ECONOMIC SITUATION

HC Deb 23 October 1967 vol 751 cc1258-308

10.11 a.m.

Mr. Jeremy Thorpe (Devon, North)

It is nearly three months since the House had an opportunity of examining the economic situation. Much has happened during that period, and there are many questions which we wish to put to the Government. My colleagues and I therefore felt that it might be valuable if we were to examine the prospects for the coming winter. In this connection I express our gratitude to the Leader of the House for recognising the interests of minorities and thereby making this debate possible.

I am sure that the House wishes to congratulate the hon. Member who, I expect, will reply to the debate and to wish him well in his new office at the D.E.A. But I am sure that the House will be disappointed that the Leader of the Opposition is not able to be with us today, especially after the promise which we had that the Government would be opposed on their economic policies night and day. He appeared on Saturday to receive the euphoric plaudits of his party for saying that he would relentlessly oppose the Government, particularly on their economic policy. He rested appropriately, at sea on Sunday. And he was conspicuous by his absence from the House of Commons on Monday.

For an Opposition which claims to be one of the most dynamic which we have seen for many centuries, it seems strange, if the hon. Member for Moray and Nairn (Mr. G. Campbell) will forgive me for saying so, despite his own merits, that instead of the Tory Front Bench we have the feather duster brigade here. However, if the Tories are to be taken on their own evaluation as an Opposition, it is clear that they would do so much less damage when in Opposition than when in Government that many of us are content to leave them there.

One of the events of the last few weeks and months has been that the Prime Minister has become overlord of the eco- nomy. We do not know whether this betokens a change of policy, but certainly it appears to betoken a lack of enthusiasm on his part in the performance of his colleagues and some lack of confidence in their future capabilities. Perhaps the most eloquent comment on his new appointment is this: As if the economic outlook were not black enough, with all the figures I have given, we have the Prime Minister descending from the misty stratosphere where he has been disporting himself with such singularly little effect and taking charge once again, as he did in 1956, of our economic affairs."—[OFFICIAL REPORT, 7th February 1961; vol. 634, c. 329.] Those are the words of the present Prime Minister criticising Mr. Harold Macmillan for doing precisely what he himself is now doing. Once again we find good Tory precepts adopted to the disadvantage of the country.

There have been more meaningful events in the past few months. There has been the Report of the Common Market Commission. Since we hope that they will accept our late entry form—with a few exceptions whose views I respect but from which I differ—obviously the view which the Commission takes of our economy is of some relevance. In addition, the unemployment figures have reached 560,000, or 2.4 per cent., which is the highest for a similar period for 27 years. We also know that it has been suggested that the unemployment figure could rise to as high as three-quarters of a million if there were a severe winter. We know that the £ has been under pressure for the past six weeks and that the Bank Rate, now at 6 per cent., is above that for all countries in Europe with the exception of Denmark. We know that the trade figures for September, showing a trade gap of £52 million, were the worst since June, 1966, and that the dock strike and the effect which that will have on our export drive means that none of us can look with very great enthusiasm at the October figures. Whatever they may be, I do not think that they can give us cause for much enthusiasm.

One thing which can be said is that in all quarters of the House there is agreement on the economic objectives of the country. Where I think the difference arises is that there is a disagreement on priorities. The objectives are fourfold. The first is to achieve a sufficient balance of payments surplus to repay over three years the £700 million which we owe. The second is a satisfactory growth rate, to restore industrial confidence for investment and expansion and for financing improved social services. The third is for full employment. The fourth is full use of our resources and growth in underdeveloped areas. Although the unemployment figures in some of the worst affected areas have slightly improved, which we welcome, we still have unemployment running at 3.7 per cent. in Scotland and Wales and 7.5 per cent. in Northern Ireland.

If one is taking the question of priorities, the best way to achieve those four-fold objectives is by an export-led expansion in this country. I believe that that is something which we have to achieve, and to achieve very soon.

Has the economic situation changed dramatically since 1964 or are we in very much the same position? I may say, in parenthesis, that the Report of the Commission of the European Community is very long and that it is very dangerous to quote parts of it without taking the whole, but there are one or two general pointers which one can quote. For example, the Report says, Although the British economy has recently emerged from the state of tension in which it found itself from 1963–64 on, its fundamental situation has hardly changed compared with similar phases in its previous evolution. It is perfectly true, if we take the basic balance of payments, in 1964, whatever the Conservative conference may say, that there was a deficit of £716 million. It is perfectly true that in 1966–67 the deficit is of the order of £9 million—a very creditable achievement. But it has been at the cost of stagnation and high unemployment, and to a certain extent through the benefit of the 1966 delayed exports caused through the seamen's strike. It is true that exports have risen from £4,400 million in 1964 to £5,300 million in 196667, but this is in a context in which world exports have been going up, and what is more significant is that Britain's share in 1963–13 per cent.—had dropped to 11 per cent. in 1967.

The most disappointing aspect of the present economic situation has been the low growth rate—3 per cent. in 1964, 2 per cent. in 1965, 1 per cent. in 1966 and a projection of a possible 2 per cent. in 1967 and perhaps 3 per cent. in 1968. With the increased productivity per man. if we are to have full employment in this country and a full use of the resources of the country, we shall need about 4 per cent. to 5 per cent. growth per annum, if we are to achieve all these things. The first question which I want to ask the Government, therefore, is whether they are satisfied with the 3 per cent. growth rate or whether they are now setting their targets higher?

Certainly we shall need a very high growth rate if we are to tackle the poverty which still exists in this country. If any member of the Treasury bench is in any doubt about that, let him look at the excellent article in Tribune on 13th October under the signature of Professor Townsend. That article shows the tremendous challenge in tackling poverty which awaits the Government.

What is the formula for success? It is easy to talk about the need for increased retraining schemes—and I want to say a word about that in a moment—particularly in respect of semi and unskilled workers. It is easy to talk about defence and the £73 million which we have spent abroad on military aircraft and which accounted for part of the £458 million increase in our imports since 1964. It is easy to talk about the prices and incomes policy which, instead of rewarding and encouraging increased productivity, discounts increased production: the taxation system which has partly produced the movement of scientists and engineers out of this country, as evidenced by the Jones Report; and the pricing policy of the nationalised industries by which we find that people will pay an increase of between 1½ per cent. and 16½ per cent. for electricity this winter.

Far more fundamental a subject and one which we must discuss in detail is the role of sterling. This is a question which a Liberal finds almost as difficult to get the House of Commons to discuss today as the question of the Common Market between 1955 and 1961. There are two problems which are separate and distinct. The first is whether sterling at its present valuation is right. The second is the problem of its reserve role in future.

Devaluation—almost a dirty word in this House—on its own achieves very little. It can give a temporary feeling of wellbeing, but it is no good lowering the fence three inches if the horse has not been properly fed in the stable in the first place. That feeling of wellbeing is dissipated if there are not proper tariff cuts and other measures immediately following devaluation.

The European Commission did not and could not advocate devaluation. However, the Commission was clearly worried about the position of sterling on several counts. First, it was not satisfied with the undertaking given by the Prime Minister under Article 108 of the Treaty of Rome; in which he sought to distinguish between internal pressures on sterling from the Community and external pressures. At the time I thought that the right hon. Gentleman's remarks were unrealistic and said so. The Commission also took the view that sterling would be a big problem for the Community and that even if we maintained a growth rate of 3 per cent. between now and 1970 that might overstrain the economy.

The Commission went on to mention sterling holdings and said that they did not represent such a significant percentage of our assets as they did. However, it suggested that this could be a vulnerable aspect of our economy and that they could place a significant strain on the Community. The Commission's Report implied—although I concede that this was not expressly said—that one cause for concern was sterling's present valuation.

The Government would be the first to accept that if sterling is over-valued, or is artificially valued, then nothing could more readily inflate the cost of our exports and damage our growth rate. Indeed, buying time by forward measures, whether through the Bank of England or gold guaranteed loans, will merely place a tighter halter around the necks of future generations. So long as Europe feels that sterling is over-valued, so long will they continue to speculate in sterling and so long will sterling be subjected to pressures.

Many suggestions have been put forward; for example, a floating exchange rate, an idea which has commended itself to the Deputy Leader of the Opposition. I suggest that a floating exchange rate now would mean the £ being lowered in value—and this seems a hole-in-thecorner way of advocating devaluation. Then there is the suggestion which Professor Meade has put forward, of a gradual adjusted rate of, say, 2 per cent. per annum.

If the Government are against any variation in the present exchange rate of sterling—accepting, as they must, the very real fears which our future economic partners in Europe have of sterling—what is their alternative? Next, can we be told the Government's view of the reported remarks of the Chancellor of the Exchequer, which, if correctly reported, are very good news indeed? The right hon. Gentleman said at the recent Conference in Rio—his remarks were reported in Le Monde—that he is prepared to examine the question and that he has no basic objection to the concept of a European reserve currency. On this issue, the Commission said in its report: … no national currency could assume the role of a Community currency. The E.E.C. monetary system should be achieved by progressive co-ordination of the policies of the member-states. The disequilibrium of economy is such as to make it difficult for Britain to shoulder her Community obligations. If we are talking about the continued reserve role of sterling, it becomes all the more important that that sterling is correctly valued in relation to the other European currencies with which we hope it will become part of a European reserve currency. What are the Government's intentions on these two matters, including the issue of sterling's potential reserve future?

To which priorities do the Government attach the greatest importance; the maintenance of sterling, economic growth or full employment? Many of us now believe that the Government are so attached to the sacred cow of sterling that they are allowing it to take priority over full employment and growth and that, in setting these priorities, they are achieving nothing. Sterling continues to be under pressure, there is very little growth, there is stagnation and unemployment is the highest for 27 years. The position of sterling must be discussed by us as responsible Parliamentarians. We must not pretend that the problem does not exist. Our European partners have said that in their view this is one of the biggest obstacles to Britain joining the Community.

