PRICES AND UNEMPLOYMENT

HC Deb 28 June 1971 vol 820 cc42-164

4.3 p.m.

Mr. Roy Jenkins (Birmingham, Stechford)

I beg to move, That this House condemns the management of the economy by Her Majesty's Government and, in particular, the betrayal of their specific electoral promises on prices and unemployment. This is a censure Motion. It censures the Government for their gross betrayal of their principal election pledges and it censures them for their mismanagement, or lack of management, of the nation's economy.

I begin with prices. With every day that goes by, the total failure of the Government's policy becomes more apparent. The index of retail prices has risen by 9.8 per cent. over the past year, more than twice the average rate of increase during the six years of Labour Government. Between January and May, 1970, the period about which one has heard so much from the party opposite, there was a movement of four points, or just under 3 per cent., in the index; between January and May, this year, there was a movement of 6.2 per cent., or 4¼ per cent. in the index.

The Government inherited a problem here. I have always stated that perfectly clearly in every economic speech I have made since the election. But the charges against the Government are, first, that they cheated the electorate by making false and irresponsible promises on that issue; secondly, that nearly everything they have done since the election has exacerbated, and deliberately exacerbated, the prices problem.

The first point, the cheating of the electorate, is hardly worth arguing any further. Everybody, except the Prime Minister, knows it to be true. The Prime Minister, as the House knows perfectly well, can put up no convincing defence on this point. He can merely shout into the wind and endeavour to show that his self-righteousness in impenetrable either by argument or by truth. His reputation has suffered more on this than on any other issue. I am rather sorry for the Minister of Agriculture. I thought that he put up the best defence that he could, and the fact that it was so devastating comes not from his own maladroitness but the impossibility of defending the indefensible.

Since the election, in the year that has gone by the Government have shown themselves totally unconcerned with their main election promise. They have rushed to abolish—they have glorified in abolishing—the watchdogs of the Prices and Incomes Board and the Consumer Council. They have relentlessly and enthusiastically used increased charges—school meals, school milk, dental and prescription charges, rents, rates, travel costs, even museum charges—to give themselves elbow room to reduce taxation for the better off. The result has been an unprecedented year of inflation and an unprecedentedly depressing prospect of its continuance for at least the remainder of 1971, and probably well into 1972 too. It has all been at the expense of the housewife, the section of the electorate most sedulously and cynically cultivated by the Government last June.

Unemployment is an almost equally discreditable story. We all remember what Mr. Iain Macleod said about last June's figure; what he would say about this June's I cannot imagine. Within a year, the Government have achieved the remarkable feat of combining roaring inflation with an increase of unemployment which has already taken us half-way back to the conditions of the late 'thirties, conditions which most of us believed we had long left behind for ever.

There is no prospect of any major alleviation. The most the Secretary of State for Employment can claim is that there is some tentative indication of a slackening of the rate of the climb of the underlying trend, not even that we are on a plateau, and still less that we see any prospect of going down from the present intolerable level; merely that we are going up the mountainside a little less steeply. There is not the slightest prospect, even if the Chancellor's Budget forecasts for the remainder of the year for growth in the economy were realised, which is now quite out of the question, that there would be an effective reduction in unemployment. The realisation of these forecasts would merely prevent it from rising still further.

As always, it is the weakest regions which have suffered worst. For Scotland the increase in unemployment for men is no less than 2.3 percentage points for this June over last June, a rise from 5.2 per cent. to 7.5 per cent. There are 120,000 out of work in Scotland, and the worst area of all is the west of Scotland, particularly Clydeside. For the Government in these circumstances to behave as they have done over U.C.S. simply passes comprehension, particularly when it is remembered that again the shadow of Rolls-Royce trouble is hanging menacingly over this same area of the country. For Northern Ireland, Yorkshire and Humberside, and for the North-Western Region, the figure of male unemployed is up by 1.4 percentage points, and for the Northern Region and East Anglia by 1.3 percentage points, over the past year.

What has happened so far in these regions is mainly an accentuated and intolerable product of the general recession throughout the country. But the still more dismal nature of the prospect owes a great deal to the Government's destruction of an effective development area policy. The figures for I.D.C.s granted in April and May of this year were published last week in a Written Answer. They show that in the country as a whole I.D.C.s granted for these two months provided the prospect of 10,000 new jobs, compared with an average of 23,000 for the same month in each of the past three years. But in Scotland, I.D.C.s granted in these two months provided the prospect of only 750 new jobs, compared with an average of 3,000 for these two months in each of the past three years. In the Northern Region, the figure is 400 compared with an average of 4,500 for each of the past three years. On unemployment, the Government have, indeed, acted "at a stroke", but in exactly the opposite direction from that in which they were pleased to trail their election promises.

On both these issues, therefore, the Government, and the Prime Minister in particular, stand convicted of electoral fraud. The verdict has been given not just by debates in this House but by the electorate; by the electorate at the local elections, by the electorate at Bromsgrove, by the electorate at Hayes and Harlington, and it will be given, too, by the electorate at Macclesfield as soon as the Chief Whip can brace himself to take the shock.

The economic faults of the Government do not stem merely from the fact that they misled the public and won by a trick. They stem also from matters more important than their own tarnished reputations, more important indeed than any exchanges of party politics. They stem from their blind, dogmatic, continuing neglect of the real problems of the economy today, and from their dissipation of the opportunities which have been open to us during the past year.

The real trouble with the Chancellor of the Exchequer is that he is interested only in taxation. He convinced himself in opposition—I doubt whether it required a very strenuous wrestling match—that the supreme duty of a Tory Chancellor was to reduce and redirect fiscal burdens, particularly away from the upper income groups, and that if this were done everything else could be left to look after itself; and during the past year his attention has been overwhelmingly concentrated upon this issue.

This misguided piece of dogma has been buttressed by two other equally mistaken beliefs on the part of the Government as a whole. The first is that the Industrial Relations Bill will create an entirely new climate in industry. This is the opposite of the truth. It is a bad Bill which will do harm and not good. But even those who take the contrary view regard the claims made for it as ludicrously exaggerated. This is certainly the overwhelming view on the management side in industry. Second, there is the hope of the Government that a heavy dose of unemployment plus a number of spectacular bankruptcies will frighten people into a more submissive attitude. These three shibboleths are the essence of what the Prime Minister on Friday was pleased to describe as his "long-term fundamental changes", his "decisive action", his determination "to break through the crust of procrastination that had formed and hardened round the heart of national prosperity. I do not know whether he has broken through any crusts, but he has done a remarkable amount of rapid damage to the heart of national prosperity itself.

These three pieces of Tory dogma do not begin to be an economic strategy. They are three pieces of incantation which are a substitute for dealing with the real problems with which the Government have been confronted. At best they are irrelevant; at worst, they do massive and cruel harm. I do not know how many hon. Members read the speech of the noble Lord, Lord Boyle, in another place last week. It was a maiden speech and it was couched, as Lord Boyle's speeches always have been, in most courteous terms. But it was a powerful indictment of our present economic plight coming, may I venture to say, from a Conservative with more experience, knowledge and understanding of the problems of running the economy than all the present Treasury Ministers put together. He said: … it is no good anyone trying to conceal from himself the fact that virtually all the key indicators for Britain's economy are depressing at the present time."—[OFFICIAL REPORT, House of Lords, 23rd June, 1971; Vol. 320, c. 9180.] He pointed to the sustained high level of unemployment, he pointed to the capital investment intentions of industry, worse than at any time since the present system of forecasting was introduced 16 years ago—

Mr. Speaker

Order. I apologise for interrupting, but is the right hon. Gentleman quoting?

Mr. Jenkins

No, Sir. I ventured to quote one very brief sentence from the noble Lord, but I have not been quoting for the last three sentences. I am summarising. I always endeavour for the benefit of the House to summarise, and to do so as quickly as possible. He pointed also to the volume of exports, virtually stagnant for the past 18 months. He asked whether the Chancellor's Budget forecasts—and I asked this afternoon—of a rise in G.D.P. of 3 per cent. and of personal consumption by 5.3 per cent. between the first halves of 1971 and 1972 were now likely to be achieved. Not surprisingly, he got no answer. Not surprisingly, either, he pleaded with the Chancellor for a quick method of reflation, vitally necessary, he argued, on a wide range of grounds.

What will be the Chancellor's response today? No doubt it will be that which he gave, with somewhat muddled arguments, last Wednesday—that he is waiting for the July forecast and a number of other figures. No doubt that may be followed by a package of rather inadequate measures in mid-July. But the essential point is not whether he does it this week or next or the week after, but that he has already left it far too late and may easily, by the foolish time incidence of his Budget proposals, have ensured that whatever he does or does not do may easily be wrong.

Let us look at the past year. During this period there have already been four major economic debates. Today's is the fifth. On each of these occasions, the Chancellor of the day said that growth was in the pipeline. It has never yet emerged. Last July, Mr. Macleod made his one speech as Chancellor. He was at that stage, as was natural, just having taken office, cautious. He said: In trying to give a balanced picture, I must tell the House that although the growth side so far is disappointing, there are some signs pointing the other way. Industrial production was rising at a reasonable rate in the four months to April and new export orders for engineering goods … in January and April were well up on last year. That is a great deal more than can be said now. He went on: I conclude, therefore, that … it would be premature at this moment to take action to stimulate demand."—[OFFICIAL REPORT, 7th July, 1970; Vol. 803, c. 508.] Seasonally adjusted unemployment was then 561,000 on the last count available. On 4th November, the present Chancellor made his first major speech as Chancellor. He said: I have stated before in this House that I believe that one should be wary of short-term forecasts"— I would agree with him on that, if on nothing else— but I think it right that I should tell the House that on all the information available it seems that over the coming six months or so"— that was from last November, the six months which ended a month ago— the upward trend in the output of the economy as a whole will be broadly in line with the estimated rise in productive potential. During the period since I became Chancellor of the Exchequer I have naturally considered whether to take steps to reflate the economy. … There were fears, very genuine fears, that unemployment would rise to a much higher level during the winter. It is true that output was pretty stagnant in the early part of the year, partly, no doubt, due to strikes, but now there is evidence of a significant rise in consumer spending and of rising activity generally. After a reference to rising costs, the right hon. Gentleman said: … it follows that it would be wrong to take any steps likely to increase further pressure of demand."—[OFFICIAL REPORT, 4th November, 1970; Vol. 805, c. 1088–9.] That was on 4th November. Unemployment was then 576,000. In February we had a further debate. The Chancellor then resisted any measures in advance of his Budget. Unemployment was then 623,000. The Budget came at the end of March. He then phased his measures in the Budget, as I have said before, on an almost incredibly foolish sense of timing. Unemployment was then 656,000. As rapid as possible a stimulation was clearly necessary, as well as the sharpest possible impact on prices.

Purchase tax, if he had money to give away, was the obvious weapon. Instead, he chose a cut in selective employment tax, still not in operation but with all the indications pointing more clearly than ever to a derisory effect upon prices. Let the Chancellor look at the survey in the News of the World yesterday. If he does not like the News of the World, let him look at the survey in the Daily Telegraph last Friday, which shows exactly the same thing, exactly what we predicted at the end of April and in the debates since—that the effect on prices would be totally negligible and of a totally different order from that which could have been achieved for £290 million by a cut in purchase tax.

None of the right hon. Gentleman's other Budget measures are yet in operation either—neither the income tax remissions nor the pension increase. Of course, it is difficult to judge exactly what effect in combination with other factors they will eventually have on the economy. It is difficult to judge exactly how much quick reflation should be added to the slow reflation which, in the Budget, because he cared far more about the pursuit of fiscal popularity than about the health of the economy, he deliberately chose. It is a dilemma entirely of the right hon. Gentleman's own making, and in the meantime he has allowed seasonally adjusted unemployment to rise to 741,000. Yet last week he was still using the same "prosperity-round-the-corner" remarks that we have had in every economic debate of this Parliament.

Mr. Peter Tapsell (Horncastle)

Is the right hon. Gentleman quite certain that if the trend of his remarks were implemented he would not just be adding demand inflation to existing cost inflation?

Mr. Jenkins

In a situation in which the level of unemployment is at an un-precedentedly high level since the war, in which the underlying trend is still continuing to rise, in which capital investment intentions are catastrophically low, in which the general opinion is that there is unused capacity in the economy which may well be as great as 20 per cent., we are miles off demand inflation. The answer is, therefore, that I would not add demand inflation to cost inflation, and that I believe that the Chancellor is seeing the wrong danger and that, without any impact on cost inflation, he is consistently running the economy far below the level at which it should be run.

There is the separate point as to what effect the measures taken now, in two weeks or whenever the right hon. Gentleman plucks up the courage to take them, will have in combination with the Budget measures. That is a judgment which he has to make. But the fact that he has that difficult confluence to arrive at is a dilemma of his own creation entirely, because, for reasons of fiscal dogma, he chose to design his Budget so thoroughly badly.

Before the hon. Member for Horncastle (Mr. Tapsell) put a point to me which I was glad to endeavour to answer, I was pointing out that the Chancellor is still sounding the same note as he has sounded in every economic debate of this Parliament— "Wait a bit. It is coming. It is in the pipeline. It is just around the corner." Speaking of the Chancellor on Thursday, the Financial Times reported: He emphasised that although the economy had been very sluggish during the past six months, there were now signs of a revival of consumer demand which he would expect to gather strength; etc., etc., That is exactly what we have heard in every debate and in every major statement. We have heard it all too often before and no doubt we shall be hearing it again today, and again when unemployment reaches 800,000 or 900,000 or one million. It will all be buttressed, as it has been throughout the past year, with talk about expansion being impossible until excessive cost inflation has been squeezed out of the economy.

That has never been a convincing policy, and I believe that it is not so today. There is not the beginning of an approach to evidence that a more rapid growth rate in the past year would have produced a faster increase in wage rates. It is possible, perhaps even likely, that earnings might have gone up somewhat more, but that would have been because of overtime and factors of that sort which would not of themselves have been undesirable. From the competitive point of view, it is unit costs which count, and I believe that with faster growth they would have been lower. With a fuller use of capacity at home, we would have sold more and not fewer exports, and there would thus have been a further and wholly benevolent stimulus from this quarter. Investment would be much healthier. There would have been some import price to pay, but that could have been afforded and would have been worth while.

I do not under-estimate the difficulties and responsibilities of the Chancellor of the Exchequer. I remember too vividly the responsibility of trying to get the balance of payments securely right and to save a further change in the exchange rate after the devaluation of 1967. I am sure that it was right, having moved with great travail to a new fixed exchange rate, to show that we could hold it there and put our balance of payments firmly into surplus. I believe that there are different circumstances in which too much importance can be attached to the parity of the pound. But that was not true in the aftermath of 1967. Had we failed then—and at times the margin was narrow—I would have borne and deserved a heavy share of the responsibility. The judgment, rightly, would have been harsh. But the judgment upon the present Chancellor of the Exchequer will be even harsher if, when his reign is looked back upon, it is seen that he wasted all the almost unique opportunities to strengthen and expand our economy which had been presented by the balance of payments surplus of the past two years.

Above all, we need a period of self-confident growth. We have waited long enough for it. We need desperately a new and higher level of capital equipment in our industry. We need a spirit of confidence on both sides of industry and the feeling that men can work for their country without working themselves out of their jobs. Yet, in pursuit of the absurd dogmas of this Government, the right hon. Gentleman is proceeding in exactly the opposite direction. He will never get investment up on the basis of recession. He will never cure inflation by squeezing out wage claims while prices are allowed, indeed encouraged, to roar ahead.

The right hon. Gentleman says that he has never rejected a voluntary incomes policy in principle. I should hope not. But his every action has made it more difficult to achieve one. He has an important meeting of the National Economic Development Council on 7th July. Let him use that occasion to begin a new approach. It will mean jettisoning a lot of useless Conservative luggage. But it must be done if the present dismal and hopeless slide is to be stopped. He should offer a clear programme for effective growth, a boost to capital investment, a substantial reduction in unemployment, and a willingness to control prices. In return, he should ask for a new and equally effective restraint on wage claims—

Mr. J. Bruce-Gardyne (South Angus)

What answer will he get?

Mr. Jenkins

If the hon. Gentleman does not know, a number of his right hon. and hon. Friends who make less noise in this House do. They know that, unless and until this strategy is adopted, the country will never achieve the prospect of getting out of its economic difficulties. There are many right hon. and hon. Gentlemen opposite who know that perfectly well.

Mr. Peter Hordern (Horsham)

In that case, perhaps the right hon. Gentleman will remind the House of the prices and incomes strategy that he and his Government abandoned six months before the General Election.

Mr. Jenkins

That was a prices and incomes strategy which certainly was not perfect—[Interruption.] No strategy is. Before right hon. and hon. Gentlemen opposite laugh too much, let me remind them that it was a strategy which, in the aftermath of devaluation, when we were endeavouring to hold consumption steady and when we had to absorb the inflationary effects of a 14 per cent. devaluation, held prices at half the rate of increase that we have seen under this Government.

If the Chancellor of the Exchequer listens to the more serious commentators and to the more serious thinkers on his own back benches rather than to those who interrupt too quickly, he will yet retrieve the position. If he does not, above all he will be the Chancellor of the Exchequer of missed opportunities, the man who fiddled with taxation while the country slipped further down into deeper and more depressing recession.

I wanted, too, to say a word to the Government in general and to the Prime Minister in particular, if he had honoured us with his presence—

The Chancellor of the Exchequer (Mr. Anthony Barber)

The House should know that my right hon. Friend is at present with the Italian Prime Minister.

Mr. Jenkins

I understand that. But I shall say a word to the Prime Minister, if I may, vicarious though it must be. He and the Government are engaged at present in a major enterprise to take Britain into Europe. As the House knows, I agree with that. It is a difficult enterprise of immense importance to the future of the country. But it involves a venture into what many regard as the unknown. It involves the willingness to face new challenges and to seize new opportunities. Such a venture can be accepted much more willingly from a basis of confidence. People cannot be frightened into Europe, and I beg the Government not to attempt it. By far the best contribution that they could make would be to remove the sense of apprehension, insecurity and unfairness which at present hangs over far too many people in the country.

Even if the European issue did not exist, the Government's economic policy would still stand condemned. It has produced a year of increasing inflation, mounting unemployment, depressed production and collapsed investment intentions. Above all, it has been a year of betrayed promises and wasted opportunity. The betrayal of promises cannot now be redeemed. They were short-term and specific. That can never be expunged from the record now. But some of the opportunities still remain. They will not do so for much longer. The Government must learn to equate self-respect with results and not with stubbornness. Until they do, their economic record will continue as calamitously as it has begun.

4.40 p.m.

The Chancellor of the Exchequer (Mr. Anthony Barber)

There are obvious advantages in any year in having an economic debate before we rise for the Summer Recess, but this year there are two particular reasons which make it more than usually desirable.

The first is that it is generally agreed that, whatever differences of opinion there may be on the merits of the Budget proposals, they were in many respects, as I think the right hon. Member for Stechford (Mr. Roy Jenkins) would agree, more fundamental than is usually the case, and it is right, therefore, that right hon. and hon. Gentlemen opposite should wish to take stock before we rise.

The second reason that it is right that we should debate these matters before we rise is that, as I am sure the whole House will agree, the economic problems with which we are faced, and which have been dealt with by the right hon. Gentleman, are far more complex than any that we have experienced for many years past.

Before I turn to the wider considerations which have to be taken into account—

Mr. Harold Wilson (Huyton)

The right hon. Gentleman has three times used the phrase that it is desirable to have this debate before the recess. We do not yet know the date of the recess. When I gave notice of this censure Motion the Leader of the House said that there was to be a two-day debate. For some reason, the Government do not seem to have gone on with that. Are they not proposing on their own initiative to have another debate on economic affairs before the recess?

Mr. Barber

The right hon. Gentleman knows perfectly well that this was discussed through the usual channels. Any future debate is also a matter for discussion through the usual channels.

I was saying that before I turn to the wider considerations which have to be taken into account in any assessment of the present position and any consideration of the future, I hope that the House will allow me to make one preliminary personal observation.

I have been a Member of this House for 20 years—[An HON. MEMBER: "Too long."]—and although some hon. Gentlemen opposite may disagree strongly with the policy which I am pursuing, those who come from my part of the country—the West Riding of Yorkshire—and certainly those who know me well, recognise that I am as deeply concerned as they are about the social consequences of the present level of unemployment and the degree of inflation. I am determined to achieve a solution to these problems which is based on firm foundations and which can be sustained.

It would be all too easy to solve our problems in the short term by acceding to those who press for the expedient of a wages and prices freeze, or for the reintroduction of the statutory control of incomes on the lines of that brought in by the previous Administration. Such action would certainly have a shock effect in the short term, as it did last time, but I believe that right hon. and hon. Gentlemen opposite will agree, in the light of their own unhappy experience of such a course of action, that it would really provide no lasting solution. Because I am convinced of that, as they have been by their own experience when in office, I have ruled out a reversion to those policies, which were unfair and unworkable when tried by the previous Administration. They played right into the hands of the militants. When those policies were finally abandoned, they left behind the wage explosion which is at the root of our difficulties today.

We have to find a lasting solution to those problems. So often in the past, as the right hon. Member for Stechford and my other predecessors in both parties would be the first to recognise, we have found a degree of success in solving one problem, only to find that, by our very solution, we have created other equally serious difficulties. For instance, as the right hon. Gentleman indicated, it is a fact that throughout their years in office the previous Administration struggled to produce a surplus on the balance of payments, only to find at the end of their period of office that what they had achieved had been obtained by policies of restriction and high taxation which themselves set back our economic growth and sowed the seeds of the present inflation and unemployment.

I am sure that the right hon. Member for Stechford will be the first to agree how difficult it is at any time to assess the likely trend of output and the future strength of demand in the economy. At present it is more difficult than usual, for a number of reasons which I should like to put before the House.

In the first place, the flow of economic information this year has been badly distorted by the postal strike, not only whilst it was in progress, but subsequently. The House knows, for example, how this has played havoc with the monthly movement of the trade figures, making it almost impossible to discern the underlying trend. It is only now that we are beginning to get figures free from distortion. The figures for May were probably the first without distortion. The right hon. Gentleman will agree—indeed, he said it many times when Chancellor—that it is dangerous to deduce trends from information for one month.

Another example is the Index of Industrial Production. The provisional monthly figures were again severely affected for the reason I mentioned concerning the trade figures. Six weeks ago it was thought that industrial production had fallen substantially in the first quarter of this year. Now, with fuller information, as the right hon. Gentleman knows, there appears to have been virtually no change.

Taking account of all the information, which was the point raised by the right hon. Gentleman, certainly it is true that there was a in total national output, including non-industrial production, in the early months of this year. But the important question is how far this was a temporary check, how far it may be made good later, and whether and how far it means that the level of activity is now, and will continue to be, lower than I was assuming at the time of the Budget. The House will recall—certainly the right hon. Gentleman does—that in the Budget Statement I was then estimating a fall in output between the second half of last year and the first half of this year. I should like to explain some of the considerations which have to be assessed in forming a serious judgment on these matters. First, I will take consumers' expenditure, to which the right hon. Gentleman referred. A considerable part of the fall in the first quarter can be accounted for by reduced sales of clothing in mail order—this has now become quite clear—because of the postal strike, by reduced purchases of cars because of the Ford strike, and also by reduced consumption of tobacco because of the report on "Smoking and Health". These figures, which have since come out, are clear. The question is how far the fall in consumers' expenditure for these reasons, which was accompanied by a high rate of savings, will be made up later.

Looking at the position of Stockbuilding, which throughout the years successive Chancellors have found a very volatile element of demand, the rate of stock-building—

Mr. Gerald Kaufman (Manchester, Ardwick)

I believe that the Chancellor of the Exchequer has, by mistake, got hold of one of the speeches of the Secretary of State for Trade and Industry.

Mr. Barber

I was dealing seriously with some of the factors which have to be taken into account by any Chancellor of the Exchequer who wishes to make other than a purely debating speech.

I was referring to Stockbuilding. As the right hon. Member for Stechford knows—indeed, as any former Chancellor knows—this is a very volatile element of demand. The rate of Stockbuilding appears to have fallen sharply in the first quarter, particularly in retailing, where there was a large reduction in stocks, but it is clear to everyone that this cannot go on indefinitely, and therefore the question here is how far, and how soon, there will be a levelling off and a rebuilding of stocks.

The right hon. Gentleman referred in particular to private industrial investment, and he was right to do so, but here again, if one is trying to make a realistic assessment of the likely trend, I thould point out—and those who are seriously concerned with these matters will see the significance of this—that although there was a substantial fall in the first quarter—the level of investment in that quarter was very much in line with my expectation at the time of the Budget. I am sure that the right hon. Gentleman will agree with that.

I have mentioned those few examples to illustrate the particular difficulties that are involved in forming an estimate at this time, and that is why I have said that the comprehensive review, which always takes place at this time of the year—it did so throughout the years of the Labour Government, and it is doing so this year—will be of more than usual significance.

The Opposition, as is their right, and I make no complaint, have chosen to debate these matters in the full knowledge that this comprehensive review is not normally complete until July. The right hon. Gentleman knew that when he chose the time for this debate. It follows, therefore, that what I have to say about the economy must, inevitably, be subject to that new forecast. But with that qualification, I think it right that I should give the House some facts about the present situation in order to correct what I might call the rather over-optimistic view expressed by the right hon. Member for Stechford.

Whatever the underlying situation in the early months of this year, I am sure that the right hon. Gentleman, wishing to be fair, would agree that there are some distinct signs of an improvement since then in a variety of fields. Industrial production recovered in April, so did the volume of retail sales. New car registrations, which had been depressed by the Ford strike in March and April, rose markedly in May on a seasonally adjusted basis, and have probably been rising further in June.

There has been a remarkable improvement in private house-building. In the first four months of this year starts have been at a level more than one-quarter above that of a year ago and, as the House knows, the building societies are reporting a strong demand for mortgages. In fact, in the first five months of this year their new commitments to advances were 37 per cent. higher than a year earlier.

