INDUSTRY

HC Deb 20 November 1975 vol 901 cc185-332

3.7 p.m.

The Secretary of State for Industry (Mr. Eric G. Varley)

I should like to congratulate the Opposition on having chosen industry as the first topic as we enter the detailed debate on the Gracious Speech. Not only have they selected that aspect of policy on which all other policies depend, but they have demonstrated once again their own sheer effrontery. For, although all Governments of the past 30 years, including Labour Governments, have made their mistakes—sometimes serious mistakes—in industrial policy, the Conservative Government who left office last year made nothing but mistakes.

In the fascinating series of articles on our industrial problems which the Sunday Times is currently publishing, nothing stands out more starkly than the authors' total condemnation of the policies pursued by Lord Barber and by the right hon. Members for Knutsford (Mr. Davies) and Worcester (Mr. Walker). I should like to quote one section from the articles which have appeared: Up to June 1970 each administration could claim some successes as well as failures. Mr. Maudling and Mr. Brown had increased industrial investment. Mr. Jenkins had transformed the balance of payments. What was unique about Mr. Heath's 1970–4 administration was that failure was total… …it was the weakness of domestic policy that was fundamentally to blame. The Conservative Party left us with an appalling legacy: escalating inflation; a record balance of payments surplus frittered away and turned into a record deficit even before the oil price crisis; and, worst of all for our long-term future, an industrial base rotting away, starved of investment in the face of a deliberate policy of massive tax reliefs handouts to the Tory Party's wealthier supporters.

This was topped off with a property boom caused by loose money making a dash for the only growth industry that really took off under the Tory Party—the building of empty speculative prestige office blocks that disfigure the skylines of our large cities.

It is the job of this Labour Government to end this country's industrial decline, to reverse the trend decisively and to achieve our objective of a high wage, high output economy firmly based on full employment. The Gracious Speech marks a further stage in our progress towards that objective. I have already congratulated the Opposition on their choice of subject for today's debate.

Mr. Peter Walker (Worcester)

Since the right hon. Gentleman inherited such a sad position, how is it that, after nearly two years of a Labour Government, production, investment in industry and the volume of exports are all lower than they were even during the period of the three-day week?

Mr. Varley

Because when the right hon. Gentleman left office, when he left this job, the oil crisis had not begun to bite on the British economy. The quintupling of oil prices had still to come through and we were just entering the worst industrial recession for about 40 years. The right hon. Gentleman knows that.

I am particularly pleased that the Opposition have selected this day to debate industrial policy—[Interruption.] I do not know what the right hon. Member for Lowestoft (Mr. Prior) is doing below the Gangway. I do not know whether he wants to move up and join the celebrated Opposition Front Bench. If he wants to intervene, no doubt he will want to do so in the usual way. But if he is going to barrack, I hope that he will let me know so that the House can listen to his stupid interruptions.

Mr. Peter Tapsell (Horncastle) rose—

Mr. Varley

No, I shall not give way. I have not yet come to the main burden of my speech. I am just trying to establish whether the right hon. Member for Lowestoft wants to sit there barracking all afternoon or to join his Front Bench and let us get on. That is all that I want to know. I want to be sure how we should proceed with this debate.

I am particularly pleased that the Opposition have chosen this day for this debate, because the House of Commons can join in celebrating the coming into force today of the Industry Act 1975. This week I signed the order bringing the National Enterprise Board into fully fledged operation—also starting today. I shall be announcing the composition of the Board on 27th November, when it plans to hold its first meeting.

The NEB starts with a formidable group of subsidiaries, employing some 250,000 workers. These subsidiaries include a number of companies with difficult problems which the NEB has the job of putting right, including Rolls-Royce, which, as we always fondly recall, was brought into public ownership by the party opposite. This fulfils one of the principal objectives of the Industry Act—as deleted in another place and sensibly re-inserted and re-asserted by this House—namely, the extension of public ownership into profitable areas of manufacturing industry. So the NEB, foreshadowed years ago in a Labour Party policy document, is now at work.

The Government have well under way their initial discussion for planning another vital element of the new Industry Act—planning agreements with individual companies. I am sorry that so far the CBI has yet to be convinced of the merits of planning agreements. It has put forward the view that these agreements are best kept to the sectoral level. Sectoral planning is, of course, a key component in our approach to an industrial strategy, but a sector cannot make, cannot keep and cannot deliver an agreement. Only a company can do that, and only a company can benefit from the relationship with Government that a planning agreement entails, and from the stable frame-work that planning agreements can provide—and, incidentally, from the reciprocal in- formation provisions, for which we are all indebted to my hon. Friend the Member for Motherwell and Wishaw (Dr. Bray).

Planning agreements are a new concept that will evolve and take shape through discussion. All those who participate in these discussions will help to develop not only individual planning agreements, but the very nature of planning agreements. In any case, if part of our industrial problem is poor performance and not getting the best out of our investment, it can be best remedied at the level of the firm. I should have thought that the CBI would have grasped the opportunity to engage in this kind of discussion. I still hope that it will. In any case, I am a great believer in gentle persuasion.

There is, of course, another side to the development of good industrial practice. I have always been convinced, and am more than ever convinced today, that the regeneration of British industry can be achieved only on the basis of developing industrial democracy. The British economy has suffered grievously from the slowness of our realisation as a country that industry will prosper only if there is a commitment from those who work in it to the achievement of its plans—whether for growth, new investment, increased efficiency through better utilisation of existing plant, or a capability to make the return on capital needed to finance investment. This can be achieved only if workers, through their trade union representatives, participate fully in the key decisions that govern their working lives and prospects.

Another ingredient in our industrial policy, an ingredient which I know will be warmly welcomed by the Opposition, who have long demanded an end to the continued uncertainty, is the immediate re-introduction of the Aircraft and Shipbuilding Industries Bill. The Bill received its First Reading today and will be brought forward for its Second Reading very soon indeed. We shall then all of us have our opportunity to deploy our arguments and the outstanding merits of this essential measure.

Each of these industries has problems and weaknesses, which can best be tackled through public ownership. There is wide agreement on the need to merge the two main groups of the aircraft industry, but this has not come about under private ownership and we shall do it by means of the Bill introduced today. The shipbuilding industry has deep-seated and longstanding problems which have combined to put it in the state in which we find it today. Private ownership has failed to solve these problems and public ownership is now the industry's last hope if it is to survive.

In fact, after a few weeks in this job, I received a deputation from shipbuilders and ship repairers. They made the ritualistic claim that they did not want nationalisation of their industry. They said "We do not really like nationalisation, but when will it happen? Make it quick. How much compensation shall we get?" Conservative Members know that that is the way in which they see it.

All these proposals listed in the Gracious Speech form part of the Government's approach to an industrial strategy, and the task that faces us is daunting.

Mr. Eric S. Heffer (Liverpool, Walton)

Does not my right hon. Friend agree that, coupled with the shipbuilding and ship repair proposals, there should also be proposals for the public ownership of the ports? If we are to have a viable ship repairing industry, we need in the ports facilities which are not there at present because of private ownership. Should not my right hon. Friend be pressing his right hon. Friends to accept that the two should go hand in hand—a good ship repairing industry and the facilities to make sure that it is developed?