Let us also examine incentives. We recall the Prime Minister's speech at Scarborough—and I refer, of course, to the one he made in 1963. The right hon. Gentleman is always more radical in opposition. He said in that speech that it was vital to keep our scientists and technologists at home. How right he was. We now know that in 1966, 4,200 engineers and technologists and 2,000 scientists—which, if The Timeswas right in its assessment, is a figure representing two-fifths of those who graduated three years earlier—left this country. Whatever may be the puritan instincts of the party opposite about taxation, it must realise that unless people are given incentives they will not stay in this country. They will leave for greater opportunities.

This being so, let us consider some of our present taxes. There is no doubt that Selective Employment Tax has been one of the most ludicrous and ill thought-out taxes ever introduced. It is hitting the development areas, many of which rely on service industries such as tourism, which incidentally is our greatest single dollar earner. Other important service industries ancillary to manufacturing industry are being adversely affected and many people have been thrown out of employment without having alternative jobs to take.

We should now be moving towards the concept of an added value tax for industry. This will be a direct incentive to industrialists to lower their overheads and will give a direct incentive to industry generally to boost exports. Such a tax, we are now told, is impracticable, but I have no doubt it will be adopted in five or six years time. We must look at the whole question of annual Budgets —budgets made every 12 months and which merely tinker with the problem. We must have a proper economic strategy for taxation.

The Jones Committee brought out forcefully the feeling of people in Britain that they have little participation and involvement in the professional decisions. This is true be they politics or work.

This is a reason for tackling the whole question of regional development; that is, if people are to have a democratic say in the formulation of society. Participation in industry is vital. We need more works councils in industry. This is not only a question of incentives but of recognising the present lack of involvement, which makes people feel that they may have better opportunities elsewhere.

One of the main indictments of the Government is their failure to organise the labour market. Unemployment stands at 2.7 per cent. and the Prime Minister states that he rejects as an instrument of social policy a permanent pool of unemployment. We should be told just how much this concept represents Government policy, remembering that Sir Leslie O'Brien, Governor of the Bank of England, said in a recent speech: The second way in which wage and price inflation is now approached lies in an acceptance—a courageous acceptance I believe for a Labour Government—that it is impossible to manage a large industrial economy with the very small margin of unused manpower and resources that characterised the British economy in the 1940's and 1950's. We must have a somewhat larger margin of unused capacity than we used to try to keep and this the authorities are now firmly determined to retain. One way and another we have gone rather further than we like for the moment, but we are determined in principle to keep what we regard as a desirable margin of spare capacity and not to let it be eroded by unsustainable booms. Does that mean that the days of relatively full employment of the 'forties and 'fifties are a thing of the past; that to a Labour Government today they are now to be regarded in retrospect as over-full employment, something now unobtainable by the Government? I hope that we shall have a comment from the Minister on that point.

I hope, also, that we shall also hear the Government's prognosis of the likely unemployment figures for the coming winter, and the particular measures they propose to take to keep those figures down to the minimum. I believe that the residue after reflation will be very much greater, largely because of increased productivity from those who are at this moment in employment, largely because greater and greater skills are required of the people in industry today, and largely, also, because our retraining schemes concentrate very much on the skilled to the detriment of the unskilled and the semi-skilled. I therefore think that we are creating what will be a very difficult unemployment problem to resolve even when reflation comes about.

As to retraining, it is perfectly true that the Government have made various grants through the Ministry of Labour such as plant grants for training purposes, weekly training subsidies and free loan of Ministry of Labour instructors to help with the unskilled and the semiskilled but, having said that, I believe that it is appalling that by the end of October we shall have only 38 retraining centres with a capacity of 12,000 people, and that by 1969 we shall have 48 centres with a capacity of 21,000.

When one considers that in France there are some 900 retraining centres and that one-third of all trained workers pass through them, and that in Sweden I per cent. of the labour force is either under training or retraining; and that 1 per cent. of the labour force of this country would be of the order of 240,000, one sees that the retraining facilities here are totally inadequate from the Government, and from a Government whose economic policies have resulted in the unemployment we have today, and who were warned at the time that the retraining facilities were totally inadequate to deal with that increased figure.

I hope that we shall hear something of what the Government intend to do about retraining. The Estimates Committee, in its ninth Report, on Manpower and Training in Industry, put forward some very valuable recommendations and suggestions, and I hope that we shall hear something more about that from the Government. But surely nothing less than 100,000 places a year for retraining will be adequate to deal with the present situation.

The electricity increases, which will hit many people very hard this winter, are all part of the price of not having a national fuel policy. I hope that we shall hear something about that from the Minister, or that, at any rate, he will pass on the message to his colleague, the Minister of Power.

Nor, obviously, can one be happy at the state of industrial relations when one considers the railway strike and the position in the docks. But I would say to the Government that the decasualisation scheme was one which, from what one can see from the outside, deserved to succeed but that what the Government have failed to take into account is that, if we are seeing the recurrence of Ludditism, it is partly because of the fear of unemployment, of the knowledge that if a man is unemployed, his possibility of getting redeployed is very difficult, indeed. We have the case of the B.M.C. workers who were trained for six months to be are welders, only to find out that there was no job for them.

Throughout the whole of our labour force there is a feeling of fear of the figures of unemployment we have at the moment, the effect of the wage freeze on increased productivity and the fact that there are inadequate rewards for it. The Government are themselves partly to blame for the industrial climate which exists at the moment, and they should not underestimate it.

Mr. Eric S. Heifer (Liverpool, Walton)

Is the right hon. Gentleman aware that the Liverpool dockers who are in dispute at the present moment have no objection whatsoever to the modernisation scheme or the decasualisation plan that is now being brought into operation? All they want is the just right to participate in it by having a fair amount of money in return for accepting it. It is not a question of Ludditism at all, and that remark is, in a sense, a slander on the workers who are involved in this dispute.

Mr. Thorpe

I am very grateful to the hon. Member, and I entirely accept his point. I am sure that he would agree with me that this is yet another effect of the wage freeze. This is the part of the atmosphere in which the sort of Fawley-type agreement of a few years ago is now barely possible because of the Government's prices and incomes policy. I entirely take the hon. Gentleman's point, and I am sure that he will agree that this is produced partly by the economic climate which the Government's own wages policy has produced. All I said was—and I do not wish to "slander", to use the hon. Gentleman's word, any group of people in this country —that the unemployment—the "shakeout", to use the Prime Minister's euphemism for unemployment—plus the restrictionist movement on what would otherwise be increased wages to get increased productivity, are all contributing to produce an industrial climate in which we shall not be able to get maximum economic growth.

Will the Government tell us their prognosis for the spring? Are we to see flowers when the spring comes, or are we to find that the earth remains hard and frozen? What do they put forward—if I may now "recap"—as their growth rate? Are they satisfied with the rate of 2 per cent. or 3 per cent. or do they intend to raise their sights to something of the order of 4 per cent. or 5 per cent., which I think we must have if we are to have full employment? What is to be the position of sterling both as a reserve currency and as to its present valuation? What is the Government's view of a European reserve currency? What incentives are to be given—where they are pitifully absent at the moment, if the Jones Committee findings are to be any concern to the Government?

What is their prognosis for unemployment? How high do they think it will rise during the winter months? What have they in mind to step up retraining, which is at present very inadequate and therefore involves a great waste of human resources? In short, can we expect anything more than the timid stop-go policies of Conservatism which we have had from this Government since they were elected in 1964?

Several Hon. Members rose—

Mr. Speaker

Order. This is a short debate, and many hon. Members wish to catch my eye. Mr. Allaun.

10.38 a.m.

Mr. Frank Allaun (Salford, East)

I should like to follow the Leader of the Liberal Party, the right hon. Member for Devon, North (Mr. Thorpe), in speaking about unemployment, but I want to take up one aspect in particular. The Governor of the Bank of England, Sir Leslie O'Brien, speaking to the Anglo-Argentine Chamber of Commerce on 5th October, said that the Government had accepted that there must be a larger margin of unused manpower and resources.

In simple language, in workshop language, that means a larger and permanent pool of unemployed.

Many Labour Members want to know, and are entitled to know, whether Sir Leslie was correctly stating the Government's policy. He either was or he was not. If he was not correct, he is not fit to hold this important position and should be sacked immediately. If, on the other hand, he were telling the truth, the anger of the people would be vented on the heads of the Government. Labour men would demand an immediate jettisoning of this policy.

Sir Leslie was appointed. I understand, by the Chancellor of the Exchequer, and presumably could be fired by him. The question naturally arises: did he consult the Chancellor of the Exchequer before he made this speech? Whether he did or did not, if the Government do not categorically repudiate Sir Leslie, they in turn will be repudiated by the British people, by the people in general and by the Labour and Trade Union Movement in particular. Because by 99 per cent. of the members of that great movement a permanent pool of unemployment is hated by every bit of their beings. This is Conservative, not Labour politics. This shocking policy is so wicked, so intolerable, that it must be immediately repudiated or rejected.

I remember 20 years ago drawing up a leaflet for one of the Labour Parties in Manchester. It bore on it in very large type the words of a former Conservative Member of Parliament, Mr. Higgs, who, speaking in New Zealand, said: The only thing which will make Britons work is to have 11 men for every 10 men's jobs. That kind of statement was the kind of thing which brought the Conservatives down in 1945. To me if there is only one man unemployed there is one man too many. Full employment is the biggest boon the worker knows. It means that a young lad leaving school can choose his career and is not forced into some uncongenial job. It also means—and has meant over the last 20 years, thank goodness—that blind and disabled workers stand a chance of getting jobs. It is not so easy for them today.

I have tried to table Questions on Sir Leslie O'Brien's speech, Questions to the Chancellor and the Prime Minister. I have had to put them in very vague terms, because any reference to that speech has been ruled out of order by the Clerks at the Table. I understand your difficulty, Mr. Speaker, and I am not making any criticism of you, because I am told that there is no Government responsibility for Sir Leslie O'Brien. That is a bit of a joke, a bad joke, too. I wish to pursue the matter now and to ask the Government for a clear reply today. I hope that the House will forgive me for making an exact quotation of Sir Leslie's speech as reported in The Times, as I do not want to be unfair to Sir Leslie. He said even worse things than the Liberal Leader has quoted.