On the question of exports, the right hon. Gentleman will have seen from the information produced by the Department of Trade and Industry that the volume of exports may well be picking up again. Certainly the volume of world trade in manufactures, which had been relatively sluggish since last summer, seems to be expanding more rapidly, with increasing opportunities for our exports, and these opportunities are the greater as a result of the recent currency changes in Europe.

On the basic problem of unemployment, I have repeatedly said that, taking account of the Budget measures, I expected that the rate of increase in unemployment would, after a time, slow down and then stop. That is what I said, and certainly that has been happening, as is apparent from the figures that have been published in recent months.

Also, the House will know that the number of adult vacancies, which had been falling since last autumn and which in the past, I think it is generally agreed, has often signalled changes in the trend of unemployment a month or so in advance, rose between April and May, and again between May and June. It is true that the rise in those two months was not great, but it was a welcome change from the fall which had continued since last autumn.

Mr. Peter Shore (Stepney)

I thank the right hon. Gentleman for his courtesy in giving way. Is he really satisfied with the account that he has given the House of the trends in unemployment? Is he satisfied that it is enough for him to say that the rate of increase appears to be diminishing slightly when he is talking about a level of unemployment of 800,000 seasonally adjusted, and the highest level that we have had since the war?

Mr. Barber

As I am sure the right hon. Gentleman will have learned from his experience at the Department of Economic Affairs, in making any assessment about future action, what one has to consider is the likely trend for the future. The point I was making was that I had said that I expected the Budget measures to result in certain trends, and that that has been borne out by the figures. I shall give the House the figures if hon. Members desire them, but I did not want to weary the House with them, because I have a great deal more to say.

In his opening remarks, the right hon. Member for Stechford said that there were great difficulties for any Chancellor of the Exchequer in hazarding a forecast about the future, but I think that few objective observers would dispute that the more recent developments to which I have referred provide some indication that the slow-down in activity has come to an end, and one very important factor which should be borne in mind in this connection is that the full effects of the increase in child allowances, as well as the cut in S.E.T. and the increase in old-age pensions and other National Insurance benefits, are still to come. The first two measures, involving a reduction in tax payments of about £450 million a year will begin to take full effect early next month, and the increase in pensions and other benefits in September. I should remind the House that those National Insurance benefits will outweigh the increase in contributions by a substantial margin.

Mr. Roy Jenkins

Would the right hon. Gentleman tell us whether that adds up—I think it must, as I endeavour to follow it—to the fact that the right hon. Gentleman believes that we are at present, broadly speaking, on the Budget course, and that the increase in G.D.P. will be as forecast in the Budget Statement?

Mr. Barber

On the information that I have, I believe that the increase in G.D.P. between the first half of this year and the first half of next year of 3 per cent., which was what I expected at the time of the Budget, will prove to be the case, but the right hon. Gentleman, being fair about these matters, will be the first to admit that the first major review assessment and forecasting exercise which takes place after a Budget is completed in the middle of July, and therefore it is obvious that any figures, or any information, that I give about the likely course for the rest of the year are bound to be subject to the outcome of that review, as it was during the time when the right hon. Gentleman was Chancellor of the Exchequer.

I was talking about the full effects of the increase in child allowances, the cut in S.E.T. and the increase in old-age pensions that are still to come, and there are other facts to be considered, such as the decision, announced by my right hon. Friend last week, to spend an extra £46 million for home improvement grants in development and intermediate areas over the next two years.

One of the remarkable developments in recent months has been the upsurge in personal savings. In the past three months the amount of National Savings outstanding has risen by £140 million, compared with only £18 million in the same period last year, and the most recent figures of all, those for May, show that net receipts were the best since January, 1963. As the House knows, there has also been a considerable increase in building society shares and deposits. The total net amount invested in National Savings, building societies and unit trusts has risen by about £550 million in the past three months, as against just over £300 million in the same period last year. Obviously I very much hope that that trend will continue, but in making any forecast of the level of future demand it should be borne in mind that a difference of only 1 per cent. in the personal savings ratio now equals about £350 million a year on consumers' expenditure. Here again the trend of personal savings is a factor of considerable importance in any assessment of the future course of demand.

Mr. Tom Ellis (Wrexham)

Is the right hon. Gentleman not aware that the thing we are most concerned about in the economy is the state of liquidity? Therefore, is not what he is saying about savings in contradistinction to what the situation should be?

Mr. Barber

It was precisely because this has such an important bearing on the likely course of demand in the future that I gave the very large figure which is represented by only 1 per cent. change in the present savings ratio. This is why it is a matter of considerable significance. Clearly, any decision by a Chancellor of the Exchequer whether or not to take action on demand must depend not only on a review of the current situation, but on the best assessment which can be made of the likely course of the economy for a year or so ahead. This is why I have said that until the review is complete, which will be about the middle of next month, I have no intention of committing myself to any particular course; but if I then judge that further action is called for I shall not hestitate to take it. That remains the position and nothing the right hon. Gentleman has said this afternoon has caused me to doubt that my decision was right.

As I said at Question Time in the House the other day, it is folly to chop and change from month to month, but if at any time during the year action is called for, it is not a sign of weakness to take it. It is common sense. But any decision concerning the management of the economy should be taken as a considered act of judgment and, with all due respect to right hon. Gentlemen, not as an instant political reaction to a Motion by the Opposition.

I have so far been talking mainly about the immediate past and the problems involved in making a reliable short-term forecast before the present review is complete. But it is right, when considering these matters, that the House should not lose sight of the longer term structural changes which are in progress, and with which we have been concerned in recent months. Too often in the past we have been dominated by short-term considerations and lurched from crisis to crisis and from expedient to expedient, and have had no time to introduce long-term reforms to make it easier to manage the economy on the basis of a high and sustainable level of employment less liable to short-term fluctuations.

First of course—and the right hon. Gentleman referred to this matter—there is the all-important question of our accession to the European Economic Community. It is my profound hope that the House will in due course accept the terms which have been agreed and that we shall become a member of the E.E.C. on the 1st January, 1973. The new opportunities and the new sense of purpose that this will bring to Britain and to British industry will enable us to achieve a faster rate of economic growth, and so a rate of increase in personal and national prosperity which would otherwise be beyond any reasonable hope of achievement. No one will dispute that, if my conviction is justified and we achieve a significantly faster rate of economic growth together with a fuller use of our resources, we shall be much more likely to succeed in the battle against inflation and unemployment.

The second long-term factor is the reform of industrial relations.

Mr. Dick Taverne (Lincoln)

Before the right hon. Gentleman turns to another point, I understood him to say that if we made full use of our resources we would be in a better position to deal with inflation. Has he not in the past maintained that we could not expand the economy faster and make full use of our resources because we first had to beat inflation?

Mr. Barber

What I have said, and I would have thought that this was common ground, is that if the House approves the terms which have been reported to the House and we join the E.E.C.—this must be a matter of judgment—this will lead to a significantly faster rate of economic growth. This is my belief, and I thought that the hon. and learned Gentleman agreed with me on that matter.

Mr. Taverne

The point I was making, to which I should like an answer, is whether what the right hon. Gentleman has just said is reconcilable with what he maintained throughout the Budget debate, when we were pressing him to reflate, namely, that we could not make full use of our resources because that would prevent our gaining control of cost inflation?

Mr. Barber

What I have said throughout is that the extent to which we can take the sort of action the hon. and learned Gentleman had in mind must depend to some extent on the success we have in the de-escalation of pay settlements. I have said that repeatedly, and I think that the hon. and learned Gentleman agrees with me on that.

I turn to the second major factor which I believe to be of vital importance to industry, namely, the reform of industrial relations. The right hon. Gentleman the Member for Stechford referred to the Bill which is now going through Parliament. When he criticised that Bill in the way he did, he did not do so with very much conviction. The interesting thing is that already, before the Bill has been passed, the firm stand which has been taken by the Government and most of industry during the past year is beginning to show results. [HON. MEMBERS: "Rubbish."] We are now beginning to reverse the impression that has grown up in recent years that militancy always pays. [An HON. MEMBER: "What about strikes?"] Somebody asks, "What about strikes?". This year it is true that we have had some large and long strikes and, consequently, there are high figures for the number of days lost in industrial disputes. But the number of strikes and the number of workers involved has been declining dramatically. Taking the past three months, March. April and May, and comparing them with the same number in previous years, we see that the number of workers involved in industrial stoppages has been the lowest since 1963. And what is more, the number of strikes in the past three months has been lower than in any year since 1953. These are figures of great significance.

I have already explained why I rule out either a wages freeze or a return to the statutory control of wages. What I have never ruled out is voluntary cooperation between the three partners involved—Government, employers and unions. And both the C.B.I. and the T.U.C. know that this has always been my view.

In any judgment about the future course of the economy, one of the crucial factors is the likely trend of earnings. It was so when the right hon. Gentleman was Chancellor of the Exchequer and remains so today. Whatever view hon. and right hon. Gentlemen opposite may take of the policy which we have been pursuing, there can be no doubt that the policy of de-escalation has already checked the rise in the level of pay settlements. We mean to continue with that policy, because the biggest single cause of unemployment and the rise in prices has been the excessive increase in pay settlements. [Interruption.] Anyone who pretends otherwise is simply not facing reality.

If any hon. Gentlemen doubt what I say, let me remind them of the words in the Coalition Government's 1944 White Paper on Employment Policy—a document which is so often quoted, with approval, by hon. Members opposite: If we are to operate with success a policy of maintaining a high and stable level of employment, it will be essential that employers and workers should exercise moderation in wages matters. And, of course, that remains true today. In many cases, settlements which have borne no relation to any conceivable increase in productivity have priced our products out of markets both at home and abroad. They have forced companies to make drastic economies in their use of labour in order to avoid insolvency. And they have forced many companies to cut back their investment plans, on which future employment depends, and this, as we have seen, has caused immediate unemployment in the engineering and construction industries.

The one thing that is absolutely certain is that if the rise in incomes had been related to the increase in productivity the level of unemployment would now be very much lower than it is. And that, of course, is just what the Leader of the Opposition meant when he said that restraint in incomes is our only guarantee against unemployment. There is not an hon. Gentleman opposite who in his heart does not know that the Leader of their own party was 100 per cent. right. They also know that he was right when he said: One man's wage increase is another man's price increase. But those were in the days when he was Prime Minister.

I have said that I am determined to work for a lasting solution to our problems. I remember well what happened when, in 1951, we last took over from a Labour Government. By 1952, after we had been in office for only one year, as now, prices were rising at 7 per cent. a year and unemployment was twice as high as the year before. But we stuck to the policy which we knew to be right, and that policy led to 13 years of rising living standards—[Interruption.]—at a rate the like of which the British people have never experienced either before or since. It will happen again, because we are resolved not to be diverted from the overall strategy on which we have embarked. [Interruption.] The right hon. Gentleman said that he had never denied that this Government inherited a problem as far as prices were concerned. How right he was to admit that, because the game was given away by his right hon. Friend the Member for Coventry, East (Mr. Crossman), who said: The main fact is that we won the 1966 election by choosing the moment of wage inflation before prices had really been felt to rise, and obviously we were seeking to do it again in this election in 1970. For six long years right hon. Gentlemen opposite applied policies of restriction and high taxation, and we are now seeing the inevitable results. The memories of July, 1966, and of all the following years of squeeze and freeze are still too fresh for hon. Gentlemen opposite to pose with conviction as the apostles of growth and expansion.

If hon. Gentlemen opposite do not accept my account of the cause of the wage explosion with which this Government have had to grapple, I will quote from this year's T.U.C. Economic Review: From the third quarter of 1969, wage and salary demands began to be pitched at much higher levels as a response to the very low growth of real earnings attained during the previous years. Later it said: the rise in disposable average earnings for male manual workers can only have been at an average of just over 1 per cent. per annum over those four years. The rise in real disposable income per head, which was 3 per cent a year between 1951 and 1964, was cut to only 1 per cent a year between 1964 and 1970. That was the achievement of hon. Gentlemen opposite—to cut the rise in the standard of living by two-thirds and, according to the T.U.C., to hit hardest of all the lower income groups.

It seems incredible that the right hon. Gentleman should now have the nerve to talk of this Government and the cost of living. On the authority of his own Cabinet colleague, together with the then Prime Minister, they cynically selected the date of the General Election by "choosing the moment of wage inflation before prices had really been felt to rise". The right hon. Gentleman said that nearly everything that we had done had exacerbated the rise in prices. I will remind the House of the contribution of the Labour Government to price stability during their term of office. In one Budget after another they put up taxation, which put up prices. They increased the duty on petrol five times, and that put up the cost of living.

Mr. R. T. Paget (Northampton)

How many times have the Conservatives increased it?

Mr. Barber

We have not increased it at all.

They increased the duty on wines and spirits four times, and that put up the cost of living. They increased the duty on beer three times, and that put up the cost of living. They increased the duty on tobacco three times. They invented selective employment tax, and then increased it twice.

During our period there has been no increase of direct taxation of any kind—[Interruption.]—and if the right hon. Gentleman is talking about Government action exacerbating the rise in prices, he should bear in mind that the increases in direct taxation deliberately imposed by the Labour Government directly increased the retail price index by 7½ per cent. That is the difference between hon. Gentlemen opposite and ourselves.

Already, in this financial year, tax rates have been reduced by £1,000 million. What hon. Gentlemen opposite find so galling is the fact that this Conservative Government are taking the action which they failed to take and which they know to be essential to achieve a period of sustained prosperity. We are taking the necessary action and it is succeeding.

5.16 p.m.

Dr. Edmund Marshall (Goole)

This is the first occasion on which a maiden speech in this House has been delivered by an hon. Member for the Goole constituency. The constituency was created only in 1950 and since then it has been continuously represented by the late George Jeger who, prior to 1950, was the hon. Member for Winchester. The people of the Goole constituency were fortunate when George Jeger moved to them from Winchester, and for 21 years he gave them excellent service as a devoted constituency Member.

I must be one of the few hon. Members of this House who never met George Jeger. However, in recent months I have come to know him posthumously through the high regard for him which is present throughout the constituency. No matter how much he was assailed in the storms of national politics, his dedication to his constituents remained undiminished.

It is my good fortune to have inherited from him a constituency of uncommon geographic and economic variety. It is part of the West Riding of Yorkshire—here I claim a common background with the right hon. Gentleman the Chancellor of the Exchequer—and includes one borough, one urban district, three rural districts, 38 parishes and no fewer than 19 internal drainage areas.

The one borough is the town of Goole itself, proud of its position as the one port of the West Riding. It is more than 50 miles from the sea, yet it is a port for ocean-going vessels from all over the world. Goole stands at the confluence of the inland waterway system of the South Yorkshire area and the basis of its trade from the beginning has been the shipment of coal from the Yorkshire pits.

In recent years there has been a declining demand for coal. We have also had the development of new coal shipment facilities nearer the sea at Imming-ham. This has contributed to a fall in Goole's trade, creating a cloud of uncertainty over the port. Yet there can be no doubt about the wonderful potential which exists because of Goole's position between, on the one hand, the industrial Midlands and the North, and, on the other, Continental Europe and Scandinavia.

This is a potential which will be vastly increased with the coming of the M62 and M18 motorways. Yet the value of these new roads for the town of Goole will not be fully realised until there are also adequate road links within the borough itself, with more modern bridges along the road across the docks, with which many hon. Members may be familiar, and also until we have completed the southern bypass to take commercial traffic away from the town's main street.

Public developments like these all require imaginative planning by Government Departments and by the borough council. Only such public works can invigorate the local economy and provide the extra work which is needed in the town. At present the unemployment rate in the Goole exchange area is 5.4 per cent., well above the national average, and this is despite the daily exodus of some thousands of Goole residents who work away from the town in Hull and Scunthorpe, in Doncaster and in York. Goole urgently needs an economic tonic, and I suggest that this can come only with a large-scale programme of public works in the locality.

At the western end of the constituency is the urban district of Knottingley, a relatively prosperous town famous for its glassware industry and for the massive power stations at Ferrybridge overlooking the Great North Road. Near the town, too, is the modern colliery at Kellingley. The unemployment rate of Knottingley is considerably below the national average yet the town still has urgent economic problems, for the presence of so much industry leaves many environmental problems which local authorities are manfully attempting, as far as they have the power, to tackle. Pollution in the atmosphere, pollution on the spoil heaps, pollution in the river and canal—these are all readily evident at Knottingley, and they exemplify the need for national policies which ensure that our prosperity is not bought at the price of physical dereliction.

The third and most populous part of the constituency is the Thorne rural district, lying to the south of Goole and towards Doncaster. The ancient town of Thorne is a centre of traditional boat building, and the nearby growing community of Hatfield is a residential area for many who work in Doncaster. But elsewhere in the Thorne rural district the economy has been based soundly on the collieries, with Hatfields main pit at Stainforth, and Thorne pit at Moorends.

The economic fortunes of the whole area are inextricably linked with the fortunes of the coalfield, and the closure of Thorne colliery since 1956 has left a great gap in the local economy which is now as wide as ever. On 10th May, 1971, there were in the area of the Thorne employment exchange, 1,124 people registered as unemployed out of a total work force of 9,597. It does not require a mathematician like me to point out that this represents an unemployment percentage three and a half times the national average.

This chronic local situation is something which cannot readily be observed from the statistics put out by the Department of Employment. Those statistics merge Thorne in a travel-to-work area with two other employment areas, one of them the large Doncaster area, so that the weighted average of unemployment gives little indication of the true and severe position at Thorne. But that indication is only too clear in human terms to all those who know the locality well, especially at Moorends, which is a community which was created for the sole purpose of working in Thorne pit. With the closure of that colliery, the community has been left high and dry. I am too young to have lived in the 'thirties when there was mass unemployment, but my experiences of the people at Moorends have shown me in quite clear, dramatic terms the demoralising and wasteful impact of unemployment.

This problem could be solved at once by the reopening of Thorne colliery, where earlier technical difficulties have been solved at great expense. Yet, understandably, the National Coal Board is unable as yet to reopen the colliery in view of the present contracting demand for coal. I suggest to the House that the onus for getting a definite decision on the future of Thorne colliery rests not just with the National Coal Board but with the Department for Trade and Industry in drawing up a fuel policy which fully utilises Britain's indigenous reserves of fuel, and with the Department of Employment in seeking all ways to cut out waste of manpower. So long as there is even the remotest possibility that Thorne pit can reopen, other enterprises which might be attracted to develop in the area are reluctant to do so for fear that the available reservoir of manpower might at some time be drained away underground.

I have dwelt at length on this economic survey of the constituency because the various problems described are precisely those which national economic policies must be designed to tackle. They are problems which to a large extent Goole shares with most of the Yorkshire and Humberside region. They are problems of dereliction and excessive dependence on old industries; problems of lack of growth, because very few of Britain's growing industries are located in the region; problems of under-utilised manpower, because labour-intensive industries are contracting and only capital-intensive industries like electricity generation are expanding rapidly in the locality. All these problems will grow unless there is Government intervention.

Above all, the economic policies which are most suitable for the overheated economy of London and the Midlands are probably the most detrimental for the stagnant economy of Yorkshire. The West Riding, as typified by my constituency, needs a programme of public works such as that associated with the name of Franklin Roosevelt. A New Deal must come to Yorkshire.

I have little hope that traditional British economic policies can solve the problems facing us, for the heart of those policies has been the philosophy of laissez faire, of the freedom of the market place, where each individual is expected to fight for the best terms for himself. This approach can never cure the malaise of unemployment, and it is an insult to expect the unemployed man to thrive in conditions of economic freedom. What is more, so long as we leave it to individuals to fight for the best prices and the lowest costs and the highest wages just for themselves, it is no wonder that the pressure in the economy is all upwards. I believe that inflation such as we are now experiencing is an inevitable consequence of the free rein economy, and that seems to be the objective of present policies.

So long as we attach primary importance to the individual units of society, to the individual trees of the forest, the wood as a whole will remain a disorganised mass and the lesser varieties of plants will be choked underneath.

In our complex modern society there are so many interwoven branches between the individual trees that we cannot rely on the interest of the individual to coincide with what is best for the whole. In my time I have been employed by two of the great international companies and by one of our nationalised industries, and my experience with all of them has indicated the inadequacy of depending upon the interplay of the interests of the individual people involved in order to produce the best effects for the interests of the organisation as a whole. Enlightened self-interest may have been a reasonable doctrine for Edmund Burke in 1795, but is utterly out of touch with the reality of mass society in 1971. Similarly, the theory of the value of competition in a free market is hardly applicable in the modern situation, in which large companies which appear at first sight to be cut-throat rivals are more likely to be collaborators than competitors.

There are two further inadequacies of the free enterprise system which render it incapable of solving the economic problems which I have described. Firstly, there is no provision in the free market for protecting environmental amenities and for combating pollution. Few people will voluntarily pay to repair the damage done to the environment by their industrial activities. Secondly, a free-rein economy in our country takes no account of regional differences and of the need for different economic policies in different parts of the land. So long as we persist in a free market on a nation-wide basis, there will be an economic drift from the poorer to the richer regions.

For all these reasons, I hold little hope that any of the economic problems of the Goole constituency can be tackled by simple adaptations of traditional policies. I have good reason to believe that a majority of my constituents are of like mind. What is necessary is nothing less than a real economic revolution, a phasing-out of the free-rein economy and a move towards community planning. This, for me, is the need for modern socialism in this country, socialism on a Christian basis. Man was not made to fit the mould of economic policies; but economic policies have to be found to increase the happiness and nobility of man. Until we are prepared for such a thorough reorientation of our policies, the basic economic problems which exist in the Goole constituency, throughout Yorkshire and throughout so much of this land will remain.

I have been sent to this House in no doubt that I have come here because the people whom I represent want me to press for a radical solution to all these problems that they face, and I shall seek every possible opportunity of fulfilling that purpose.

5.34 p.m.

Mr. J. Enoch Powell (Wolverhampton, South-West)

I am glad that it falls to me to congratulate the hon. Member for Goole (Dr. Marshall) on his first speech in this House, though I am afraid I have to tell him that most of us find that our first speech in the House was the easiest that we ever tried to make. I do not think that, in retrospect, he will regret having spent so much of his speech in interesting and feeling references to the characteristics of his constituency; for whatever topic we debate here, and at whatever level we debate it, it is the consciousness of that piece of the country that we represent and of the people who sent us here which gives reality and realism to whatever we contribute.

I do not think it can be made a complaint against the Opposition, whatever objection may be taken to the content of the opening speech—and it was a speech remarkably devoid of positive content—that they chose today to concentrate the mind of the House upon inflation. We can so easily, under the force of habit, lose our sense of proportion. If anyone at the General Election a year ago, friend or foe, had predicted 10 per cent. inflation in the year 1970–71, he would have been scoffed at as a dishonest scaremonger. But 10 per cent. inflation is what we have had, and there is a certain danger that we might, from sheer habit, get used to such a rate of inflation and regard it as somewhat less than the serious threat which it represents. It is indeed a phenomenon with which we cannot long live and a question of great urgency. All the more necessary is it that we should endeavour to be precise both about its causes and about the remedies that we have in mind.

There is one fact about the inflation of the last year or so which I believe cannot be disputed. That is that it has been accompanied by an increase in the money supply, or quantity of money, which was fully adequate to finance and to account for the scale of the inflation. My hon. Friend the Minister of State at the Treasury, in a written Answer on 15th June, gave it as his estimate that in the last financial year the increase in the money supply had been about 12 per cent., amply sufficient to cover, to account for, indeed to necessitate, an increase in prices generally, an inflation, of some 10 per cent. Thus the other factor in monetary demand, the joker in the pack, which at various times in the past has caused us so much difficulty—velocity of circulation—is not a factor which can have been in play in the recent past, or be in play now.

There have no doubt been periods when the quantity of money in circulation needed to be multiplied by the effect of accelerated velocity in order to account for, and to make possible, the general rise in prices which was experienced. But it is not such a period through which we have been moving in the last 12 months or so; nor indeed has that been the characteristic of the last five or six years. Throughout the whole of that period the factor of velocity has been neutral, inert and perhaps even slightly negative; for it is possible that there has actually been—I think a reference to this was made earlier in the debate—a slight fall in velocity, which has tempered the effect of the increase in money supply.

So we have one plain and surely very important fact before us: that money supply and not velocity is the immediate cause upon which we must concentrate our attention. From this there follow two rather important deductions. One is that the theory of inheritance to explain our current problem of inflation is very difficult to sustain—so difficult to sustain that I was astonished to hear the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) throw that card away at the beginning of the game. For surely, if the thesis is that pent-up demand long held back is the cause of a surge in prices during a particular period, then we would expect to see that effect carried through by an increase in velocity: surely the demand should accelerate the circulation of the existing money rather than increase its quantity. So it is difficult to reconcile the clear relationship between money supply and inflation in the last 12 months with the theory that in some way the cause was inherited and carried over from a previous period.

Equally difficult is it to reconcile that simple fact with the theory that somehow inflation arises from a fault either in our system of industrial relations or in the manner in which industrial relations are conducted. No doubt there are faults in our system of industrial relations and in the law which governs them. No doubt there are faults in the way in which management and unions conduct their reciprocal relations. But one thing they cannot do is to multiply the supply of money. They can conceivably bring it about that the velocity of money in circulation accelerates; but they are impotent to bring about the increase in quantity which is the most prominent and perhaps the sole causal factor in our present situation.

So we are enjoined to look at this surge in the supply of money in the economy, which has matched the surge of inflation during the last 12 months, and to see where it comes from.

In past years increase in the money supply has been traceable wholly or largely to the financial behaviour of Governments, to the monetisation of debt, to the effect of the ever-persistent preference of Governments for spending over taxing and consequently turning into new money the excess of expenditure over the purchasing power which the Government drew for their purposes from the economy by taxation or by borrowing. I believe there is no evidence that this factor has been at work in the last 12 months. Certainly if it has been at work at all—I imagine my right hon. Friend the Chancellor of the Exchequer would confirm this—the scope for it and its scale must have been extremely small.

