ECONOMIC AND INDUSTRIAL POLICY

HC Deb 18 February 1971 vol 811 cc2141-264

4.11 p.m.

Mr. Roy Jenkins (Birmingham, Stechford)

I beg to move, That this House has no confidence in the economic and industrial policy of Her Majesty's Government. The Motion expresses the lack of confidence which we on this side of the House, and an increasing number of people outside, feel in the major home front policies of the Government. We do not wish this debate to be too narrow or too technical an economic debate. We do not on this occasion propose to discuss the intricacies of fiscal or even monetary policy, or the details of public expenditure. These can be more fully dealt with next Monday, if there is time, and when we come to the Budget debates. What we are more concerned with here is, first, the unemployment position and prospects, particularly in the weaker regions, but now affecting to an increasing and disturbing extent hitherto prosperous areas as well.

Secondly, we are concerned with the Government's attitude towards industry, both private and public, as exemplified on the one hand by their handling of the the Rolls-Royce affair and on the other hand by their proposals for hiving-off. The projected level of industrial investment gives a clear indication of how industry views the future under this Government.

Thirdly, we are concerned with the Government's policies, or lack of policies, for dealing with inflation, in particular, their handling of recent public sector wages claims.

Let me make it clear to begin with that it is no part of my case to deny that the Government face genuine problems. Some were there when they started. They inherited many things which were good and some things which were bad. Clearly, they inherited a very strong balance of payments. The Chancellor of the Exchequer told us on Tuesday that there would be a current account surplus of at least £600 million and possibly a good deal more than that. That is the strongest position we have ever had.

I am wholly mystified by the strange quirk of character in the Prime Minister which makes him incapable of admitting this inheritance and which leads him into all sorts of twisted convolutions in order to try to pretend that black is white and white is black and that, whatever distortions he may have to get into, he must prove not only that he is right now but that he has always been right in the past. The plain fact is that there was no deteriorating trend in June, as he claimed, but rather the contrary, if anything. Everyone except him now knows this to be true.

What the Prime Minister could reasonably say is that the last Government left the present Government an unprecedentedly strong and, for the time being, secure balance of payments but a rising inflationary trend. That would be a balanced and convincing statement. But he cannot achieve conviction because his stubborn partisanship will not allow him to be fair or balanced—and even when he deals with inflation he has to try and persuade himself that we deliberately engineered it for electioneering purposes, which is, quite frankly, just childish. If elections were the cause of inflation there must have been an awful lot of other Governments in the world who were under the mistaken impression that they were facing an election in 1970. The dates of elections are not normally matters about which Governments make mistakes. [Laughter.] Let me say that the statutory dates are not normally a matter about which they make mistakes.

I do not blame the Government for taking inflation seriously. The case against them is different. It is that nearly everything they have done—from the Chancellor's crass words about the doctors' 30 per cent. during the election to the mini-budget and to the abolition of the Prices and Incomes Board—has made things worse and not better. What is the new policy? The absence of a prices and incomes policy, or at least the unwillingness of the Government to take the responsibility for stating one, is now paradoxically made the excuse for not having a policy on almost every other major economic issue too.

What is the policy for reducing unemployment? What is the policy for increasing industrial investment? What is the policy for using the unprecedentedly strong balance of payments surplus as a platform for more rapid and sustained economic growth? Or are we just to stand petrified and watch this fritter itself away without any effective use being made of it?

The Prime Minister's attitude whenever any of these questions is asked is rather like that of a surly shopkeeper who says, "Haven't you heard that there's an inflation on?" His errand boy, the Chancellor of the Exchequer, says the same thing, only a bit more nervously because he is afraid of the customers. The object of economic policy must always be to try to achieve a balance between a number of different objectives, and in any event there is not the slightest evidence that rising unemployment, falling investment and stagnant production will help us to cure inflation. If anything, the reverse is true.

No one would sensibly want to exacerbate the present cost-push inflation by adding demand inflation to it. But we are miles off that. Today's unemployment figures are by far the worst we have known since the war, save for a short time in the quite exceptional winters of 1963 and 1947, when there were totally different weather conditions from those prevailing now. Unless there is a rapid change of trend—and there is no tendency of that at the moment—we shall very soon be back almost exactly half way between the full employment figures of the earlier post-war years and the mass unemployment, the mass wastage of human resources, of the late 1930s which we thought we had left behind us for ever.

The figure of 721,000 unemployed for the whole country is bad enough. The Scottish figure of 118,000, or 5-5 per cent., is even worse. It is a horrifying figure. It is far worse than any monthly total under the Labour Government. But it is not only the position in Scotland and in other development areas. The position, as I indicated earlier, is that it is now the more prosperous areas of the country too which are beginning to feel the pressure of real unemployment. The figures for Birmingham were published yesterday; a post-war peak of 2.7 per cent., a total of 14,700, over one-third as much again as in this month last year.

In Derby, as we know only too well, there is still more at risk. There are over 7,000 further redundancies already announced—without any from Rolls-Royce—in the Midland Region not included in these figures. It is very serious that we should have this development even in the very prosperous areas, because not only does it mean that because of the destruction of a large part of development area incentives as a result of the policies announced by the Government last October, there is less pull to the development areas, but it means that there is less to pull because there is less prosperity and employment in the country as a whole.

Whe one considers this position, the words used consistently by Tory Opposition spokesmen as they then were, and as they ought to be again soon, about the unemployment position up to last June make pretty hypocritical reading. We all know the figure published today, 721,000. That, at least, was the figure 10 days ago. It is probably quite a bit worse today.

In April 1970 the unemployment figure was 100,000 less than that. Commenting on that figure the Secretary of State for Employment said: If we could get back to Tory policies, the unemployment situation would be a great deal better than it is today."—[OFFICIAL REPORT, 6th May, 1970; Vol. 801, c. 421] That was when the figure was 100,000 lower, In May of last year the figure was 140,000 lower than it is on today's count. The same right hon. Gentleman then said that this was a damning indictment of the Government's economic policy, and of their good faith. In June the figure was 200,000 less than it is today, and the late Iain Macleod, who I believe would have been horrified by today's figures, described it as "a tragedy for Britain" and spoke of the unemployment position as "the final proof that Labour Government has failed."

Quite apart from the Prime Minister's promise of 16th June to reduce unemployment "at a stroke"—it was a double promise, on unemployment as well as prices—were these strong words intended to mean anything or where they just a cynical Opposition exploitation of an issue without any intent that anything should be done about it as soon as the votes were counted? At Question Time the other day the Prime Minister denied that it is the deliberate policy of the Government to bring about unemployment in order to contain inflation. I suppose that is something, though it is far from enough. The present United States Administration used very similar words in April 1969, two years ago, but they have put unemployment up from 3½ per cent. to 6 per cent., and without curing inflation either. Without achieving their objective, in the United States they have switched their policy, and one may well ask what has been the purpose of this abortive essay in deflation for two years which has been switched off before it had any beneficial results. That is a matter for the United States. But the Government might well learn some lessons from this experience, and one of these almost certainly is that we shall now require far more than a neutral policy, which the Prime Minister implied; we shall need a very vigorous and positive policy indeed to prevent unemployment rising rapidly still further and, in the weaker regions at least, rising to quite intolerable and unacceptable levels in the very near future. I hope that we shall hear from the Government not palliatives but a major programme of expansion to deal with this great problem at present.

I turn to industrial investment. The Government's survey of intentions predicts a fall of 2 per cent. This is the first time since 1963 that a fall has been predicted. Home machine tool orders, a crucial factor here, are reported this morning as 42 per cent. down in the last quarter of 1970 as against the last quarter of 1969. The statement from Mr. Barrett, the trade association general secretary, says that in his view that decline in orders has continued during the first six weeks of this year, and he attributes part of it to the difficulties associated with the switch-over from investment grants to investment allowances.

I gather also that the C.B.I. survey of investment intentions, the full results of which have been delayed, probably indicates a still worse prospect. But even if that were not so, the outlook here is bad enough and industrial investment, as I need hardly remind the House, is not merely an abstract statistic but is vital for our future competitiveness, for the security of jobs and for our future standard of living.

Hon. Members in all parts of the House quite rightly reminded me frequently and forcibly enough when they thought that I ought to have been getting a bigger surge in investment in the two years up to the General Election. But the position was consistently far better than the really calamitous situation revealed by the figures which I have quoted.

We must remember that investment intentions depend above all on industry's confidence in the future—on the future, not on the past; on the prospects, not on the inheritance. Even a Government as devoted to shrugging off their responsibilities as this one can hardly contend that investment intentions for the future, in February, 1971, are all the fault of the Labour Government who went out last June. They are a very clear indication of what industry thinks of future prospects under this Government's economic policies.

Everything I have been talking about so far was the result prior to the Rolls-Royce crash. It has undoubtedly become a good deal worse as a result of that in the past two weeks. There are the jobs directly at stake. There are those affected by the widespread repercussive effects here at home. There is the longer term threat to our exports involved in the damage to our national reputation in the United States and elsewhere. No one should minimise that.

It cannot possibly be argued that these consequences will do other than harm to the already bad climate for unemployment and business confidence. The Rolls-Royce situation has been debated twice, and will be debated again. I want to deal primarily today with the attitude of the Government to public and private ownership generally, as illustrated by this particular situation. Their attitude almost defies belief. During last Thursday's proceedings, apart from the Parliamentary Secretary's great statement that on, above all, hard bargaining, it was the intention of the Government to outbid any rival and to announce it in advance, the dominant note in that debate was the concern of the Government to reassure their back-benchers, and perhaps some of their front-benchers too, about how quickly, once the State had done its rescue operation, the company could be returned to private ownership on a healthy, profit-making, going concern basis.

This must be seen against the background of a general policy, to which apparently the highest priority is to be given, of hiving off as many of the profitable bits of existing nationalised industries as they can lay their hands on. Even before the Rolls-Royce affair, this was partisan dogmatism run mad and something which I believe would be emulated by practically no other Government in the world. The French, the Italian and the American Governments do not try to sell off the valuable national assets which they control. Whether Governments be nominally left-wing or nominally right-wing, the general tendency is very much in the other direction.

After Rolls-Royce, this Government's policy becomes not only dogmatic, retrograde and partisan, but insensitively ridiculous as well to an extent which suggests that the Prime Minister must have had a very close personal hand in it.

I do not often agree with the right hon. Member for Wolverhampton, South-West (Mr. Powell), but I thought that on Monday of last week he handled the dagger with absolute precision when he said that it is an extraordinary proposition to come from a Conservative Government—that State ownership is the natural instrument, the chosen method, for restoring unprofitable assets to profitability."—[OFFICIAL REPORT, 8th February, 1971; Vol. 811, c. 82.] This Government apparently intend to be the chosen instrument and natural method by which the nation always pays the cheque and the private owner always gets the profit, if there is one.

Mr. F. A. Burden (Gillingham)

In view of the Government's involvement with Rolls-Royce for such a considerable time, why, if they considered that it was such a great national asset, and in view of its difficulties which must have been known to them, did not the Labour Government nationalise it when they had the opportunity?

Mr. Jenkins

First, the hon. Gentleman credits the Labour Government with a great degree of prescience if he says that the difficulties must all have been known to us by last June, since this Government have made it quite clear that the position was not known to them, even in broad outline, by last November. Second, the point of substance is a reasonable one for the hon. Gentleman to put forward. He now appears to be a general convert to nationalisation, though I do not recollect his voting for our Amendments to nationalise the whole company last Thursday evening. However, I was defending, and I do generally defend, an undogmatic position. What this Government are putting forward is one of the most dogmatic positions which has ever been put forward in any advanced country—that to save private enterprise the State nationalises, but when something under public ownership is going well the State gets rid of it.

Following what has been for the Government the Rolls-Royce fiasco and for everybody else the Rolls-Royce tragedy, let us now for the sake of common sense, and indeed of common decency, have an end to this hiving-off nonsense. Let the Government leave the Air Corporations to get on with their job. Let them leave British Railways Hotels where they are, profitable and, on the whole, very well run. Let them stop harrying the Steel Board and damaging its investments. Above all, let them leave the Coal Board unpillaged and give themselves a chance of getting a chairman for it who can command the confidence both of the nation and of the miners.

On the wages front the Government's record is a mixture of inconsistency, unfairness, dilatoriness and spite. Before the election, they proclaimed two policies. First, they were doctinally against any form of prices and incomes policy, voluntary or statutory, against any form of guide lines, and against the P.I.B. When they talk about the inflationary pressures that they inherited, it must not be forgotten that they consistently opposed every attempt to curb inflation. They voted in the Lobbies for inflation whenever they had the chance.

Second, although for the private sector it was to be market forces and nothing else, on the public sector—I agree that they said this before the election—there was to be heavy but undefined Government pressure. Then they made nonsense of the second point and made the unfairness doubly compounded—for this the Chancellor bears a very heavy personal responsibility—by endorsing 30 per cent. for the doctors during the election.

Then they introduced the mini-budget, which will make every family man earning up to nearly £3,000 a year worse off. It must not be forgotten that the substantial inflationary effects of that minibudget—the effects on school meals, of prescription charges, of other health charges, and perhaps above all on rates and ultimately on rents—have yet to be felt. They are still in the pipeline; they have not come out of the pipeline yet.

Then the Government saw that the situation was getting out of control. Let us not be in any doubt that, for all their talk about the inheritance, the pace of wage settlements was substantially faster in the second half of 1970 than in the first part. Then the Government saw the situation getting out of control and thought that they could get the Wilberforce Inquiry to dig in for them and then proceed, by the totally arbitrary method, based on no principle of fairness, of 1 per cent. less on each subsequent settlement.

But the Wilberforce Inquiry backfired in all sorts of ways. First, by its own natural and inevitable lack of economic experitise, confessed to by itself, it showed what a nonsense it was for the Tories to have got rid of the P.I.B. Second, it put the responsibility for formulating a general incomes policy firmly back on the Government's doorstep as something which went, in the words of the Report, to the heart of political decision. Third, it illustrated the unwisdom, to say the very least, of Ministers sheltering behind the oral evidence of senior civil servants in a major matter of such current political controversy. I do not believe that that procedure will ever be followed again.

Fourth, the Wilberforce Inquiry told the Government that they cannot ignore prices in dealing with wages, Fifth, it produced an award which, so far from being a guide line—under a different name—for the future, has been differently interpreted by nearly everybody who has studied it, but hardly anybody, except the Secretary of State for Employment and a few of his colleagues, believe that it is 10.9 per cent. [AN HON. MEMBER: "They should read the Economist."] It is not only the Economist. Many other commentators in almost every paper of every shade of opinion have said so.

So where do the Government go from here? [HON. MEMBERS: "Out."] The Post Office strike is allowed to drag on, with the union continuing its determined fight to avoid an actual reduction in the standard of living of its members. The Government no doubt think that the U.P.W. should go to arbitration. I take it that the sacking of Professor Clegg is intended to encourage it in that direction. It illustrates only too clearly the basis of the union's fears, and it illustrates, too, that the Prime Minister cannot trust or tolerate an independent mind, neither at the Treasury nor at the Civil Service Arbitration Tribunal.

It is typical of this Government that they choose Post Office workers to bear the brunt of their so-called anti-inflation policy. They are public servants. They are amongst the most lowly paid, and thought, probably wrongly, to be without great bargaining strength. But it is a policy which is proving far more effective at spreading bitterness than at containing inflation. That is the fundamental error of the Prime Minister's approach. He has no sense of persuasion and no sense of fairness. He is an expert at demolition and at division, whether it be in industrial relations, in dealing with Rolls-Royce or in dealing with the Commonwealth; but at promoting cohesion and construction he is barren. This, I believe, is because he is to an extent greater than any Prime Minister since Neville Chamberlain, incapable of understanding the minds of those who do not agree with him or have a different background of experience.

What should be done? Inflation cannot be dealt with by further depressing employment. The price would be so intolerable that not even this Government could in the last resort pay it. They would repeat what has happened in America. What they must, on the contrary, do straight away is to try to recreate confidence—confidence for workers in the future of their jobs, confidence for business in the future of investment and the confidence of the nation as a whole that our social structure is not to be further torn apart by divisive dogmatic policies.

The Government must give up their foolish faith, which hardly any informed person now shares, that everything can be dealt with by an ill-thought-out unworkable Industrial Relations Bill. They must give up their plans for a further instalment of unfair redistribution in the Budget. They must, on the contrary, try to repair the damage of the mini-budget. They must renegotiate the RB211 contract and give jobs back to Rolls-Royce and faith in Britain's name back to our customers abroad. They must show that they care about prices as well as wages. They must stop discriminating against the public sector. They must stop trying to pick off the weakest. But, above all, they must stop the unemployment drift and offer the prospect, the quick and massive prospect, of more jobs and growing production. That is the only way in which they can get co-operation to halt the wage-price spiral.

In their eight months of life they have exposed the bankruptcy of their own narrow philosophy with a speed rarely equalled in the history of British government. To begin to re-create confidence they must give up their dogmatism. Until they do that they will damage themselves almost as rapidly as they are damaging the country.

4.45 p.m.

The Chancellor of the Exchequer (Mr. Anthony Barber)

I beg to move, to leave out from "House" to the end of the Question and to add instead thereof: recognising that cost inflation weakens the nation's competitive position, undermines employment and industrial investment and creates social injustice through rising prices, applauds the determination of Her Majesty's Government to curb inflation by resisting excessive pay claims, by maintaining a firm monetary policy by keeping down public expenditure, and by reforming industrial relations, thus preparing the way for sustained economic growth". Those of us on these benches have often wondered why the right hon. Gentleman and his Friends decided, week after week, not to use one of their Supply days to debate what is undoubtedly the most pressing economic problem of our time, cost inflation. Now, having listened to the right hon. Gentleman the Member for Birmingham, Stechford (Mr. Roy Jenkins) this afternoon, I believe we appreciate the reason; because the truth is that on this, which is the basic problem which we inherited from him and his Government, and which we face today, the Opposition have no policy.

I shall return to the speech of the right hon. Gentleman, but there is one other aspect I should mention by way of introduction. The right hon. Gentleman has waited to select these matters for debate until less than six weeks before the Budget. He of all people realised full well when he put down the Motion that at this time I would have not the slightest intention of anticipating next month's Budget. Nevertheless, despite this obvious constraint, I am pleased to have this opportunity, first of all, of dealing with the current situation and of explaining the Government's policy, and secondly, of showing the House that this Motion of censure is a sham and deserves to be decisively rejected.

Mr. E. Fernyhough (Jarrow)

Can the right hon. Gentleman explain why it would be improper for him, in replying to my right hon. Friend, to reveal anything of his intentions as far as his Budget is concerned next month when he has already revealed, last November, what part of that Budget will contain?

Mr. Barber

I believe the right hon. Gentleman, if he listens to what I have to say, will appreciate the answer which I give to his right hon. Friend's speech. His right hon. Friend started by saying—which I must say really was the understatement of this Parliament—that some of the problems were there when this Government took over. Whether it be the course of earnings and prices, of unemployment, of industrial relations or of investment, every single one of these problems, as he knows full well, has its origins in the disastrous economic policies which were pursued by the last Government.

Mr. Harold Wilson (Huyton)

Since the right hon. Gentleman the Prime Minister and his friends claimed at that time to have full knowledge of all these problems, why did they at that time, in the week of the election, say that they would reduce unemployment, that they would take action to reduce unemployment, to cut the wage-price spiral and to reduce prices within a few weeks, at a stroke? Why did the right hon. Gentleman say that if he knew then what he now claims he knew?

Mr. Barber

The right hon. Gentleman knows perfectly well, for my right hon. Friend has dealt with that point time and time again. I would say this to the right hon. Gentleman. His right hon. Friend's speech this afternoon would have been a little more convincing if it had not been totally belied by his performance as Chancellor. The right hon. Gentleman was Chancellor for three years. [An HON. MEMBER: "You will not be".] During that time the standard of living of the British people rose by less than 1 per cent. a year. At the end of that period there was a full abandonment of all remnants of an incomes policy and prices were rising faster than at any time for 20 years. [An HON. MEMBER: "Not as fast as now".] They were three years in which he boasts that he increased taxation more than any other Chancellor in the history of this country.

Mr. Roy Jenkins

As a matter of interest, will the right hon. Gentleman say whether he seriously believes that in the last minute he has given a fair summary of the salient economic events of those 2½ years?

Mr. Barber

The right hon. Gentleman need not worry. In the course of what I have to say I shall refer to a few other points. The right hon. Gentleman recognises that the central problem facing both the Government and the nation is that of cost inflation. It is central to almost every economic problem of consequence. Cost inflation, it is universally recognised, is the principal cause of rising prices and the principal cause of the present high level of unemployment and of the poor record of industrial investment to which the right hon. Gentleman quite properly referred.

It is, moreover, an evil which threatens the whole fabric of our society. What are the facts? The country is at present in a dangerous condition of spiralling inflation. These words are not mine, they come from the report of the Wilberforce Court of Inquiry which listened to evidence not only from the Treasury but also from the T.U.C. and the C.B.I. It went on to say this: By 'dangerous' we mean a state of affairs which undermines, almost from the start, the real benefit of the wage increases sought, creates social injustice and resentments, and which if continued will threaten our balance of payments and destroy the value of money. What are the origins of this situation? Only a few minutes ago the right hon. Gentleman accused the Government of shuffling off their responsibilities. Does he not remember that just six months before the General Election, as Chancel lor, he came to this House to speak in support of the then Government's White Paper which laid down a norm for pay settlements of 2½ per cent. to 4½ per cent.? That was in December, 1969. [Interruption.] I am entitled to reply to the right hon. Gentleman because he accused this side of the House of not being responsible in relation to these matters concerning wages.

What he did in December, 1969, was to say that pay settlements should not be above the norm of 2½ per cent. to 4½ per cent. Although it is scarcely credible, it was the same right hon. Gentleman, in the same speech just six months before the General Election, with all the information available to him as Chancellor, who predicted that in 1970: We should now be able to look forward to a greatly reduced rate of price increase."—[OFFICIAL REPORT, 17th December, 1969; Vol. 793, c. 1476.] That is what he said in December, 1969, six months before the election.

Mr. Harold Wilson

indicated assent.

Mr. Barber

If the Prime Minister nods approval—[Laughter.] To come to the substance of the matter—and, I hope that the Leader of the Opposition will listen to this, because I will tell him what actually happened—in every single month between then and the election the rate of price increases was higher than during the month when the right hon. Gentleman spoke—every single one of them. When the right hon. Gentleman handed over the reins of office in June of last year pay settlements were running at the rate not of 2½ per cent. to 4½ per cent—his own figure—but of 9 per cent. [Interruption.] Earnings were rising by 12 per cent. and what is more, the rise was accelerating.

Mr. Harold Wilson

rose——

Mr. Barber

I will give way later. What is more the right hon. Gentleman by this time had abandoned all pretence of curbing the rise in pay settlements. That was the deteriorating situation which the right hon. Gentleman bequeathed to us in June of last year, a situation which he knew on the information then available to him was fast becoming critical.

Mr. Harold Wilson

The right hon. Gentleman referred to me just now, in rather mixed capacities. In talking about the price increases in those early months of 1970 would he recognise that the one on which he went to town, with his right hon. Friend, on I think 20th May was a 2.1 points increase in the cost of living at the seasonal peak of the year, made up partly by seasonal food price movements but mainly by Tory councils increasing rents and rates? [Interruption.] The records of the Department of the Secretary of State for Employment explaining this at the time are on record and the Prime Minister can look them up if he will understand them. Having made that point about the month up to the election, may I ask whether the right hon. Gentleman will now give an assurance that the increase in May this year, apart from seasonal food movements, will not be a lot more than 2.1 points as a result of his mini-budget?

Mr. Barber

The right hon. Gentleman cannot avoid the facts.

Hon. Members

Answer.

Mr. Barber

Not just in May but in every single month since his right hon. Friend said to the House what I have mentioned, the cost of living rose. In his speech the right hon. Gentleman referred again to some remarks which I made during the General Election campaign about doctors' pay. He used the words which he has used before and said that I endorsed the 30 per cent. for the doctors.

I took no notice of that when he raised this on the first occasion, because I assumed that he would take the trouble to check. I will now tell the right hon. Gentleman, and I am sure that he will accept it from me, that what I said in the course of my speech was this: Of course any Government, Conservative or Labour, must have the last word, and a deteriorating economic situation is a relevant factor. Having been concerned with doctors' and dentists' pay both as a Treasury Minister and as Minister of Health, it is crystal clear to me that in the context of the present awards the only reason for turning them down can be the threat of an economic crisis. I then went on to add this: There can be no possible reason for rejecting these recommendations of an independent body other than that the Government is gravely alarmed at the inflation which is now gathering force. We are determined not to allow the present rate of cost inflation to continue. There can be no dispute that the continuation of cost inflation at the present rate would have the most serious consequences both domestically and externally. At home it would lead to an arbitrary and haphazard redistribution of income with the main sufferers, as always with inflation, being the poor, pensioners and those living on fixed incomes. [Interruption.] Hon. Gentlemen opposite are destined to sit on those benches for a minimum of four to five years and if they go on shouting like this they will sit there for a lot longer.

Externally the affect of a continuation of the present rate of inflation would be to weaken our competitive position. There are already signs that this country's costs are rising faster than the costs of some of our main competitors. By the third quarter of 1970 wage costs per unit of output in manufacturing were already 9 per cent. higher than in the last quarter of 1969. It is true that Germany experienced a similar rise over the same period, but in Italy, Japan, France and Canada the rise was probably of the order of 5½ to 7½ per cent. and in the United States it was considerably less. There are also indications that there was a deterioration in the profitability of United Kingdom exports between the third quarter of 1968 and the third quarter of 1970, and nobody would pretend that the present Government were responsible for that period. Wages and material costs per unit of out-put in manufacturing rose in that period by about 14 per cent. while export prices of manufacturers rose by only about 8½ per cent.

The right hon. Member for Stechford, who had the audacity this afternoon to criticise this Government, knows full well that all this was building up while he was Chancellor of the Exchequer. What did the right hon. Gentleman do? The General Election was approaching and so he let inflation rip; that is the truth of the matter. The right hon. Gentleman, quite rightly, referred to the very high level of unemployment which was announced in the figures today, but I hope that the House will be under no illusion as to what a continuation of the present rate of cost inflation would mean for employment. It would lead without doubt to a direct loss of jobs in export industries and also in industries competing with imports. In turn, this would be bound to have a cumulative effect on those employed in other industries and services.