Mr. Varley

One thing of which I am utterly convinced is that the measure introduced today is essential. If I had to choose between the two, it is certainly more essential for shipbuilding. My hon. Friend knows that the docks are not my departmental responsibility. I know that he has drafted a motion on this subject and that it is supported by some of my hon. Friends. I can only answer him by saying that the manifesto, which includes the subject which he has just raised, is a manifesto for a full Parliament. We are only just starting the second Session. One should realise that all the proposals will take some time to reach the statute book, but I know that my hon. Friend will continue to press as he has today. The task is undoubtedly formidable and very daunting. I suppose that the biggest single problem facing the Government at the moment is that of Chrysler. Hon. Members of all parties, particularly those with constituency interests, have been generous and forbearing in not pressing Ministers too hard. I have seen a number of hon. Members privately and so has my hon. Friend the Under-Secretary.

We are naturally aware of the concern arising from the continuing state of uncertainty. But these are extremely delicate negotiations, and I can only assure the House that we are anxious for the problem to be resolved as quickly as possible. A statement will be made as early as possible. Chrysler is an immediate and urgent problem with which we have to deal.

However, the basic issues that we have to face are the underlying structural problems of British industry. These problems will not go away if we ignore them. Nor will the British genius for muddling through avail us. This time we cannot simply rely on it all coming right somehow, sometime. The facts are stark and it is time we faced them.

Between 1964 and 1973 Britain's GDP grew at an average annual rate of 2.6 per cent. In West Germany it was 4.5 per cent. and in France it was 5.5 per cent. In the same period our industrial output grew by an annual average of 2.8 per cent. In West Germany it grew by 5.4 per cent. and in France by 5.8 per cent.

Between 1963 and 1973 our share of the main manufacturing countries' exports of manufactures fell from 15–3 per cent. to 9.4 per cent. West Germany's share rose from 19.8 per cent. to 22.1 per cent., and it was up in France as well.

The fact is that British industry is becoming increasingly uncompetitive. Output per head in manufacturing industry appears to be a good deal lower than in West Germany and France. Since 1960 it has increased by only about 60 per cent. In West Germany it increased by 80 per cent. and in France by 100 per cent.

We have fewer workers in manufactur-ing—the figures dropped from 34.8 per cent. to 32.3 per cent. between 1963 and 1973. In France the decline has been much smaller—28.7 per cent. to 28.1 per cent. In Germany there has been an appreciable increase—38.7 per cent. to 40.6 per cent. A smaller industrial work force whose productivity increase flags is benefiting too little even from such investment as there is. For each £1 of extra investment we get only two-thirds of the output that West Germany and France achieve.

During this period a variety of approaches have been tried. We had the boom and bust policies of the right hon. Member for Chipping Barnet (Mr. Maudling). We had the over-rigid national plan of my noble Friend Lord George-Brown. We had the Selsdon policies which marked the first period of the premiership of the right hon. Member for Sidcup (Mr. Heath) to which the Leader of the Opposition, I understand, now wishes to return. Then we had the panic policies of Lord Barber which can be summarised as "print and spend".

The hon. Member for Henley (Mr. Heseltine) was a Minister when both Tory policies were tried and when both Tory policies failed. He even held office in the Department of Trade and Industry at that time. I am surprised that he has so much to say on these subjects and the nerve to get up so often to speak on them. However, we have heard very little from him over the past fortnight about Chrysler. I am surprised that he has not made a public statement about that, because he usually jumps in with both feet.

Mr. Michael Heseltine (Henley)

I thought that the right hon. Gentleman thanked all hon. Members for the sympathy that they had extended to him in the difficult circumstances. I do not wish to push him, but I thought that that was exactly what he was telling the House a few minutes ago.

Mr. Varley

On reflection, I think I have been rather unfair. I apologise to the right hon. Gentleman. The idea was put into my head by a journalist who approached me the other day and said that he had been trying to get in touch with the Opposition to ask them for a statement about Chrysler. He said that he had been told, uncharacteristically, that they were not prepared to make a statement on the subject and that even when he approached Conservative Central Office he was told that it was not prepared to make a statement. [Interruption.] Of course I am grateful. The only point that I am making is that this action is so uncharacteristic and unusual. The hon. Gentleman is not a shrinking violet—he does not usually hide his light under a bushel. I hope that when other delicate subjects arise and a decision is to be made on them, we shall have the same kind of understanding from the hon. Gentleman and the right hon. Lady the Leader of the Opposition. The hon. Gentleman and his party have shown over the years, and certainly over the past 18 months, that they do not even understand the problem.

A new approach is essential—a Socialist approach using a wide array of instruments, ranging from the more salvageable parts of the 1972 Industry Act to the new measures that come into force today. Our immediate task is to stop the erosion of our manufacturing base. The sectoral retreat typified most painfully and bitterly by the decline of our motor cycle industry must stop.

No hon. Member should fail to read the Boston Consulting Group's report on the motor cycle industry. It is an industrial horror story that proves that when a foreign competitor moves in, the response must not be to yield ground to him, but to counter-attack aggressively. The Government fully recognise that this involves on our part an obligation to consider help when inherently viable firms face short-term difficulties.

I know that many of my hon. Friends see selective import controls as part of our response. The Government have made it abundantly clear that although no decisions have been taken, they have not ruled out the introduction of selective controls where industries are under heavy competitive pressure from imports and where the survival of important firms may be threatened. We must ensure not merely that new measures would be justified in terms of survival, but that they would be effective, that is to say, they would not simply stimulate diversion or counter-measures.

Yesterday, my right hon. Friend the Prime Minister made his position on the subject clear. It was made clear after the recent Chequers meeting that the Government were ready to consider help for industries offering hopeful long-term propects, but meanwhile facing interim difficulties. We announced details of several such industry schemes earlier this year, and in September I made it known that we were considering further schemes. I shall announce these as soon as the necessary arrangements have been made.

However, most of all, it is the Government's objective to pinpoint and stimulate those areas of industry where action has to be taken to improve performance. That is where wealth and high wages lie. It is significant that this is the basic approach both of the Government's document, "An approach to an Industrial Strategy", and the Labour Party's document "Labour and Industry: The Next Steps".

It is significant, but not a coincidence, as those of us who prepared the Government's document always had the Labour Party document at our side. Both documents are united in believing that viability must be the ultimate test.

I should like to quote from the Labour Party document. I dare say that the Conservative Party has not had a chance to study this document, but on page 6 it says: We do not support, however, any attempt to ossify the structure of British industry or to continue the production of goods for which there is no demand…On the one hand, there is the need to consider the social costs, and the costs to the taxpayer, of redundancies. On the other is the need to consider marketing prospects, possibilities of new management policies, and, above all, the basic viability of the enterprise. Again, both documents put forward the view that the market approach must be fully exploited. Page 3 of the Labour Party document says that Britain must: Ensure that industry fully aand quickly responds to changes in market demands, especially in overseas markets; gear our research, design and development efforts much more closely to market demands; and give an absolute priority in our planning to the needs of companies and sectors able to help bring about a sustained improvement in our balance of trade. Both documents insist that forward economic planning must be based, not on a rigid once-and-for-all plan, but on a flexible programme that rolls forward year by year to take into account sectoral changes.