About the source of this present surge in the money supply in the economy, however, there is no secret. It comes from the total currency inflow which we have experienced across the exchanges in the last 12 or 18 months. In this, our experience is nothing new or unique. It is an experience which we have shared with other countries which have had a very large balance of payments surplus, against which those other countries have been obliged to protect themselves, simply for the reason that the automatic and necessary consequence of such a large increase in internal domestic money demand must have been a large inflation.

In the first quarter of 1971 the total currency inflow across the exchanges into this country amounted to little short of £1,000 million. That is a rate, if it is grossed up—we are accustomed to do that in this context for purposes of comparison, so as to bring out the scale of the movement—of no less than £4,000 million per annum. It is not difficult to understand the phenomenon of inflation when in a single quarter £1,000 million has been added to domestic monetary demand by the inflow across the exchanges.

I know that two grounds are urged why this factor is alleged not to operate as I have asserted. It is said, first, that this money is wholly or largely lent to the Government, that it is invested in gilt-edged securities, and indeed may be invested in new gilt-edged securities, in "tap" of one form or another; and so, it is said, for this reason it becomes harmless and does not increase the total of demand in the economy.

There is one situation in which that could be true. If the Government were in fact monetising their debt, if they were in the process of creating inflation by spending faster than they were able to borrow from the public, the fact that, instead of printing the difference, they obtained it from the currency inflow across the exchanges, would make the situation no worse. I concede that the effect of the currency inflow would be neutral in those circumstances but only in those circumstances; and they are circumstances which, as I have already said, do not exist at the moment. Otherwise, whether the Government succeed in borrowing the extra money in the economy or whether it is borrowed or spent elsewhere, it is a net addition to the total domestic money supply and to the total domestic money demand.

The second reason which is sometimes given for ignoring this at present decisive factor is that we are told that this huge surplus—a noble Lord does not think that I should call it a surplus; very well, then; let us have the correct expression, this huge total currency flow—is used to repay debt.

This, alas, is a fallacy. If the money were literally being spent to repay debt, if it were, so to speak, being sent back in repayment of debt, there would not be a total currency flow. In fact all that happens is that, as with all surpluses and deficits, an adjustment is made either to assets or liabiliiies on the other side of the exchanges; it is simply a bookkeeping transaction, a bookkeeping entry, by which this huge actual currency inflow is balanced. After all, there is no need to labour this point, because if the mere fact that liabilities outside diminished or that assets outside increased could neutralise the effect of the currency flow, what on earth were the Germans worried about? What on earth were the Dutch worried about, or the Swiss, or any of the other countries which have been plagued by the consequences of what we ourselves are now suffering from?

Mr. Tapsell

I am grateful to my right hon. Friend for giving way so willingly, because this is a subject on which I have heard him speak before and in which I am very interested. I suggest that there is a difference between the German experience and ours in that the Germans did not have short-term debt to repay. When the French had a large hot money inflow and had debt to repay they were able to sterilise it to some extent. I suggest that, to the extent that we are repaying short-term debt, we are sterilising this hot money and it is not contributing to our inflation.

Mr. Powell

My hon. Friend has stated very well the view which I was combating. Whether the Germans were at the time of their large surplus reducing—in terms of bookkeeping—an outstanding liability or increasing a credit, the effect in either case was that it did not alter the domestic consequences of the total inflow of currency.

There is a strong dislike—and in a sense, if he will forgive me, my hon. Friend has exemplified this—a pervasive dislike, for accepting the importance of money supply and of the balance of payments in this whole question of inflation. It is an interesting psychological speculation why this should be so. One would have supposed that an argument which produced a mechanical instead of a moral cause for something from the consequences of which we are all suffering, that a proposition which was calculated to defuse inter-class and inter-party strife and rivalry, would be rather welcomed uncritically than over-critically examined. However, perhaps it is only human that we should wish to cling to our customary forms of thought and argument, particularly those which supply us with handy material for throwing at our political opponents, and at those whom we like to regard as being somehow on the other side.

However, the moment of truth is approaching in this matter of the relationship between inflation and the consequences of a fixed exchange rate in producing either surpluses or deficits on the balance of payments. For over a year now the £ sterling has been floating in relation to the Canadian dollar. Perhaps we can laugh that off; but since my right hon. Friend's Budget at the end of March something much more important has happened: the £ sterling has been floating in relation to one of the main currencies of the world, the German mark. I have not noticed that the air has been filled with the complaints of those who have discovered that a floating rate rendered it impossible to conduct either financial or commercial relations with the partner country. So far as one knows, everything has been going on perfectly smoothly, exactly as before, in the financial and trading relations between this country and West Germany, or for that matter Holland, whose guilder has been floating. Nor is there any sign of common sense being soon abandoned by either of these countries.

It is coming, "for a' that an' a' that"—recognition that a deficit or a surplus on the balance of payments of a country is a monetary evil, and that particularly a large surplus is a monetary evil because it operates as a direct cause of domestic inflation. I again appeal to my right hon. Friends to reconsider this whole question of exchange rates and inflation and, if I may put it this way, to align themselves from now on with those countries which have set themselves free from at any rate one of the potential causes of domestic inflation. I emphasise that I am not saying that there is no other cause. Of course I am not saying that if we banish this one no others can exist or come into existence. What I do assert is that manifestly at the present time this cause is overwhelmingly, if not solely, the cause of the inflation we are experiencing and that we ought not to be afraid to recognise it and deal with it.

Mr. Ian Lloyd (Portsmouth, Langstone)

Before my right hon. Friend leaves this extremely intriguing analysis, could he suggest to the House why it is that an inflation no less damaging, no less serious than that pervading this country, has continued and co-existed in the United Staes over the last 18 months with a massive balance of payments deficit while a similar inflation co-existed in this country with a massive balance of payments deficit several years ago?

Mr. Powell

This is not very difficult, especially as I have been careful to state that an inflow of currency from outside is not the sole cause, the only available means, of inflating the internal money supply. It is by no means surprising that a country like the United States, which is engaged in a disastrous war and which is suffering, as one of the many consequences, the inflation of its currency as part of the means of paying for the war, exhibits the phenomena of inflation despite the deflationary effect of running a balance of payments deficit. Just because I say that this is a cause of inflation and is the one operative in this country now, I am not denying that other causes are possible, or that they are operative elsewhere, or that they have been operative in the past.

With that appeal to my right hon. Friends to look at this whole question again, as other Governments have been forced to do, I want to pass to the other matter to which this censure Motion refers, unemployment. Here again, if anyone a year ago had prophesied not just that there would be 10 per cent. inflation or just that there would be a rise of unemployment to three-quarters of a million seasonally adjusted, but that both things would have happened together, he would have been laughed at as an economic ignoramus. In fact, we have enjoyed this paradoxical experience in the last twelve months.

Mr. John Hall (Wycombe)

My right hon. Friend speaks of anyone who might have prophesied that we would have three-quarters of a million unemployed by mid-summer 1971. I plead guilty to being a political and economic ignoramus because in October, 1969, I prophesied just such a thing.

Mr. Powell

I am sorry; my hon. Friend who is normally very attentive, nodded off for a moment. I did not say that anyone who had prophesied that there would be three-quarters of a million unemployed would have been an economic ignoramus. What I said was that any person who prophesied simultaneously both roaring inflation at 10 per cent. and a rise of unemployment to three-quarters of a million would—wrongly as events prove—have been laughed at as an economic ignoramus. I must admit I was hoping that when my hon. Friend rose he might be able to claim the prize of having actually done that a year ago, and I am disappointed on his account that he can not.

This paradox has knocked away the sub-structure from almost the whole of our vocabulary, let alone our thinking, on the question of unemployment. We see this when we notice hon. and right hon. Gentlemen opposite still talking in terms which are clearly inapplicable to the present situation. The right hon. Member for Birmingham, Stechford—and I am sorry to have to refer to him in his absence—was constantly calling for reflation. But there is no meaning in calling for reflation in the middle of what he called "roaring inflation". What does he want—another 2 per cent.? Does he want 12 per cent. inflation? Is he saying that 12 per cent. instead of 10 per cent. inflation would do the trick? If 10 per cent. inflation is consistent with three-quarters of a million unemployed, then it is not for lack of inflation or of monetary demand in the economy, nor for lack of money supply matching the rate of increase of prices and wages, that we are suffering from unemployment. It is not merely thoughtlessness, it is a stupid abuse of language, to talk about "reflation" when face to face with those facts.

Instead of replaying records long obsolete we are called upon to address our minds to what may be the actual causes of this phenomenon of three-quarters of a million unemployed. It is a subject upon which no hon. Member dare be dogmatic, yet a subject upon which we have the duty to the best of our ability to state our opinion. I do so myself. It is that this unemployment is structural unemployment, that it is the mark of a big shift and change in the pattern of British employment and British industry, a shift and a change not primarily brought about by the specific acts of Government, though a number of the specific acts of Government have highlighted and precipitated it. When the Government took the decisions they have taken on Rolls-Royce, Upper Clyde Shipbuilders, the Mersey docks and harbours and half a dozen other cases, they were not altering the course of economic events; they were saying to the country, in the most potent form, in actions not words, "The facts have changed. You cannot deny them. You cannot paper them over by continuing to use public money to sustain operations and to sustain management which misuses resources and applies them to bring about a loss and not a profit".

But such cases make up only a part of the change in pattern which has taken place. We do not need to look to areas where the Government have had responsibility in the past through the interposition of public money. All around we can see it. I see it in my own constituency, in my own area, changes of process and method, somehow all seeming to come together, and bringing about a very large change in the pattern of British industry and British employment.

I do not know whether that analysis is right, though in my judgment it is one which fits all the facts we have. If it is right, I say this to my right hon. Friend—and I know that what I have to say will fall upon receptive ears— "It is no use, if that is so, trying to back-track; it is no use, if that is so, saying, ' Well, let's start pretending again. Let's start again using money raised from the taxpayer to sustain and preserve an old pattern which is in any case breaking down '."

Mr. Norman Buchan (Renfrew, West)

The right hon. Gentleman's argument is based on two fallacies. The first was on the semantics of the case for reflation while there is inflation. The whole of his argument went at that point. The second was his reference to structural changes causing unemployment. He gave the example of Upper Clyde, but the structural change had taken place. Employment was continuing at that level. Productivity was going up at that level. The trouble was the old-fashioned concept the right hon. Gentleman maintains of profitability at a certain point of time. That was what caused the trouble.

Mr. Powell

The trouble was that the structural change had taken place but was still being desperately concealed, that the pattern of work, of production, on the Upper Clyde for years past had ceased to correspond with the facts and demands of the real world, but that this had been suppressed year after year by the injection of public money. In a sense it is true to say that the tragedy of Upper Clyde did not happen last month; last month was when the tragedy of Upper Clyde ended, by the realities being brought out into the open.

Mr. Dan Jones (Burnley)

Does the same apply to Rolls-Royce?

Mr. Powell

I have said so in this House. I have made it clear that I believe that British industry must be ready to stand the test of competition and of showing that it is using manpower and resources not to make a loss but to make a gain—I need not call it profit, if some hon. Members dislike the word. Let us call it simply "plus" instead of "minus"; let us speak of creating a plus instead of creating a minus.

If the analysis I have given is correct, or if it is only partially correct, it is no good suddenly back-tracking, pausing, hesitating, returning upon our footsteps, and I am sure that the present Government will not do that. On the contrary, we must go forward with still more determination upon the same course, because the only safety, the only security for employment and for a high level of employment, is to be doing those things which the world at large wants, and to be doing them in the way in which the world at large wants them done.

It is in the ability to adapt itself, flexibly and over and over again, to a changing environment, and not to do so by fits and starts, held up and held back by Government action, that safety lies for British industry and for the level of British employment. If we are witnessing a structural change, the answer is to see that the structure adapts itself continuously and sensitively to a world which has already changed around it.

So I offer two exhortations to my right hon. Friend. The first is that he and the Government should look again at the factor of money supply and exchange rates in relation to the phenomenon of inflation, and that they should separate that phenomenon from the very different, real phenomenon of unemployment. As to unemployment, let them have faith in the fact that only a British industry which is able continuously and constantly to adapt itself to the needs of the actual world, inside and outside this country, is a British industry which will give the people of Britain what they have a right to expect.

6.7 p.m.

Mr. Peter Shore (Stepney)

I, too, open by offering my most sincere congratulations to my hon. Friend the Member for Goole (Dr. Marshall) on his maiden speech. If I may use his own botanical analogy, he will find in the hothouse of the House of Commons that his own plant, if we are to judge by the form he showed this afternoon, will somehow thrive and prosper even in the most difficult conditions that he may expect to find here in the years ahead. We look forward to hearing him in the future.

My hon. Friend was absolutely right when he said that Goole, like many other parts of the country, was in need of an economic tonic. As he will be the first to recognise, although in a maiden speech one does not claim these things, that is precisely the kind of economic tonic which made sure of the size of his majority at his recent by-election, and which will in time make sure that we get a change of national policy and a change of Government.

The right hon. Member for Wolverhampton, South-West (Mr. Powell) has been tantalising in one sense. He offered an analysis of our problems entirely different from the analyses presented by the Government Front Bench; and also very different from the points made on this side. I am reluctant to pursue him down the by-ways and highways of his thought. The first reason is that he has presented a rather intricate analysis which I want to study carefully. Second, if I did so I think that I should take up most of my time pursuing him and trying to expose his errors rather than devoting myself to dealing with the present situation and the Government's lamentable failure to produce policies for dealing with the subject of this censure debate; the growth of unemployment and the continuing increase in prices.

However, I will allow myself one comment on what the right hon. Gentleman said. He will have to be rather more convincing than he was this afternoon when he was suggesting that there was no distinction between what we have come in the past to recognise as demand inflation and cost inflation. If I understood him correctly, he said that as we had an unprecedented increase in prices, due, as was presented to us, to a kind of chasing upward spiral of prices incomes and costs, it was inevitable that there could not be a problem of shortage of effective demand in the economy as a whole.

I find it perfectly reasonable to visualise—and in recent years we have actually experienced such situations—a situation in which there is a continuing measure of cost inflation coexistent with either excessive demand inflation or inadequate demand, which will be reflected in the level of output of the economy as a whole. The only thing which may be exceptional in recent circumstances is the rate of increase of the cost inflation associated with an unparalleled lack of effective demand in the economy as a whole. It may be paradoxical that these two exist together and it may be difficult intellectually to show how they can simultaneously exist, but in the real world it is part of our experience that they have existed and are coexisting today. I do not think that we should be quite as puzzled, although we are trying to find a simple answer to intellectual problems in terms of policy as the right hon. Gentleman suggested.

Nor would I accept that the major cause of cost inflation in Britain today is the increase in the money supply due to the surplus that we are running on the balance of payments. There are several aspects to this subject of the surplus and I want to come later to one of them, in order to try to ascertain what is our genuine balance of payments surplus; that is, our current account in visible and invisible trade with the rest of the world. We must get this clear, because it is germane to the whole subject of demand management in the economy.

The other component in the inflow of money is the large currency movements which have taken place on an unusual scale and which have affected not only this but other countries in the last two or three years. If this were the main problem, it would not follow automatically that what the right hon. Gentleman has argued as the solution would be the right one—he mentioned floating the currency as one possible way in which to deal with this situation. It may be one way, but one must ask first why such large amounts of hot money have flowed into Britain in the past six to nine months. For example, one obvious factor has been the differentially high interest rate which we have maintained here and which has been way above those prevailing in other countries, although we have made adjustments fairly recently. This may well prove to be a more important device for checking the inflow than some of the other devices which have been suggested.

With that I turn to the facts of the present situation which have now been generally agreed. The most striking facts are the coming together in a simultaneous experience of a record increase in prices during the year, not just an increase of one year over another, but a record continuing increase, worse than in any year which one can remember, with what may be a record fall in industrial investment. Investment is already dipping down and the latest figures certainly suggest that the dip may lead to a prolonged and very deep fall in the level of industrial investment.

Thirdly, we have record figures of the number of people out of work and an almost record low figure of job vacancies in relation to the number of people out of work. The actual level of unemployment is always something which one should take very seriously. There is no question of pretending that it is not a crucial indicator.

A second and startling indicator is the relationship of the number out of work to the number of jobs vacant and available. If the country were divided into broadly three regions, the southern region would have a ratio of men out of work to jobs available of about two or three to one; in the middle region, which would include Wales, the figure would come out at four or five to one, in the northern region and Scotland it would be between five and seven to one. These are appalling figures. Over the country as a whole, it is four or five to one people out of work to jobs available.

These are the three first prizes, if hon. Gentlemen opposite wish to consider them such: the first prize for record price rises, the first prize for record unemployment figures, the first prize for the greatest fall in investment.

Yet we have this extraordinary coincidence of a record balance of payments surplus. This is the outstanding paradox on which we have all commented and on which we will continue to comment until this matter is cleared up. How did it come about that we could have these things coming together as they did?

In the first phase of the Government one wondered whether this was simply a matter of the uncertainties of judgment of a new Government with perhaps the inevitable difficulty in forecasts and the change which, unhappily, took place at the Treasury. That may have been a reason for firm judgments being difficult to make in the autumn of last year, but as time has gone on the same facts have continued to be associated and there has been no obvious explanation of the purpose, motives and theme of the Government's policy.

What shook me and my right hon. Friends most in the Government's economic policy during the past year was the revelation of their thinking in the economic forecasts accompanying the Budget. There was issued the Government's own estimate of effective demand in the economy as a whole, leading to a growth in output of just about the level of the growth in productive potential, taking the first half-year over the half-year of a year ago. That meant in effect that there would be no increase in demand in the economy as a whole and, therefore, that the level of unemployment would not be reduced. The general expectation was that between then and the end of the coming year unemployment would rise.

Certainly what has happened since the Budget debate has not given us any reason to change our view that unemployment would go on rising, and there is nothing the Government have set in train which is likely to reduce it between now and a year or more ahead. Most of us read the forecast of the National Institute of a few weeks ago. I note its estimate that unemployment will continue to rise through 1971 and 1972 with a level-ling-off towards the latter part of the second year. It also forecast a falling off in investment.

There is not a great deal of disagreement about the facts as we have them now or, in spite of the Chancellor's heavy weathering about waiting for short-term forecasts, about the actual outlook for the next year or so. It is because we know broadly the picture ahead that the puzzle about what is the Government's policy and what is the real constraint and restraint in their policy remains unsolved.

I should like to ask a few questions which I hope the Minister will seriously consider and answer when he winds up. Is the balance of payments surplus forecast for 1972 and 1973, and perhaps even beyond, the main restraint and constraint on the increase in output and increase in effective demand in the economy now? Is this what is in fact restraining that measure of reflation, of effective demand, which my right hon. Friends believe to be necessary now? What is the Minister's picture of the balance of payments surplus during the coming year and the year ahead?

Last year there was an extraordinary improvement in our balance of payments, but I think we all recognise that the surplus was swollen by many factors, not least that the level of output which we hoped for in 1970 did not materialise. The balance of payments surplus, therefore, was swollen by our relatively low growth rate in 1970. Taking account of that—the Minister must know, he has the estimates—what is his view about the size of our surplus this year? Obviously, it will not be the £600 million of last year, but does the Minister agree or disagree with the National Institute's forecast of a £300 million surplus for this year? I realise that he cannot be pinned too hard to a particular figure, but is this roughly the figure he has in mind?

If this is his expectation of the size of our surplus for this year, looking ahead, what is constraining the Government? Is it the knowledge that they have to repay debt over the next three years at the rate of £300 million a year? If it is, looking only slightly further ahead to 1973, how does the right hon. Gentleman's picture of the economic effects of entering the European Economic Community affect his estimate of the balance of payments from 1973 onwards? This is a very relevant consideration. After all, we have been talking in this debate not only about unemployment as we are experiencing it now and price increases as we have experienced them so far, but also about the future. As far as I can tell—and I do not think the Minister would disagree—we shall certainly get higher prices if we go into the E.E.C., but we want to know whether we shall also get higher unemployment.

I am open to comment and disagreement on this, but it looks to me as though our actual surplus is no greater at present than our actual repayment obligations of debt. Yet on top of this, in 1973, we have to contemplate the beginning of an annual subscription and a deterioration in our balance of trade if we go into the Common Market. My authority for this is the right hon. Gentleman's colleagues. The Chancellor of the Duchy of Lancaster assured us on 16th December, 1970, when he made his statement in the House, that over the first five years the balance of payments would deteriorate by £200 million to £300 million a year by the end of the five-year transitional period. To back that, the Secretary of State for Trade and Industry told a group of Conservative back benchers on 20th May this year: I think that the period of industrial transition which is perhaps four to four and a half years will prove to be a vexatious period. There will not be a marked recession. What there will be is dissatisfaction with the growth of our export trade. This is perfectly consistent with the deterioration of the balance of payments to the extent of £200 million to £300 million building up over the next five years. That is quite a point, but that is not all. If the right hon. Gentleman is able to turn his mind from the problems of industrial relations to the problems of the future of the British economy, he will also know that his colleagues are proposing, under the arrangements that the Chancellor of the Duchy brought back only a few days ago, to start paying across the balance of payments the subscription fee, the absurd contribution which this country has to make of—what is it?—£100 million, in 1973, building up to £200 million by 1977–net figures, I may say. When we add these together, will the right hon. Gentleman tonight confirm or deny that, as a result of going into the Common Market, on the figures that he and his colleagues have already given, we shall pay across the balance of payments in the first five years of the transitional period—the five years when we pay less than we shall later on—no less than £1,500 million to Europe, made up of £750 million direct contributions in the first five years, plus £750 million trade deterioration on the balance of payments, according to the figures and facts presented by his colleagues in the House?

If we can get these matters cleared up, we shall perhaps get the reason why this extraordinary combination which we have never had in any year since the war of record unemployment and a deflated economy co-existing with a record balance of payments surplus has been allowed to go on; not for a few months as a result of statistical errors and miscalculations, but month after month and as it is, planned to go on for at least two to three years.

The country is faced with a grave situation. We cannot look for a quick solution to this problem, unless the right hon. Gentleman can tell us that the position about our surplus on the balance of payments is different from the facts I have presented. Unless he can tell us that, then he has not got the substance in the Treasury to sustain that increase in output, that reflation of the economy, that return to full employment which we want to see in this country.

I have carried my point as far as I need to go. I conclude by putting it to the right hon. Gentleman. Often in the House we make points which are not answered, but I hope that tonight the right hon. Gentleman will answer these points which are so relevant to the whole future of the economy of this country not just for now but over the next five years.

Several Hon. Members rose—

Mr. Speaker

Order. The debate has been going on for nearly two and a half hours and we have just finished the fifth speech. At that rate a great many hon. Members will be disappointed.

6.29 p.m.

Mr. Peter Hordern (Horsham)

I will not attempt to follow the right hon. Member for Stepney (Mr. Shore) too closely, particularly in view of your request, Mr. Speaker, that our speeches should be brief. On a debate which is supposed to be primarily concerned with inflation and unemployment I should find it difficult to follow the right hon. Gentleman since most of his remarks and questions were concerned with the years that follow 1973 and almost all were concerned with the effects of our entry into the E.E.C. and not at all with the debate under discussion.

I must make a few comments on the speech of the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins), who opened the debate. I do not know whether the right hon. Member meant his speech to be as it was, but I suspect that he did. It was certainly a highly concentrated speech in that it dealt only with events since 18th June last year. In that respect, it was rather like the dog that did not bark in the night, because it was not only extremely selective but interesting for what it left out as much as for what it included. What it left out was what he mentioned only in passing, when he said that the Government inherited a problem here. What he was referring to was a state of inflation. Towards the end of his speech, he made great claim to the benefits of a voluntary prices and incomes policy. I asked him what sort of prices and incomes policy of any kind his Government were operating during the six months before the election. They were of course operating no such policy at all. It is curious that it should have such attraction for him now.

It is an extraordinary admission of failure by the Labour Party that their economic policy appears to be based upon some sort of voluntary compact between the trade unions, the employers and the Government in a voluntary prices and incomes policy, when they know very well from their own experience that no such compact could be arrived at. The situation which we find today—inflation and unemployment—has been largely caused by and is the direct result of the statutory prices and incomes policy imposed by the last Government. It was the artificial constraint of the movement of both prices and incomes which has caused the increases of both prices and unemployment. Today it was the right hon. Member for Coventry, East (Mr. Crossman) who blew the gaff. He said in a broadcast last April: The main fact is that we won the 1966 Election by choosing the moment of wage inflation before prices had begun to rise, and obviously we were seeking to do it again in 1970. The right hon. Gentleman is very helpful to the House in his indiscretions of this kind. We can only be thankful that in his important post during the war there was obviously some greater form of censorship on his remarks than exists now. He has been helpful to us on many occasions, and I trust that he will go on telling us his experiences.

What the right hon. Member for Stechford also forgot to mention was that lack of growth in the economy today was caused by the previous Government. It was caused by high rates of taxation on individuals and on company profits and of indirect taxation. While the last Government were in power the average return on industrial assets slid from 15 per cent. to 10 per cent., while the proportion of the gross national product taken up by taxation rose from just over 31 per cent. in 1964 to 44 per cent. in 1970. It was the Labour Government who knocked the stuffing and confidence out of industry, not only through increases in taxation, but through such devices as the National Plan, in which the right hon. Gentleman was involved, and through such agencies as the I.R.C. and the interventionism of that walking disaster area, the right hon. Member for Bristol, South-East (Mr. Benn). For them to have the nerve to criticise us is a fiction equalled only by the memoirs of the Leader of the Opposition, with their great treasure trove to us of quotations in the future.

What is the Opposition's alternative? It is that we should have a higher rate of growth backed by a form of voluntary prices and incomes policy. But the right hon. Gentleman knows as well as anyone that such a policy has as much attraction for his party as a tea-party for topers. It takes a great deal of time to recover from such treatment of the economy as it has had from the party opposite.