Mr. William Hamilton (Fife, West)

I also have had difficulty in putting down Questions. I think a fairly easy way of doing it would be simply to ask the Chancellor to dismiss Sir Leslie.

Mr. Allaun

I wish that I had been ingenious enough to think of that one. This morning I am asking if Sir Leslie was correctly stating the Government's view. This is what he said, and it is worth listening to carefully because it may or it may not be the truth: The second way in which wage and price inflation is now approached lies in an acceptance—a courageous acceptance, I believe, for a Labour Government—that it is impossible to manage a large industrial economy with a very small margin of unused manpower and resources that characterised the British economy in the 1940s and 1950s. We must have a somewhat larger margin of unused capacity than we used to try to keep and this the authorities are now firmly determined to retain.

Mr. Russell Kerr (Feltham)

Shame.

Mr. Allaun

The next day The Timeseditorial said that Sir Leslie was honestly and accurately reporting the Government's oft declared strategy as set forth in the Chancellor's last Budget. I quote The Timesagain: Between 600,000 and 750,000 total unemployed is what is actually involved in paying our way over the next three to five years. That is a horrifying statement. The next day Sir Leslie flew into London Airport.

When questioned on his speech, he did not deny making the statements I have read. In the interview reported in The Timesand other newspapers, he said: My understanding is that the Government have accepted that we need a rather larger margin of unused manpower and resources. Asked to define full employment, he said: Beveridge thought it was 3 per cent. of unemployed. In the years since the war there has been a very much lower margin. My understanding is that we need a rather larger margin, and if my recollection is correct the Chancellor dealt with this in his speech. Sir Leslie explained to the reporters that his speech, made to British business men 7,000 miles from home, was, to remove from their minds some of the pessimistic and confused notions they may have on a policy which I consider to be successful. If that terrible statement had been made nearer home and earlier in the week and had reached the Labour Party delegates at Scarborough, there would have been an explosion—and rightly so.

On 20th July, 1966, that fateful day in British history, the British Prime Minister said that he thought 2 per cent. unemployment was not unacceptable. Asked by an hon. Member, Did that mean 2 per cent. after redeployment? he said that it did. Half a million unemployed in my view is not acceptable, but now there is a suggestion of something far worse. Two per cent. unemployed means 500,000 out of work. Three per cent. unemployed—the Beveridge figure—means 750,000 signing on.

Quite apart from Sir Leslie's speech, unemployment—including Northern Ireland—has reached nearly 600,000, the highest for this season for 27 years, and it is admitted that it is likely to go higher still. Yet the Government could reduce this figure. There are many ways open to them of relaxing the squeeze. They could reduce hire-purchase deposits on such consumer goods as furniture, T.V. sets, washing machines and motor cars. The recent 5 per cent. reduction in deposits is nowhere near good enough. This would revive employment in these industries. The Government could bring forward higher pensions and family allowances, thus increasing purchasing power. They could reduce Purchase Tax now totalling £600 million a year. They could reduce Bank Rate, instead of increasing it as they did last week, and they could encourage the banks to be more forthcoming in loans to their customers.

Why do they not do this? Because they are frightened that if they did there would be inflation, a worsening in the deficit on our balance of payments and another run on the £. I say that it is possible to have one without the other. It is possible to relax the deflationary measures without a run on the £ if the Government are prepared to make really slashing and immediate reductions in our overseas arms expenditure, which is the main cause of our deficit on the balance of payments. This is the only way they can cut expenditure without hurting working people.

Secondly, they could do what 50 Lamour M.P.s recommended this summer in their pamphlet, "Beyond the Freeze". That is to take over with fair compensation £1,000 million of our £9,000 million overseas capital investments and sell them selectively. This, while no long-term solution, would meet the immediate situation and would end the pressure on our balance of payments and permit a return to the 320,000 unemployed figure we had until 20th July, 1966.

Then there should be selective control of imports. I am not merely referring to such things as one-armed bandits or fruit machines which we are importing from America. There are much more important things. Nearly 40 per cent. of our textiles are imported today. We have lost the world market. We cannot recapture that. But it least we could have the home market. Forty per cent. is being imported from low-wage countries such as Hong Kong and Portugal, where workers are making textiles in return for wages of 10s. and 9s. a day, respectively. We cannot compete with that. That is what is putting thousands of Lancashire operatives out of work at the moment.

Finally, I have said some critical things today about the Government. I may be accused of rocking the boat. I have come to the conclusion that, when one sees the boat heading straight for the rocks, true loyalty lies, not in sitting still and doing nothing, but in trying to regain the true, original, course on which the boat set out. As the late Hugh Dalton said in his autobiography, writing of Ramsay Mac-Donald's days in the 1931 crisis: It would have been far better if we had been more loyal to our principles and less loyal to our leaders.

10.50 a.m.

Mr. Peter Hordern (Horsham)

The House is very grateful to the right hon. Gentleman the Leader of the Liberal Party for introducing this debate on the earliest possible occasion. It is a particularly suitable moment to do so after just three years of government by the Labour Party. That period is long enough for us to be able to make a reasonable assessment of the progress which the Government have made in that time.

The position now is that sterling is at the lowest rate which is tolerable and is being supported by the Bank of England, both at the spot and at the forward rates. The dollar premium is at 30 per cent. This is the amount that people are prepared to pay to invest their money in other countries than our own. The trade figures for September were still bad and an unfavourable balance of £52 million was recorded. We were told that we would have a surplus on our balance of payments last year and again this year. It is now quite clear that we shall not get one. Most of the nation's investment portfolio has been liquidated in order to start to repay a part of our international obligations.

However, even by selling part of our national capital, for that is what it is, the amount that we have available is dwarfed by the size of our international debt, about £500 million to be repaid between 1968 and 1970. This is the plain position as to our external interests and obligations.

As the right hon. Gentleman said, our basic position at home is just as alarming, if not more so, and will extend far beyond the coming winter. Unemployment is at its highest October level since the war. Some 560,000 men and women are unemployed, representing 2.4 per cent of the labour force. It is true that there is an apparent underlying improvement in the latest figures, which we welcome. The fact remains that nobody pretends that unemployment will not rise to between 600.000 and 700,000 during the coming months and might even be more if the winter were to be very severe.

Hon. Members opposite are not too concerned about this. They take the long view. After all, these figures merely show that, so far from threatening the nation with continuing unemployment, by creating the opportunity for a new breakthrough in export production they hold out the surest guarantee we have of full employment for a generation. That is surely what the position is. That is what the Prime Minister said just a year ago on 4th October at the Labour Party conference. I wonder which generation he was referring to. I am sure that those who are now unemployed and those who will become unemployed will draw no great comfort from that statement. They have had the Prime Minister's word for it that he does not believe in regulating demand by a pool of unemployment. We all well remember what the Prime Minister said before he came to power, that the one lesson of the past few years is that sterling will not be made strong by making the economy weak.

Further, we now find that the Prime Minister gets the congratulations of the Governor of the Bank of England for having the courage to reduce demand and create unemployment. The hon. Member for Salford, East (Mr. Frank Allaun) mentioned this. The Prime Minister is said not to be very happy with the Press—it has this inconvenient habit of reporting what he says to different audiences and, worse still, of comparing what he does with what he promises. As the Chancellor of the Exchequer said not so long ago, the Prime Minister is very inventive. That is a Butlerism, if ever there was one. We can be certain that there will always be some piece of bad luck which will explain the continuing poor performance of the economy and why we are always being blown off course.

Curiously enough, it is not the wretched performance of the economy that is so disturbing in the prospects for the coming months and the future, with the level of production now no better than it was at the beginning of 1965. Nor is it necessarily the many mistakes which the Government have made, starting with the import surcharge, going on with the Selective Employment Tax and the humiliating £50 travel allowance. After all, mistakes can always be corrected.

The real cause for concern is the complete collapse of confidence in the Government, both at home and overseas. What is worse is that this is no temporary collapse of confidence, but one which will remain as long as the Government stay in office. This loss of confidence has risen partly because the word of the British Government just is not trusted and partly because the Government themselves have such a transparent distaste for the world of the free enterprise system and the profit motive in which it lives. [Interruption.] I recognise that hon. Members opposite think I am bound to claim that there has been a loss of confidence and that it cannot be established or quantified. But it can. Hon. Members opposite think that confidence is some ephemeral quality.

Mr. Heffer

I believe that the Government have far too much respect for private enterprise.

Mr. Hordern

I know that the hon. Gentleman has his own solution to the economic solution, one which is shared by some of his hon. Friends but, fortunately, not by enough of them. We shall make our own position perfectly clear. It is clear that hon. Members opposite think that confidence is something which occurs just according to the state of business men's livers. The Labour Government started with a very large fund of good will, which it has taken a lot of time and energy to dissipate. Confidence represents nothing more than the considered opinion of business men at home and overseas of the expectation of security and growth, in the form of higher profits, that they may obtain in any one country. It is to be measured by the willingness of foreigners to hold that country's currency and of industrialists to invest in the expectation of profit. It has in that respect virtually nothing whatever to do with the City, which merely provides the mechanism through which this confidence is expressed.

So the flight from the £ that occurred at the end of 1964 arose, as the Prime Minister has said, from confidence factors. It occurred, not because of the size of the deficit, which was well known, but because the Government, for party political purposes, insisted on referring to assets invested overseas in 1964 and amounting to over £400 million as if they were a liability. The Prime Minister was quite happy to boast of our assets when he got to New York, but that only made it worse. The direct cost of that political stunt was £900 million in debt, which we are supposed to repay by 1970.

The Prime Minister often refers to us as selling the country short. It may be a comfort to him to realise that the extent to which he sold our country short can be precisely measured—£900 million. It does not help foreign confidence to see that people in this country are prepared to pay a premium of 30 per cent. to put their money elsewhere, nor that the level of private investment here is due to decrease by about 6 per cent. this year and to remain stagnant at that lower level as well. That is the latest forecast from the C.B.I.

It does not help confidence that the Government are always complaining about their bad luck and never have a word to say about their good fortune. We hear nothing about the favourable turn in the terms of trade to the tune of £255 million, nor of the adventitious flow of capital from the take-over of Rootes by Chryslers' and of Pye by Phillips. Yet it is this favourable change in the trade winds rather than any machinations of the Government which has brought about such improvement as there has been in the balance of payments.

