HC Deb 24 July 1968 vol 769 cc732-808

11.5 p.m.

Mr. Michael Foot (Ebbw Vale)

The subject which I wish to discuss, the level of unemployment, naturally follows from the debate we have just had on the economic situation generally. I am sure that the House has listened with great appreciation to the speech of my hon. Friend the Financial Secretary to the Treasury in discussing the matter raised by the hon. Member for Louth (Sir C. Osborne).

But I must remark that the House faces a very peculiar state of affairs on these two debates. It was a very good thing that the hon. Gentleman raised the subject of the general economic situation, and it is a very good thing that I am raising the question of unemployment. But we should have had a full debate on the economic situation generally. It is pretty well unprecedented in modern times for us to depart for the Summer Recess without a general debate on the economic situation demanded by the Opposition. It is particularly unprecedented when outside the House the Leader of the Opposition has made speeches damaging for the country and, he would hope, for the Government, speeches which say that the country is on the road to ruin, that we are hurtling into ever deeper bankruptcy and indebtedness. It is extraordinary for the Leader of the Opposition to say that outside in such emphatic terms as the right hon. Member for Bexley (Mr. Heath) has chosen to do, and then to decide not to have a debate in the House but to compel the hon. Member for Louth and some of my hon. Friends to have on the Consolidated Fund Bill a debate which for 20 years we should normally have had in other circumstances, with the Opposition demanding it. Everybody in the country should recognise, when we are discussing the whole of our economic situation and the level of unemployment at this late hour and on this Bill, which is normally devoted to particular matters that hon. Members wish to raise, that the choice rests with the Leader of the Opposition, who in an unprecedented way has refused to face the challenge of an economic debate at this time.

Therefore, I hope that we shall not have any squeals from the Opposition tonight or at any time about not having had an opportunity to debate this matter. They know very well that they ran away from an economic debate at this time. They were prepared to make wild statements outside, but not to substantiate them here. The speech of my hon. Friend the Financial Secretary and the figures he has given of the truth about the nation's indebtedness cast a remarkable light on the speeches of the Leader of the Opposition outside. It is most deplorable that we have not had a full debate.

Having spoken earlier in the day without enlisting universal approbation from the House, I do not propose to speak at great length now. The subject I am raising is of extreme importance. We put it down as soon as we discovered that there was not to be a general economic debate. We thought that it would be inexcusable if the House departed for the Summer Recess without having a debate on the level of unemployment. I am surprised that the Official Opposition which has many more opportunities than we have of raising debates, have not done this. But the deficiency has been repaired, and the House will not depart for the Summer Recess without discussing the very serious unemployment figures that we now face.

I appreciated some parts of my hon. Friend's speech, but when he talks of the comparatively favourable conditions in which we are to conduct the hard slog I must say to him that the hard slog is also to be conducted at a time when we have heavier unemployment than we have had in this country for years past. So a considerable part of the burden of the hard slog is being put on some of the unemployed—unemployed people in my constituency and other constituencies. We on this side regard this matter as being the most serious aspect of the economic situation generally.

The underlying trend of unemployment has been steadily upwards since February. The figure is 581,000, seasonally adjusted, for July—2.5 per cent., the highest level for any month since the present method of calculation was introduced and probably the highest figure since 1940. These are very serious matters.

What is to happen next? I will not make any wild prophecies. I do not wish to spread any despair. But it would not be an extraordinary guess for someone to say that in the autumn, if the trend goes on, the figure is likely to be well over 600,000. That is the present indication. Some would say, and have said, higher.

We want the Minister to tell us what estimate the Government make about this. Some of us have been trying for months to get the Government or the Secretary of State for Employment and Productivity to tell us their estimate of the unemployment level. One of the arguments of the Labour Party used to be that the whole economic plan should be partly designed to ensure that the unemployment figure was kept to the lowest possible. We want to know the Government's estimate of what the level of unemployment will be in the autumn and at Christmas. They must make some calculation, and we think it ought to be revealed to the House. If it is to be a figure—

Sir Douglas Glover (Ormskirk)

Has the hon. Gentleman forgotten the Prime Minister's reply to a Question by me in 1966, long before the major crisis arose, when he told the House that he thought that after the shake-out the nation would expect a permanent level of unemployment of between 2 and 2½ per cent.?

Mr. Foot

I remember the reference, and that is why right from July, 1966, some of us in the House—a minority on this side, I am sorry to say; nobody else—have opposed both the deflation and the other measures that have produced the heavier unemployment. Right from the time the Prime Minister made that statement some of us have been urging that the Government should apply themselves much more seriously to the level of unemployment that would arise. The figures now arising confirm what was said from benches on this side of the House much more than they confirm what was said from either of the Front Benches on the question of what the level was likely to be.

So I first want my hon. Friend to tell us the Government's estimates of what the level of unemployment is likely to be in the autumn and the winter. Then I want him to tell us whether the Government accept the figure and whether they will take any measures to prevent such a high figure from appearing.

Some people are content to accept this high figure. Among them are our creditors.The Times' correspondent in Washington, Mr. David Spanier, last week reported the opinion of the members of the International Monetary Fund about this level of unemployment and the present situation. He reported that the opinion of the experts was: Britain should keep on to the end of the road and if need be clamp down more heavily. That is the message from the executive directors of the International Monetary Fund. He went on to say that that was absolutely clearly what the message was to be. That is the opinion of our creditors. In a few days' time Mr. Richard B. Goode is arriving here to look at the accounts, and presumably he will voice much the same opinion.

If there are discussions in the Treasury in the next few days, after the House has risen, on the level of unemployment—discussions between the Chancellor and the representatives of the International Monetary Fund—we have it on the authority which I have just quoted that all the influence of the I.M.F. will be used to persuade us to continue with this high level of unemployment and, if necessary, to clamp down even more heavily.

That is one of the reasons why some of us opposed the letter sent to the I.M.F.—precisely because we believed that it involved these implications. It is not fanciful for anyone to suppose that over the next few weeks in the Treasury and the Government there will be arguments whether they should clamp down. One of our objections to the borrowing of money on those terms and to the letter which was sent by the present Home Secretary was that it bound our hands. It is difficult for the Government to reject that kind of advice when those terms have been accepted. It is a very serious matter when the employment of people in my constituency is partly to depend on the advice, or even the pressure, which will come from the representatives of the I.M.F.

There is someone else in favour of maintaining the present level of unemployment—or at any rate he does not feel strongly that we should move in the opposite direction on employment. I refer to the Governor of the Bank of England, Sir Leslie O'Brien. We have often asked Ministers to state their view of the statements which Sir Leslie O'Brien has made on this subject. He made a statement in South America in October, 1967, just before devaluation, in which he said that it had been agreed by the authorities in this country that we would maintain a higher level of unemployment, a higher margin of unused resources, than had been acceptable for the previous 20 years.

That statement was made pre-devalua-tion, but it has never been withdrawn and we have asked time and again that it should be withdrawn. The only answer we have had was that by the Financial Secretary to the Treasury— although perhaps the Prime Minister gave roughly the same kind of answer— which was in effect that they did not want to give the lie direct to Sir Leslie O'Brien and that we must not offend his susceptibilities. Some of us are more concerned about the susceptibilities of our constituents—

The Financial Secretary to the Treasury (Mr. Harold Lever)

I hate to intervene, but my hon. Friend must not distort what I said. I said that one who was as great a champion of free speech as my hon. Friend ought to allow others the right to express opinions, which are not necessarily the opinions of the Government.

Mr. Foot

In that case we want a little more free speech from the Government because I want to know what is the Government's view of Sir Leslie O'Brien's statement that we should maintain a pool of unemployment. These are extremely important questions. I have said before and I repeat: it is scandalous that the Governor of the Bank of England should be permitted to make statements of that nature. How does my hon. Friend think that it will be viewed by unemployed people in Tredegar? How do they regard it when my hon. Friend says that Sir Leslie O'Brien is entitled to free speech and much not be—and has not been—repudiated? Indeed, I believe that Sir Leslie thinks that the Government are still pursuing that same policy. He thought when he made that statement that he was expressing Government policy, and as the Government have not given him the lie direct he is entitled to say that it is Government policy. I hope that my hon. Friend will talk plainly to the Chancellor of the Exchequer and let him know that we feel, at a time when unemployment in this country is higher than at any time since 1940, that we ought to be given a clear statement from the Government whether they believe in this idea of a pool of unemployment.

There are other people who believe in it. We have heard reference tonight to the Report by the London and Cambridge Economic Survey on this very subject of the level of unemployment. Although an interesting document, I will not go into all its comments about the export of capital, although they confirm much of what many of my hon. Friends and I have been saying. Our views have been repeatedly repudiated by the Government. Month after month some of my hon. Friends have been the only people to draw attention to the dangers to our balance of payments arising from the failure of the Government properly to control the export of capital.

This survey calculates the surplus we may hope for in our balance of payments in the next year. It says, commenting on what has been happening in the early months of 1968, that more drastic action should be taken to deal with the export of capital. It assumes that the Government will take steps to deal with this problem, particularly from the point of view of the export of capital to Australia and Canada. After assuming that the Government will take these steps and after pointing to the beneficial effects that those steps would have, the survey says: It is essential, however, to prevent any semblance of excessive demand in the wake of devaluation. In present circumstances, this means that unless the balance of payments moves into surplus more quickly and on a bigger scale than expected, unemployment should not be allowed to fall below 2 per cent. of the labour force. Here is a third expert authority saying that we should be content with heavy unemployment. The I.M.F., the Governor of the Bank of England and now these expert Paish-ites put out this doctrine of a heavy rate of unemployment; and we believe that many people in the Treasury accept this doctrine.

Time and again we have asked the Government if they believe that their economic policy should be directed to maintaining an unemployment figure above 2 per cent. throughout the country. We are entitled to an answer and the more the Government refuse to give it the more suspcious it makes us about the whole proposition and the more it makes us believe that the Government have accepted the Paish doctrine that this is the way to run the economy.

The majority of my hon. Friends and the overwhelming majority of Labour Party supporters in the country will never accept the doctrine that we need maintain a pool of unemployment of this size so that it may be used as a mechanism for making the economy work. We shall go on raising this matter as long as it appears that the Government are prepared to accept such a high level of unemployment.

One reason—only one; there are many others—why we entirely repudiate such a doctrine is that if the Government accept the idea of a 2 per cent. level of unemployment throughout the country, their policy for the development areas will be disrupted. Do the Government appreciate this? I have often said that I greatly appreciate certain aspects of the Government's development area policy, and many steps have been taken to assist these areas. In my constituency, despite the heavy level of unemployment, if it had not been for Government assistance we would be worse off still.

But once it becomes accepted that the Government are prepared to tolerate a level of unemployment of 2.5 per cent., we can only assume what will happen to all the plans to steer new industries to the development areas. It will break down. One might call this the Lewisham-Ebbw Vale syndrome. If it becomes known and accepted that in Lewisham or in the so-called grey areas—

Mr. Stanley Orme (Salford, West)

Or in Salford.

Mr. Foot

In Salford or elsewhere— that the Government are prepared to accept a general unemployment level of 2 per cent., 3 per cent. or perhaps more, the efforts to steer industries into the development areas will be meaningless.

Far be it for me to argue against any hon. Member who comes from a grey area and who wants to secure for it advantages we have in the development areas. But if we get throughout the whole country a 2 per cent. rate of unemployment, the dykes will break. The Government will not be able to maintain the differentiations in assistance as between the grey areas, development areas and other areas. The first consequence of allowing unemployment at this level to be tolerated is to destroy eventually the Government's development area policy.

Dr. M. P. Winstanley (Cheadle)

The hon. Gentleman keeps using the word "tolerate". But that is not the point. In July, 1966, the Prime Minister said that unemployment would not reach a level which hon. Members would find intolerable in the circumstances. We want to know what is the level, which we are expected to tolerate as between one area and another and over all.

Mr. Foot

I understand that. My first point was that the level the Government appear to accept is intolerable. I am now arguing that one of the further reasons why we find it intolerable is that it will strike a mortal blow at an essential part of Government policy. I do not know whether the Government understand or appreciate fully that, if they maintain unemployment at this level, they will not be able to use their present methods to steer industry into development areas.

It has always been the case that development areas get full advantage of discrimination which the Government rightly give them only if we have a boom. During a boom, if the Government maintain the divisions between in- centives and discriminate between development areas and others, industry goes into the development areas and we can change their prospects over the next 10 or 20 years. But if we accept unemployment at this level, that prospect breaks down.

I know that hon. Members opposite are prepared to see it break down. The Powellite philosophy is that we cannot run discrimination and that it is bound to break down. Of course, if we leave the situation only to market forces it will break down, and I warn the Government that the result of sustaining or accepting the present level of unemployment will be, in the end, the same as that which would be brought about by the Powellite philosophy. The Government should check the situation in time.

The Government may argue that there is no alternative to their policy other than the policy advocated by hon. Members opposite, either in the Powellite or in the Heathite versions. There is not a great deal of difference between these two. Earlier tonight, hon. Members opposite were advocating heavier deflation. They would have clamped on more repressive measures earlier this year, which would have caused a much higher unemployment figure than we have now. It should be known throughout the country that hon. Members opposite would have imposed measures which would have pushed unemployment even higher than it is now.

That is why my right hon. Friends the Prime Minister, the Chancellor of the Exchequer and the Secretary of State for Employment and Productivity say, when they speak on these matters, that the only alternative to their policy is the one advocated, sometimes openly and sometimes surreptitiously, by hon. Members opposite—heavier deflation and heavier unemployment, depressing the economy by such means.

Mr. Nicholas Scott (Paddington, South)

The hon. Gentleman will remember that the Government said that the prices and incomes policy was the alternative to deflation and this level of unemployment. Now we have both.

Mr. Foot

I understand that. It is part of my argument, not the hon. Gentleman's. They say that the prices and incomes policy plus the moderate deflation, as compared with the more savage deflation that hon. Gentlemen opposite advocate, is the only alternative for the nation. That is the way that they want the debate to go in the country, but we are not prepared to accept it. There is a very different alternative and the figures of increased unemployment, of increased productivity which we have had recently, show what has been happening in the country, and they do not justify the Government's case or that of hon. Gentlemen opposite.

They justify the case of the third policy, which has been presented to the nation throughout. I hope that we will never again hear from a Minister that there is not an alternative. Of course there is. Let them read, in the light of what has happened in the last few months, the policy presented, not only by hon Members in this section of the House, but by the T.U.C. This policy has been advocated by my hon. Friends and supported by the T.U.C. The latest unemployment figures show productivity increasing but unemployment falling. All this was prophesied by the T.U.C.