My right hon. Friend the Chancellor of the Exchequer in his Budget made some important and historic structural changes to the economy, all of which have been needed for some time. I refer to the change in the income and surtax positions and the reduction and reform of corporation tax. It is true, as my right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) said, that there is no shortage of money about. If anything, there is rather too much money about. I have never disguised my feelings on monetary consequences of increasing the money supply.

Mr. William Molloy (Ealing, North)

Tell the old-age pensioners that they have too much money.

Mr. Hordern

The Budget judgment will be reviewed by my right hon. Friend in the course of the next two weeks, as he made plain today, and it will be reviewed not only in relation to the course of the economy but, I am sure, to a completely new factor—the imminent prospect of this country joining the E.E.C. My right hon. Friend made his Budget judgment on the course of the growth of the economy in the first three months of this year. The right hon. Member for Stechford quoted my right hon. Friend as saying on 4th November that he expected that output will rise … broadly in line with … productive potential … "—[OFFICIAL REPORT, 4th November 1970; Vol. 805, c. 1088.] But the figures which have emerged and which were not available for the Budget do not tell that story. The figures quoted in the latest Bank of England Review make it plain that the level of domestic production and output fell in the first quarter of the year.

As my right hon. Friend has said, it was right at the time of the Budget to forecast a level of growth of 2 per cent. if no action was taken and it was proper to increase that rate to 3 per cent. in order to fulfil productive potential. Surely there is a strong argument for saying that if it is found that the growth is in fact less than 2 per cent. the increase that should be allowed for should be rather higher than 1 per cent. This is a matter not of party politics or of party dispute, but simply a judgment based on economic findings which were not, in the outturn, found to be correct.

We have many statements from industry, notably on the level of manufacturing investment and consumption, to show that the disappointing figures for the first quarter have been carried through to the second quarter as well. I am sure that my right hon. Friend will make his judgment as to whether the regulator is to be used entirely on the basis of the figures which will be available to him. But no one can be ignorant of the feelings and experiences of industry and business about the level of the economy today. Although it is naturally based on an imperfect and subjective judgment, I feel that this is the time in which the regulator should be used in a downward direction. I say that because this is not the only factor which has emerged since the Budget judgment was made.

The new factor, whatever the right hon. Gentleman and my right hon. Friend may care to say, is the imminence of our joining the E.E.C. I do not believe that it is possible to approach such an entry with the thought that we should be for ever in a policy of constriction and restraint until such time as the rate of inflation is at zero or nearly at zero.

Criticisms will be made no doubt that it would be madness to increase economic activity because of the danger of demand inflation. But I do not believe that it is really possible to claim that if the regulator were used in a downward direction the bargaining power of the trades unions would be greatly increased thereby. The level of unemployment is now so high that the majority of manufacturers will be slow to take on labour again, such has been their experience in the last few years. That may not be a happy fact, but it is the case that demand inflation will not follow as a result of easing the regulator and the increased bargaining power that the trade unions would have. Therefore I am confident that that is what my right hon. Friend will do.

The most difficult part to accept is the high rate of inflation compared with the very low rate of growth. It is the gap between the two which increasingly is becoming so intolerable. I believe that we shall join the European Economic Community and that it will have a beneficial effect upon our economy. No one can say that for certain until we join, of course, but it seems to me probable.

But it is also clear that it is no use approaching the subject of future economic growth by shackling ourselves with constraints and by making sure that we do not provide incentives so that the economy can advance when we face the imminence of our entry into the Community.

When my right hon. Friend carries out his July review, I am confident that he will come to the conclusion that it would be right to use the regulator or to reduce hire purchase restrictions and so provide a much needed boost to the economy.

6.42 p.m.

Mr. John D. Grant (Islington, East)

We are suffering from a Government who are indulging in a policy of calculated complacency. Anyone who has listened to the Prime Minister purporting to answer questions on economic policy, anyone who read that extraordinary "wait and see" speech from the Chancellor of the Exchequer last week to the Association of British Chambers of Commerce, or anyone who noted the casual, offhand comment of the Secretary of State for Employment on the latest disastrous unemployment figures, will be surprised to have heard the Chancellor of the Exchequer accusing this side of the House of hypocrisy. Clearly the hypocrisy lies on the other side of the House. The Government are behaving with callousness or with gross incompetence, or a combination of the two.

Right hon. and hon. Gentlemen opposite do not have to take that from me. There is plenty of corrobation. My right hon. Friend the Member for Birmingham, Stechford (Mr. Roy Jenkins) referred to the local election results and the parliamentary by-election results, especially those at Bromsgrove and Hayes and Harlington. Soon we shall see what happens at Greenwich, and we are all waiting anxiously for the Macclesfield by-election, when the Government have the courage to announce the date.

Right hon. and hon. Gentlemen opposite do not have merely the election results from which to take it. They can take it from the T.U.C. In his speech today, the Chancellor of the Exchequer quoted the Congress approvingly when it suited him. However, he did not go on to say that currently the Congress is engaging in a nationwide campaign against rising unemployment. My right hon. Friend the Member for Stepney (Mr. Shore) mentioned the National Institute forecast, and there is further evidence there. Then we have the C.B.I., where the Government have friends at court whom they could lose. The C.B.I. has made it plain that business confidence is sagging, as is industrial investment, and that output at very best is stagnant.

We have evidence also from the hon. Member for Worcestershire, South (Sir G. Nabarro), who is not in his place today. Possibly he is a little too embarrased to be here. We have heard about his well-publicised anxieties. He has made it clear recently that the huge rise in prices is quite contrary to the pledges of his party prior to the General Election. If the hon. Member for Worcestershire, South is not quite a typical Tory backbencher—he just looks typical—perhaps I might quote my own Member of Parliament, the hon. Member for Bromley (Mr. Hunt), who wrote in the local paper recently that he had no doubt that the dismay and discomfiture of his hon. Friend the Member for Worcestershire, South was widely shared by Conservative Members of Parliament. Finally, we have just heard from the hon. Member for Horsham (Mr. Hordern), who also clearly wants a very early remedy and is hardly satisfied with the way events are moving now.

Despite all the evidence, the Prime Minister refuses to accept that the two key promises on prices and unemployment which brought him and his party to office have not been kept, and they were short-term promises.

In the past year, prices have gone up by something like 10 per cent., and the latest increase in unemployment has been almost three times as much. I appreciate that my hon. Friends who represent constituencies in Scotland and the Northern Region feel perhaps that they have some priority when it comes to talking about unemployment. I support them in that, since the level of unemployment there is horrific. But it is significant that it is spreading to London. In the last two weeks, I have been lobbied by trade unionists from my constituency who are deeply concerned about unemployment in London, especially among school leavers and in certain skilled trades. It is clear that this industrial cancer is spreading throughout the nation.

In a recent interview to the Sunday Times, the Prime Minister painted a touching picture of his Cabinet sitting round the table with copies of their little blue school book before them. I refer, of course, to the Conservative Party manifesto. Apparently it is always taken to Cabinet meetings. I wonder whether they ever turn up the paragraph in which they called for an economy based on more jobs, on higher wages and on lower costs. Perhaps it appeared only in the unabridged version that we had prior to the General Election, when they said nothing about wage restraint, about which we hear constantly from them now.

We are entitled to ask, as I am sure many hon. Members opposite are asking privately, if not publicly, why we are still waiting and why we must continue to suffer from this marked under-utilisation of capacity in industry and the unemployment which goes with it. I have in mind especially the inevitable drain that it means on our social security system and, above all, the blow that it is to the pride and well being of the whole nation.

We have a healthy trade balance, and my right hon. Friend the Member for Stepney was right to ask why we are afraid to use it and to opt for expansion now. I hope that the Secretary of State for Employment will answer my right hon. Friend's points. Are we sitting on that balance as the price of entry into Europe? If that is the reason for the present procrastination, I hope the Government realise that, should the present recession worsen, we shall have squandered the balance whether or not we go into Europe.

It may be the Prime Minister's obsession with Europe which precludes him from tackling personally the bread and butter issues which face us. Those bread and butter issues are outlined clearly in the Motion. If the Prime Minister finds the time difficult to come by he might try working a five-day week instead of a four-day week. I do not know whether he is trying to set a personal example to many thousands of people who are on short-time working as a result of the Government's policies. We want to see not more but less of him.

The message coming to the Prime Minister from the elections in the recent months is to get his anchor up and aweigh—and to take his crew with him. Our people have made it clear that he should forfeit his mandate and do the decent thing; he should have the guts to call a General Election.

6.50 p.m.

Mr. Edward du Cann (Taunton)

I have one obviously partisan remark to make. It is something that I believe requires to be said clearly, especially in view of the speeches made by the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins)—I hope that he will not mind my referring to him, as he is not present at the moment—the right hon. Member for Stepney (Mr. Shore) and the hon. Member for Islington, East (Mr. John D. Grant). This censure Motion lies ill in the mouths of those whose policies—or lack of them—laid the foundation for today's scene. The scripts of complaints delivered by the right hon. Member for Stechford and the right hon. Member for Stepney were all the better written, I reflected, as I listened to them, because those right hon. Gentlemen were the very people who in large part designed the scenario for today.

However, the debate is timely. Anxiety about certain features of our economic scene is certainly not confined to hon. Members opposite, or to the House as a whole; it is widely shared and keenly felt. It is the most obvious of those aspects to which attention is drawn in the Motion.

First, there is unemployment. A good deal of interest is being expressed in the fact that National Savings are doing so well at the moment. There is one reason for this: people are frightened of being unemployed. I have no hesitation in saying that the present level of unemployment is intolerable. It is a crime of the first magnitude to waste human skills in this country, whose almost only resource is its own people.

Then there is inflation. All sections of society are deeply troubled about that. Some people, luckily, can opt out successfully, and selfishly they do.

But it is not only the obvious effects of inflation that we should be considering—the effects on pensioners, civil servants and so on; there are other more serious aspects to consider. One is the disruptive effect upon our society, the potentiality for which Lenin was the first to point out clearly. There is the cumulative effect upon investment. Many firms are making far too little provision for depreciation—for the replacement of yesterday's plant at tomorrow's prices—and all the time export prices rise.

These things are symptoms of a deep malaise in our country. I do not attempt to define that. We all sense it. If we do wish to see what my right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) would call the mechanical aspects of it, we have only to look at our failure to hold our share of world trade.

I find much to applaud in the Chancellor's actions—for all the contemptuous terms in which the right hon. Member for Stechford spoke of them. I applaud my right hon. Friend's future intentions on tax reform. I applaud the immediate reductions in taxes on a massive scale that he has so far introduced. I equally applaud the increases in social benefits that he has brought in. Above all, I applaud the Government's strategy—the grand design to ensure greater effectiveness in our economy. Heaven knows that is needed. Heaven knows, also, how refreshing it is to find a better concentration upon the individual—some encouragement for him to attempt to tackle the economic ills in our economy and the basic causes of difficulty must surely be right. If my right hon. Friend succeeds he will no doubt be applauded by the whole House.

This Motion is about two things. It is about whether, in one year, the Government could have reversed the tendencies which were obvious in June, 1970, and whether their policies will constitute a breakthrough from the failures of the last 25 years—from all that tedious and frustrating experience. I believe that they may well do so. But there is a feeling that has run through every speech so far, namely, that time is running out for us.

We bought time with devaluation. Note how slow we were to take advantage of it. How ill it lies in the mouth of the right hon. Member for Stechford to complain about my right hon. Friend's imaginary delays. I well remember how many of us, after devaluation, when the right hon. Member for Stechford became the new Chancellor, saying, "Settle in and evaluate the problem, by all means, but take some action". He was the slowest Chancellor of them all.

Then we gained more time with the revaluation of the mark. Note again the idiotic smugness of the commentators who rejoiced in saying that we were not affected. Of course we were. The £ and the dollar were again devalued. Note too that the dollar will surely be in further trouble within the next 12 or 18 months.

We must rely not upon these accidents. Time is running out for the nation and the Government, and the only criterion is success. That is what the unemployed and those suffering from the cost of living—all of us—are interested in, or ought to be interested in. In contrast to the right hon. Member for Stechford and others, I shall try to make some practical suggestions.

I am certain that above all the Government must give their strategy time to succeed. That may mean the abandonment of some old shibboleths, as my right hon. Friend the Member for Wolverhampton, South-West pointed out. Although I do not entirely agree with what my right hon. Friend has said, I think that we ought to abandon our usual preoccupation with the balance of payments.

Our commerce and industry cannot take much more discouragement, in the sense of "stop-go", in or out of the Common Market. More encouragement is needed.

Last Saturday's Financial Times says: Most firms are preoccupied at present with their excess of productive capacity"— and it gives the figures—" with a dearth of orders"— again it gives the figures— and by the low level of profitability. It will be a good while yet on the most optimistic assumptions before the prospect of entry into the Common Market begins to affect their planning. What is the best encouragement we can give to commerce and industry? I suggest stability on the one hand and the certainty of economic expansion on the other—and the best way to generate them is to abandon once and for all our emotional commitment to existing exchange rates. That is no panacea, but it is at least one way of gaining the time of which I have spoken.

Second—I hope that my right hon. and hon. Friends will not mind my saying this—the Government must take the nation much more into their confidence. The reasons for the results of the local elections and others are not as right hon. Gentlemen opposite have so simply supposed. All too few people really know or understand what the Government are trying to do. There must be a better, wider and louder explanation, especially an explanation given with the authority of Ministers. That task of explanation—people always respond to a lead, and they will certainly respond to the common sense approach of this Government—would be easier if the Government were seen to be more active in the economic sphere.

I agree with my right hon. Friend the Chancellor of the Exchequer that we do not want expedients. But we have to face the fact that the Budget is three months away, and Ministers have chiefly been seen in the interim in circumstances over which they had no control—for example, the U.C.S., Rolls-Royce, and other catastrophes. In other words, they have been seen in circumstances of difficulty when they have been on the defensive. I want to hear them in the country talking in a constructive and hopeful way, which I believe they are entitled to do. That could make a considerable difference.

We recognise that the Chancellor has been in baulk over Europe. We recognise, as he suggested, and my hon. Friend the Member for Horsham (Mr. Hordern) referred to this, that some sign of revival in consumer demand may be evident and may increase in the months to come. We also recognise that there may be some modest de-escalation of wage claims. If all these things are so, then, again as my hon. Friend the Member for Horsham said, some additional stimulus to the economy can certainly now be afforded.

I have no wish for the Chancellor to attempt to acquire some temporary popularity at the expense of the long-term gain that we all so much hope he will achieve. I foresee a consumer boom next year, and it may be that at that time he will have to move in a different direction. I make no bones about it, it would be foolish of my right hon. Friend to undertake stimulation of the economy on a large scale. But, again, as my hon. Friend the Member for Horsham said, it is clear that some stimulus is essential in the near future for the reason, perhaps above all, that confidence is very much in danger.

Industry is in the process of talking itself into a recession. This is dangerous and must be contained. The best way to do that would be to give evidence of the Chancellor's determination to see our economy prosper. Therefore, my third recommendation is that there should be some modest stimulus to the economy before the Summer Recess.

Now reflation, if that is the right term to use in the context of the remarks of my right hon. Friend the Member for Wolverhampton, South-West, involves risks. The question is how to mitigate them. My fourth proposal is such a method. The great Mr. Disraeli—my right hon. Friend the Prime Minister is rightly fond of quoting him—once remarked: The Conservative Party is a national party or it is nothing. It is not currently so understood to be. [Interruption.] It is not so represented to be, as we hear from the cackles opposite.

In a short speech which I made on the Budget, I suggested that it was time again to begin a dialogue with the trade unions. I realise that everything depends on timing. Perhaps what I was then suggesting was premature. However, as my right hon. Friend the Secretary of State for Employment and Productivity is present, I feel that perhaps it is appropriate to repeat that suggestion. I believe that it is time for the Government to begin this process of discussion, and I hope to see them begin at an early date.

I do not believe in a wage freeze, nor indeed in a statutory incomes policy; but a voluntary incomes policy is another matter. My right hon. Friends the Prime Minister and the Chancellor have stated that they are ready to discuss these matters when the right time comes. It may be that the right time is now. If so, I hope that a voluntary incomes policy will not be discussed only in the context of holding down wages and salaries. I see it as a positive thing. My view about wages and salaries has always been, and still is, that the sky is the limit for earnings, provided that they are truly earned. I hope that my right hon. Friend will comment on that suggestion in particular when he winds up tonight.

My fifth suggestion—unusual perhaps, but I hope that it might be thought appropriate—is that there should be an examination of the way that this House performs its legislative function. I make that suggestion for this reason. I recall, as a new Minister going to the Board of Trade in 1964, producing, on advice, a catalogue of the number of matters on which legislation was required. In the event there were some 14. One of the Government's objectives is that there should be less interference in people's daily lives. I support that objective most warmly, but I think that we should carefully consider whether we are introducing as much legislation as we should of a kind which is urgently required and getting it through.

For instance, one item in the catalogue of 14 of which I spoke was the need for the reform of company law. It might be thought that as our prosperity so largely depends on the private sector we would at least give it an up to date system of company legislation. Yet it is seven years since I and my colleagues gave evidence to Jenkins.

We hear talk of savings. I think that any fair-minded and competent Minister could have announced a number of individual proposals which required to be carried out to bring much of our savings legislation up to date. That would not have been difficult of realisation at any time in the last five years, or even the last seven, eight or ten years. Yet what have we got? We have two new inquiries. They are no doubt worthy and will probably produce good answers, but I sometimes feel that it is unsatisfactory to delegate so much work outside the House to competent people who, in the words of the Leader of the Opposition, tend to take minutes and to waste years in getting things done.

I repeat, an examination of the way that we are setting about our structural work is desirable. We spoke about steel this afternoon, and we shall probably talk about it as any other industry on Wednesday. We must also look to ourselves.

I have put forward what I hope are some practical suggestions. My right hon. Friend certainly has my full confidence and support. The situation is critical and in certain respects distinctly worrying; but given resolution—I hope that he sticks to the policies which have been laid down—he will have the support of all right hon. and hon. Members on this side of the House. We look forward to the day when we can applaud him more widely and still more warmly.

7.7 p.m.

Mr. John Pardoe (Cornwall, North)

It is a pleasure to follow the right hon. Member for Taunton (Mr. du Cann)—another West Country Member. I agree that the time has come for a dialogue between even this Government and the trade unions.

I disagree on one point in the right hon. Gentleman's speech. It is curious how, whenever a Government run into trouble, they always seek to excuse themselves, or some of their supporters do, by saying that there are not enough public relations men to tell the country what they are doing. I do not think that anyone would deny that Lord Robbins knows what the Government are trying to do. According to the Financial Times last week, he came to this conclusion on the Government's policy: It is just possible, I suppose, that this may succeed. But I would not rate the chances at more than 50 per cent. If one informed the rest of the electorate as well as Lord Robbins is informed of the Government's policies, they would want to be convinced that there was more than a 50 per cent. chance of their working.

The right hon. Member for Taunton and other hon. Members have spoken of an underlying sense of gloom and despondency. That is nothing new in discussing our economy. That mood of despondency and gloom has been with us for a very long time.

What is new at this time is the extraordinary rate of inflation which we have had over the last 12 months. Like Lord Robbins I, perhaps alone of all who have spoken and will speak in the debate, have no need to apportion blame. When I survey the story of the last 20 years of our economy I have to choose between concluding either that the country has been governed by incompetent morons or that the government of our economy is unaccountably difficult. On the whole, I stand with those who believe that it is rather difficult, not with those who believe that we have been governed by incompetent morons, though sometimes I settle for the latter.

Some of our problems are not due to the mistakes only of this Government. Some were due to the mistakes of the Labour Government, some were undoubtedly due to the mistakes of the previous Conservative Government and, who knows, some of the mess may be due to the mistakes of the last Liberal Government. But there is no point in going back over the years, and one has to go back some years to get to that.

The right hon. Gentleman said, as most hon. Members have said, that inflation is bad. That is sometimes disputed in the country. There are people who argue that inflation causes social change, almost social revolution, and welcome it for that reason. I welcome social change, but not in this rather haphazard manner, being caused by inflation. Inflation also creates problems for the balance of payments, but I believe that that problem can best be overcome by either floating the £ or by devaluing earlier.

By far the most important problem which inflation represents is the effect on the balance between future investment and current consumption. I suggest that that is the danger. We have seen a tremendous change in the balance between money paid in incomes and money which has gone in profits, and this has been represented right through in the level of investment in our economy. As far as I am concerned, all inflation is bad, and 10 per cent. inflation is intolerable and, indeed, ruinous.

It is only when we discuss what we are going to do about inflation that we see that there are only two broad solutions. One is to pump out new solutions of quick remedies at two a penny. The other is to despair, and it seems that Lord Robbins in his article last week, and the Government, if they are represented by the speech of the Chancellor of the Exchequer this afternoon, are opting for despair.

There has to be a solution to our economic problem. The right hon. Member for Wolverhampton, South-West (Mr. Powell) has put forward one solution. He believes, almost to the exclusion of all else, that the problem is the money supply, and he has a point but, like most of his points, he tries to flog it further than it will go. The right hon. Gentleman is right about a floating exchange rate, and I have held that view for many years, but if control of the money supply alone were used to solve the problem we should have to accept, as short-term results, social consequences which are unacceptable and, indeed, politically impossible. How many unemployed? How many bankruptcies? How many Rolls-Royces?

Perhaps we have reached the stage when the gap between what is economically sound and what is politically possible is becoming wider, but the consequence of accepting that is that we also have to accept that the country is becoming ungovernable, and that does not come easily to politicians. The right hon. Member for Wolverhampton, Southwest may be right about the money supply, and I am sure that in part he is. It might work if it were carried on, and on, and on, but it cannot be carried on, and on, and on, for political reasons, as Mr. Nixon has found in the United States.

The right hon. Member for Stepney (Mr. Shore) has what I term an even more curious solution to our economic problem. His solution appears to be to stay out of Europe. This lacks logic. Whatever else it lacks, it lacks logic. We have a problem, we have had it for years, so, he argues, we can presumably cure it by not doing something that we have not yet done. If not going into the Common Market will solve our problem, why did not going in not solve it in 1967, when the right hon. Gentleman was a member of a Government who believed that going into the Common Market would solve it?

Mr. Molloy

What the hon. Gentleman has said is untrue. The then Government said that they were prepared to examine the situation to see whether terms could be arranged. Let us have the record straight. There is nothing like the truth to upset the Tory Party. That is one thing hon. Gentlemen opposite hate, and I am sorry that the hon. Member for Cornwall, North (Mr. Pardoe) has joined them in misrepresenting what happened under a Labour Government.

Mr. Pardoe

There is nothing like hypocrisy for burying the Labour Party. If the Labour Government, in 1967, embarked on wasting our time and that of the people of Europe in fruitless and phoney negotiations when they knew that they could not get proper terms, what kind of Government were they? If they now believe that the terms that have been negotiated are worse than those which they would have negotiated, why is it that the right hon. Gentleman who was conducting their negotiations publicly stated in the last two weeks that the terms are better than, or at least as good as, he could have got? I am aware that the right hon. Gentleman—and no right hon. Gentleman on the Front Bench opposite—does not speak for all the Labour Party. That would be an impossibility.

Mrs. Renée Short (Wolverhampton, North-East)

He does not speak for the country, either.

Mr. Pardoe

The right hon. Member for Stepney, with all his tales of woe, is only repeating the tales of woe which many politicians in his position told the Belgians, the Dutch and the Italians before they went into the Common Market. There is no one of any consequence in Belgium today who does not believe that entering into the Common Market has helped enormously to solve their economic problems. The right hon. Gentleman and his colleagues had six years to prove that this country, with a Socialist Government, could solve its problem within its own shores. They failed to prove that, so why should the right hon. Gentleman believe that he will be able to do better next time?

Coming to the Government's solutions, they, too, have made some attempt to give reasons for the problem we face, and some are less convincing than others. The Chancellor of the Exchequer apparently believes that higher taxes equal higher prices. Some do. It may be true in many cases. But if that is true, then lower taxes must equal lower prices, so the right hon. Gentleman then pointed an accusing finger across the Dispatch Box and accused the Labour Government of raising taxes, and therefore of raising prices. We know from what the right hon. Gentleman has said that the Tories have lowered taxes, and therefore raised prices, so we are back to square one, and that is obviously no solution. Whether it lacks logic or economics, I know not.

We cannot solve our economic problem without a direct attack on cost inflation and that, in part, must mean a direct attack on wages and salaries. I am not putting forward an incomes policy as a panacea. I do not believe that a statutory incomes policy is politically possible in the long term, or even politically de- sirable in the short term, but there seems to be no debate about what kind of incomes policy we ought to have. It seems to have been accepted by both the Government and the Official Opposition that an incomes policy ought not to be discussed, and yet the T.U.C. has put forward a perfectly sensible solution. No one has taken it up. The Government refuse even to discuss the matter.

What the T.U.C. has done is to say that the present demand for higher and higher wages is made up of two component parts—first, the need to keep ahead of inflation, to keep up with the cost of living; and second, the need to gain a genuine increase in the standard of living. It has said that those two component parts should be clearly differentiated and separated and that the negotiations should treat them separately.

If only the Government would enter into negotiations with the T.U.C. to come to a joint, united and agreed incomes policy of that sort, we would have the means to solve a large part of our present problem, because we would then underwrite inflation in incomes negotiations. If we were to do that, we could undoubtedly bring down wage settlements from their present chaotic level. It is no good bewailing the fact—and this was an error into which Lord Robbins fell—that union leaders do not see sense, that they do not negotiate what he terms sensible wage agreements. It is their job to get the best deal that they can for their members. They, too, have elections, and they have to think of their members and to get their support.

I believe that such a policy should then be backed with an agreed allowable maximum wage increase for a short time. That would be agreed between the T.U.C., the unions, the C.B.I. and the Government, and if the Government wanted to enforce that—and it might be necessary to do so—it could be done without raising prices by putting a tax on insurance contributions. That would be a way of ensuring that people did not get a rise in wages above the level that had been agreed between the T.U.C., the C.B.I. and the Government.