Furthermore, apart from the balance of payments, in the trading account during the last three years performance should clearly have been a great deal better than it has been. I quote from the recent London and Cambridge Bulletin: The movement between 1964 and 1966–67 for U.K. exports must be regarded as one which was achieved under conditions of external growth which were at least as favourable as it was reasonable to expect. The improvement in exports has been smaller than that of any of our major industrial competitors. Whereas the improvement last year for the United Kingdom was 6½ per cent., for Germany the improvement was 14 per cent. and for Japan 16 per cent.

The volume and make-up of our imports in a period of squeeze continue to give cause for concern. Indeed nearly half of the growth of imports consisted of finished manufactures, although those represented only some 11 per cent. in 1964. I seem to remember some remarks about the Edwardian profit motive being displaced by purposive planning, no doubt in the hard core industries—those were happy days!

If the Government do not take account of these factors, that can only mean that they can easily be disappointed by the trade figures in the coming months. There is reason to hope for an improvement in trade with Germany, Italy and France, but there is one cloud looming on the horizon which could easily pose great difficulties for our country and world trade as a whole.

The United States is our most important single national market and now absorbs about 20 per cent. of world exports. For many years the growth of the American economy has been of considerable assistance in boosting world trade, and the success of the Kennedy Round seemed to ensure a further reduction of tariffs as another step in this direction. Recently, however, there has been some discouraging talk from Congress about imposing quotas on textiles, steel and other products. If such quotas were to be imposed, the Kennedy Round would be thrown to the wind.

It is very strange that if the Communist world were to be asked to nominate a way to disrupt world trade and the capitalist system, it would undoubtedly start by getting Congress to impose quotas on imports and the Federal Reserve to raise interest rates. The second of these is already happening through the reluctance of Congress to allow higher taxation. Bank Rate here has already had to be raised to 6 per cent., and if interest rates continue to rise in the United States, they will certainly have to do so here. I sympathise with the Chancellor in this predicament; He has enough problems to contend with without the vagaries of Congress in an election year.

To this disturbing trend must also be added the doubts, now emerging, about our physical capacity to increase exports. The key to increasing exports necessarily lies in investment, but as a proportion of the gross national product private investment lagged well behind our main industrial competitors. In Japan the figure was 22 per cent. while in West Germany it was 25 per cent. and here only 15 per cent.

What is even more striking is the composition of the total investment between the public and private sectors. When we left office, private investment stood at £612 million a year while public investment was running at £456 million a year. The position now is that private investment has declined slightly while public investment has risen by £82 million to £538 million. At this rate public investment will actually exceed private investment in two and a half years. I know that hon. Members opposite see nothing wrong in this, but the plain fact is that we cannot export houses, hospitals and schools and, welcome though this investment is on social grounds, it does practically nothing to help us pay our way in the world.

The Government have done their best to stimulate exports and investment by cajolery and persuasion. We have had the National Plan and its collapse; we have had declarations of intent and productivity conferences. What we have not had and what we shall never get from this Government is the realisation that business men will invest only if they believe that the profit which they will earn, after tax, will make it worth their while to do so. This is supported by a piece in the Daily Mail today in the business section. It is a quotation from that admirable man, Mr. de Vigier, Chairman of Acrow. He was asked to attend a committee inquiring into the alarming rise in imported engineering goods. His reply is a model of what all should say to any Minister on every occasion. 'I do not believe in wasting my time with official committee meetings which seldom result in positive action'. He was then able to point out in precise forms what the Government could do to help. Hon. Members opposite could learn a great deal from that article.

Businessmen see both company and personal taxes up by £1,000 million. They see Government expenditure rising inexorably, with a record borrowing requirement and the certainty of higher taxation to come. They see ever more Government interference in steel, in transport and in the I.R.C. and in the new enabling Bill to allow the Government to intervene in industry. We have the new Secretary of State for Economic Affairs declaring with pride that he is an interventionist, and this from a Cabinet composed of men none of whom has ever had to make a commercial decision in his life and none of whom will ever be asked to do so.

It is no wonder that confidence is at its lowest point and no wonder that the brain drain has become a flood and will continue to increase. One can speak only from one's own observations; I was in the United States in April, looking at some of the technologically advanced companies throughout that continent. In every one there were British scientists and technologists every one of whom said that he wished to return to this country, if only levels of taxation were reduced so that his real prospects could be improved. This observation is confirmed by the Jones Report which said that one-third of the average annual output of engineers and technologists emigrated. Surely there can be no clearer demonstration of the present lack of confidence.

Where do hon. Members opposite stand? Do they want to take a still larger proportion of the gross national product for public expenditure?

Hon. Members

indicated assent.

Mr. Hordern

Of course they do; they are nodding assent. That is where we are divided. We on this side of the House believe in lower taxation for its own sake—because it stimulates saving and productivity and therefore growth. It is from the growth in the economy that we can afford higher social services, and this we proved in office.

We believe in cutting Government expenditure. We should not have had to take on an extra 46,000 civil servants, and we should not even have had a Land Commission or the I.R.C. I do not believe that the Government will introduce selectivity into the social services and I do not believe that those hon. Members now present want them to do so. Nor will the Government undertake a proper reform of the trade unions—I am certain that hon. Members opposite do not want them to do that. We are fully committed to both.

There is no easy, dramatic solution to the Government's predicament, certainly not on the lines suggested by the right hon. Member for Devon, North (Mr. Thorpe)—I am not sure whether he was suggesting devaluation or not. All that can be said is that the despised methods of stop-go have had to be applied in every country and in every case have eventually worked through to the benefit of the balance of payments. Italy, Germany and Japan all provide recent examples of this.

In fact, the prospects for the coming winter are not as bad as was at first feared. The Government have pumped some more money into the economy and have relaxed hire-purchase restrictions. Consumer expenditure has risen and the motor industry seems to be making a partial recovery. But there are no signs yet of a recovery in the capital goods sector—hon. Members should ask the machine tool industry, that vital industry, whether production and exports are to rise over this year. Investment is stagnant and looks as though it will remain so for some time to come. It is stagnant because so many manufacturers cannot see a worth-while profit. Unique among our competitors, our industry is faced with an antipathy towards profits from the Government and it is this attitude more than anything else which guarantees a stagnant economy for as long as the present Government last.

We can be sure of Ministerial exhortations, productivity conferences. The Prime Minister can appear on television every hour on the hour, like some cuckoo out of a clock, but none of that will be any use at all. They just do not live in the world of the free enterprise competitive economy. They have lost the confidence of our creditors overseas, they have lost the confidence of industry at home, they are losing the confidence of the people. To coin a phrase: "Brothers, they're on their way".

11.10 a.m.

The Joint Under-Secretary of State for Economic Affairs (Mr. Alan Williams)

It is appropriate that this morning my maiden speech from this Box should follow on a speech by the right hon. Gentleman the Leader of the Liberal Party, because when I first came to the House my maiden speech as a back bencher followed immediately upon a speech made by his predecessor.

I would, however, hasten to assure my hon. Friends that this is the only way in which I see my political career being in any way tied to the fortunes of the Liberal Party. Before I begin answering some of the points made, I would like to present to the House the apologies of my right hon. Friend the Secretary of State for Economic Affairs who has written to the Leader of the Liberal Party, explaining that he could not be here this morning. I would also like to present the apologies of my right hon. Friend the Chancellor of the Duchy, who at this moment is travelling down by air from the North.

It is indicative, as the Leader of the Liberal Party said, that these are not the only absences—that the new dynamic Leader of the Conservative Party is not with us. Can we really express any surprise at this, since at his conference, far from offering any alternative policy for dealing with the situation in which we find ourselves, he took the line that this was nothing to do with him and that it was not part of his duty to provide an alternative policy.

It is small wonder in view of this attitude that not only his own personal standing but the standing of his party is where it is in public esteem. What we are confronted with is a Conservative Party which sees its future tied, not to its economic policy, not to the quality of its leadership, but to the vagaries of the long-term weather forecast.

As a Government we are particularly grateful for the opportunity to return from Recess and discuss the employment and economic situations. It is virtually three months since we had an opportunity of a reappraisal. It is imperative that what is happening at the moment should be seen within the context of the overall Government approach to economic policy. All manner of solutions have been offered, through newspapers and at meetings. "Instant solutions" are provided to our problems, but most, when they are followed through and explored in greater depth, do not stand up to close analysis. They are all right if one treats the problems individually, but in an interdependent economy, such as ours, such solutions are not capable of solving our overall economic problems.

In this context I was particularly glad to hear the right hon. Gentleman the Leader of the Liberal Party saying that he appreciated that devaluation could be nothing better than a short-term remedy and did not contain any long-term solution. He asked about the Chancellor and his statement at Rio. What the Chancellor said was that he is willing to reexamine the position of sterling given two provisos. They are that the interests of the holders of sterling are safeguarded and that such a re-examination contributes to the solution of the general problem of world currency reserves. We want to find a solution to the general problem of world liquidity and are willing to be flexible in our approach if this would be beneficial.

My hon. Friend the Member for Salford, East (Mr. Frank Allaun) put forward what in essence is the reflation argument. The danger is that reflation of the type which my hon. Friend has put forward is very close to an inflation argument. This is the sort of predicament that any Government is in when it is working within the limitations imposed, (a) by balance of payments and (b) by the structural nature of our economy, which runs us into these periodic inflationary bouts.

If we did what my hon. Friend asks, if we conducted a general form of reflation, whether through the type of policy that he has advocated or through some similar policy, we would probably ease the position this winter, but as surely as we would ease the position this winter we would guarantee that the position would be worse in winters in future.

Hon. Members

No.

Mr. Williams

My hon. Friends say "no", but I will go on to say why. One cannot in one sentence explain a whole speech. The point that I am trying to make is that the situation confronting us now is part of a long-term situation. It is not just a short-term occurrence, but something that has to be seen against long-term strategy. Basically, we are confronted with a long-term malaise and there is no immediate economic wonder drug available to us, such as reflation or devaluation, which will solve the problem.