Page 53 of its report says: … a reflation that expands demand only moderately may make little inroad into the high unemployment that characterises the later stages of deflation. Even a rapid expansion will only gradually reduce the total of unemployed. That is the situation in which we are now in today. Page 61 says: … the General Council believe that the Government is still underestimating the amount of spare capacity in the economy, and the underlying improvement in productive potential to which the Prime Minister himself has previously drawn attention. … Shortages of labour in previous periods, which were reflected in the hoarding of labour by employers, have given way to extensive unemployment. The best way of guarding against a reversion to the previous situation is by developing productivity bargaining, which can be further encouraged only in the context of falling unemployment and greater job opportunities. The report goes on: In particular, trade unionists should not respond, in terms of accepting the changes in their own attitudes and practices which are advocated in this Review, to policies which would in their view lead to little reduction in unemployment during the next eighteen months. What has been happening in these months has borne out what the T.U.C. prophesied. We are now getting the heavier unemployment because of the moderate expansion for which the Government have planned. The figure for actual expansion is higher than the Government foretold could take place. I am glad to see that it is happening, despite what the Government said, and it is bearing out what the T.U.C. said. I hope that the Chancellor and other Ministers will study very carefully, in the light of July, what the T.U.C. said in February and what some of us said immediately after devaluation—what we said a few months earlier. Our prophecies of what would happen to the economy have been borne out, not the prophecies of the Government, or the Opposition.

The Opposition prophesied bankruptcy and ruin and they are still doing so. The Government prophesied that there would be falling unemployment. It has been going the other way. This is because they did not expand the economy sufficiently fast, and they did not do that because they adopted the orthodox policy of the creditors. Because they stuck to the orthodox policy we had the spectacle of some increase in production, but no real effect in dealing with the underlying unemployment, and in many areas severe unemployment—the worse unemployment situation since the war.

I do not want any talk about economic miracles while that goes on. I do not want any talk about the good conditions in which the hard slog is to be conducted. I say that the Labour Party should state that we regard a heavy level of unemployment—which prevents the Government from dealing with the huge unemployment in development areas—as intolerable. I am not content with a situation in which the Government are content with the present position, when we have 5 per cent. or 6 per cent., even 8 per cent. or 9 per cent. unemployed in some areas. It is intolerable. The Government should not speak in these complacent terms. A Labour Government should be speaking during every hour of the day about employment. They should not be prepared to talk about being satisfied with the present situation, particularly when an alternative policy has been presented to them. Never let them say to us or the country that it is a choice between the barren, bankrupt policy of the Tories and their own moderate, cautious, pussy-footing methods. That is not the alternative. There is a third possibility for the nation, and we believe that it is the only way in which this Government and this country can save themselves.

11.35 p.m.

Mr. Edward Milne (Blyth)

The subject of this debate affects not only the areas badly dealt with in relation to the prospects of employment but the country as a whole. As my hon. Friend the Member for Ebbw Vale (Mr. Michael Foot) said, on the Government's decisions the solution not only of this problem but of the country's problems. It was Bishop Gore who gave the definition of a Christian as one who was able to look at statistics with compassion. I do not suggest that the Government are not looking at the statistics with compassion, nor that a tremendous amount has not been done in tackling the problems of unemployment which beset certain areas.

One of the great watersheds in political life in this country was the fact that for the first time in British history, in the wake of the Second World War, with the upsurge of post-war planning and the changing outlooks in the nation, the main political parties came to the conclusion that the cornerstone of the economy should be full employment. One did not work out one's economic policy and hope that full employment would follow. One's economic policy was based on the foundation of full employment and the rest of the policy was built round it. The danger at the moment is that we are tucking the unemployment problem into a corner and hoping that the other economic problems will be solved somehow. My hon. Friend the Member for Ebbw Vale talked about the speech of the Governor of the Bank of England. He and many others have been talking in economic terms about the level of unemployment which the country needs to solve its other problems instead of dealing with the matter the other way round.

I wish to consider not only the figures of unemployment but the consequences. If the present unemployment figure moving towards 600,000, represented the number of unemployed people moving from one job to another or was merely transitional, very short-term unemployment, one could argue that the economy was working all right. I am not prepared to accept the figure even on a transitional basis. I argue that, if it were a transitional figure, it would be reasonably easy for the economy to bear it. Contained within that global figure of the nation's unemployed is a rising number of long-term unemployed. It is this rising figure of long-term unemployed that concerns those of us who represent constituencies in development districts. We do not ask that the high figures of unemployment ruling in the development districts should be transferred to the overcrowded Midlands and the South-East which have a low level of unemployment.

The Government's policy in creating new industry in development districts has been a considerable success story. It is one on which the Government spokesman will no doubt amplify later. The disturbing factor about this success story to those of us from those areas which are receiving new industries is that, fast though we move, successful though the new measures and the new ventures have been in keeping the rising tide of unemployment down, we are still faced with figures of from 4 per cent. to 10 per cent. unemployed in certain pockets throughout the country.

Two or three weeks ago my hon. Friend the Member for Darlington (Mr. Ted Fletcher) asked the then Minister of Labour what would be the difference in the weekly payment of unemployment benefit if the unemployment figures in the Northern Region, which at that time were running at 4.5 per cent., were reduced to the national average of 2.5 per cent. He was told that the difference would be £130,000—just over £1 million in 2 months. Thus, in considering the problem of those who are unemployed and those who are facing unemployment, it should be appreciated that it would have been much better if the Government had dealt with the unemployment problem by using the money paid out in unemployment benefit further to develop the districts which needed the cushioning, the assistance, and the development district policy.

I believe that in the past the Government have laboured too much in the past by talking about the benefits which have accrued to development districts without considering the overall policy which will provide us with the solution to these problems. It is said that if the economy is over-heated we shall run into difficulties. I would be prepared to take the risk of full employment. I would be prepared at this moment to eliminate the present figures of unemployed and let the other aspects of our economic problems be sorted out from that angle. When so much of our economic policies hang in the balance, it is far better to take the risk of a policy of full employment by taking people from the development districts, who are already signing on at the labour exchanges, and putting them into the work that they need and, indeed, deserve.

I turn now to two other aspects of this problem. The development districts have borne the brunt of the changing face of British industry. Contained within the development districts of Britain we have the declining industries. Some of those industries are not so much in decline as they were. Long overdue, but no fault of the present Government who only took power in October, 1964—

Mr. Peter Emery (Honiton)

Four years.

Mr. Milne

It is all very well for the hon. Member for Honiton (Mr. Emery) to talk of four years. But it was not until the present Government were returned to power that the measures needed to deal with the reorganisation of the shipbuilding industry, for instance—and this is one part of the success story— were taken and are now beginning to show considerable impact, particularly on the Tyne and on the Clyde. The forward prospects and figures there are very encouraging indeed.

When that is balanced with the position on the railways—again a problem for the development districts—and the coal mining industry and its inevitable and increasingly speedy contraction, one realises that, no matter how fast we move concerning development district policy, we will be faced with further unemployment.

It is no use talking about the difference between the ways that respective Governments in the post-war period dealt with this problem or the type of unem- ployment benefit that is paid now compared with what was paid earlier. Nor is it good enough for the Government to talk about the redundancy payments agreements which exist in the coal mining industry and elsewhere. This is not what the development districts want. They want a return to full employment. Only that will remedy or redeem the pledges which were given in the 1964 and the 1966 elections.

My hon. Friend the Financial Secretary, in the debate on the nation's economy, talked about the rising standard of living that was available to our people. I think my hon. Friend was perfectly correct in making this point, but we have had debates in this House in the past on discrimination against one type of citizen or another. So long as we tolerate a high level of unemployment, no matter what the general prosperity of the nation, we will be discriminating against a section of our community and leaving them outside the benefits which are being felt by others. If only for this factor, the problem of unemployment becomes a major priority for the Government.

That is why I welcome this debate, even at this late hour. Like others who have spoken, I am extremely sorry that this debate has not taken place before now, within the context of a major debate on the nation's economy, because we are dealing not merely with the question of employment, but with the failure of the nation and of the Government to use the economic resources at their disposal to the maximum extent. No nation in this modern world can hope to solve its economic problems unless every person in that nation is given the opportunity to work, and the services that he can give are properly utilised.

We have often been told that it is extremely difficult for the Government, even with the incentives they can offer, to persuade firms to move from London and the South to other areas because the skills needed for the newer industries are not available in those areas. This is not true. I can speak best about the area that I know best. Modern industries which have moved to the North-East have found the labour force there extremely adaptable. Workmen have moved from the older declining industries into the newer industries with an ease and speed which, in the main, have surprised even the firms concerned.

I ask my hon. Friends on the Front Bench not to stick too closely to the briefs given to them by their Departments, but to consider the points which have been made during the debate. I ask them to realise that in the past too much attention has been paid to the balance of payments and to other not unimportant factors. I am not criticising that concentration of attention, but I am asking my hon. Friends to realise that full employment is the corner stone of our economy in the months and years ahead, and that it is only by having full employment that we can solve the general economic problems which confront us.

11.53 p.m.

The Chancellor of the Duchy of Lancaster (Mr. Frederick Lee)

I propose to intervene for a few moments only to follow my hon. Friend the Member for Blyth (Mr. Milne) who, quite naturally, discussed the regional aspects of the problem confronting us tonight. My hon. and learned Friend the Minister of State, Treasury will reply to the debate in the general economic sense, but I should like to make one or two points about the regional aspects of the matter under discussion.

My hon. Friend the Member for Ebbw Vale (Mr. Michael Foot) dealt with the regional aspects of the problem, but it seemed to me that he confused the issue by suggesting that high unemployment was spread throughout the country. This is not so. The higher levels of unemployment are to be found in three main development areas—Wales, the Northern Region, and Scotland. My hon. Friend asked whether we were tolerating these high levels of unemployment. Let me remind him that, having said that high unemployment is to be found in three main development areas, the Government are so tolerant of these levels that they are spending £300 million a year to eliminate them. That is the short answer to the point which the hon. Member was making, on the question whether we tolerate unemployment of this type.

Mr. Alec Jones (Rhondda, West)

Does not my right hon. Friend agree that since the level of unemployment is increasing in these areas despite the amount of assistance being given it indicates that that assistance is inadequate?

Mr. Lee

That does not necessarily follow. I shall try to show the amount of assistance being given. I am not arguing that to double the amount of assistance that we are giving would cure the problem, but I believe that given more time than we have yet had we can eliminate the problem. The problems of these areas—the North-East, Scotland and Wales—are problems of the rundown in the basic industries upon which those areas have lived for a hundred years. I agree that the figures of unemployment in the last two months have been disappointing, but that comes from the fact that the rundown in the coal industry, for example, has accelerated at a faster pace than we have been able to get new industry to take its place.

That is not to say that the Government's policies have failed; it means that they have not as yet had time to accelerate to the point at which they are adequately replacing the rundown of the older industries to which I have referred.

Mr. Scott

The hon. Member is developing the case that the Government's policy is not a failure. The Prime Minister said that the development regions would be insulated from the effects of the July, 1966, measures, but unemployment in the Northern Region today is double what it was in 1966. Is that success?

Mr. Lee

I have pointed out that the problem of the Northern Region is the huge rundown in the mining industry— but unless that industry is run down we shall never eliminate the problem of the region. It is a disappointment that, as yet, the attractions of the development area policy have not managed to catch up with the basic rundown in that industry.

Let us consider what has been achieved. Since 1960 over 190 new manufacturing firms have set up in the Northern Region. That region, with about 6.2 per cent. of the total United Kingdom population, had an estimated 17.3 per cent. of additional employment arising from I.D.C.s in 1965; 13.1 per cent. in 1966, and 16.1 per cent. in 1967. About 9,900 new jobs are estimated to have been created by I.D.C. approvals in the first half of this year compared with 9,100 in the first half of 1967, thus proving that we are not failing to get new industry into the area.

Industries are now expanding well, but I grant that the basic problem is the huge acceleration in the rundown of the industries upon which these areas have depended for well over 100 years. The jobs in prospect in the new and expanding firms in the Northern Region in the next four years number about 41,000— nearly two-thirds of which are for males.

I want to outline the way in which we are accelerating the assistance that we are rendering. Since the Local Employment Act of 1960, 53 advance factories have been approved for the Northern Region, of which 37 have been approved since the Government came into being in October, 1964. In considering the location of recent additions to the programme particular regard has been paid to those areas most affected by the colliery closures. In terms of floor space, advance factories completed in the Northern Region represent 40 per cent. of completions in all development areas, and at present the region has eight completed factories unlet, only one of them being in a special development area.

Let me now give a little information on the advance factory programme, which I hope my hon. Friends will consider is praiseworthy. If we look at completions of advance factories from October, 1960, to October, 1964, the previous dispensation managed to create 12. From October, 1964, to July, 1967, when these programmes were getting under way, completions totalled 17. Completions from July, 1967, to July, 1968, totalled 14. This acceleration of the advance factory programme has been dramatic.

Again, if one looks at investment grants and grants under the Local Employment Acts, grants paid in the Northern Region under the latter last year amounted to £9.5 million. In 1967–68, again, no less than £57.5 million, or 38 per cent. of the total for all development areas, was paid to the Northern Region in investments grants. The regional employment premium which came into operation only last year will bring an extra £28 million a year in Government assistance. Again, development areas were recently exempted from the withdrawal of the S.E.T. premium. This we estimate will bring the North another £7 million a year.

Since 1964 we have been giving financial assistance to the North-East Development Council towards its work in trying to attract new industry to the area, and last July similar aid was given to the Cumberland Development Council based at Whitehaven. In trying to deal with the problem of getting new science-based industries into the area, the Ministry of Technology has set up five industrial liaison centres in the region, with the object of increasing liaison with the technical colleges and encouraging firms to adopt new techniques. We are seeking out new viable technical programmes which merit financial support. One could go on with a great list of projects by which we are seeking to get new science based industries in order not only to get people to take new jobs in the areas, which may fold up, but to form a basis for the future prosperity of the areas.

We have recently created special development areas with even greater grants than are available in the development areas themselves. Five employment exchange areas in Northumberland, 11 in Durham and six in Cumberland are now covered by these new measures, with extra inducements to persuade industry to move into or expand in those areas. Within the special development areas, the moment an advance factory is taken we will replace it, under a rolling programme, with a further advance factory. As a consequence, more factories have been taken, and now only one advance factory in a special development area in the whole Northern Region is without a tenant. Major industrial estates are being established at Cramlington, in Northumberland, and Brandon, in County Durham, with a rather smaller one in Cumberland. We are also ready to consider suggestions for other measures of assistance.

I have repeated the point about the terrible problems of the mining industry. To alleviate hardship among older ex-miners who would probably find difficulty in obtaining alternative employment, we have introduced under an Order submitted to the House, the Redundant Mineworkers Payments Scheme, which came into operation in June. This scheme provides for payment out of public funds to mineworkers over 55 years of age made redundant between 17th July, 1967 and 28th March, 1971, sums equivalent to 90 per cent. of their take-home pay after they have been declared redundant. A miner under 55 years of age will receive redundancy payments open to others under existing legislation.

We attach very great importance to the point made by my hon. Friend about retraining. This is one of the basic problems which face the nation. I remember asking Questions from the opposite side of the House when the previous Government were doing nothing about it. We now have four centres with a potential output of about 1,600 trainees a year. A fifth centre is to be opened this year at Maryport. There will be others at Darlington and Middlesbrough. In time the potential output of trainees from these centres will be over 3,600 a year. We are also making generous grants to firms which provide their own training.