I have not discussed regional policy today because it seems to me that the national economy is in such ruins that to talk about whether we shall get a better slice of the cake in Cornwall, Scotland or Wales in this situation is not relevant. There has been a total collapse of regional policy because of the removal of the major incentives which the Labour Government set up to bring industry to Cornwall, Scotland, Wales and other outlying areas. If we solved the problem of increasing costs—and some of the proposals I have put forward would help to this end—we could safely reflate demand. We could do this by the regulator, by completely scrapping S.E.T., or in whatever way we decided. But we must now face a long-term recession. The Chancellor of the Exchequer said that the Government were working towards a lasting solution for the British economy. I suggest that, if he continues with his present non-policies, he is working towards a final dissolution of the British economy.

7.20 p.m.

Mr. Julian Ridsdale (Harwich)

The hon. Member for Cornwall, North (Mr. Pardoe) referred to Lord Robbins' article in the Financial Times last Wednesday. Lord Robbins said so wisely that the problem we face is a national one and he went on to underline the importance of some form of incomes policy. I join him in hoping that what will result from the talks on 7th July will be some form of voluntary agreement on prices and incomes with the T.U.C. I am convinced that if we are to carry out what is needed, more investment and more reflation of the economy, this must be done by voluntary agreement on prices and incomes so that the money which would otherwise go into inflationary demands can go into investment in industry, which has had such a bad investment record for such a long time.

The right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) underlined the importance of growth and investment. It is a pity that when he was in power he did not carry out this policy with deeds. Indeed, the right hon. Member for Huyton (Mr. Harold Wilson) "at a stroke" abdicated his responsibilities when he decided to have an election in June last year, when he could have gone on governing for another year. The reason he did this was that he knew that his prices and incomes policy was in flames. He ran away because he knew the kind of price rises that were in the pipeline. He also knew the kind of record of investment by his own Government in manufacturing industry and he realised that this would compound itself into the kind of price rises that we face today.

It is enormous hypocrisy by the Opposition to be censuring us for their gigantic failure. They are using a political bikini, "At a stroke", to cover up the elephantine failure of six years of Socialism. It is all very well to chide us about our Jim's defence of our leaders use of the phrase "At a stroke" when Labour's Jim, at a stroke, knocked 15 per cent. off purchasing power of the £ by devaluation and then, after devaluation, ran up a short-term debt of £1,500 million, of which we have already paid off over a half. We have reduced taxes by £1,000 million and in September we are paying out £500 million in increased pensions. In spite of price rises, we shall have done all we can to protect the pensioner and lower wage earner from the difficulties we inherited from the Labour Government. Indeed the married man on £15 per week with one child is being helped by £89 in the current Budget proposal.

Mrs. Renée Short

By God, he needs it.

Mr. Ridsdale

The man with two children will be helped to the tune of £104. I hope that my right hon. Friend the Chancellor of the Exchequer will do more soon to reduce taxes both in terms of S.E.T. and the regulator and, above all, I hope that he will make a priority of investment. I am certain that in the long run we can only stabilise prices if we make the proper investment in manufacturing industries which I am sure is certain to pick up when we join the European Economic Community.

An almost 10 per cent. increase in the cost of living in one year naturally is causing great distress to those on lower incomes. This is why I ask the Prime Minister to underline one specific pledge we have given, which is that those in the lower income groups will be protected now that we are changing to a new agricultural policy and are about to enter the E.E.C. This must be a continuing pledge. Indeed, with the kind of price rises pensioners have had to face recently, I ask the Government to be prepared to act to help pensioners ahead of entry into E.E.C., particularly in view of the change of agricultural policy. If we do not do this we shall lose much of their support in joining E.E.C. I hope that soon we shall get a more stable price level, but until we do I press the Government to shorten the period when relief and help can be given to those on lower incomes, especially the retired.

Is it not possible for the Government to do something to stabilise prices in the nationalised industries? Can they not take some steps in regard to rail, bus, electricity, gas and coal prices? I do not ask for a subsidy, but can we look at investment policies and use this, at least as a starting point, with management and unions to make some long-term agreement on pay and prices. It does not make sense to me when we are trying to fight inflation and rising prices for the Government to press at this moment for investment in the nationalised industries to be found from higher and higher charges to the consumer. All this leads to increased wage demands and pension increases. A stop to the mounting spiral of prices has to be made somewhere. Why not a freeze for the year on prices in the nationalised industries? I hope that with it we can see emerge a voluntary agreement on prices and incomes from the harsh and bitter period of industrial relations that we have just been through. I am sure that only then shall we reach a more stable price level and be able to see the level of investment pick up in industry.

Nevertheless, there is no doubt that confidence is coming back. The amount of money that came into the country in the first quarter of this year was some £4,000 million. We have yet to translate this confidence abroad into confidence at home. I am certain that it can be done if we work directly to encourage investment in manufacturing industry. I hope that this will come about now that we have decided on our course in regard to the E.E.C. terms. I therefore hope that the Government will be able to assure pensioners that they will be protected against any further rises, and I hope that we shall soon reach a level of stability which will lead to further investment in the manufacturing industries.

Mr. Speaker

The first five speeches took two and a half hours; the next five speeches have taken just about an hour. If hon. Members will keep speeches down to about 10 minutes each I believe that I shall be able to call everybody on the Opposition side of the House who wants to speak and a certain number of hon. Members on the Government benches.

7.29 p.m.

Mr. Eric Ogden (Liverpool, West Derby)

I will do my very best, Mr. Speaker, to follow your recommendation. It may be difficult, but I will try very hard. Certainly it is particularly difficult when hon. Members opposite say that we have decided what we shall do about terms of entry in the Common Market. At this stage I may be one of the fence-sitters, I may be one of the pros or one of those against, but I would point out that the House of Commons has not yet decided on the matter.

The hon. Member for Harwich (Mr. Ridsdale) was not at his most convincing today. He was loyal to his Government and tried to defend it by attacking what he considered to be the shortcomings of the Labour Government. But he has less hopes, and even less expectations, about what his own Government will do. When he spoke about a price freeze it was only in relation to the nationalised industries. I would ask him to make up his mind whether he wants a statutory or a voluntary policy before he speaks on these matters in the House. I hope I have not offended the hon. Gentleman. He made one of his most loyal, if not one of his best, speeches.

Earlier, the hon. Member for Horsham (Mr. Hordern) complained because my right hon. Friend the Member for Birmingham, Stechford (Mr. Roy Jenkins) spent the major part of his speech attacking the Government. That is the purpose of a censure Motion. The Government have had a year in office and we are entitled to judge the success or failure of their policies.

In recent days I have been sending out questionnaires to my constituents about the Common Market and other matters. I have listed half a dozen subjects which most concern my people and I have asked them to mark the order of priority. The items are housing, employment, education, public transport, pensions, the cost of living and the Common Market. The replies have been coming back fast and furious, with the first concern being the cost of living closely followed by the problem of unemployment.

Most of the speeches made by hon. Gentlemen opposite have been unconcerned, at least for the major part, with these difficulties. They have concentrated on sophisticated subjects like money management and so on. They are anxious to speak about the Common Market and sundry other subjects—anything to avoid the cost of living, unemployment and the other major matters that are worrying the majority of people.

The right hon. Member for Taunton (Mr. du Cann), whose temporary absence from Parliament has mellowed him a little, at least spoke of the waste that unemployment meant. He referred to the crime of human talent and lives that was inherent in unemployment, and he made a number of suggestions. At least his speech had the merit of being somewhat constructive, and he had the grace to demonstrate that what the Government were doing now and what they had done was either wrong or insufficient.

The Government have done more harm in the last 12 months than any British Government this century. [Interruption.] I assure hon. Gentlemen opposite that my hon. Friends and I have no difficulty in providing them with a long list of the reasons why that statement is true. Few hon. Gentlemen opposite who will parade through the Lobby in support of the Government do not have major criticism of the policies being adopted by the Government. If they do not have the courage to vote against their leaders, they should at least have the decency to abstain.

We are debating the fundamental right of men and women to earn a living by the skills and abilities which they have worked hard to achieve. We are speaking of boys and girls who are leaving schools and colleges with high hopes of winning their way in the world. People want to use these skills and abilities to provide decent homes for themselves and their families and to earn what is for the vast majority only a modest standard of living.

The people we represent and about whom we are speaking are not, in the main, given to envy or jealousy of the rich. They just want a chance to earn a living, to look after themselves and their families, stand on their own feet, save a little for their old age and be able to accept and maintain a reasonable standard of security. I have used some phrases which have been corrupted by the Conservatives to mean attributes that are less honourable than they used to be.

It has always been the purpose of the people I represent to help one another. We in the North-West seldom talked about lame ducks until the Conservatives came to power, yet we have always been prepared "to help a lame dog over the stile". These are the people who we represent and whom hon. Gentlemen opposite are supposed to represent.

In the election campaigns of 1966 and 1970 the Conservatives made as their first claim the fact that the mere election of a Tory Government would create a climate of confidence. They said they would get the economy going again, create investment and opportunity for full employment. They emphasised the latter. What were we promised by the Conservatives? In what they described as Our new Conservative programme we were told: This is what we are going to do: Get the economy straight, check rising prices, and restore expansion". They told us: Our first aim is this: to run this country's affairs efficiently and realistically so that we achieve steadier prices in the shops, high wages and a really decent standard of social security … The next Conservative Government will not hesitate to take all the measures necessary to deal with the immediate economics situation. Our new economic programme will make a prices and incomes policy really effective". That meant "norm minus one" for some, nothing for many, and roaring inflation for the rest. The Conservatives said: Second, we will use tax incentives to encourage individual men and women to earn and save more for themselves and their families. What use is sixpence off income tax if one is unemployed and does not have any income to tax? Then they told us: Third, our new policies for competition will inject fresh vitality into British industry". The Conservatives told us that they would reform management and unions. Certainly they turned their attention to the unions, and disastrously, but they have made little attempt to reorganise management. Many people with real knowledge of industry are claiming that a basic fault with Britain today lies in the need for a reorganisation and restructuring with more effective management.

The hon. Member for Cornwall, North (Mr. Pardoe) said that he would not talk about regional policies, but for my area and the vast majority of the country, regional policies are absolutely vital. Let us consider some of the policies hon. Gentlemen opposite made in this regard. They promise to deal with the special problems of each area … to … develop fully the resources of each region … and … accelerate action on regional studies". In September, 1970, a deputation from the North West Industrial Development Association went to the Government to ask for aid for the North-West. The deputation met the then Minister of Technology, who said that the Government intended to pursue a vigorous regional policy in the North-West and all over the country. A major objective would be to obtain much better value for money from regional expenditure. To this end, a review of regional measures was being carried out and the results would be announced as soon as possible. That was last September, long enough ago for us now to be told what has happened to that study.

At the General Election even my Conservative opponent in Liverpool, West Derby, an honourable man—I am glad to say that it was a completely honourable campaign—believed the claims of his leaders, who, at the time, said: Britain will be better of"— under the Conservatives, and declared— By new policies for regions like Merseyside—greater growth in the economy, and a boost for industry—the Conservatives will get unemployment down. In the Queen's Speech hon. Gentlemen opposite told us: My Ministers attach the greatest importance to promoting full employment and an effective regional development policy. They will stimulate long-term growth in the less prosperous areas by increasing their economic attractions and improving their amenities. So much for their intentions. So much for Conservative promises.

The majority of the electorate in West Derby, Liverpool, on Merseyside and in the great industrial areas of the North-West, the Midlands and London did not believe them—[Interruption.]—and those who did believe them are entitled now, after 12 months of Conservative Administration, to know which, if any, of these promises have been kept. It is clear, however, that none have been kept.

Time is short and I am anxious to abide by Mr. Speaker's injunction to be brief. We think of Macclesfield, Bromsgrove and the various other areas where the electorate have shown that they have no confidence in the Government. After 12 months, the newspapers and every independent observer are telling us that we are "sliding into recession" and they talk of unemployment in terms of the great depression earlier this century.

My hon. Friend the Member for Liverpool, Scotland (Mr. Marsden) made his maiden speech not based on hopes, expectations, adventure and the possibility of growth but on the tragedy of the teenage jobless on Merseyside, where there are 41,000 unemployed. There are 20,000 jobless in Liverpool, giving a percentage of 5.6 of the population. Remember, however, that for the person unemployed, he is 100 per cent. unemployed. My hon. Friend is reported in one newspaper as having said: One of the saddest things in this sad, sad, tale is the fact that on Merseyside we have over 3,000 boys and girls in the age group of 15 to 17 who are out of work". We appreciate the tragedy of this state of affairs. When we question how many days are lost by absenteeism and strikes, should we not also question the number of days lost through tens of thousands of people being unemployed? It is true that the June unemployment figures show a very small improvement, but they are still very much worse than last year.

We have been trying to convince the Government to change their policies, to do something that they have not done before, but so far all we have had is the same kind of argument that we have had time and time again. We had it again from the Chancellor of the Exchequer today, which only convinced me that the right hon. Gentleman may well be a taxation expert and is, I believe, a very nice man, but he is certainly in the wrong job.

To be fair, some decisions have been made. Only ten days ago the Government announced that the headquarters of the new value-added tax organisation will be in Southend. We on these benches may disagree with that tax, but if it is to come about, with all the necessary organisation, the headquarters might as well go to the development areas. Unemployment in Southend is 3.9 per cent.—.8 per cent. above the national average. There is certainly no joy in the fact that Southend has 6,000 unemployed. The Prime Minister said that it was the purpose of his Government to give the greatest help to the areas of greatest need: it seems that when he talks of people in greatest need he talks of the two Southend Conservative Members.

It is no wonder that a Liverpool Member told the Government last week: You don't do enough for the North-West. He is reported as saying: He saw this as another piece of discrimination against the North, and he added: I am fed up with the Government discrimination against the North-West. Anyone who could say that last week against the Government should vote with the Opposition this evening. It was said by the hon. Member for Liverpool, Wavertree (Mr. Tilney), who I know is an honest man. I am interested to see how he will react tonight, and how he will find in his heart to support the Government.

Members of Parliament have much to do outside this place as well as in and within its precincts. Since 1964 I have been very much involved with the work of the North-West industrial Development Association. After the 1970 election that Association thought that it should tell the Prime Minister what ought to be done in the North-West, and should speak of the difficult unemployment situation created there. I was able to persuade the association that that was not the best thing to do; that this was a different Government with a different way of doing things, that it should start lower down the line and deal with the Departments of Technology, Trade and Industry and Environment. The officers of the Association met the Ministers. They reported back: There was a general feeling of disappointment at the outcome of the meeting. Following this, the director of the Association wrote in May to the Prime Minister asking him to receive a deputation from the Association (which is by no means a Labour controlled body; it represents chambers of trade, industry and local authorities which at that time were mainly Conservative-controlled). The Prime Minister refused to meet a deputation, and on 27th May it was reported: We were asked to consider the reply from the Private Secretary to the Prime Minister declining the Association's request for a deputation to press the seriousness with which the Association view the current unemployment situation in the North West. The report went on: We were concerned that the Prime Minister could not find the time to meet a deputation from the Association, and we considered that due to the further deterioration in the unemployment position … the Association should make a further approach to the Prime Minister to reconsider his decision and agree to meet a deputation from the Association. A month later, in a Written Question, my hon. Friend the Member for Liverpool, Exchange (Mr. Parry) … asked the Prime Minister what representations he had received from employers' organisations, trade unions and other bodies concerning unemployment on Merseyside; and what replies he has sent. The Prime Minister's written reply was: I am aware of the present level of unemployment on Merseyside, but I have received no recent representations on this subject."—[OFFICIAL REPORT, 21st June, 1971; Vol. 819, c. 205.] How recent is a month? Was the Prime Minister not aware of the Association's approach? Was this a mistake? Did no one tell him? His reply was given within a month of having been requested by the Association to receive a deputation, and he should have been aware of it. Let us say it is a contradiction in terms. We are now told that the Prime Minister is thinking about the deputation, and has asked to be sent a memorandum.

I doubt whether there are any great hopes of a delegation coming down. I do not think that enough people outside this building have realised that once a Government such as this spell out that it is determined on three major points—disengagement, reduction in direct taxation and reduction in Government expenditure—there is little hope in asking them to invest more money in the intermediate areas, or to provide more money for investment grants for the extension of development areas.

I believe that the time has come when we in the regions will have to say that for the length of time this Government last we are on our own; that we must look, not to Whitehall and Westminster but to the people at home. We have to look to the control of local authorities. We have got control of many of the cities, and if we can get control of Liverpool next year we must use local authority resources to help solve our own unemployment problem.

Instead of our trade unions looking to the Government to nationalise where redundancies are taking place, we must ask them to invest in their own areas. There seems to be no reason why, for example, a small print works that might otherwise close should not be taken over by the unions and others. Let us do some organising, and takeovers and competing. Let us look at some of the major organisations in the region and say that it is time we cleared up the mess, of dereliction and waste. Much more could be done by Press, radio and television in the North-West to sell the advantages of the region, even though this means extra on the rates here and there.

There is much that we can do in the regions. We should be helped by the Government, but it looks as though we shall not be. Therefore, until the time comes when we can get rid of the Government, we must do a great deal more for ourselves. In view of the Government's record a censure Motion was never more deserved.

7.47 p.m.

Mr. John Hall (Wycombe)

Although the hon. Member for Liverpool, West Derby (Mr. Ogden) went a little over the voluntary ten minutes we are now setting ourselves I do not complain of it, because he spent some time in quoting some very good extracts from the Conservative election manifesto. I remember the late Nye Bevan saying, "There is no such thing as bad publicity; all publicity is good publicity." I am therefore quite delighted that the hon. Gentleman should have quoted as he did.

For some months before the 1970 election I spent some time talking to my constituents on economic affairs, and drew their attention to the grave situation which was developing. As long ago as October, 1969, as I mentioned in an intervention in the speech of my right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell), I had forecast that we would at least have three-quarters of a million unemployed by the midsummer of 1971. I also forecast, not the rate of inflation from which we are now suffering but a rate of increase in wages which is not too far from the present rate. I mentioned these things to my constituents right up to the actual time of the election, and I said that this was the situation which any future Government, of whichever party, would have to face.

I said, "If we have a Conservative Government, although you are appreciating what I am telling you now, I will bet my bottom dollar that within a few months of our coming to power, despite the fact that we have told you that our programme is for a five-year period, you will expect that the things which we are talking about will happen in the first 12 months. You will be expecting the sun to rise twice a day with a Conservative Government."

We have not been disappointed. This has been precisely the reaction. Although we said in our manifesto that we were facing a very difficult and serious economic situation that would take time to cure, people are expecting, naturally and understandably, a cure within the first 12 months. This does not detract from the grave feeling of anxiety all of us feel at the problems which inflation is creating for everyone, especially those who cannot protect themselves by increasing their incomes, whether wages, salaries or any other form of income. It is to that problem that most of the speeches during the debate have been directed.

One of the unfortunate consequences of a censure debate, but nevertheless unavoidable, is that the Opposition spend most of their time censuring. That is natural; one does not complain about that. But it produces a reaction on the other side, who, therefore, tend to attack the Opposition and to draw attention to the defects of the Opposition when the Opposition were in power. There is a to-and-from of accusations and a "you too-ism" which does not take us very far. The situation we have faced for a very long time is much too serious to be the subject of constant party bickering.

We have had some discussions about unemployment. My right hon. Friend the hon. Member for Wolverhampton, South-West rightly said that one of the problems arises out of the restructuring of industry. This is true. This is not only due to the realistic actions taken by the Government but also to the impact of higher costs and wages upon industrialists. What happens, for example, when industrialists are faced with very high wage demands to which, for one reason or another, they have to accede? The first thing that happens is that they start to shake out the under-employed. Throughout all our industries over many years there have been a number of underemployed people.

The next thing is to streamline production or to introduce more labour-saving machinery to produce the same result with fewer people. The inevitable consequence is that a rise in labour costs adds to the unemployment problem. The only way to avoid that, if it is possible, is to pass on the increased costs to the market. But this is becoming more and more difficult especially in the overseas markets. I speak as someone whose companies export a great deal. We find that we cannot pass on increased costs to any extent in overseas markets because we should lose those markets. We, in company with many others, have to find ways of dispensing with labour. This is a difficult and serious problem.

I hazard a guess that at present probably nearly 25 per cent. of the productive capacity of Britain is not used. We have this spare capacity which is not taken up. For that reason, I tend to support some degree of reflation. I say "some degree" advisedly because we ought to be very careful at this stage, before all the effects of the Budget measures have been felt, not to reflate too quickly and too much. With nearly 25 per cent. of production capacity not used, we shall not cause too much danger by a moderate degree of reflation to take up some part of that under-used capacity.

I am as puzzled and bewildered as any Member of the House by the present trend of events. I find it as difficult as Lord Robbins has found it, in his article, to suggest a cure to the inflationary problem with which we are confronted. But it is our duty to examine constructively together some ideas, even if they appear to be revolutionary and not immediately acceptable. The T.U.C. has advanced a proposal. I agree with some hon. Members who have spoken that the Government and the T.U.C. should be having conversations in the near future to see whether there is any point of agreement or meeting of minds.

The T.U.C. has suggested, amongst other things, that in return for more moderate wage demands, they would like to see cost-of-living clauses written into their agreements. There is a superficial attraction in that. It can, however, be very dangerous, for reasons which would be obvious to most hon. Members, unless we are to accept continuing inflation of a fairly high order as being something from which we are always likely to suffer.

There is a school of thought that believes that we should let inflation have its way, providing that we can find some way of cushioning the effect upon the fixed income groups and providing that we can compensate for the effect upon overseas markets as costs rise. This could be done fairly easily in the case of State pensioners. By increasing taxation or through buoyant taxation revenue, the Government are able to increase State pensions. It is much more difficult to deal with people on occupational pensions or living on their own savings. But even that could be done by an introduction, for instance, of the negative tax system, which would take into account people's changes in income due to inflation. We could take into account the effect on overseas markets if we adopted the floating exchange rate. I am very much in favour of a floating exchange rate, even apart from this particular proposal. We could live with inflation if we did a number of fairly drastic things, but they would be difficult to do.

There are those who would like to see the prices and incomes policy restored, despite the experience of the past. Though I have no ideological objections to a prices and incomes policy, I am against it because it will not work. It has not worked in the past and I cannot see circumstances in which it would work in the future for any length of time.

It is true that we could have a short-term respite by imposing an overnight freeze on prices and incomes generally, and that would work for a short period, perhaps six months. That might give sufficient time to find some longer-term solution, but unless we are fairly certain that we have a possible long-term solution to the problem which would justify imposing a very short-term freeze, we could make the situation much worse in the end if we imposed a freeze and found that inevitably, in the end, it leaked around the edges. If we then let it go, as we would ultimately be bound to, we would have a spate of frustrated wage demands and price rises such as we have experienced since the end of the last such policy.

Another suggestion advanced is that having arrived at what one believes to be an appropriate wage increase, nationally speaking—perhaps as a percentage of the growth of the gross national product—if any industry gives an increase which is above that, it should be taken away by taxation, either directly on the employer or on the employee or on both. That idea has been floated from time to time by various reputable economists, but has been dismissed because it is thought too difficult to implement. One can see the difficulties of implementing it, but it is by no means impossible. It is fairly easy to do it with employers, but much more difficult with the individual employee. But with a little ingenuity, if I were put to it I should probably suggest some way of doing that as well.

All these ideas should be examined very carefully. In an ideal world, I suppose that we ought to be able to arrange an agreed policy between the trade unions, industry and the Government whereby wage increases, which not only compensated for an increased cost of living but also gave some additional benefit, an increase in the real standard of living as well, would be arranged by saying that once the country had achieved an increased gross national product, part of that increase would go to increased wages and benefits generally. It would be possible to do this, but it would require a complicated and elaborate structure to enable it to be done. The increase would have to be agreed between the trade unions and shared out on an equitable basis.

In some cases it would be easy to do this, because it would be related to their productivity. In the case of others which are in the service industries or in the professions it would be much more difficult to arrive at a proper solution.

However, it is a possibility which should be examined. We are not spending sufficient time on examining sometimes controversial and perhaps rather revolutionary ideas. On a very small issue, something which might encourage industries to think even more seriously than they are about increasing productivity and reducing unit costs, perhaps we should divert attention from exports with the Queen's Award and honours in the Honours List for doing well in the export market, which I have always thought was slightly irrelevant, and switch it to companies which increase productivity, decrease their unit costs, and are able to show real industrial efficiency. This might be an encouragement to management to look even more closely at the way in which it manages its affairs than it does at present.

In conclusion, inflation looks like continuing for another 12 months at least and possibly for 18 months, if nothing is done. The rate of wage increases, despite my right hon. Friend's statement—I know that he has some justification for saying what he did—appears to those of us in industry not to be slowing down appreciably. Although there may be a temporary pause now, I hazard the guess that over the next 12 months there will be a revival of very high demands and I do not believe that in the end the rate of increase in wages in industry will be any less than it has been over the past 12 months.

Inflation is creating despair in the hearts and minds of many thousands throughout the country. Even those whose husbands have had wage rises which enabled them to more than keep pace with the rise in the cost of living are affected psychologically on entering the shops day after day and seeing that the price of everything has risen. There was a time when people entering supermarkets and seeing a price label on an article knew that the price would be undisturbed for a month, anyhow. Now a price tag does not remain undisturbed for a day.

These are events which to a large extent appear to be outside the control of government. I make no party point of this except to say that if the Opposition were in government now they would be facing exactly the same problem as the Tory Government are now facing and I doubt very much whether they would have any different approach from that of the Tory Government, except that a Labour Government would probably increase taxes instead of decreasing them. We have to find an answer to the desperately important problem of inflation. It is the most important single problem facing Britain, quite apart from that of entering the Common Market which might raise quite different problems.