Mr. James Prior (Lowestoft)

How does the right hon. Gentleman reconcile what he has just been saying about the Labour Party document and not ossifying outdated practices with what the Government now intend to do about the proposals contained in "Dockwork", which seem to me to be just designed to ossify the existing structure?

Mr. Varley

That is not so at all. The right hon. Gentleman will at some stage no doubt get an opportunity of debating that subject, but the Labour Party document and the Government's document "An Approach to an Industrial Strategy" are at one in saying that we ought to be much more flexible than we have been.

In The Guardian this week, Mr. Barry Norman wrote a humerous article translating our political and economic problems into football terms. Mr. Norman said: the national team and the national economy are running neck and neck in the relegation zone of the second division of the world league. That is much too near the truth to be funny.

What we have to do is to enter as quickly as possible the promotion stakes and to realise the nation's true potential; to exploit the talents of our technologists and middle management, and to bring out the best in our work force. At our best we can beat anybody, and we are doing so. We need to achieve the regeneration of British industry not because industrial growth is an end in itself—a successful industrial policy is only possible along the lines that the present Labour Government are proposing—but because a successful industrial policy is essential if the Labour Government are to achieve their most cherished objectives.

It is the wealth created by those who work in industry which alone can provide the resources to fulfil our social objectives—that is, better homes, an end to slums, better schools, better health service, and better pensions and other benefits. That is what industrial policy is all about. That is why the present Government's industrial policies are essential and why we are determined to carry them through to success.

3.33 p.m.

Mr. Michael Heseltine (Henley)

At a time when it is accepted in all parts of the House that the industrial crisis in this country is more severe than any that anyone can remember, the speech of the Secretary of State for Industry will come as a major disappointment. We expected, as this was the first opportunity he has had to expand upon the words of the Chequers statement, that we would be given some factual proposals and some concrete explanation of what was meant by those words. Instead we have had at best a controversial and inaccurate historical survey. Once it moved to any attempt to deal seriously with the problems of British industry we were treated once more to a range of extremely controversial and largely irrelevant descriptive journalism.

The one thing I found interesting was how the right hon. Gentleman had come to miss the advice that the Opposition have tried to give him on how he should take decisions. The fact that we had not, in the case of Chrysler, come forward with specific proposals obviously caused him some severe embarrassment—such, presumably, that his own statement on this matter is continuously delayed. Perhaps I may say to the right hon. Gentleman, in all humility, that if he is short of advice my colleagues are only too ready to offer that to him in the very difficult decision he has to make.

I come to the critical issue which I hoped that the Secretary of State would discuss this afternoon. That is the question of the opportunity with which he was presented to expand upon the Chequers talks. As has been pointed out by my right hon. Friend the Member for Worcester (Mr. Walker), the Secretary of State for Trade and Industry in the previous Conservative Government, we now have one of the worst unemployment rates since the war, one of the fastest declines in the rate of manufacturing investment, and production in five days running at levels below that at which it ran during the period of the three-day working week. Therefore, it can be no surprise to anyone that the present Government have decided that it is time for a new policy. The surprise that we have on the Opposition side of the House is at the nature of the policy itself.

No one questions the seriousness of the situation, but the sum total of the proposals the Government have put to the country appears to rest partly on a reliance on further State ownership of two industries—the nationalisation of the aircraft and the shipbuilding industries—and partly on a decision to hold discussions with the TUC and the CBI in the hope—no more—that a strategy will emerge at the end of those discussions.

I do not understand why the Secretary of State did not explain which 30 industries it is intended to focus attention upon in the first place. The only possible explanation I can conceive is that the Government have not yet decided which industries are listed on the list of 30. But how is it that they are certain that 30 is the right number if they have not actually got a list with which the rest of the country can be presented so that people not on the list may bid to be included in this major industrial action?

The House will also have noticed that the Secretary of State concentrated his strategy on the concept of discussions with the 100 largest companies. There was no reference in his speech to the hundreds of thousands of small businesses and the self-employed who account for so substantial a sector of the economy. The reality is that their plight is, if anything, even worse than that of the large companies, because at least the latter often have the option of living on their reserves, reducing their investment, or borrowing from the banks. They are to an extent protected by their very size, the diversity of their product range and the multinational pattern of their trading. The further down the scale one goes the less likely it is that those protections will exist, and the more likely that the full rigour of inflation and the pressures of the depression in the domestic market will be loading an intolerable burden upon them.

In the face of the record number of bankruptcies and insolvencies in this sector of the economy, these people do not even rate a mention from the Secretary of State. Coming after a Session which saw the introduction of the capital transfer tax which threatens the long-term security of these organisations, we now have a Session which apparently leads to a state of total indifference to the short-term plight of these organisations as well.

It is symptomatic of the Government's belief that conversations with large companies are some sort of substitute for effective economic and fiscal policies, for that is really what they are basing their-hope upon. The strategy is to hold discussions in the midst of the worst climate of depression and lack of confidence in living memory. The strategy consists of detailed discussions. Of course, at Chequers the soothing phrases were there in plenty to appeal to anyone, to all sides of the political spectrum. It was something obviously designed by politicians in order to gather in the widest body of support from the entire industrial world. The Government paper identified the need to reverse the declining rate of industrial profitability. It called for an end to the "pre-emption of resources" by the public sector and personal consumption. The Government were prepared to condemn the "restrictive practices and over-manning" which again are widely recognised as endemic problems of the British economy.

These were the words that were ringing in the memories of those people who listened to the Gracious Speech to see how the words would be matched by practical proposals for legislation or Government action. When we listened to the Gracious Speech yesterday, what did we find? First, we found a Bill to nationalise the aircraft and shipbuilding industries at a cost that the Government are not prepared—dare not, even—to disclose. Secondly, we found a Bill to extend the restrictive practices of dockland to a range of efficient profitable warehouses miles inland at a cost estimated in today's newspapers by one observer at about £150 million—on the cost of living.

I am delighted to see the Secretary of State for Prices and Consumer Protection present with us this afternoon. I hope that she had an opportunity in Cabinet, when the discussions were taking place, to comment on whether there was an economic or social purpose to be gained from extending inland up to five miles what are generally recognised to be among the most restrictive and inefficient methods of behaviour in British industry—those to be found in our ports and docks. That is the policy manifested in the Gracious Speech as being one of the ways in which the improvements about which we have heard so much are to be sought.

Third, we are to have a Bill to create a monopoly power for the National Union of Journalists in Fleet Street. We are to have a Bill to enable the Giro to undermine the commercial banking system. There is to be a committee on worker participation. No one has told us when that committee will be set up. Perhaps the Secretary of State for Prices and Consumer Protection will give us the date.

Mr. Russell Kerr (Feltham and Heston)

The hon. Member should declare his interest.

Mr. Heseltine

My interest is that I would like to see a revival of the domestic economy. I would have thought that everybody in the country wanted that.

Mr. Russell Kerr

His newspaper interests.

Mr. Heseltine

I fail to understand how the proposals I have mentioned will strengthen the domestic economy, which must be the concern of the hon. Member as it is mine.