The present level of unemployment is, as the right hon. Gentleman indicated, as wasteful in economic terms as it is in human terms, but there can be no doubt that one of the principal causes of the increases in unemployment has been the excessive increases in pay settlements. It is, I believe—[Interruption.] If hon. Members opposite will give me a chance I will let them have the facts and figures.

It is a sad spectacle to see some trade union militant leaders almost forcing their members to price themselves out of work, but that is what is happening. It is time that those who are directly involved in the negotiation of wages realised that the more excessive the claim the more likely it is that it will lead to redundancy and unemployment.

The right hon. Member for Stechford referred quite rightly to the question of investment. The same considerations apply. The right hon. Gentleman was right to look to the future and to talk about investment intentions, but I am sure that he would be the first to agree—because he as good as said this when he was Chancellor of the Exchequer—that the prospect for investment is directly related to the current level of inflation. However attractive particular investment incentives may be—and we have discussed at length whether we should have retained investment grants—the overriding consideration which governs investment intentions is whether management believes that the company concerned can sell its goods at a profit.

There can be no doubt that the poor investment record of industry in the past few years has been both a cause and a consequence of our poor rate of growth, and we shall not achieve a significant improvement in investment intentions—let alone achievements—as long as we are cursed with the present rate of cost inflation.

When a company takes its investment decisions it has regard, first, to prospects and, secondly, to profitability. On both sides of this balance sheet, getting down the present rate of cost inflation is crucial.

Mr. R. B. Cant (Stoke-on-Trent)

rose——

Mr. Barber

The present rate of inflation is damaging to confidence which is essential to investment. I agree with the right hon. Member for Stechford on that. Company liquidity is bound to be under severe pressure until there is some easement in the pressure of rising costs and inflationary wage increases.

Mrs. Elaine Kellett (Lancaster)

Has my right hon. Friend heard what a well known trade union leader said when he addressed the Kent branch of the Institute of Management? Mr. John Cousins said: It is my union's policy to hurt as many people in a strike as possible. I realise that strikes cause a great financial strain on some companies. But I would rather close a firm down than not have it pay wage claims". Does my right hon. Friend agree that this is one of the major causes of the present high unemployment?

Mr. Barber

I had read the report of that speech and I thought that it was appalling. But, whether one is considering the high level of unemployment or the low level of investment by industry, one is inevitably brought back to the root cause of our troubles—cost inflation. This is why the Government are resolute in their determination to defeat it, and this is why the steps we have taken have been necessary.

There can be no doubt about the serious consequences of the present inflation and I hope that there is no one, even on the benches opposite, who doubts the seriousness of the situation. But, equally, there can be no doubt whatever about the main cause. There are some hon. Members who would bury their heads in the sand and, in a vain attempt to divert attention away from the inflationary consequences of wage and salary bargaining, pretend that pay increases are not the most important cause of inflation. But if one is considering the facts——

Mr. Cant

rose——

Mr. Barber

No, I will not give way.

If one is considering the facts, and if one is genuinely seeking the cause of inflation, it is clear that over the past year the main factor driving up prices has been increases in pay. Let me give the House the figures. Between the third quarter of 1969 and the third quarter of 1970—the latest period for which full information is available—labour costs per unit of output in the economy as a whole rose by over 12 per cent. Of the other main components of total costs, import prices rose by under 4 per cent., company profits fell by 2½ per cent., and there were no increases in indirect tax rates.

In the light of those figures, it cannot seriously be denied that pay increases are the main cause of the current inflation.

Mr. Jeremy Thorpe (Devon, North)

rose——

Mr. Barber

I will give way in a moment.

Hon. Members opposite may now doubt that pay increases are the main cause of the current inflation, but the right hon. Member for Stechford did not doubt it when he was Chancellor of the Exchequer. In his Budget speech last year, he said: If serious inflation gets a grip it will be very difficult to shake it off; and in all sorts of ways it will be the weaker members of society who will suffer. The illusion that money incomes can be pushed up by the kind of figures which have become common in industrial bargaining recently without producing harmful effects of this kind is a dangerous one. The right hon. Gentleman went on to say: Everyone concerned with wage settlements should understand that if we are to achieve the reasonable stability of prices which is necessary for a sound economy and a healthy social framework, incomes cannot for long continue to rise at their recent rate."—[OFFICIAL RFPORT, 14th April, 1970; Vol. 799, c. 1224–5.] It is absolutely right that our policy for curbing inflation should be directed at the source of the problem which the right hon. Gentleman recognised when he was Chancellor of the Exchequer—that is, the excessive level of pay settlements. In the longer term, whatever hon. and right hon. Gentlemen opposite may consider, the country knows that our proposals for reforming industrial relations will do much to restore responsible collective bargaining, and avoid our appalling record of industrial unrest. But in the short term, if we are to defeat the urgent problem facing us now, there must be a progressive and substantial reduction in pay settlements in both public and private sectors.

Mr. Thorpe

Would it simplify the task of the Chancellor of the Exchequer, and enable him to give information to the House which the House wants to hear, if it is generally conceded that the entire House accepts that there is an inflationary situation and is anxious to see prices controlled and wages tied to productivity? If that be the case, will the right hon. Gentleman tell us either what new policies the Government now have in mind or, alternatively, what existing policies they intend either to improve or refine?

Mr. Barber

There are those who believe that the policy of the last Government—[HON. MEMBERS: "Answer."]——I am coming to answering the right hon. Gentleman—

Captain Walter Elliot (Carshalton)

On a point of order. It will be in your recollection, Mr. Deputy Speaker, and that of the whole House that when the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) moved the Motion, he was heard in comparative silence. Now from the Opposition benches there frequently comes a series of primordial noises, grunts, shouts and cries of all sorts. I can understand that hon. Gentlemen opposite do not want to hear the replies, but is it not possible to get some sort of order so that we on this side of the House can hear?

Mr. Deputy Speaker (Sir Robert Grant-Ferris)

The hon. and gallant Gentleman will realise that I must be the judge of order in the House. I have, naturally, been paying attention to it. These are matters which affect the people of this country very gravely, and I realise that feelings are running high. I ask hon. Gentlemen on both sides of the House to accord to the Chancellor of the Exchequer a careful hearing, as they did to the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins). When important speeches are being made, however provocative they are, it is important that they should be allowed to be properly heard.

Mr. Barber

I was coming to a consideration of the alternatives which are open to any Government, and I was saying, not in any critical way, that the right non. Gentleman and his right hon. and hon. Friends tried for a time as one solution a total freeze. I have no doubt that a freeze of all incomes would provide a temporary respite, but it would provide no lasting solution. I do not doubt the sincerity of the right hon. Gentleman and his hon. Friends who trooped into the Division Lobby in support of a wages freeze, but we on our side believe—and said so at the time—that the Labour Government were wrong. I believe that the whole House will now agree, in the light of the events which followed, that we were right and they were wrong, and that a freeze is not the answer.

To look to another alternative, I recognise that there are some who hanker after a return to a system of detailed statutory control of pay settlements. I should have thought that we had all learnt not merely that the statutory control of pay settlements is both unfair and bound eventually to break down but that, as our experience has shown, when eventually it goes, as it must in due course, it leaves in its train an even worse situation. As we have seen, the militants take over and the moderate and responsible trade union leader is put in an impossible position.

I recognise that hon. and right hon. Gentlemen opposite detested both the freeze and the paraphernalia of detailed statutory control of incomes. I have never doubted—and I have never said anything to the contrary—that they did what they did, repugnant as it was to each and every one of them, because they believed at the time that it was the right answer. I should have thought that the whole House would have learnt from that bitter experience that the answer to the central problem of excessive pay settlements lies in neither of these two remedies.

So then, it is said, what about a voluntary policy? Both the T.U.C. and the C.B.I. know full well that I have never ruled out a realistic voluntary policy in which they and the Government could co-operate. But, as I have said before, I simply do not believe that it is practicable at present. It is for all these reasons that the Government believe that, if we are to defeat inflation, there must be a substantial and progressive de-escalation in the rate of pay settlements.

Mr. Eric S. Heffer (Liverpool, Walton)

Will the right hon. Gentleman give way?

Mr. Barber

No. All the evidence is that the public fully support our determination to stand up to industrial action which is unwarranted. The public also realise full well that the sure way to get more strikes and ever more inflation is always to give way. Every time an unwarranted strike succeeds——

Mr. Heffer

rose——

Mr. Deputy Speaker

Order. The hon. Gentleman must not persist if the right hon. Gentleman does not give way.

Mr. Heffer

rose——

Mr. Deputy Speaker

The hon. Gentleman must resume his seat unless the right hon. Gentleman gives way.

Mr. Barber

The right hon. Gentleman very sensibly said that he did not on this occasion propose to deal either with monetary policy or with Government policy. We are to have a debate on the latter topic on Monday and I will therefore follow him in that regard.

I turn to one matter which he raised and on which recently I agreed with the philosophy he expounded. As the right hon. Gentleman said, to a considerable extent the problem of unemployment is a problem of balance between the regions. It is common ground between the right hon. Gentleman and myself that if by means of regional policy we could reduce unemployment in those areas where it is particularly high, we could then bring about a much better use of resources and sustain a higher pressure of demand throughout the economy as a whole. This is accepted on both sides of the House.

Since we came to office we have been making a further and thorough-going study of regional policy. The first results of our thinking were contained in the White Paper on Investment Incentives which we published in October.—[Interruption.] If hon. Members from the regions are not interested in listening to what I have to say, their constituents certainly will be. I said in October that further studies were taking place. Certain aspects of these studies have been completed, and I can now give the House our conclusions. The Government have carefully reviewed the coverage of the intermediate areas, development areas and special development areas. The one outstanding conclusion to be drawn from the review is the failure of policy in recent years to deal with the problems of the older industrial centres in the development areas, industrial centres which, with the impact of structural change, have been experiencing, for two or three years, unacceptably high levels of unemployment. On 3rd February my right hon. Friend the Secretary of State for Scotland told the House that West Central Scotland was to have special development area status. That status will be effective from today. In addition, the Government have decided to give special development area status to the Tyneside and Wearside area and to extend the coverage of the special development area in South Wales.

For the convenience of hon. Members I have arranged for a list of the employment exchange areas affected to be placed in the Library. These changes, will give special development area status to an additional 71 employment exchange areas and the consequence will be that the proportion of the insured population of Great Britain in the special development areas will rise from the previous figure of 1.8 per cent. to 8.5 per cent.

In the new and enlarged special development areas there is a great need to attract new projects to provide employment. On 28th October the Minister for Industry announced that the operational grant which, under the Local Employment Acts, is available in special development areas for new incoming projects would be in future be calculated on the basis of 20 per cent. of eligible wage and salary costs in the first three years of operation.

In view of the need to increase still further the attractiveness of these areas to new industry, the Government have now decided that the rate shall be increased to 30 per cent. on the same conditions as before. Apart from these changes affecting parts of the development areas, I should also mention that the Government are designating seven employment exchange areas as intermediate areas. The reason for this is that, because they have been excluded from assisted status, they have experienced increasing economic difficulties. They are Edinburgh, Portobello, Bridlington, Filey, Oswestry, Okehampton and Tavistock. My right hon. Friend the Secretary of State for Trade and Industry will lay an Order before the House as soon as possible.

While the Government will seek to avoid frequent changes and the risk of uncertainty which this would cause both to industry and to the assisted areas, it is important that the coverage of the assisted areas should be kept under review to ensure that changing circumstances are reflected in the coverage.

Another important aspect of regional policy is expenditure on infrastructure and the environment.

Mr. Edmund Dell (Birkenhead)

rose——

Mr. Barber

I shall give way in a moment. In this field the development and intermediate areas already account for a considerable part of the total programmes and we shall ensure that there will be a continuing reflection of regional development needs within various public expenditure programmes—especially in relation to the road programme and general environmental improvement.

Mr. Dell

Is not the effect of creating the special development areas simply to raise the amount of assistance given within them to about what it was before development area incentives were downgraded by the Conservative Government? Does not the fact that the right hon. Gentleman has not included any part of Merseyside as a special development area mean that Merseyside has been downgraded relatively in terms of development area assistance?

Mr. Barber

Many right hon. and hon. Gentlemen have particular interests and no doubt in due course will wish to bring them forward. [HON. MEMBERS: "Answer the question."] There were two questions and I am dealing with the second first. On the first question, the proposals which I have outlined today will involve additional expenditure.

Those who seek to criticise, as did the right hon. Gentleman this afternoon, can make their criticisms stick only if they are able to establish that they could have done better. The right hon. Gentleman and his colleagues in the Labour Government had their chance—for six years—and they failed. At the Labour Party Conference last autumn the right hon. Member for Stechford made this impeccable observation: We must strike the right balance between consistency and new thought. If the country believes that we are saying different things just because we are freed from the responsibility of government, they will not think much of that. Little did he know how right he was. It was also the right hon. Gentleman who said in his Budget speech in 1969, that the Government had therefore— …decided to implement without delay…some of the more important provisions incorporated in the White Paper ' In Place of Strife'".—[OFFICIAL REPORT, 15th April, 1969; Vol. 781, c. 1006.] We all know what happened to that.

I suggested early in the new year to the N.E.D.C. that we should have a discussion on the whole question of inflation, and we did in fact have an extremely useful discussion. The T.U.C. put in a paper——

Mr. Harold Wilson

Splendid.

Mr. Barber

The right hon. Gentleman the Leader of the Opposition says, "Splendid". I hope that he will say that in a moment when he hears what I have to say. The T.U.C. put in a paper for consideration and later on released it to the Press——

Mr. Roy Jenkins

rose——

Mr. Barber

No, I will not give way at this moment. In that paper, referring to the period since April, 1965, the T.U.C. said: Real wages and real disposable incomes advanced even more slowly than the limited rate of real pay advances in the decade up to the mid-1960s. Does the right hon. Gentleman applaud that? It went on: The proportionate burden of taxation falling on working-class households increased significantly. Does he applaud that? It then said that for many income groups the level of real wages actually fell in the years 1965 to 1969. That was the verdict of the T.U.C. on the years for which the right hon. Gentleman and his hon. and right hon. Friends were responsible.

Mr. Roy Jenkins

I am sorry to take the right hon. Gentleman back for a moment—it is difficult to find a moment to interrupt him when he is not quoting one of my own speeches. This is an important point. Does he agree with the statement of my right hon. Friend the Member for Birkenhead (Mr. Dell) that the new incentive he has announced takes the position back in special development areas to what it was before the mini-budget? Will he also confirm that he has announced nothing this afternoon which will improve the general level of employment throughout the country?

Mr. Barber

On the first question, for obvious reasons, if I were to answer a question about a particular area I should want notice of it. On the second matter, I have explained to the House this afternoon, and the House has accepted it, that we cannot hope to deal satisfactorily with the question of unemployment unless we are able to get under control the present rate of cost inflation. That is a basic question which has to be dealt with at the present time.

Mr. Roy Jenkins

I am sorry to have to press the right hon. Gentleman, and I would not do so if it were not quite clear, no doubt because I did not put the question clearly, that he has completely misunderstood my question. I was not asking him about any one area as opposed to another. I was asking him a general question, in regard to all the areas which he has now designated for the first time as special development areas, whether he will say if in these areas as a whole—and he must have a general point about them or he would not have announced a policy—the level of incentive for industry to go there is back to what it was before the mini-budget?

Mr. Barber

I would ask the right hon. Gentleman if he is talking about the intermediate areas in the country as a whole?

Mr. Roy Jenkins

I am talking of the special development areas the right hon. Gentleman has now announced.

Mr. Barber

In October 1 explained that the incentive to industry to go to the regions was not any less than it was previously under the régime operated by the right hon. Friends. What we have now done in the light of our consideration—I thought the right hon. Member for Stechford would welcome it—is to designate a number of other and additional areas as special development areas and as intermediate areas. [Interruption.] The right hon. Gentleman the Prime Minister now asks me another question. [HON. MEMBERS: "Oh."] We had to put up with the right hon. Gentleman for six long years and I must say the experience is engraved on my heart.

The right hon. Member for Stechford said at the end of his speech that we were pursuing divisive policies. What has divided the nation above all else in recent years is the sense of growing helplessless felt by those people without big powerful organisations to protect their interests. Whole sections of our society have had to make do with whatever is left when those with greater strength have finished exerting their bargaining power. For far too many people there has been nothing left at all. That is why we are seeking to strengthen the forces of moderation and responsibility in industrial relations. Above all, it is why we are determined to correct the present inflation. By doing these things, we shall be fulfilling the first requirement of greater unity, which is a Government who are determined to ensure justice for every section of the people and to speak for the interests of the community as a whole.

5.31 p.m.

Mr. Alan Williams (Swansea, West)

I was surprised to find that the Chancellor observed the convention normally reserved to maiden speakers of avoiding contentious material, though towards the end of his speech he showed a considerable capacity as an unconscious or semiconscious comedian.

The right hon. Gentleman delivered his speech with the enthusiasm that one would expect of one who reading the Gospel according to St. George Street. His speech would have been a source of shame to the lowliest Parliamentary Secretary, and I suspect that, on reflection, it is to the right hon. Gentleman. It was a demonstration in monumental smugness which was matched only by its monumental ignorance of the problems with which we are dealing.

The right hon. Gentleman showed an astonishing lack of concern for the real lesson that is embodied in today's unemployment figures. He spoke about unemployment being due to cost inflation. At the same time, he abdicated from any duty on the part of the Government to tackle it meaningfully. As he adduced his evidence to support his assertion that it was cost inflation, his unwillingness to consider any meaningful policy became more incredible. He ignored the fact that the current unemployment figures demonstate that we have at last, unfortunately, returned to the state where we see a relative decline in the employment position in the development areas vis-à-vis the rest of the country. The position is getting worse in the development areas faster than it is deteriorating elsewhere, and this is a major reversal of what has been happening in the last six years.

Since November, the rate of decline in employment in the development areas has, on today's figures, been 35 per cent. greater than that in Britain as a whole. This is an extremely disturbing matter to any hon. Member who represents a development area constituency.

The right hon. Gentleman has made certain announcements which, quite frankly, I am astonished that he had the impudence to bring to the House. He spoke of them as being related to the present problem of the development areas. But let us see what he has really said. Implicit in the fact that he has made the announcement is the admission that the timing and content of his last announcement was completely wrong. He has made the mistake of thinking that coverage—the size of areas—is the basic problem. The fundamental problem is one that he has not tackled. It is how to create enough extra footloose industry: how to boost the level of investment to the extent that there is enough industry to go to the development areas.

If anything, the right hon. Gentleman's extra designations have worsened the situation for those places which are already development areas. The limited amount of footloose industry available, which is becoming increasingly limited, will now have to be spread even more widely. As for his infrastructure, this is nothing but a piece of coating on a pill which is a placebo but has no industrial medical value. He knows, as we do, that the infrastructure improvements, even if they were massive, cannot produce an improvement in the employment situation in development areas for five or six years, whereas we face a drastic and declining situation immediately. There was no sense of immediacy in the right hon. Gentleman's speech.

I was glad to see that the Secretary of State for Wales and the Secretary of State for Scotland were here to listen to the right hon. Gentleman. They have to share with their right hon. Friends the guilt for the situations that have arisen in Scotland and Wales. There is no one to share the guilt in the North, of course, because the Government have robbed the North of a Minister to look after its problems.

Only a short time ago, the Prime Minister told my hon. Friend the Member for Cardigan (Mr. Elystan Morgan) that the people of Wales should be grateful for any hour's sleep that was lost at night by the Secretary of State. It becomes clear from today's figures that the Secretary of State has not lost an hour's sleep at night. He has not even lost an hour's sleep in the day. He and the Secretary of State for Scotland, with their Cabinet colleagues, fail completely to understand the nature of the development area problem. It is not simply a matter of the lack of diversity. It is not simply a matter of too much 19th century industry. It is also a problem of an abnormal and massive job loss because of tendencies in certain key industries. It is the result of mechanisation in agriculture, of a market contraction for coal, of technical change in the steel industry and of the market situation confronting the shipbuilding industry.

When I was at the Department of Economic Affairs with my right hon. Friend the Member for Stepney (Mr. Shore) I worked on "The Task Ahead" document. At that stage, I was doing the regional work. We pointed out that the magnitude of the job loss in the development areas was frightening during the period for which the document was relevant; that is, to 1972. We pointed out that in the development areas there would be a job loss of up to 300,000 as a result of the industrial changes that were taking place.

The future of the development areas does not depend on pious speeches, nor on what the right hon. Gentleman called "useful discussions", nor on the submission of papers. It depends, first, on appropriate regional policies to attract industry and, secondly and fundamentally, upon a sufficiently high level of investment to create enough footloose industry to match the job loss being faced in the development areas.

Mr. Dan Jones (Burnley)

That should be obvious.

Mr. Williams

It should be obvious but, when they were in opposition, right hon. and hon. Gentleman opposite were too busy talking about the problems to understand and find solutions to them.

The policies that they have adduced will do the exact opposite. Where certainty is needed, the conversion to allowances from grants has created unpredictability. Allowances depend on future profits and the value of money, and no hon. Gentleman opposite will make predictions about the value of money on the basis of the Government's policy.

Where a good cash flow is needed, there is no cash flow for firms on the margins of profitability, and even for those which are profitable, the time spent before cash begins to flow can be longer under the allowance system than under the grant system.

The final factor is that, where business confidence is needed, all that the Government have done is to create alarm and doubt. This is aggravated by their refusal to attack the basic problem of inflation. I suspect that the sheer ineffectiveness of the right hon. Gentleman's speech today will alarm industry even more. Everyone in industry will be as appalled, as my right hon. and hon. Friends were, at the barrenness of the speech and the sheer lack of policy presented by the right hon. Gentleman.

Past experience gives us no reason to put any hope in the new measures which the Government have adopted. In terms of dealing with the down-turn in the investment cycle, looking to the post-1961 down-turn, under the allowance system there was a decline of virtually 20 per cent. in the proportion of G.D.P. which went into investment in the two years to 1963. When we hit our downturn of the cycle in 1966, the fall was a third of that under the investment grant system, although the right hon. Gentleman's old organisation, the C.B.I., at the beginning of 1967 predicted that there would be a decline during that year of over 20 per cent. I believe, speaking from memory, that the figure was 27 per cent. In fact, because we introduced the 5 per cent. two-year differential, the decline was a mere 3 per cent. We virtually ironed out the trough in the investment cycle.

There is no question of comparability of the two systems for dealing with cycle down-turns. We have shown in such a situation that the investment grant system is more capable of maintaining the level of investment than the old or the new allowance system.

Experience in Wales—it is similar in the North and in Scotland—shows that under the grant system in 1968 and again 1969 there were more approvals of industrial square footage than in 1961, 1962 and 1963 taken together. Each year under the grant system was worth more than three years under the allowance system.

Right hon. and hon. Gentlemen opposite may say, "It is not the same old package, because we still maintain your old R.E.P. We do not like it, but we maintain it." But we have now got cost without benefit. We have the cost of R.E.P., but the announcement that it will definitely be terminated in four years. This means that new firms looking to Wales and to the development areas will say, "By the time that we have got planning permission, built the factories and got them operational, R.E.P. will no longer be relevant, so we cannot take it into account."

It is not surprising, therefore, that already in Wales inquiries for new industrial sites are down, jobs in the pipeline are down, and vacancies are down. Only unemployment is up.

Mr. Dan Jones

Is it not a fact that the point being made by my hon. Friend is compounded by the knowledge that the banks are now refusing loans which they were formerly prepared to make?

Mr. Williams

This is quite true. Right hon. Gentlemen opposite have got themselves in a paradox of policy, which I shall demonstrate later.

Three men carry responsibility for this situation. I discount the Secretary of State for Wales and the Secretary of State for Scotland. They do not matter, because they are not voices in the Cabinet. They are public voices outside the Cabinet for the Prime Minister, but they are not speaking for Wales and Scotland inside the Cabinet. That is clear from today's figures.

As I said, three men are responsible. The first is the Secretary of State for Trade and Industry. I am sure that his old colleagues at the C.B.I. were proud when he got his job. He was going to show what the businessman could do in Government.

Mr. Dan Jones

A lame duck.

Mr. Williams

In history, there is no better example than the reversal of the normal process of the gamekeeper turned poacher. The right hon. Gentleman has been a remarkable convert to commercial blood sports. The lame ducks of 1970 are the dead ducks of 1971.

If anyone doubts this, let him look at the figures produced yesterday which show that in a mere eight months the right hon. Gentleman has managed to achieve a situation in which we have reached the highest level of commercial bankruptcies for the last 10 years. They are the highest since 1960—since the last Conservative Government.

The implication was that the right hon. Gentleman was a new boy who had done well and would do better next year. The Government were prophesying figures even worse during the current year.

Mr. James Hamilton (Bothwell)

Will my hon. Friend also remind the right hon. Gentleman, who came from the C.B.I., that the C.B.I. in Scotland and the Scottish Development Council have said many times that the departure from investment grants to free depreciation was a retrograde step and would not be beneficial to the development areas?

Mr. Williams

My hon. Friend is quite right. However, he makes the point as if he were talking to reasonable people who want to know the facts. If my hon. Friend were talking to reasonable people who want to know the facts about allowances versus grants, why did the right hon. Gentleman and his right hon. Friend not wait for the outcome of the cost benefit study into the effectiveness of investment grants which, when I was at the D.E.A. and later at the Ministry of Technology, they harried us to do? When right hon. Gentleman opposite came to office, without waiting for the conclusions of this study, they abandoned grants in favour of the previous system which, in their previous period of office, had never been the subject of a cost-benefit study by the Treasury. I am grateful for the evidence produced by my hon. Friend in support of my case, but it is wasted because it is falling on the deafest ears politically.

The right hon. Gentleman must realise that many of his old friends now have grave misgivings and doubts about his effectiveness as a policy maker. The only place from which the right hon. Gentleman will find any adulation at present is a group which I am told is thinking of making him the patron saint of liquidators.

The second man responsible for this situation is the Chancellor of the Exchequer. The right hon. Gentleman's policy and psychology of approach to the problem were quite wrong. The change to allowances, which was his right hon. Friend's pet doctrine at the C.B.I., was not based on any economic assessment. It was not an attempt to cook the books, but to gently broil them. All that the right hon. Gentleman wanted to do was to conceal the volume of aid being given to industry by the Government. This is the only useful effect which the right hon. Gentleman can adduce in support of the change.