Finally—my time is nearly up; I want to speak for only 10 minutes—if over the next three to six months—even as long as that—it is shown that the policies which my right hon. Friend is following and which I entirely support are not working as rapidly as they should and it appears that my right hon. Friend's belief in the good sense and wisdom of the people as a whole and of trade unions in particular is not quite as justified as he thought it was, I think that he will have to take more drastic action than he has taken, even if only as a temporary measure whilst a long-term solution is found. Only in such circumstances would I be prepared to accept on a very short-term basis, any restriction or freeze upon prices and wages, on the one understanding that we had a firm policy in our minds as to how we were to deal with the matter in the long term and that we wanted a breathing space to be able to achieve that. I greatly hope, that this will not happen.

I hope and believe as an act of faith that the policies my right hon. Friend is following will turn out to be correct and will produce the answer. I am certain that he has the nerve to face the unpopularity which policies like this will always attract. I am certain that he is right to follow, at this stage, the policy he is now pursuing. He will have my support in the Lobby tonight.

8.5 p.m.

Mr. William Molloy (Ealing, North)

Before the hon. Member for Wycombe (Mr. John Hall) came to his second or third from last conclusion—I forget which it was—he said that the probability was that if we were in government—the quicker we are the better—we would not do anything different from what the present Government are doing.

I can tell the hon. Gentleman that we would not be attacking the school children by increasing the price of their meals. We would not be robbing the primary school children of their milk. We would not be increasing the price of travel for children going to school. One of the fundamental differences between the Conservative Party and the Labour Party is that the Labour Party realises that the nation's greatest asset is its school children.

The hon. Member for Cornwall, North (Mr. Pardoe) chided my right hon. Friend the Member for Stepney (Mr. Shore) and some of my right hon. and hon. Friends on the Front Bench for having disputes and discussions on the question of entering the Common Market. It is right and proper that we should have discussion and argument about such a momentous decision. Those in the Liberal Party, without any discussion or examination, were quite prepared to get out their kneepads and creep in on any terms.

There now seems to be a little argument going on in the Liberal Party between the hon. and learned Member for Montgomery (Mr. Hooson), the hon. Member for Cornwall, North, the right hon. Member for Orkney and Shetland (Mr. Grimond) and the right hon. Gentleman who at the moment leads the Liberal Party, the right hon. Member for Devon, North (Mr. Thorpe). It is about time that these issues were discussed honestly and properly. I sincerely hope that we on this side will ensure that we have the biggest argument ever on the question whether Britain should enter the Common Market.

I turn swiftly to discuss some of the terms of the Motion. I shall concentrate on that part of the Motion which refers to the Government's "betrayal of their specific electoral promises on prices and unemployment".

Most people are under the correct impression that under this Government everything rises except the rain and that soaks you. In addition to all the economic arguments that we have had, there is the fundamental principle as to whether a party should be allowed to continue in government when it has been guilty of such enormous frauds. The House will doubtless recall that when the Tory Party won the General Election we saw on television some people who were genuinely happy. It was a year ago. They were crying outside No. 10 Downing Street, "We want Ted". Today they are still crying, "We want Ted" but they are adding "and his Government crew right out of office as quickly as possible".

When the Prime Minister accepted office he said categorically our purpose is not to divide this nation but to unite it. One of the first methods the Tories chose to unite the nation was to provide massive tax relief for the wealthy. Then they deliberately set out on a policy which has undoubtedly created unemployment for the ordinary folk. They deliberately set out on a policy which has shown complete contempt for the pensioners. They deliberately set out on a policy to divide those who work in the public sector from those in the other sector. This is what the Prime Minister says in uniting the country. The Tories have indulged in other uniting efforts—thieving the children's milk and increasing the cost of their school meals.

There can be little doubt that one of the biggest confidence tricks ever used to deceive the British electorate was, "We will bring down prices at a stroke". Looking through the Tory Party manifesto it can be seen that it is well stocked with pious frauds. One Tory leader sincerely wanted to unite the nation. He was a man who is often quoted by the present Prime Minister as a great Tory statesman, as I believe he was. He was Benjamin Disraeli, and when he discovered what sort of a party he was leading he still had the courage to regard it as organised hypocrisy.

Mr. Tapsell

When Benjamin Disraeli said that he was not leader of the party he had not then joined it.

Mr. Molloy

That is probably true, but what he discovered at the end of his days is that he had not done much to get rid of the hypocrisy.

Mr. John Hall rose—

Mr. Molloy

The hon. Gentleman spoke about his 10-minute speech. It was a very old-fashioned ten minutes. It had about three or four conclusions which added ten minutes to it.

I hope that the mass media will note that if the present Government had suffered the abuse and attacks which my right hon. Friends received when they were in office people really would be able to see what was going on. If my right hon. Friends had committed the crimes which have been committed in the past 12 months by those on the Treasury Bench there would have been the biggest hue and cry the nation has ever known.

I am convinced that my right hon. Friend the Leader of the Opposition was one of the most maligned Prime Ministers we have had since David Lloyd George. My right hon. Friend the Leader of the Opposition and my right hon. Friends the Members for Blackburn (Mrs. Castle) and Birmingham, Stechford (Mr. Roy Jenkins) inherited a bankrupt economy. Just as in 1946 Aneurin Bevan was determined to introduce a National Health Service, despite the fact that we were almost a bankrupt nation, having gone through one of the toughest and costly wars in the history of man, so one of the first things we did in 1964 was to give old-age pensioners, despite the massive debt that we had inherited, one of the biggest rises that they had ever had.

Then we raised the status of the health services to their highest ever level. More hospitals were built in Great Britain in the six years of Labour Government than in the 13 years of Tory rule. The entire programme of refurbishing British industry had to be carried out, decisions had to be made, but in the end slowly and surely the Government were pulling the country together. There was a correct attitude to education, acknowledging that children are our greatest asset. We would be scoffed at by some hon. Members opposite if we pointed out that under a Labour Government we were spending more money on education than ever before.

The supreme crime of my right hon. Friend the Leader of the Opposition and my right hon. Friends the Members for Blackburn and Stechford was that they inherited from the businessman Tory Government a national debt of £800 million and had the nerve and audacity to change it into a national surplus of £600 million. For that they will never be forgiven by the Tory Party or anyone else who has dealings with that party.

The quicker that everyone realises that the present occupants of the Government Front Bench are dangerous the better it will be. The Chancellor has made a number of apologetic speeches in this House but today's was one of the worst—or one of the best, depending on how we look at it. We have only to look at the excuses we have had as to why prices are rising. Everyone knows that the Prime Minister said that the Tory Party had examined all these things and he stated categorically that prices would be reduced at a stroke.

Mr. Arthur Lewis (West Ham, North)

That was a joke.

Mr. Molloy

It might have been a joke at the time. The Minister of Agriculture, who was P.P.S. to the Prime Minister when he was Leader of the Opposition, might have thought it was a joke. He probably did and perhaps he thinks that the joke has gone far enough, hence his statement on B.B.C. when he said he did not think that people really believed the Prime Minister when he said that. The Minister of Agriculture is now know as "Prior the Prices"—the enunciator of the new dictum of Tory politics—how to be honest—afterwards.

The Secretary of State for Trade and Industry has many crimes which can be laid at his door. He has made his contribution to rising prices and unemployment. I understand that in Wales he is known as "Davies the Death". He is the appointed funeral director of British industry. He has threatened the motorcar industry with the removal of import tariffs, he has attacked the publicly-owned airlines, he has traied to savage the regional industrial policies introduced by the Labour Government, and we all know what has happened to Upper Clyde and British Steel. He is following a policy which is guided by one dictum, "If it's British bust it."

The Prime Minister cannot escape blame. He has many heavy responsibilities. It is said of the Roman Emperor Caligula that he appointed his horse as a pro-consul. The crime of the Prime Minister is that he has appointed a bunch of mules to the Front Bench.

I hope that there will be argument about entering the Common Market and I hope that the people of this country realise that it would be unwise to enter the Common Market with this Government. I would advise the people of this nation that they would be taking a grave risk going into Shepherd's Bush market with this lot, let alone the Common Market.

The Labour Party, too, must face up to its responsibilities. We have a responsibility to return to the primary tenets of Socialism, which we have always held will provide the solutions to our problems. The quicker we enunciate more policies of public ownership, the quicker we say that we do not believe that the profit motive can get us out of our troubles the sooner will we be able to get down to the job of providing an alternative Government. Not only do we have to be more efficient than the Tories, we have to be more realistic and follow our Socialist faith. A few hon. and right hon. Gentlemen opposite believe that an extreme form of Conservatism is the right way to tackle the problems of the country. Some of us on this side believe that our party has not yet fully enunciated and embraced the principles of democratic Socialism as we understand it. We should do so, and then lay out a programme along those lines. In so doing, we shall not only make a better nation and unite it, and enhance the standard of life of every man, woman and child in Britain, but we could at the same time set a model for all mankind.

8.20 p.m.

Mr. Wyn Roberts (Conway)

It is only a small consolation to realise that at least we in Britain are not alone in the world in having to face the dual problem of rising prices and unemployment. I have here the Report of the O.E.C.D. Working Party on "Present Policies Against Inflation" in no fewer than 22 countries. In practically all of them there is the same problem of rising prices and increasing unemployment.

Mr. Eric S. Heifer (Liverpool, Walton)

It is funny that they do not have British workers over there.

Mr. Roberts

We come to that in a moment.

All those countries are suffering from a particular kind of inflation. I do not think that there is any disagreement between the two sides of the House that it is cost inflation as opposed to demand inflation. "Cost inflation" is a very imprecise term. It can be used to describe a typical phase of the inflationary cycle when costs are rising faster than prices. It can cover the lagged relation between demand pressures and prices, resulting from the ebb and flow of inflationary expectations, or it may refer to forces pushing up costs and prices which are independent of present or previous levels of demand. That last category could even include the inflow of money referred to by my right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell).

There is probably something of each of those three ingredients in our present situation. But of one thing I am fairly certain, that the mixture from which we are suffering is not precisely as it was before. We are all agreed that demand pressures are now down, and so are the so-called inflationary expectations. The inflationary psychology is undoubtedly broken. People are generally more restrained in their spending, and not simply because of higher prices and because there is less money about. It is not so long ago that the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) was saying that there was too much money about. That situation has changed. There is now not enough money about. There has been a realisation by the public that we could not go on as we were going on, getting more without doing more.

Perhaps the uncertainty of the present employment situation has also contributed to restraint. People are more inclined to save than they were, not only because rainy days are now a real possibility but because they know that the present Government will do their utmost to preserve the value of money, whatever the fall in the purchasing power of the pound in the past 12 months. My point is that the lessening of demand pressure is a valuable gain, and the Government must be very careful not to throw it away if and when they succumb to the reflationary pressures to which they are subject.

The existence of the need for reflation is undeniable, if we are to judge by the C.B.I.'s latest industrial trends survey, which shows that 81 per cent. of the 1,304 respondents thought that the most important limitation on their output over the next four months would be lack of orders. As the lack of demand seems to afflict the manufacturing industries particularly, there is a strong argument for using the regulator. But again I urge my right hon. Friends to beware of the confusion that may arise in the public mind and to beware of the return of demand inflation. If it were added to cost inflation, we could face even worse trouble than we face now.

Perhaps what we need is what is called smoother demand management, better demand management. I am sure that the Government realise this, and are giving the matter the urgent attention which it deserves. Not enough is known soon enough of the effects of Government measures on the economy. Our anticipation of those effects must be improved. I understand that it can be as long as nine months before the full effects of budgetary changes can be seen.

I began with a three-part definition of cost inflation which included the thesis that we are now in the phase when costs are rising faster than prices. We were told last week—indeed, as early as last January—that world prices for certain basic food commodities had risen by no less than 7 per cent. over the year. I looked up the similar increase in the prices of materials, home-produced and imported, used in non-food manufacturing in this country. The increase was 5.6 per cent. between May, 1970, and May this year, mostly of imported materials. That is very significant, and must be taken into account in any analysis of current price rises.

We know, too, that average costs per unit of output have increased. I have not got exactly parallel figures, but I know that between the fourth quarter of 1969 and the fourth quarter of 1970 labour costs increased by as much as 11.7 per cent. We also know that 84 per cent. of the companies involved in the C.B.I. survey said that they had suffered from increased labour costs, and 79 per cent. said that they expected to suffer from them in future. If those costs are mostly due to wage increases, we are bound to be critical of those companies which do not appear to share the Government's determination to keep wage increases down to manageable proportions. What they are saying in effect is that they are prepared to accept less competitive prices for their exports, and presumably in the home market, for the sake of being able to accede to wage demands of such an order that their present level of output, employment and investment will be reduced. That is not a responsible attitude commercially or in any other sense. It is a defeatist attitude on the part of the companies concerned and a short-sighted attitude on the part of the unions involved.

I am glad to see from yesterday's newspapers that the T.U.C. may advise moderation in wage claims, but I am dismayed that it must wait until after the Government have announced re-flationary measures. The two should surely go together in the interests of all. If reflation is urgent, so is moderation in wage demands. If the T.U.C. cares about unemployment, it should surely take the first step and not wait for any reflationary measures which the Government may take further to those outlined in the Budget and coming into effect next month.

I firmly believe that it is not and never has been the Government's policy, any more than it was that of the previous Government, deliberately to create unemployment to ease demand. We know from our own experience and from that of the United States that these days there can be rising prices in the middle of a slump. Unemployment is an inevitable consequence of steps taken to reduce demand and cost inflation. When the money supply is squeezed, people are squeezed out of work, too.

What I find reprehensible is that the unions are now lending a hand in this process and are failing to take all the steps they can and ought to take to reduce redundancy and unemployment by easing cost pressure. If we are to apportion blame in this matter, they must take their share.

It is abundantly clear that one of the main contributory causes of our present situation is the smallness and inadequacy of our home market. Of the firms replying to the C.B.I., 63 per cent. said that they were working below capacity in a situation in which demand pressures had only just about been brought under control. It could be argued that if we had a larger home market, as we could have if we joined the E.E.C., we should not have reached the saturation point of existing demand so quickly. The whole process would have been much slower and we should not have been faced with the necessity for precipitate measures.

I end by reassuring hon. Members opposite that I am as deeply concerned as any of them about prices and particularly about unemployment. Steadier prices was one of my main election platforms, as was resumption of growth. But we shall never get growth until it is realised that what we are now suffering from is cost inflation and that wage costs play a significant part in its causation. There is no reference to wages in this censure Motion, and its very absence is particularly eloquent.

8.33 p.m.

Mr. Eric S. Heffer (Liverpool, Walton)

The Chancellor of the Exchequer today repeated in essence a speech which we have heard before. It is like a cracked record which is stuck at a particular point and goes on and on. The essence of the argument is that the fault for both unemployment and higher prices lies with the trade union movement and the wicked workers in industry who want better wages and conditions, and that, but for them, conditions would be satisfactory, the problems would be solved, the economy would be booming and going ahead at a thundering pace.

That view is not universally accepted, not even by every hon. Member opposite. I was interested in the view of the right hon. Member for Wolverhampton, South-West (Mr. Powell). I am not sufficiently knowledgeable about economic matters to know whether his philosophy about the money supply was sound and whether the money supply is a serious consideration. Some of my hon. Friends who understand these matters assure me that it is not as serious as the right hon. Gentleman suggested, but others say that it is.' I do not understand whether it is or not, but I was fascinated by the point.

Right hon. Gentlemen on the Front Bench are trying to deny that they are basically responsible for the rise in unemployment. The old argument used to be that unemployment was like a hurricane and beyond the control of normal, natural forces. There was a gentleman by the name of Keynes, who was not a Socialist but a left-wing Liberal, who pointed out that it was not beyond the control of human beings to deal with unemployment and that it was essential for the Government to intervene in economic affairs by using the regulator and other methods.

All Governments since the end of the war have accepted the principle of full employment, except for the last Government, part way through their period of office, and now this Government in a blazing manner. The Labour Movement believes that we should get back the principle of full employment. I hope that tonight it will be spelt out in no uncertain way that a future Labour Government will be dedicated to the principle of full employment and will deal with this problem in the way in which it was dealt with by the Attlee Government.

The arguments advanced by right hon. Gentlemen on the Government Front Bench are absolutely phoney, and they know it. It has been said that the Government are dealing with the problem of industrial relations by the Industrial Relations Bill and, in the meantime, have diminished the number of strikes. It is true that the number of strikes has diminished, but the number of lost hours has gone up. It was said that that was in the first quarter, and that in the second quarter both the number of strikes and the number of hours lost went down. If strikes were responsible for unemployment, the economy should be booming now and should be going ahead at a tremendous rate, because the number of strikes and the number of man hours lost have gone down. Hon. Gentlemen opposite know that strikes have nothing to do with our present economic problems and with the policy being pursued by the Government.

The hon. Member for Conway (Mr. Wyn Roberts) made an interesting point when he said that he had just read in the O.E.C.D. report on inflation that 21 other countries were suffering from inflation. I could not help but call out to him that they did not employ British workers. I thought that the problems of cost inflation and unemployment were to be found only in this country and did not exist in all the other 21 countries. But, of course, those countries do not employ British workers. Cost inflation exists not only here but in every advanced country in the world.

This leads me to the important point made by the right hon. Member for Wolverhampton, South-West. We are going through a second technological revolution; that is absolutely right. He referred to it as structural changes in our industrial society.

We have gone through such technological changes in the past. They have invariably meant, with the introduction of new machinery and new techniques, that workers have been thrown on to the streets. I do not disagree with the right hon. Gentleman about that. It is happening again at the moment. I recall here what Walter Reuther once said to one of the Ford family when he was visiting a factory. Ford said to him, "Look at all this automation. We shall not need any workers." Walter Reuther replied, "It is true that you will not. But you cannot sell your motor cars to machines. You can sell them only to workers, to people."

It is true that there is a second technological revolution. That means not that we abandon the workers. It does not mean that we say, "This will sort itself out and it does not matter what happens to the workers". It is precisely at that point, because of the technological revolution, that we have to deal with the problems of the workers involved. That means that Governments have to concern themselves with what happens to the workers. It is our concern. But this is the difference between the philosophies of the Conservative Party and of the Labour Party. We are concerned with what happens to the workers. We are concerned to see that they are given alternative employment. We are concerned to deal with the problems in a positive way. We argue that they have to be dealt with in a planned socialist way.

The Government must carry out immediately a policy of some reflation and not wait until the figures have been looked at in ten days' time. Ten days does not seem a very long time but the quicker we get reflation going, the better. That can be done through cuts in purchase tax and the removal of a great number of restrictions on hire purchase. There must be cuts in the working hours of workers, particularly in those industries involved in the technological revolution. That is absolutely vital and it is time that it was advocated by Parliament.

I shall not talk about regional development and Merseyside in particular because my hon. Friend the Member for Liverpool, West Derby (Mr. Ogden) has done so effectively. But we need the direction of industry into such areas. We need a much more effective use of industrial development certificates. I hope that a future Labour Government and even this Government will be prepared to introduce and set up new Government industries—labour-intensive industries—in the under-developed areas of this country, which might be linked in some way with under-developed parts of the world so that a positive policy of development generally could be operated.

We also need greater resources for training and retraining in our development areas. One of our problems is the mass of semi-skilled and unskilled workers in such areas. Many problems could have been solved if sufficient skilled labour had been available. But it was not available because of lack of educational opportunities. On Merseyside, we need a public works programme immediately in order to get our people back to work. On Merseyside, 40,000 people are unemployed. In Kirkby, one-fifth of the population is unemployed, particularly amongst the youth and those over 45 years of age.

It is a crime that good, honest working people who wish to work are thrown on to the scrap heap. The responsibility rests with the Government, and the Government must do something about it.

8.45 p.m.

Mr. Peter Tapsell (Horncastle)

Not surprisingly, the one point on which we are all agreed is that we are suffering from very serious cost-push inflation. Many other countries also suffer from it, but, in broad economic terms, what makes it particularly worrying for us is our low rate of increase in production. This means that our net rate of inflation is higher than any of our leading industrial competitors. It means also that the competitive advantage we gained overseas as a result of the 1967 devaluation is being whittled away steadily. Unless the rise in our costs and the rate of the rise in our wages can be moderated quickly, we shall soon be back in our familiar balance of payments difficulties. Then those huge sums of hot money to which my right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) referred, having flowed in during the past year, will flow out even more quickly. It will be interesting to see whether the outflow has that moderating influence on inflation which, one would suppose, is the corrollary of my right hon. Friend's argument. I doubt it very much.

It is vital that the rise in wages should be brought into line with the rise in production. There is no longer time for a long, hard slog. Fairly quick results are a national necessity.

I say that for three reasons. First, if wages continue to spiral, so will prices. That will gravely impair the chances of rallying public opinion behind a determined advance into Europe.

Secondly, if our net costs continue to rise more rapidly than those of Western Europe, we shall not be able to afford to enter the E.E.C. on 1st January, 1973, without a further devaluation of sterling. In this context, it was significant and a little disturbing that the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) said that he no longer attached the same importance to the maintenance of the sterling parity as he had when he was Chancellor of the Exchequer.

Thirdly, rising prices are so unpopular that the authority of the Government will become gradually undermined unless they are soon restrained.

This is where I part company with my right hon. Friend the Member for Wolverhampton, South-West, because I believe that my right hon. Friend the Chancellor of the Exchequer deserves credit for refusing to listen last autumn and since to those siren voices which urged on him so persuasively a much tougher restriction of the money supply as a solution to our problems. If the money supply was tightened sufficiently, I accept that the inflationary spiral would be brought to a halt. I see the logic of that. But the result would be achieved at an intolerable price in terms of the level of unemployment and the rate of bankruptcies.

The Government can point to a slowing down of the rate at which wages have been rising recently. As a result of the policies that they have pursued in the past year, we are seeing settlements falling in the 8 to 10 per cent. range instead of the 10 to 15 per cent. range. I hope that my hon. Friend the Member for Wycombe (Mr. John Hall) was wrong when he said that this slow-down is only temporary and that in the coming 12 months we shall see as high a rate of wage inflation as we have in the past 12 months. Whether wage increases remain in the 8 to 10 per cent. range or get back to the 10 to 15 per cent. range, it is clear that wage settlements are all far too high and in excess of any increase in production that we would be likely to achieve, even if we gave a considerable stimulus to the economy in the next fortnight.

For the reasons that I have given I believe that something more is needed than the present moderate restriction of the money supply combined with relative restraint on wage awards in the public sector, which I take to be the Government's present policy. Since I reject the more Draconian use of the money supply I welcome the more friendly comments that are now being made by many of my hon. and right hon. Friends about a voluntary incomes policy. I believe that I am right in saying that all the six still living former Conservative Chancellors of the Exchequer believe that an incomes policy is necessary. Last week in the House of Lords, in the same debate in which Lord Boyle made his excellent maiden speech there, Lord Amory said that the fact that incomes policies had failed before was certainly no reason, in this important sphere, for not making further attempts to make them work. He concluded by saying that if we could not achieve a successful voluntary incomes policy the future of this country was indeed bleak.

I echo those comments of Lord Amory. I have always argued, as has my hon. Friend the Member for Rutland and Stamford (Mr. Kenneth Lewis)—even when we were in a minority of two—that a voluntary incomes policy, under which the Government, the trade unions and the C.B.I. get together to co-operate in the moderation of wage demands, is absolutely essential to our economic well-being.

Despite the extremely high and worrying level of unemployment in my constituency, which is a rural constituency—where wages are well below the national level—we have had no strikes of any kind. Last winter the rate of unemployment on the coastal strip of my constituency was 11 per cent. and children leaving local grammar and secondary modern schools are finding great difficulty in getting work—this underlines the social injustice of the present situation. The people who suffer most are not the people whom the Government naturally wish to restrain. I was therefore glad when my right hon. Friend the Member for Mitcham (Mr. R. Carr), winding up the last debate on unemployment, reaffirmed the Conservative pledge to which I attach the highest importance, namely, that the maintenance of a high and stable level of employment is a prime aim of our policy.

My right hon. Friend also made it clear that there is no intention to try to use unemployment as a deliberate weapon to restrain inflation. That is not only morally and socially right, but it makes economic sense, because you do not restrain inflation by allowing unemployment to rise. Experience in America in recent years seems to confirm that.

Despite the extremely high and worrying level of unemployment there is not much scope for more than a very modest measure of further reflation, over and above the measures announced in the Budget—now taking effect—until wage awards are running at a much lower level. If we go for more than a very moderate reflation at this stage our balance of payments position will soon become critical. The key to Europe, to stable prices, to full employment, to industrial efficiency, to rising living standards and to public support for the Prime Minister's "quiet revolution", is the level of wage awards over the next two years.

This, in turn, depends on whether a voluntary incomes policy can be achieved. I do not believe that it will be achieved merely by the continuance of existing policies. I am a strong believer in the politics of moderation and reconciliation, handed down to us by Disraeli, by Baldwin and by Harold Macmillan. Once the highly necessary but inevitably controversial Industrial Relations Bill is on the Statute Book I hope that we can strive, in the industrial field, for rather more consensus and rather less conflict. Indeed, I would hope that we could strive for that over the whole national sphere of politics.

We all have to live together in this crowded island. If we are to enter Europe and take full advantage of the opportunity which this presents, we must do so in a national mood in which the proud Tory belief in one nation is seen to be an aim for which we are actively striving.

Last weekend, the Prime Minister rightly reminded us that since the Second World War successive Governments have pursued four objectives of economic policy: steady economic growth, a viable balance of payments, stable prices, and full employment. In this context it is perhaps worth recalling that the period when we were most successful in achieving all four simultaneously—the Chancellor referred to this in his speech—was from 1952 to 1955, which was the heyday of so-called "Butskellism". Winston Churchill was Prime Minister, R. A. Butler was Chancellor of the Exchequer and Walter Monckton was Minister of Labour. Respectively, in those years, those three men gave this country inspiration, moderation and conciliation. I believe that my three right hon. Friends, who now hold those positions, are peculiarly well-equipped to provide this country at this time with those same three qualities. I believe that those three qualities of inspiration from the Prime Minister, moderation from the Chancellor of the Exchequer and conciliation from the Secretary of State for Employment and Productivity, have a most important part to play in our national affairs.

