utterly false economies. He presides over the funeral of large parts of British industry, for which the Prime Minister is the enthusiastic assassin, and the Secretary of State for Employment, who seems unable to show the public courage of his private convictions these days, seems content to send a wreath and a sympathy note. I applaud the stand that the right hon. Gentleman took at the weekend on the closed shop, but he seems to have gone remarkably silent on economic policy. In his speech at the weekend he was beating his breast about the plight of the unemployed, but he shares fully in the collective responsibility for what is happening. I wonder whether anyone can disagree with what was said in the recent editorial in The Sunday Times—perhaps it was just a last pre-Murdoch fling—which said: Britain is experiencing the worst recession of the century". The headline was Wrong Mrs. Thatcher, wrong, wrong, wrong". Everyone knows that the headline was right.

I quote briefly from the TUC's "Plan for Growth" dealing with the causes of unemployment. It says in chapter 2: There is no evidence to show that workers are pricing themselves out of jobs. Research carried out by the TUC shows that the main cause of unemployment is lack of orders and falls in sales (lower demand). The TUC analysed all the reports of redundancies in the Financial Times between October 1 and December 31 last year. It then gives a summary of the result, and continues: The message is crystal clear: the biggest reason for declaring redundancies is low demand in the economy. Little mention of high wages or restrictive practices appeared in the reports during the period coveted. The TUC's survey—based on what industrialists are saying and doing—nails the Government's lie about high wage costs causing unemployment. Every hon. Member who has spoken to employers knows that that is true. We know the grim truth; so do Ministers. It is a question of when the Government will have the guts to do something about it.

Perhaps the Secretary of State now shares the view of the Minister of State, Foreign and Commonwealth Office. Has he been converted to the view that a reserve of unemployed people is not just an inevitable consequence of the Government's policies but is actually desirable? Perhaps the Secretary of State can tell us whether the Minister of State, Foreign and Commonwealth Office cleared his speech with the Secretary of State for Employment, with 10 Downing Street, or with anyone. Surely that is normal Government practice.

My hon. Friend the Member for Ogmore (Mr. Powell) referred to the article in this morning's Daily Mirror about additional pit closures. I do not know whether the Secretary of State can tell us whether there was anything in that story. I assume that he is aware of the situation, because there are obvious important employment implications. Of course, the story has been somewhat overtaken by events. However, the matter is not unimportant, and I hope that my hon. Friend will receive an answer to his question tonight.

My hon. Friend the Member for Bothwell (Mr. Hamilton) raised the question of the great resentment that was caused last night, particularly to Scottish Members, by the attitude taken by the Minister of State, Department of Industry when he nonchalantly brushed aside the loss of nearly 5,000 jobs at Linwood. It is not surprising that my Scottish hon. Friends were incensed by his attitude. Every day there is a new blow on the employment front. Pits, steelworks, car factories and a multitude of small businesses that the Government pledged to protect and encourage are daily savaged. Then the Secretary of State comes to the House and asks us to swallow this kind of measure.

The Government's policy is riddled with contradictions and irreconcilable aims, none more so than when they pour out money on unemployment instead of on jobs. Anyone who is not confused by their policies does not understand what is happening.

I want to put a couple of final points to the Secretary of State. First, I underline the question asked earlier by my right hon. Friend the Member for Chesterfield (Mr. Varley) from the Dispatch Box. The Bill raises the borrowing limit to £300 million—the estimated cost to the fund of statutory payments in 1980–81. I received a reply to my question last week about the estimated cost for 1981–82. The Under-Secretary of State said in that reply that the latest working assumption of the cost would be up to £400 million. I gather that that estimate is the top range figure.

The hon. Gentleman's officials must have estimated the parallel level of unemployment overall related to the potential redundancy payout. What unemployment figure were they using at the maximum for 1981–82? They could not have picked a figure off the top of their heads, much as I respect the imaginative powers of the Department's officials. I hope that the Secretary of State will be able to tell us the unemployment figure that they are expecting during the period.