The basic problem which has faced successive Governments throughout this century has been that in our employment pattern we have a pyramidal structure of employment. There are high peaks of employment in London, the Midlands, and the South-East, peaks where, not only is the employment rate high, but where the activity rate is high too. This is of as great significance as the problem of unemployment and unemployment rate.

At the same time, in our pyramid structure, in the outlying regions there are areas of law activity rates and high unemployment. This was not greatly helped by the 13 years in which the hon. Gentlemen opposite were in office because, far from helping to close the gap that already existed, they widened it by the nature of their policies. The rate of growth of jobs in areas containing development areas such as Scotland, Wales, the West, the North and North-West, was only 6 per cent. during the 13 years compared with 15½ per cent. in other regions. The areas which were already prosperous were proportionately more than increasing their prosperity, while the development areas and outlying areas were still dragging behind.

Mr. Ian MacArthur (Perth and East Perthshire)

The hon. Gentleman has mentioned the growth of new jobs. Would he not bear in mind that during the years of real growth, s1960–64, 157,000 new jobs were created in Scotland, which is very much higher than his own Government's forecast for the equivalent period now?

Mr. Williams

We all understand the stimuli that were operating in that period up to 1964, and we all understand the sort of policy which this would induce in hon. Gentlemen opposite. Indeed, one of the misfortunes is that it was very largely the solution to a political problem that has led us to much of our economic difficulties today.

Against a structure that is so substantially different in the regions and the areas of prosperity, if we had a general reflation, as suggested, there is no doubt that in these prosperous areas the relatively shallow pool of unemployment would very quickly be sucked up and cleared.

An Hon. Member

Good.

Mr. Williams

Of course it is good, but there is no secondary pool available, because of the high activity rate. There is no possible source of would-be workers, such as there are in development areas, who have never in the past had jobs. I am thinking of the Midlands, Mid-Wales, and the North. The activity rates are high, there is no pool to call on and the consequence is that in these areas here is wage competition. Because there is a shortage of workers there is a competition for those available, and because of the competition, wages rise and there is inflationary pressure. A firm cannot fulfil export orders because it is short of workers, and because wages are high there is an increase in imports.

The consequence would be that within these localities there would be no problem of unemployment, but over full employment with inflation getting at the balance of payments situation; so at the same time—this is the paradox of our position—there would be almost over-prosperous conditions in these localities and relatively high unemployment in the outlying regions, because the type of unemployment in the outlying regions is not just created by short-term market conditions, but is contributed to very substantially by structural factors, such as depletion in old industries and modernisation of old basic industries. Consequently, while we were running into overheating in part of the economy, not only would we have not even sucked up the whole pool of unemployment but we would have made no impact on the secondary pool—the people who have never worked in the past, the people whose presence is revealed not in unemployment figures but in the low activity rate figures for areas like the South-West, Wales and Scotland.

Mr. Hordern

The hon. Gentleman has criticised the growth of the development areas during our 13 years in office. Would he say what growth is now proceeding in the development areas?

Mr. Williams

I shall come to that in a moment. I shall be moving to the positive side of the argument later.

The outcome of such a policy as advocated by my hon. Friend the Member for Salford, East and by many other people would be that the areas which are least in need, with the lowest level of unemployment, would get most benefit, while the outlying regions which are most in need—Wales, the South-West, Scotland and the North—and want most help in employment would get the least benefit and would soon, as a result of the inflation in the big industrial complexes, be condemned to another wave of unemployment as remedial measures would have to be taken to deal with the balance of payments situation.

It is not that the points made by my hon. Friend the Member for Salford, East have not been considered; they have. But for these reasons we think that the solutions to our problems must be more profound in terms of policy and more selective in the areas of impact. My hon. Friend's solution was global. We must try to get the jobs where pools of labour exist. Inevitably, they must, by the nature of the long term situation, be long term solutions.

Our approach is to have a policy not of general reflation but of regional reflation. If we reflate in areas in which there is basic unemployment, we may get rid of the deflationary unemployment, but we shall still be left with the hard core unemployment. Our policy is to achieve regional reflation coupled with an industrial and economic policy of regional regeneration. I am sure that members of the Liberal Party who represent such areas will realise the importance of this distinction.

Mr. John Biffen (Oswestry)

Before the hon. Gentleman leaves the speech of the hon. Member for Salford, East (Mr. Frank Allaun) and moves to what he calls the positive side of his argument, would he recall that the hon. Member for Salford, East spent a great deal of time in discussing the speech of Sir Leslie O'Brien? Would the hon. Gentleman take the opportunity to assert that the Government stand by that speech and have no intention of sacking Sir Leslie O'Brien?

Mr. Williams

Both the hon. Gentleman and my hon. Friend the Member for Salford, East will be satisfied a little later in my speech. If the hon. Gentleman had preserved patience a little longer, both hon. Members might have been satisfied—or, at least, they might have been answered, if not satisfied. I realise that there is a distinction between the two.

I deal now with the points about a larger pool of unemployment. The Government's point is that during this phase of re-expansion of the economy we must hold back on overheating in areas like the Midlands, London and the South-East. As a long-term policy, we have accepted, as I think all hon. Members have accepted, the need for redeployment. We have been asked whether the figure of 2 per cent. accepted by the Prime Minister is before or after redeployment. This misunderstands the nature of redeployment. Redeployment is not a once-for-all thing. We are going through a phase in which we are having to shed a lot of surplus fat in some areas of the economy. There is an initial major problem of redeployment which was never tackled by hon. Members opposite. The problem of redeployment in a volatile, technologically evolving community will obviously be permanent. We do not have redeployment once and for all. We must continuously redeploy from old industries into new industries.

It is in this sense that we say that there may be a larger short-term pool of people moving from job to job. This is inevitable in the type of economy which we are developing. As long as it is short-term—and I mean very short-time —the period of transition has been provided for. That was the thesis behind the policies, which hon. Members supported, for wage-related unemployment benefits and redundancy payments.

Mr. Frank Allaun

Would my hon. Friend repeat that it is the policy to have 2 per cent. unemployment—500,000 out of work—for a long period? That is what he has just said.

Mr. Williams

No, I did not say that. I referred to comments made by the Prime Minister and tried to explain the background against which this problem had to be judged. My point is that in a more dynamic economy, whichever party is in power, there will be more movement of labour between industries and job. Therefore, there will inevitably also be an increase in short-term unemployment. I do not think that there is anything basically unsocialistic about this. If hon. Members say that they resist this, then they are saying that they resist the whole process of modernisation of the economy. [HON. MEMBERS: "No."] Hon. Members have asked me to deal with the point. I pointed out that I would be giving an answer. I also said that I did not anticipate that it would necessarily satisfy all my hon. Friends.

The Government have already taken many steps towards achieving this objective. At present, we are spending approximately £190 million a year on selective aid to the development areas to help to build up employment in the areas which are desperately in need. The first step was to widen the development areas because of the obvious inadequacy of the former areas shown by the results while hon. Members opposite were in office. But, having created the wider areas, our next job was not merely to provide inducements for capital intensive industry. The capital inducements have tended to bring big new projects to the development areas, but a small amount of employment. Therefore, we felt it imperative to encourage not only the new technologically advanced industries but the labour-intensive industries.

It was for that reason that we supplemented our longer standing investment grants and building grants, which are very much biased in favour of the development areas, with the regional employment premium. One hon. Member referred to the figure of £190 million. The regional employment premium, which starts this month, will represent £100 million of that, which will be distributed in this way. Scotland will receive approximately £40 million; Wales £12 million; the North £28 million; the North-West £18 million. Manufacturers in these areas will receive a rebate of 30s. per man and 15s. per woman employed in manufacturing. In addition, we have moved in our advance factories, and we have had stricter I.D.C. control for these areas. A fact conveniently overlooked by the hon. Member for Moray and Nairn (Mr. G. Campbell) when talking about Government policy was that in the last four years when his party was in office, Scotland and Wales received only 26 per cent. of all I.D.C. approvals whereas in 1965 and 1966 they received 34 per cent.

The Leader of the Liberal Party spoke of the need for retraining. We agree that there is an overwhelming need for retraining if we are to have redeployment and the short-term movement of labour. There must be facilities to equip the labour to get the new jobs and to meet the needs of the new emerging industries. For this reason we have doubled the throughput of the G.T.C.s—and we recognise that that is not enough. One cannot institutionally solve such a problem overnight. Consequently, we have supplemented it with the doubling of training grants in the development areas to encourage training within industry. When I was in Scotland with the Prime Minister last week I saw an interesting experiment in the pooling of training facilities by several firms. It was most enterprising and most encouraging in its potential for other areas. That would be outside the normal G.T.C. structure. We must, therefore, be careful not to judge facilities for training purely by the numbers going through the G.T.C.s, otherwise we can be misled. It may not even be the most efficient way of reaching the targets.

In addition to the overall measures, we have taken certain measures intended to have an impact this winter. But at all times we have to bear in mind that in introducing policies for the winter we must not imperil the long-term situation or force ourselves back into facing the same problem again in another winter or another two winters.

In addition to the general measures which I have mentioned, we have approved an increase in public works schemes—a mini-works scheme, as it has been called—to improve the infrastructure of the economy, worth £20 million. This will provide jobs, but, more important, it will begin to provide certain necessary minor improvements. My hon. Friend the Member for Ebbw Vale (Mr. Michael Foot) knows the problems of many of the Welsh valleys. They need, if not motorways, improvements in bottlenecks which would be of great assistance in improving the accessibility of the area to manufacturers and employers. This mini-works scheme is intended to do that, and in the process it will also supply some jobs.

We have deferred pit closures which were due to take place for the last quarter of the year and we have also made the point that that is not necessarily only a one-quarter reprieve. The N.C.B. is to have discussions—Lord Robens is having discussions—with the chairmen of the regional councils to see what is needed for the following quarter and what will he the long-term impact of the closures. My hon. Friend the Member for Salford, East will also observe that the improved National Insurance benefits will come into effect at the end of the month. He mentioned this point.