8.57 p.m.

Mrs. Barbara Castle (Blackburn)

First, I should like to congratulate my hon. Friend the Member for Goole (Dr. Marshall) on an excellent maiden speech. Everyone who heard him admired his fluency and combination of moderation of tone with firmness of purpose. Considering the alarm which he must be feeling at the rise of 1.7 per cent. last month in hard core unemployment in Yorkshire and Humberside, he did indeed restrain himself manfully.

I was particularly pleased to hear my hon. Friend refer to the benefits of the M62. I modestly remind him that as Minister of Transport I was responsible for extending it to Hull. Therefore, I hope that in future there will be a great basis of solidarity between us.

We have all listened with immense interest to the hon. Member for Horn-castle (Mr. Tapsell). He took up a refrain which has wafted through the benches opposite during the debate with a kind of haunting nostalgia: "Oh dear, we did leave that faithful maidenly prices and incomes policy, but perhaps we were wrong and perhaps we can woo her back again."

The hon. Gentleman rather touchingly said that perhaps there was a possibility, when the necessary Industrial Relations Bill was out of the way, that we might get back to policies of moderation and conciliation à la Walter Monckton. Walter Monckton, for whom I had a very great respect, must at this moment be turning in his grave at the contents of the Industrial Relations Bill which the Government are forcing through Parliament, and, indeed, at the policies which we are debating today.

The hon. Member for Horncastle was touchingly naïve when he professed his belief that the Government were not using unemployment as a deliberate instrument of national policy. If he can believe that, then, dear me, he really can believe anything.

It is appropriate that the Secretary of State for Employment and Productivity should be winding up the debate tonight. Certainly it is true that this is a censure debate. In a censure debate on the Government's mismanagement of the economy, one would normally expect the Prime Minister at least to have attended, if not to have spoken in the debate. We were informed by the Chancellor of the Exchequer, by way of excuse, that the Prime Minister was seeing Signor Moro——

Hon. Members

Signor Colombo.

Mrs. Castle

It does not make any difference to my argument. When my right hon. Friend was Prime Minister, on one occasion he was brought from his talks with M. Pompidou to take part in a censure debate that was being launched by the then Opposition. The present Prime Minister is so besotted with the Common Market as the cure for all our ills, which he is incapable of solving within a domestic framework, that he cannot spare even an hour of his time to discuss the economic difficulties from which the people of this country are suffering. I warn the right hon. Gentleman that the country will not fail to notice his order of priorities.

If we cannot have the Prime Minister here for the debate, it is right that the Secretary of State for Employment should be put up in his stead, because the right hon. Gentleman has debased his Department into a creature of this Government's disastrous economic strategy. The right hon. Gentleman used to enjoy taunting me for not taking part in unemployment debates, but unemployment under the Labour Government was of an entirely different character, and I shall enjoy demonstrating to the House why that was so.

As my right hon. Friend the Member for Bristol, South-East (Mr. Benn) said in a brilliant speech during our last unemployment debate, the change in unemployment that we are now witnessing is not only a quantitive change but a qualitative one. Certainly the level of unemployment was a matter of serious concern when we were in Government. We were not happy, content or at ease with unemployment at over half a million, but it was an entirely different problem. Our problem was to find a cure to the maldistribution of activity between the different regions. It was largely a regional problem. It was also a problem of transforming the structure of our industry from its emphasis on the old, declining, traditional industries to the creation of modern ones. It was therefore appropriate that the subject should be dealt with by the industrial and regional development Ministers.

Under this Government, unemployment has become a nationwide catastrophe. It has become one of the major weapons of economic policy. The right hon. Gentleman, who is left behind by no one on the Government Front Bench in enthusiasm for the Government's economic strategy, has become a major accomplice in defrauding the electorate, because he is lending the whole force of his Department, which, as the hon. Member for Horncastle said, ought to be a Department for moderation and conciliation in a country in which we all have to live together, to underpin a new divisive and destructive economic strategy designed to hold down growth in this country, at whatever cost in unemployment, until the Government have succeeded in emaciating the bargaining power of the trade unions.

That is what the right hon. Gentleman said at his Press conference in Washington during his recent visit to America. He is quoted in the Financial Times as having spelled it out very simply that the Government had no intention of reflating the economy, whatever the level of unemployment, and he could not forecast how it would go, until they had succeeded in stabilising wage settlements at around 8 per cent. I asked the Prime Minister whether this represented Government policy and was told that the right hon. Gentleman has said nothing of the kind—the dear Financial Times had obviously got it wrong again. If that is what the right hon. Gentleman did not say in Washington, then what did he say? May we have spelt out this evening whether he believes in that particular kind of economic strategy? The difference between this approach that we have now had spelt out on various occasions, not only in Washington by the right hon. Gentleman, but in this House—and always when the right hon. Gentleman is embarrassed he turns and talks to his neighbour and pretends he is not listening, so he cannot be surprised if he gets misquoted from time to time—the difference between this approach and that adopted by the Conservative Party during the election is positively obscene.

Those who have been careful students of what was said by the Prime Minister and others of his colleagues during the election campaign are quite wrong in thinking that it was only prices which were to be brought down at a stroke; they were quite wrong in thinking that this was just a casual phrase thrown off as a bribe to silly housewives. [HON. MEMBERS: "Oh."] Oh, yes, this is obviously what the Minister of Agriculture thinks they were—that is his definition, not mine. This famous phrase was not something that was said in a moment of excitement on the hustings, or put in as an afterthought, or smuggled into an unimportant document by the Conservative research department when the Prime Minister was not looking. It was part of a 1,200-word comprehensive statement on Conservative economic policy which simply claimed that there was a very real alternative which ought to be pursued immediately. In other words, it was an alternative to the policies we were pursuing, an alternative which, the document said, would at a stroke reduce the rise in prices, increase production and reduce unemployment. This was the last major economic statement made in a desperate bid to capture votes within 48 hours of the people going to the polls.

Mr. James Hamilton (Bothwell)

He was only kidding.

Mrs. Castle

As we all know, and as the country now knows only too well, the moment the Government got into office they quietly and deliberately set out to do exactly the opposite—they set out to push prices up.

Mr. John Hall

Ridiculous.

Mrs. Castle

I will give the hon. Gentleman some illustrations in a moment. They pushed up prices, they put production into reverse, so it went down instead of up, they sent unemployment to the astronomical levels we have today, and then, to cap it all, they sit back and blame it all on the trade unions. The right hon. Gentleman the Secretary of State must be sorry that he has left himself no excuse for not taking part in today's debate. In our previous debates on unemployment he is on record as saying what he considers to be disastrous and unacceptable levels of unemployment—or at least he considered them to be so when he was in Opposition. He is also on record in laying down definitions of failure to deal with the unemployment problem. How he must now wish that he and his colleagues had never tabled those condemnatory Motions of February and May 1970. By any of the indices he cared to quote then, the present Government stand condemned, not for having made the situation no better, but for having made it spectacularly worse.

I remind the House of a few of the indices that the right hon. Gentleman employed to measure success or failure in our earlier debates. In the debate last year he held forth to the House the inequity of having 617,000 people unemployed and he said that that, the April figure, was the highest since 1940. Now, in June, the figure is 750,000. It is the highest June figure since 1940.

In the debate last May, the right hon. Gentleman said that the underlying employment situation had got worse. I have no doubt that when he speaks tonight he will have the audacity to say that the latest unemployment figures show that the situation is getting better. Is that considered a great achievement under the Tories? If a catastrophic rise does not continue to accelerate, is that an achievement of which to be proud under the Tories?

That is the sum total of any success the right hon. Gentleman can claim today. However, although the June figures are not quite as disastrously high as had been foreseen, he knows perfectly well that, seasonally adjusted, they have not begun to fall by anything like the amount they should have been falling in June. As the Financial Times says: The fall is less than expected at this time of the year and the trend is still upwards. The right hon. Gentleman also used to have a lot of fun by talking about the level of unemployment. For example, he used to be fond of saying that in 32 months of Labour Administration the number of unemployed was about 500,000. In April, 1970, he said that because to that date out of 63 months of Labour rule, the total of unemployed had been about 500,000 in 32 of those months, that was an unanswerable indictment of the Labour Government.

I agree that we had the half-million figure during about half of our period in office, but the Tories have got 12 out of 12. They could not have done better had they tried. In every one of their 12 months in office the number unemployed has never fallen below 500,000. For 10 of those months it has not fallen below 600,000, and for five of those months the figure has not fallen below 700,000.

If one looks at the Press statements issued by his Department, one sees that the figures of wholly unemployed have been shooting up at such a pace that there is insufficient room on the graph to record the statistics properly—and, after all, it is the wholly unemployed with whom we must be mainly concerned.

While the right hon. Gentleman used to say that the figure of wholly unemployed exceeded 500,000 in about 30 of our 63 months in office, if one takes the seasonally adjusted figure for June, 1971, relating to the wholly unemployed, one sees that it is 714,000, or 3.2 per cent., compared with 561,000, or 2.4 per cent., in June a year ago. This is the third month in which the figure of hard core unemployed has been above 700,000. As the Financial Times says: The seasonally adjusted figure is at a new post-war peak for any month. Then the right hon. Gentleman used to say, "Do not let us look at the total figures but at the special categories of people—for example, at those who have been out of work for 12 months or more". Let us do that. They, too, are up. Look at the figures relating to those who have been out of work for six months or more. Those figures are up under the Tories. What about the figures of the unemployed disabled? They are up under the Tories.

Above all, let us do what the right hon. Gentleman invited us to do in May, 1970, and look at the level of employment and not just at unemployment. In other words, let us look at the number of people in jobs. The right hon. Gentleman had quite a dramatic line on this subject. I remember his saying now in March, 1969, the number of people in jobs was 676,000 fewer than in March, 1966–that is over three years. This Government have produced a fall in jobs of 342,000 in 10 months, taking the April figure, which is the latest available.

What is even more significant, and this is at the kernel of our argument, is the type of industry which is now affected. This is not a fall in traditional industries. In fact, the contraction in coal mining, for instance, is levelling off. We had to take that painful process on board. Contraction there is levelling off. The new fall in employment is in what, if the country is ever to pull itself out of the chronic flat spin into which it has been precipitated, should be our prosperous industries.

Let us instance electrical engineering. In April, 1970, when the right hon. Gentleman was making his speeches, employment was up on the previous year by 5,000: this April it is down by 20,000. Mechanical engineering—up by 19,000 more jobs in April, 1970: 19,000 less this April. Again, the motor car industry is important to us. In that industry there was a slight fall in jobs in April, 1970, of 3,000: jobs under this Government have fallen by 22,000. In chemicals we had 6,000 more jobs in April, 1970, but 14,000 less this April. So one could go on over a whole range of other industries.

Can anyone say that the position is not getting worse when there was a loss of 81,000 jobs in our production industries in March-April—in one month alone? So industry is now shedding its workers three times as fast as happened throughout the year as a whole. This, as we know, is borne out by the figures of working hours; by the big drop in overtime of 20 per cent. when short time has rocketed by 35 per cent. and, as The Guardian has put it, the drop in employment far exceeds the recorded rise in unemployment.

The Chancellor tried to take comfort from the slight rise, unadjusted, in the number of unfilled vacancies last month, but he has also said that we should never take one month's figures as indicative; that what matters is the trend. The trend in vacancies for male unemployed has been consistently down under the this Government. In September, 1969, there were 108,000 vacancies for male workers, by September, 1970, that figure had dropped to 104,000 and in June, 1971, it had dropped to 73,000.

There is, of course, the same gross betrayal on the prices front, as my right hon. Friend outlined earlier today. It is not only that the retail price index has gone up by 9.7 per cent. in the last 12 months': even more alarming is the trend of manufacturers' selling prices. The figures published by the Department of Trade and Industry a few days ago show that manufacturers' selling prices are going up as well. That means that the effect of the rise in manufacturers' selling prices has still to work itself into the retail price index. As the Daily Telegraph told us with brutal frankness only the other day, there is no relief for prices coming from the halving of S.E.T. The Daily Telegraph said: 290 million S.E.T. cut little benefit to customers. The most nauseating part of all is that this increase in prices is quite deliberate. As Jo Rogally said in the Financial Times the other day, Some part of the price inflation that is now so much of a bad dream to so many ordinary people can be blamed directly on the policies of the present Government; these in turn derive from its free market ideology. He gave some examples: increases in health charges, in the price of school meals, milk, fares and rents. They are movements which have probably done as much as anything else to stimulate wage demands, to say nothing of the new increases due in the next few weeks from the imposition of the agricultural levies, with V.A.T. hovering like an evil spirit in the wings.

We say tonight that nothing could be more recklessly irresponsible than the prices policy pursued by the Government. We are now in danger of making inflation in Britain respectable, because the Government have deliberately fed the assumption that prices will inevitably continue to rise. Yet the problem of inflation is one of psychology to a very great extent. If people think that inflation will always be with us it always will be with us. In such a situation, which the Government have created by their free market ideology, how can we be surprised that workers seek anticipatory wage rises? Once we start charging them more for school meals and for the Health Service, what else can workers do to defend their standard of life?

One speaker after another in the debate has concentrated on the importance of wage increases. But do they not realise that the Government have set the whole economic policy framework in which a worker has no other alternative or duty but to exploit his market power? For if the Government cannot guarantee or refuse to guarantee that other people will be made to restrain their demands, how can we expect the individual worker not to press his advantage to the utmost? It is not only Scamp who said that we cannot deal with individual wage settlements piecemeal. Wilberforce also said that we cannot impose an incomes policy on one section of the community. That is why unemployment plays such a key part in the Government's policy. The right hon. Gentleman, in that diplomatic language of his, admitted as much during the debate on 29th April, when he said: Clearly, under present circumstances, moving to reduce unemployment by boosting domestic demand without first controlling our cost inflation would be short term."—[OFFICIAL REPORT, 29th April, 1971; Vol. 816, c. 837.] I could not have had a clearer admission of the kernel of Conservative policy.

In his opening remarks, the Chancellor of the Exchequer made a most interesting Freudian slip. He said that an essential part of the Government's long term policy was that we should go into the Common Market as a stimulus to growth; that is why we must go into the Common Market. He added that if we achieved a higher rate of growth, we should be able to cure inflation and unemployment. But, as my hon. and learned Friend the Member for Lincoln (Mr. Taverne) said, if growth will cure unemployment and inflation, why not go in for a little growth now? If the Government say, "We cannot afford to risk growth", we say that this country cannot afford to risk entry into the Common Maket either. To imagine that Britain's economic life can be saved by first deliberately weakening it—by causing unemployment, by causing inflation, by reducing growth—and then using that as an excuse for joining the Common Market is an attitude which is designed to unite the entire ranks on these benches.

My right hon. Friend the Member for Stechford warned the Chancellor that the British people cannot be frightened into the Common Market. I believe that my right hon. Friend was, as he often is, being too generous because this Government's whole reason for joining the Common Market is to obtain a greater power to frighten the British people. The Secretary of State for Trade and Industry is rather a liability on the Tory benches: he has a habit of letting the cat out of the bag. In a recent speech to the German Federation of Industry in Dusseldorf he said something that he would never have dared to say in the House; he pointed out that control of wage settlements in Britain by tougher competition is one of the prime purposes of entry from the Government's point of view.

The tragedy we are highlighting is that the Government in 12 months have wasted the achievements and the sacrifices of our last two years of office. [Laughter.] They were achievements. The Secretary of State for Employment has great fun demonstrating what he calls the failure of our prices and incomes policy. He knows full well that in the crucial months after devaluation it was that policy that helped to save Britain from what could have been the inflationary consequences of the devaluation price rises. There it is: it is in the figures. From April to December, 1968, because of the sacrifices we all had to make, the increase in unit labour costs was only 1.9 per cent. It is true that by the end of 1969 people were breaking through the restraints; I admit that. In the last quarter of 1969 unit labour costs rose by just over 7 per cent. The right hon. Gentleman calls that failure. In the last quarter of 1970 under his Government unit costs rose by 11.7 per cent. as the result of the Tory Government's policy.

There had to be sacrifices in our period of office to give us the strong balance of payments that hon. Members opposite have inherited. We did not impose those sacrifices in obedience to the type of masochism demonstrated by this Government. We wanted that surplus for a purpose. We wanted it as a basis for growth. What have hon. Members opposite been doing with it? Counting it? And while they have been counting it it has been slipping through their fingers. On the basis of that surplus we could have entered into a new dialogue with the trade union movement. [Laughter.]

If the right hon. Gentleman had been listening to the debate he would have heard this refrain in speech after speech from hon. Members opposite. If he thinks that speeches from the back benches opposite have been speeches of confidence in the Chancellor's policies, then I wish that the right hon. Gentleman could have heard them all. There has been the refrain, "Yes it is difficult, yes it did not succeed completely last time but what is the alternative to the catastrophic unemployment, the continuing fall in production, the downward spiral?" There is the hope that entry into the Common Market will give the Government an alibi. That is the alternative that speaker after speaker has rejected this afternoon, and it is because we reject it that I call on my hon. and right hon. Friends to join me in the Lobby this evening.

9.30 p.m.

The Secretary of State for Employment (Mr. Robert Carr)

As the right hon. Lady the Member for Blackburn (Mrs. Castle) ended her speech by speaking of the price explosion of the third and fourth quarters of 1970, attributing them to the action which this Government did or did not take in July or possibly August of 1970, I could not help wondering why, if things would have been so different under the continued blessings of the Labour Government, they ran for cover at the election in June last year. It is quite obvious that what happened to prices, to all economic indicators in the last part of last year, must have been in the pipeline as a result of the actions of the last Government.

Before dealing with the right hon. Lady's speech and other speeches may I, like the right hon. Lady, pay a deserved tribute to the hon. Member for Goole (Dr. Marshall) on his maiden speech. He spoke, rightly, about the respect in which his predecessor was so long held by this House. He knows how sadly his loss was felt here. I can assure him that by the manner of his speech and the care he showed for his constituency this afternoon, he is well on the way to earning similar respect in the future. When the hon. Gentleman spoke about the 19 internal drainage areas in his constituency, I felt some envy, bearing in mind the difficulties we had in my constituency a year ago through apparently having only one internal drainage area.

May I point out to the right hon. Lady, as she has mentioned it, that the Prime Minister is absent from our debate today because he has a long-standing visit from the Prime Minister of Italy. It is right that he should keep that appointment. His absence tonight, like the absence of the right hon. Gentleman the Leader of the Opposition, about which the right hon. Gentleman courteously sent me a message this afternoon, is entirely due to that cause and, whatever the right hon. Lady may say, the House understands the reason for the absence of both the Prime Minister and the Leader of the Opposition.

Anyone ignorant of the immediate past history of Britain and listening to the righteous indignation of the right hon. Lady and to some extent that of the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) earlier this afternoon, might have found it difficult to realise that she and the right hon. Gentleman were leading members of a Cabinet which allowed or caused unemployment to double during their term of office. They were leading members of a Cabinet which left office a year ago when prices were rising at an annual rate of about 8½ per cent. and when there were still many higher pay settlements in the pipeline which they knew would bring substantial price increases in the summer and in the autumn. Of course we have not yet beaten back that gnawing inflation, nor the rising unemployment which inevitably goes with it. But we are now clearly beginning to control it and we shall beat it.

Another prominent feature of the speeches of the right hon. Lady and the right hon. Member for Stechford which will have been obvious to all, whether or not they knew the history of the Labour Government, was that they had no constructive policy of their own to put forward, unless the right hon. Lady talks about a meaningful dialogue with the trade unions. What signs was she giving of being able to have a meaningful dialogue with the trade unions last summer? What happened, not just at the T.U.C. but at the Labour Party's own conference? What sort of meaningful dialogue was it when the great union leaders, far from entering into dialogue with her party, made it absolutely clear that they would steamroller the Labour Party conference against all sorts of incomes policy, not just a statutory policy but a voluntary policy as well? Does not she remember how in the course of the past six weeks or so Mr. Jack Jones has said on the radio that he will not consider having the claims of his union vetted even by the T.U.C? That is the atmosphere in which the right hon. Lady knows she was struggling a year ago, and which she knows equally well we are struggling with now, as far as meaningful dialogue with the T.U.C. is concerned. But let me assure the House—

Mr. Roy Jenkins

The right hon. Gentleman is taking a slightly harder line than the Chancellor did this afternoon. Does that mean that he rules out any approach to a new departure on 7th July?

Mr. Carr

Certainly not, because the right hon. Gentleman heard me say just before I gave way to him, "But let me assure …" I was going on to follow precisely what my right hon. Friend the Chancellor said this afternoon and has said before, that we shall welcome talks with the T.U.C. and the employers on these subjects. There is a meeting of the National Economic Council on 7th July, and we are very ready and anxious to pursue fruitful talks on the subject. It is not a new line; it has been made clear for a long time.

The last occasion on which I took part in a debate in which the Front Bench speakers for the Labour Party were the right hon. Lady and the right hon. Gentleman was on 17th December, 1969. The subject was the right hon. Lady's latest and last Prices and Incomes White Paper. The Motion before the House was to continue the statutory powers of Part II of the Prices and Incomes Act, 1966. I then put to the right hon. Gentleman, who was Chancellor of the Exchequer, that his economic policies were creating a situation in which … the inevitable casualties are bound to be investment on the one hand, and industrial peace on the other. I also pointed out that as to the investment effect there would be … a considerable time lag between cause and effect."—[OFFICIAL REPORT, 17th December, 1969; Vol. 793, c. 1468.] My forecast proved to be true. In 1970 we had a greater number of strikes than ever before in our history. Some time later, after the time lag which I forecast, we have had the acute depression in investment prospects.

We have now changed and reversed the basic policies. The number of strikes has fallen dramatically already. I am sure that after the inevitable time lag investment will once again begin to rise, and when that happens we shall begin to see the cure to our problems that we are talking about now.

Mrs. Castle

Does the right hon. Gentleman think that the loss of 9½ million working days through strikes in the first quarter of this year is proof of the success of his policy when it is compared with the loss of 2½ million days through strikes in the first quarter of 1970?

Mr. Carr

No. I think that the loss of working days is seriously high. But, as the right hon. Lady herself once used to point out, and as the Donovan Commission pointed out, the number of strikes is a better and more meaningful indicator of the state of industrial relations. [HON. MEMBERS: "No."] Yes, that was the thesis of the Donovan Commission and it was the thesis of the right hon. Lady when she published "In Place of Strife".

If the right hon. Lady cared to look at the Department of Employment Gazette, published today, she would there see the detailed strike record. She would find that not only has the number of strikes fallen dramatically, as my right hon. Friend the Chancellor pointed out in detail, but the working days lost in industry category by industry category, excluding the Post Office and Fords—[Laughter.] If the right hon. Lady will look at all the categories listed, she will find that in the vast majority there has been not only a dramatic reduction in the number of strikes, but, in the majority of industry sectors, a substantial reduction in the number of working days lost. If she looks at the table category by category, she will see that that is so, and she may rediscover her own way about a journal which, presumably, she knows quite well.

Mrs. Castle

Is the right hon. Gentleman seriously saying, knowing that 66 per cent. of our strikes were always over in three days or less, that a switch to fewer strikes like Fords, when 2½ million days were lost in a key industry, is an advance in industrial relations?

Mr. Carr

I am not saying that those big strikes were anything but extremely serious. What I am pointing out is that over the vast majority of categories of industry there has been not only a substantial reduction in the number of strikes but a very substantial reduction in the number of working days lost through strikes and a very substantial reduction in total, including Fords and including the Post Office—

Mr. Hefter rose—

Mr. Carr

—in the number of people involved in strikes.

Mr. Harold Walker (Doncaster) rose—

Mr. Carr

I apologise to the hon. Gentleman for not giving way, but I have already done so many times.

Before dealing with the more detailed arguments about the problems and actions required to deal with them, I wish to reaffirm at the end of the debate, as a Chancellor did at the beginning, that the Government are absolutely determined to halt and then reverse the upward trend in unemployment. [HON. MEMBERS: "When?"] It is not tolerable for it to go on and it is least tolerable in those areas where the levels of unemployment are higher than the national average.

But we are also determined, as I made clear in the last debate on this subject, on 29th April, not simply to produce a flash in the pan. This present unemployment problem has been raising its ugly head in Britain over the last five years. It has accelerated very seriously in the last six months or so, but it has been a long-term trend. During the winter months unemployment rose much faster than was forecast or could have been forecast on experience of the movement in recent previous years in relation to the levels of production and demand, and so forth.

Any suggestion which right hon. and hon. Gentlemen opposite are fond of making that we took any decisions deliberately to put unemployment to this level are, let me repeat, lies. Unemployment moved much faster than the forecast indicated. [HON. MEMBERS: "Investment grants."] If it is suggested that the investment grants decision taken at the end of last October brought unemployment in December to these levels, hon. Members had better think again.

Mr. E. Fernyhough (Jarrow) rose—

Mr. Carr

I am sorry, I cannot give way. I have already given way several times. One could easily take measures which would buck the trend for a short time but, if we failed to tackle the underlying causes of the trend and, still more, if we aggravated them by excessive short-term measures, the trend would soon reassert itself, and a quick fall in unemployment would be followed by a steeper increase afterwards. So, as I said in the unemployment debate on 29th April, we are determined to get unemployment down and keep it down, with the emphasis on keeping it down. [HON. MEMBERS: "When?"] I will come to the matters that determine the timing in a moment.

There has, I am glad to say, been some sign of progress since our debate in April. Whatever the right hon. Lady might say about the last two months' figures, they give grounds for cautious optimism that the position may now be changing. The underlying trend, as she said, is still upwards, but it is much less strong. We first have to slow a trend before it can be stopped and reversed. The trend has been much less this month than last month and much less last month than the month before. Moreover, the indicator of the demand for labour, namely, the seasonally adjusted figure for unfilled vacancies, has also shown a welcome change. I do not want to say much about the amount of increase, which is very small, but after falling for a good many months running, the seasonally adjusted figure for unfilled vacancies has now checked and for two months running has, if anything, slightly increased, rather than continuing to decrease.