Secondly, during 1980 the fund paid out £242 million. How much of that sum related to payments where employers were insolvent compared with the previous year? It is right that the House should know the extent to which the fund had to cope with bankruptcy. Managers as well as employees will be interested to know the figure, because it is not only the shop floor that has been hit by redundancy; management, too, has been hit.

I shall quote from a management survey by MSL. The first paragraph reads: Having already sunk to its lowest level for more than 20 years the number of job opportunities for executives in the UK fell still further during the final quarter of 1980. In fact the recruitment of managers as measured by the MSL index has now reached a point more than 9 per cent. below the lowest previously recorded level of 1971, the year in which executive redundancy reached a record peak. So redundancy affects all sides of industry.

I repeat that it is scandalous that the Secretary of State should be obliged to come to the House tonight and seek public sector cushioning of the fund of this magnitude. It is quite without precedent. Before 1965, when the then Labour Government introduced the Redundancy Payments Act, employees with years of loyal service could be thrown out of work without a penny compensation.

That act was the first in a major industrialised country to set up a central fund on a statutory basis to remedy what we all agreed was a long-standing social injustice. The present situation illustrates vividly how crucial that legislation is and will continue to be. Unemployment is at nearly 2½ million and is still increasing. The Government have broken the barrier of 10 per cent. out of work and will very soon break another barrier by increasing unemployment by 100 per cent. since they came to office.

In my own area of Islington we have 11,500 people registered as unemployed—a rise of 49 per cent. in 12 months. Certainly there have been payments there under the redundancy legislation and sadly there will be many more. The Government are simply paying people not to work instead of paying them to work. Even the fall in the rate of inflation and the balance of payments surplus can give no pleasure to anyone. They are further indications of the depth of the recession into which we have sunk.

We shall not oppose the Bill because it is intended to rescue the fund from near bankruptcy. However, we must make it absolutely clear that we see the Bill as one more piece of evidence that the real bankruptcy, both economic and moral, is that of the Government.

8.9 pm

The Secretary of State for Employment (Mr. James Prior)

I am afraid that my voice is not as good as it might be. I hope that I shall be forgiven if I speak rather softly.

The hon. Member for Islington, Central (Mr. Grant) and all those who have taken part in the debate recognise that the Government face a serious problem, which is not confined to this country but is worse in this country than in many others. We on the Government Benches are as aware as Opposition Members of the personal tragedies and the indignities that high unemployment is causing. As the hon. Member for Huddersfield, East (Mr. Sheerman) said, it is not what people want, and I can assure him that it is certainly not what the Government want.

We are presenting the Bill in order to increase the borrowing powers of the redundancy fund so that we may continue to pay out from that fund the proportion of 41 per cent that has been set and that we have not altered, enabling payments to be made on exactly the same basis as before. I assure the hon. Member for Islington, Central that there is no indication that we shall make changes.

The Bill is designed to deal with a deficit which it is expected will be temporary. Over a time it should right itself. This time last year we were building up resources in the redundancy fund, and therefore we changed the percentage. The fund has now been running down rapidly, so we need to enable it to borrow more money in order that the payments from it can be made.

As my hon. Friend the Under-Secretary pointed out in his opening speech, maternity payments are not affected in any way. It is within the Secretary of State's discretion to use the combined fund in any way that he thinks desirable.

The right hon. Member for Chesterfield (Mr. Varley) asked whether I could give an indication of the numbers of unemployed that we were working on, bearing in mind the future demands on the fund. There is no clear link with unemployment, and certainly no clear link with the cost of redundancy.

Generally speaking, we have worked on three possible exercises—an optimistic, a medium and a pessimistic. On the optimistic exercise, by the first quarter of 1982 there would be a balance in the fund of minus £77.6 million. That does not include any further borrowing. On the medium exercise, the figure would be minus £168 million, and at the most pessimistic it could be minus £202.4 million.