There has been discussion and argument in this House about public investment. The North used to be at the bottom of the table of public investment in the regions. It is very difficult to calculate exactly what any one region's share is, but provisional figures we now have for public investment on new construction works indicate that on the basis of public investment per head of the population the North is now fifth, not tenth as it was before. Expenditure has increased by about 94 per cent. since 1963–64, from £66 million to £115 million.

Last year in the minor works programme we spent an extra £7 million on the Northern Development Area. It is not the case that the Government have permitted stagnation or any other features of decay in the development areas. Housing, for instance, is now running at near record levels and, despite cut-backs in the country as a whole, it has been made clear that the programmes in the Northern Region will be safeguarded.

In road programmes £130 million has been allocated to projects in the five-year period 1965–70. Ministry of Transport funds committed during the last year total £55 million. As yet there have been no postponements of starting dates in the Northern Region. By facilitating move-ment within the region and making for easier contact between the region and markets in the South, the roads programme will serve as a very powerful aid to economic expansion.

My hon. Friend did not mention a great development which he and I are very happy about, the coming of the Alcan centre to Lynemouth. This will employ 900 men and during the construction work a team of between 2,000 and 3,000 will be engaged on building the smelter. I believe that development will act as a magnet in attracting ancillary industry to the area.

A comment was made by my hon. Friend about shipbuilding. It got a sneer from hon. Members opposite. Perhaps I can help them to get rid of the sneer. There has been a positive upsurge of orders for shipping on the Tyne and on the Wear. A further £15 million of orders for Wear firms was announced only last week. The Swan Hunter and Tyne shipbuilding group has in hand orders worth £102 million, including £51 million worth secured since the consortium came into being at the beginning of this year. Wear shipbuilders now have in hand orders worth £72 million. These are very real accomplishments, which would not have been possible had it not been for the actions of the Government.

I am sorry that I have kept the House so long, but I wanted to reply to the regional points made by my hon. Friend. I say to my hon. Friend the Member for Ebbw Vale that it is not the case that there is any inbuilt desire in the Government to tolerate any kind of percentage of unemployment. I would not remain a member of any Government which ever did. For my part, having known something of the practical side of unemployment over a period of years, I would consider it disgusting and degrading for any Government to connive at or to tolerate any levels of unemployment.

Until we can get a proper balance of industry throughout the nation, until we can get rid of the imbalance which has cursed us for so long, there will be economic problems of the overheating of one area while we still have unemployment levels in other areas.

Mr. Scott

Will the right hon. Gentleman give way?

Mr. Lee

No, I will not. This is now proceeding apace. There are successes, as I have tried to show, but certainly, for our part, there is no desire to retain levels of unemployment as part of the economic programme. Indeed, there is precisely the opposite.

I hope that my hon. Friends will take what I have said, that where there is unemployment—and I have pinpointed the areas of it—we are now expending moneys at a pace unheard of at any period of industrial history. We are not doing this because we desire to maintain unemployment. We are doing it for the very reason which is deep in the "guts" of my hon. Friends and myself, because to us unemployment is unacceptable. It is not a feature which any of us would want to tolerate.

I have tried to answer the regional points and to give the general assurance that there is nothing in our policies which presupposes the need or the toleration of any particular levels of unemployment.

12.13 a.m.

Mr. James Dickens (Lewisham, West)

After that enthusiastic statement of Government policy from my right hon. Friend the Chancellor of the Duchy of Lancaster, I merely make one comment on his remarks. Despite all the money which has been spent and all the achievements listed by my right hon. Friend, the facts are that in the Northern Region today, in July, 1968, some 6,000 more people are out of work than were out of work in July, 1963, and in Wales over the same period, 36,000 people are out of work in 1968 as against 27,000 five years ago. Therefore, the point made about the Rhondda is absolutely right—namely the Government must do very much more than they have been able to do so far to cure this regional imbalance.

Mr. Frederick Lee

May I again make the point that not only in the Rhondda, but taking the Welsh valleys as a whole, and in the Northern Region, in the 1963 period there was a huge rundown, which had to come, in the mining industry. In the Northern Region there are now more people employed in science-based industries, engineering, chemicals, and so on, than there are in coal. That is a very great achievement.

Mr. Dickens

I appreciate that, but I think that my right hon. Friend overlooks other factors. For example, he has not mentioned the considerable depopulation which has taken place over the past five years from Wales or from the North and which is continuing all the time.

When the House resumed after the Summer Recess last year, it turned its attention at once to the question of unemployment. The fact that we are again debating it tonight before we adjourned for the Summer Recess and the fact that we have debated it on a number of occasions throughout this Parliamentary Session is sufficient indication of the deep concern and anxiety felt by many of us on this side, and, indeed, throughout the whole House, about the present trends in unemployment.

Unemployment, whether it takes place in Lewisham, in Blyth or in Ebbw Vale, is a human tragedy and is social waste. I want to analyse two central factors affecting unemployment: first, the effect of deflation on unemployment in, so to speak, the Callaghan deflationary cycle since 1966, and to contrast that with the earlier Selwyn Lloyd cycle of deflation between 1961 and 1963; second, the modernisation of industry and its effects on unemployment. Both problems are separate and must be analysed separately.

It is appropriate that the House should tonight examine unemployment, for we are just past the anniversary of the measures of 20th July, 1966 which launched us on our present deflationary cycle. How does this cycle compare in its effects on unemployment with the earlier deflationary cycle of 1961–63?

In July, 1961, seven years ago, the then Chancellor of the Exchequer launched his deflation with 259,000 people unemployed. The figure rose to 878,000 by February, 1963, of which perhaps 250,000 could be accounted for in that month because of exceptional weather conditions. So the real figure of unemployed in February, 1963, the high point of that deflationary cycle, was about 628,000. By July, 1963, that is, two years after the deflationary cycle had commenced, the figure had fallen to 449,000. In short, it had risen by 190,000 in the two years.

When my right hon. Friend the present Home Secretary began his deflationary cycle in July, 1966, unemployment was almost identical with what it had been in July, 1961, at 264,000. By January of this year, we had reached the peak in this two-year deflationary cycle, with unemployment totalling 631,000, about the same peak figure as on the earlier occasion. But today, in mid-summer 1968, much more ominously, the figure is not 450,000 as it was in 1963 but 514,000, that is, 65,000 more.

All the indications are that we have now reached, as it were, a turning point in our attitude towards unemployment and towards future trends in unemployment. There have been references to the Prime Minister's view of the level of unemployment in 1968. Those of us on this side who argued the case for devaluation as part of a package of measures designed to break away from traditional fiscal policy urged upon the Government a real alternative policy. In November last year, in the first flush of the immediate post-devaluation period, when he was talking privately—the House and the country should know this —of a rate of economic growth this year of 6 per cent., not 4 or 3 per cent., my right hon. Friend the Prime Minister was asked by the Leader of the Opposition to reaffirm the Government's position on the level of unemployment as stated on 20th July, 1966. He replied: Certainly I do, and I can tell him, on the best estimates available to us before devaluation "— before devaluation, be it noted— that unemployment next autumn"— that is, the autumn of this year— looked like being well within that l½ to 2 per cent. bracket, as a result of what was already going forward … It is right to tell the House that the problem which we shall be facing in a year's time is far more likely to be not deflation and unemployment but expansion to a scale which might lead to labour shortage in many areas."—[OFFICIAL REPORT, 22nd November, 1967; Vol. 754, c. 1334.] The first question we must ask is "What has gone wrong since 22nd November, 1967?" One can at this stage only hazard a number of guesses, but I believe that immediately after devaluation the Government were quite sincere in their determination to go for a rate of economic growth of 6 per cent. and to cut unemployment, but that they have been pushed back relentlessly and remorselessly by our international creditors and powerful forces in this country which are urging courses of action such as those to which my hon. Friend the Member for Ebbw Vale (Mr. Michael Foot) drew attention. Need one doubt this? Let us look, for example, at the views of the Industrial Policy Group, described by my right hon. Friend the Home Secretary in his post-devaluation speech, when he was Chancellor, as a sinister conspiracy. It says of the future levels of unemployment: Realism demands that full employment so construed and it tries to analyse the construction it has placed on the term in an earlier paragraph— should cease to be a plank in the platforms of major political parties … Post-war experience is that a figure close to 2 per cent. unemployed with narrow fluctations about it would give the necessary flexibility without causing intolerable hardship. If the figure falls much below this level the system becomes too inelastic"— whatever that may mean— and inflationary pressures become inescapable. We should try to see what truth there is in that argument. Is it the case that a high level of unemployment stops inflation? Between 1961 and 1963, during the earlier cycle when we had a high level of unemployment, when the party opposite were in power, the cost of living rose by 5.9 per cent. In the two immediately preceding years, from July, 1959, to July, 1961, the cost of living rose by 5.1 per cent., rather less.

What has happened in more recent times? From July, 1966, to June, 1968 —the figures for July are not yet available—the cost of living has risen by 7.5 per cent. Perhaps it will be seen to have risen by more than that when this month's figures are taken into account. In the two preceding years, between July, 1964, and July, 1966, it rose by just over 8 per cent. So there is little in it, if anything. Therefore, the Industrial Policy Group is totally wrong in its claim that inflation is in any significant way affected by the level of unemployment.

There are many other factors—devaluation, the levels of import prices and so on. all of which have a direct bearing on the cost of living. Any examination of price trends in recent years does not bear out the assertion that the deliberate creation of unemployment leads to a slowing down in the increase in the cost of living, nor is it the case that … the system becomes too inelastic and inflationary pressures become inescapable. I would argue the contrary case. As the T.U.C. argues very cogently in paragraph 6 of its Economic Review, The first essential for active trade union co-operation in industrial change is a credible plan for full employment. A moment's reflection will show, as the T.U.C. goes on to argue, that If the new approach to productivity throughout the country proves in the eyes of work people to have been at their expense, there will be an inevitable tendency for them to protect themselves in the only way they know, by restricting output and productivity and by sharing work. This produces a much more inelastic situation than a high level of employment throughout the country. So on the basis of analysis and of all our experience in dealing with rapid industrial change and increases in productivity, all the evidence shows that a high level of unemployment is a direct hindrance to change because people are fearful of change. A high level of employment— in short, full employment—speeds the process.

My hon. Friend the Member for Ebbw Vale reminded us of the speech of Sir Leslie O'Brien in Buenos Aires to the Anglo-Argentine Commerce Society. It might be that in the interval, thanks to the pressures on him, Sir Leslie has changed his views. Alas, this is not the case. It is important to see what the most recent expression of his views in a collective sense amounts to. This ties up with the question that I posed about what has happened since 22nd November.

The most recent report of the Bank for International Settlements published on 10th June, appropriately enough in Basle, made a 20-page analysis of the British economy and what was wrong with it between the devaluation of 1949 and the devaluation of 1967. It lists eight points which it thinks were weaknesses. Some of my hon. Friends will be interested to learn that among the eight points it includes demands for cuts in public expenditure and the need for a revision of labour law—and how much we have heard on that from the Conservative Party in recent months.

The fourth item is: Throughout most of the 1950s the economy was kept under the pressure of an overfull employment level of demand which tended to erode the competitive benefits of devaluation. It was saying by implication that we cannot go back to the levels of employment that we knew in the 1950s and that if Britain is to succeed with the present devaluation we must be accustomed to a much higher level of unemployment. It may interest hon. Members to know that one member of the Board of directors is our good friend, Sir Leslie O'Brien.

It may be asked what Sir Leslie is doing giving collective expression to this view of the Bank for International Settlements, which arranges the credits for which the Government are so diligently negotiating and which has told the Government that they can have medium-term loans and credits and, in a sense, as much borrowing as they want to keep sterling afloat in the short term so long as they run the British economy by arrangement with it and in agreement with what it lays down about the level of expenditure and unemployment and about trade union policy.

It may be thought that I have a fixation about bankers. That is not so. Bankers are no doubt good husbands and fathers and, for all I know, good sons and lovers. But for the most part they are bitterly hostile to the aims and policies of democratic socialism. The Government have been edged away from a much more rapid rate of economic growth, which the Prime Minister and the Cabinet originally set out to achieve in November last year, because of the pressures upon them from the International Monetary Fund, the Bank for International Settlements, the Swiss banks consortium, theDeutschesbundesbank and other organisations abroad, and at home from organisations like the Industrial Policy Group and interests in the City. It will be very hard to prove that. In 30 years' time, when all the public documents are available in the Public Record Office, we can examine the matter, if we are alive. But for the time being we have to be content with the information which we have.

All the public information and all the private conversations go to show that the Government made no fight at all for an alternative policy on the lines set out in the T.U.C. Economic Review and on the lines argued by some of us in the recent past. Through the Letter of Intent to the I.M.F. on 30th November, 1967—a letter of breathtaking foolishness for the future development of this country —they offered the I.M.F., without a great deal of pressure, all that the I.M.F. could have wanted by way of restrictions on pay, the level of unemployment and incomes policy.

The Bank for International Settlements and the European central banks are a different kettle of fish. The I.M.F. are perhaps more generous creditors. But the fact is that as a consequence of pressure or by agreement the Government have got themselves into a position in which, by and large, they are content to run the economy on terms either agreed with or dictated by foreign bankers, and that has led to a situation in which we are to tolerate as a permanent feature of British life in at least the years immediately ahead a figure of 500,000 to 700,000 people out of work, in summer and in winter, with only minor fluctuations around these levels.

That means that the Government have been pushed off the level of economic growth of 6 per cent. which the Prime Minister expressly advocated at a private meeting of the Parliamentary Labour Party. They were pushed back to 4 per cent., at which even the Treasury thought that we might aim. Ultimately they were forced back to a level of 3 per cent. and, as my hon. Friend the Member for Ebbw Vale said, they are getting rather more than that in spite of themselves.

The T.U.C. did not argue for 6 per cent. for nothing. In its Economic Review it argued that an important component of that 6 per cent. would be take-up from the existing level of unemployment and take-up from the existing level of spare capacity. It was for those reasons that it argued that we could expand above the level of 4 per cent. on which the Government had earlier settled.

I say to my hon. Friend that the time has come for the Government to listen to the advice given to them by their friends. We were told by the Press that the T.U.C. Economic Committee met the Cabinet recently and again came away empty handed. The T.U.C. apparently argued that the Government should go for a much more rapid rate of economic growth designed to take full advantage of the increased productivity which we are getting and to get the level of unemployment down.

It may be argued that as a consequence of devaluation we have had to take severe measures to restrict the pressure of internal demand. I believe that, following devaluation, the steps which were taken to restrict the pressure of internal demand by £750 million—announced immediately after devaluation—were sufficient in themselves. Many people argued at the time that they were too much. But to add to those restrictions the cuts in public expenditure announced by the Prime Minister in January, the deflationary effects of the Budget and the further tightening of credit through the banks in May—all those steps together—has been altogether too severe. It is taking us into a position in which we are pursuing, first, a policy of devaluation and the Government's general economic strategy and, secondly, a policy of restriction and repressive deflation.

I want the Government to take some of the brakes off and to recognise that a prosperous home market for certain industries—a recent report about the motor industry bears that out—leads to lower export prices because wage costs per unit of output fall. They are run-ing a serious risk of getting industry in a position in which, because of the deflationary effects of Government policy on the domestic market, unit costs will perhaps rise steeply to the disadvantage of exports in the second half of 1968 and in 1969.