In addition there is the repeated emphasis on the use of the National Enterprise Board and planning agreements. What I fail to understand is how planning agreements will stimulate investment. I fail to understand in what way the divulging of Government secrets, forecasts and programmes dealing with how they see sectors of the economy developing will play any part in persuading industrialists to take commercial decisions that in their own natural, commercial environment they would not be prepared to take.

This is the nub of the strategy the Secretary of State puts forward. He seems to believe that if the Government explain what they see as the rate of inflation or the rate of growth in the domestic product or whatever there will be a range of people in the board rooms of this country who will then commit manufacturing industry to investment to which they would not otherwise have been committed. I do not understand why he believes that that will be the case. There is no logical connection between the thought processes involved that would lead to that situation. It is no surprise to me that in asking as many industrialists as the Secretary of State has asked I am unable to find one who believes that this process will lead to an extra pound being invested in British industry.

It is curious that the Secretary of State, who has been talking about planning agreements all this time, is not able to give an instance of a single company which wants to enter into such an agreement. It is strange that he cannot come forward with a single investment proposal that has emerged from them and is unable to set out a single industrial scheme that will benefit from this system. Is it possible that the reality is that this is a great delusion, a Civil Service bureaucratic system which, while it will give an involvement in the process of management to the Government and the unions, will give no commensurate benefits to management?

Mr. Max Madden (Sowerby)

I am surprised that the hon. Gentleman does not know of any sectors of industry that are interested in entering into planning agreements. Is he aware of the evidence given by many representatives of the motor car industry to the Trade and Industry Sub-Committee of the Public Expenditure Committee? Is he aware that that Sub-Committee took evidence from a number of senior managers who said that they would be interested in entering into planning agreements? Does he not agree that the confidence which he and his colleagues emphasise at every turn would be assisted by planning agreements which provide managers, representatives of workers and others with long-term information about strategy and policy? Would that not help to increase investment and remove many of the defects which we find arise?

Mr. Speaker

Order. The hon. Member is trying to catch my eye. He has given me notice that he wishes to speak in this debate. He does not help his chances by that kind of intervention.

Mr. Heseltine

The hon. Member will find that the evidence given to the Sub-Committee was in favour of sectoral planning rather than company planning. I will deal with the precise impact of that sort of system upon individual companies in a moment.

There are a number of issues which the Government must recognise. The first is that inflation must be dramatically abated before there is a restoration of industrial confidence. The danger is that in fighting inflation we are using weapons that will create wholly predictable problems of a different sort tomorrow. Second, we have to recognise, as The Sunday Times has pointed out so starkly, that as a nation we have absorbed more of our manpower resources in non-productive activities than we can carry. Third, we neither invest enough nor obtain a rate of return from existing investment comparable with that of other economies.

I quote to the Secretary of State his own departmental publication Trade and Industry, which shows that the return on investment in commercial and industrial enterprises is lower now than at any time since 1964. It has fallen over that period from 11 per cent. to 4 per cent. if we allow for stock appreciation. The right hon. Gentleman does not need to look further than that to find out why British industrial investment is lagging. He has only to look at those statistics produced by his own Department.

Fourth, investment will only follow profitability and confidence in future profitability. It is one of the difficulties that Ministers face in trying to stimulate investment quickly. If we look over the past decade we can see that first there has been rising confidence, then rising profitability, and then, and only then, rising investment. If we do not seek to restore confidence and then to restore profitability, which goes with the restoration of confidence, there is no way of persuading a substantial flow of funds into further investment.

Mr. Arthur Palmer (Bristol, North-East)

Will the hon. Gentleman explain why it was that the shift from productive employment to parasitic employment accelerated between 1970 and 1974 in particular?

Mr. Heseltine

I thought that the purpose of this debate was to learn from experience, not to ignore it, as Labour Members seem to be content to do.

Against all the standards I have set I believe that either by commission or omission the Government are acting in-effectively or positively harmfully. In the battle against inflation the daunting task, which we must all recognise, is to educate public opinion not only to forgo current public expenditure so as to release resources for industry, but to be prepared to change jobs in large numbers from the public sector back into industries where profits can be earned. This is something which the Government are studiously ignoring.

Mr. Heffer

What the hon. Gentleman is saying—and it is absolutely right—is that in our type of capitalist society, unless profits are made, there is no investment. Profitability is the essence of the existing capitalist system. Does the hon. Gentleman agree that it is precisely because of the growth of machinery in our type of society that there has been a fall in profitability? [HON. MEMBERS: "Rubbish."] Tory Members may not agree, but the fact is that the growth of technology and machinery, which has led to a decrease in labour, has meant a fall in profitability. Is the hon. Gentleman aware that the answer to this problem is one which we have been arguing for some time on the Labour Benches, namely, a planned economy with planned investment and the extension of public ownership?

Mr. Heseltine

This was the argument which the Prime Minister so admirably described as the initial argument of the Luddites. The Luddite was against machinery because he thought it destroyed jobs. That is why he broke it. The fallacy of the hon. Member's analysis, which, I have to concede, is much more honest than that which we get from the Government Front Bench, lies in the fact that in reality whenever inventiveness and ingenuity has been allowed to go forward it has gone on to accrete wealth after the initial use of the first investment. It is not the planned Socialist economies that go on to higher rising standards of living. It is the capitalist economies, because they allow ingenuity and entrepreneurial skills to seek ways of pushing the frontiers forward when a planned economy would be suffocated by bureaucratic control, planning agreements, unionisation—a whole range of components.

The daunting task of honestly educating public opinion to the responsible sacrifice that we shall all have to make is being studiously avoided by the Government. Two conditions are necessary to bring about that process of education. First, there will have to be rigid manpower controls on the level of employment in the public sector. Secondly, the Queen's Speech does not recognise that there will have to be a growing number of jobs available in the private sector and that, to achieve that, measures will have to be taken to stimulate such employment. Therefore, the danger is that the process of increasing job opportunities in the private sector will be left to the upswing in the economy which, as always in the past, will catch us with too little capacity.

The Government will argue that the National Enterprise Board and the planning agreements are designed to stimulate exactly this demand ahead of the normal cyclical upturn, but there is no prospect that the NEB will be able to achieve such stimulation on anything like the scale required. I see no reason why industrialists should take the advice of the NEB to do what they would not do on their own commercial judgment.

Industrialists are much more aware than are the Government of the danger of the British Leyland situation. Against the commercial judgment that should have been applied to the level of profits in that company, the company went on investing. The consequence was that, although it was still profitable, it went straight into the hands of the Government, but it was insufficiently profitable to carry the investment. Prudent management would have been forced to cut back on the level of investment or to have increased profitability. Because British Leyland did neither, it is now in the position with which we are all familiar.

I personally welcome—and I think you will, too, Mr. Speaker—the new focus of attention that the Government have placed on the development of the NEDC machinery. It was created in the early 1960s as a framework for a partnership between all sides of industry. It has never in this country—although it has in other advanced capitalist economies—been given the follow-through that the basic concept merited. But the basic concept never assumed that a dialogue in NEDC was a substitute for profit. The real motivation of investment is profit, and without that no dialogue with anyone will get dynamism in a capitalist economy. Nor did NEDC assume that, if the climate were unfavourable for investment, a dialogue with NEDC would become a substitute. The most that could be achieved was a situation in which the NEDC machinery could act as art overrider gear where the momentum was already well under way. There was never the potential that it could act as an engine for the economy, which is what the Government seem to think it can become.