That assumes that in the five quarters between 1981 and the first quarter of 1982 the fund's income is £260 million. That is the figure that we are working on. Therefore, we have taken the precaution of saying that we shall borrow £200 million and if necessary return to the House to borrow further money up to £300 million.

The hon. Member for Islington, Central also asked about the payments made under the insolvency provisions of the Act. In 1979 £10 million was paid out, involving 37,000 employees, and in 1980 the figure was £20.1 million, involving 61,000 employees.

I turn to the questions asked by the hon. Member for Workington (Mr. Campbell-Savours). The Financial Times articles to which he referred based their speculation on the fact that a consultative document on payments on termination of employment was issued by the Inland Revenue in August 1979. There were about three articles altogether. They assumed that a decision to legislate to make changes in taxation arrangements had been taken. I assure the hon. Gentleman that the speculation is unfounded. There are no proposals for changing the existing basis of taxation of redundancy benefits.

It is necessary to give 14 days' notice of the intention to seek a payment from the fund. That is not an unreasonable period. It avoids frivolous claims being put in at any time, and it has not caused a great deal of trouble. If an employer does not give the 14 days' notice, the most that can happen is that 10 per cent will be knocked off, but that will happen only if there are exceptional reasons for his not having given a fortnight's notice. In any case, he has a right of appeal to an industrial tribunal if he is dissatisfied with the treatment that he receives.

I shall examine the matter, in the light of the cases that the hon. Gentleman mentioned, and if we find that there is anything further that we can do by publicity and so on to bring the point home to small employers, we shall do it. But I do not think that it is serious matter.

The cost of unemployment was raised by a number of right hon. and hon. Members, including the right hon. Member for Chesterfield and the hon. Members for Bothwell (Mr. Hamilton), for Huddersfield, East, for Newcastle-under-Lyme (Mr. Golding), for Birmingham, Perry Barr (Mr. Rooker), for Islington, Central, and for Keighley (Mr. Cryer). In the latest of the blue documents that it publishes from time to time, the Economic Progress Report for February, the Treasury gives a figure of £340 million for every additional 100,000 unemployed. It states in as clear and analytical language as it can how that figure is made up. It has a number of components, some of which the hon. Member for Islington, Central told us about.

There is a tendency to think that if we merely spent the 340 million we should save 100,000 unemployed. The right hon. Member will know that that is not so. If it were, or if the figure were the £8.2 billion that some hon. Members have mentioned, or any other figure, any Government would spend the money, because in theory there would then be no unemployment. But, as Opposition Members will know from their period in office, it unfortunately does not work like that. If we were to put those 100,000 unemployed back into work, we should not be able to pay them £340 million, even supposing that no goods and services and other factors had to be taken into account in assessing what they were costing. It would be necessary to deduct from the £340 million, or from the £3,400 a year that might be the average payment, the national insurance and taxation involved, or there would be double counting.

As the Labour Government found, as much as we have found, the actual figure that could be paid out would not be £3,400 a year, £70 a week, or whatever, but about £45 a week. As the Labour Government discovered, and as we know, if one tries to pay people £45 a week one destroys the whole basis of a wages structure. The unions would not allow it to happen. Even under the special temporary employment programme, the wages that have to be paid are those paid to similar workers in the district concerned. The payments made under the special temporary employment programme amounted to about £80 in each case; sometimes more, sometimes a little less. Regrettably, it is not simply a matter of saying that the costs of the unemployed could be transferred and that unemployment could be saved by spending more. Nor is it fair to say that one can simply use oil revenues. The revenue that we receive from North Sea oil goes into the Exchequer and is used to finance Government expenditure of various kinds.

The right hon. Member for Chesterfield and others criticised the Government because of the level of public expenditure. The TUC's document on the Budget suggested that we should spend £6,000 million more. Hon. Members have said that we should spend more, use our oil revenues and so on. The right hon. Member for Chesterfield said! that Government borrowing was out of control. He cannot have it both ways. He can either argue that the Government are spending too much—in which case Government borrowing is out of control—or that the Government are not spending enough. He cannot say in one breath that Government borrowing is out of control, and in the next that we should spend more.