The right hon. Gentleman's psychology is wrong because, at a time when all the evidence indicated that we were in danger of reaching the peak of an investment cycle, when anything could have precipitated the down-turn of that cycle, he at the N.E.D.C. gave credence to the talk of a spate of bankruptcies in 1971 and a continued tight cash situation. The right hon. Gentleman was essentially wrong in his understanding of businessmen's attitudes to the statements of leading politicians. Obviously, his right hon. Friend was unable to give him any meaningful guidance. The result of the Chancellor's inabilities and ineptitude is that retail stocks are piling up—they are 12 per cent. higher than a year ago—machine tool orders are down to the lowest level for three years—the fourth quarter for 1970 was 42 per cent. below the same period for 1969—the chemical industry's investment is down and, even more alarming, is talking of withdrawing from projects in the development areas on which the industry was pinning its hopes. Overall investment has not just been pushed over the edge, but, by the policies implemented by the right hon. Gentleman, now that we are on the down slope the slide is being greased.

The right hon. Gentleman has today given an astonishing demonstration of what can only be described as economic illiteracy. The Chancellor has ignored what we know has been Treasury advice for months on incomes policy. Let the right hon. Gentleman not disdain it, as some do, and say that even the P.I.B. only claim a 1 per cent. effect from it. We must bear in mind that 1 per cent, is £250 million a year—it is £250 million cumulative—and at the end of five years it is doing a great deal to reduce pressure on prices. Concurrently with it, because of our marginal propensity to import there is also a £60 to £80 million bonus in import saving.

The right hon. Gentleman, by refusing to consider a meaningful incomes policy, has left industry knowing that the only available alternative is the traditional contraction, and on this basis it has been planning its investment decisions.

However, there is one word of hope for industry. The right hon. Gentleman cannot give it, but I think we can. "As long as you can hold out for a while there is a chance because, as sure as God made little Conservatives, 18 months before the General Election, the right hon. Gentleman will find that he is able to take off the brakes and allow industry to invest and consumption to boom ahead."

The third responsible man, and the overwhelming one, must be the Prime Minister who won the General Election by disfiguration of the truth, by distorting on the balance of payments, by deceiving the public on his intentions in relation to prices. So now we have achieved Dr. Heath's economic miracle—a touch of the galloping inflations with the near running recessions. This is the sort of paradox that I was talking about in the economic problem which the Prime Minister has created.

We now see the three pillars of Tory freedom—freedom from work for an increasing number of people in ever-widening parts of the country, freedom from affluence for the old-age pensioners and those on fixed incomes as a result of the Government's refusal to deal with the problem of inflation, and freedom from security for those who are lucky enough still to have jobs, because they cannot ever feel very certain, with the policies being taken by this Government, that their jobs will remain available.

The right hon. Gentleman has divided the nation. This Government have divided the nation. They have divided it in a rather original way. They have divided it into the have-nots and into the others, who are afraid that they are about to become have-nots. The Government have failed the people. They have cheated on prices and misled on the balance of payments. They have shown themselves utterly unfit to solve the basic economic problems of the country. They have failed, the Chancellor has failed, and after his speech today, we can be sure that they will continue to fail.

5.52 p.m.

Mr. John Boyd-Carpenter (Kingston-upon-Thames)

The hon. Member for Swansea, West (Mr. Alan Williams) made a speech which, whatever else it was, was not lacking in courage. First of all, he appeared to regard it as a grave indictment of the present Administration that in the period of eight months they have failed wholly to cure the results of the preceding six years' economic maladministration, and went out of his way, with a most dramatic gesture, to say that they had failed to cure inflation—[HON. MEMBERS: "They have not tried."] Does he really think that a Government inheriting a situation which even the former Chancellor admitted had considerable elements of inflation, a situation of roaring wage inflation, are to be condemned because they have not wholly solved it within eight months?

Mr. Alan Williams

I am sure that the right hon. Gentleman will have detected, from the cries of my right hon. Friends and myself, that it is the Government's sheer inability even to have devised a policy within eight months which so alarms us.

Mr. Boyd-Carpenter

If the hon. Gentleman will wait for a moment, I may be able to help him a little on the policy. But I understand, now that he has resumed both his seat and his composure, that he has abandoned the proposition that we could have cured inflation within eight months.

I also thought that there was a certain rather attractive courage in his suggestion—no doubt based on personal reminiscence—that about 18 months before the General Election the brakes would be taken off. I have no doubt that the hon. Gentleman is speaking on the basis of very good personal experience.

But I thought that the hon. Gentleman was on to a matter about which he was rightly concerned, and about which I am also concerned, when he dealt with the question of investment. It is crucial that we should secure a large up-turn in investment, since otherwise the equipment of British industry will become out of date, the British worker will have behind him less and less plant and equipment compared with his foreign competitors, and there will be, quite inescapably, a deterioration in our standards of life.

But where I parted from the hon. Gentleman was over his naïve faith that this could all be put right by returning to the system of investment grants. I wonder whether he has studied, for example, the Report of the Public Accounts Committee of the last Session of the last Parliament. That Committee examined and reported on the way the investment grant system actually worked. It brought out—it is all set out in the evidence—how so much of the very heavy expenditure, which was running at some £600 million a year, went in grants in respect of investment which would have taken place anyway. It also indicated how difficult it was in many cases to secure that the conditions of the scheme were honoured, and how in many cases it was quite impossible to connect this expenditure of public money with any benefit at all to the British economy.

Specific examples were given of ships built abroad, to be chartered abroad, to be operated throughout their working lives abroad, which, simply because of financial transactions which gave them, during building, British ownership, although they continued to be used for the purposes for which they had been planned by the people who had ordered them——

Mr. Neil McBride (Swansea, East)

rose——

Mr. Boyd-Carpenter

I am in the middle of a sentence, admittedly rather a long one. I hope that the hon. Gentleman will let me put in a full stop anyway before I give way.

Ships built abroad, used for the purpose for which they were intended abroad, never coming near this country, were, because of financial arrangements, receiving substantial grants from the British taxpayer by way of these investment grants. I ask the hon. Member for Swansea, West to appreciate that, however good the intentions, this was a grossly inefficient and extravagant method of doing what he and I and the whole House want to do—stimulating investment.

Mr. McBride

I am listening to the right lion. Gentleman's argument about allowances and investment grants. As he perhaps knows, my hon. Friend the Member for Swansea, West (Mr. Alan Williams) and I have the honour to represent a great Welsh city. One of the difficulties which we face is that the cash flow accruing for every £100 investment being planned means a disparity of £7 in adverse terms under the allowance system compared with the investment grant system. We are faced with this difficulty, which the right hon. Gentleman knows is incontrovertible, that firms native to the area face a difficulty because of non-profitability in the first year, when starting up, and that firms from outside the area cannot be encouraged to go in. How will the right hon. Gentleman relate this to the rising tide of unemployment which we seek to combat?

Mr. Boyd-Carpenter

As I told the hon. Member for Swansea, West, I am as concerned as he is—perhaps even a little more—to get investment, in the development areas and elsewhere, going again. But I do not believe that one can devise a less efficient method than that of investment grants, for the reasons which I have given.

I want to come back to what seems to be the nub of this, that, although all these artificial stimuli have their place, particularly, of course, in the development areas, we shall not see the resurgence of investment in this country which we all want to see unless the whole general economic climate is changed. We shall not see companies investing their shareholders' money, or, indeed, even being right to invest that money, unless it appears that there is a reasonable prospect of that investment being remunerative.

If costs are rising the whole time, if the outlook, when one is planning a new investment to build new plant, is rocketing labour costs in the years ahead, if any calculation of a profitable return becomes wholly hazardous, companies will hold back. The House deludes itself if it thinks that any system, whether of grants or allowances, however well devised, will restore the level of investment to the level which we want until the general economy is got right, until wage inflation is checked, until there is a prospect that soundly conceived investments will be profitable, until saving for investment is encouraged and until, along the lines which my right hon. Friend outlined, the economy is put in a stable and forward-moving position.

Therefore, this is the nub of the whole debate. It is perhaps significant that the Opposition Motion gives no reasons at all for the lack of confidence which the House is asked to show in the policies of Her Majesty's Government. No doubt it would have taxed the ingenuity of the draftsmen to do so. Of course, the House knows perfectly well that the very difficult and perplexing problems which concern the hon. Member and which concern us all, which the Government, above all, have to tackle, are not only the direct conseqence but the foreseeable consequence of the policies which have been pursued in the last few years.

The right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins), in his very agreeable way, said that economic policy had to be based on trying to deal with a balance of considerations. This, of course, is true. It is true that all major industrial countries in the modern world have been seeking to deal—and, under all Governments, not wholly satisfactorily—with the problem of having at the same time stable prices, free collective bargaining and full employment. Since Keynes, it has become possible to operate economies at levels which make quite full use of resources and labour, but that creates a situation in which those who organise labour, unless they exercise very considerable restraint, have such bargaining—and, in some cases, such blackmailing—power that they produce a situation in which the country is driven into roaring wage inflation, with all the consequences, with which we are only too familiar, of unemployment, lack of investment, hardship to those who cannot protect themselves and the pricing of our exports out of world markets. All this will happen unless those who manage these negotiations are able to exercise restraint.

There is nothing novel in this. It was recognised by the Labour Party when in Government. We recall the whole story. Hon. Gentlemen opposite started with a voluntary appeal, and then we had the Declaration of Intent and the rest of it. When that failed, they went for compulsion, and we had the compulsory powers under the Prices and Incomes Act. It was a brave thing for them to do, though we warned them that it would fail, for the reasons which my right hon. Friend gave.

Mr. T. W. Urwin (Houghton-le-Spring)

rose——

Mr. Boyd-Carpenter

I will not now give way. I am in the middle of a complex argument. The hon. Gentleman will agree that I normally give way.

As I was explaining, that failed; and then, in the last year or 18 months—this bears on what the hon. Member for Swansea, West said—the Labour Government completely let go of the end of the rope.

The right hon. Member for Stechford looked hurt when it was suggested that that might have been done for political reasons. Perhaps he did not recall, as we do, the observations of his right hon. Friend the Leader of the Opposition, as reported in the Sun on 3rd December, 1969, to a gathering of trade unionist hon. Members. The right hon. Gentleman was reported to have said: The crucial issue is not the incomes policy but the next general election. It is now obvious that the problem of the timing of that election—to which, by a Freudian slip, the right hon. Member for Stechford uncharacteristically ineptly referred—was all important. It was to be while a lot of people were feeling happy because they were receiving large increases in money incomes, but before the quite inevitable price avalanche caught up.

This is why a Parliament which could have lasted, from the legal point of view, until next month and more was brought to an end last June. It is also why some of us resent the attitude of the Opposition in lecturing us now on the problem of inflation. This is a problem which they not only failed to tackle but must, certainly in the last 18 months of office, have known that they were failing to tackle and could not have cared, for in the words of the Leader of the Opposition what was crucial was not the incomes but the next General Election.

What is the point of this Motion of censure? Is it because, in the view of hon. Gentlemen opposite, we are seeking to tackle this problem? Is it because my right hon. Friend, with all the immense difficulties with which he must contend, is seeking to secure that future wage increases are increasingly moderate? Are hon. Gentlemen opposite arguing that we should not be doing this?

When one listens to the Secretary of State for Employment making statements at 3.30 on various afternoons one might think that the Labour Party thought there was something appallingly wrong for the Government to be saying that inflationary wage demands should not be accepted. Is this the point of the Motion of censure? This seems to be a correct statement of the position: In the next few years output per worker is likely to go up by about 3 per cent. a year. Therefore if we are to avoid a steep increase in the cost of living money income should only rise at about that rate. This was the basis of the 'norm' of 3 per cent. to 3½ per cent. for pay increases which formed the starting point of the policy in 1965. If productivity rises faster than expected then so can incomes. The principle was accepted in 1965. It is still true today. This means that most wage and salary settlements need to fall in the range of 2½ per cent. and 4½ per cent. increase in a year if this aim of greater price stability is to be achieved. Is that view accepted by hon. Gentlemen opposite? It comes, as they will recognise, from their White Paper "Productivity, Prices and Incomes Policy After 1969", Cmnd. 4237 of December, 1969. It is these same right hon. Gentlemen who were responsible for the clear, wellset-out statement of the case for restraint who now seem to support any wage demand, however high. [Interruption]. This is the essence, as the House will remember from the speeches we have heard, before and on this Motion of censure; right hon. Gentlemen opposite are criticising my hon. Friends for the resistance, not always successful, which we have shown.

Mr. Arthur Palmer (Bristol, Central)

Does the right hon. Gentleman appreciate the great difference between the situation now and the situation some time ago? There is now a much stronger balance of payments position and a need for the economy to expand. It will not expand by having incomes restrained.

Mr. Boyd-Carpenter

The hon. Gentleman ignores the date—December, 1969—when the then Chancellor of the Exchequer was priding himself on the strength of the balance of payments position. He also ignores the fact that the passage which I quoted does not, in terms, relate to the balance of payments position directly but relates to the perfectly simple necessity—for balance of payments reasons and many others as well—to prevent wage-price inflation because of the effect of that on investment, on other people and on the internal level of prices. I want to know whether those words in their 1969 White Paper are still accepted by hon. Gentlemen opposite, and, if not, why not, now that they are in Opposition.

Mr. Michael Foot (Ebbw Vale)

I will certainly reply to the right hon. Gentleman's question when I get a chance to do so at the end of the debate—that is, as long as he will say whether he now stands by the statement of 16th June of the present Prime Minister of his policy for dealing with the inflationary spiral.

Mr. Boyd-Carpenter

I am anxious to oblige the hon. Gentleman. I have no doubt that my right hon. Friend's statement was a perfectly sound one. My right hon. Friend has, thanks to the kindness of hon. Gentlemen opposite, been given ample opportunity to justify it from time to time. I do not think, therefore, that it is necessary for me to add to what my right hon. Friend has said and what has seemed to me conclusively to justify that statement. I have complied with my part of the bargain. Would the hon. Gentleman like to answer my question, or shall I have to wait for the end of the debate?

Mr. Foot

I want to entice the right hon. Gentleman to be here to hear my comments at the end of the debate, when I shall, of course, reply to his question. I wanted to know from him whether he stood by the statement of 16th June, and, if so, which part of that 16th June alternative policy put forward by the present Prime Minister has been or is to be carried into effect.

Mr. Boyd-Carpenter

The hon. Gentleman will have ample opportunity of hearing that from the Prime Minister himself. I can only add that I see no reason to resile from it. I am perfectly happy with it and, therefore, happy to give the hon. Gentleman the answer he requires. I hope that, in the excitement at the end of the debate, he will not unfortunately overlook the necessity to answer the question which I put, which is whether hon. Gentlemen opposite stand by that White Paper, and, if not, why not.

This is the nub of the debate. We are seeking to do—I suggest more effectively—what the Labour Government were seeking to do. It is surprising that in these circumstances the members of the then Government should appear to be throwing that overboard and seeking to pass a Motion of censure, no reasons given for it, condemning us for doing what they wanted to do.

The truth of the matter is that we shall deal with all these problems only if we get our economy moving forward again. The tackling of wage-price inflation is the first necessary step—the condition precedent, as lawyers would say. We must set expansion going forward, with the higher investment, which will enable our working population to earn much better wages, but to earn them as a return for part of the increased productivity which they create. Some part, of course, must go to those sections of the population—nurses, civil servants and so on—who cannot demonstrate productivity in any measurable way.

We want to see that done, and the House knows in its heart that we must clear away the wage-price inflation which the letting go of the end of the rope 18 months ago bequeathed to us.

The Government and the House have much to learn from the practice in other countries. We have much to learn from history about the right methods. I know that my right hon. Friend appreciates that the policy will have to be refined and developed as it goes forward. But on the prospect of the last six years we have nothing to learn from right hon. Gentlemen opposite. For them, with their record of six years behind them, to criticise us for economic mismanagement is an act of sublime impertinence comparable only with advice from Casanova on the desirability of marital fidelity.

6.11 p.m.

Mr. J. Grimond (Orkney and Shetland)

It is always a pleasure to listen to the right hon. Gentleman the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter), and we must be thankful that he was not elevated into silence. He began by saying that he would help out the Chancellor of the Exchequer on economic policy, but, although he made some excellent points against the Opposition, I did not notice that he added much to the almost nil start which we had from the Chancellor himself.

I shall return to some of the points which the right hon. Gentleman the Member for Kingston-upon-Thames made—his main point lies at the crux of the debate—but, before doing that, I wish to welcome what the Chancellor said about special development areas. If I tell him that I shall need a little time to find out exactly what it means, he will sympathise, I am sure, because, plainly, he was not quite sure what it meant, either. I draw attention to one point, however, at this stage.

There is always the danger that if we concentrate help on, say, the West Central belt of Scotland, we shall induce some diversion of investment away from other areas of importance, from the far North and the area which I represent, from the Highlands, the Borders, the medium-size towns and the North-East. I should like the Chancellor to consider whether he could limit the extra assistance to, say, companies over a certain size. encouraging smaller companies to go into what are still development areas but which, as I understand it, are not to benefit from the new measure which he has announced.

I wholly agree with the right hon. Member for Kingston-upon-Thames that the most serious danger facing us is inflation, and we cannot tackle the serious problem of unemployment until we put that right. To my mind, it is the crucial danger for the Western world. Unless it is curtailed and curbed, raging inflation is the classic prelude to an attack upon liberty in general and can easily lead to anti-libertarian measures.

I do not believe that any Government of any party can meet this danger alone. One of the lessons to be learned from today's debate is that it is becoming common form in the House that economic debates are largely taken up either by saying how badly the Labour Government did in past years or by saying how badly the Tory Government are doing now or did in even more remote times. In fact, inflation went on at a fairly steady pace whatever Government were in power. The alarming feature now is that it is accelerating.

We must realise that a concerted effort is needed. I greatly sympathise with those who have stressed that it needs a united national effort, too. I do not believe that any Government of any party, facing perpetual opposition and a divided nation, can deal with this most serious matter.

At present, in my view, we are on a suicidal course. The rate of inflation has risen from 6 per cent. a year to 8 per cent., and it is all too likely this summer to reach 10 per cent. It is a disease which feeds on itself. The higher and the faster it goes, the more strength it gathers.

It is inconceivable to me that a 10 per cent. increase in wages could be considered a welcome minimum. I was astonished at the exchanges in the House over the award to the electricity workers. We heard the Opposition trying to prove that it was actually better than 15 per cent., and the Government saying, "No, it is only 10.9 per cent.". In fact, the increase in productivity is only about 1 per cent.

If that sort of thing is to be repeated across the board, and if it is to be annual—this matters a great deal, because no sooner is one claim dealt with than another is put in—one can foresee, with only the most elementary arithmetic, where we shall end up. In fact, 10 per cent. is double and more the rate which was said to be tolerable by the last Government. We are seeing that now as a minimum, and with serious attendant industrial friction at the same time.

I shall not repeat all that has been said about the dangers of inflation, but I must add a few words because those dangers cannot be too often stressed. First, inflation creates social injustices of a peculiarly harmful sort. There are women and girls in the North of Scotland and in my constituency who are still earning only £7 to £15 a week. Yet that is the extra demand being put in by many trade unions today on top of a basic rate which itself is far above that. The people who are really suffering—it is a disgrace that we do not make more fuss about them—are the low-paid workers and others similarly hit. They are the ones who ought to be demonstrating, demonstrating not only against the Government for their lack of policy but against other sections, too, and some of the trade unions for exploiting their monopoly position.

Second, inflation not only divides but debauches the nation. It rewards the "spiv". It does away completely with the general rule that one should impose upon others only what one is willing to accept oneself. It puts a premium on payments in kind, things under the counter, expense accounts, and so on.

Third—this is closely relevant to what the right hon. Gentleman said—inflation will simply dry up investment. At present. one would have to earn 15 to 20 per cent. on one's investment to make it worth while. There will be little more voluntary investment soon if that sort of thing continues. There could be forced investment, but that would be part of the movement away from a libertarian society. Those of us who have been supporting the savings movement should consider carefully whether we are, in fact. supporting a long-term fraud.

All these results will follow for this country whatever happens in the rest of the world. It is sometimes said, "What does it matter if we inflate if other countries inflate equally fast?". But all these injustices will arise in Britain whatever happens in the rest of the world, and, what is more, if we inflate faster than the rest of the world, as is happening now, we shall soon be in a balance of payments crisis.

The trade unions today are in a very different situation from their situation at the time of the Tolpuddle Martyrs. Some of them represent favoured groups who arc by no means the poorest or most helpless people in society. It is the unorganised who are being so hopelessly left behind in the inflationary race.

On the other hand, so expensive is modern machinery that the owners of it, whether the State, nationalised industry or private enterprise, cannot afford to see it standing idle for long. So the bargaining position of the unions—certainly of the strong unions in certain industries—is immensely strong.

Further, it seems to me that certain conditions of a modern industrial State are in themselves inflationary. There has been a dominant bureaucratic trend in both Government and business to worship size and to worship sophisticated technology. This has been largely nourished by arguments about prestige and the pressure of those employed in such industries; for instance, the production of aeroplanes which will never pay their way. The result has been a great diversion of effort to create products for which no one really wants to pay. That is just as inflationary as making weapons in time of war for which wages are paid but which do not add at all to the number of saleable commodities in the market.

There also seems to me to be a difficulty in the lengthening time of production of many sophisticated products. Wages are being paid out all the time, but even if the product is wanted on the market it does not reach it until considerable sums have gone into circulation.

We know the situation. The Government, caught by inflation, cannot expand. Perhaps they have missed their chance. Probably after the election they could have risked some expansion, but now it is much more difficult. So we are in an exceptionally dangerous situation of inflation plus stagnation plus high unemployment. It used to be thought that it was an almost impossible achievement to reach a very high rate of unemployment at a time of raging inflation, but we have done it. I doubt whether the real standard of living of many people in this country has risen at all over the past five years.

It seems to me that we must get rid of certain facile assumptions. First, there are the inquiries which are set up ad hoc in one form or another, and which always find something above the minimum demand. They are not a very satisfactory way of dealing with incomes. Second, there are the arguments on comparability. We in the Chamber might compare ourselves with American Congressmen, and if we did we should be entitled to £20,000 a year plus £50,000 expenses. Comparability must take account of the circumstances of the society in which we live.

Further, even if prices go up, which gives people a very valid excuse for a wage increase in many ways, obviously if everyone chases present and future rises in the cost of living we are in exactly the position of the donkey chasing a carrot tied to its own bridle.

But, while the difficulties that we face are great, we have certain assets. We might, even in a debate on a Motion of censure, count our blessings. First, as the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) said, we have a strong balance of payments position.

Second, we have in the unions many sensible men who know the situation all too well. Here I come to a rather controversial note in my speech. I happen to hold the view that the Minister in charge of labour is quite a sensible man, and I do not believe that it is beyond the bounds of possibility—I put it no higher than that—that he should get together with the unions privately and see whether the growing friction can be stopped. I know that there is a National Economic Development Council, but that is the sort of body I want to get away from. The growing friction which is doing nothing to check inflation and could do the economy great harm can only be reduced in less public circumstances.

If we are to restore a better atmosphere, there must be concessions on both sides. I do not know Professor Hugh Clegg. I have listened to the explanations of why he has not been reappointed Chairman of the Civil Service Arbitration Tribunal. Of course, the Prime Minister has a case. The question is whether there are not many wider considerations than whether Professor Hugh Clegg took on an appointment by the unions for the Scamp Inquiry. This is the sort of area in which the Government should have shown more generous statesmanship. If they have no other objections to Professor Hugh Clegg, let him go on. Someone must make a few concessions and not appear to be driving through everything on the exact letter of some law or because of arguments which have a certain amount of logic.

I fail to understand some of the talk about hiving off profitable parts of nationalised industry. I am not a very keen nationaliser, but the Government always tell us that nationalised industries must show a profit. When those industries have some part that does, they are told to sell it. I cannot see that that is a very suitable policy.

We must also get away from the question of prestige. I should like the newspapers and other mass media to get away from all the language of battle they constantly use in industrial relations. When a sensible and moderate trade unionist is put on the televisison, someone asks, "Don't you take this finding as a defeat?", when the man has, possibly very reasonably taken rather less in a major award than he originally claimed. We must get away from that atmosphere of battle, for which the papers and television are very much to blame.

Several things are essential to any economic policy that can deal with inflation. First, we must have a lead from the top. It is impossible to forgo wage rises when the top people, the managing directors, the leaders of professions and everyone else at the top increase their emoluments and payments in kind every year. It is almost inconceivable that the managing director of Rolls-Royce had an increase of £9,000 last year. Where is the productivity? I can understand such people having increases when their businesses do well, but they get more cars, more secretaries and more money whatever their businesses do. I do not think that it can be argued that this does not affect the economy. No one suggests. that chairmen of companies should be allowed to murder people simply because they do not murder very many, that it does not matter very much if they murder one or two. There is a general rule that the top people show an example.

Second, we should look at some of the top institutions. There is a lot of talk about people putting up prices, but some of the banks have increased their dividends and their charges. They are in a monopoly position; they operate restrictive practices. They even refuse to take the decimal halfpenny. There are members of the Government who have great influence with the banks. Let them induce a little economic sense in them.

Third, we must have a prices and incomes policy. It may not be the same as the Labour Party's policy, but it is insufficient for the Chancellor virtually to say, "I have no policy. We all hope for the best." Does he think that 10 per cent. is the right level of increases in wages? Is that to be the norm? If he does not like the P.I.B., has he any means of establishing a principle for wage increases and fixing salaries and so on in the public sector? Obviously, productivity is not applicable. We cannot judge judges by productivity. A very good point was put to Lord Wilberforce when he was asked, "Has your productivity gone up?" It is absurd to apply productivity everywhere. But there must be some criteria. We cannot leave the matter to a whole series of ad hoc inquiries.

I should also like to see a policy which encourages plant bargaining instead of across-the-board wage increases, and I should like to see increases when they occur in monopoly conditions referred to something like the Monopolies Commission. It has often been suggested that there is no reason why unjustifiable increases arising from a monopoly position should not be subjected to scrutiny by a body like the Commission, and so should rises in prices.

I am not asking the Government to go back to the time when they tried to fix wage rates all across the board, but I am asking them to establish principles and to take action against what they consider to be unjustifiable wage increases. They should also consider the possibility of taxing such increases which are clearly beyond the public interest.