We now have a new concept to which the Government continually refer—spotting winners, as though this were a skill in which Governments or civil servants were particularly qualified. It is as though, by discussing strategies with industries or with companies, by seeking a consensus about what is likely to happen, that consensus creates its own momentum. That is a dangerous and deluding assumption. If Governments, Ministers and civil servants could spot winners, the making of fortunes would be totally predictable. All one would have to do would be to measure a consensus of given views of industrial confidence at any one time and one would be on a winner. One could be certain that one's judgment would materialise and that the endeavour would succeed.

The Government have failed to recognise where the strength of the private sector lies. The private sector possesses the ability to back a vast range of enterprises and to produce a substantial number of different products, some of which will succeed, some of which will fail. The expertise of the private sector is in the ability to spot quickly enough those that will fail to enable it to draw back from a total commitment to them, and then to back those that have a prospect of success. That is the strength of a commercial system. It is the opposite to the strength of a political system. There is no flexibility within a political system. It is a whole range of imperatives. It is unable to change its mind quickly enough when it has made mistakes and is unable to withdraw the commitments it has made for fear of the political odium and political responsibility that will accrue. That is true of unions and of the Government.

Mr. John Watkinson (Gloucestershire, West)

If the hon. Gentleman has so much faith in the profit mechanism will he explain why, in the period from 1970 to 1974, when his administration flooded the business world with money, it found its way not to productive enterprise but to property speculators? Is that the way in which the profit mechanism works?

Mr. Heseltine

That is one of the myths it suits the Left to believe. The cyclical investment pattern of the early 1970s was that investment bottomed out in about 1971 and then began to rise steeply. We had the biggest annual increase for many years in 1973–74, but then we went back to the point which investment reached in the early 1970s. [HON. MEMBERS: "In-vestment in what?"] Investment in manufacturing industry. The Department of Industry's figures show the position.

The coming of the oil crisis and the world commodity explosion destroyed industrial confidence—and who can blame industrialists for that? They would not have survived if they had not drawn back at that moment when they had such devastating problems with their cash resources. We can argue about the way in which money flowed between 1970 and 1973, but investment did recover as a direct consequence of the upturn in confidence and profitability in the early 1970s. So the analysis is not as the hon. Member for Gloucestershire, West (Mr. Watkinson) would have us believe.

Backing winners has been the theory behind a range of similar assessments by Government and people outside Government in recent years. It was, for example, the assumption behind the gross over-optimism of industrialised housing. Exactly the same attitude led the electricity generating industry to believe that there would be a massive upturn in the demand for transformers after the National Plan of 1964. Exactly the same concept created a world capacity of 20 million vehicle units in a world market in which there was a demand only for 12 million cars. It is symptomatic of Government that, whereas more prudent and cautious investors are wondering whether there is a future for long-term investment in the automobile industry in the Western world, the Government have decided that it is likely to be the biggest winner of them all and have put £2.8 billion worth of taxpayers' resources behind the success of one company. It is to be seen whether that judgment is right or wrong, but, my word, it is a massive risk to run to assume that complete dominance by one company will produce what the spread of a similar amount of money amongst a range of companies might have been able to produce.

Then we have the Bill to nationalise the aircraft and shipbuilding industries. At any time the possibility of the transfer of control of manufacturing production from the private to the public sector would fill me with grave concern. I see no evidence anywhere in any nationalised industries to give me faith that it is more likely that we can manage our national resources better in public ownership than in private ownership. There is no historical evidence to suggest that the problems of industry will be overcome by public ownership, either in terms of industrial performance, employee relationships or a more coherent industrial strategy. Those are the arguments that I would deploy in theory on any occasion, but at this moment, when the whole nation is supposed to be undergoing a massive economic crisis and we are all expected to respond to the national need, to introduce a Bill of this sort is divisive and wholly wasteful.

Perhaps the most revealing sentence in the Chequers statement was the one that explained that while we might have to sacrifice the economic ends of the Government and while the social improvements which the Labour Party wishes to make may have to be put on one side, the one sacrifice the Government are not prepared to make is their political obsession with public ownership. At whatever cost, their party dogma must be served to the last. We shall be debating the Bill on Second Reading, which, I understand from the Whitehall-leaked rumours, is to be in the not-too-distant future. Therefore, it will be appropriate to wait till that moment.

As we have heard so much from The Sunday Times, I do not believe that the House would wish me to refrain from quoting from The Times of today. [Laughter.] I can understand the laughter from the Under-Secretary of State for Industry. I am not sure what other defence he has got. I should like to quote from the first leader in The Times. [Laughter.] Yes, I know it hurts. The Times says: The first and perhaps the worst is the Bill to nationalise the aircraft and shipbuilding industries. Almost all the nationalised industries at present are in a state of managerial disorder, grotesque over-manning and huge loss. The shipbuilding industry has serious problems which nationalisation will no doubt manage to make worse, since they are just the sort of problems nationalisation has in fact made worse in other cases. The aircraft industry, though heavily dependent on Government orders, is fairly efficient and fairly profit- able. It is wicked to propose now to nationalise these two industries when there has been so total a failure to make a success—or avoid the disastrous failures—of those industries which are nationalised already. A Government which pushes ahead with doing so loses its claim to be concerned with the merits of public issues. The whole thing becomes just a political job of the most contemptible kind. And so say all of us.

I come back to the theme to which the Minister has referred so often, the concept of the winners and the best chance of success. I suggest that the winners with which he ought to be most concerned are those companies which have a proven track record of profitable activity. Those are the companies which, by their energy and judgment, have proved their ability in practice to achieve what the Government claim they want in theory. Unfortunately, these are the companies which, because of their success, become the most heavily taxed. Year after year, the more successful they were the more the present Government took from them. Instead of wondering how to spend the taxes supporting less effective companies, why do not the Government apply the logic of their own arguments and consider ways of giving back to the profitable companies some part of the excessive tax burden which they have imposed? That really would be backing success. Of course, to do so would need compensating reductions in public expenditure, but that is necessary anyway if resources are to be shifted, as the Goverment recognise has to happen. If such a proposal were linked to investment carried out within a tight timetable, not only would it have a job-creating potential but it would advance the investment cycle.

If a genuine attempt is to be made to rekindle confidence in investment the Government will have to grasp the nettles within their own counter-inflationary policy. It is quite pointless for the Secretary of State for Industry to talk about encouraging profits and the Secretary of State for Prices and Consumer Protection to set about the tightening of profits and prices control. It is unacceptable to expect the owners of investment funds to pour them into manufacturing investment if, in real terms, dividend restraint reduces the rate of return on their money every year, unless the money is injected into industry as loan capital where the rates of return are not subject to the same controls. But to encourage loan capital is to debilitate the balance sheets of British industry and its borrowing powers. In all the dialogue about the activities of the National Enterprise Board, which has, perhaps, £1,000 million to spend over five years, it should not be forgotten that even in the depressed markets of today 157 companies have raised £1,000 million this year on the London Stock Exchange.