It would be interesting to know what calculation the Government have made of the effect on unemployment of the take-up in export demand. Mr. Michael Crawford, in theSunday Times last Sunday, gave a figure purporting to show that, for every £100 million net of increased exports we attain, we reduce unemployment by .1 per cent. I know of no evidence for this but perhaps we can have a Treasury estimate of the effect on unemployment of increased exports.

The other aspect of Government policy to which I wish briefly to raise is the effect of rationalisation and modernisation of industry on unemployment levels. This will be a major problem which we must tackle in good time. My hon. Friend said there was growing pressure in the grey areas and some of the more prosperous areas, such as South-East London, where, for example, there has been a run-down in industry, such as the closure of the G.E.C.-A.E.I. factory in Woolwich. There is great resistance in such areas to work moving away into development areas. The reason is clear. People are frightened by the prevailing overriding job insecurity. Everywhere this is so and not just in areas of high unemployment.

Until we can work out a credible plan for full employment, until we can phase out older industries in a more methodical way and tie in with the phasing-out the development of new science-based industries in a way which will not lead to more than unavoidable and inevitable transitional unemployment, we run the risk of putting the future modernisation of industry seriously in jeopardy because people are unwilling to accept change when they feel insecure.

This issue confronts some of the biggest industries. The steel industry, for example, will have to shed about 150,000 workers by the 1970s. Many other industries will have to shed tens of thousands of employees. It is of the most urgent and highest importance that the Government devise plans for phasing out these older industries, deploying their workers to new industries and providing them with a much more comprehensive scheme of transfer allowances and benefits than at present. This will also mean a massive increase in the retraining programme, facilities and expenditure, as well as improved transferability of pension rights and so on.

There can be no burking the issue. We cannot go on haphazardly—for example, allowing another incident like that of the G.E.C.-A.E.I. closure in Woolwich, putting 5,500 people out of work at a moment's notice without any co-operation with the Economic Planning Council or anyone else.

Industrial change must be socially responsible, and, in drawing attention to the negative and destructive features of deflation and unemployment, we are pointing out the need for constructive alternative policies on this and over the whole range of economic policy.

12.40 a.m.

Mr. Peter Emery (Honiton)

While I realise the problems discussed by the hon. Member for Lewisham, West (Mr. Dickens) following the closure of major industrial concerns, he must accept that all parties are urging industry generally to achieve greater rationalisation, efficiency and productivity. If that were hampered by the whole procedure of closures and redundancies having to go through regional development councils, local authorities and other organisations, this process of rationalisation would be set back many years. That is one weakness in the hon. Gentleman's argument.

I was aghast to hear some of the Minister's remarks. He spoke as though the North-East, Scotland and Wales were the only areas that mattered and that, because of their high rates of unemployment, they should get most attention from the Government. That is an absolutely wrong approach to the problem of unemployment. As a result of one of my interests, I have played a part in attracting industry to the development areas. The hon. Member for Blyth (Mr. Milne) will confirm that I was instrumental in getting a factory established in his constituency, and that is now providing jobs for some of his constituents. Every hon. Member should attempt to attract new industries to such areas.

I condemn the approach made by the hon. Member for Ebbw Vale in suggesting that only this Government were dealing with the problem of the development areas. He knows it is not true. This is not a problem easily dealt with by either party.

Mr. Alec Jones

Would the hon. Gentleman agree that many of the problems in South Wales could, and ought to have been, solved by his party if it had undertaken any programme for the re-industrialisation of the area? Complete neglect and failure to produce any plan is the main cause for the present delay in industrialisation.

Mr. Emery

I would not agree with that. I should be delighted to deal with that, because I speak with a little authority. The problems of South Wales are the same as for the coal mining industry generally. The number of people leaving the industry this year will be as great as in any previous period. Some of the problems are worse today than they were in 1957 to 1960, when redeployment in the industry was as great as that carried out today. I am aware that the hon. Member feels that more should be done for his area, but there are other sections of the community neglected by the Government.

One such section is the seasonally unemployed, not just in development areas, but in seaside resorts, with high unemployment other than for six or eight weeks. Government policy has done nothing to help here. As a matter of policy they have prevented local authorities in such areas taking the necessary steps to deal with the problem. A year ago a company wished to move into Honiton. The number of unemployed was in hundreds, not tens of thusands, as elsewhere, but it is the percentage within the community which matters. It is very serious when that figure reaches 6, 7 or 8 per cent.

The local authority in Honiton went out of its way for a number of years to attract a small industry to the area. Finally it succeeded, and a firm decided to move to Honiton, just as a firm with which I was connected decided to move to Blyth. It happened that a site at Honiton was more ideal for this firm's purposes than a site anywhere else. About 250 jobs would have been created. A survey had been conducted by the firm to ensure that it could fill these jobs. It was convinced that it could.

My accusation against the Government is that active steps were taken to ensure that that firm would not go to Honiton, but moved elsewhere. This is a serious charge to make against the Government, but it is true. Anybody who knows anything about this instance knows that the Government would not give an industrial development certificate. Although the county council had gone as far as to purchase the land to encourage this firm to go to the area, the Government did everything in their power, and succeeded, to make certain that nothing should be done for this area in Devon.

My accusation is not only that the Government failed, in their overall consideration of unemployment, to consider the smaller areas which are not within development districts, such as agricultural areas where there has been a flight from the land, but that they consider only areas where they see electoral advantage. [HON. MEMBERS: "Nonsense."] I repeat it—only areas where they see electoral advantage.

Mr. J. J. Mendelson (Penistone)

This has been a serious debate on a serious subject. Why drag it down to that level?

Mr. Emery

The hon. Gentleman must realise that I consider this to be a serious matter. If he thinks that my point is not true, let him or the Minister tell us an instance in the last four years of the Government having given aid or industrial development certificates to encourage a major industry to go to an area where no political advantage was to be gained. Of course hon. Members opposite do not like the accusation. [HON. MEMBERS: "Nonsense."] I am delighted that even at this hour we can raise a little passion. They do not like it because it hits them hard and this is something of which they do not like being accused. But it is so. If hon. Members wish to advance arguments to the contrary, they should do so. On the whole, I know that it is so in the South-West and in other areas of which I have specific knowledge.

The Under-Secretary of State for Employment and Productivity (Mr. E. Fernyhough)

In the last couple of sentences the hon. Gentleman qualified his earlier statement. I hope that he is not trying to convince the House that we have any intention of subverting Northern Ireland by helping industry there.

Mr. Emery

If the hon. Gentleman thought that he had any chance of doing so, he would do it, but he knows that it would be hopeless. I have talked about Great Britain. I did not mention Northern Ireland. On the whole, the unemployment position in Northern Ireland is so severe that no Government could neglect it. What the hon. Gentleman has said does not alter my point about Britain. I have given expression to the feeling which exists in the South-West and which has been proved to be true in many areas. If this is not so, why, when small pockets of unemployment go out of their way to help themselves, do the Government do nothing to assist them? The Government said that the position in Exmouth was no concern of theirs. If they say that, they must expect this accusation to be made.

Mr. Milne

As to the siting of the factory, the advantages are now appreciated by the firm that made the move. The hon. Gentleman spoke about action taken for political advantage. He must know that at the time the firm made the move the unemployment rate in the Cramling-ton-Blyth area was higher than that prevailing in Northern Ireland. To talk about political influences bearing on decisions concerning development districts is flying in the face of reality.

Mr. Emery

I shall not debate the circumstances affecting one factory which the hon. Gentleman and I know about, nor shall I say anything which might adversely affect the successful working of the factory in his constituency. That would not be in the interests of either of us. The factory is operating satisfactorily and we are pleased with the staff who are there. I am certain that (he locality has been pleased to receive the firm.

The argument in principle is that the only reason why the Government have been able to encourage firms to go to certain areas is that they have had a definite policy concerning the amelioration of high unemployment. The rate of unemployment in certain districts in the South-West has at times been higher than in Blyth. The Government have done nothing to attract industry to those areas. They have taken active steps to stop industry going there. That is what I accuse the Government of doing. That is the charge that the seaside and marginal areas of high unemployment in the South-West have to make against the Government. I have stayed late to make this specific point. The Government have to realise that their policy of—

Mr. Fernyhough

Will the hon. Member for Honiton at least acknowledge that part of the South-West is a development area and that for the whole of the South-West the average rate of unemployment is lower than for Great Britain as a whole?

Mr. Emery

Yes, for the whole of the South-West. But will the Minister get his hon. Friend, in reply, to acknowledge that there are pockets in the South-West not in the development districts which have a higher rate of unemployment throughout the whole year, and specifically for nine months of the year, than most other areas in the United Kingdom? If the Government are not willing to try to do something for these areas they are neglecting their duty.

On top of this, if the Government take active steps to stop factories moving to these areas, having been attracted to them, they deserve the political accusation which I have made across the Floor of the House tonight. It is as clear and definite as that. There is no aid in development grants and there is no help in attempting to ensure that these areas are told about firms which would be willing to go there.

Selective Employment Tax is making the problem of unemployment in seaside and semi-rural areas worse, because it is being applied to the service and hotel industries when, in my view, it need not and should not be so applied. I cannot develop that, because obviously it would be out of place in this debate.

What I have attempted to make clear is that the Government are interested in Wales, Scotland and the North-East, and are not paying one jot of interest to certain of these smaller pockets of unemployment throughout the country. I use the South-West as the best example. If the Government will not do anything about these areas, it is understandable when people condemn them and make the sort of accusation that I have made across the Floor of the House. I am merely repeating what has been said by many people in my constituency: that aid cannot be expected for these smaller areas within the South-West, because the Government realise there is no political advantage to be gained.

1.4 a.m.

Mr. Brian Walden (Birmingham, All Saints)

I rise to make some random remarks about unemployment, not a coherent defence of the Government's policy, because that would be presumptuous. That is obviously for the Government Front Bench to do. I am aware that these remarks will be deeply offensive to my hon. Friend—

Mr. Arthur Lewis (West Ham, North)

On a point of order. Mr. Deputy Speaker, is it the usual custom for a Minister to make a speech and get straight up and walk out and never come back? That is not the usual courtesy to show to the House, is it?

Mr. Deputy Speaker (Mr. Sydney Irving)

I am not aware of what the hon. Member is referring to.

Mr. Lewis

Is it the usual custom for a Minister to make a speech and then leave the Chamber? That is not the usual courtesy to the House, is it?

Mr. Deputy Speaker

This is a matter for the Government. I assume that the hon. Member is referring to a Minister who was on the Front Bench before I came into the Chair.

Mr. Fernyhough

My right hon. Friend was here as the Minister for the North-East to reply to my hon. Friend the Member for Blyth (Mr. Milne) who was raising north-eastern problems. My right hon. Friend did not think that anybody else would be dealing with the North-East. He looked round the Chamber before he left to see whether anyone else would be raising points in connection with the North-East. He did not see anyone else, and, therefore, as my hon. and learned Friend intends to reply to the general debate, my right hon. Friend left the Chamber. I do not think that my right hon. Friend can be accused of discourtesy.

Mr. Lewis

The Minister made a statement to the effect that the Prime Minister made no remark about the degree of unemployment. He intervened in the debate, and then walked out. I am saying that that is not the thing to do. He should stay and listen to the debate.

Dr. Winstanley

Further to that point of order. If the explanation for the Minister's absence is as we have just been given it, that he intervened merely to reply to regional points about the North-East, may I ask whether we are to have a selection of regional Ministers replying to hon. Members who raise points about the various regions?

Mr. Fernyhough

The hon. Gentleman ought to know that my right hon. Friend has special responsibilities for the North-East. My hon. and learned Friend will reply to the general debate.

Mr. Emery

The right hon. Gentleman intervened after the second speech of the debate. It is nonsense for the hon. Gentleman to say that his right hon. Friend did not think that anybody else would speak about the North-East. To intervene after the second speech and then to have his action defended by the hon. Gentleman is utter nonsense.

Mr. Deputy Speaker

Order. Hon. Members are raising matters which are not for the Chair, nor are they points of order.

Mr. Walden

When I rose some time ago to make some remarks, I did not think that we would be faced with a series of points of order. I have long regretted that in this House we do not have the custom which they have in Congress in America, that of reading things into the record. We could have saved the Minister the trouble of coming here this evening if he could have read his speech into the record. He did not seem to meet the point made by my hon. Friend the Member for Ebbw Vale (Mr. Michael Foot). Whatever my disagreement with my hon. Friend, he knows that I shall make some attempt to meet his point. It seemed a fair and straightforward explanation of what the Government were trying to do in the regions, but it would have been better given in a different debate on a different occasion.

Not everything that I say is meant to controvert what was said by my hon. Friend the Member for Ebbw Vale. This debate is about the very point that he raised, and which was reinforced by my hon. Friend the Member for Lewisham, West (Mr. Dickens), namely, the charge —or the claim if a softer word is preferred—that the Government are regulating the economy and the level of demand in such a way as to create the present level of unemployment which, as my hon. Friend said, is the highest since 1940. When I said something like this not very long ago, many people in the Labour Party said that I was advocating that we should have that level of unemployment. Far from it. I was saying that it was going to happen.

My hon. Friend the Member for Ebbw Vale said that the Government were not clear in stating exactly what they predict the level of unemployment to be, and not entirely clear in explaining how it has come about. I do not dissent from him on that. I do not think that they are entirely clear, and I venture a view why. It is because they are horribly torn between what they know they have to do and what they think the hon. Member for Ebbw Vale and his friends will put up with. So they are anxious that he should not understand the issue too clearly.

That does not work with him, because he is a highly intelligent man, but it does work with many other people in the country. I fully expect to see a Labour Party conference at which the Government will attempt to get an endorsement of their policies on devaluation, deflation, Budget strategy and restrictions strategy—on all of which I agree with them—and at one and the same time try to get through Conference a resolution saying that unemployment ought not to rise and that the Government are breaking their backs to see that it does not.

I do not blame them for trying to do that; they have a very difficult problem confronting them. The word "unemployment" in the Labour Party is the hydrogen bomb of the movement. One has only to mention the word and they stop thinking and start emoting. When the Minister spoke from the Dispatch Box earlier in the debate—in his sad intervention, which touched off so much acrimony—he could not refrain from the usual hand-on-heart pledge that he would not remain a member of a Government which could possibly tolerate this level of unemployment.

Mr. Mendelson

Perhaps the right hon. Gentleman was so anxious to declare that the Government were opposed to unemployment because he does not share my hon. Friend's view that only my hon. Friend the Member for Ebbw Vale (Mr. Michael Foot) will see through this. He may realise that the people of Dudley and Caerphilly also see through it, as well as some others.

Mr. Walden

I will not pursue that point; I only want to say that I wish we could get out of this way of talking about serious economic matters. I hope that my hon. Friend the Member for Ebbw Vale will give every assistance to those who hold what he often calls unpopular views which should be expressed in the House of Commons and ought to be subjected to the scrutiny of the House. I only hope that he will give us every assistance in discussing them in an intelligent 1968 style, and will not let loose the dogs of the 1930s on us, because it is that sort of thing that causes that sort of speech from the Front Bench.