Mr. Varley

Perhaps I should explain the position more clearly. I am arguing that Government expenditure is out of control, according to the Government's standards. The Government set a medium-term economic strategy, which is out of control. It is not part of my case to suggest that the Government should increase public expenditure in order to discover how practicable it is to put people into proper jobs.

Mr. Prior

The right hon. Gentleman is right if he is arguing that the Government's public sector borrowing requirement is greater than we estimated in the medium-term financial statement. It is greater for a number of reasons, the chief of which is that it has proved necessary to increase expenditure on the nationalised industries. Increased expenditure has been necessary in a number of areas, such as investment, redundancy payments and, in the case of British Leyland, British shipbuilders and British Steel, to meet losses.

As the right hon. Gentleman said, the public sector borrowing requirement is running at about £11 billion or £12 billion. That is a factor in the high cost of money and in the high level of interest rates. The Government intend to lower interest rates at the earliest possible moment. There seems to be a contradictory thread in the Opposition's argument. One minute they ask us to spend more, without suggesting how that extra money will be paid for in terms of interest rates and so on, and in the next breath they tell us that the Government's public sector borrowing requirement is out of control. I do not accept that argument, any more than I accept the argument that were it possible to reflate on the scale suggested by the Opposition, and were we able to do that, it would necessarily have the impact on employment that both they and we might desire.

The Opposition must know that although the public sector borrowing requirement doubled between 1977 and 1979, the real earnings of those in work increased by 14 per cent. In Britain, unemployment fell from its peak by only 150,000. There is a deep-seated problem. Were reflation an option open to us, it would not reduce unemployment by anything more than a comparatively small margin. That is why we must work to reduce the rate of inflation. That is the best method of ensuring that any future expansion of the economy has a firm base. More than anything else, that will enable us to become competitive once again.

I stress that the problem is not the level of pay but unit labour costs. That is at the root of our problems. I am not trying to read economic lectures to anyone. It is unit labour costs that are at the root of our problems, not just a high exchange rate, though that has had a part to play. Over a period of years we have become less competitive as a nation. The figures are available for everyone to see, and they are undeniable.

The TUC and CBI documents contain tables that were presented at the NEDC meeting the other day. Perhaps we could combine some of those documents and tables. Perhaps, as a nation, we could make a concerted effort to convey the facts—in plain English—behind our poor competitive position. We must get across the message that our unit costs have increased when those of other nations have not. We are quite proud of our rate of inflation. We think that it will help. However, the rate of inflation in Japan and in Germany is about half that in Britain. We are still behind them. Those are the facts that will influence the level of employment or unemployment in the next few years.

Mr. Golding

Can the Secretary of State tell us why the Potteries were so successful before May 1979, with the unit costs that they then had? Why do employers say that Government policies are giving rise to increasing overheads and to a reduction in orders which add to their unit costs. It is the Government's policies that driving up unit costs not increased pay or inefficient management.

Mr. Prior

We could argue about this for a long time. However, those employers who say that the Government are adding to their costs are the very same people who tell me that they increased wages by about 20 per cent. last year. They tell me that they recognise that they could not afford that. I do not have the figures for the Potteries in front of me, but in 1979–80—until the summer of 1980—wage increases were running at 20 to 22 per cent. Some of that was again catching up with the incomes policy of three years of Labour Government which had compressed wages, as we know, and which resulted in the explosion that followed. That is certainly an added problem and an added cost that the country has had to bear.

In addition to that, in the case of a number of industries the dramatic increase in the exchange rate has affected business. I think that that would be true of the Potteries. But what we would, in effect, be saying in countering that is that the only way in which Britain could ever be successful as a nation would be if every year we had a devaluation of our currency. That is what has happened ever since 1972, when we allowed the pound to float downwards. We have made up for our lack of competitiveness and productivity by allowing the pound to float down. This has caught up with us, and with a double vengeance, both because the impact of oil has helped to raise the exchange rate and to give confidence in Britain to people abroad and because we have allowed that situation of uncompetitiveness to be masked for a number of years by a falling exchange rate.