Next, instead of cutting down the social services the Government should increase them. I am trying to stop the causes of distress in this country. If we increased the Community services in particular we should make it a good deal easier to restrain wage demands. I do not for one moment share the Government's view that the social services are intended only for lame ducks. I regard them as part of the fabric of this country. They need altering and extending in some ways. They should become community services to a great extent. I want them to be used as instruments for greater equality and binding us more closely together.

The question of Government expenditure has not been much raised in the debate. It is pretty clear that in spite of all the promises there will be no reductions, or very little. What is rather significant is that such reductions as there will be will be in the Government's involvement over investment. There are arguments on both sides as to whether allowances are better than grants. Certainly, in my part of the world grants are generally more useful because they provide some cash. According to the Government there will be less money for investment, whatever system is used. Yet we are running a very large Budget surplus with no effect on inflation and have a strong balance of payments position. In this situation we should begin to make credit rather more readily available and try to reduce some interest rates.

I agree with the right hon. Member for Kingston-upon-Thames that ultimately it is the confidence of investors in the future that will decide whether or not they invest, but certainly lower interest rates and a less restrictive policy will encourage them to take a rather rosier view of the future. This is very true. It is very serious indeed that Scotland has 118,000 people unemployed. Although the Government may consider that it is impossible to do anything more than they suggest, I do not think that their present measures will impinge on that situation unless they take more general measures to encourage again investment and the taking up of the slack.

For my part, I believe that the running of the economy is a matter not simply of economics but of politics as well—politics in its widest sense. As has clearly been demonstrated over the years, a great deal of the party battle in this House is totally irrelevant. In fact, the economy is not going to be put right by total nationalisation nor by an attempt to go back to a completely competitive society—an attempt which has been knocked on the head as soon as it started. The only major measure the Government have taken is to nationalise Rolls-Royce. That is their great triumph in the first year of office. That is their battle honour. Their battle has not been very successful so far.

If we are to remain a free society, a joint effort must be made both to protect people from the causes and effects of inflation and to deal with the serious cases of hardship caused by rising prices. It must be done by establishing general principles, particularly in the public sector, and by trying by reasonable concessions to build up again some unity of purpose between us with which to run the economy and the labour relations of trade unions and employers and to do all those other things which ultimately go to make the wealth on which we depend.

6.32 p.m.

Mr. John Nott (St. Ives)

It is a pleasure to follow the right hon. Member for Orkney and Shetland (Mr. Grimond) because his speeches are always very interesting and also because he represents the most northerly constituency of the British Isles while I represent the most westerly and the most southerly constituency. So, when he talks of inflation, both of us are aware of the serious danger which this causes in particular in our areas which include some of the lowest wage earners in the United Kingdom. But when he says that the only major Measure which the Government have taken of any consequence is the nationalisation of Rolls-Royce, he does his own intelligence and knowledge of the Government's substantial new social security measures less than justice.

We all recognise the dangers of inflation and that somehow it has to be conquered. It is the major problem of the Government and of the western world at the present time. We are in a situation in which, if the current inflation continues at its present rate the price level will double in 10 years, which will bring us just about to the time, in 1980, when the number of pensioners rises from about 7 million to about 9 million. There are major social security and other problems ahead of us unless we can get inflation down to a lower level.

My sense of goodwill towards right hon. and hon. Members opposite has been slightly diminished as a result of the sort of behaviour in Parliament to which the right hon. Gentleman referred. Nevertheless, I have to say that the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) was, in a technical sense if in none other, a good Chancellor. I always felt that he possessed in economic and financial terms a good grasp of the job. But I have to say that his speech today was rather inadequate and somehow beneath him. It was worthy of a man who, having watched his own colleagues beat a horse to death, then gives a survey of the carcase but has absolutely no suggestion as to how the poor beast can be raised from the dead. He gave no suggestions as to how he would tackle the increasingly serious inflationary situation which confronts the country at the present time.

I looked up the right hon. Gentleman's last speech as Chancellor of the Exchequer on the prices and incomes policy of the last Government. He said: No one can prove exactly what the effect of the prices and incomes policy has been over the past 18 months, or over any other period. It is not in the nature of the subject for exact proofs to be possible."—[OFFICIAL REPORT, 17th December, 1969; Vol. 793, c. 1474.] The venom and strength of his comments today on prices and incomes policy do not fit very neatly with the views he expressed in office. I think that the Government are equally entitled to their doubts as to the effectiveness of the type of prices and incomes policy followed by the Labour Government.

The right hon. Gentleman also referred to loss of growth. But had the economy grown under the previous Government at an equivalent rate to that achieved in the long period of office of the last Conservative Government, the country would be about £11,000 million better off and we would not have any of the major social problems—the pensions problem and all the other difficulties—which confront the country at the present time.

At the top of the list for sheer effrontery were his charges against the Government on prices, because he cannot rely on his reincarnation as Opposition spokesman to obliterate our memories of the fact that he was a strong, early and well-leaked advocate of devaluation.

Contrary to any action which the present Government have taken, the right hon. Gentleman knows that devaluation was a conscious and deliberate policy to shift the balance of our internal and external price levels. It was intended to diminish the standard of living of the community for the benefit of exports and the balance of payments. The Conservative Government have never pursued a deliberate and conscious policy of raising internal price levels. Indeed, they are grappling still with the consequences of devaluation.

Although we welcome the balance of payments surplus, it is quite improper to suggest that it is secure. First, we have the Common Market negotiations and the whole question of our financial contribution looming up; secondly, we have major problems of oil imports which may be upon us within the next few years; thirdly, we have major debts still to repay which the last Government were responsible for incurring. While I agree that we have some surplus in our balance of payments which might be used for expansion or for other purposes, that £600 million is not as secure as I should like.

The right hon. Member for Orkney and Shetland made some valid points. I agree with him about the low level of the debates on inflation in this House. It is almost as low as the level at which we debate entry into the Common Market. Some of the arguments are banal. For the right hon. Lady the Member for Blackburn (Mrs. Castle) to declaim and try to prove that a wage settlement of 10.9 per cent. is nearer 15 per cent. is an irresponsible way of trying to tackle what both sides of the House agree is the major problem of our time.

I want to outline some thoughts of my own which are not of a party political nature. I believe that historical analogies are seldom apt, but when I contemplate the revolutions of the nineteenth century which toppled the royalists from their seats and finally compelled them to accept the rule of law, I recall that everyone at that time looked upon the rule of law as the rampart of liberty, and it sustained the expectations of the Western world for many years and still, indeed, sustains the expectations and confidence of the older generation in this country today. But we have another sort of revolution in the Western world at the present. This time it seems to be against the rule of law as being the enemy of liberty. The right hon. Gentleman, who talks of unity, is noted for being a supporter and an enthusiast for certain elements of the younger generations in our society who I feel regard the rule of law as being the enemy of liberty. We are all in search of a basis on which citizens may be protected against the institutional abuse of power by the royalists of the 20th century —the trade unions, the Press, big business and bureaucracy.

I hope that some way will be found to tackle this problem without us all dissolving, as the right hon. Gentleman said could easily happen, into anarchy and unbridled individualism.

The inflation cycle from which we suffer stems initially from political unrest. It is as much a political as an economic problem. It is initiated so often by labour unrest, and that leads to wage inflation. With the previous Government, wage inflation led to "stop—go", which led to economic stagnation, then to cost inflation, to more price inflation and back to labour unrest again.

What I admire about the policies of the Chancellor and the present Government is that they are pursuing a steady course and, in fact, precisely the same level of demand in the economy as was recommended by the previous Chancellor. If the present Chancellor can be criticised at all, the criticism must be that he has been marginally expansionary, certainly not marginally deflationary, and still we are operating, broadly speaking, on the same criteria advanced by the right hon. Member for Stechford. We do not have "stop—go", and I am glad of that.

Mr. Robert Sheldon (Ashton-under-Lyne)

If the Chancellor has been marginally expansionary, why is the level of bankruptcies and of unemployment the highest for the past 10 years?

Mr. Nott

The hon. Gentleman knows quite well that the economic measures taken by the Government in October, which is the only date to which we can refer—I do not say that they were major expansionary measures, only marginal ones—are likely to have effect within four or five months. That is why I believe that my right hon. Friend is perfectly correct in not moving sharply either in an expansionary or a deflationary direction at the present time.

I apologise for what is nothing more than a preamble, but in these circumstances, where we have major political problems and to some extent a breakdown of discipline in society throughout the western world, the ideological arguments which have divided the two main parties, and which we still have across the Floor of the House night after night, are becoming increasingly irrelevant and sterile. I agree with the right hon. Member for Orkney and Shetland on that score.

In his final remarks the previous Chancellor accused the Conservative Party of being doctrinaire, but a large portion of his speech was taken up in laughing and sneering at the Conservatives because they had nationalised the defence assets of Rolls-Royce. He cannot have it both ways. Either the Conservative Party is doctrinaire or it is not. He cannot sneer at the Conservatives for taking over the assets of Rolls-Royce and, in the same speech, say that we are doctrinaire.

There is not much object in inveighing against capitalism on the one hand and Socialism on the other. The problems of capitalism are entirely practical. They are not much divorced in many respects from the problems of Socialism. First, there is the problem of the growing size of institutional capitalism, with the social problems, which it creates including less adaptability to change, greater bureaucracy, and more impersonal relationships between management and men. Second, there is the growing inability of capitalism to finance new projects. There is not just the problem of illiquidity in the economy but the problem of innovation outstripping the resources of society and capitalism to provide the necessary sums to put developments into production. These problems would exist were the activities carried on in public ownership or private ownership. The only difference is that the sanctions against failure under private ownership are much more severe.

When the right hon. Member for Stechford worked himself into quite an intellectual lather about the so-called hiving off of elements of the public sector, he was not making a very important point. If he regards the sale of Thomas Cook, a few pubs, some ferry services, and the odd hotel owned by British Railways, as a major economic issue, I feel rather sorry for him.

It could be said that Thomas Cook is an example of one of the tragedies of the public sector, that, with the greatest name in travel, it has hardly increased its business—it has increased it slightly over the years—whereas American Express, which started 50 years later, is one of the largest businesses in the world.

Mr. Arthur Palmer (Bristol, Central)

If the hon. Gentleman argues that getting rid of these assets from nationalised industries is a relatively minor matter, why do the Government go to so much trouble to do it, and cause so much disturbance and disunity in the process?

Mr. Nott

The Government do it for exactly the same reason that the West German Government decided to sell their shares in Volkswagen. The previous Chancellor said that no Western Government—it was a great high-sounding phrase—would ever be so foolish as to sell off a major public sector industry. That is precisely what the West German Government did with Volkswagen, which has since done extremely well. There are many other similar examples. The right hon. Gentleman said "no other Government". I would not go so far as to say that he was ignorant, but he was just wrong. He made an inaccurate statement. There are plenty of examples of chairmen of nationalised industries, such as Sir Ronald Edwards and Lord Robens, who have advocated bringing private capital into the public sector.

Why not bring some of the sanctions of the capital market into the public sector? I cannot see that this will do anything but good.

The right hon. Gentleman the previous Chancellor mentioned Rolls-Royce. I did not speak in the Rolls-Royce debate, but I believe that the Government handled this matter in the most excellent and decisive way, and I will now support that view.

Is it seriously suggested by hon. Members opposite that a huge American company which itself was in comparable difficulties would have renegotiated a contract under the threat, as opposed to the actuality, of receivership? It would not. If the Government had said to Lockheed—the crisis was not of the Government's making—"we should like to talk about the renegotiation of this contract with you before we allow the receiver to go in"—if they had any option of allowing or disallowing a receiver to go in—what does the hon. Member for Ashton-under-Lyne think would have happened then? The Government's position would have been utterly untenable in the negotiations. Absolutely no respect is gained in business by displays of weakness, which is what it would have been.

Mr. Sheldon

Surely the hon. Gentleman is aware that no private company other than under the insistence of a Government who fail completely to understand these issues would ever go into the situation of Rolls-Royce, where it has only one creditor that is threatening to ruin it, without seeing what arrangements it might come to with the company before putting the receiver in.

Mr. Nott

The Government did not put the receiver in. If the Government wished to save the taxpayers, pensioners and everyone else £170 million plus and believe that it was worth while renegotiating the RB211 contract, the way to do it was to go to Lockheed not before receivership but after it. This is the way the hon. Gentleman would have handled it.

Mr. Sheldon

indicated dissent.

Mr. Nott

Apparently the hon. Gentleman would not have handled it in that way, in which case he would not have come out of the negotiations with a renegotiated contract.

I find no argument of business ethics in the Rolls-Royce case. If Lockheed was so foolish as to enter into a contract with a private company on the assumption that the British Government were underwriting it, it deserved to reap the consequences of its miscalculation. That is my attitude. I do not know what ethics or national reputation are involved in the British Government's sticking to the agreement which had been made to advance a set amount of launching aid for an engine. I do not know of any morality that requires a Government to borrow from, or tax, their citizens to uphold a contract which a private company has failed to meet.

I have not time to comment on unemployment, except to say that I am gravely disappointed at one matter in the Chancellor's statement. I am very critical of the announcement about development areas and special development areas. I do not know that we want to have development areas, special development areas, intermediate areas or even a new announcement on intermediate special development areas. The regional development policy is becoming a complete jungle. If we could do so, we should abolish it and start again.

However, I must make one parochial plea. I believe that the unemployment in my constituency is higher than that in any one of these new special development areas. It runs at an average of 8 per cent. for six months of the year in one district and at 12 per cent. in another district. Yet there is no mention of Cornwall. I have no doubt that the Department of Trade and Industry will say, "You represent a seasonal area." I assure the Government that the 8 per cent. and the 12 per cent. unemployed in my constituency do not want to be seasonal workers. They want regular employment. The average wage in my constituency is very much lower than that in any of these Scottish and most of these Welsh constituencies. What my constituents want, if we have a regional policy at all, is permanent employment and permanent work.

I therefore hope that my hon. Friend the Under-Secretary will tell my right hon. Friend who is to wind up that I can see no reason why Cornwall is entirely excluded unless it he, perhaps, that Cornwall since the last election has four Conservative Members whereas most of these constituencies are represented by Socialist Members. Perhaps that is not a very fair remark, but I feel strongly about the matter.

I will now conclude, although I think that I have spoken for only a quarter of an hour.

Mr. Speaker

The hon. Gentleman can consult HANSARD tomorrow. He will find that he is wrong.

Mr. Nott

The major problem facing us is an international one. President Nixon is about to indulge in Keynesian economics. By the time that he has been indulging in Keynesian economics for two years the dollar deficit will be considerably higher than it is at present and world inflation will be at a very much greater rate. I wish the Government well in their domestic policies, but unless they do something to isolate themselves from the international consequences of what is about to happen in the United States the prospects for bringing inflation down within reasonable levels in Britain are extremely grim.

Several Hon. Members

rose— —

Mr. Speaker

I repeat my plea for shorter speeches.

In fact, the hon. Member for St. Ives (Mr. Nott) spoke for 23 minutes.

6.55 p.m.

Mr. E. Fernyhough (Jarrow)

The wisest part of the speech of the hon. Member for St. Ives (Mr. Nott) was contained in his last few sentences, when he acknowledged that world conditions were playing their part in the inflation from which we are suffering, although every other hon. Member opposite who has spoken would have the country believe that inflation can be attributed solely to the trade unions.

It is precisely because the Government are taking the line when replying from the Dispatch Box and in their weekend speeches that it is the selfish, grasping greedy trade unionists who are responsible for all the inflation in Britain that we must try to get some part of the record put straight.

When the debate is over I intend to see whether I can find the election addresses of those hon. Members opposite who have spoken today. I will gladly let them read my election address. I did not tell the people of Jarrow that there would be any tax cuts or that the road would be easy. I told them that we should have the standard of living that we worked for.

It is no good right hon. and hon. Members opposite playing down the increases they grant to judges, top civil servants, and chairmen of nationalised industries and giving £100 million away to their friends by abolishing the Land Commission, and then telling the miners, the steelworkers, the textile workers, or any other section of workers, "You must moderate your claims."

Workers were greatly upset immediately after the Tory Government came to power, because the mini-budget was a deliberate attack upon many workers. The Chancellor said today that my constituency and the surrounding constituencies are to have more help because our unemployment problem is worsening. 1 welcome the news, that Jarrow will be part of a special development area but this is from the same Chancellor who last November said that from this May the unemployed will not get benefit for the first three days, the sick will not get benefit for the first three days, and the victims of industrial injuries will not get benefit for the first three days. Could anything have been meaner?

As I said when the statement was made, we have to go back to 1931 to find an attack so mean and so contemptible. At a time when unemployment is rising, the Chancellor is to take from the unemployed, the sick and the injured the first three days of their benefits. It is the few millions which are thereby saved which are to enable him to carry out his pledge to reduce taxation. If a Government, whatever their complexion, can honour their wild and extravagant pledges only by demanding sacrifices of the weak, the injured and the unemployed, they ought to be swept into oblivion at the first possible opportunity. I believe that they will be, because it is the measure of what they call their humanity, their better tomorrow. What a good start for the better tomorrow is this attack upon the sick, the unemployed and the injured.

It did not stop there. The right hon. Gentleman went on to make his attack likewise upon the sick in relation to prescription charges; and it was said in the same announcement that the price of school meals was to go up. This is the Chancellor who is calling for co-operation from the trade unions, who is asking for help to enable him to get out of the problems and difficulties which he faces. That is very significant, because my constituency was the first victim of the no-help-for-lame-ducks Minister. In April of last year Palmer's, the world renowned ship repair yard, was about to close and a Labour Government decided that there should be a rescue operation. By that rescue operation 1,000 men, 750 of them skilled men, had their jobs saved. Immediately this Government came into power they told Palmer's and Vickers that there would be no help forthcoming. The ship repair yard was closed. Now the Government which had to save Rolls-Royce and will have to save Harland and Wolff but which was not prepared to save Palmer's have to spend a lot more money providing alternative work for the lads who would already have been at work if a Labour Government had got back on 18th June last. Those lads fear fear that they are a sacrifice.

If the Chancellor of the Exchequer or the Government think that the shop stewards from Palmer's when they go into other establishments are going to be nice, quiet, understanding and cooperative boys they do not understand how bitter those men feel about being sold down the drain. Of course they are not going to be helpful. Likewise, if anybody expects the miners to be helpful and co-operative when the profitable parts of their industry are to be sold off he does not understand how the men's minds work. Equally, it can happen in steel and certainly within the railways. At a time when the Government need the understanding and co-operation of the organised workers more than ever they spit at them. They knock them in the teeth. They say, "Whatever your views, whatever your feelings, we are going to pursue this policy regardless."

Captain W. Elliot

Would the hon. Gentleman tell the House why Palmer's was closed?

Mr. Fernyhough

It was closed because it was not viable, as Rolls-Royce is not viable. I accept it. Hon. Gentlemen are now going to spend money on getting firms to go there, but there is no assurance that industries will be viable because there is no certainty at all; so they are merely having to spend money to get there additional work which Palmer's would have provided. What is more, it would have made the shipyard the biggest, finest and best-equipped in the North-East when needed. The Prime Minister talks of the threat in the Mediterranean from the Soviet Navy. It may be that we shall have ships involved. They might get damaged, and there will need to be a place for them to be repaired. But the facilities and the craftsmen will not be there because the Government were not prepared to find the necessary money to sustain that yard during a lean year or two.

Mr. Nott

The hon. Gentleman has admirably expressed the best argument for Conservative regional policy. We now have an allowance system rather than a cash grant to one industry so that there is no necessity for the less viable firms to go to his constituency.

Mr. Fernyhough

If the hon. Gentleman would like to read a social history of Britain let him read the history of Palmer's. It had to be rescued before, in the 1930s, and if it had not been it could not have done the magnificent job it did in the last war. I hope the need never arises again, but if it does hon. Members opposite will have some responsibility for it.

We want the co-operation of workers. What are the Government going to do about housing subsidies? Rents in Jarrow will be going up by 10s. and in Hebburn by 14s. if the economic rent without subsidy is to be paid. Does the Prime Minister expect the lads to suffer increases in rents of that kind and not try to seek some protection for themselves by getting some wage increases as compensation? What the average council house tenants cannot understand, because they are not blind, is why the Government are going to see that those who can do so pay the economic rent and yet are going to give public money to those who are already very well-housed who can afford to buy a tumbledown weekend cottage and make it up-to-date at public expense. Hon. Members here will know scores of cases where that has happened. Wealthy people buy a tumbledown cottage, whether it be in the Lake District or on the coast, and put it into first class condition at public expense. That will continue under this Government, but no man or woman who lives in a council house who gets a certain income is going to get away with less than the economic rent.

I want the Government to overcome their difficulties if they can because I love this country. I do not want to see mass unemployment. I do not want to see us losing our place in the sun. But there is no possibility whatsoever of their beginning to attempt to overcome their problems so long as they are pursuing their existing policies. The Prime Minister talked of uniting the nation. Every major decision they have made so far has divided the nation. It is because of that that I say the sooner they quit those benches the better it will be for this nation and the people in general.

7.10 p.m.

Mr. A. E. Cooper (Ilford, South)

What must be said first of all is that for the Opposition to put down this Motion is a piece of effrontery which really takes some beating when one considers that for years they governed—if that is the right word—this country, they allowed a level of unemployment to develop, they increased taxation by no less than £3,000 million and they allowed a situation where profits became stagnant and where it was almost impossible for companies to invest anything. The right hon. Gentleman the Member for Birmingham, Stechford (Mr. Roy Jenkins) in his Budget speech of 1965 introduced the iniquitous Schedule F which is one of the main causes for the lack of liquidity in companies today.

I hope that when my right hon. Friend introduces his Budget later this year he will announce that this is to be done away with. Perhaps hon. and right hon. Gentlemen opposite are not fully aware of the impact that Schedule F has on industry. There are many companies employing, say, 2,000 or 3,000 people, earning a gross profit before tax of about £1 million. Before Schedule F, after they had paid tax and a reasonable dividend, they would have a retention in the company of about £150,000 out of which their investment for future development had to be found.

The right hon. Member for Stechford introduced Schedule F to restrict companies from paying higher dividends. It most certainly had that effect. The result was that after a company had paid its corporation tax and a reasonable dividend, and then Schedule F, it was lucky if it had £2,000 or £3,000 left for retention. High rates of interest combined with Schedule F is the prime reason why, at present, company profits are insufficient for investment.

I listened with great interest to the right hon. Member for Stechford today, and I must confess that I heard nothing that was of the slightest interest to the future of this country. I trust that when my right hon. Friend the Prime Minister replies to the debate he will not waste too much time on dealing with the right hon. Gentleman because there was nothing much to talk about. The right hon. Gentleman chides us with the problem of Rolls-Royce when he and his hon. Friends were the people who destroyed TSR2, one of the greatest aeroplanes ever produced. The RB211 flows from that decision. When the present Leader of the Opposition formed his Government who did he put in as Minister of Technology? The right hon. Member for Bristol, South-East (Mr. Benn)—probably the classic case of sending a boy to do a man's job. One of the reasons why we are in this great difficulty over Rolls-Royce is because of the ineptitude, incapacity and inefficiency of the right hon. Member for Bristol, South-East.

The central point of my argument is that, whatever differences there may be between us, there is one basic and central fact governing all and that is that all we have, all we can do by way of education, the provision of pensions and social services, depends entirely on an efficient and prosperous British industry. Everything flows from that. If we cannot have an efficient, prosperous industry, if we are incapable of selling our goods here or abroad, no profits will be earned, no investment will be made and we shall not have such things as pensions and education.

It is a fact to be remembered that we have a population of about 52 million. The working population is only between 23 million and 24 million. In other words, less than half the population provide all that is required. This proportion will become more unfavourable as the school leaving age rises and it becomes possible for people to retire earlier. It is likely that we shall find that the working population will be proportionately less than it is today. It is therefore the bounden duty of Government of whatever party to make sure that company taxation is at such a level or is imposed in such a way that the company is able to earn profits to provide for investment necessary to keep industry up to date.

I have listened to all of the debates on the Industrial Relations Bill and what has worried me has been the talk of some hon. Members opposite about the bosses and the workers. I sometimes wonder whether hon. Gentlemen opposite really know what goes on in British industry today, whether they really understand what is happening. There are many of us, and I am sure there are many hon. Gentlemen opposite, who spend a lot of our lives trying to sell the products of industry, not only here but all over the world. What we want is an absolute assurance that we can produce those goods at the right price and deliver them to customers at the right time.

One of the greatest obstacles to selling British goods abroad is not to do with the quality of the product or even with its price. The question that we are asked is, "Can you deliver? Will you have a strike which will prevent you from doing something? Look at the situation at present." With the great capacity of British industry to improvise we are getting over this postal strike and, so far as my company is concerned, Mr. Jackson and his colleagues can go on strike from now until Christmas. We are quite happy. We are getting along quite well as are most companies.

Nevertheless, when it comes to dealing with people abroad this is a very difficult situation to overcome. It is the problem which arises week after week, of whether we can deliver, whether there will be some problem which will prevent us from meeting our obligations. In other words the whole prosperity of the country is built upon co-operation between the people, business men and nations.

Hon. Gentlemen opposite know this. I understand the reasons why they have to make the noises they do during our consideration of the Industrial Relations Bill. They know that there has to be a regularising of relations between management and workers, nations and companies if we are to live together happily and prosperously and to put our affairs on a right footing. What we must seek to do is to make sure that we know the ultimate objective, which is the prosperity of our country and peace, if we can get it, between unions and management.

As management we have no desire to be constantly in trouble with the unions with whom we have to work. Our sole objective is to create a situation in which we can work happily and peacefully together, in which we can tell our men what orders we have, what deliveries we have to meet and what conditions there are. The men want that. The trouble is not with the ordinary chap on the shop floor who is a 100 per cent. honest-to-God chap. The trouble is the militant shop steward. He is the man we must control.

For the Opposition to put down this Motion condemning the Government for their economic policies, in view of the awful policies which the Labour Government pursued for six years and which are now largely responsible for our present difficulties, is a piece of effrontery which it would be hard to beat.

7.30 p.m.