It cannot be admitted that certain things are being done, because if it is admitted it is feared that the emotional reaction will be so great that the Government will suffer grave damage in the country, or grave danger at the party conference, or that there will be turmoil in the executive Government—not that it is exactly free from that at the moment.

I want to make a few random observations. In general, the level of unemployment is due to Government policy. It is a very good thing that the Government have at least consistently pursued certain economic policies since devaluation. I do not agree with those of my hon. Friends who appear to think that some domestic reflation—and some are asking for a substantial domestic relation—will in the long term be a good thing for this country.

Perhaps the Treasury should talk rather more. It is difficult for the Treasury—there is no Department for which I have greater sympathy, which makes me virtually unique among my hon. Friends—but perhaps it should talk more to some of its colleagues in the Government and instruct them on these points, because some of my hon. Friends are seriously misled by Ministerial speeches which do not make it absolutely clear that the Government will not satisfy demand by allowing domestic reflation to reach such a level as will adversely affect the economy.

That should be said, and not just by Treasury Ministers. It should be said not only by the Chancellor but by other Ministers in the Government, and particularly the Minister responsibe for employment. It should be said because it is Cabinet policy, and anybody who sits in the Cabinet is endorsing that policy, and anybody who sits in the Cabinet should at any rate realise that his failure publicly to endorse that policy calls seriously into question his right to be there.

That is Government policy. The Government's policy is not to fill up by a domestic reflation; not to go for growth that will basically be growth in internal demand. My hon. Friend the Member for Ebbw Vale is absolutely right in saying that this is the principal reason for the figures we have. Of course the Government are right to claim that they have done everything they can to mitigate the position in the development areas. I believe that to be true. I am not an expert in these matters, as the hon. Member for Ebbw Vale is, but I believe that the Government have done much there, and I notice from the figures a rather more even pattern in the level of unemployment than we have seen previously.

None the less, whatever is said about insulation, there is bound to be a spill over into the development areas because of the general restriction on the level of demand. I assume that that was the point made by my hon. Friend, and if I am right in that assumption I must say that I entirely agree with him. Of course it is the case, and it should be said that it is the case.

The coal industry and the steel industry have been mentioned in this debate. I must say that I was rather amazed to hear that the steel industry is now regarded by one hon. Member as one of the older industries, though I do not accept that this is necessarily so. But, of course, the coal industry has run down rather more rapidly than people expected it would. There, again, I must say that the Government have encouraged the run down, and they are right. The Chairman of the National Coal Board sometimes protests that the run down is too rapid, but I do not agree. But I do not agree, either, with the Government's refusal to defend their own policy. They have run down the coal industry rather more rapidly, but that is only part of the answer.

My hon. Friend is right in supposing that the run down is not the only, or the primary, cause of the unemployment in his region. The primary cause is the general restriction on demand. Is this the Government's policy? Of course it is. I do not see how anybody could suppose that anything else was. Sometimes as I sit here or elsewhere and listen to speeches made on this theme, I wonder whether I am mad or whether everyone else is. Whether one can really approve of the strategy of devaluation, whether one can really approve the enormous sum taken out of the domestic economy by the last Budget—the largest ever, as the Chancellor of the Exchequer always says; whether one can approve of all that, will the means and then reject the end, whether one can wave an Order Paper in approval of a Budget speech and cheer devaluation, and then on the Floor of the House condemn the present level of unemployment, I do not know, but I do know that the two are absolutely causally connected—

Mr. Michael Foot

Once we get the 6 per cent. increase which the T.U.C. plan puts forward we would have sufficient resources, as that plan calculates, to deal with the balance of payments, with more to distribute generally. We would, of course, have to take some steps to see that imports did not go up too much. So this is the alternative to the policy that my hon. Friend advocates with such brilliance—and he might make an even more brilliant speech if he were defending a better policy.

Mr. Walden

I am flattered by my hon. Friend's view, but I will come to the so-called alternative. My hon. Friend knows very well—since we are discussing speeches made in Committee—that just after devaluation I said in Committee that we would not get 6 per cent. He knows that the constant criticism I make of the Government is that they will make over-optimistic claims that then hang round their necks. I wish that they would not, but nothing I can say or do persuades them not to do it. We had another example this evening, and we have had it again in the country. The Government are incorrigible. They cannot help taking the most optimistic figure they can find and then propagating it as a certainty.

I did not say that we could get this 6 per cent. I did not think that we would have a surplus this year—and I am by no means certain that we shall have a surplus next year. I take a gloomy view, on the whole, but not as gloomy a view as that taken by the party opposite. I think that devaluation will work, and that we will have very real and significant benefits, but the one thing we shall not have is what my hon. Friend calls "full employment".

Do not let us forget that in the recent past the term "full employment" was bogus. We had a job for everyone, or almost for everyone who wanted one, but we had it on a false exchange rate for the £. That is not now in dispute. I had this point of view as early as anyone, as my hon. Friend will gladly admit.

Secondly, we had it in uncompetitive prices for exports. That is not the only factor which affects exports, but everyone admits that we were over-priced in the export market. This needs to be said from these benches more than from the benches opposite. We had it on the basis of profound over-manning of certain industries and jobs being done which ought not to have been done. I want hon. Members to look at the most distressing figures which this country can produce in the most modern industries such as transport equipment, electrical machinery and chemicals. Look at what it rakes us in men to produce identical output as our competitiors. Hon. Members can find all the references for this. If they have not seen them already, they will be shocked when they do see them.

This is not concerned only with a comparison with the United States. Look at our figures for steel in comparison with those for Italy, and for chemicals in comparison with Sweden. We have appalling over-manning in this country. I have never seen any evidence to shake my believe about that. That is why I agree with modernisation and that full employment of the recent past has been bogus. Of course it is possible to provide every man with a job if we take no account of the general economic value of what he does, blind ourselves to the export position and are indifferent to economic costs and care not at all about what happens to balance of payments.

Some of my hon. Friends and many outside, if they were really frank about it, would say that this is exactly their view—that everyone should have a job, be provided with some work and then we should look at the figures which should be made to respond. My hon. Friend said that employment should be the cornerstone of our policy, but, even if none of my reasons has substance, I think my hon. Friends will at least accept one piece of reality. That is that the Government are not going to change their policy. Whether they agree with my reasons or not, they will not at this stage accept the charter or any other alternatives. It is the policy we have and they are going to keep it. There are good reasons why they should. [Interruption.] My hon. Friend says it is too pessimistic.

Mr. Dickens

I said fatalistic.

Mr. Walden

That seems not altogether different. My hon. Friend is wholly optimistic about the value of paper programmes, resolutions, alternatives, speeches at Labour Party conferences. He knows at heart, if he would face it, that the Government have set themselves on a course from which they will not move.

Mr. Arthur Lewis

Policy has been changed before.

Mr. Walden

Certainly peripheral policy in respect of east of Suez. It could be changed again despite the view of the Financial Secretary that our defence commitments are essential, and we could save the money on that. We can change the rate of the £, as my hon. Friend the Member for Lewisham, West said, but he will remember—he and I were both devaluationists—that we always said that it was bound to happen because of the logic of the situation.

The logic of the situation is that the Government will not change their policy, and my hon. Friend has given the very reasons. I do not say that he is right. I do not believe in conspiracy theories. That is another fault of my hon. Friend the Member for Lewisham, West; he is given to that view of life. If, however, he is right, what possible chance is there now that having guarantees of that kind, they will be taken up and—

Mr. Deputy Speaker

Order. The hon. Member must address the Chair.

Mr. Walden

I am sorry, Mr. Deputy Speaker. What chance is there now that they will swim out on a wholly alien sea with the world monetary situation as unstable as it is, with sterling only recently bailed out from what could have been a serious crisis, with, on the statement of my hon. Friend the Member for Lewisham, West, a world hostile at best, possibly bitterly hostile, to the kind of proposals that he suggests? Can he really see the Government, at this stage, suddenly making a departure of that kind— [An HON. MEMBER: "Or any Government."]—or, indeed, any Government, but certainly not the present one?

Mr. Dickens

I did not say that the Government were faced with a world hostile to democratic Socialism. I said that foreign bankers were hostile to it. I merely remind my hon. Friend that even with the present Government, even with some of the personnel in the Government, there is always the prospect that with the mounting demand for change, voiced by the T.U.C., by many of us on these benches, by theGuardian and other sources, we can in time get the Government to move towards a position where their policies are changing, not overnight, not dramatically, but as part of a phased exercise over a period of years.

Mr. Walden

If my hon. Friend waits for that, he will have fallen for one of the confidence tricks of the Left. They wait until the situation has inevitably undergone the change that is bound to occur.

I am not saying that we will have these unemployment figures for ever. Then when it happens, when the Government take the brakes off, the Left will say, "There you are. That was because of the insistent pressure we applied in the House of Commons, inTribune and all the rest." If my hon. Friend sits around and does nothing, if he waits, makes no speeches and contains his soul in patience, he will find that by the autumn of next year the unemployment figures are well down. So that if he wants for the Government to phase it out slowly, I can predict for him a great success. He or his friends will be able to claim that his constant advocacy has forced these changes upon the Government.

It is important to say this, because this situation, perhaps in a slightly different form, but, I suspect, even in its present form, may well be true again. My hon. Friend knows, and I know, that he can get no changes this autumn and this winter. The difference between us is that I do not think that we ought to have those changes anyway. I will say why. I cannot think of anything that is more likely to cause a run on the £, indeed a general lack of confidence among all our creditors and a complete rejection by the economic community—not the financial community—than that we should at this stage domestically reflate.

I could bombard the House with quotations but I will give only one, because it happens to be a very good one. Sam Brittan, at present the economics editor of theFinancial Times, the great critic of Treasury policy, the man who fought hardest for the Department of Economic Affairs to be set up, and the consistent supporter of full exployment, said not long ago that anybody who does not understand that domestic reflation now would be a disaster is incapable of learning anything from experience. I reiterate it. Anyone who supposes that the Government at this stage should pump money in to put people back to work not as a result of an export-led boom but simply because of a rise in home demand, anyone who imagines that that is the solution, is incapable of learning anything from experience. That is exactly what I do not want the Government to do.

There is unemployment in Birmingham, though I grant that it is not as great as in Ebbw Vale.

Mr. Orme

And it is rising.

Mr. Walden

And it is rising, as my hon. Friend says. The unemployed in Birmingham worry as much and feel all the psychological pressures which unemployed people do. I know something about that, because it is an experience which was common in my own family. They have all the problems which the constituents of my hon. Friend the Member for Ebbw Vale have. But I beg the Government not to reflate domestically in order to soak this unemploymnt up on a temporary basis—for that is what it would be. When the crisis comes back, and come back it will if we do it that way, we shall have the unemployment all over again, except that it will be a much deeper trough and it will be that much harder to rediscover confidence. And, by the way, it will not be this side of the House which will be given the job of rediscovering that confidence.

Those are the stakes. I know that my hon. Friends wish that our country's situation was different and they honestly believe that if their policies had been followed all through it would have been different. I know that they really believe that it is possible to create a well regulated purely national economy which can largely insulate itself from movements elsewhere, and that it can all be done on the basis of very high rates of growth —the 6 per cent. my hon. Friend the Member for Lewisham, West spoke about—with full employment, and at the same time, by savings on defence and on the export of capital, and, if necessary, by mobilising the dollar portfolio, they can preserve that full employment, the high rate of growth and the balance of payments.

I do not accept that, but it is late at night and I have gone on too long as it is. I shall not explain my reasons now. All I say to my hon. Friends is that they have not got a hope in hell of the Government changing their policy in that way. What the Government must do is see the export boom go ahead. The most sensible question which my hon. Friend the Member for Lewisham, West asked was whether there were any calculations of what every additional £100 millions of export business meant in terms of unemployment. That is the relevant question, for that is where we shall see things develop, until such point as the Government think that the balance of payments can stand a certain degree of reflation.

I do not suppose that the Government, who have never been ruthlessly consistent, to say the least, in any of their economic policies, intend to be ruthlessly consistent about this one either. Directly they think that the balance of payments can stand the strain, they will allow a certain measure of domestic reflation. They will allow home demand to run on a bit. It is relevant to ask, therefore, what we are doing in export performance, and how much that export performance is soaking up labour which evists in this country, and is meant to exist in this country, for the purpose of exporting, for the purpose of a greater export effort and not for the purpose of raising the general level of home demand.

That is the reality of the situation. I often wonder what my hon. Friends below the Gangway think they are doing when they initiate debates of this kind. It is a most valuable kind of debate to have, and I listened with the greatest interest to at least two of the speeches which were made. But what exactly do they want. Are we really living in the age of pledges? Do my hon. Friends who read out so many quotations of which the Government should rightly be ashamed want to add another quotation to the list, do they want somebody to give them a promise at the Dispatch Box that the unemployment figure will be such and such by Christmas to shut them up for a few months, until they read the unemployment figure at Christmas and realise that what was bound to happen has happened.

I do not understanding the logic of this kind of approach. If my hon. Friends cannot accept Government economic strategy—and Government economic strategy is the most important thing in British politics—they should bring the Government down. It is no real defence to say that they do not want to do that because they dislike the alternative even more. The only sensible thing one can do is what the American gamblers tell one to do—put up or shut up, bring the Government down or back them. I do not understand the extraordinary pose of being for the Government as people but against their policy, nor do I believe that from men who talk so much about the morale of the movement in the country it does anything to improve the morale of our people in the country. They must be very confused to hear by hon. Friend the Member for Ebbw Vale say that the Prime Minister's economic defence policies are the worst that could be devised, except for those of the Leader of the Opposition, which is hardly much recommendation, and that the Prime Minister is of all men the man he most wishes to give his loyalty to as leader of the country. They must wonder what my hon. Friend to trying to say. I think that I know.

Mr. Michael Foot

I have never said anything quite like that in my life. All that I say about the Prime Minister—and I do not pay any exaggerated compliments—is that I prefer him to the hon. Gentleman's candidate.

Mr. Walden

That enables me to do something which illustrates a rule of my hon. Friend—that these things should be said on the Floor of the House. I am glad that he made that interjection. It enables me to say that my hon. Friend does not know who my candidate is.

Mr. Mendelson

I do.

Mr. Walden

It seems to me that my hon. Friend the Member for Ebbw Vale has been under a persistent misapprehension about this. Despite his support and my opposition, the Prime Minister of this country will go on being the Prime Minister. The difference between us is that whatever I think of some of my right hon. Friend's performances I support his policy, whereas my hon. Friend the Member for Ebbw Vale does not. I think that that gives me a right to be a critic of certain other aspects which do not entirely meet with my approval. One that I keep referring to is the constant over-confidence of statements from the Government Front Bench. I am sure that my hon. and learned Friend the Minister of State will avoid that tonight by giving us a frank and careful analysis—and no pledges, I beg him. He must make sure, as I am sure he will, that nobody else gives any pledges, especially just before the Labour Party conference, which is the time of the year when they tend to be made. Here I am being quite serious. I agree with what several hon. Members on both sides have said in this and a previous debate. If that is done there is a real chance that we shall pull out of this difficulty.