In addition to this, as the Chancellor reminded the House earlier this afternoon, there are about to come into the economy and into force the substantial tax reductions which were made by the Chancellor in the Budget, and the £450 million a year from cutting S.E.T. in half. When I remember the hundreds of millions in extra taxation which the last Government year after year took out of the economy, I believe it is a good thing to be putting back hundreds of millions into the economy, and that is just what has happened. All these will be coming into effect in the next month or two and will soon be adding substantially to the level of demand in the economy.

If we are to set about killing these evil problems and not simply putting them to sleep for a few months, we must engineer a solidly based expansion which can be sustained. That is what our policies are preparing for and doing, and just as soon as but no sooner than we see it right to give a further extra push to expansion, we shall do it without a moment's delay.

Mr. Shore

I asked the right hon. Gentleman earlier to what extent his worries about the balance of payments were a restraint upon the increase of demand and the reduction of unemployment, and how far, in this context, his worries about the payment of the membership fee for joining the Common Market was an additional restraint. Will he answer?

Mr. Carr

I listened to the right hon. Gentleman's questions carefully. I do not think that it has been the practice of Governments, certainly not for any Minister other than Chancellors of the Exchequer on carefully selected occasions, to give forecasts of that nature. Like the House as a whole, the right hon. Gentleman should await the White Paper on the Common Market, consider it, and then we shall have a chance to discuss it. Meanwhile, the House might be interested to know how he himself managed to remain a member of a Cabinet who said that they would not take "No" for an answer on British entry.

The solution of these problems of rising prices and rising unemployment has a short-term and a long-term component. The long-term component is a matter of deep economic policy. I want to deal for a moment with the short-term. There is no doubt, as we said in April and earlier, that the immediate cause of the present crisis in both prices and unemployment is the excess level of pay settlements, and the most immediate and most essential contribution to the cure of both problems is to moderate the level of both claims and settlements. Surely the right hon. Lady and her colleagues cannot deny that.

Mr. Fernyhough rose—

Mr. Carr

I apologise to the right hon. Gentleman if I do not give way but I have given way a great deal already.

As to the link with unemployment, I need do not more than remind the House again of what the Leader of the Opposition, as Prime Minister said—that restraint in incomes is our only guarantee against unemployment. If we are at all honest, we know that that is right.

Mr. Fernyhough

I am grateful to the right hon. Gentleman for giving way. Can he explain, if I accept the logic of his argument, how it comes about that, in the development areas, where wage rates are lower than in the country generally, unemployment is highest?

Mr. Carr

It is obviously the over all level of demand in the economy which determines the over all level of activity and we shall never get a solution to the problems of the development areas until we get an over all expansion moving again.

The link with prices must surely also be very clear. Here again I must go back to the debate of 17th December, 1969, because in that debate the right hon. Lady presented a White Paper, paragraph 36 of which stated: … most wage and salary settlements need to fall in the range of 2½–4½ per cent. increase in a year if this aim of greater price stability is to be achieved. That is what she and the right hon. Member for Huyton said at the beginning of 1970. Let me remind her of what she said in that debate.

Mr. Michael Foot (Ebbw Vale)

Explain your policy.

Mr. Carr

I am explaining to the hon. Gentleman if only he has the intelligence to listen. The right hon. Lady told the House, not just for the moment but for 1970 and beyond: The central challenge … is this: if output per worker increases by 3 per cent. most pay settlements need to fall within a range of 2½ per cent. to 4½ per cent. if the aim of greater price stability is to be achieved. She concluded this part of her speech by saying: Is there anyone in the House who contests this?"—[OFFICIAL REPORT, 17th December, 1969; Vol. 793, c. 1379.]

Mr. Foot rose—

Mr. Carr

There may have been some hon. Members on the then Government back benches, one of whom is on the Opposition Front Bench now, who did contest it.

If that is what the right hon. Lady believes and what her right hon. Friends believe, why, in March, 1970, only three months later, did the right hon. Lady and her Cabinet give the green light, without any inquiry, to a settlement at Fords not of between 2½ and 4½ per cent., but of 18 per cent? It is increases on that scale, trying, as the right hon. Member for Coventry, East (Mr. Crossman) has made clear, to buy votes in the June Election, which gave rise to the prices explosion—

Mrs. Castle

Which votes were right hon. Gentlemen opposite buying when, during the election, they attacked us for opposing a 30 per cent. increase for the doctors and described our opposition as "an outrage"? How can the right hon. Gentleman now say that he believes in—[Interruption.]

Mr. Carr

We have always made it clear that we do not believe in giving people negotiating machinery and then not having the guts as a Government to make our own decisions but, instead, to refer the results of one review body to another review body. That is what was wrong.

It is the excessive pay settlements which we have to bring under control before we can safely unleash substantial extra expansion. My right hon. Friend the Chancellor of the Exchequer has said that he is watching and will continue to watch the forecasts being made and that, when he has seen those results, he will decide what to do. But the pressure of de-escalation which we have been applying with success in the past six months is essential. It will be continued. If anyone doubts that it is having success, let him consider the figures.

In the second half of 1969, hourly wage rates rose by 4.5 per cent. In the first half of 1970, they rose by 5.3 per cent. In the second half of 1970, the rise was 8.1 per cent. In the first five months of this year, it was 3.5 per cent. The earnings figures show a very comparable result.

We are pressing on with this policy because, as we said from the moment that we took office last June, this is the most urgent single problem that we face. We shall succeed. In our policies on expenditure, on taxation and on industrial relations reform, we have laid the foundations for the faster rate of growth of the country's wealth which we were elected to bring about, which we shall bring about and which, at the end of our period in office, we shall be seen to have been justified in doing.

Mr. Tom Driberg (Barking)

There were two phrases worth recalling in the

Minister's speech. He said that unemployment would be checked as soon as, but no sooner than, the Government saw fit. In other words—

Mr. Robert Mellish (Bermondsey) 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:—

The House divided: Ayes 284, Noes 316.

Division No. 397.]	AYES	[10.0 p.m.
Abse, Leo	Dormand, J. D.	Jay, Rt. Hn. Douglas
Adbu, Austen	Douglas, Dick (Stirlingshire, E.)	Jeger, Mrs. Lena (H'b'n&St. P'cras, S.)
Allaun, Frank (Salford, E.)	Douglas-Mann, Bruce	Jenkins, Hugh (Putney)
Allen, Scholefield	Driberg, Tom	Jenkins, Rt. Hn. Roy (Stechford)
Archer, Peter (Rowley Regis)	Duffy, A. E. P.	John, Brynmor
Armstrong, Ernest	Dunn, James A.	Johnson, Carol (Lewtsham, S.)
Ashley, Jack	Dunnett, Jack	Johnson, James (K'ston-on-Hull, W.)
Ashton, Joe	Eadie, Alex	Johnson, Walter (Derby, S.)
Atkinson, Norman	Edelman, Maurice	Johnston, Russell (Inverness)
Bagier, Gordon A. T.	Edwards, Robert (Bilston)	Jones, Barry (Flint, E.)
Barnes, Michael	Edwards, William (Merioneth)	Jones, Dan (Burnley)
Barnett, Joel	Ellis, Tom	Jones, Rt. Hn. Sir Elwyn (W. Ham, S.)
Beaney, Alan	English, Michael	Jones, Gwynoro (Carmarthen)
Benn, Rt. Hn. Anthony Wedgwood	Evans, Fred	Jones, T. Alec (Rhondda, W.)
Bennett, James (Glasgow, Bridgeton)	Faulds, Andrew	Judd, Frank
Bidwell, Sydney	Fernyhough, Rt. Hn. E.	Kaufman, Gerald
Bishop, E. S.	Fisher, Mrs. Doris (B'ham, Ladywood)	Kelley, Richard
Blenkinsop, Arthur	Fitch, Alan (Wigan)	Kerr, Russell
Booth, Albert	Fletcher, Raymond (Ilkeston)	Kinnock, Neil
Boyden, James (Bishop Auckland)	Fletcher, Ted (Darlington)	Lambie, David
Bradley, Tom	Foley, Maurice	Lamond, James
Brown, Bob (N'c'tle-upon-Tyne, W.)	Foot, Michael	Latham, Arthur
Brown, Hugh D. (G'gow, Provan)	Ford, Ben	Lawson, George
Brown, Ronald (Shoreditch & F'bury)	Forrester, John	Leadbitter, Ted
Buchan, Norman	Fraser, John (Norwood)	Lee, Rt. Hn. Frederick
Buchanan-Smith, Alick (Angus, N&M)	Freeson, Reginald	Leonard, Dick
Butler, Mrs. Joyce (Wood Green)	Calpern, Sir Myer	Lester, Miss Joan
Callaghan, Rt. Hn. James	Garrett, W. E.	Lever, Rt. Hn. Harold
Campbell, I. (Dunbartonshire, W.)	Gilbert, Dr. John	Lewis, Arthur (W. Ham, N.)
Cant, R. B.	Ginsburg, David	Lewis, Ron (Carlisle)
Carmichaed, Neil	Gordon Walker, Rt. Hn. P. C.	Lipton, Marcus
Carter, Ray (Birmingh'm, Northfield)	Gourlay, Harry	Lomas, Kenneth
Carter-Jones, Lewis (Eccles)	Grant, George (Morpeth)	Loughlin, Charles
Castle, Rt. Hn. Barbara	Grant, John D. (Islington, E.)	Lyon, Alexander W. (York)
Clark, David (Colne Valley)	Griffiths, Eddie (Brightside)	Lyons, Edward (Bradford, E.)
Cocks, Michael (Bristol, S.)	Griffiths, Will (Exchange)	Mabon, Dr. J. Dickson
Cohen, Stanley	Crimond, Rt. Hn. J.	McBride, Neil
Coleman, Donald	Gunter, Rt. Hn. R. J.	McCann, John
Concannon, J. D.	Hamilton, James (Bothwell)	McCartney, Hugh
Conlan, Bernard	Hamilton, William (Fife, W.)	McElhone, Frank
Corbet, Mrs. Freda	Hannan, William (G'gow, Maryhill)	McGuire, Michael
Cox, Thomas (Wandsworth, C.)	Hardy, Peter	Mackenzie, Gregor
Crawshaw, Richard	Harper, Joseph	Mackle, John
Cronin, John	Harrison, Walter (Wakefield)	Mackintosh, John P.
Crosland, Rt. Hn. Anthony	Hart, Rt. Hn. Judith	Maclennan, Robert
Crossman, Rt. Hn. Richard	Hattersley, Roy	McManus, Frank
Cunningham, G. (Islington, S. W.)	Healey, Rt. Hn. Denis	McMillan, Tom (Glasgow, C.)
Dalyelt, Tam	Heffer, Eric S.	McNamara, J. Kevin
Darling, Rt. Hn. George	Hilton, W. S.	Mahon, Simon (Bootle)
Davidson, Arthur	Hooson, Emlyn	Mallalieu, E, L. (Brigg)
Davies, Denzil (Llanelly)	Horam, John	Mallalieu, J. P. W.(Huddersfteld, E.)
Davies, G. Elfed (Rhondda, E.)	Houghton, Rt. Hn. Douglas	Marks, Kenneth
Davies, Ifor (Gower)	Howell, Denis (Small Heath)	Marquand, David
Davis, Clinton (Hackney, C.)	Huckfield, Leslie	Marsden, F.
Davis, Terry (Bromsgrove)	Hughes, Rt. Hn. Cledwyn (Anglesey)	Marshall, Dr. Edmund
Deakins, Eric	Hughes, Mark (Durham)	Mason, Rt. Hn. Roy
de Frertas, Rt. Hn. Sir Geoffrey	Hughes, Robert (Aberdeen, N.)	Mayhew, Christopher
Delargy, H J.	Hughes, Roy (Newport)	Meacher, Michael
Dell, Rt. Hn. Edmund	Hunter, Adam	Mellish, Rt. Hn. Robert
Dempsey, James	Irvine, Rt. Hn. Sir Arthur (Edge Hill)	Mendelson, John
Doig, Peter	Janner, Greville	Mikardo, Ian
Millan, Bruce	Rankin, John	Summerskill, Hn. Dr. Shirley
Miller, Dr. M. S.	Reed, D. (Sedgefield)	Swain, Thomas
Milne, Edward (Blyth)	Rees, Merlyn (Leeds, S.)	Taverne, Dick
Mitchell, R. C. (S'hampton, Itchen)	Rhodes, Geoffrey	Thomas, Rt. Hn. George (Cardiff, W.)
Molloy, William	Richard, Ivor	Thomas, Jeffrey (Abertillery)
Morgan, Elystan (Cardiganshire)	Roberts, Albert (Normanton)	Thomson, Rt. Hn. G. (Dundee, E.)
Morris, Alfred (Wythenshawe)	Roberts, Rt. Hn. Goronwy (Caernarvon)	Thorpe, Rt. Hn. Jeremy
Morris, Charles R. (Opemshaw)	Robertson, John (Paisley)	Tinn, James
Morris, Rt. Hn. John (Aberavon)	Roderick, Caerwyn E. (Br'c'n&R'dnor)	Tomney, Frank
Moyle, Roland	Rodgers, William (Stockton-on-Tees)	Torney, Tom
Mulley, Rt. Hn. Frederick	Roper, John	Tuck, Raphael
Murray, Ronald King	Rose, Paul B.	Urwin, T. W.
Ogden, Eric	Ross, Rt. Hn. William (Kilmarnock)	Varley, Eric G.
O'Halloran, Michael	Sandelson, Neville	Wainwright, Edwin
O'Malley, Brian	Sheldon, Robert (Ashton-under-Lyne)	Walden, Brian (B'm'ham, All Saints)
Oram, Bert	Shore, Rt. Hn. Peter (Stepney)	Walker, Harold (Doncaster)
Orme, Stanley	Short, Rt. Hn. Edward (N'c'tle-u-Tyne)	Wallace, George
Oswald, Thomas	Short, Mrs. Renée (W'hampton, N. E.)	Watkins, David
Owen, Dr. David (Plymouth, Sutton)	Silkin, Rt. Hn. John (Deptford)	Weitzman, David
Padley, Walter	Silkin, Hn. S. C. (Dulwich)	Wellbeloved, James
Paget, R. T.	Sillars, James	Wells, William (Walsall, N.)
Palmer, Arthur	Silverman, Julius	White, James (Glasgow, Pollok)
Pannell, Rt. Hn. Charles	Skinner, Dennis	Whitehead, Phillip
Pardoe, John	Small, William	Whitlock, William
Parker, John (Dagenham)	Smith, John (Lanarkshire, N.)	Willey, Rt. Hn. Frederick
Parry, Robert (Liverpool, Exchange)	Spearing, Nigel	Williams, Alan (Swansea, W.)
Pavitt, Laurie	Spriggs, Leslie	Williams, Mrs. Shirley (Hitchin)
Peart, Rt. Hn. Fred	Stallard, A. W.	Williams, W. T. (Warrington)
Pendry, Tom	Steel, David	Wilson, Alexander (Hamilton)
Pentland, Norman	Stewart, Donald (Western Isles)	Wilson, William (Coventry, S.)
Perry, Ernest G.	Stewart, Rt. Hn. Michael (Fulham)	Woof, Robert
Prescott, John	Stoddart, David (Swindon)
Price, J. T. (Westhoughton)	Stonehouse, Rt. Hn. John	TELLERS FOR THE AYES:
Price, William (Rugby)	Strang, Gavin	Mr. William Handing and
Probert, Arthur	Strauss, Rt. Hn. G. R.	Mr. John Golding.
NOES
Adley, Robert	Chapman, Sydney	Fortescue, Tim
Alison, Michael (Barkston Ash)	Chataway, Rt. Hn. Christopher	Foster, Sir John
Allason, James (Hemel Hempstead)	Chichester-Clark, R.	Fowler, Norman
Amery, Rt. Hn. Julian	Churchill, W. S.	Fox, Marcus
Archer, Jeffrey (Louth)	Clark, William (Surrey, E.)	Fraser, Rt. Hn. Hugh (St'fford & Stone)
Astor, John	Clarke, Kenneth (Rushcliffe)	Fry, Peter
Atkins, Humphrey	Clegg, Walter	Galbraith, Hn. T. G.
Awdry, Daniel	Cockeram, Eric	Gardner, Edward
Baker, Kenneth (St. Marylebone)	Cooke, Robert	Gibson-Watt, David
Balniel, Lord	Coombs, Derek	Gilmour, Ian (Norfolk, C.)
Barber, Rt. Hn. Anthony	Cooper, A. E.	Gilmour, Sir John (Fife, E.)
Batsford, Brian	Cordle, John	Glyn, Dr. Alan
Beamish, Col. Sir Tufton	Corfield, Rt. Hn. Frederick	Gober, Rt. Hn. J. B.
Bell, Ronald	Cormack, Patrick	Goodhart, Philip
Bennett, Sir Frederic (Torquay)	Costain, A. P.	Goodhew, Victor
Bennett, Dr. Reginald (Gosport)	Critchley, Julian	Gorst, John
Benyon, W.	Crouch, David	Gower, Raymond
Berry, Hn. Anthony	Crowder, F. P.	Grant, Anthony (Harrow, C.)
Biffen, John	Curran, Charles	Gray, Hamish
Biggs-Davison, John	Davies, Rt. Hn. John (Knutsford)	Green, Alan
Blaker, Peter	d'Avigdor-Goldsmid, Sir Henry	Grieve, Percy
Boardman, Tom (Leicester, S. W.)	d'Avigdor-Goldsmid, Maj.-Gen. James	Griffiths, Eldon (Bury St. Edmunds)
Body, Richard	Dean, Paul	Grylls, Michael
Boscawen, Robert	Deedes, Rt. Hn. W. F.	Gummer, Selwyn
Bossom, Sir Clive	Digby, Simon wingfietd	Gurden, Harold
Bowden, Andrew	Dixon, Piers	Hall, Miss Joan (Keighley)
Boyd-Carpenter, Rt. Hn. John	Dodds-Parker, Douglas	Hall, John (Wycombe)
Braine, Bernard	Douglas-Home, Rt. Hn. Sir Alec	Hall-Davis, A. G. F.
Bray, Ronald	Drayson, C. B.	Hamilton, Michael (Salisbury)
Brewis, John	du Cann, Rt. Hn. Edward	Hannam, John (Exeter)
Brinton, Sir Tatton	Dykes, Hugh	Harrison, Brian (Malden)
Brocklebank-Fowler, Christopher	Eden, Sir John	Harrison, Col. Sir Harwood (Eye)
Brown, Sir Edward (Bath)	Edwards, Nicholas (Pembroke)	Haselhurst, Alan
Bruce-Gardyne, J.	Elliot, Capt Walter (Carshalton)	Hastings, Stephen
Bryan, Paul	Elliott, R. W. (N'c'tle-upon-Tyne, N.)	Havers, Michael
Buchanan-Smith, Alick (Angus, N&M)	Emery, Peter	Hawkins, Paul
Buck, Anthony	Eyre, Reginald	Hay, John
Bullus, Sir Eric	Farr, John	Hayhoe, Barney
Burden, F. A.	Fell, Anthony	Heseltine, Michael
Butler, Adam (Bosworth)	Fenner, Mrs. Peggy	Hicks, Robert
Campbell, Rt. Hn. G. (Moray&Nairn)	Fidler, Michael	Higgins, Terence L.
Carlisle, Mark	Finsberg, Geoffrey (Hampstead)	Hiley, Joseph
Carr, Rt. Hn. Robert	Fisher, Nigel (Surbiton)	Hill, John E. B. (Norfolk, S.)
Cary, Sir Robert	Fletcher-Cooke, Charles	Hill, James (Southampton, Test)
Channon, Paul	Fookes, Miss Janet	Holland, Philip
Holt, Miss Mary	Mills, Stratton (Belfast, N.)	Sharples, Richard
Hordern, Peter	Miscampbell, Norman	Shaw, Michael (Sc'b'gh & Whitby)
Hornby, Richard	Mitchell, Lt.-Col. C. (Aberdeenshire, W)	Shelton, William (Clapham)
Hornsby-Smith, Rt. Hn. Dame Patricia	Mitchell, David (Basingstoke)	Simeons, Charles
Howe, Hn. Sir Geoffrey (Reigate)	Moate, Roger	Sinclair, Sir George
Howelt, David (Guildford)	Molyneaux, James	Skeet, T. H. H.
Howell, Ralph (Norfolk, N.)	Money, Ernie	Smith, Dudley (W'wick & L'mington)
Hunt, John	Monks, Mrs. Connie	Soref, Harold
Hutchison, Michael Clark	Montgomery, Fergus	Speed, Keith
Iremonger, T. L.	Morgan, Geraint (Denbigh)	Spence, John
Irvine, Bryant Godman (Rye)	Morgan-Giles, Rear-Adm.	Sproat, lain
James, David	Morrison, Charles (Devizes)	Stainton, Keith
Jenkin, Patrick (Woodford)	Mudd, David	Stanbrook, Ivor
Jennings, J. C. (Burton)	Murton, Oscar	Stewart-Smith, D. G. (Belper)
Johnson Smith, G. (E. Grinstead)	Nabarro, Sir Gerald	Stodart, Anthony (Edinburgh, W.)
Jones, Arthur (Norrhants, S.)	Neave, Airey	Stoddart-Scott, Col. Sir M.
Jopling, Michael	Nicholls, Sir Harmar	Stokes, John
Joseph, Rt. Hn. Sir Keith	Noble, Rt. Hn. Michael	Stuttaford, Dr. Tom
Kaberry, Sir Donald	Normanton, Tom	Sutcliffe, John
Kellett-Bowman, Mrs. Elaine	Nott, John	Tapsell, Peter
Kershaw, Anthony	Onslow, Cranley	Taylor, Sir Charles (Eastbourne)
Kilfedder, James	Oppenheim, Mrs. Sally	Taylor, Frank (Moss Side)
Kimball, Marcus	Orr, Capt. L. P. S.	Taylor, Robert (Croydon, N. W.)
King, Evelyn (Dorset, S.)	Osborn, John	Tebbit, Norman
King, Tom (Bridgwater)	Owen, Idris (Stockport, N.)	Thatcher, Rt. Hn. Mrs. Margaret
Kinsey, J. R.	Page, Graham (Crosby)	Thomas, John Stradling (Monmouth)
Kirk, Peter	Page, John (Harrow, W.)	Thomas, Rt. Hn. Peter (Hendon, S.)
Kitson, Timothy	Parkinson, Cecil (Enfield, W.)	Thompson, Sir Richard (Croydon, S.)
Knight, Mrs. Jill	Peel, John	Tilney, John
Knox, David	Percival, Ian	Trafford, Dr. Anthony
Lambton, Antony	Peyton, Rt. Hn. John	Trew, Peter
Lane, David	Pike, Miss Mervyn	Tugendhat, Christopher
Langtord-Hott, Sir John	Pink, R. Bonner	Turton, Rt. Hn. Sir Robin
Legge-Bourke, Sir Hairy	Pounder, Rafton	van Straubenzee, W. R.
Le Marchant, Spencer	Powell, Rt. Hn. J. Enoch	Vaughan, Dr. Gerard
Lewis, Kenneth (Rutland)	Price, David (Eastleigh)	Vickers, Dame Joan
Lloyd, Rt. Hn. Geoffrey (Sut'n C'dfield)	Prior, Rt. Hn. J. M. L.	Waddington, David
Lloyd, Ian (P'tsm'th, Langstone)	Proudfoot, Wilfred	Walder, David (Clitheroe)
Longden, Gilbert	Pym, Rt. Hn. Francis	Walker, Rt. Hn. Peter (Worcester)
Loveridge, John	Quennell, Miss J. M.	Walker-Smith, Rt. Hn. Sir Derek
Luce, R. N.	Raison, Timothy	Wall, Patrick
McAdden, Sir Stephen	Rawlinson, Rt. Hn. Sir Peter	Walters, Dennis
MacArthur, Ian	Redmond, Robert	Ward, Dame Irene
McCrindle, R. A.	Reed, Laurance (Bolton, E.)	Warren, Kenneth
McLaren, Martin	Rees, Peter (Dover)	Weatherill, Bernard
Maclean, Sir Fitzroy	Rees-Davis, W. R.	Wells, John (Maidstone)
McMaster, Stanley	Renton, Rt. Hn. Sir David	White, Roger (Gravesend)
Macmillan, Maurice (Farnham)	Rhys Williams, Sir Brandon	Whitelaw, Rt. Hn. William
McNair-Wilson, Michael	Ridley, Hn. Nicholas	Wiggin, Jerry
McNair-Wilson, Patrick (New Forest)	Ridsdale, Julian	Wilkinson, John
Maddan, Martin	Rippon, Rt. Hn. Geoffrey	Wolrige-Gordon, Patrick
Madel, David	Roberts, Michael (Cardiff, N.)	Wood, Rt. Hn. Richard
Maginnis, John E.	Roberts, Wyn (Conway)	Woodhouse, Hn. Christopher
Marples, Rt. Hn. Ernest	Rodgers, Sir John (Sevenoaks)	Woodnutt, Mark
Marten, Neil	Rossi, Hugh (Hornsey)	Worsley, Marcus
Mather, Carol	Rost, Peter	Wylie, Rt. Hn. N. R.
Maude, Angus	Royle, Anthony	Younger, Hn. George
Maudling, Rt. Hn. Reginald	Russell, Sir Ronald
Mawby, Ray	St. John-Stevas, Norman	TELLERS FOR THE NOES:
Maxwell-Hyslop, R. J.	Sandys, Rt. Hn. D.	Mr. Jasper More and
Meyer, Sir Anthony	Scott, Nicholas	Mr. Hector Monro.
Mills, Peter (Torrington)	Scott-Hopkins, James