Mr. John D. Grant (Islington, East)

From 18th June until today is just eight months. I do not think that even the Secretary of State for Employment, were he here, would, with his curious method of calculation, dispute that statistic. But to many of us on this side of the House it seems far longer. It must seem very much longer to the electorate, who were fed on a pre-election diet of promises of the good time ahead and of a better tomorrow. I think that they have already learned the hard way that perhaps tomorrow never comes.

It is perhaps reasonable to say that the autumn of hope has been swiftly followed by a winter of discontent, and we are now heading for a spring of total disillusionment. I cannot say that I feel very cheerful about the prospect of the summer, and nothing that the Chancellor said today alters my view or that of any of my hon. Friends.

It is necessary and relevant to have a quick look back to those balmy pre-election days when the Prime Minister-to-be was sailing on with gay abandon and that carefree smile which we all know so well. That was before he saw "Anthony the Albatross" on the horizon. At that time the right hon. Gentleman talked about the decisions of the Labour Government, which he said were dictated by the short-term gain which had counted for everything. He talked of travelling abroad and hearing about our shrunken reputation; of the cynicism among young people in this country; of the need for a new style of Government with sound and honest British traditions; of his responsibility to all the people; and, as he said, of an end to the quick trick.

The Conservative Party manifesto said: Under a Conservative Government the gap between the politician's promise and Government performance will be closed, so that people and government can be brought together again in one nation united in a common purpose—a better tomorrow". If any hon. Member believes that that has been the pattern of events in recent months he should ask his constituents about it. I am sure that my constituents would rapidly let anyone who held that opinion know that he was suffering from some extraordinary delusion.

There are the unemployment figures, for which the Conservative Party was only too ready to blame the Labour Government. We have had the matter underlined today with the publication of the disastrous unemployment statistics. People can see the economic stagnation and flagging industrial investment and. in particular, how that infamous promise by the Prime Minister about reducing prices "at a stroke" was a total phoney, an unprincipled piece of political chicanery. It was this promise above all else which put the Conservative Party in office. I challenge hon. Members opposite: did any of them believe before the election that the Conservative Party, if elected, would reduce prices "at a stroke"? Any offers? The silence is significant and deafening.

Mr. Wilfred Proudfoot (Brighouse and Spenborough)

If the hon. Gentleman had read our literature at election time he would have found that we never said that. We said that we hoped to slow them down.

Mr. Grant

The Prime Minister has conceded that he used the phrase "at a stroke" in a speech on 16th June. I did not say that it appeared in election literature. I do not know whether the hon. Gentleman's intervention was an example of touching faith, but it was not reciprocated by any of his hon. Friends. The Prime Minister's speech was a prime example of the "quick trick", about which he was only too pleased to talk before the election—" Here is your price cut, madam: now you see it, now you don't."

Let me deal with the question of our overseas reputation. I do not know what hon. Members opposite think the South African arms affair will do to our reputation abroad, including the economic implications. I mention in passing the effect abroad of the rantings of the right hon. Member for Wolverhampton, South-West (Mr. Powell), with whom all hon. Members opposite are associated even if they do not like to recognise it. Now we have the Rolls-Royce fiasco. Some reputation that will earn us abroad in terms of prestige, goodwill and economic interests! That is the clearest possible indication of the Government's disruptive double talk—the double standards they set between public and private sectors of industry.

The only answer which we get from the Government when we talk about the perils of inflation is, "Blame the unions." "Aunt Sally" has now become "Uncle Vic". I share the view of the right hon. Member for Orkney and Shetland (Mr. Grimond). It is time the Government started talking directly to the trade union movement. I share the right hon. Gentleman's view that "Neddy" meetings are not a suitable forum in which to initiate this kind of necessary discussion.

We hear from the Prime Minister that he does not believe in ostracising those with whom he disagrees. Perhaps he will make a start by stopping ostracising the trade union movement. The fact is that he does not want to talk to the trade union movement.

The Prime Minister (Mr. Edward Heath)

I have no wish to ostracise the trade union movement. In fact, my personal relationships with it are very good. Perhaps the hon. Gentleman could explain why "Neddy" is not the correct forum in which to have discussions between unions, employers and Government. It was created for that purpose by the Conservative Government and carried on by the Labour Government for 5½ years for that purpose. We are doing the same again.

Mr. Grant

I did not suggest that there should be direct talks at this stage between Government, employers and unions. I am referring to the necessity for the Government and the trade unions to get together to find common ground. The Prime Minister said, in effect, that his relations with the trade unions are very good. I find that statement staggering. When was the last occasion on which he saw the T.U.C. General Council or any of its members on any deputation outside "Neddy"? Perhaps the right hon. Gentleman will answer that question. The Labour Government were certainly in direct contact with the trade union movement outside the "Neddy" forum.

The fact is that the Prime Minister does not want to talk to the trade unions direct. He wants to restrict them by means of the irrelevant Industrial Relations Bill.

Mr. Arthur Lewis (West Ham, North)

Does my hon. Friend agree that the ideal suggestion was made by me in a question to the Prime Minister; namely, that rather than see the T.U.C. General Council, important though that may be, he should go to the demonstration on Sunday and address the 100,000 trade unionists who will be there? It would be much better for the right hon. Gentleman to do that than meet the T.U.C.

Mr. Grant

I am grateful to my hon. Friend. All his suggestions are ideal, although I doubt whether the hearing would justify the visit.

We must look at the fiasco created over the question of arbitration. We have heard a great deal about the necessity for arbitration in industrial relations in the last few days. The decision on Professor Clegg above all else underlines the reason why the trade unions will no longer put their trust in arbitration. The Prime Minister said this afternoon that Professor Clegg had to go because one side of the Civil Service negotiating body —the Whitley Council—had lost confidence in him. Perhaps the right hon. Gentleman would say why he appointed Lord Wilberforce as Chairman of the Court of Inquiry into the electricity dispute when it was clear that the trade unions had no confidence in that gentleman, whatever the outcome of the inquiry might have been.

Meanwhile, we stumble on with no policy for prices except to let them rip. The Chancellor of the Exchequer this afternoon said practically nothing about prices. The crude policy for wages is simply to hold them down regardless of the merits of the individual claim, and even that policy is in tatters. We have the incredible spectacle of the Secretary of State for Employment telling the electricity workers that they will get far less than their unions say they will get if they accept the Wilberforce formula. What an encouragement to those lads to settle! That example of face-saving by the Government is as politically deplorable as it is industrially dangerous.

The Tory Party 1964 election manifesto said: An effective and fair incomes policy is crucial to the achievement of sustained growth without inflation. The Government have created a climate in which that policy is now a pipe-dream. So, by their own definition, sustained economic growth is impossible and the Government Amendment is, therefore, irrelevant. The Government have been hoist by their own petard, and none has been hoist higher than the Prime Minister.

I will conclude with a quotation about the Government: Its joy is singular, its self-congratulation is premature. Is this the new political line—that you congratulate yourself on what you have not yet done and trust that the fervour of the self-applause will hypnotise the onlookers? The Prime Minister might remember that quotation. We know how difficult he finds it to write his speeches, but this speech was, presumably, written for him and the quotation was pinched from the Daily Mirror and used by him in the House, in the debate on the economy in March, 1966, to attack the previous Government. It aptly fits the Government's position since last June, and he is condemned out of his own mouth. The contrived fervour of self-applause by hon. Gentlemen opposite when the Chancellor of the Exchequer sat down this afternoon will certainly not hypnotise us or anyone outside the House.

We had no answers from the Chancellor of the Exchequer, and he could have been described this afternoon as a walking, talking vacuum. Similarly, none of us is confident of receiving any answers from the Prime Minister tonight. The one price that will not be reduced is the price that will be paid eventually at the polls by hon. Gentlemen opposite for their past deception and for the present debâcle. It will be a very high price but one which will be well justified.

Mr. A. G. F. Hall-Davis (Morecambe and Lonsdale)

In the course of my remarks I will touch on some of the points raised by the hon. Member for Islington, East (Mr. John D. Grant), but I will start by taking up the point made by the right hon. Member for Jarrow (Mr. Fernyhough) when he said that in his election address he had promised his constituents the standard of living they worked for. Our troubles today stem largely from the fact that during the years of the Labour Government the people did not enjoy the standard of living that they had worked for. Only this afternoon the Chancellor of the Exchequer told us that for the last three years of Labour Government the standard of living rose by less than 1 per cent. This has a direct relationship to the wage cost pressures that we are experiencing today.

I listened with some pleasure to the speech of the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins), but one remark destroyed his whole argument. He said that Governments do not normally make mistakes about the date of an election, but it is well known to the right hon. Gentleman and to anybody who is at all versed in economic matters that the right hon. Gentleman the Leader of the Opposition knew in May last year that the course of prices and unemployment was then set for 1970. The time lag between decisions affecting employment and their impact is particularly long, and the employment situation to which the Opposition have referred has been determined inescapably by the policies which the Labour Government were following when they were in office.

It is important that these things should be said, because it would be a tragedy if, just at a time when the tide is turning, we were to be diverted from our present policies because we felt that the situation was due to anything other than the decisions and actions of the previous Government. The responsibility for the present situation is not on the Government but on the two right hon. Gentlemen and the right hon. Lady who have put their names to the Motion. The Leader of the Opposition deliberately encouraged a wage bonanza before the General Election. He thought that it would win him the day. He knows this is true, and we know it is true. The country spotted what the consequences would be and where we were heading and rejected him on 18th June.

The right hon. Member for Stechford also has a heavy burden of responsibility. The price take-off began in the first quarter of 1970 and continued in the second and third quarters of last year. The percentage cost of living increase on the preceding months was, in January, 1970, 5 per cent.; in April, 1970, 5.6 per cent.; in July, 1970, 6.7 per cent.; in October, 1970, 7.4 per cent. That shows a clearly defined trend pointing inescapably to our experience last year, and the right hon. Gentleman bears much of the blame for 1970 being the year of "Mr. Rising Price".

Why does he bear that responsibility? At the time of devaluation he was not responsible for what went before but he had a direct responsibility for what came after. He made individuals carry the brunt of the devaluation cut-back, and after two years they revolted against carrying that brunt. Talking about his success in containing consumption, the right hon. Member for Stechford said: Judged by any standard other than the exceedingly stringent one which I applied last year, a growth of only 1 per cent. in personal living standards, combined with a growth of 4 per cent. in G.D.P. is a considerable and unusual achievement."—[OFFICIAL REPORT, 15th April, 1969; Vol. 781, c. 999.] The trouble was that it was an achievement which the public found no pleasure in sharing. They were prepared to go on wearing a hair shirt to extricate the previous Government from the results of their economic mismanagement for a limited period only, and at the end of 1969 they revolted.

The origin of the present wage-cost spiral can he clearly traced to the last months of 1969. It was stimulated by the right hon. Gentleman's acquiescence in dropping the first Industrial Relations Bill which he had commended in his Budget statement that year.

The right hon. Member for Blackburn (Mrs. Castle) must take her share of the responsibility. I have some sympathy with her, not just because I come from Lancashire and the area which she represents, but because she is made of sterner stuff than the Leader of the Opposition. She really believed in her Industrial Relations Bill, not just as a political gimmick but as something of real relevance to our economic problems. How right she was. She fought for it, and when her colleagues gave in she should have resigned. Instead, she stayed to make that disastrous speech to the conference of the Institute of Directors. The speech was probably misunderstood, and certainly misquoted, but the choice of the words real power now lies in the workshop was, in the circumstances of the time, a fatal misjudgment and politically inept.

Let us look for a moment at the industrial relations scene. It was not last month but midsummer of last year when Vauxhall's chairman had to announce that strikes in his company and in the companies of its suppliers had cost Vauxhall's 22 per cent. of its planned production and produced the worst six-month loss the company had ever suffered. Over the same period British Leyland had lost over 15 per cent. of its planned production—a total of 88,000 vehicles.

The right hon. Member for Stechford commented on the disappointing investment figures. There is no encouragement to management to invest in new, highly expensive machinery which needs to be run round the clock without interruption. They are constantly seeing disruption of production in their factories, and the Industrial Relations Bill and the consequences which flow from it will have a direct relevance to the restoration of confidence in the desirability of investment. I would not expect the Opposition to rush to pull the Government's chestnuts out of the fire. This is not what happens in the House of Commons or in politics in general, but I would expect them to behave with a sense of responsibility in a situation which is largely of their own making.

The hon. Member for Islington, East said that there was a responsibility to all the people. I agree, but it is a responsibility that rests with the Opposition as well as with the Government. There is such a sense of responsibility among many people outside the House. I feel that the tide of wage-cost inflation is turning and that the public's attitude to our problems is changing.

The right hon. Member for Orkney and Shetland (Mr. Grimond) said that it was a pity that we conducted our affairs in an atmosphere of battle. The general public has formed the view that the time has come to call a truce and that it would be in everybody's interests to do so. It would undoubtedly be in the interests of those members of trade unions whom hon. Members opposite frequently tell us they represent. Those are the people who have the most to gain from a moderation of wage claims and settlements. The people who should be pointing this out to their trade union friends are those hon. Members opposite who sat below the Gangway in the last Parliament opposing vigorously the statutory control of wages of the Labour Government.

The right hon. Member for Orkney and Shetland then referred to the fact that we were perhaps in danger of destroying or restricting the liberty of our society. Hon. Members opposite chide the Government for not taking action, but are they asking the Conservative Government to return to statutory wage control? If I were a member of the Labour Party who had fought against statutory wage control, I should now be saying to my trade union colleagues, "You, above all, should follow a policy of moderation because, unless there is a slackening of the tide, public opinion will force a return to the policies you most bitterly resented and resisted." High wage claims have not worked. They have not benefited the wage earner and are a direct cause of the rising level of unemployment. If one makes any commodity expensive enough. one cuts down demand.

There is another reason why it is in the interests of wage and salary earners to return to settlements related to production and the cost of living in the same type of relationship they were prepared to accept two or three years ago. So long as wage and salary claims continue to be made and pressed at their present levels, they take away from the Government freedom of manoeuvre to take action to expand the economy and to reduce unemployment. I believe that, as soon as wage claims and settlements moderate, if the prospects for employment and industrial investment remain as they are now it will be desirable for the Government to take some expansionary action. I hope they will take action to bring a double benefit, not just in expanding the economy, but in securing a further moderation of the wage-price spiral. The alternative is that either the Government can act directly on prices by reducing purchase tax or selective employment tax, or they can act indirectly on prices and industrial costs by reducing direct taxation on lower levels of income and so moderating the pressure for wages and salaries to be pushed up to keep ahead of prices.

I have already referred to the responsibility of the right hon. Member for Stechford through his acquiescence in the abandonment of the first Industrial Relations Bill. He has a further responsibility for the level of wage claims made in the last 10 months. I believe that it was folly bordering on the incredible to have eliminated in his last two Budgets the reduced rates of income tax on the lower bands of taxable income. It showed a lack of political feel—a failure to understand how men's minds work. People pay just as much attention to the tax they will pay if they increase their earnings as they do to what they are paying on their current earnings. When prices are rising by 2 or 3 per cent. perhaps a marginal rate of 32 per cent. is not so significant, but when prices rise by 6, 7 or 8 per cent. union leaders and the men they represent know that it is not enough to get rises equal to the increase in the cost of living if they are to keep pace in their standard of living.

I believe it is in everybody's interests that wage increases should be moderated and that it is unrealistic not to recognise that the first move in this direction must come from the employers and those who negotiate with them across the table, and the second move, the follow-through action, must come from the Government. It is a poor service to those from whom the Opposition claim to draw their main support to seek to make party points in this situation without studying the facts. The fact that the Opposition have moved a Motion of censure today indicates that they still believe that people have very short memories. I find this surprising. It was because the right hon. Member for Huyton (Mr. Harold Wilson) relied on the electorate having a short memory that he rushed to his defeat in June. He has now put himself in a position of putting down a Motion of censure on policies which he himself was carrying out. It is a Motion I shall have great pleasure in rejecting in the Lobby tonight.

Mr. Peter Doig (Dundee, West)

The right hon. Member for Kingston-upon-Thames said that there was no evidence on which to base this Motion of censure. Does he not consider that the present high level of unemployment is evidence enough?

I will quote an example in the construction industry. Figures issued by the Department of Employment in October showed that 107,000 construction industry workers were unemployed, and it is common knowledge that that figure has risen considerably since. If we add to that figure unemployment in the service industries which work directly for the construction industry, we find that over 250,000 people are unemployed in the construction industry alone. Does the right hon. Gentleman not think that that justifies this Motion?

The Chancellor of the Exchequer told my right hon. and hon. Friends that if we wanted to make our criticism stick we had to show that our regional policy was effective. I propose to do just that.

I take the Tayside area as an example, with Dundee as its centre. The present unemployment figure in Dundee is 5.8 per cent. That represents 5,319 people. The figure for men alone is 8 per cent. That is a much truer figure, since many women who become unemployed do not bother to register. The male employment rate of 8 per cent. is much more realistic.

In addition to the effect of the Government's policy of economic restraint, in our area we are seeing the contraction of the jute industry, that being the main industry in the region. In that one industry alone we have already lost over 5,000 jobs, 2,000 of them in the last year, and we are likely to lose another 5,000 very shortly. When one considers all those factors, clearly they add up to a very serious problem.

In the area, we have seen the Keiller factory close, we have seen the Swel factory close, we have seen Kellie's factory close, and a linoleum factory has closed. Even a modern industry like N.C.R. is 1,200 below its peak employment figure. Smedleys is proposing to close shortly. Moving out from the immediate area of the city, we understand that the Cupar sugar beet factory is to close, despite all that was said by right hon. and hon. Gentlemen opposite when they were in opposition.

Another matter which gives rise to concern is that unemployment is not restricted to skilled and unskilled people. There are 60 people on the executive register—draughtsmen, industrial chemists, analysts, electronic engineers, and so on. Those are the types of people in the area who find themselves unemployed. Not long ago, a lorry driver's job was advertised. There were over 800 applicants. That is how serious the problem is.

Unfortunately, we have a record of unemployment which is much worse. Going back to 1921, there were over 43,000 unemployed in the City of Dundee. That represented one out of every two people of working age. Frequently in the 1930s over 30,000 were unemployed. In four different years there were occasions when the figure rose to that extent. Today, however, we regard a figure of 5,000 as quite unacceptable. The reason is that the policy of the Labour Government has shown how the problem can be overcome.

In 1945 a Labour Government passed the Distribution of Industries Act, which brought an industrial estate to our city. Many new industries were attracted to Dundee. In fact, it was so successful that a group of influential local businessmen asked the Board of Trade not to bring any more industries to Dundee. They feared that they would not be able to get workers for their jute mills. That is how successful the policy was in the area, and it gave renewed hope to the whole of Scotland. It resulted in better paid jobs, and the unemployment figure fell to below 3,000.

The two instruments responsible for achieving this result were the industrial development certificate and the investment grant. Those were the means that brought the success. Unfortunately, we reverted to a Tory Government. They relaxed these controls, but, by this time, because we had the new industries, unemployment increased only slightly. In 1964 a Labour Government was returned, and they decided again to tighten the control of industrial development certificates which the Tories had relaxed, and they decided again to increase financial grants with the object of attracting new industry.

The monthly average of unemployment in Dundee for the whole period in office of the 1964 Labour Government was 2,522. The average from the time that the present Tory Government came to power is practically double at 4,594. Those figures show clearly that the twin policies of effective industrial development certificates and effective financial inducements are successful and can do the job.

Mr. Hall-Davis

While I sympathise with the great problems of Dundee, the hon. Gentleman has quoted several figures. Will he say what was the figure in June, 1970, compared with the average of the period in office of the Labour Government?

Mr. Doig

In June, 1970, it was 4,046. But, as the hon. Gentleman must know, just as both sides of the House agree that one month's trade figures do not give a fair indication, neither do one month's unemployment figures. That is why I quoted the average over Labour's period in office. If necessary, however, I could quote figures going back to 1921 to show that these policies have worked, do work, and will continue to work.

We have a situation now where again the Tories are relaxing industrial development certificates, ending the regional employment premium and ending the Industrial Reorganisation Corporation. They have created a new special development area in West Central Scotland. That is to be welcomed. I understand that they are to create another in the Methil and Buckhaven area of Fifeshire. We have heard today about others that they intend to create. That is good for those areas. However, it is probable that Dundee's prospects are bleaker than those of anywhere else in Britain; yet we find that Dundee is not to be included in a special development area.

The situation will become even worse if we go into the Common Market. Without the inducements that have brought industries to Scotland in the past, the drift to the South will become accelerated. The prospects are worse than any that I have known since the 1930's.

There is a shrinking market for jute. That means that the import quota system to which we have changed now gives a larger share of that shrinking market to jute imports. At a time when Dundee faces such a bleak future as a result of the rapid contraction of the jute industry, our Trade Ministers are considering increasing jute import quotas. It is almost incredible. Many jute mills are barely paying their way. Any relaxation of controls could lead to their closing altogether. There are alternatives, one of which is the increasing use of polypropylene. However, whereas the Tayside area had a monopoly of the jute industry, it has no monopoly in polypropylene. The labour force required for the manufacture of polypropylene is about half that required to produce jute for the same amount of cloth.

In many cases the regional employment premium payments exceed the gross profits of some of the jute mills. What will happen when these end? The prospects will be bleaker than I have known them since the 1930s.

Consider the plight of the unemployed. What did the Labour Government do to help the unemployed? They introduced redundancy payments, earnings-related supplementary benefits, rate rebates, and increased benefits. These are some examples of what was done by the Labour Government to alleviate the problem.

What have the Tories done? My right hon. Friend the Member for Jarrow (Mr. Fernyhough) told us that about the only thing they have done is to deprive people of the first three days' benefits should they become unemployed or sick.

We now have another equally serious problem—the wage-stop clause. That means that a family cannot get any more by way of supplementary benefits than its normal earnings. In fact, families get slightly less. On that basis, if council house rents go up by 10s. per week a family which is already below the minimum on which people are expected to live will be 10s. a week worse off. Because of the wage-stop clause, when rents go up the supplementary allowances do not, so that people already getting less than the minimum on which people are expected to live are that much worse off.

Another problem which the Government should consider is seasonal employment, which is one of the biggest rackets out. If a person is on supplementary or normal unemployment benefit, and the only work which he can get is for six months in the year, and he does that for three successive years, then his normal pattern of employment is one of working six months and being idle for six months. So for the six months which he normally works he will be entitled to benefit, but for the six months during which he does not normally work he will not be entitled to any benefit at all. That is an extraordinary situation, which neither the last Government nor this Government appear to have done anything about. It is high time that they had another look at it.

Finally, I turn to prices, also a burning question. The more unemployment there is, the more important prices become to people with shrinking incomes. I suggest that the Government ought to establish a costing department to which prices could be referred whenever there is reason to suspect that there has been over-charging. There are hundreds of ways in which these matters can be discovered. Some companies are still making big profits and paying big dividends. Competition has not brought down prices, as everybody, except the Government, knows. If we can successfully tackle and control prices, and if they can be brought down quickly, we shall solve a lot of our industrial strife.

I suggest that the Government should make Tayside a special development area and that they should scrap even thinking about tampering with the jute import quotas.

8.5 p.m.

Mr. Wilfred Proudfoot (Brighouse and Spenborough)

Perhaps I may be unconventional, Mr. Deputy Speaker, by asking your judgment on a possible point of order. Will it be in order for you to call me to order after, say, 15 minutes have elapsed so that hon. Members who have been trying to get in the debate all afternoon can share the time which is left. I shall be delighted if you will stop me even in mid-flight, after about 15 minutes.

We have had an interesting experience since the last General Election. I have enjoyed myself enormously looking at the political journals and newspapers. The journalists and commentators are out on open territory. We are out of trench warfare. It is rather comic, because there are many journalists chasing too much space. They have to produce a thousand words a day or a week. They have no electors and no real responsibility except to turn out those thousand words. Our society is pushed around by men who have to fill a piece of white paper, or pink in the case of the Financial Times, every week.

I am delighted that the Government have got them hoaxed. I say that because the last Government gave them plenty of copy. The strategic policy of the last Government was changed every other week, so they had plenty of material to go on. I am sure that this Government will stick to their guns and I am convinced that they will succeed.

I am of the opinion that an incomes policy is absolutely impossible in any free society. It might work in Russia or in China, but it will not work here. In my researches on this topic, I have discovered that all countries in the Western world which have tried it have not met with any lasting success. Incomes have been held only for a little while. Indeed, in the previous Conservative Administration there was a wage freeze. At that time I said that if there was another White Paper on incomes from this side of the House its title should be, "More Pay and How to Get It". I am convinced that that is correct.

Someone—I believe an American—once said that we were a half-time community working for part-time wages. I want to see high wages in this country.

The commentators are lost at the moment. They talk about an incomes policy, but they really mean a restrictive policy—holding incomes down. I prefer production to rise and incomes to rise with it.

An incomes policy need not necessarily be restrictive. We have an incomes policy which is more to my liking than any restrictive policy—to trust the market. I did not learn how the market operated by academic means. I learned by getting into business and finding out about supply and demand. The market is not a beautiful logical thing, but it has truth in the end. People do the most ridiculous things in the market. They buy things which they do not want either because they have been conned into buying them or because the neigh- bours have got them. But the market in the end produces the truth.

Competition is an absolute must when we consider a free competitive market. I believe that the interference of the I.R.C.—it was proved to be interference —harmed this country. I want the Government to hurry with anti-trust laws. I want more laws to create competition. I also want the Government to look at tariffs. This might be an unpopular thing to ask for in the middle of the Common Market negotiations, but only this morning the Financial Times showed the real protection which business enjoyed in this country.

When politicians interfere with the free working of the market they make a mess of it and ultimately there has to be a day of reckoning. The only achievement of a restrictive rent policy in six years has been to produce a housing shortage. I am convinced that the sooner we get back to free market economics the better. I hasten to add that a free market economy is not cruel, because people do not move so rapidly. It is only when the politicians have to dismantle the things which they have put up that we get a huge movement in any economy.

I have great confidence in this Government. I am delighted that they abolished the I.R.C., which I sometimes thought of as a lot of gentlemen putting patronage before profits, meeting once a month, probably after a restless night thinking of which two, or even three, industries could couple together, and thereby receive a knighthood for a stroke of genius.

It is right to kick away industry's financial props, money provided by the last Government. The courage of the Rolls-Royce decision will pay off in psychological tonic. I think of inflation as an octopus. The previous Government tried to kill it by chopping away at the tips of the tentacles. We must go to the centre of it.