We talk about full employment as Labour Party policy. Surely it is the policy of all sensible men. There can be nobody in the House who wishes to see men out of work if they can be employed meaningfully doing jobs that give greater economic strength to the country. I do not believe that there is any Conservative who can be so foolish as to want men unemployed for the sake of it, for the sake of having a statistic. I do not think that full employment is solely a Labour Party policy, although I think that in the past the Labour Party was much more constructive in the way it went about it. It embraced Keynesianism rather more rapidly than hon. Members opposite did, though even that is a matter of controversy. I do not believe that full employment should be a matter of political controversy. All sensible men can see the need for full employment provided the price paid is not a much greater and more savage deflation, and much worse unemployment later on. That seems to me to be the way we should discuss these issues.

We ought to have things done to even out trouble in the regions. That is good policy. We ought to urge the Government, when they have the base on which to move, to take the brakes off our home demand or even consider import controls and to soak up by domestic reflation some of the unemployment.

We ought also in the Labour Movement to accept the responsibilities of government, accept that the sun will not shine every day, that our supporters cannot have their hearts' desire every week, that no Government can ensure for them total security every year of their lives, that we live in an age of enormous change—many of the changes listed by my hon. Friend the Member for Lewi-sham, West—and that these changes are bound to involve hardship, insecurity and unemployment, and that on top of it all the Government are fighting for economic stability and that unemployment will be made much worse everywhere.

We ought to accept that, and we ought to tell our people that, and we ought not to ask the Government for unrealistic and potentially dangerous pledges. The Government ought to say that frankly to their supporters. They ought not to play the "two balls in the air at the same time" game. They ought not to put Treasury policy in one compartment and employment policy in another compartment and pretend that the two do not relate to each other. They ought to give a frank, intellectual and respectable case to which men can give their loyalty, and not saw the branch off behind them when they try to give some justification for what they are doing.

That is what the Government ought to do, and if they did that and my hon. Friends and I did the other the end of unemployment would come that sooner, and the morale of the Labour Party in the country would not, contrary to what is often said, go lower—I do not know how it could go lower—but would go higher. What people can understand and what they think is intellectually respectable they often defend even if it is against their interest. What they will not defend is a situation which they do not like; and which is not explained honestly to them anyway.

So I hope we shall all attempt to co-operate not only to get rid of unemployment but to explain why we have it and how long it will go on, and that it is the policy of the Government and not just that of the Treasury, that the Cabinet has agreed to it and will go on agreeing to it, and that any pledges to the contrary extracted in moments of temporary difficulty are worthless and no hon. Member should spend his time trying to get them.

1.43 a.m.

Dr. M. P. Winstanley (Cheadle)

I came into the debate—[HON. MEMBERS: "Why?"]—to listen, and I have heard it all and have not found it unrewarding. It was not until the end of the speech by the hon. Member for Lewisham, West (Mr. Dickens) that I felt inclined to intervene. My resolve to do so was strengthened by the speech of the hon. Member for Birmingham, All Saints (Mr. Walden).

I leave out the one intervening speech by the hon. Member for Honiton (Mr. Emery), save to say that he was right to remind the House that it is wrong to look at the question of unemployment purely on a regional basis and feel that we can explain it by referring to the development areas. He was right to point out that there are pockets of unemployment anywhere and right to emphasise that one cannot think about it purely in terms of figures. If one is the person unemployed, the figure is 100 per cent. It is not just a matter of regions.

The hon. Member for Honiton was right also to point out that it is not just a matter of the decline of old trades, like mining, as we were told by the right hon. Member for Newton (Mr. Frederick Lee), who came in and spoke and then went off back, we presume, to the North-East whence he appeared to have come.

It seems to me not surprising that we have not had many contributions from this side of the House on this subject. As I reminded the hon. Member for Ebbw Vale (Mr. Michael Foot) during his speech, at the time of the July measures in 1966 the Prime Minister's words, as I recollect, were that unemployment would reach a level which hon. Members would not find intolerable. I thought then, and I think now, that the degree of toleration exhibited towards different levels of unemployment in different parts of the House would differ very markedly if one knew what it was. We have not heard from the Conservative Party what is a tolerable level of unemployment. We have heard expressions of resentment about the level in certain areas, but we have heard no estimate of what would be regarded as tolerable—nor have we heard that figure from hon. Members opposite. We heard details from the Minister about advance factories and development certificates, but there were no prophecies, no estimates and no statements of intention. Of course, we have been told that that would be the wrong way to do it, but surely the whole business of politics is to predict the future effects of present actions—and that is what we are trying to do about unemployment.

There is no point in my going over many matters which have been discussed at length. I agree with much that has been said. I agree largely with the opening remarks of the hon. Member for Ebbw Vale and I will not repeat them but will concentrate on a narrow issue which has not been adequately debated. Whatever other hon. Members regard as tolerable I take the view that a situation in which one able-bodied person who is willing to work but for whom there is no work is intolerable. If a person's capacity is not being used, he is being wasted—and it is waste which we cannot afford.

The hon. Member for All Saints spoke about the full employment which we have had as being bogus, much of it produced by over-manning, and he repudiated the idea of his hon. Friend the Member for Blyth (Mr. Milne) that full employment must be a cornerstone of policy. I believe that we must for a moment look at the situation in a slightly different way. I believe that if we are to achieve the results which we want, full employment is a "must". Many of the points which the hon. Member made in his interesting speech arose not from full employment but from the fear of unemployment which was one of the consequences of the announcement of the July measures. Once the Prime Minister had resurrected the spectre of unemployment, he had also raised the uncertainties and fears which have bedevilled the trade union movement for the last 30 years. One of the tragedies of the trade union movement in this country is that it has tended to waste a great deal of its time, energy and enthusiasm purely on short-term gains. That is because it has grown up in an atmosphere of fear and uncertainty in which inevitably it looked to the short term because the longer term could not be predicted with any accuracy. If a union did not know whether its members would have jobs at all in another month or two months, it had to direct its attention to what it could get for its members this week and next week. I should like to see the trade unions playing a much more dynamic and constructive rôle in industry, protecting the prosperity of their members by safeguarding the long-term interests of the trade to which they belong.

The period of full employment which we had had—interrupted by what happened between 1961 and 1963, but that was relatively short—had begun to have an effect. Looking at the trade union movement fairly closely, as I did, I noticed a difference in their attitude. I had felt that at least some trade unionists who had been inclined to take a reactionary view towards progress were beginning to look at things in new ways. One was beginning to hear trade unionists talking about the possible benefits of two men doing the work of four as long as there was other work for the other two. They began to talk genuinely and regularly about machines being valuable things instead of being threats to their security. They began to talk of new ways of working to the benefit of their members and of the community as a whole.

Yet, with one sentence in this Chamber, the Prime Minister destroyed all that and sent them scuttling back to their old entrenched positions. A whole lot of old ideas suddenly seemed up to date—not because they were up to date but because the Prime Minister had put the clock back by bringing back the atmosphere of fear and insecurity which had done so much to hold up the development of sensible and efficient industrial relations in the past.

There is what one might call the "philosophical" concept of having a pool of unemployment which would mean flexibility and the ability to keep people at the job. It would, it is claimed, be an incentive, a big stick. But it has precisely the reverse effect. Industrial unrest arises not where there is full employment but where there is unemployment because it is insecurity which tends to make people oversensitive and anxious about their security and to make them take up entrenched positions. If we want to get rid of industrial unrest, we must get rid of the unemployment which leads to it.

Liberals utterly reject the concept that there is a peculiar economic necessity for a pool of unemployment with which constantly to threaten people when there is any kind of unrest. We shall not get industry functioning efficiently, get expansion, a rising standard of living and a favourable balance of trade until we get full employment. We must get rid of the delusion that the way to achieve these objectives is by having a pool of unemployment.

We have heard a great deal about the declining coal industry. Quite apart from economic grounds, on social grounds alone we should be saying that it is no longer acceptable that men should be burrowing underground in search of coal. But hon. Members opposite have talked of these wonderful people in the coal industry and all the hardships they undergo, the risks they run and the injuries and diseases they contract and then say that it is intolerable that the industry should be allowed to decline. Insecurity and lack of a clear idea of the alternatives causes the apparent attachment to mining. If the miners are to accept the need for change and if there is to be retraining and redeployment, there must be full employment.

Mr. Walden

The Government are not following their present policy in this matter so that they can threaten people. Can the hon. Gentleman explain why wage rates have tended to rise rapidly in periods of high unemployment and why, if such a fear of insecurity exists, the productivity figures are the best since the war?

Dr. Winsfanley

Productivity depends on many things, management perhaps more than labour. What matters from the productivity point of view is not the number of people employed but the work those employed are doing. A person doing useless work is just as wasted as a person unemployed. If we are to get rid of overmanning, there must be security so that people do not take up entrenched positions and so maintain thestatus quo.

The hon. Member for All Saints asked the Government to say frankly that the present policy would continue. I ask them to say equally frankly that it will not continue and that they will do everything they can to reduce unemployment. The mood of the people concerned depends not so much on predictions as on the objectives and the aims. While statements are being made by the Bank of England and others about tolerable levels of unemployment and while those statements are not being repudiated by the Government, people cannot be blamed for thinking that the Government intend to maintain a pool of unemployment. If the Government said frankly that they aim to reduce unemployment quickly, many of the existing problems would disappear.

2.0 a.m.

Mr. Stanley Orme (Salford, West)

I agree with much that the hon. Member for Cheadle (Dr. Winstanley) has said. However, my hon. Friend the Member for Birmingham, All Saints (Mr. Walden) rather took me and my hon. Friends to task, in a friendly but severe fashion. I do not criticise him for that, because I shall give it back in kind. He asked why we had initiated the debate, and then said that he did not complain that we had done so. We have done so because, as Socialists, we are not prepared to tolerate unused capacity in a modern, technological society. That is what a Labour Government is about—a planned economy. We are not an island—no man is an island, as John Donne said. There are external pressures upon us, but it is possible to organise the type of society that can rid us of unemployment.

Everyone pays lip-service to full employment, but we find that there are different standards. It is becoming fashionable to talk about it as being about 2 per cent, to 2½ per cent. It is being written into the terminology of full employment, but we are not having it. Full employment means what it says. The Prime Minister said in 1966, in reply to the Leader of the Opposition, that after redeployment, the level of unemployment would be 1½ per cent. to 2 per cent. That incensed us, and it is not satisfactory.

My hon. Friend the Member for All Saints, talks passionately, almost demagogically—which tended to spoil his usual eloquence. We are talking about human beings, not machines, about people thrown on the scrap-heap of society, treated like machines. This creates anxieties in an already complicated society. We in this House know better than most, the pressures upon our constituents as society becomes increasingly complicated. There can be no greater anxiety than the threat of losing one's livelihood, and with it one's self-respect, regardless of whether it is in Ebbw Vale, Birmingham, Lewisham or Salford. It does not matter whether the figure is 2 per cent. or just under, as it is in my area, or going up to 2 per cent., as it is in Birmingham, or just over 4 per cent., as it is in Ebbw Vale. It is the individual who is concerned.

My hon. Friend the Member for All Saints made a great defence of the Government's policy. He said that the Government should advocate it. Does my hon. and learned Friend the Minister of State agree with him? Will he underwrite his magnificent speech in support of Government policy? I have heard my hon. Friend defend the Government's economic policy before, but, unfortunately, it has not always been right. We are in a difficult position because it is wrong. My hon. Friend has advocated changes in the past to that policy. He mentioned some tonight—east of Suez, the rate of the £, and so on. But I do not think my hon. Friend can avoid the question consistently posed in this debate: Can we resolve our problems without resorting to unused capacity as advocated by Paish and other people?

Mr. Walden

My answer is, "Yes, given time and given the right pace". The issue is what the Government will do this year and next year, not the general issue of whether we can have full employment. I agree with my hon. Friend on that.

Mr. Orme

My hon. Friend says, "Yes, given time". But the situation is getting far more serious and unemployment is rising. My hon. Friend talks eloquently about what we should be telling our supporters in the country. They are telling us in far more eloquent terms what they think of the policy which has put us in our present position. That is what I want changed.

A unique economic situation is developing. We are getting what is known as technological unemployment. At a time when unemployment is rising, production is rising because of the nature of industry. In certain industries, particularly in export industries such as the car industry, increased production is reflected to a large extent. This point was made by Eric Wigham inThe Times on 19th July. My hon. Friend the Member for Lewisham, West (Mr. Dickens) talked about the T.U.C. going for a production target of 6 per cent. Production is rising at a far higher rate than was anticipated by the Government when they talked about 3 per cent. According to the index published on Wednesday, production during the first five months of the year was nearly 6 per cent. higher than it was during the corresponding period of 1967. That is not a 6 per cent. growth for the year but a rapidly increasing growth in a specific period. On the other hand, unemployment is still rising, particularly among people in the older industries and among unskilled and many semi-skilled people.

The mid-July figure is 514,000. I am glad that an hon. Member for Northern Ireland has entered the Chamber. The figure for Northern Ireland used to be included, but the figures are now split. If the figure for Northern Ireland of 36,000 is added, the total is 550,000, which is the highest figure since the July, 1940, figure of 827,000. In July we take up many people who can be employed in many occupations temporarily or part time. The percentage for the country is 2.2. For Northern Ireland it is 7.1 per cent., a scandalously high level which should not be tolerated by any Government. The situation is very distressing.

On 25th June I attended the Press Gallery lunch at which Aubrey Jones, speaking about unemployment, said: For the first time for a long time, possibly for the first time ever, output per head in this country has increased whilst employment has decreased. Over the whole course of 1967 the increase in output per head from one quarter or another rose from 1.5 per cent. in the first quarter to 3.8 per cent. in the last quarter, while unemployment decreased throughout the entire year. Aubrey Jones was speaking about 1967. We have now moved into the post-devaluation period. His figures are now confounded by the fact that the phenomenon has developed that there are rising production and rising unemployment.

This has serious implications for the future. This is why the T.U.C. met the Government recently and asked for action by a Labour Government, because if the figures are like this for July what will they be like in the autumn and in December? The Treasury never make forecasts on these matters, because nobody knows. We might have a severe winter, which we have not had for a couple of years, and this could cause much unemployment in the construction industry. Without that, if this trend is not turned down it could easily be 750,000 which would be very serious.

We have to take into account that many of the Budget proposals have yet to bite in our economy. Some are beginning to take effect. Prescription charges are just being implemented—again another form of taking purchasing power. Selective Employment Tax, which is to be increased in the autumn, will be another decisive factor in many of the industries which will be vulnerable from the point of view of maintaining full employment. This is the situation facing us.

The question posed both by the Government and, in a more extreme form, by my hon. Friend the Member for All Saints is: what action do we take to prevent it? Do we, as it were, stop the Government achieving what looks like being economic success by immediately injecting into the economy a form of build up of steam to create purchasing power to create jobs and offset the problem of rising unemployment?