It is not enough to warn of the dangers of inflation and then fail to recognise the urgency with which the Sandilands Report on inflation accounting should be dealt. It is no use expecting people, from those on the shop floor to the most senior management, to watch their differentials being eroded by supposedly equalising pay controls, which in practice either destroy incentives and encourage caution or on an increasing scale lead to a growing number of people now leaving this country for higher rewards overseas.

The industrial performance of this nation has been inadequate for two decades. However unpalatable it may be for us to acknowledge that, no one outside this nation would question it for a moment. The danger now is that we have fallen, or are rapidly falling, so far behind that, regardless of the vagaries of the investment cycle, we shall always lag behind our more effective competitors.

There are only two ways that offer a solution. The centrally-directed controlled economy provides at least one theory, even if, on any available evidence, it is unlikely to provide economic growth and it is certain to destroy political freedom. The one alternative is to recognise that the capitalist system offers the only tried method of meeting the material wants and needs of society combined with a freer political system. What cannot work is what the present Government seek to create, a system that is a combination of erratic central control and restricted enterprise. That system will grow progressively weaker, fostering increasing resentment, till in the end it is replaced by a society tired of excuse and failure.

After 22 months of lamentable indecision and misjudgment the Government say they want another chance. Rather like St. Paul on the road to Damascus, they have seen the light. The trouble is that there is no evidence that they know from which direction it is coming.

4.6 p.m.

Mr. Jeremy Thorpe (Devon, North)

The hon. Member for Henley (Mr. Heseltine) has made a speech in which he put forward a very clear and lucid analysis of our economic situation. Although I do not agree with everything he said, I think it was one of the best speeches that we have heard from the Opposition for a long time. With the exception of the suggestion about the repayment of tax to the successful, which is an interesting concept, I hope he will not think me churlish if I say that I do not think that there were other practical suggestions of alternative policies. If he can, with the same lucidity, put forward alternative policies on behalf of his party, he will do his party and this House a great service. I wish him well in that endeavour.

I should have thought that the main factor that was missing in industry was confidence. It seems to me that the three ingredients which are needed—I do not think there is any difference between the two sides of the House here—are, first, continuity of policy; second, certainty; and third, job satisfaction. In the last five years alone in this country the zig-zags to which British industry and business has been subjected have been phenomenal.

We had what I might call Heath Mark I, which lasted from 1970 to 1972, in which the free market was to be the determinant, lame ducks were to perish and there was to be no prices and incomes policy. We then had Heath Mark II, with a prices and incomes policy, the rescue of lame ducks, a Price Commission, which I understand the Opposition are now eager to condemn, and the 1972 Industry Act, which fashioned the tools which the right hon. Member for Bristol, South-East (Mr. Benn) has no compunction in taking over and using.

Then under this Government we have Benn Mark I, which so scared the wits out of British industry that the Prime Minister had to move him sideways. We now have Varley Mark I, in which the Leader of the House extols the virtues of profits and the need for a mixed economy, in which at the Chequers talks there is reference to profitability as being an imperative for investment, and in which the right hon. Member for Ebbw Vale (Mr. Foot) says that he accepts industry's view that a reduction to single-figure inflation in a year is an unrealistic target if the present pay policy is to be followed by a free-for-all and that there will have to be another policy but it is too early to say what form it will take. I remember saying at the last General Election that whichever party was returned, it would have to introduce a prices and incomes policy, enforced by law, within six or nine months. Hon. Members opposite find that allegation very much more difficult to resist now than they did in October.

If the Leader of the Opposition had her way, we would move into Thatcher Mark I. We do not know her current view on prices and incomes because the Opposition abstained when that issue arose, but if her speeches in America are any guide, market forces are to be the determinant and we shall be back to Heath Mark I. The criticism among many Conservative supporters in the City is not merely that the Tory Party has not shown that it is likely to be any more successful in dealing with the economy than when it was last in power but that it has not yet indicated what its policies will be.

There has been a total lack of continuity in economic policies in the last five years and before. We have had, particularly under this Government, a Niagara of badly-drafted laws and sudden changes in the incidence of taxation, whether VAT, corporation tax or capital transfer tax. The Government's fiscal policy has lacked any strategy and usually any definition, too. There would be much merit in having a Select Committee on taxation to hear evidence throughout the year so that we can build up a body of information about whether the people who are the wealth producers in this country find that the fiscal system is helping or hindering them.

At the moment, the Chancellor of the Exchequer goes into purdah for two months before the Budget and then comes out and opens his Pandora's Box. Unfortunately, the Chancellor seems likely to ignore the Select Committee's Report on the wealth tax, so it seems unlikely that we can expect the Government to give much attention to a Select Committee on taxation. But no firm or company can be expected to expand and invest on the basis of constant fiscal changes.

It is symptomatic of our economy that we have the highest percentage of people employed in administration of any ad- vanced democracy in the West. A total of 18 per cent. of the work force is involved in administration. There are many reasons for this situation, among them the local government reorganisation of the previous Government in which "bigger" meant more people doing substantially the same jobs for substantially higher wages.

Turning to job satisfaction, I welcome the encouragement in the Gracious Speech of further discussions on the advancement of industrial democracy. Although I hope everybody would join a trade union, I believe that in a free society one must have the right to join and the right not to join. In all the Government's discussions on industrial democracy, they refer to what can be done through unions. People elected to works councils must also belong to trade unions. If industrial democracy is as good as I believe it is, I do not see why the 50 per cent. of the work force who are not trade unionists should be excluded. Otherwise, we should have not industrial democracy, but industrial oligarchy.

When one looks at the progress made in other countries, one can see just how far we have to travel. The coal and steel industry in West Germany has a main supervisory board with 11 members—five representatives of the shareholders, five representatives of employees and a neutral chairman. They take all decisions on investment, operating and manning. Also in West Germany they are moving towards parity between workers and shareholders in all firms with more than 2,000 employees. There are also 14½ million people in capital accumulation schemes as a result of 850 union-negotiated agreements. In West Germany they talk not only of the actual wage and the social wage, but of the investment wage a worker takes home.

Our Government should look into this. If we are to continue with a prices and incomes policy which requires restraint, we must realise that pay restraint for a worker is total while dividend restraint is likely to be deferred, and this causes great feelings of injustice. It has been estimated that if 2½ per cent. of the wage increases held back by an incomes policy were invested in a British national investment trust, with a comparable payment into the trust by the employers, a total of £3,000 million a year would be available for industrial investment in this country.

The introduction of profit-sharing schemes would be one way of improving industrial democracy, but the fact that we are still talking about the desirability of works councils rather than making them mandatory shows how far we have to go.

It has been estimated—and I think it would be generally agreed—that we have probably under-invested by something like £20,000 million over the past decade compared with other major industrial nations. The higher the corporation tax and wage bill of a firm, the greater the toll they take. In 1973 the wage bill and global overheads of manufacturing industry were seven times more than its trading profit. This year they are likely to be nearer 11 times more. That is one reason not only for the lack of confidence and investment, but for the lack of liquidity.

I shall look forward to seeing the guidelines of the National Enterprise Board. So far, Government investment has been aimed at propping up ailing industries. It is an appalling thought that NVT and British Leyland virtually had to go bankrupt before it was realised that their products were not competitive in the market. We shall want to see whether the Government are genuinely going to spend money on expanding industries or whether they will just patch up jobs in situations that might eventually produce unhappy and sad employment problems. If that is their approach, they will merely be putting off the evil day.