I hope that the Chancellor will check the money supply, as the last Government tried to do until they decided to try to buy the election. If they had kept to what they started, perhaps I would not be here tonight. They ran away from their own policy.

We must get down to direct taxation. We have not heard as much about that as I should like. Bringing down direct taxes would be an enormous tonic. In my wildest moment I think that if a Conservative Government could bring down direct taxes to about 4s. in the £, we should be the most staggered people in the world. Services would improve and people would work hard, not because of exhortation—that is no good—but because they were allowed to keep their own earnings. The sooner we stop pouring taxpayers' money into limping industry the better. In other words, the taxpayers' point of view should be that it is better for business to be laughing all the way to the bank than crying all the way to the Government.

8.12 p.m.

Mr. John Horam (Gateshead, West)

I should like to take my text from the remarks of the hon. Member for Brighouse and Spenborough (Mr. Proudfoot), who talked of market economies. I want to start from the same point, but to arrive at a precisely different end. I speak not only as a former economic journalist, with six years in the field, but also as a man who started a successful business, so I think that the hon. Gentleman will grant my competence to argue against him.

I think that it would be generally agreed that when we are trying to tackle inflation there are two broad alternative paths—either the more orthodox, possibly pessimistic point of view which says that the only way is to squeeze the economy by lowering profits, increasing unemployment, and reducing wage claims, and so affect prices, or the view that it is possible and desirable to act directly on prices and wages and, to the extent that one is successful, accelerate expansion. There are variations within those two broad fields, but they are the main alternatives.

It is also clear at any moment of time that stress a Government are laying on one or other of these alternatives. What is abundantly clear about the present situation and the policies of the present Government is that they are laying the main stress on the unemployment route. They are squeezing the economy and that is how they hope to cure inflation.

In doing so, they are going back not only on the policies of the previous Government—after all, that is their prerogative—but on the past ideas of their own Government when they were last in office. We remember when the right hon. Member for Barnet (Mr. Maudling), who is not present unfortunately, was Chancellor of the Exchequer and made a dash for growth. Of course, that was just before an election, and some of us questioned his motives, but many among us agreed that there was a genuine element of trying to get faster growth and to get Britain out of the shackles which had held her for so long.

We remember the creation of N.E.D.C., a genuine dialogue among all three sides of the industrial equation. We remember when the Prime Minister was Minister of Labour, and, perhaps in wiser days, he restrained himself from bringing in a trade union Bill. The membership of the Front Bench opposite has changed a little, but not all that much. The right hon. Member for Barnet still sits on it, now as Home Secretary. In many ways, we wish that he were Chancellor—[An HON. MEMBER: "He might be, very soon."]—from the point of view of both Home Office affairs as well as that of the Treasury. At least he would bring a bit of class to the job.

So why have they changed course since then. It is not a question of changing combinations on the Front Bench. It is more a matter of two other points—first, that in opposition the present Government misunderstood the nature of popular opposition to the then Government's prices and incomes policy. That was never unpopular in principle. I believe that it was unpopular because the Government had to make a net shift in the balance of resources towards the balance of payments, to achieve which they had to limit the increases in the standard of living to very small amounts each year. It was this which was unpopular, not the principle.

Second, I would attribute the shift in the Government's policies—going back not only on the Labour Government's policies but on their own in the Macmillan era—to some extent to the influence of the right hon. Member for Wolverhampton, South-West (Mr. Powell). We know his views on economic policy: they are roughly those of Adam Smith—appropriately, an eighteenth century figure. Those views, distilled with the appearance of compelling logic which he always puts on his utterances, are very heady stuff to some of the newer Tory Members, particularly if they do not know too much about economics, as certainly the right hon. Member himself does not.

Therefore, the Government, when in opposition, with the pressures on them—we know the pressures on the present Prime Minister when he was in opposition —had to some extent to defer to the right hon. Member's views, even if, by the same reckoning, they had to exclude the man himself.

For these reasons, the Government shifted their ground to this more brutal form of policy. Indeed, when they first came in, they were practically overwhelmed with their ideological purity. They were intoxicated with the exuberance of their own ideology, slightly to misquote a previous Conservative leader of rather greater eminence. In fact, they really believed that free market economics, to quote the hon. Member for Brighouse and Spenborough, would bring down prices, or at least reduce the rate of price increases.

They believed that the rigours of free competition would actually do something about this, by, to use a rather more lame-duck phrase, "shopping around". But they came up against the facts of life. I once heard a member of the present Cabinet say, "The facts of life are Tory." In the week after the Rolls-Royce affair, I do not think that he would like to be heard repeating that. Indeed, the facts of life point to Socialist solutions, certainly in the case of prices, where the situation now is not uninhibited competition but price leadership and market sharing.

The same is true on economic policy. The Government had to go back to some restraint on wages, but the way that they have come back to it is such a shamefaced, bastard way that they cannot even legitimise it by giving it its proper name. My right hon. Friend the Member for Birmingham, Stechford (Mr. Roy Jenkins) in describing, with his usual eloquent adjectives, this policy of theirs, called it inconsistent, dilatory and spiteful. I would call it cowardly, unfair and futile. It is cowardly because they have put people into the firing line other than themselves to carry it out, and that goes for the chairmen of nationalised boards and chairmen of courts of inquiry, who, even in their reports, have said that it was the wrong thing for the Government to have done.

It is unfair because the only criterion for the success of the policy is that a particular wage claim should be settled for 1 per cent. less than the previous claim. It is futile because in their evidence to the Wilberforce Committee they said that prices would rise by 6½ per cent. this year, but on certain hypotheses, based on the policy they were following. In other words, even if their policy were to succeed, that would be the rate of price inflation this year. This, combined with the unemployment statistics published today—this is the real heart of the policy which bites deep—shows the appalling mess into which the Government have got themselves.

In many ways the saddest thing of all —I cannot say this forcibly enough—is that this is such a missed opportunity. Whatever the economic policies of the Labour Government and whatever hon. Gentlemen opposite may think of those policies, they built up the biggest and probably the most lasting balance of payments we have known since the war. That was the springboard which, with the right kind of policies on wages and prices, could have led to expansion which would have lifted us away from our present unsatisfactory base. Instead, however, we have had a narrow sterility which would have done credit to Neville Chamberlain, and one might even go back to Stanley Baldwin.

Mr. Proudfoot

Would the hon. Gentleman care to mention devaluation as well?

Mr. Horam

Devaluation was a springboard, too, as my right hon. Friend the Member for Stechford said at the time. He was right.

My argument is that if one wishes to go in for growth, one can achieve it if one treats the problems one meets on the way, whether they be balance of payments or inflation problems, by direct measures, which leave the path of growth clear.

Whether one has a slightly higher or lower rate of growth may not matter too much in the Chelsea flats or the leafy roads of suburbia, but it matters in Gateshead, Tyneside, and the twilight zones of our big cities and in council estates. This is why the Conservative Government are now so unpopular, despite all their clever calculations over the Industrial Relations Bill. It is also why they are far behind in the public opinion polls and why they will stay disliked until they change their policies.

8.24 p.m.

Mr. Tom Boardman (Leicester, South-West)

I will not comment at length on the economic arguments adduced by the hon. Member for Gateshead, West (Mr. Horam) because, frankly, I found some of them confusing. When he put the argument that economic theory was better than the facts of life, and went on to elaborate something which lost me completely, I thought that I would begin by declining to comment on his general theme. Perhaps my ignorance of economics led to my confusion.

One is bound to be somewhat suspicious of the economic arguments of hon. Gentlemen opposite when one recalls the views and measures of the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) and those of his predecessor who, we were told, took a crash course in economics. That, of course, led to devaluation. I believe that the facts of life have a part to play in our economic affairs and that the experience and practice of people concerned with industry, the shop floor and the unions represent a voice which deserves to be heard. That is the view of the majority of people, whatever theories the economists put forward.

Mr. Horam

rose ——

Mr. Boardman

I trust that the hon. Gentleman will forgive me if I do not give way. Many hon. Members still wish to speak.

I must correct the hon. Member for Gateshead, West in one respect. He repeated the statement that the Treasury evidence to the Wilberforce Tribunal forecast that prices would rise by 6½ per cent. If the hon. Gentleman reads the evidence and Report carefully he will see that that was put forward as a hypothetical case; that if certain things happened, certain consequences would result.

Mr. Horam

Would the hon. Gentleman ask his colleagues on the Govern- ment Front Bench to give their forecast of likely price increases this year, leaving aside hypotheses?

Mr. Boardman

The hon. Gentleman must not tempt me by putting forward something as a fact which is not a fact and asking me to ask others to comment on it. That only diverts me from the main theme of my argument, and I wish to be brief because many hon. Members still wish to speak.

It is agreed that the problem with which we are dealing is cost-inflation, so that there are really only two main headings under which I need speak. The first is the cause, which we must examine because the Motion of censure implies that the cause lies with us. That is obviously not the case.

One need only go back to devaluation and consider what led up to that and the mismanagement which followed it, with the inflationary spiral that was set going. That was the starting point and there followed further prices and incomes freezes and squeezes with all the pressures that they had built up since 1965.

We had statutory controls. They were abandoned and we recall the way in which they were abandoned when, in his Budget speech of April, 1969, the right hon. Member for Stechford told us how he would replace the prices and incomes policy by an Industrial Relations Bill. I wondered how the right hon. Gentleman could this afternoon, having spent the last few weeks voting against the Conservative Industrial Relations Bill, speak in the way he did on this Motion of censure, particularly bearing in mind his Budget speech of 1969.

Following the abandonment of their Industrial Relations Bill, and their prices and incomes statutory controls, we had the inevitable wage explosion, when all the pent-up forces of the previous five years were let loose, particularly in the public sector. We recall what happened in the autumn of 1969, with the buildup of wages, leading up to June, 1970.

Mr. Kenneth Lomas (Huddersfield, West)

Will not the hon. Gentleman concede that the previous Government at least sought to do something about prices, whereas the present Government have done nothing? Does he not accept also that, by attacking the public sector, the Government are destroying their credibility in expecting the ordinary individual to accept the policy which they are pursuing?

Mr. Boardman

If the hon. Gentleman had followed my argument—I am trying to be brief, and I may not have put it clearly—he would have heard me explain what had happened as a result of imposing statutory controls on wages and prices. We know how ineffective that policy was in many sectors and how deeply it was resented. We know also of the inevitable consequences of its removal. We on this side forecast that, when the controls were released, there would inevitably be an explosion in wages and a prices spiral. In fact, that is what happened.

I was surprised to hear from the right hon. Gentleman the Member for Stechford, from the hon. Member for Gateshead, West and from other hon. Gentlemen opposite references to Rolls-Royce, the implication of their remarks being that this was a failure of private enterprise. It was no such thing. If ever there was an example of the results of Government intervention, Government financial support and Government encouragement allowing ordinary commercial decisions to be distorted, this was it. There is manifest evidence of that, but if one wanted justification for the policy which we are adopting in removing Government intervention and that type of subsidy, there it is. Let no one imagine that it was a defeat for private enterprise.

Having dealt briefly with the causes of our trouble, I come now to the courses open to the Government. One course which is advocated sometimes by reputable organs such as The Times is that there should be some form of statutory control. But all hon. Members on both sides recognise how ineffective such a policy is. I shall not cite statistics to show how it failed to stem wage inflation and price inflation a few years ago. We all recognise the consequences when it was removed. My right hon. Friend is absolutely right to resist any pressures upon him from outside to adopt a policy of that kind. It would have but a short-term effect, if any effect at all, merely putting off the day when far more serious consequences flowed from the removal of the controls.

The hon. Gentleman the Member for Ebbw Vale (Mr. Michael Foot) has undertaken, in response to my right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter), to express his attitude to the paragraph in the White Paper of December, 1969, which my right hon. Friend quoted. I am sure that he will deal with that question, because a pact was made across the Floor that it would be done.

Having rejected a statutory prices and incomes policy, as one can quite briefly, one comes then to the policy being pursued by my right hon. Friend. It is a thoroughly right, sensible and practical policy. The wages explosion behaves, in a sense, rather like the atom bomb; after it goes off, the real mushroom comes out at the top sometime later. Similarly, the real impact of the explosion prepared by the party opposite was felt after the General Election in June last year. It has now come through in price increases, with prices now standing at a level which I certainly do not like, and I am sure that no hon. Member likes it, either.

The Government's policy is to restore rational bargaining and a sense of responsibility. We cannot go on greasing the wheels of inflation with excessive increases in the money supply, either. 1 am sure that my right hon. Friend is very conscious of that in maintaining his approach to what I believe he calls a neutral balance. We have already seen the effect of what the right hon. Member for Stechford did in priming the pump, pouring money in, and aggravating inflation.

Then there is the need for example in the public sector. I shall not develop that at length. Hon. Members opposite must not talk about our penalising the workers in the public sector, for nothing could be further from the truth. The Government have a clear duty to protect the public. I hope that hon. Members opposite, if they complain, as well they may, when their rate bills come in, will remember how much the increases are the consequence of the local government strikes and the wage demands which went with them. They will realise that the Government have a prime responsibility to protect the public consumer, and that the public consumer has no choice here He has only one dustman to empty his dustbin and only one source of electricity supply. The Government and public bodies have a duty to protect the public by not yielding to unreasonable demands

Mr. Lomas

Fourteen pounds a week.

Mr. Boardman

The hon. Member for Gateshead, West touched on the question of deflation or growth. It must be a mater for judgment and timing. We may be reaching a time when some relaxation is due. Investment plans must be made well ahead, and if they are not made now because of doubts about future demand there could be a lack of capacity and plant over the next three years or so. We are all anxious about unemployment, unused capacity, investment and so on. I am confident that my right hon. Friend's policy is bringing about the de-escalation of demands and will bring inflation under control. The lessons are being learnt, and I am sure that we shall achieve the price stability and rising standard of living that we are searching for.

Mr. James Hamilton

And lower unemployment?

Mr. Boardman

Of course, we are unhappy about the unemployment situation, and I am sure that unemployment will come down. When those objects are achieved, as they will be, I hope that my right hon. Friend will enable us to see that we have the capacity available to meet the increasing demands that will be made in the competitive world in which we operate. I am concerned that if we are late in our timing, if my right hon. Friend perhaps does not encourage investment early enough, in the next two or three years we may find that we are short of the capacity we shall desperately need then. The decisions being made now as to whether or not to invest will affect the production capacity a year or two ahead.

8.38 p.m.

Mr. Gwynoro Jones (Carmarthen)

It has been very interesting to hear hon. Members opposite stating their attitude towards the condition of the country in June and saying that inflation and unemployment, the whole basis of the situation today, were stoked up then. If so, there is all the more reason for the condemnatory attitude we should take towards the Prime Minister, who promised to reduce prices at a stroke. He spoke to the housewives of Leicester about school meals and the burden of their cost on the mothers of the children of Britain. I noticed that the Chancellor was very quiet in his comforting remarks to those housewives. Nothing was ever said about the increased charges for school meals and other charges across the whole spectrum imposed on 27th October, which will directly affect the very people the Conservatives were most concerned about two days before the General Election.

I could go on to analyse the psychology behind all those promises, but many hon. Members want to catch the eye of the Chair. Tonight we must pin the Prime Minister down on his statement about the balance of payments on 16th June, when he said: Already on the balance of payments we are over the best and heading downhill. The surplus of which Mr. Jenkins boasted will melt away in a matter of months. That was two days before the General Election. Peculiar and downright dishonest promises were made, promises meant to mislead. There is no need to argue about the reason why the Tory Party is now in power. It is there because of the promises of a party and Prime Minister hungry for power regardless of the consequences and regardless of people's attitudes.

The Government inherited a regional problem which had not been solved. But while, during the last Government's term of office, 60,000 jobs were lost in Wales because of the decline of the old, basic industries, 30,000 new jobs were created. and 28,000 are in the pipeline. The problem of providing more jobs and opportunities in the development areas would have confronted every Government, and it is to the credit of the Labour Government that those 30,000 new jobs were created in Wales.

Hon. Members opposite have attempted to argue that one cannot assess the relative advantages of investment allowances and investment grants, but the example of Wales shows that the grants were far more beneficial. Between 1965 and 1969, a total of 193 new establishments were announced as going to Wales. In the period 1960 to 1964, only 63 new establishments announced that they were going to Wales under the investment allowances system which the Government now boast about as being the answer to our regional imbalance.

Responsible opinion in Wales in the early part of 1970 was coming to the conclusion that we were laying the basis for a new economic climate in the Principality. The Chairman of the Welsh Council and other economists held that view. But in a matter of months—indeed, within weeks after the election—the whole situation has changed. There is now great concern in the C.B.I. and the T.U.C. Advisory Committee in South Wales about the facts which are emerging. Redundancies now average 1,000 a month. The percentage figure of unemployed for Wales is 4.4 per cent., the highest since 1963. It is astounding to realise that within eight months of taking office the Government have put back development in Wales by decades. It takes little now to convince the Welsh people that they are seeing policies being applied which failed before and led to ruin in the 1950s and early 1960s. When the restructuring of industry was beginning to take place and old industries were declining, what happened during the 13 years of previous Conservative rule? Wales got only 11 advance factories, providing 1,500 jobs.

The Labour Government put in a tremendous effort, spending £89 million to attract industry to Wales, but even that was not good enough and we were unable to maintain or close the gap between the number of jobs being lost and the number of new jobs coming in. The present Government, in their brief period of office, have engendered uncertainty and concern. On 28th January, The Times said: The simplest action the Government could take now would be to make it clear which investment projects are still eligible for grants and how allowances will operate in the variety of grey areas that have come to light … the position now is that viable schemes are being shelved because of the uncertainties involved. We are witnessing in Wales the £20 million aluminium concern in Swansea being delayed. In the Llantrisant area, two factories are not now coming. According to the Press, in Flintshire a factory which would have employed 500 people is not coming after all. This is the situation which the people of Wales, which has 43,000 unemployed, is faced with, and industrial inquiries are falling.

With the abandonment of the great system, even the National Institute of Economic and Social Research said that the argument for the investment allowance system in the relevant White Paper was incomplete and almost wholly lacking in supporting evidence, and on the main point, the linking of investment subsidies to current company profitability, the justification offered is no more than a counter-assertion. In his speech today the Chancellor made no reference to any evidence supporting a claim that the investment allowance system is the one which will help the regions of Britain which have built and created in essence the wealth of the whole of the United Kingdom.

If overheating of the economy has been the bugbear in Britain since the war, that overheating happened in the South-East and the Midlands, whilst Wales, Scotland, the North-West and the North-East are under-utilised. We should be creating a better system of redistributing our wealth, as the previous Government endeavoured to do—and which the present Government are so unconcerned about. But they are hastily dismantling the whole edifice upon which the future prosperity of, certainly, Wales, lies.

In a series of pronouncements regarding advance factories, the Government have said that they have no intention of allocating any more to Wales until those there already have been taken up. What a situation, in terms of a factory taking four or five years to build. The Government say that when the last factory has been allocated they will allocate more. That means that there will not be an empty advance factory ready for a tenant for four or five years. This is not a policy of confidence or faith in the future.

I turn briefly to the subject of prices, which again the Chancellor was very quiet about. Probably he is not interested in knowing what the less well off, the lower-paid people in my constituency—35 per cent. of people in Carmarthenshire earn less than £900 a year—now think of the clear cut promises of 16th June, nor the 25 per cent. of the people in Wales who earn less than £15 a week. Those people have been hit by a deliberate policy of increasing the cost of living. The Minister of Agriculture openly said that he had no intention of curtailing, subsidising or taking control of the situation. He is quite happy to see charges, the cost of living, especially the cost of food, rising day after day, and so are the Conservative Party and Conservative Members. I conclude on a note of warning to the Government. There has been a great deal of talk of lame ducks. Let not the Government or the Secretary of State for Wales, who is Chairman of the Conservative Party, ever imagine that they can treat Wales as a lame duck, as they did in the 1950s. We on this side of the House have a great deal to contribute and a great part to play in ensuring that the prosperity of Wales is equivalent to that in other areas of Britain, as it should be.

8.49 p.m.

Mr. W. R. Rees-Davies (Isle of Thanet

I very much enjoy hearing the accent of the Principality, whence I myself originate. We in the Isle of Thanet, where we have many people who came from the Principality back in the 1920s and the 1930s, do not talk in terms of £900 or £1,000 a year. We talk in terms of so many pounds per week. The Principality is a great deal richer than th Isle of Thanet.

When we in the Isle of Thanet talk about unemployment, we do not talk of 4.4 per cent. unemployed. The unemployment figure for Margate is double that—8.9 per cent. We are quite prepared to give the figures of unemployment for the coastal areas of East Kent. We wish to point out that we are not in a development area, although our unemployment figures are considerably higher than those obtaining in almost every development area.

I wholeheartedly endorse the Government's general policy of what is popularly called "disengagement". I want the Government to get out of certain areas of control where it is impossible for them to succeed. This goes for development area policy, too, although disengagement here must be a gradual process.

The first step to getting effective control over cost inflation is to end industrial anarchy. Last August Tom Jackson, having first discussed the matter with the other unions in the Post Office, signed the Post Office arbitration agreement which contained terms relating to arbitration. Within six months he flouts that agreement. That smells of industrial anarchy. It is not adhering to a gentleman's binding sense of honour, whether it is legally enforceable or not.

Until industrial anarchy is ended there can be no effective control to ensure that the increase in wages is tied to the benefit which a man is entitled to get from his industry. Profits are declining. Investment is right down.

I will give an example of an industry which could be made the finest in the country if the Chancellor would heed three points. I refer to the tourist industry. It is more than a question of just attracting foreigners here. It is a question of building up our home market, which would do much to provide more employment in coastal resorts where the home tourist industry is suffering greatly. Individual hoteliers and caterers are suffering whether they are in Blackpool, Thanet, Whitstable, Herne Bay, Eastbourne or elsewhere.

Three things must be done. First, there must be investment allowances. Second, we must ensure that we get depreciation allowances and that the tourist industry is treated as an industry it is just as much entitled to its purpose-built hotels and other forms of modernisation as other industries are entitled to modernise.

Third, I hope that the Government will find a means of enabling the independent hotelier and caterer to have some access to the cash flow of loan capital in the short run so that this development can be secured. I am completely against the grants, and I am delighted that they are to end.

None of the measures to which I have referred requires Government control. Thus there can be a policy of complete disengagement.

Hon. Members should recognise that with Rolls-Royce we are concerned with the development of the aero-engine industry, which requires capital of such magnitude that no private company on this side of the Atlantic could find it. This is why the Government must take over in this field, not only to secure the protection of our defence commitments, but also to be able to meet Britain's aeroengine commitments world-wide, because what is required in this field it is over and above the type of market finance that any company could ever be able to supply.

I turn now to development area policy. It is a failure because it is not specific. It does not pinpoint the issues. It is quite pointless nowadays to give development area status to Swansea. One knows well that that is developing as a most successful town. I heard a futile speech delivered at the beginning of this afternoon by one of the hon. Members from Swansea. It was a long tirade of vituperative language—at which I am equally excelled if I need to use it, but I find it distasteful—levelled against the Government without regard to the immense prosperity which has been achieved over the years by the Tory Party and by the Labour Party for large parts of the Principality. What is needed in development area policy today is to get rid gradually of the whole field but to pinpoint the particular areas where specific treatment is required. In certain areas it may be heavy industry, in others light industry, in others office development. In others a tourist development policy may be needed; but according to the particular needs of the district it should be so classified.

The Department of Trade and Industry, therefore, should have several classifications for development areas which should be classified for heavy industry, light industry, office or tourism. Then the particular servants who serve the Department of Trade could be directed to those particular areas to give them encouragement. I believe this to be not new but at least a fairly novel approach to the way in which we could on the one hand secure a policy of gradual disengagement and on the other hand be able to draw the attention of the Department to the best places to direct its efforts.

So far as the Isle of Thanet is concerned, Margate has today unemployment of nearly 9 per cent. and Ramsgate of nearly 7 per cent. In the summer the figure is still 5 per cent.—in excess, I am told, of anything in the Principality.

Hon. Members

No.

Mr. Rees-Davies

I am referring to something said by an hon. Member who spoke earlier. Those are the figures, and, therefore, one is faced with a picture in which we need in the Isle of Thanet some offices, and we need the encouragement of the home tourist industry. That industry could be the biggest single industry in Britain in the next three years. It is the biggest dollar earner as it is. If we could persuade people to have holidays at home in future instead of going abroad, and enjoy the pleasures of travelling throughout all the country—I am suggesting not just remaining in Margate but passing round the perimeter of Britain so that they enjoy places over the whole of the country—we should be able to develop a first-class home tourist trade.

If we do this we shall provide money for the Chancellor in every way. He will get his money from drinks in the pubs—and we shall shortly extend the licensing hours, I have no doubt with the assistance of the House. We shall get more money from the tobacco tax for him. People will have the pleasure of seeing the Prime Minister engaging in his yachting, a Broadstairs boy enjoying his own pleasures—and I am delighted that my right hon. Friend has now appeared. Generally speaking, therefore, we shall be able to secure in this country a really large balance of payments, not merely by exporting goods but by containing our own people in our own country to enjoy the expansion of our own pleasures.

There is a policy of gradual disengagement, through which we can look forward to assistance in particular areas where it is needed, not so much by grant but by encouraging the flow of light and heavy industry, offices or hotels into those areas which best suit them. We do not have to pay the money but we shall enjoy the benefits. I hope that my right hon. Friend, when he comes to deal with his Budget, will have something pleasurable to say which will assist my constituents as well as the whole of the tourist industry.

9.0 p.m.

Mr. Michael Foot (Ebbw Vale)

Speaking as an honorary Welshman and being extremely proud of that capacity, I must say to the hon. Member for Isle of Thanet (Mr. Rees-Davies) that I have never recognised him as a compatriot in these matters. I hope that he will not think me discourteous in any way if I suggest that my hon. Friends who actually come from Wales, such as my hon. Friend the Member for Carmarthen (Mr. Gwynoro Jones) and my hon. Friend the Member for Swansea, East (Mr. McBride) and others who have spoken in this debate are better qualified than he is to discuss what is good for Wales or the other regions which have figured so prominently in this debate. We wish him well, however, in getting assistance from this Government for the Isle of Thanet.