Mr. John Grant rose—

Mr. Prior

I do not want to read economic lectures tonight, but I give way.

Mr. Grant

I am not looking for one, either. The right hon. Gentleman said that many hon. Members had referred to the cost of umemployment, but when he dealt with that he seemed to suggest that there was no link between the cost of unemployment and the public sector borrowing requirement. Is that what he really believes?

Mr. Prior

Of course the level of unemployment affects the PSBR. I have said that the cost of 100,000 unemployed is £340 million. What I have tried to explain—I thought that I had explained it—is that one does not simply solve one's problem by saying "We shall spend that £340 million in extra public expenditure and save 100,000 unemployed." If it were as easy as that the Opposition would have done it when they were in Government, and we would be doing it now.

The Government have to recognise—the Blue Paper to which I have referred makes it abundantly clear—that there is an increased cost to the country of high unemployment. The only mitigating factor that one can mention there is the number of schemes that the Government are running, whether it be this scheme, of having to top up the redundancy fund, or the virtual doubling of the youth opportuunities programme.

We are trying the whole time to get a much greater element of training into the youth opportunities programme than we have done before. I think that there are some grounds for believing that we have been successful in this aim. We are getting more employers to take places under the YOP. It is our objective, over a period, to convert the YOP into a traineeship for every young person who at present does not get any form of training after he leaves school.

As for the job release scheme, I think that hon. Members have glossed over things a bit. We still have a scheme. It is true that we had to put back the age at which it operates to 64—except for disabled people, for whom we kept the age at 60—but I must point out to the Opposition that they reduced the age to 62 only in March 1979 and that the scheme did not operate until May 1979. We had the costs of that scheme, at the 62-age rate, for that year.

Of course, it is a very valuable scheme. When resources are available for the scheme to be improved, I should like the age range to be brought down. This is one of a number of ways in which we can help to get older people who would like to retire early out of the employment market, so that we can, perhaps, employ more younger people. The House has heard me say on other occasions tht we would like to expand this programme as and when an opportunity is available.

The temporary short-time working compensation scheme is now helping 600,000 people. Its cost has risen to about £400 million. It is a further indication of what the Government are seeking to do to mitigate the worst effects of unemployment in every way open to them. Opposition Members try to give the impression that we do not care about unemployment. I would only say that for a Government who do not care about unemployment, according to the Opposition, we are spending vast sums of money in a whole range of directions whether on these schemes, on aid for British Steel, British Shipbuilders, British Leyland, the National Coal Board or others. Many resources are being devoted to British industry to preserve employment. These are difficult days. They would be difficult days for any Government. They are certainly difficult days for anyone who has my position.

I end by saying that we are aware of the shortcomings of the redundancy payments system. We believe that there ought to be opportunities, perhaps, for a further review of the whole system, and that we have to review our whole attitude to unemployment along the lines that my hon. Friend the Member for Rutland and Stamford (Mr. Lewis) and one or two other hon. Members, including the hon. Member for Perry Barr, have suggested. It will, perhaps, be necessary for more radical solutions to be considered and required. The Government do not turn their face against further radical re-examination of our attitudes to unemployment and the schemes through which we seek to deal with it.

For the moment, I believe that the Government are right to seek the further loan to enable the redundancy funds to be continued. I believe that the redundancy payments themselves have an important part to play in helping to ease the problems of unemployment. Nothing that I have said should seek to diminish the view of the Government that only a firmly based economy, a low rate of inflation and a competitive industry will, in the end, produce the real jobs that all hon. Members wish to see.

Question put and agreed to.

Bill accordingly read a Second time.

Bill committed to a Committee of the whole House.—[Mr. Newton.]

Further proceedings postponed, pursuant to order this day.