What will be the position regarding Chrysler? In human terms, it is a firm employing 28,000 people, but in economic terms it has lost about £35 million in seven out of the past 13 years. Do we want to prop up one industry to compete with another of a similar type, namely Leyland, which we have also propped up at a cost of more than twice as much as we should have—twice as much as the public purse could justify?

The Government have a tremendous job to do in retraining. It was announced in September that the Manpower Services Commission was to spend £30 million to create 15,000 new jobs. This does not compare well with experience in Canada where about 150 million dollars was spent to create 100,000 new jobs. The Labour Government might do worse than look at the activity of the Liberal Government in Canada.

I do not think Governments can be commercial punters, picking winners and hitting the jackpot for the nation, but Governments can ask themselves which firms, on the basis of quality and competitiveness, will be able to expand. These firms should be given the assistance so to do. Industries in the calculating and computing field, and in the supply of health and hospital equipment, quality cars and carpets all have great expanding futures.

When Lord Shepherd announced in another place on 24th September that the Government would pay £5 a week per head for school leavers employed by companies, he stated that the date of operation of the scheme would be announced later. On the basis of that, a number of firms in my own constituency immediately employed school leavers. The Government would be the first to agree that these companies responded to the invitation to recruit school leavers. However, on 3rd October the Government announced that firms would qualify for this scheme only in respect of school leavers employed after 13th October. Therefore, anyone who employed them before 13th October, who moved quickly in response to the Government's request, will not qualify for the scheme. I have written to the Secretary of State, but I have not yet had satisfaction. I might put down a Question on the subject, not only in my own name, but on my own account.

We might also consider a system of grants to local authorities for certain projects in the national interest. The Government are thinking along these lines, but they could go much further. It is crazy that local authorities should have to abandon projects and lay off workers who subsequently have to be paid by the State for being unemployed. The Government must take this issue further. The answer is that there must be massive retraining, far greater than anything carried out so far. There must be job evaluation and help for those who are planning to expand.

We shall be able to debate at great length the nationalisation of the aircraft and shipbuilding industries. I do not see how that proposal can be in the national interest. I have come to the conclusion that there are hon. Members who would streak down Whitehall or stand on their heads in Parliament Square if they were told that there was a commitment to that in the manifesto. It seems a most extraordinary holy writ.

The Government will run into great problems in extending the dock labour scheme. The scheme had the initial laudable objective of securing employment. However, the extension of the scheme either to a five-mile band or throughout the country should not be accepted by the House unless the case for it could be proved. There are now new warehouses lying empty and there are dead ports and harbours. The reason for this situation is that employers have been forced out not only by the high wage costs, but by the large number of people they are told to hire. There are few other industries where an employer is told how many people he must employ to do a job that he is presumably in business to know about.

As the process of contraction goes on, as it is bound to do under an extended dock labour scheme, there will be more and more people to be employed in fewer and fewer docks and harbours. This will mean a greater danger of overmanning. I was told by a leading tea importer the other day that it is cheaper to have tea shipped via Rotterdam to Hull, then to be brought to London by road, than it is to have it landed in London direct, because of the enormous port costs.

An extension of the scheme will have a further effect in escalating costs. Wherever the scheme is extended employees who are not registered, like warehousemen, transport men and men working in cold storage, have actually been turned out of their employment. That is one of the reasons why the association representing warehousemen and packers, the Transport and General Workers' Union and the National Union of General and Municipal Workers have been violently opposed to the Government's plans. I believe that it has lobbied many Labour Members.

I do not believe that the proposal will increase efficiency. The gross figure of tons shifted per man hour in dock labour scheme ports is something like a quarter of the figure for private enterprise ports. I know the position of one small port in my constituency—Bideford. It feels that if the scheme is extended and it is compelled to employ more labour than it believes it can economically take on, it will go out of business. Not only will this proposal make the ports uneconomic: it has already produced inter-union strife.

This is primarily a debate on industry, and there will not be a debate this week on devolution. I hope that I shall be permitted therefore to make a few remarks on that subject. I have always believed in a federal system of government for this country, and it would be appalling if there were unnecessary delay. I say to the nationalist parties that the problem we all face is that the two major parties refused for so long to bring about devolution that they have not yet got round to converting their own back benchers to the idea. I doubt whether, if the legislation were rushed through in this Session, there would be a majority for it in the House.

That being so, I should like a pre-legislation Select Committee to discuss the Bill when it is introduced before the end of the Session. Just as the Conservative Party was for years out of touch with the position in Northern Ireland, just as I think many Labour Members are out of touch with the aspirations of Scotland and Wales, so I believe the Scottish National Party was itself out of touch with the views of the people of Scotland on the future of Britain in the EEC.

I hope that we shall make progress on this topic. If the Government ignore the one unanimous recommendation of Kilbrandon—that the electoral system should be representative of all shades of opinion—they will ignore it at their peril and they will ignore it with just the same results as the Tory Party found, to its cost, when it abolished proportional representation in Northern Ireland in 1929.

Two points which will be vital to the economy are not included in the Gracious Speech. The first is some indication of what is to happen if there is a challenge to the £6 policy in the New Year. Do the Government intend to stand firm and possibly to invoke their statutory reserve powers, in which case they might be unlikely to get a majority of their own supporters? Or are they to give in, in which case they might undermine foreign confidence in sterling? Secondly, there is no indication of what will happen after August when the £6 policy expires.

I believe that the nationalisation proposals are irrelevant and that the dock labour scheme extension will be expensive and will give monopolistic powers over a vital sector of our economy to a few people. I believe that the Gracious Speech does nothing to ensure the continuity and certainty of policy which industry needs if we are to bring about an economic revival in this country.

4.27 p.m.

John Sfonehouse (Walsall, North)

The right hon. Member for Devon, North (Mr. Thorpe) has made a typically refreshing speech. I agreed with what he said at the outset—that we have had a Niagara of Bills churning out from this place. I see no particular merit in the quantity of Bills recommended in the Gracious Speech. They clog up the work of the House, they distract the attention of Ministers and hon. Member from the serious questions of the day, and they add to the bureaucracy not only of the administration, but of industry and commerce outside. Industry and commerce find it very difficult to keep up with the mass of legislation that pours out of the two Houses of Parliament.

There is also a serious danger that the people will be overwhelmed by the mass of bureaucracy that they now have to bear, and the Government are doing nothing positive to reduce that bureaucracy. The Gracious Speech seems to show that it will increase rather than decrease.

The proposals for Scottish and Welsh Assemblies could easily add to the weight of bureaucracy, not reduce it. Although the proposals for devolution might be attractive in theory to a minority, they are fraught with problems. I hope that we shall use the next year or two to examine them very carefully before we rush into proposals that would not be generally acceptable.

It was always an anomaly that Northern Ireland Members were able to deliberate upon and to determine the laws applying in England while at the same time having their own assembly at Stormont. Are Scottish and Welsh Members, as well as having their own assemblies, and perhaps even being elected to them, as parallel Members at the same time to be able to make laws for England? That would be anomalous and no English Member of Parliament would stand for it. English Members would demand assemblies for the regions of England, and that would simply add to the bureaucracy of which I complain.