I come next to the right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) who put a question to me earlier in the proceedings. I will not traverse the whole of the discussion we had, because we entered into a pact and I do not think that he has fulfilled his part of the bargain. I invited him to tell us which parts of the speech of the Prime Minister, delivered on 16th June, he thought had been carried into effect. I have not heard the answer, but I am willing to give the right hon. Gentleman the reply for which he asked with reference to my views.

He referred to some Government White Paper produced, I think, in 1969. It is true that on that White Paper, as on several other White Papers, I did offer to the House, my own judgment at the time. I dare say that developments subsequently have shown my prescience, and therefore I should not like to commit myself to saying that I agree with every paragraph of that White Paper until I have had full time to study it, because I imagine that some of the criticisms I made at the time are as justified now as they were then.

Mr. Boyd-Carpenter

The hon. Gentleman is speaking for the Opposition on a Motion of censure. Will he now answer on behalf of the Opposition the question I asked him, namely, do the Opposition stand by the view that wage increases, given the present level of productivity, should be in the 21 per cent. to 41 per cent. zone? If the Opposition do not think that, can he say why?

Mr. Foot

I propose to address myself exactly to those questions which have formed the dominant theme in the debate. I was dealing with the particular paragraph. I thought it was only courteous to refer to the paragraph mentioned by the right hon. Gentleman. The hon. Member for Leicester, South-West (Mr. Tom Boardman) referred in strong terms, as did others who spoke, to Rolls-Royce and to the part played by my right hon. Friend the Member for Bristol, South-East (Mr. Benn) in the Rolls-Royce affair.

I suggest to hon. Gentlemen opposite that, if any of them have any criticisms of my right hon. Friend about Rolls-Royce, they should use their influence to persuade the Prime Minister to agree to the proposition which has been put officially by the Opposition—just to satisfy the right hon Member for Kingston-upon-Thames—for a Select Committee to inquire into the matter. Such a Select Committee would have every opportunity of investigating and reporting upon the part played by my right hon. Friend in this matter. It is not very becoming that hon. Gentlemen opposite should continue to make criticisms of my right hon. Friend if the Prime Minister continues to refuse to permit a Select Committee to examine this question. We on this side of the House are in favour of it and we believe that the House will effectively demand such a Select Committee before much more time has passed.

The main features of this debate have been the kindred problems of inflation and unemployment, and I propose to direct most of my remarks to those subjects. I was very surprised by the suggestion of the Chancellor of the Exchequer that the sole cause of rising unemployment is cost inflation. It is a very peculiar economic doctrine to express, particularly when we realise that in our history some of the heaviest periods of unemployment have been during times not of inflation but of deflation.

First, I should like to dispose of what I think is an unfair charge made against the Government in some quarters on some occasions. It is said that they do not have a policy or strategy for dealing with these questions. But I think that they have, and I should like to share my secret with the House and the country. It consists, in the main, of four principal measures—four strategies or prongs in the same strategy: the plan, as they call it, to reform industrial relations; the insistence that they must resist the immediate wage pressure; the measures that they take to restrict and restrain the economy in the meantime; and the measures they are taking to apply the kill-or-cure appliance to the economy and to industry generally. Those are the Government's four policies and they are now in operation. The main purpose of the debate is to discuss whether they are good policies and where they are leading, and that is what I propose to do. I shall not say a great deal, because the House has spent a large part of its time in recent months on discussing the Industrial Relations Bill. Although it is the background for this debate and what is happening in the country, those who have listened to the debates on that Bill, including some hon. Members opposite, have come more and more to recognise that profound issues of principle arise from that Bill which cause great disturbance in the House and will cause greater disturbance throughout the country.

I come to the more direct and immediate question—the Government's present conduct in dealing with wage claims, particularly in the public sector. I deal first with the question of arbitration. The Secretary of State for Employment was very impressive and eloquent about arbitration. I wonder whether the Prime Minister will tell us whether he thinks that he has assisted the process of arbitration over the past few weeks. Does he think that what he said about the Scamp Report was wise? Does he think that that was a good way of dealing with public servants who have come forward to perform the onerous task of judging these difficult questions?

What about the position of Professor Hugh Clegg? Perhaps the Prime Minister will say something about that matter. I gather that he removed Professor Clegg from his post because of his fastidious feeling that those who preside over these inquiries must be like Caesar's wife—above suspicion. The Government took a long time to find Lord Wilberforce on that same principle.

When the right hon. Gentleman comes to consider it, he will recognise that he has done grievous harm to the possibility of getting effective arbitration. The postmen in my constituency of Ebbw Vale put the matter quite simply. They say, "Under this Government arbitration means that if you have a quarrel with your wife the matter has to be settled by your mother-in-law". But the matter is even more subtle than that. When Ministers speaking in the country say that they have massive public support for the policy of restraining wages and stopping the roaring inflation, I can understand that in general terms. We are all against roaring inflation. But when it comes down to the details, the details of an inquiry or an arbitration, the Government find it extremely difficult to discover three people in the country—let alone massive support—who will agree with their policies.

Mr. Rees-Davies

Has the hon. Gentleman asked Tom Jackson whether his mother-in-law's policy last August was different from her policy today? Has he asked him whether the policy was wrong when he signed the agreement last August which included arbitration? Was there no arbitrator then?

Mr. Foot

I will say more about the Post Office strike in a moment, although we are to have a full debate on it on Monday. [HON. MEMBERS: "Answer!"] I will answer it in my own time.

There were other disputes before the Post Office dispute. Three people could not be found who agreed with the Government's attitude about the dustmen's strike, and the right hon. Gentleman was furious about it. The Government like some parts of the Wilberforce Report, and the unions like some parts, but that Report certainly does not represent an acceptance of the Government's view. In many respects the Wilberforce judgment is not so different from the Scamp judgment.

It is no use the right hon. Gentleman thinking that the matter can be settled by bandying figures. On the question of how much money goes into a man's wage packet I would rather trust the view of the general secretary of a union who has to explain the matter to his members than the view of a Minister who has to explain it to his backbenchers. If the Wilberforce Report proved anything, it proved that Mr. Frank Chapple happened to know more about wage packets than Sir Douglas Allen and, maybe, even more about Sir Douglas Allen's wage packet. The right hon. Gentleman must not think that by juggling the figures he can conceal the fact that on one major aspect the Wilberforce Report came down in the same way as the Scamp Report in saying that the court could not be expected to intervene and say that the line has to be drawn at a certain point, and, if there is general inflation, particular groups of workers cannot be expected to submit and say, "We are the people who will have to stop the inflation". It is all in the Wilberforce Report as it is in the Scamp Report.

The same applies to the postmen, who, in my opinion, have an extremely good case. The difficulty which the Government have got the country into with these claims is this. Under this Government's wages strategy, win or lose, it is the country that suffers. If the Government lose, as they lost over Scamp and as largely they have lost over Wilberforce, the matter must go to the next court of inquiry and the next round. But if the Government win as I suppose it is conceivable they might in the case of the Post Office workers—although that would be a disgraceful development—if the Government succeed in driving to defeat the postmen in that sense, what do they think will happen in the public service afterwards?

What do they think will happen in the mining industry to the miners who voted for a strike, which under the Industrial Relations Bill would qualify as a full strike? There would be bitterness there, too. In one public industry after another the Government are building up bitter feelings which certainly will have no good effect on the conduct of those public services and could lead to a much more disagreeable state of affairs in the country as a whole. Therefore, on the first prong of their policy they are taking the attitude about wages which will do great injury to the public service and will not solve the problem of inflation.

I come to another major prong in their policy: unemployment. Unemployment has risen to the highest figure we have known for seven or eight years—720,000 and going upwards. On this basis and at this rate the first major economic achievement of the Government will have been to have added 200,000 to the total which existed under Labour. I criticised the previous Government for accepting and tolerating what I thought was too high a figure of unemployment, and I do not want to withdraw anything I said on that count. But this figure is far worse. And what the Chancellor of the Exchequer said today is no abatement of the situation.

I do not know whether the Chancellor of the Exchequer—or the Prime Minister in winding-up the debate—will put a figure on these concessions. I do not think the Chancellor was very much aware of what concessions he had made. He has the knack of coming into the House of Commons and making a declaration as if somebody had stuffed that information into his hands just before he came into the House. He seemed as well informed on investment grants as he was on the family incomes supplement. He said also that he did not wish to anticipate his Budget Statement. That is about the only thing he will have a chance of anticipating.

I ask the Chancellor of the Exchequer to regard what was said by my hon. Friend from Wales as by my other hon. Friends from the regions on the intensification of the unemployment figures as showing a situation of the utmost seriousness—as serious as roaring inflation. In Wales almost every day we hear of a new close-down, new redundancies, fresh fears of more of the same thing to come. I do not know whether the Government have any conception of the shiver that is now going through Scotland, Wales and all the regions on the policies which the Government are now pursuing. How long will they persist in this policy? How high has the figure to go before the Prime Minister decides to change course?

Then there is a fourth strand in their policy to add to the situation. This is the policy of the ritual strangling of lame ducks: the kill-or-cure policy; the policy of bullying or blackmailing the great public corporations of the country, such as the steel industry. I do not know whether the Prime Minister intends to deal with this matter. The abolition of investment grants will mean a loss to the Steel Corporation of something like £100 million a year. When taken with other measures, what effect will this have on investment policy generally—at a time when investment is falling as it has not fallen since a Conservative Government were last in power. We can all read it in the newspapers. Hon. Members opposite may say that it is nothing to do with them. Perhaps they will take it from the Daily Telegraph. In an article headed: Alcoa shelves plan to build £20 million plant in South Wales", Mr. Roland Gribben, its business correspondent, wrote last Tuesday: The move provides additional confirmation of the pessimistic capital spending indicators. Latest official estimates suggested that the combination of the policy change on investment incentives, the liquidity squeeze and economic outlook will produce a 2 per cent. drop in manufacturing industry's capital outlay this year. On top of the heaviest unemployment for years, we have an investment prospect that is much worse than we have known for years. In other words, if there is not a dramatic reversal in the policies which the Government are pursuing, we shall be heading for a major recession. Therefore. we have put down this Motion to see how soon, in the interests of the nation, we can get those policies reversed.

They are policies which are associated with the Prime Minister. He promised us a new style of Government. Certainly we have had a new style of Conservative leadership. There is nothing of the grouse moors about the right hon. Gentleman. The only birds that he ever shoots are albatrosses.

We want to know how long the right hon. Gentleman intends to pursue these policies. It is perfectly true that it is possible to solve the problem of inflation by the combined policy of wage resistance, unemployment and declining investment. It has been done by a Conservative Government before in our history. It was done in the 1920s.

The right hon. Gentleman need not think that this is some abstruse problem. He knows the problem. Inflation can be solved by the methods that he is pursuing, but we shall see the wreckage of the country's industrial prospects in the process. That is what these policies did in the 1920s, and that is the course on which the right hon. Gentleman has started.

We want to know whether the right hon. Gentleman intends to pursue these policies and how far he will persist in them. The four strands of policy associated with the right hon. Gentleman—the Bill, the bankruptcies, the unemployment and the savage discrimination against those employed in the public service—are like the four horsemen of the Heath Apocalypse. How far will the right hon. Gentleman drive them, with such havoc up and down the country?

The country could take a different course. Whether the right hon. Gentleman would have the courage or the humility or a combination of the two to attempt it is extremely doubtful. At the beginning of the debate, my right hon. Friend the Member for Birmingham, Stechford (Mr. Roy Jenkins) outlined some of the possibilities. The whole country knows that, if we are to solve the problem of inflation without mass unemployment and without the kind of industrial catastrophe that we had in the 1920s, there must be a new compact in our society. There must be a new agreement between the rulers and the ruled, between the trade unions and the industrial side of the country. That is the only way.

In order to carry that through, we must have a Government of skill and authority. I say little about the skill of right hon. and hon. Gentlemen opposite. When the Prime Minister made his selection, I suppose that he had to choose the best talent available. As every month has passed, hon. Members on the back benches opposite have understood and begun to appreciate how deadly was the insult.

When the right hon. Gentleman made his selection it was quite evident that we were going to have one of the most pedestrian Administrations of modern times. But what could not have been reckoned upon was that we would have this small-time spite, scarcely to be dignified even with the name of malice, this obstinacy masquerading as courage, particularly, as I say, associated with the right hon. Gentleman.

The right hon. Gentleman's difficulty—it applies to his Government, too, but most of all to him—is that he knows, and the country knows, that his Government were elcted on a lie. Shall I quote the words?

Hon. Members

Yes.

Mr. Foot

I have not mentioned prices before. What was the pledge? "We will reduce prices"——

An Hon. Member

"At a stroke."

Mr. Foot

No. Do not use such harsh terms about the man of principle. Not "at a stroke", not honest Ted. He would not use words like "at a stroke". Not at all. "We will reduce prices when we consider it may be suitable or convenient, or about five years after we have entered the Common Market, whichever period happens to be the longer." Was that the tocsin on which he gathered in the housewives' vote at the election?

We know what happened to the right hon. Gentleman. He tries to pretend that he is so tough, but he loses his nerve at critical moments. [HON. MEMBERS: "Oh."] Oh, yes. That is why we got the story in those few days before 18th June about a new devaluation, a national emergency, prices and unemployment to be cut "at a stroke". The right hon. Gentleman will not stand by any of those claims today. Or let him try. He has never tried since the General Election.

So the real question facing this country and the House—nobody knows exactly when the date will come—is: what are the Government going to do when the crash comes? What will they do when the figures for unemployment move up to the million level? What will they do when they see the deepening crisis due to the failure of investment? Will they have the courage or the humility, or a combination of the two, to put those policies in reverse? Are there any hon. Gentlemen who will perform the service to their country which some Tories had to do in 1940 when the British people had to be saved from a previous Conservative Government?

If the right hon. Gentleman wishes to claim any authority to govern this country he must, first of all, abandon the policy on which he claimed those votes. It was as fraudulent claim. It is a policy which is leading the nation to disaster. The test for the country is how soon a few patriots on the benches opposite will pluck up courage and speak.

9.28 p.m.

The Prime Minister (Mr. Edward Heath)

This debate has been built up by right hon. and hon. Gentlemen opposite as a major Motion of censure on Her Majesty's Government. Those of us who have listened to most, or a great deal, of the debate today must have been astonished at what has been taking place. Seldom have I heard the right hon. Mem- ber for Birmingham, Stechford (Mr. Roy Jenkins), fluent as he is, so unconvincing. [HON. MEMBERS: "Oh!"]

In the course of the debate we have had barely a handful of hon. Members opposite prepared even to speak in support of the Opposition's Motion of censure.

We have just listened to a speech from the hon. Member for Ebbw Vale (Mr. Michael Foot) which has been nothing but a savage Motion of censure on the Labour Government of 1929 to 1931 for creating unemployment. His main success has been in usurping the position of his own Leader, who now prefers only to interrupt intermittently and not to take a major part in a Motion of censure on the Government.

Seldom have I heard an Opposition censure themselves so completely as they have done today. Every criticism made has been a condemnation of their actions during their last year in Government, when they abdicated responsibility as the right hon. Gentleman knows. Never has it been more clearly described than in the words of the hon. Member for Ebbw Vale. He was determined that his own Government were going to abdicate their responsibilities and he did his utmost to ensure it. Hon. Members opposite have clearly demonstrated tonight, as, indeed, they have demonstrated day after day and night after night in these last few weeks, how they behave in opposition—[Interruption.] The behaviour of hon. Gentlemen is not confined to the Chamber. It goes to the country outside, because it demonstrates that, as an Opposition, they have thrown away any sense of responsibility which they had.

The right hon. Member for Stechford paid the Government the compliment of saying that they take inflation seriously. The Leader of the Liberal Party, who is unfortunately not with us tonight——

Mr. Thorpe

rose——

The Prime Minister

I apologise, I acknowledge the right hon. Gentleman's presence in an unusual position. He said that the whole House accepts that there is an inflationary situation, implying that it should not be discussed on this Motion of censure. Very well, let us accept that the whole House will agree that there is an inflationary situation here. Let us accept that they will agree that it is a cost inflation. Very well. I agree about that, but what hon. Members refuse to face up to is the wage element in the cost inflation. That has been apparent throughout this debate.

Nor will they face the fact that cost inflation of this kind leads to redundancies and to unemployment. Inevitably this is so. The facts are there today for all to see, re-emphasised in today's serious unemployment figures, re-emphasised by those who are on short time, or alas, about to be redundant, from Rolls-Royce and those who are on short time because of the postal strike.

All these things emphasise the impact of cost inflation through wages costs on employment. The right hon. Member for Stechford said that he would cover a broad field, and I will do the same—inflation, public sector wage claims, Rolls-Royce, hiving-off, unemployment I will deal with those. But there was not one word from hon. Members opposite, nor has there been from anyone on the Front Bench opposite, nor has there been during these past months from the benches opposite, discouraging inflationary wage claims. Indeed, throughout their period of opposition hon. Members opposite have done everything possible to stoke up wage claims in every way they can—most notably the hon. Member for Ebbw Vale. In fairness to him, he has been frank tonight in inciting larger wage claims.

The right hon. Member for Stechford accused us of voting against the statutory policy and the orders made by hon. Members opposite. What about the hon. Member who has just wound up on his behalf? He opposed a statutory policy. He opposed a voluntary policy. He did not have the guts to vote against it—he abstained every time—but he was absolutely opposed to that policy. His attitude now, on the Opposition Front Bench, to every wage claim that comes up is" Give them the money, all of it".

There was a major example which the hon. Gentleman quoted again tonight; the miners' claim. They asked for 23 per cent., and his view was that they should be given all of it, quite regardless of its inflationary content. That is the position which the hon. Gentleman takes up on every wage claim.

Mr. Michael Foot

The reason why I was in favour of that wage claim was that I believed it to be necessary to get the coal. To get it we must have the miners and the miners' wages have for years been falling behind those of the rest of the community. That is why I said that they should have had what they claimed. That is the only way in which one can deal with the problems in the public service. What we are complaining against is the discrimination of the Government against those who work in the public service.

The Prime Minister

That is an extraordinary economic doctrine to put forward for a declining industry for which the Labour Government made special provision so that redundant miners would be paid special allowances.

Moreover, the hon. Member for Ebbw Vale has been inciting the miners to take more than they themselves were prepared to settle for. That is the concern he has for wage-cost inflation in this country.

Mr. Foot

rose——

Hon. Members

Sit down.

The Prime Minister

I have a lot to say and time is short.

Mr. Foot

Is not the right hon. Gentleman aware that the majority of miners voted for the full wage claim?

The Prime Minister

I am aware that the miners' union settled for 12 per cent. and was not prepared to support the hon. Gentleman.

The right hon. Member for Stechford has a heavy responsibility for the wage explosion, cost inflation and the subsequent rise in prices. In the frank and honest way in which he addressed the House this afternoon, he might have acknowledged that. In his 1969 Budget speech he abandoned the statutory incomes policy, presumably because he felt that it could not be worked any longer. I agree. Therefore, however, he has no statutory incomes policy to put before the House. The right hon. Gentleman spoke of a voluntary incomes policy and a norm of between 2½ per cent. and 4½ per cent. He did not get it. He was quite incapable of getting it—so that he has no voluntary incomes policy to put before the House, either. The right hon. Gentleman announced a programme of industrial relations as the counterweight to abandoning his statutory incomes policy, but within two months he was jettisoned by his right hon. Friend the Leader of the Opposition—[Interruption]—and, as a result of that, he had no incomes policy, no policy for the reform of industrial relations and he got a wage explosion. The proof of that inflation is the escalating rate during the last years of that Government. [Interruption.]

In 1968 we had an index of average wage earnings which was 7½8 per cent. up on the year before. A year later, in 1969, it was 8½2 per cent. up, and by June, 1970, when the right hon. Gentleman went out of office, it was 11.9 per cent. up. That shows the very rapidly accelerating rate, reflected in the rise in prices and working through the system since then. [HON. MEMBERS: "What is it now?"] I am pointing out to the right hon. Gentleman what the position was—[Interruption.]—and if the right hon. Gentleman——

Mr. Roy Jenkins

rose——

The Prime Minister

I have given way enough.

Mr. Jenkins

rose——

The Prime Minister

No.

Mr. Speaker

Order. If the Prime Minister does not give way, the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) must resume his seat.

Mr. Jenkins

rose——

Hon. Members

Sit down.

The Prime Minister

I have already given way several times.

Mr. Speaker

Order. I remind hon. Members that the hon. Member for Ebbw Vale (Mr. Michael Foot), who wound up for the Opposition, was listened to in comparative silence.

Mr. Jenkins

As the right hon. Gentleman referred to me on several occasions, I would have thought that he would have had the courtesy to give way at least once. My question is simple. The right hon. Gentleman gave the progression from 1968 to 1969, through to June, 1970. What is the figure today?

The Prime Minister

It will be something under 14 per cent. for the year 1970. I cannot give the figure for the year from June, 1970, obviously, so the hon. Gentleman must take the calendar year.

What I am pointing out is the increasing rate of acceleration under the last three years of Labour Government. It is with that that this Government are dealing, and dealing now.

The right hon. Gentleman has criticised us because of the increases in prices in the nationalised industries. He was doing that in a popular, well-paying newspaper last Sunday [Interruption.] I was always very happy to write in it myself. Look at the deficits that the right hon. Gentleman left, the deficits of the nationalised industries, for us to deal with when we took power: in the postal services, £74 million a year down; in electricity, £67 million; in gas, £20 million; in coal, £90 million; in steel, £50 million; and in the B.B.C., £27 million. Those are the reasons, deficits which were ignored by the right hon. Gentleman and on which we had to take action to get the nationalised industries into any sort of balance at all. Let the right hon. Gentleman take the blame for that. The right hon. Gentleman summed up by saying that the last Government handed over some good things and some bad things. This leads on directly to the other matters with which he wants us to deal—the industrial situation and, in particular. Rolls-Royce.

Mr. Roy Jenkins

And the balance of payments.

The Prime Minister

On the balance of payments surplus, the right hon. Gentleman raised again the question of what I said in the first half of 1970 about being on the downward slope. Would he like the figures now? In the first quarter of 1970 the current balance was plus £213 million. In the second quarter it was plus £119 million and in the third quarter plus £73 million. That was a downward slope, and I said so. It was a downward slope for the first two quarters of 1970 which led to the election. Perhaps the right hon. Gentleman will now have the decency to withdraw his allegation and substantiate what I said, because the figures are there for everyone to see.

Mr. Roy Jenkins

Does the right hon. Gentleman seriously believe that the third quarter, which contained extraordinary amounts, with deficits and surpluses of plus £100 million and plus £200 million owing to the dock strike, has any meaning from this point of view? Is it not absolutely clear that the balance of payments for 1970 taken as a whole is the strongest we have had in our history?

The Prime Minister

In June, 1970, I was dealing with the first two quarters of the year. There is no point in the right hon. Gentlemen trying to confuse that with the third quarter. The surplus for the first quarter was £213 million and for the second quarter £119 million. That is a downward slope, and the recovery was made only in the fourth quarter of 1970.

What about the bad things that the right hon. Gentleman declared he left us? He fully acknowledged that he left us with rising inflation. Does he not realise that a surplus on the balance of payments and a rising inflation are bound to mean a damaging situation in the long term? He has shown no realisation whatever of this situation, and still does not show that he realised it at the time.

In addition, the right hon. Gentleman left us with escalating wages, rapidly rising prices and a heavy international debt for which the balance of payments surplus is still required. There is £1,500 million to be paid off. We ourselves have been able to pay off some of it, but it is still a major demand on the balance of payments which above all the right hon. Gentleman should recognise.

Low savings and an industrial situation whose weaknesses were apparent, which the last Government tried to disguise by their so-called industrial reconstruction policy, have now become very clear for the country to see. I doubt whether the reconstruction policy touched more than 1 per cent. of the capital organisation of British industry in the 5½ years of the last Government, but as a result of their general policy of heavy taxation and squeezing profit margins there were insufficient resources left for investment. That is now becoming painfully apparent. Huge personal taxation meant low savings from the people and an insufficient supply of funds to the market for industry. So industry as a whole was forced to go through I.R.C. to the Gov- ernment to try to get loans and subsidies. The position must now be rebuilt by British industry, and it will take firms a considerable time. Hence the importance of the 2½ per cent. reduction in corporation tax on 1st January this year, to help firms reconstruct their own finances.

The right hon. Gentleman mentioned Rolls-Royce. Rolls-Royce was a bitter blow to British industry and to this country. I do not want to deal with it in detail, because we have already debated it twice in the House, but there are certain points that I wish to make about it. The Government had no responsibility for that matter, and, as far as I know, neither did the previous Administration. That was clear for everyone on both sides of the Atlantic to see. We undertook additional responsibility for launching aid, which was explained to the House, and at the same time we put in the accountants. If that had not been done the real situation would not have been revealed, I believe, either to the company or to Parliament and the country.

I must ask right hon. Members opposite what their real position is about this. Do they believe that we should have taken over Rolls-Royce as a firm with all its liabilities, including the liability which became known at the end of January for production losses of £60 million on the RB211 engine, in addition to the very large further amount of launching aid that would be required and the very heavy indemnities for late delivery of this engine which the firm recognised in January this year?

If that is the position, the Opposition are perfectly entitled to take it, but the right hon. Gentleman should not be so inaccurate as to state that we nationalised Rolls-Royce to save the private investor. The situation is exactly the reverse. We did not save the private investor. The private shareholder will lose his interest in the same way as others who are involved in the unhappy collapse of Rolls-Royce. What we have parliamentary authority to do is to buy that section of the firm which is essential for our defence interests and for safeguarding the defence interests of 81 other nations and the 200 airlines. We would not have been justified, in my view, and, I think, in the view of the country, in using the money of the taxpayers, whether in direct taxation or indirect taxation of their goods and services, to buy the whole of this company, with all its obligations, liabilities and indemnities. That would not have been justifiable in the public interest.

So we are now having a thorough assessment of the assessment of the future of this engine. We must all hope that we can reach a suitable arrangement. The right hon. Gentleman asked us to renegotiate the contract, and that we shall do once we have the assessment. The answer does not depend on the Government alone, nor on the firm alone, nationally owned as it will then be. It must depend on what others are prepared to do to make an arrangement which will deal with the present problem of the engine.