The overall effect of those policies—long-term but not necessarily short-term —will be to bring new industry to the development areas and, equally important, to keep the industry already there. It is against that background that R.E.P. should be seen this winter. I do not suggest that it will lead to an immediate influx of new jobs in a matter of months. Business investment does not take place as quickly as that. But business disinvestment can take place very quickly, and many of the problems of the outlying areas arise from the collapse of firms already there. In the Rhondda about 25 per cent. of the present unemployment has resulted from the collapse of a few firms within the last two years. We believe that it is every bit as important to keep the jobs that are there as to bring in new jobs, because every factory that closes means that one extra factory must be provided.

Mr. Gordon Campbell (Moray and Nairn)

The hon. Member pointed out that R.E.P. is for the benefit of the manufacturing industries. What will the non-manufacturing industries in the areas receive except the Selective Employment Tax?

Mr. Williams

Our belief is that R.E.P. will work by enabling firms which receive it to meet competition. It is not intended to be a direct subsidy for the manufacturer to put in his pocket to bolster his profits. It is intended to improve his competitive position vis-à-vis firms outside the development area so that he can hold his share of the market or obtain a bigger share. This situation in general does not apply to service industries. The argument that competition has to be met from outside the development area applies to manufacturing industries but not in general to service industries. This is one reason why it is felt that R.E.P. would not be appropriate to meet that need. I do not think that it would improve the overall efficiency of the area.

I have spoken for longer than I intended, but I have given way several times and have attempted to meet several of the points raised by hon. Members. For that reason my speech has been even more disjointed than my speeches nor- mally are. But I should like to deal with the signs of success of our policy. Some hon. Members have asked whether there have been any such signs. The hon. Member for Horsham (Mr. Hordern) had doubts about it, although he admitted that there was a certain upturn in the employment position. I am told that the only tears ever shed by the Tories over the unemployed were shed by them last Thursday when they saw that the basic position had improved.

Mr. Hordern

All I said was that there was a favourable underlying trend in the unemployment figures. But the figures are still the worst since the war, and that is the kind of argument which the hon. Member and the Government must meet.

Mr. Williams

The hon. Member still admits that there has been some improvement in the underlying trend, which is the point which I wish to establish. Individual indicators of improvement obviously cannot mean too much. Movements in statistics are too fine to be individually significant. But if, taken together, these indicators suggest an improvement, then we have something of much greater significance. In the unemployment figures there was an overall change in the basic position of a fall of 22,000, but equally, at the same time, there was an improvement, seasonally adjusted, in vacancies of 11,000. There seems to be a certain easing. No one pretends that this will make a tremendous inroad into the present level of unemployment but the important point is that the underlying trend is not only for a pause but for a turn.

This is supplemented by earlier signs. Hon. Members referred to investment and production. The second quarter showed a slight improvement in the index of industrial production on the first quarter and the last three months show a slight improvement on the previous three months. These are small movements, but they are movements in the right direction and they are consistent with the movements which we are seeing in employment. In the three months up to August, retail sales showed an increase of 1 per cent., which will probably be accelerated as a result of the casing of hire-purchase restrictions.

We all know how important the car industry is to the economy, and not just to certain localities, and car sales have shown a sharp increase through new registrations in August. Hire-purchase contracts were up by 36 per cent. in the three months to September. According to reports—although I have no official statement—the car industry is extremely happy with the position as a result of the early days of the Motor Show. It seems probable that the car industry may again be one of the leaders to an industrial acceleration in our activity in this country.

House building is also showing a firm upward trend. In many parts of the country it is at peak production. When I was in the North of Scotland with the Prime Minister, I was told that certain localities could not place extra load on the construction industry at the moment because it is working at peak capacity. That does not alter the fact that there are other areas where this does not apply. It is a patchy situation. Nevertheless, the situation in house building and in construction is again promising and moving in the appropriate direction.

Investment is also showing a similar characteristic. The Board of Trade investment intentions survey which came out last week—on 18th October—shows that the rate of investment is higher than anticipated and is expected to improve further next year. If businessmen intend undertaking this investment it would appear that there is a greater optimism amongst business men than perhaps the hon. Gentleman may like to admit.

So on the evidence of all these various statistics it would seem that we are moving into a phase of industrial expansion and we are moving into it perhaps in a state of greater fitness because of the greater advance we as a nation have made in productivity. It is significant that output per man hour since 1965 has risen by 7 per cent. in this country, compared with only 3 per cent. for the comparable period 1960–63. It means that our industry is more efficient; it means it is more competitive vis-à-vis those abroad.

Mr. Norman Atkinson (Tottenham)

It is transparent hypocrisy to use these figures of investment increases as increases in productivity, as though level of general efficiency has been increasing. It is absolute nonsense that we should try to show that because we have fewer people working in service industries the overall average of productivity has gone up. Because we have taken out those people from service industries does not mean productivity has increased.

Mr. Williams

It was of manufacturing industry I was speaking. This increase of 7 per cent. is in the manufacturing sector. I was excluding the service sector for this very reason that it was open to this criticism. The increase of output per man hour in manufacturing has gone up 7 per cent. since 1965, compared with 3 per cent. in the earlier period.—[Interruption.]—It is not a good thing for hon. Gentlemen always to underestimate the importance of improvements which have been made. I can understand their being cynical about one or two statistics, but when we have an improvement in the economic position it is just as well for us to recognise it.

As a result of these improvements in productivity, as a result of such things as the prices and incomes policy in holding the cost of living more steady, we improve the long-term competitive power, we improve our position vis-à-vis our competitors.

To deal with a point of detail, the hon. Gentleman touched on the balance of payments. As was rightly said, the balance of payments situation at the moment is perhaps less happy than it appeared in the first half of the year.

Mr. Frank Allaun

I remind my hon. Friend about Sir Leslie O'Brien.

Mr. Williams

In the first part of the year we had reached a situation where as a nation we were paying our way. However, in the field of international trade there are some imponderables which are not within the control of the Government and the picture of the next few months depends on factors not within our control. It depends, for instance, partially on Suez, when it is decided that Suez will be reopened again. Remember, the cost in balance of payments terms of the closure of Suez is £20 million a month. That alone is significant. That is a position not within the control of this Government but which has an impact on the ability of the Government to manœuvre economically. In the same way the general level of world trade depends on what happens in governmental decisions not here at Westminster but in Germany and in the United States and what is happening in their trade position.

However, the indications at present would seem to be that the world trade position should continue improving during the next 12 months, and—the hon. Gentleman referred to next spring—the prospects are certainly better for next spring.

There are other imponderables, such things as strikes in the export industries. I am sure that the dockers, just as much as we, dislike the fact that industrial action which they may feel they have to take will have an impact on our trade position. Nevertheless, it does have that impact, and we have to take that into account, and as something not within the control of this Government.

I know that the Leader of the Opposition has waxed eloquent about trade union reform. I seem to recollect that he himself was at one stage Minister of Labour, round about 1959, and I seem to recollect that when he was a Minister the number of hours lost through strikes was double the number lost in the first three years of the Labour Government, and if there was a time when he thought action was necessary it was in his period of office, not ours.

It is economically dangerous in the short term to make any major change in policy because all the things that people have been asked to make sacrifices for and to work for could be endangered if we ran into another period of inflation during the winter as a result of a panic decision to meet a short-term situation. For this reason we as a Government have said we intend to fulfil our pledge to achieve the long-term objectives and the first long-term industrial objective is continual growth, and it is from this policy we refuse to be diverted.

11.46 a.m.

Mr. John Tilney (Liverpool, Wavertree)

I am glad to follow the hon. Gentleman the Member for Swansea, West (Mr. Alan Williams). I am sorry that he rose so early, because there is a number of questions I wanted to put to him and which I hoped he would answer openly in public. I had a little difficulty in hearing what he said because often his back was turned to you, Mr. Deputy Speaker, and he seemed to be more determined to address the opposition in his own party than to address the Opposition benches.

I was going to congratulate him on his new job and to say I wish him well. Despite what he said about the Leader of the Conservative Party, I still do so, because I think he will stand as a monument of misstatement, and the country will judge—it will have a chance of judging in a number of places quite soon.

The hon. Gentleman, and the Leader of the Liberal Party, whom I congratulate on bringing forward this debate and on many of the comments he made, had the effrontery to state that the Conservatives would do less damage in Opposition than in Government. I wonder how many of the unemployed in North Devon, Salford, in Manchester, in Gorton particularly—and there are a great many of them—will agree. They will soon judge. The House enjoys the quips of the Leader of the Liberal Party, but I would suggest that he is much better when he lets go his Jeremiads and concentrates a bit more on the new Jerusalem.

With some of the points he made today anyone who is against Socialism would agree. The Socialist policies and maladministration of the Government over the last three years have brought the economy to its present state. The lack of confidence which industry has in good government in large measure has produced the unemployment which we see today. If the hon. Members for Salford, East (Mr. Frank Allaun) and Liverpool, Walton (Mr. Heffer) have their way, that confidence will diminish still further. Because of that lack of confidence, we have less investment, and it is on investments that the country's economy expands.

I regret that the two opposition parties are bickering between themselves, rather than concentrating upon the attack on Socialism. Above all, it is Socialist policies which are bringing this country to near economic ruin, since we depend entirely on exports from private enterprise.

The right hon. Member for Devon, North (Mr. Thorpe) referred to devaluation. However, that could only be a very short-term remedy at the expense of all those who live on small fixed incomes. What we must see is a cut in Government expenditure and an increase in incentives, and we have said at our party conference that we intend to do away with the absurd Selective Employment Tax.

The Minister referred to the premiums which will be given to manufacturing industries in the development areas. Some of those industries are engaged in processing expensive imported raw materials, yet those who are engaged in dealing with exports and in servicing those exports pay Selective Employment Tax and receive no benefit from R.E.P.

I wish to refer to something which is much more deep in the heart of Lancashire. I have the privilege of representing part of Liverpool, which is often regarded as a city on its own, and not as part of Lancashire. Liverpool is a development area, whereas Lancashire as a whole is not. However much better the long-term future of Merseyside may be—and I believe that it is better, thanks to the great Ford factory which was brought in by the Conservatives—

Mr. Heifer

And thanks to the policy of the Labour Council.