Before dealing with that matter I want to deal with the questions facing industry and the points that have been raised about the efficiency or inefficiency of British industry. I do not believe that British industry is as inefficient as has been made out. Of course there are weaknesses and faults. We did not have the whole of our industry destroyed during the last war, as did West Germany or Italy, and have to rebuild on a new industry. Within my own constituency and the Trafford Park area there is the giant A.E.I. factory. One finds brand new modern technological factories side by side with 19th century industries. So British industry is not at a constant level; it has a mixed capacity.

British industry has many facets. It has a great deal of skill and training within it. It is upon that skill that the life of this country depends. My hon. Friend spoke about overmanning as one of the major problems. We will not get rid of overmanning by fear or by threats, but by full employment, growth, and having a situation whereby industries can go in for investment and replace new machinery by going for low unit costs. This is the way to create the situation within industry which removes the fear of unemployment.

One hears talk about trade unions and so forth. People fight for jobs. Whether it is a fitter working in a factory in Salford or Mr. Cecil King on the Board of the I.P.C., every man fights for his job at the end of the day, because it is something to which, for very sound reasons, he clings. If we want to change this attitude in the sense of creating a new atmosphere, we will create it within growth, within planning and within an acceptance of the right to work—and a Labour Government can create the conditions and climate for that acceptance.

The Amalgamated Engineering and Foundryworkers' Union, which I think is recognised as one of the key unions in the key manufacturing industries of this country, has a policy of the right to work based on not being prepared to concede that rationalisation or modernisation, which is not always rationalisation, is in the interests of better production. It does not always mean that because we close factories down and amalgamate and move them about from different areas we are necessarily creating more efficient industries. It has a policy of the right to work until alternative employment is found for its workers, whether they happen to be working in Wales, in the North-East, or anywhere else. Can anyone blame them? My hon. Friend the Member for All Saints should not be obsessed with this argument that everything is resolved by efficiency, and that we must all become little Japanese workers to succeed. I do not accept that. Our figures for production per man hour are not the best in the world, but they are by no means the worst. There are countries with better figures than ours, but there are many developed countries whose figures are much worse than ours. There are many reasons why we cannot be at the top of the league.

What can we do to deal with this problem? My hon. Friends and I have been accused of putting forward defensive policies, but we are in very good company.The Times this morning said that whilst import controls had not been accepted they might have to be introduced, and on the question of the outflow of capital from this country the Cambridge Report said: The long-term capital outflow has shown very large fluctuations in recent years. From a record £374 million in 1964 it came down to only £26 million last year; but in the first quarter of 1968 alone it was £148 million. The wealth going out has been created by our engineers, by those in manufacturing industry, and by other workers. This money is too precious to be allowed to go out of the country to be invested in South Africa, in Australia, and so on.

Despite the improved export figures, we are still sucking in to many imports of manufactured and semi-manufactured goods for the health of the nation. Secondly, purchasing power is not evenly spread. This is why so many of us tried to tell the Government that the prices and incomes policy should not be the central theme of the economy. The Government ought to do other things instead of wasting their time, skill and effort on this sort of thing. They must take action to deal with the uneven spread of purchasing power which makes it possible for some sections of the community to buy the imported goods to which I have referred. I am glad that a Treasury Minister is to reply to the debate. I hope that he will deal with some of the points which have been raised.

My hon. Friend the Member for All Saints says that it is impossible for anybody in the Labour Movement to talk about unemployment without putting his hand on his heart and saying, "I have been unemployed," or "I come from a family which suffered from the effects of unemployment," and that that sort of thing has become folk-lore. I do not think there is anything wrong in that. We may have some sacred cows in the Labour movement; there may be some things that some may feel we cling to long after the need for them has gone—

Mr. Dickens

Like full employment.

Mr. Orme

Full employment is something that, as trade unionists, we demand. To think that in 1968 we would be debating the philosophy of it with a Labour Government is almost inconceivable, when we realise that going back to the 1960s and even up to the 1964 election it would not have been on the agenda; it was not considered to be a subject for argument.

I am not making this point in a demagogic manner, or making an appeal to the emotions. It is already an emotional issue. It is something that the people that I represent demand, and in the areas where it does not exist the fact is reflected by the words and actions of the people in no uncertain terms.

I hope that the Minister will tell the Chancellor that we shall not tolerate a situation in which we are expected to be patient and accept a policy based on what we consider to be outmoded economic theories. We shall insist on a policy of growth, expansion and full employment.

2.26 a.m.

Mr. J. J. Mendelson (Penistone)

My hon. Friend the Member for Birmingham, All Saints (Mr. Walden) made a useful suggestion. He said that we might sometimes copy the procedure and custom of the United States Congress and read certain points into the record. I should much prefer to put to my right hon. Friend's face a point that concerns the coal industry in my area, but he is no longer here, so I have to accept my hon. Friend's suggestion and read it into the record.

My right hon. Friend talked about the coal industry in certain areas and said that we had not yet been able to provide for the arrival of new industries before pits were closed. Perhaps my right hon. Friend will read HANSARD tomorrow and will remember that when he was Minister of Fuel and Power and was in charge of the coal industry he spoke from the Front Bench in a debate on the industry and I interrupted him and asked him to give a certain pledge. My hon. Friend the Member for All Saints expressed his contempt for pledges this evening, but I cannot avoid using the word because my right hon. Friend used the word at the time. I asked for a pledge that there would be a general staff composed of senior Cabinet Ministers—the Minister of Housing, the Minister of Labour, as he then was, and the Secretary of State for Economic Affairs—meeting every week to consider the decline in certain of the old coalmining areas, so as to arrange for new industries to be sent to those areas before pit closures took place.

I remember turning to the Tory benches—which then included some notable criticis of the mining community; I am glad to say that a good many of them did not come back after the ensuing election—and saying that my right hon. Friend would not be intimated by the jeers of hon. Members opposite. I asked my right hon. Friend to spend public money in seeing that the miners were employed until the new industries could be set up in their areas. My right hon. Friend gave the House a pledge that there would be a general staff; that the Ministers would meet every week, and that this policy would be pursued—but he told us this evening that this was a problem that the Government had not been able to solve. He is two years behind with his own policy.

That is what I wanted to write into the record. That is one reason why we have had such disastrous results as Caerphilly. There, the pits are being closed, and there is an unemployment level of 8 per cent. It was the pit closures and the 8 per cent. of unemployment that produced that miserable result at Caerphilly, and which, if it occurred in other similar areas would produce a first-class defeat for our Government, which we would all hate to see, and let in the Tories by default, not because anyone wanted to embrace their policies but because they did not approve of what was being done. That is the danger that faces us.

The main case has already been made by my hon. Friends, with whose policies I very largely identify myself. This debate was absolutely essential, because we have now, against the expectations and the predictions of the Chancellor of the Exchequer, a rising trend in unemployment, although he told us at the time of devaluation and in his Budget speech that, whilst he could not promise a rapid decline in unemployment for the rest of 1968, it would begin slightly in the second half of this year and would accelerate in 1969.

We are facing the opposite position tonight. I can assure my hon. Friend the Member for All Saints that although we cannot change the Government's policy overnight—certainly not in this debate and certainly not in the absence of the right hon. Gentlemen the President of the Board of Trade and the Chancellor of the Exchequer, we are still doing a very useful job.

It is not simply that here we have a group of members of the General Council of the T.U.C., and a number of economic experts criticising Government policy and saying that we must not allow this misuse of resources to go on, because this is what unemployment means. The United Kingdom will fall behind economically rather than advance if that were to happen and we did not persuade the Government to adopt a different policy. Then time passes, and the Government adopt the new policy, and my right hon. Friend says that we are all very foolish— and he must include the General Council of the T.U.C., he must not just confine himself to his poor colleagues sitting with him on these benches—to say when change does occur that we brought it about.

Those of us who sit here below the Gangway are very cautious about claiming to have brought about anything at all. But it would be equally foolish to do as he suggested and shut up. Again, that advice must include the General Council of tthe T.U.C. and the trade union movement generally, because the Government are not prepared to accept our policy immediately.

The purpose of the debate is to put on record before the House rises for the Summer Recess that there are hon. Members who regard this trend as being very dangerous and urge the Government to change course so that the present dangerous trend shall not continue. We should be failing in our duty to shut up on this occasion because we have not had a guarantee that the President of the Board of Trade, or the Chancellor of the Exchequer, or the Prime Minister, or the Cabinet as a whole will change course this morning, as it now is.

This is the great trend in unemployment. It is this great danger that makes it the duty of hon. Members to debate the subject properly. I would go further, and say that the Government should appreciate that, having failed in their duty to find time for an economic debate before the House rises, they will be pressed to have such a debate as soon as we return, with unemployment as the central piece of the debate. Of course I understand why the Leader of the Opposition did not want to have a debate on this subject now. He has been going around the country talking so much economic nonsense that he did not want to face either the Prime Minister or the Chancellor of the Exchequer in a debate today. That he has been irresponsible does not mean that the rest of us should be irresponsible.

My hon. Friend the Member for All Saints spoke like an iron chancellor this evening. He put forward a stern concept. It is one of the characteristics of these economists returning to pre-Keynesian economics to speak like iron chancellors. They say, "You sentimentalists have been arguing since the 1930s that unemployment is a misuse and waste of our resources and that it is socially undesirable, but all the time you have overlooked the fact that there are iron rules of economics which put Keynes out of business". My hon. Friend was speaking as sternly as a whole cabinet of iron chancellors, but the Prime Minister has not been doing this.

I asked the Prime Minister some questions recently about the rising trend of unemployment. He did not give the reply of my hon. Friend the Member for All Saints; he agreed with me in a quiet voice that of course the level of unemployment is much too high, but he was not prepared to accept my remedies. I cannot see how he could accept anything else because the Chancellor said that unemployment would be beginning to fall by now.

The Minister of State, Treasury (Mr. Dick Taverne)


Mr. Mendelson

I shall give way in a minute. I am glad to stir my hon. and learned Friend; it is about time he took part in the debate. The Chancellor said that unemployment would begin to decline. Although the Treasury does not publish estimates of future unemployment, of course it has them and the Chancellor had them. That is why the Prime Minister said that the level was too high. That secret estimate proved false. I will give way to my hon. and learned Friend now. Oh, he is not interested any more. Obviously the Treasury figure has been proved wrong. We have learned by bitter experience not to have too much confidence in Treasury estimates about future trends.

We are facing a very difficult situation in which my hon. Friend the Member for All Saints says there must be higher levels of unemployment if our policy is to work. The Treasury is finding that productivity is going up yet unemployment is not beginning to decline but is going up and they do not know what to do about it. The danger now is that the export-led boom we are all hoping for and which the Chancellor predicted and is working for—this is the meaning of his term, "Two years of hard slog"— is moving too slowly. Unless it is backed up by some reflation at home, not only will the level of unemployment go disastrously high in the next 12 months but it will become a hindrance to our retooling and better preparation for the export-led boom.

My hon. Friend is theoretically completely at fault if he thinks that we can allow unemployment to grow now and concentrate entirely on an export-led boom and that by the end of 1969 we can solve both our balance of payments problems and our unemployment problems. The Chancellor is being proved wrong in his unpublished estimate. My hon. Friend cannot demand that he should say that that is what he wanted, because what is happening is not what he wanted. My hon. Friend can be stern because he is not responsible for the economic and financial policy of the country, but the Chancellor is. Therefore, the great fallacy—

Mr. Walden


Mr. Mendelson

I gladly give way to my hon. Friend.

Mr. Speaker

Order, I do not want to discourage interventions, but this is the second of 28 debates, and interventions prolong speeches.

Mr. Mendelson

I am very unfortunate that we have now returned to your stern régime, Mr. Speaker, and that I am not, therefore, allowed to give way even to one intervention. But I accept my fate, as always.

The serious point in which we are involved concerns the fact that our whole policy of an export-led boom may prove inadequate on its own and that we cannot, on grounds of economic policy, allow a runaway situation with a level of unemployment which may reach 750,000 by the end of this year or the beginning of next year and have no further backing for investment.

The great problem has been that private investment has lagged behind. That is common ground. Private investment is beginning to pick up. It is improving in the machine tool industry and some other industries, but in others it is still lagging behind. If it became accepted that there were to be a limited export-led boom but that the Government would do nothing to increase demand at home, many of the people who make their decisions in so many private boardrooms would not make additional investment decisions between now and Christmas. If they did not, we would find that the wastage of resources and, therefore, a growing underlying trend of unemployment would go from bad to worse when we reach 1969.

There are, moreover, certain industries which, in spite of exhortation—the Government can send Ministers to them every week—will not move in the export market unless they can find a combined domestic and export market which will allow them to have a generally increased, slightly higher rate of profit at the end of their operations. Investment decisions are made not on exhortation but on general policy, as my hon. Friend knows.

It is, therefore, essential for some of those industries to provide encouragement and stimulus for the home market, so that they can be persuaded to go, either for the first time or in a bigger way, into the export market, because they need reduced unit costs and an increased volume of production ail round to make it worth while for them to go into the export market, which, they always say, is costly and needs greatly increased expenditure.

On all these grounds of economic policy, I hope that the Government will not respond to the stern appeal so eloquently made by my hon. Friend. I enjoyed greatly the way he dealt with some of us below the Gangway. I remind the Government, however, that it is not enough for them to be effective, efficient and eloquent in debating contests, because at the end of the road it is not the Members of the House who will make the final decisions. They will be made by the people of Dudley, Caerphilly and All Saints, and, indeed, of Penistone. It will be the judgment of all those people on whether it is acceptable in 1968 and 1969 to have a growing level of unemployment under a Labour Government without the Government taking quick and effective measures to increase home demand to back up the export boom for which we are hoping.

If the Government do not take measures between now and the autumn, and if they allow the unemployment level to rise disastrously, as it is doing, they will receive the verdict of the nation and we will not be able to say that they do not deserve it.

2.44 a.m.

Mr. Nicholas Scott (Paddington, South)

For getting on for four hours we have had a fascinating debate on an important subject. At times, it has appeared from this side of the House as though one was intruding upon or observing a family dispute as various views about the appropriate level of unemployment, various intensities of admiration for the Prime Minister or different candidates for the leadership of the Labour Party have been run backwards and forwards across the stage. But my task is briefly—you have reminded us, Mr. Speaker, that we are only on the second of our series of debates tonight—to survey both the facts and the prospects for unemployment.

Before coming to that, however, I shall deal with two complaints which have been directed at this side of the House. First, comment has been made about the number of contributions coming from the Opposition—only one from the Conservative Party, in fact, a remarkable speech by my hon. Friend the Member for Honiton (Mr. Emery). In reply, I remind hon. Members opposite that yesterday we had a half-day debate on redundancy, a subject of equal importance and of equal concern, one would suppose, to all hon. Members, but on that occasion there was no back-bench contribution from the Labour Party and the whole debate was sustained by this side. I suggest that that more than balances any imbalance tonight.

Second, it was said that the Opposition should have provided time for a full-scale debate on unemployment before the House rose for the Recess. The bulk of time in the House is controlled by the Government, and the first burden, if any, should rest upon them. But this week we faced a situation in which one of the Supply Days was half taken up by opposed Private Business which the Chairman of Ways and Means quite rightly put down, and it was thought that it would be wrong for us to rise without having a debate on the situation in Nigeria, so that was one of the subjects chosen. Then, with only one day left and a large number of subjects as candidates, housing and redundancy seemed to have a great claim. As we have only recently finished our debates on the Finance Bill, my right hon. Friends who are responsible for these matters—I agree with them—felt that a further full-scale debate on the economic situation was not warranted.