But surely we all need to learn the lessons of this matter—of the management required, of the commercial expertise required and of the consequences of escalating costs. After all, as a nation, we need to learn that no company, however great, and no workers, however skilled, can survive, whether as a firm or in secure jobs, on unprofitable and loss-making ventures. Nor can these long be disguised by Government subventions and Government subsidies on the scale of modern industry. This, therefore, is the lesson which everyone here must learn and which the nation as a whole must learn. It is a lesson which must be learnt by all sectors of British industry. [Interruption.] If hon. Members opposite are not prepared to learn these lessons, then they will continue to support industries which will not be strong enough to make their own way in the competitive world outside.

The Government have today announced further regional policies. [Interruption.] The right hon. Member for Kilmarnock (Mr. Ross) is apparently critical of them. As Secretary of State for Scotland, he promised that jobs in Scotland would increase by 60,000. In fact, during his term of office employment in Scotland fell by 82,000.

The right hon. Member for Stechford asked for a comparison of the positions in the special development areas now and as they were in the time of the late Administration. Under this type of arrangement for the special development areas—and this applies to the other kinds of development area as well—the effect on individual firms depends on the nature of the project, on the balance between plant, machinery, labour and factory building. Therefore, it is not possible to give a generalised view about each project which can get assistance in special development areas.

What one can say in comparison is, as we did when our measures were announced in October, that the differential benefit of free depreciation and increased assistance under the Local Employment Acts is, broadly speaking, equal to what was being provided by other means by the last Government. The fact that these special arrangements involve another —25 million expenditure will put them in a more advantageous position than they were at that time.

My hon. Friend the Member for St. Ives (Mr. Nott) said he wished to have a special arrangement for Cornwall. Cornwall benefited when we restored to service industries the assistance which they had had previously but which was removed by the Labour Government. Under this arrangement for special development areas the service industries are not affected.

In my last few words I want to deal with two particular problems which were mentioned by the right hon. Gentleman and by the hon. Member for Ebbw Vale. It is now becoming customary for the hon. Member to discuss a consensus. His argument runs that a democratically-elected Government have no right to carry out the policies which they had put to the electorate unless the Opposition are prepared to support those policies as well. This is a new constitutional doctrine. It is not one that he himself advocated when the Labour Government were in power. Looking back to 1964–66, when the House was so equally balanced that the Labour Government had a majority of only three, did they take into consideration the views of the Opposition in forcing through their own policies? Indeed, the right hon. Member for Huyton (Mr. Harold Wilson) constantly boasted to the country that with a majority of only three he would carry through divisive policies. How much consideration was given then to the views of the Opposition on steel nationalisation or the Land Commission? The hon. Gentleman's argument is entirely false. But I do not worry about that because I believe in democratic arguments of the fiercest kind. What I wish to discuss is the argument used more seriously by the right hon. Gentleman—that the social policies being pursued by the Government are dividing the country. That is a view which I challenge, and challenge completely. I do not accept the view of the hon. Member for Ebbw Vale that the reform of industrial relations is a policy which is going to divide the country [HON. MEMBERS: "Oh!" His claim shows how out of touch he is.

What have the Government done socially? They have improved the benefits for those who most need them. They have provided more money for primary schools and for hospitals. They have provided more money for the widows and more money for those who are retired and over 80. Those policies are not divisive. These are policies which are uniting the nation. [Interruption.]

Mr. Speaker

Order. The hon. Member for Ebbw Vale was heard in comparative silence. Hon. Members must not shout from a sedentary position.

The Prime Minister

I thought that hon. Gentlemen opposite wanted to have a serious discussion—[Interruption.] about the effect of social policies on this country. The policies of increasing the number of primary schools and hospitals and of helping the elderly and widowed are not divisive. They are the way in which those who can afford to help themselves more do so, and help through the community to help other people.

On the effect of this on our relations with the trade unions, I welcome the closest possible relations with the trade unions. The trade union leaders themselves know that. At any time I am prepared——

Mr. Heffer

rose——

Mr. Stanley Orme (Salford, West)

rose——

Hon. Members

Sit down!

The Prime Minister

At any time I am prepared to discuss matters with them, to discuss economic policy with them, to listen seriously to their views and to exchange with them the views of the Government.

I want to see expansion in this country, but expansion soundly based. I want to see cost inflation dealt with, and we shall continue with our policy of standing up against inflationary wage claims. I shall be glad of the day when right hon. Gentlemen opposite and some of their backbenchers also express their opposition to inflationary wage claims. The sooner they do that, the sooner this economy will be on a healthy footing; and the sooner that happens, the sooner we shall be able to expand it. If the trade unions are prepared to work with the Government, and with management——

Mr. Orme

rose——

The Prime Minister

—in doing this, we, too, are prepared to respond and work with them.

We are not prepared to abandon the reform of industrial relations. That is a long-term objective to which we shall adhere. That Bill will be placed on the Statute Book, and everybody in Parliament recognises it. Very well, let the trade union leaders themselves recognise it, because it is the will of a democratically-elected Parliament. I wish that they had consulted us and been prepared to carry through a consultation. I wish that right hon. and hon. Members opposite had been prepared not to lose valuable time tramping through the Lobbies, but seriously to discuss the facts.

Several Hon. Members

rose——

The Prime Minister

When this Bill is on the Statute Book, the trade union leaders will be prepared to operate it; and they will value it.

Mr. Kevin McNamara (Kingston upon Hull, North)

On a point of order——

Hon. Members

Sit down.

Mr. McNamara

I apologise to you, Mr. Speaker——

The Parliamentary Secretary to the Treasury (Mr. Francis Pym) rose in his place and claimed to move, That the Question be now put.

Question, That the Question be now put, put and agreed to.

Question put accordingly, That the Amendment be made:—

The House proceeded to a Division—

Mr. McNamara (seated and covered)

On a point of order. In fact, I have two points of order which I wish to raise with you, Mr. Speaker.

On the first point, Mr. Speaker, you have called me for a point of order and 1 was attempting to make that point. I was apologising to you for having to raise my voice because of the hubbub from the pposition—[Interruption.]—but you had called me to raise my point of order and I was on my feet making it when you called the Patronage Secretary to move the Closure Motion.

Mr. Speaker

If I may deal with that point straight away, the Motion for the Closure takes precedence over all other points of order and interrupts them.

Mr. McNamara

I accept that from you, Mr. Speaker.

My second point of order is this. I think that this must be placed on the record. The Leader of the Opposition alleged—[Laughter.] I mean the Leader of the Government; I always forget; the Tories quote so many of our speeches—the Prime Minister said that time was being wasted on having Divisions on the Industrial Relations Bill. I should be glad if you would draw the Prime Minister's attention to a matter of fact and a matter of order, Mr. Speaker. The greater part of the time spent in Divisions on that Bill has been spent after 12 o'clock, when the guillotine has fallen but when we should be delighted to debate the Bill. However, the Government are afraid to do that, because they have been defeated in every argument.

Mr. Speaker

Order. I do not detect a point of order in the second matter the hon. Gentleman raises.

The House having divided: Ayes 309, Noes 275.

Division No. 183.]	AYES	10.0 p.m.
Adley, Robert	Chapman, Sydney	Fowler, Norman
Alison, Michael (Bankston Ash)	Chataway, Rt. Hn. Christopher	Fox, Marcus
Allason, James (Hemel Hempstead)	Churchill, W. S.	Fraser,Rt.Hn.Hugh(Stafford & Stone)
Amery, Rt. Hn. Julian	Clark, William (Surrey, E.)	Fry, Peter
Astor, John	Clarke, Kenneth (Rushcliffe)	Galbraith, Hn. T. G.
Atkins, Humphrey	Clegg, Waiter	Gardner, Edward
Awdry, Daniel	Cockeram, Eric	Gibson-Watt, David
Baker, Kenneth (St. Marylebone)	Cooke, Robert	Gilmour, Ian (Norfolk, C.)
Baker, W. H. K. (Banff)	Coombs, Derek	Gilmour, Sir John (Fife, E.)
Balniel, Lord	Cooper, A. E.	Glyn, Dr. Alan
Barber, Rt. Hn. Anthony	Cordle, John	Godber, Rt. Hn. J. B.
Batsford, Brian	Corfield, F. V.	Goodhart, Philip
Beamish, Col. Sir Tufton	Cormack, Patrick	Goodhew, Victor
Bell, Ronald	Costain, A. P.	Gorst, John
Bennett, Sir Frederic (Torquay)	Critchley, Julian	Gower, Raymond
Benyon, W.	Crouch, David	Grant, Anthony (Harrow, C.)
Berry, Hn. Anthony	Crowder, F. P.	Gray, Hamish
Biffen, John	Curran, Charles	Green, Alan
Biggs-Davison, John	Dalkeith, Earl of	Grieve, Percy
Blaker, Peter	Davies, Rt. Hn. John (Knutsford)	Griffiths, Eldon
Boardman, Tom (Leicester, S.W.)	d'Avigdor-Goldsmid, Sir Henry	Grylls, Michael
Body, Richard	d'AVigdor-Goldsmid, Maj.-Gen. Jack	Gummer, Sefwyn
Boscawen, R. T.	Dean, Paul	Gurden, Harold
Bossom, Sir Clive	Deedes, Rt. Hn. W. F.	Hall, Miss Joan
Bowden, Andrew	Dighy, Simon Wingfield	Hall, John (Wycombe)
Boyd-Carpenter, Rt. Hn. John	Dixon, Piers	Hall-Davis, A. G.
Braine, Bernard	Dodds-Parker, Douglas	Hamilton, Michael (Salisbury)
Bray, Ronald	Douglas-Home, Rt. Hn. Sir Alec	Hannam, John (Exeter)
Brewis, John	Drayson, G. B.	Harrison, Col. Sir Harwood (Eye)
Brinton, Sir Tatton	du Cann, Rt. Hn. Edward	Harvey, Sir Arthur Vere
Brocklebank-Fowler, Christopher	Eden, Sir John	Haselhurst, Alan
Brown, Sir Edward (Bath)	Edwards, Nicholas (Pembroke)	Hastings, Stephen
Bruce-Gardyne, J.	Elliot, Capt. Walter (Carshalton)	Havers, Michael
Bryan, Paul	Elliott, R. W. (N'c'tle-upon-Tyne,N.)	Hawkins, Paul
Buchanan-Smith, Alick(Angus,N&M)	Emery, Peter	Hay, John
Buck, Antony	Farr, John	Hayhoe, Barney
Bullus, Sir Eric	Fell, Anthony	Heath, Rt. Hn. Edward
Burden, F. A.	Fenner, Mrs. Peggy	Hicks, Robert
Butler, Adam (Bosworth)	Fidler, Michael	Higgins, Terence L.
Campbell, Rt.Hn.G.(Moray&Nairn)	Finsberg, Geoffrey (Hampstead)	Hiley, Joseph
Carlisle, Mark	Fletcher-Cooke, Charles	Hill, John E. B. (Norfolk, S.)
Carr, Rt. Hn. Robert	Fookes, Miss Janet	Hill, James (Southampton, Test)
Cary, Sir Robert	Fortescue, Tim	Holland, Philip
Channon, Paul	Foster, Sir John	Holt, Miss Mary
Hordern, Peter	Miscampbell, Norman	Simeons, Charles
Hornby, Richard	Mitchell,Lt.-Col.C.(Aberdeenshire,W)	Sinclair, Sir George
Hornsby-Smith,Rt.Hn.Dame Patricia	Mitchell, David (Basingstoke)	Skeet, T. H. H.
Howe, Hn. Sir Geoffrey (Reigate)	Moate, Roger	Smith, Dudley (W'wick & L'mington)
Howell, Ralph (Norfolk, N.)	Molyneaux, James	Soref, Harold
Hunt, John	Money, Ernie	Speed, Keith
Hutchison, Michael Clark	Monks, Mrs. Connie	Spence, John
Iremonger, T. L.	Montgomery, Fergus	Sproat, Iain
Irvine, Bryant Godman (Rye)	Morgan, Geraint (Denbigh)	Stainton, Keith
James, David	Morgan-Giles, Rear-Adm.	Stanbrook, Ivor
Jenkin, Patrick (Woodford)	Morrison, Charles (Devizes)	Stewart-Smith, D. G. (Belper)
Jennings, J. C. (Burton)	Mudd, David	Stodart, Anthony (Edinburgh, W.)
Jessel, Toby	Murton, Oscar	Stoddart-Scott, Col. Sir M.
Johnson Smith, G. (E. Grinstead)	Nabarro, Sir Gerald	Stokes, John
Jones, Arthur (Northants, S.)	Heave, Airey	Stuttaford, Dr. Tom
Jopling, Michael	Nicholls, Sir Harmar	Sutcliffe, John
Joseph, Rt. Hn. Sir Keith	Noble, Rt. Hn. Michael	Tapsell, Peter
Kaberry, Sir Donald	Normanton, Tom	Taylor, Sir Charles (Eastbourne)
Kellett, Mrs. Elaine	Nott, John	Taylor, Edward M.(G'gow,Cathcart)
Kershaw, Anthony	Onslow, Cranley	Taylor, Frank (Moss Side)
Kilfedder, James	Oppenheim, Mrs. Sally	Taylor, Robert (Croydon, N.W.)
Kimball, Marcus	Orr, Capt. L. P. S.	Tebbit, Norman
King, Evelyn (Dorset, S.)	Owen, Idris (Stockport, N.)	Temple, John M.
King, Tom (Bridgwater)	Page, Graham (Crosby)	Thatcher, Rt. Hn. Mrs. Margaret
Kinsey, J. R.	Page, John (Harrow, W.)	Thomas, John Stradling (Monmouth)
Kirk, Peter	Parkinson, Cecil (Enfield, W.)	Thomas, Rt. Hn. Peter (Hendon, S.)
Kitson, Timothy	Peel, John	Thompson, Sir Richard (Croydon, S.)
Knight, Mrs. Jill	Percival, Ian	Tilney, John
Knox, David	Peyton, Rt. Hn. John	Trafford, Dr. Anthony
Lambton, Antony	Pike, Miss Mervyn	Trew, Peter
Lane, David	Pink, R. Bonner	Trew, Peter
Langford-Holt, Sir John	Pounder, Rafton	Tugendhat, Christopher
Legge-Bourke, Sir Harry	Powell, Rt. Hn. J. Enoch	Turton, Rt. Hn. R. H.
Le Marchant, Spencer	Price, David (Eastleigh)	van Straubenzee, W. R.
Lewis, Kenneth (Rutland)	Prior, Rt. Hn. J. M. L.	Vaughan, Dr. Gerard
Lloyd,Rt.Hn.Geoffrey(Sut'nC'dfield)	Proudfoot, Wilfred	Vickers, Dame Joan
Lloyd, Ian (P'tsm'th, Langstone)	Pym, Rt. Hn. Francis	Waddington, David
Longden, Gilbert	Quennell, Miss J. M.	Walker, David (Clitheroe)
Loveridge, John	Raison, Timothy	Walker, Rt. Hn. Peter (Worcester)
McAdden, Sir Stephen	Ramsden, Rt. Hn. James	Walker Smith, Rt. Hn. Sir Derek
MacArthur, Ian	Rawlinson, Rt. Hn, Sir Peter	Wall, Patrick
McCrindle, R. A.	Redmond, Robert	Walters, Dennis
McLaren, Martin	Reed, Laurence (Bolton, E.)	Ward, Dame Irene
Maclean, Sir Fitzroy	Rees, Hn. Peter (Dover)	Warren, Kenneth
McMaster, Stanley	Rees-Davies, W. R.	Weatherill, Bernard
Macmillan, Maurice (Farnham)	Rhys Williams, Sir Brandon	Wells, John (Maidstone)
McNair-Wilson, Michael	Ridley, Hn. Nicholas	White, Roger (Gravesend)
McNair-Wilson, Patrick (New Forest)	Ridsdale, Julian	Whitelaw, Rt. Hn. William
Maddan, Martin	Roberts, Michael (Cardiff, N.)	Wiggin, Jerry
Martel, David	Roberts, W yn (Conway)	Wilkinson, John
Maginnis, John E.	Rossi, Hugh (Hornsey)	Wolrige-Gordon, Patrick
Marples, Rt. Hn. Ernest	Rost, Peter	Woodhouse, Hn. Christopher
Marten, Neil	Royle, Anthony	Woodnutt, Mark
Mather, Carol	Russell, Sir Ronald	Worsley, Marcus
Maude, Angus	St. John-Stevas, Norman	Wylie, Rt. Hn. N. R.
Maudting, Rt. Hn. Reginald	Scott, Nicholas	Younger, Hn. George
Mawby, Ray	Scott-Hopkins, James
Maxwell-Hyslop, R. J.	Sharpies, Richard	TELLERS FOR THE AYES:
Meyer, Sir Anthony	Shaw, Michael (Sc'h'gh & Whitby)	Mr. Jasper More and
Mills, Peter (Torrington)	Shelton, William (Clapham)	Mr. Reginald Eyre.
Mills, Stratton (Belfast, N.)
NOES
Abse, Leo	Bradley, Tom	Crawshaw, Richard
Allaun, Frank (Salford, E.)	Broughton, Sir Alfred	Cronin, John
Allen, Scholefield	Brown, Bob (N'c'tle upon-Tyne,W.)	Crosland, Rt. Hn. Anthony
Archer, Peter (Rowley Regis)	Brown, Hugh D. (G'gow, Provan)	Crossman, Rt. Hn. Richard
Armstrong, Ernest	Brown,Ronald (Shoreclitch & F'bury)	Cunningham, G. (Islington, S.W.)
Ashley, Jack	Buchan, Norman	Cunningham, Dr. J. A. (Whitehaven)
Ashton, Joe	Butler, Mrs. Joyce (Wood Green)	Dalyell, Tam
Atkinson, Norman	Callaghan, Rt. Hn. James	Darling, Rt. Hn. George
Bagier, Gordon A. T.	Campbell, I. (Dunbartonshire, W.)	Davidson, Arthur
Barnes, Michael	Cant, R. P.	Davies, Denzil (Llanelly)
Barnett, Joel	Carmichael, Neil	Davies, G. Elfed (Rhondda, E.)
Beaney, Alan	Carter, Ray (Birmingh'm, Northfield)	Davies, Ifor (Gower)
Benn, Rt. Hn. Anthony Wedgwood	Carter-Jones, Lewis (Eccles)	Davis, Clinton (Hackney, C.)
Bennett, James (Glasgow, Bridgeton)	Castle, Rt. Hn. Barbara	Deakins, Eric
Bidwell, Sydney	Clark, David (Colne Valley)	de Freitas, Rt. Hn. Sir Geoffrey
Bishop, E. S.	Cocks, Michael (Bristol, S.)	Delargy, H. J.
Blenkinsop, Arthur	Cohen, Stanley	Dell, Rt. Hn. Edmund
Boardman, H. (Leigh)	Concannon, J. D.	Dempsey, James
Booth, Albert	Conlan, Bernard	Doig, Peter
Bottomley, Rt. Hn. Arthur	Corbet, Mrs. Freda	Dormand, J. D.
Boyden, James (Bishop Auckland)	Cox, Thomas (Wandsworth, C.)	Douglas, Dick (Stirlingshire, E.)

Douglas-Mann, Bruce	Lamble, David	Price, J T. (Westhoughton)
Driberg, Tom	Lamond, James	Price, William (Rugby)
Duffy, A. E. P.	Latham, Arthur	Probert, Arthur
Dunn, James A.	Lawson, George	Rankin, John
Dunnett, Jack	Leadbitter, Ted	Reed, D. (Sedgefield)
Eadie, Alex	Lee, Rt. Hn. Frederick	Rees, Merlyn (Leeds, S.)
Edelman, Maurice	Leonard, Dick	Rhodes, Geoffrey
Edwards, Robert (Bilston)	Lestor, Miss Joan	Richard, Ivor
Edwards, William (Merioneth)	Lever, Rt. Hn. Harold	Roberts, Albert (Normanton)
Ellis, Tom	Lewis, Arthur (W. Ham N.)	Roberts, Rt. Hn. Goronwy(Caernarvon)
English, Michael	Lewis, Ron (Carlisle)	Robertson, John (Paisley)
Evans, Fred	Lipton, Marcus	Roderick, Caerwyn E.(Br'c'n&R'dnor)
Fernyhough, E.	Lomas, Kenneth	Rodgers, William (Stockton-on-Tees)
Fisher, Mrs.Doris(B'ham,Ladywood)	Loughlin, Charles	Roper, John
Fitch, Alan (Wigan)	Lyon, Alexander W. (York)	Rose, Paul B.
Fletcher, Raymond (Ilkeston)	Lyons, Edward (Bradford, E.)	Ross, Rt. Hn. William (Kilmarnock)
Fletcher, Ted (Darlington)	Mabon, Dr. J. Dickson	Sheldon, Robert (Ashton-under-Lyne)
Foley, Maurice	McBride, Neil	Shore, Rt. Hn. Peter (Stepney)
Foot, Michael	McCartney, Hugh	Short,Rt.Hn.Edward(N'c'tle-u-Tyne)
Ford, Ben	MacColl, James	Short, Mrs. Renée (W'hampton,N.E.)
Forrester, John	McElhone, Frank	Silkin, Rt. Hn. John (Deptford)
Fraser, John (Norwood)	McGuire, Michael	Silkin, Hn. S. C. (Dulwich)
Freeson, Reginald	Mackenzie, Gregor	Sillars, James
Galpern, Sir Myer	Mackie, John	Silverman, Julius
Garrett, W. E.	Mackintosh, John P.	Skinner, Dennis
Gilbert, Dr. John	Maclennan, Robert	Small, William
Ginsburg, David	McMillan, Tom (Glasgow, C.)	Smith, John (Lanarkshire, N.)
Golding, John	McNamara, J. Kevin	Spearing, Nigel
Gordon Walker, Rt. Hn. P. C.	MacPherson, Malcolm	Spriggs, Leslie
Gourlay, Harry	Mahon, Simon (Bootle)	Stallard, A. W.
Grant, George (Morpeth)	Mallaiieu, E. L. (Brigg)	Steel, David
Grant, John D. (Islington, E.)	Mallalieu, J. P. W. (Huddersfield, E.)	Stewart, Donald (Western Isles)
Griffiths, Eddie (Brightside)	Marks, Kenneth
Griffiths, Will (Exchange)	Marquand, David	Stewart, Rt. Hn. Michael (Fulham)
Grimond, Rt. Hn. J.	Marsh, Rt. Hn. Richard	Stoddart, David (Swindon)
Gunter, Rt. Hn. R. J.	Mason, Rt. Hn. Roy	Stonehouse, Rt. Hn. John
Hamilton, William (Fife, W.)	Mayhew, Christopher	Strang, Gavin
Hannan, William (G'gow, Maryhill)	Meacher, Michael	Strauss, Rt. Hn. G. R.
Hardy, Peter	Mellish, Rt. Hn. Robert	Summerskill, Hn. Dr. Shirley
Harper, Joseph	Mendelson, John	Swain, Thomas
Harrison, Walter (Wakefield)	Mikardo, Ian	Taverne, Dick
Hart, Rt. Hn. Judith	Milian, Bruce	Thomas,Rt.Hn. George (Cardiff, W.)
Hattersley, Roy	Miller, Dr. M. S.	Thomas, Jeffrey (Abertillery)
Healey, Rt. Hn. Denis	Milne, Edward (Blyth)	Thompson, Rt. Hn. G. (Dundee, E.)
Heffer, Eric S.	Molloy, William	Thorpe, Rt. Hn. Jeremy
Hilton, W. S.	Morgan, Elystan (Cardiganshire)	Tinn, James
Horam, John	Morris, Alfred (Wythenshawe)	Tomney, Frank
Houghton, Rt. Hn. Douglas	Morris, Charles R. (Openshaw)	Torney, Tom
Howell, Denis (Small Heath)	Morris, Rt. Hn. John (Aberavon)	Tuck, Raphael
Huckfield, Leslie	Moyle, Roland	Urwin, T. W.
Hughes, Rt. Hn. Cledwyn (Anglesey)	Mulley, Rt. Hn. Frederick	Varley, Eric G.
Hughes, Dr. Mark (Durham)	Murray, Ronald King	Wainwright, Edwin
Hughes, Robert (Aberdeen, N.)	Ogden, Eric	Walden, Brian (B'm'ham, All Saints)
Hughes, Roy (Newport)	O'Halloran, Michael	Walker, Harold (Doncaster)
Hunter, Adam	O'Malley, Brian	Wallace, George
Irvine,Rt.Hn.SirArthur(Edge Hill)	Oram, Bert	Watkins, David
Janner, Greville	Orbach, Maurice	Weitzman, David
Jay, Rt. Hn. Douglas	Orme, Stanley	Wellbeloved, James
Jeger,Mrs.Lena(H'b'n&St.P'cras,S.)	Oswald, Thomas	Wells, William (Walsall, N.)
Jenkins, Hugh (Putney)	Owen, Dr. David (Plymouth, Sutton)	White, James (Glasgow, Polfok)
Jenkins, Rt. Hn. Roy (Stechford)	Palmer, Arthur	Whitehead, Philip
John, Brynmor	Pannell, Rt. Hn. Charles	Whitelock, William
Johnson, Carol (Lewisham, S.)	Pardoe, John	Williams, Alan (Swansea, W.)
Johnson, James (K'ston-on-Hull, W.)	Parker, John (Dagenham)	Williams, Mrs. Shirley (Hitchin)
Johnson, Walter (Derby, S.)	Parry, Robert (Liverpool, Exchange)	Williams, W. T. (Warrington)
Jones, Barry (Flint, E.)	Pavitt, Laurie	Wilson, Alexander (Hamilton)
Jones, Dan (Burnley)	Peart, Rt. Hn. Fred	Wilson, Rt. Hn. Harold (Huyton)
Jones,Rt.Hn.Sir Elwyn(W.Ham,S.)	Pendry, Tom	Wilson, William (Coventry, S.)
Jones, Gwynoro (Carmarthen)	Pentland, Norman
Jones, T. Alec (Rhondda, W.)	Perry, Ernest G.	TELLERS FOR THE NOES:
Judd, Frank	Prentice, Rt. Hn. Reg.	Mr. James Hamilton and
Kelley, Richard	Prescott, John	Mr. Donald Coleman
Kinnock, Nell

Main Question, as amended, put and agreed to.

Resolved, That this House recognising that cost inflation weakens the nation's competitive position, undermines employment and industrial invest ment and creates social injustice through rising prices, applauds the determination of Her Majesty's Government to curb Inflation by resisting excessive pay claims, by maintaining a firm monetary policy, by keeping down public expenditure, and by reforming industrial relations, thus preparing the way for sustained economic growth.