Mr. Tilney

It was the policy of the Conservative Administration which denied the expansion of Fords in the South-East and brought it to Merseyside. Once the present damaging dock strike can be ended, I believe that the future for Merseyside is bright.

Whatever happens in the long term in Lancashire, even as far away as the North-East, affects the well-being of Liverpool. I am a great believer in regional development, and I want to see a devolution of power to the regions. Too much of Britain's local government is balkanised and looks weakly and in vain to the centre at Whitehall. Lancashire often is not sufficiently interested in contiguous areas where there are different trades.

Talk of cotton in Liverpool is muted today compared with before the war, yet the decline of the textile industry affects the trade figures of Merseyside. What is the Government's policy on the textile trade? The Minister referred to regional regeneration, but those of us who remember clothes rationing thought that at least our minimum clothing requirements would be manufactured in this country, whatever else happened. However, I understand that 50 per cent. of the home market is now covered by imports. In the case of sheetings, the figure is 60 per cent. Perhaps the Minister can confirm that. Surely it is too great. What is the Minister's policy on anti-dumping procedures? I am told that many of them are not effective, and that it is difficult to get the burden of proof.

The effects on Lancashire of the squeeze, of the panic measures taken in July of last year, and even of the miniskirt, are considerable. Do the Government consider that the global quotas are too high? Has there not been a miscalculation? Under their plan, the Government expected the economy to expand, whereas it has been stagnant. What is the policy of the Government after 1970, and how can the Minister expect industry in Lancashire to plan ahead and instal machinery when they do not know what is to happen after 1970?

Writing to my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd), the President of the Board of Trade said recently: This limitation will last until the end of 1970 and it provides the industry with information of the maximum competition they may have to face from these countries. … I accept that the permitted level, which would have been tolerable in normal trading conditions, seems intolerable to the industry when times are as difficult as they have been over the last 12 months. But the difficulty which we had in inducing exporting countries to accept these limits without retaliating on our own export trade was so great that I see no prospect of securing any kind of international agreement to a further cut in our cotton textile imports. That is a long way from the Labour Party's promises of the 1966 General Election.

The Conservative Government put £30 million into the textile industry. Now, because of the policy of the present Government, some of the re-equipped mills are closing down.

The main point which I wish to stress is the great differences between the treatment of the development area and new towns and that of other areas of Lancashire, particularly the north-east. Those differences are too sharp. I have already referred to the premium which will be paid in respect of employees in manufacturing. Those will accentuate the differences between the "black" areas, the development areas, and the "grey" areas which are now becoming blacker.

Can the Minister say how the statistics of unemployment are calculated? Am I right in saying that married women who are unemployed and not covered by insurance are not in those statistics? Do they take account of the great migration which there has been from some of the towns in Lancashire? I accept that development projects must be steered away from the Midlands and the South-East to areas of surplus resources. However, in Lancashire, there are formed communities with churches, schools, and social conditions which have a special character, not only in terms of skilled operatives but in many others. Those areas are slowly bleeding to death, and London does not seem to care. The textile workers are worried, as are the footwear employees. What does the Minister intend to do about it—[Interruption.] Instead of just talking to his neighbour on the Front Bench, perhaps he will listen to what I have to say.

It is said that communications are bad in parts of Lancashire. What is the Minister doing about that problem, especially when the pull of the development areas and new towns will be greater in the future as a result of the regional employment premiums?

In regions such as that which I have been discussing, the differentials are too sharp between the development areas and the rest. We cannot wait for the Hunt Committee. Will not the Government say something to bring back confidence and, as a result, bring in investment to the whole of Lancashire?

12 noon.

Mr. James Dickens (Lewisham, West)

I have only a short time in which to speak this morning before the hon. Member for Colne Valley (Mr. Richard Wainwright) winds up this interesting debate, but I begin by saying that it is entirely appropriate that, on its return from the Summer Recess, the House should, at. once turn its attention to the ecenomy and the plight of the unemployed.

In his opening speech the right hon. Member for Devon, North (Mr. Thorpe) made a number of points with which I agreed. It was a stimulating speech. In his maiden speech from the Dispatch Box my hon. Friend the Member for Swansea, West (Mr. Alan Williams) made a contribution which I think brings out very clearly the difficulties which an able and conscientious junior Minister faces when he is given a hopeless brief to deliver, for the Government's policy is not only profoundly unsatisfactory to many of us on this side of the House, but is one which, in many respects, is becoming almost indefensible.

There are, I think, two important points which one must make, however briefly. First, since 1964 the Government's attitude has been to try to maintain this country's position as a great international banking and military Power. Over the past three years the Government have tried to do this against a background of certain basic electoral commitments. These included the maintenance of full employment and economic expansion. When it has come to the crunch over the past three years we have seen that they have jettisoned the concept of full employment and rapid economic growth which we had before 1964. They have done this in deference to the maintenance of the rôle of the £ sterling at its present parity, as an international reserve currency, and because of this country's imperial position as a world military Power.

The policy which the Government have been pursuing must be reversed because during the last three years they have, on successive occasions, in 1964, in 1965, and latterly in 1966, been forced to adopt what can only be described as the traditional Tory methods of deflation. I know that the Government have introduced a number of modest social and industrial reforms, and a few important ones, too, but the fact is that on central economic strategy the Government's policy and that of the Tory Opposition are almost identical.

Secondly, what can we do about the present situation? This morning my hon. Friend the Member for Salford, East (Mr. Frank Allaun) set out a constructive alternative policy which commands a wide and growing measure of support on this side of the House and throughout the country. It will not do for my hon. Friend the Joint Parliamentary Secretary—or any other Minister on the Treasury Bench—simply to say, "When you think about my hon. Friend's arguments you will see that there is nothing in them". This is not the case. Our position is not only well thought out, but is one which, as part of a comprehensive package of alternative methods of dealing with the situation, provides the only constructive policy which will save this Government over the next three years.

When I contrast the rag bag of gimmicks brought out by the Chancellor at Scarborough with the alternatives which my hon. Friend has been arguing this morning and in earlier debates, there is no doubt that our policy is profound and important. Indeed, when we hear the Chancellor dismissing all our policies as a succession of gimmicks, and when we hear the former Chancellor of the Exchequer the right hon. Member for Barnet (Mr. Maudling) describe them as hare-brained, as he did recently in The Times, we can be confident that our policies are about right.

What are these policies? First, we must take immediate steps to realise a section of our overseas portfolio investments, not for the purpose of adding these to our resources, but to use the money to pay off the £642 million that we owe to the International Monetary Fund and the Swiss central bankers and to buy back some of the more speculative sterling balances. We must realise these investments so that we have freedom to plan our economy without advice from the I.M.F. The advice which we receive from this organisation and from all other banking institutions at home and abroad has been shown, when measured against the harsh test of economic reality, to be unsound. Fair compensation to existing holders would, of course, be paid in non-convertible sterling bonds.

Secondly, we must stop the outflow of private capital to countries abroad. The Chancellor has taken certain steps to do this but there is a long way to go. If, for the last three years, we were to add the net outflow of capital to our military expenditure overseas, we would find that they more than account for the total deficit on the balance of payments.

Under the present Government the net outflow of private capital has risen during the last few years. What is most significant, though, is that the money has gone mainly to developed and not to developing countries. The Board of Trade Journal for 30th June last contains a comprehensive analysis of British overseas investment policy. The first conclusion to be drawn from this document is that under this Government private direct investment has risen from £116 million in the alleged crisis year of 1964 to £135 million in 1966. This excludes unremitted profits. One sees that a feature of this investment was a resumption of the rising trend of investment in South Africa which, as in each of the previous three years, was second in amount only to Australia. One sees, too, that the outflow in 1963–65 was two and a half times that of the previous three years. Why, it may be asked, should a Labour Government and a Socialist Chancellor allow private direct investment from this country to build up a Fascist, racialist economy in South Africa at the expense, in part at least, of full employment and economic growth at home?

Thirdly, import quotas should be introduced to cover the growing imports of manufactured and semi-manufactured goods. A 10 per cent. cut would save £250 million.

Finally, there is the problem of military expenditure overseas. Something has been done to ease the situation, but we must do very much more. We must ensure that by 1970 the level of our defence spending is reduced to 4 per cent. of the gross national product, a figure comparable to that of our trade rivals in the European Economic Community.

Those are the four things which must be done. First, we must liquidate some of our overseas portfolio investments. Secondly, we must take further steps to restrict the outflow of capital and confine it to developing countries and the investment of unremitted profits elsewhere. This would save £150 million per annum, and we must pursue this policy until the level of new capital formation in this country has reached that of France and Germany, namely, about 25 per cent. of the gross national product, over a five-year period. Thirdly, the introduction of import quotas, and, finally, cutting our overseas military expenditure.

All those fit into a pattern, but there are two further points to be considered. First, we must establish a National Investment Board to redirect our overseas investment, to build up investment at home in the regions and generally. Secondly, all this must be done under a new National Plan. I am told that a new National Plan will not be introduced in the foreseeable future. The Times said recently that the Government had now decided not to introduce a White Paper about the revised National Plan for the five years to 1972. This is very unsatisfactory.

What I have said sets out in general terms a broad alternative policy which commands the support of at least 70 of my hon. Friends. It commands a wide and increasing measure of support throughout the country, and I put it to my hon. Friend in the friendliest possible way that if the Government do not show a willingness to move towards our position in the near future, they will meet with justifiably deep and increasing hostility from the benches behind them.

12.10 p.m.

Mr. Richard Wainwright (Colne Valley)

Comment has already been made by hon. Members in other parts of the House at the fact that the Government spokesman felt that he must rise so early that the Government could not possibly answer many of the significant points which have been made during our proceedings. In particular, I regret that for this reason there will be no Government reply to the courageous speech of the hon. Member for Lewisham, West (Mr. Dickens).