I am glad, however, that we have had our debate tonight. In the event, we have had rather more than a half-day debate—or half-night debate. I can understand the reluctance of hon. Members opposite to talk about pledges or forecasts, but I should be failing in my duty if I did not start by reminding the House of three specific pledges or forecasts which the Government made about the likely level of unemployment at this time of the year.

In the devaluation statement, the then Chancellor of the Exchequer, the right hon. Member for Cardiff, South-East (Mr. Callaghan) said: Devaluation will start to reduce unemployment, as soon as our exports begin to increase and the exporting industries call for more workers. I expect to see unemployment moving down steadily from the end of the winter onwards."—[OFFICIAL REPORT, 20th November, 1967; Vol. 754, c. 937.] He was followed two days later by the Prime Minister: … the problem which we shall be facing in a year's time is far more likely to be not deflation and unemployment but expansion to a scale which might lead to labour shortage in many areas."—[OFFICIAL REPORT, 22nd November, 1967; Vol. 754, c. 1334.] At the end of that debate, the Chancellor of the Exchequer said: … there is little doubt that unemployment … will fall away very substantially during the next 12 months, not merely because we move into the spring and summer but also on a seasonally corrected basis, and we shall have a much lower level of unemployment next winter than at the present time."— [OFFICIAL REPORT, 22nd November; Vol. 754, c. 1439.] Those forecasts have been made to look increasingly nonsensical by the turn of events, and the present situation is bleak. As the hon. Member for Ebbw Vale (Mr. Michael Foot) said, at the moment we have a seasonally adjusted total of 581,000, or 2.5 per cent., the highest figure for any month for which the Ministry of Labour has kept such records. That is the improvement that right hon. Gentlemen opposite were promising the House and the country last winter.

The outlook is no better. If the average monthly increase over the past three months is continued to December we shall end up next January with a seasonally-adjusted figure of unemployment of 672,000. If we were to have a figure next January similar to that which we had last January, which few of us would regard as satisfactory, the figure would have to drop by 10,000 a month between now and then. We all know that that will not happen, so the outlook is pretty bleak.

I tempt the fates I suppose, but 1 think that it would be good, with forecasts of 600,000, 700,000 and 750,000 unemployed going around, if the Minister of State could make some sort of forecast. I know that the Government have resolutely refused to do this in the past, but there are precedents. My right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) made just such a forecast when there were similar fears in 1958 about the level of unemployment in the winter to come, and he afterwards had an accolade from the Prime Minister, who said that my right hon. Friend made a brilliant forecast and was right almost to the last decimal point. There is a standard for the hon. and learned Gentleman to live up to.

The House and the country could do with some reassurance about the figures that the Treasury thinks are likely next January and February. One cannot ask them to make allowances for the uncertainties of the weather, but, leaving that aside, I should have thought that they could give some sort of guidance about the way they think things will go, certainly more specifically than the Chancellor did on "Panorama" on 15th July, when he would not commit himself to a figure. He would not even say that 250,000 unemployed was full employment, and he described the figures in the regions at present as disturbing. The figures of unemployment in the Northern Region have doubled since July, 1956, but to the Chancellor they are no more than disturbing, not sufficiently disturbing for him to do anything dramatic about them.

Mr. Dickens

This is all very well, but where do the Tory Opposition stand on the level of unemployment that they want to see? Do they accept the view of the Industrial Policy Group that this country needs a level of 2 per cent. out of work permanently? Let us have a clear statement on that.

Mr. Scott

My reply must be rather like that of the character who when asked how to get to another place replied, "I would not start from here." If I were magically transformed to take over the responsibility, I should not reflate the economy at present. That would certainly not be right, but the overall economic plans which the Tory Party has, and which it will put into operation when it returns to power, will lead to a completely different method of managing the economy, a completely different attitude towards its management, which will make the hon. Gentleman's question irrelevant. Talk of absolute levels is misleading to an extent. The most disturbing factor about unemployment at present is not the absolute level but the way in which the regions are being severely hit, and the way in which long-term unemployment is increasing, rather than the absolute level. I have already mentioned the way in which unemployment in the Northern Region has doubled in the past two years, and Scotland, Wales and Northern Ireland have done very little better in that period.

In the duration of unemployment the increase has been remarkable. In January, 1967, the number of persons unemployed for eight weeks or more was 50 per cent. of those unemployed. Last month it was 68 per cent. The latest breakdown showing the numbers unemployed for 52 weeks and more—figures for April, 1968—show an increase compared with last year. In April, 1967, 11.2 per cent of them had been unemployed for a year or more, and in April, 1968, the percentage had risen to 15.1. This is one of the most disturbing factors because it operates against any argument that what we are seeing is a real redeployment of labour when the grown of long-term unemployment within these figures is so disturbing.

There are two aspects about the future. We have at the moment a high and rising level of unemployment. In September we are to have a 50 per cent. increase in Selective Employment Tax imposed on industry. This will have an impact on the level of unemployment. Part of the argument for the tax is that it will contribute towards a shake-out from the service industries. Employment in the service industries has been dropping and the Government have claimed that it has been in part due to the impact of Selective Employment Tax, but at the same time employment in the manufacturing industries has been dropping. So it is difficult to argue that there has been any transition from service to manufacturing industry. The most likely thing to happen when Selective Employment Tax is increased by 50 per cent. is that more people will lose their jobs in the service industries and will not be taken into manufacturing industry where employment is also declining. We want to know what impact this will have on the level of unemployment during the coming winter.

What about the impact of the continuing rise in productivity, which we are all glad to see, on unemployment? In the London and Cambridge Economic Review the point was made clearly that if the continuing upward trend in productivity continues we shall have a continuing upward trend in unemployment unless there is a substantially faster rate of growth than we have or appears likely.

So the voices of hon. Gentlemen opposite have largely condemned the Government, with perhaps one notable exception. They have condemned the performance of the Government and the level of unemployment at the moment. I repeat that it stands at the highest seasonally adjusted figure since records were kept. That is the charge to which the hon. and learned Gentleman has to reply. We should like him to reply to that charge and comment on why the Prime Minister's confident forecasts have come to this State.

2.59 a.m.

The Minister of State, Treasury (Mr. Dick Taverne)

I shall deal with the heart of the problem and the general problem.

I ought to say something about the reasons which led my right hon. Friend the Chancellor of the Duchy of Lancaster to intervene in the debate earlier. The answer is simple. One of the issues raised was that by my hon. Friend the Member for Blyth (Mr. Milne), who put forward as a subject the position of unemployment in the North-East. My right hon. Friend is specially concerned with that, and it seemed a matter of courtesy that he should be here to reply to the specific points raised by my hon. Friend. I see no reason for criticism in that. He dealt with it, and I thought it was extremely courteous.

Mr. Arthur Lewis

I raised the point and perhaps I should explain it. My right hon. Friend did not know that only one hon. Member would raise this issue. He waited to hear only one speech. He was called, made his speech and immediately walked out, and he has not been seen since. I said, and I repeat, that that is not the normal courtesy which is shown to the House, and I shall let the Prime Minister know about it because I think that it was a disgraceful thing for a Minister to do. Back-bench Members do it, but we do not expect Ministers to do it.

Mr. Taverne

I am sure that the Prime Minister will make careful note of my hon. Friend's representations. As I was to reply to the debate, it seemed to me that my right hon. Friend's intervention was courteous in dealing with a special point.

Mr. Lewis

He should have stayed for the debate. Where is he?

Mr. Taverne

I agree entirely with my hon. Friend the Member for Ebbw Vale (Mr. Michael Foot) that this is not the ideal setting for such a debate. We have had a full debate and notable contributions, but it is an unfortunate time of the morning, when one's mind is not always as clear and the points not always as concisely made as at other times. Despite what was said by the hon. Member for Paddington, South (Mr. Scott), it would have been more satisfactory if the Opposition had stuck to their original plan to have a full day's debate on the subject, particularly as the Leader of the Opposition has been making speeches about it outside the house—speeches which, as my hon. Friend the Member for Ebbw Vale said, it would have been interesting to debate in the House—

Mr. Speaker

Order. I hope that we shall come to the subject of the debate. I remind the hon. and learned Member and the House that this is the second of 28 debates.

Mr. Taverne

One cannot say that this is a very cheerful subject when there is so much concern on all sides about the higher rates of unemployment as seasonally adjusted. Most hon. Members know what that means in personal terms—not only in material loss but in the psychological loss of someone who is fit for work and is unable to find work.

It is important to know what has happened. There was a rise in unemployment after July, 1966, with a peak in mid-September and then a gradual decline. But since February the figures have been creeping up again. It is important to find out why and to identify as far as we can the reason for the increase in the figures in February. One should not be categorical about any part of it because one does not necessarily know the explanation. Often one has found that an increase in the unemployment figures has reflected something which happened much earlier.

But in so far as one can identify the factors, I think that there are three at work. The first certainly seems to be the rise in productivity, which has perhaps been stronger than had been expected. With production rising, one had expected to see the figures of employment rising, but they have not risen. A second factor may well be the higher level of imports in the first six months than had been expected. It is true that there was a drop in June, but obviously one cannot expect that to be effective yet. The figures for the first five months were higher than had been expected. One should not want to base too much on the figures for any one month, either when they are too high or when they are much lower than had been expected. To some extent the higher level of imports than had been expected held back the growth of domestic production as well as the employment possibilities.

The third factor, obviously important, has been the post-devaluation strategy of switching resources from home production to export production. Throughout industry locally we have experienced from time to time the phenomenon of restructuring an industry and the local unemployment which has been caused. In a sense we are facing it on a national scale with the attempt to redirect resources. Obviously this cannot be a contemporaneous operation. In most cases it does not happen that one day a man is displaced from a job concerned with home production and on the very next day he steps into a job concerned with production for exports.

Inevitably, a switch of resources is bound to lead to a temporary rise in unemployment. This is to be expected so that the transfer can take place. It was for this reason that more was not done by way of switching resources at an earlier time. My right hon. Friend the Chancellor of the Exchequer was criticised by hon. Members opposite for not doing more at the time of the public expenditure cuts in January. It is a difficult matter for decision as to whether or not more should have been done then. But one of his reasons was the very sensible one that there was no point in digging a hole that one was not in a position to fill.

If the Opposition's policy had been followed, and more had been done, say, by the use of the regulator in January, in all likelihood the unemployment figures would be higher than they are because export orders could not possibly have taken up the extra capacity created. An article in today'sTimes Business News shows how the export orders coming to the shipbuilding and engineering industries only came forward towards March and April. One did not expect the devaluation effects on export orders to be immediate. Some time-lag has been inevitable and this has been a factor.

A recovery clearly depends on two things—buoyancy of exports and import substitution. The aim is to reduce the level of unemployment. But this must be done through these two ways because the boom which is the way to solving the problems of the regions, as my hon. Friend the Member for Ebbw Vale rightly pointed out, is a boom which must depend on an export-led boom. It is no good having a higher rate of growth domestically if it is not founded on a higher export rate of growth. If there is no higher rate of export-led growth to lead such a boom, the impact on the balance of payments can only be disastrous, subject to the import control point to which I shall come later.

Mr. Dickens

Can my hon. and learned Friend give any information of the effect of this export-led boom, in a quantitative sense, on unemployment?

Mr. Taverne

I cannot see how I could possibly be expected to give a quantitative answer. It depends both on increased exports and import savings. The question of how much extra domestic production is created is also involved. One cannot quantify the figure for a given amount of export increase. It is impossible to quantify.

One factor in this situation is productivity. The impact of productivity has been unfavourable in the short term on unemployment, but there is no doubt that it is a favourable development in the longer term, because it will make us more competitive abroad, enable us to export more and enable domestic growth to proceed faster. If we become more competitive through increases in productivity, we are in a better position to compete with foreign imports as well. Import substitution has a better chance to increase and again this creates greater possibility of growth and, therefore, in the longer term, the possibility of reduction in unemployment. So the productivity factor, although in the short term unfavourable in terms of unemployment, in the longer term is likely to have a favourable rather than an unfavourable effect.

I was asked to make forecasts about exports. It has not been customary to make these predictions and, while there may have been a few exceptions, they have been wrong as often as they have been right. The uncertainties are so great that it is hazardous to make forecasts. The export position, which is vital, is one in which the outlook is good. Inquiries made by the C.B.I. about the expectations of exporters give one every reason to expect exports to develop on a rising trend.

I was referred to the Chancellor's statement of last March, in which he said he expected that unemployment would fall. It must be made clear that he was speaking not of the short term but of the working out of the Budget strategy over a period of 12 to 18 months.

Mr. Mendelson

Did the Chancellor expect, when he made that statement, that there would be such a serious increase in unemployment in the second half of the year—this at a time when he was forecasting a reduction in the numbers unemployed?

Mr. Taverne

The Chancellor was talking in terms of the Budget strategy. He would have been extremely rash to predict the unemployment figures for, say, the following two months. The strategy will have to be judged overall.

I want there to be no misunderstanding about the fact that we are all extremely concerned about unemployment, and particularly its psychological effect. However, to compare the unemployment position now with the position in the past is not, in many ways, valid. Much has been done to cushion the blow and the material position is now quite different from what it was. With the earnings-related unemployment supplementary benefits, redundancy payments, once National Insurance contributions and Income Tax have been taken into account, and so on, people now receive about two-thirds or more of their previous incomes, compared with one-half four years ago. If one has been employed by one's previous employer for five years or more, one can expect a redundancy payment of at least £105. This is of great help, particularly psychologically, in reducing the hardship caused by unemployment.

We recognise that when we need greater mobility and redeployment of labour, the social costs must be met. Despite complaints about the extravagance of redundancy payments and the expense involved in paying them, they are part of the burden which we must meet to deal with the need for greater mobility.

Certain remedies have been suggested and some of my hon. Friends have called for reflation. There is no doubt that if we reflated at this time, irrespective of the growth of exports and subject only to import controls, there would be a worsening of the balance of payments position. This would be totally misguided, because in the long term the effects would be more disastrous than what is happening now. It is essential to our whole strategy that we move as closely as possible to a balance of payments surplus as quickly as possible.

Some of my hon. Friends have suggested the imposition of import controls and the selling of overseas assets. I recommend them to read a speech—it may not have appealed to hon. Gentlemen opposite, but I am sure that they read it with interest—made by Lord Balogh in another place. He pointed out that if one sold one's assets, one reduced one's income. He pointed out that import controls, quite apart from the question of retaliation, are a once-for-all remedy, whereas what we face is a persistent problem, a persistent decline over many years of our share of exports, a persistent increase over the years of manufactured imports. One cannot possibly contemplate progressively increasing import quotas to deal with this. These are once-for-all remedies, and there is no question about this being the way out. The only answer lies in the strategy embedded in the Budget. There is no reason to depart from that strategy and the kind of suggestions which have been made for departing from it would only make matters worse in the long run.