The country will be as greatly disappointed, as the House has appeared to be with the Government's attitude to the economic situation, as revealed this morning. I congratulate those eight or nine members of the Conservative Opposition—there are now only five in the Chamber—who, during the course of the morning, have shown some concern at the economic situation by being present.

The House as a whole has clearly been disappointed with the Government's attitude, and I am sure that the country will be, for the simple reason that no plan, no projection—not even a catalogue of Government assumptions—has been revealed. This is not the first opportunity which the Government or the Cabinet have had to make their attitude clear. Many of us—innocents as we have proved to be—hoped that when the Prime Minister, in his new capacity of economic overlord, met the National Economic Development Corporation on 9th October he would have taken the opportunity to indicate the Government's plans.

If "plans" sounds too full of certainty for these difficult times, Liberals would have been content with a series of projections, or even a list of Government assumptions. I protest that the difficult list of contingencies which face the Government at the moment—particularly the indefinite closure of the Suez Canal—is no excuse for their failing to come forward at least with some alternative plans, so that the country may share in some common purpose. Any Government of this island trading nation has always had to include a wide margin for contingencies of one sort or another, which are always cropping up. If Suez is regarded as an outsize contingency, let us have alternative plans, or projections of policy. We have had none.

Most of the significant questions which my right hon. Friend the leader of my party asked at the outset of the debate have substantially gone unanswered. However, in the light of the Government's reply, the country is clearly faced with the prospect of having to soldier on according to the prescription of the last few months. Therefore, the only constructive questions which can be asked at this stage, and on which some views can be put forward, concern the benefit that we might get out of the medicine which has, unfortunately, been prescribed for us.

First, there is the question of unemployment. It seems to me to be quite impossible to substantiate the gloss which the Government choose to put on the recent utterance in the Argentine of the Governor of the Bank of England. If Sir Leslie O'Brien had wished to commend to the people of South America the virtues of the policy of active redeployment of labour he has a sufficient vocabulary to do so. In fact, the words he used—" a margin of unused manpower and resources"—bear no direct relationship to the idea of an active redeployment policy. The rest of the House, outside the Government, know quite well to what Sir Leslie was referring.

Mr. John Biffen (Oswestry)

Does not the hon. Member think it thoroughly unsatisfactory that the Joint Under-Secretary should totally decline to comment on the question whether the Government stand by Sir Leslie O'Brien's remarks?

Mr. Wainwright

I commented earlier on the lack of replies to the substantial questions raised by my right hon. Friend, and I stand by that. It is deplorable.

Throughout the summer nearly 60 per cent. of those registered as unemployed—taking no account of married women and others who silently disappear from industry—had been so unemployed for more than eight weeks, which is the maximum period that the ordinary published statistics reveal. This does not suggest massive redeployment. The facilities are not there, the arrangements were not made, the pre-planning was not done, for such redeployment.

It was as late as the second half of September this year that a representative of the Government was pleading with some branches of the unions—not with the national officers of the unions but with the branches—to admit adult trainees to craftmen's jobs if they had completed their training satisfactorily. This is at the root of the failure of the Government's training policy—a failure to get union branches to accept those who emerge trained from the centres or the industrial training schemes.

We have an example on redeployment today. The Times Business News tells us, as if it were in any way cause for astonishment or surprise, that the Cooperative Wholesale Society is shortly likely to dismiss from its distributive section about 3,000 employees. This is, as always in such cases, reason for distress, because of the disturbance involved. But the report goes on to indicate that this has caused something approaching panic and is yet another situation in which the Prime Minister is taking personal command.

In this uncertain world what could have been a safer bet, with a large dis- tributive unit—particularly the Cooperative Wholesale Society, which engaged its own Dr. Beeching months ago—than that this winter it would start to lay off a large number of its employees engaged on the distributive side? Why the need, when this announcement is made, for the Prime Minister suddenly to regard it as a matter for panic action and improvisation? This is the kind of thing which could have been planned for weeks if not months in advance.

The tragedy is that this total lack of planning proceeds from a Government and Prime Minister who had persuaded large numbers of key people in industry—foremen, managers, researchers and the rest—that from this Government they could expect a plan. To their credit, many people, without swallowing the whole grandiosity of the National Plan, had equally disdained the foolish ribaldry with which it was greeted in some parts of this House. They had settled down to learn the language of planning and had put on their headphones to receive the planning signals from the Government. For the last four months those headphones have been silent, and this morning we have learned that there will be no signals at all this winter. This is not the way to treat key people in industry who have tried their honest best to co-operate with the Government.

I come now to the Government's own theme—the only faint indication of a plan that we have had from them during recent weeks, which is, to use their own term, restructuring. The Prime Minister applies this term to industry. The Liberal Party would like to ask whether this is not the moment—when conditions are a little cool and and when we are not preoccupied, unfortunately, with expansion—for some restructuring of Government.

From industry's point of view, since the advent of the two new Ministries—the Department of Economic Affairs and the Ministry of Technology—the really creative, way-out, adventurous industrialists, before being able to launch any substantial new scheme, have had to negotiate a convoy of Government Departments, which, inevitably, moves only at the pace of the slowest. Is there not room here for sorting out the relative functions of the Board of Trade, the Department of Economic Affairs, the Ministry of Technology and the various so-called sponsoring Ministries of the different industries, so that those who want to be creative and to take the lead in business expansion can at least deal primarily with one Department?

Correspondence, for instance, between business and the Board of Trade on different types of machinery in respect of investment grants is proving extremely frustrating to many go-ahead business men. Why the Board of Trade should have been delegated to handle this essentially technological subject is a question which entirely defeats one.

Then there is the use—or the present misuse—of that interesting apparatus, the Prices and Incomes Board. Why have the Government set up this admirable body under strong leadership and then sent it fishing only with a line instead of with a net, inquiring into the prices of odd articles here and there—some of them very odd indeed—and reporting on a transitory basis?

As we have made plain many times before, the Liberal Party would like to see the Board given the remit, at once, of a thorough and profound investigation of the whole subject of pay structure and negotiating procedure for wages in Britain's largest industries, so that, after this grim winter, there will be some prospect of a more satisfactory pattern of wage settlements nationally and locally. To go on employing this expert body on the basis of petty, ad hoc inquiries which can have only temporary value is a great misuse of Government resources.

Surely the Government could also be using this period to exert their own influence—which must still be there, even if only residual—with the unions on the same theme of rationalising the structure of pay negotiations. It is an old theme, but I was glad to see that, only last week, the general secretary of the National Union of Dyers, Bleachers and Textile Workers explicitly told a union audience that there were far too many unions and made his own suggestions for rationalising, reducing the number and improving negotiations.

We have heard little if anything from the Government about another version of the Industrial Re-organisation Corporation—which is engaged in trying to rationalise the employers' side—to assist in rationalising the trade union field.

Then there is restructuring from the vital point of view, if there is to be reflation—

Mr. J. J. Mendelson (Penistone)

Does the hon. Member know that the Trades Union Congress is tackling this job of getting unions to unite and that we on this side strongly believe that it is not the job of the Government to instruct unions what to do? This was the policy of the Tory Conference and I notice that the hon. Member is joining the Tory Party in this sort of policy.

Mr. Wainwright

I was at pains to point out that we were asking not for Government intervention, but for the appointment of an independent body which could consider the whole matter. As for the hon. Member's reference to the T.U.C.'s interest in this matter, it expressed that so long ago, and has done so little since, that I had almost, but not quite, forgotten it.

If we are on the verge of some spendid revelation from Mr. Woodcock of a master plan I will be the first to applaud it—

Mr. Joel Barnett (Heywood and Royton)

Is the hon. Member now arguing that he would advocate—we have had little advocacy of Liberal policy, and this is, after all, their morning—that they should legally enforce amalgamations and mergers between unions?

Mr. Wainwright

For the third time, I will repeat that we are proposing a body similar to the Industrial Reorganisation Corporation, which operates in the industrial field, to speed up what the T.U.C. has, on its own admission, found so extremely difficult.

I was about to refer to restructuring in the interests of ensuring that reflation is, as far as possible, export led. We are rapidly reaching the position of having the smallest home market of all the great exporting Powers and are making very little change to adapt ourselves to the competition of countries or groups of countries with far larger home markets as a base for their export effort.

Nearly 18 months ago, at a luncheon given by the Press Gallery in this palace, the Prime Minister made this remarkable offer: What is needed is an export incentive that will make it more rewarding for manufacturers to invade export markets than to luxuriate in the ease of the home market. If there is an export incentive available which works and which is not illegal and we have not thought about it, the reward to its inventor might well go up to half this kingdom. That remarkable offer—we do not know whether it was tax-free—has been available for a long time and I should have thought that we could have heard something from the Government by now along the lines for which the Prime Minister was obviously pleading 18 months ago.

Why, for instance, are those firms which are prepared to move to three-shift working, so as to make proper use of the capital equipment which the Board of Trade now so generously helps to pay for, not offered extra grants in respect of the transfer? Like many other representatives of wholly industrial constituencies, I am appalled at the lack of social amenities for those working on the awkward shifts. What Government encouragement are local authorities given to provide special amenities for those working in the strange hours?

The Clarke Report has recently shown that invisible exports are still making a large contribution to a satisfactory balance of trade. All kinds of difficulties have been produced for every solution, but to me there is nothing simpler than the entry which a foreign visitor is bound to make in a hotel register, to prove that that hotel has earned some foreign currency. There is ample scope over the whole field, not only of tourism but of all invisible export earning, for Government encouragement without infringing our international obligations.

Also relevant is the enormous field of Government patronage through their own procurement of the supplies which all Ministries require. I know that the Ministry of Defence has long taken into account the export saleability of items which it has been ordering for its own British use, but other Government Departments lag far behind in this respect. Think of our hospitals, our schools and our other great institutions. Still, very often, their own fads, their own highly insular and traditional requirements, get in the way of the British manufacturer who wants to lay down plant for mass or batch production to offer the export market reasonably low costs.

Unfortunately, we have heard little, if anything, on these basic topics from the Government today. They have given the impression that they have hitched the economic caravan to their own car and then quietly parked the whole outfit without the slightest indication whether they will ever move it away.

Mr. Biffen rose—