There is a sign that Ministers approve of the devolution proposals not because they think that devolution is a good idea, but because they are running scared from the pressures and agitation of a minority, sometimes a minority within a minority, which is able for a brief period to make a big fuss. But in time, particularly if the economic position improves—and especially in Scotland, if Scotland's position improves as a result of the general improvement in the United Kingdom economy—the pressure that gave rise to the phenomenal success of the Scottish National Party in the past few years may reduce.

The crisis in which this country now finds itself will not be avoided by producing diversions such as devolution. The Government, or some Ministers, may be looking to the great devolution debate as a method to divert attention from the crisis, from which they have so far been unable to find an escape. It is not good enough to try, as the Prime Minister did yesterday, to brush off the crisis as though it is affecting most countries more or less equally. It is not. Britain is in a worse mess than any other Western industrial country. Our inflation rate is the worst, running at an annual 25 per cent.

It is fatuous to suggest, as was being suggested last week, that a 1 per cent. reduction in the rate is a significant trend. We cannot be confident that we have the situation under control until the inflation rate is at least halved. A reduction of 1 per cent. is a minuscule step in that direction. Other countries already have less than half our rate of inflation. The annual rate in France is only 10.7 per cent. in Japan 10.3 per cent., and in Germany and the United States 6.1 per cent.

The effect of inflation can be seen in the continuing, depressing devaluation of the pound sterling. In a debate a year ago I drew attention to the fact that the pound had dropped in value by 45 per cent. against the deutschemark since 1964. The average rate of devaluation against the deutschemark was 6 per cent. in each of the 10 years from 1964 to 1974, but between September 1974 and September this year the devaluation was 12 per cent. The rate of devaluation has doubled in the past year. What this means in real terms is that for the tourist or businessman the pound was worth 11.10 DM in 1964 but today it buys only 5.35 DM, much less than half.

If anything, German has had fewer advantages than Britain since the war. It is therefore a measure of our decay, and not only of German success, that our relative position has declined so badly, and, of course, the pound has been devalued not only against the deutschemark, but against practically every other major currency.

As the Secretary of State for Industry himself said this afternoon, our industrial productivity is among the worst in the industrialised world. The figures he gave were particularly saddening and depressing, and it was distressing that he gave no philosophical or practical justification for the policies that he supports for the so-called restructuring of the industrial sector. We had a totally inadequate speech from him in that respect. Our investment in new industrial plant is the lowest of all the industrialised States in terms of percentage of our gross national product.

In this debate we are speaking about industrial problems, but it is not entirely irrelevant to talk about violence and terrorism as well, because violence and terrorism in our society, although we do not always face up to them, are the worst in Europe. They are worse than in Portugal and Greece, despite all the traumas suffered in those two countries in the past four or five years. A total of 1,000 civilian deaths in the United Kingdom was announced only last week, and already this week there have been four or five more deaths as a result of terrorism, which is a symptom of the sickness in British society. It is also a symptom of the weakness of successive Governments in failing to grasp the real problem in Northern Ireland and continuing to attempt to apply shibboleths that cannot be applied.

We must begin to look at solutions rather than idealisms for Ulster. I said last year in the debate on the Gracious Speech that we should consider the possibility of a re-partition in Northern Ireland. That idea must be re-examined in the light of the continuing and depressing situation in that part of the United Kingdom.

There is a deep sickness in Britain which is sapping our strength and vitality. The explanation can perhaps be found in the- end-of-Empire syndrome from which we still suffer, the idea that the world owes us something. France and Germany had traumatic experiences which enabled them to break out of that torpor and complacency, but our national policy since 1951 has been dominated not by principles, not by policies which have inspired the country, but by a series of compromises and manoeuvres in an atmosphere of constant electioneering. One of the problems of the zigzag in policy about which we heard in the speech of the right hon. Member for Devon, North is that no sooner do we finish one election than we are preparing for yet another. Government after Government, of whatever complexion, are applying the stop-go idea, not because they believe in it, but because they are playing up to the electorate.

I believe that the majority of the British people have been ignored during this process in the worship of the cult of the minority. It seems that every sectional interest which has made itself vociferous enough has been placated. Only for a few brief periods has there been any attempt to project a true national purpose or policy. That attempt has soon been abandoned as political leaders have succumbed to the pressures to compromise. Regrettably, Ministers today do not seem to recognise their own lapses in this respect. They cover their ideas with humbug and hypocrisy, some of which we see in the Gracious Speech.

To propose final solutions for this malaise is not appropriate or possible in today's debate, but there are two issues to which we must pay attention. One is the awful growth of the bureaucracy in the past 10 or 15 years. In a speech this morning at Eastbourne, the Prime Minister apparently referred to the growth in employment in municipalities—an increase of 1½ million employees, from 1 million 15 years ago to 2½ million today. Instead of grasping the problem, the Prime Minister has proposed yet another committee as a watchdog. That is not a solution to the problem.

The Civil Service has also been a bad offender. I have here the Civil Service statistics brought up to date by statements in the House showing that in 1963 there were 410,000 non-industrial civil servants. The figures increased in subsequent years by 4,000, 6,000, 10,000, 21,000 and 20,000. Only in one year, between 1968 and 1969, was there a decrease, of 1,000. The following year the number went up by 23,000, and today we have 531,000 non-industrial civil servants.

That is an increase of 121,000, or 30 per cent. in 12 years. Compared with the 1935 figures the situation is even more depressing. In 1935 there were 128,000 non-industrial civil servants. There has been more than a fourfold increase in non-industrial civil servants during the past 40 years. That is a far greater increase than the economy can bear. The figures coming from the National Income and Expenditure Review also confirm those depressing increases.

As the Sunday Times' articles in the past three weeks have shown only too clearly, the growth of the bureacracy has not only cost more money in terms of public expenditure, but has drawn people from productive employment and reduced the pool of labour available whenever a boom takes place. That is in sharp contrast to what the Secretary of State referred to as the experience in Germany, where the labour force in manufacturing industry has increased during the past 10 years.

Problems to which we should draw more attention—they are avoided in the Gracious Speech—are overmanning, restrictive practices in industry and the undermining effect of strikes. We have had the depressing situation of Chrysler threatening to pull out, and even threatening to unload its investments on the United Kingdom's administration. Very few people—no Ministers as far as I am aware—have drawn attention to the reason for this action. There is not only a lack of management skill on the part of Crysler: it is a fact that in the past 10 years there has been a deplorable record of labour relations, a deplorable record on the part of workers not only in Coventry, but at the new plant at Linwood. That record has destroyed the prospects of achieving high productivity.

Mr. John Wells (Maidstone)

The right hon. Gentleman speaks about a deplorable management and labour relations record in Chrysler plants. I hope that he will expressly exclude the Maidstone plant, which has an extremely good record. The perpetual knocking of Chrysler by Midlands Members does a great deal of harm to my branch of the great Chrysler enterprise.

Mr. Stonehouse

I do not know any-thing about the Maidstone plant. I am happy to concede the point as the hon. Gentleman, who represents the area, is so well informed about the Maidstone situation.

We have also had a depressing situation at British Leyland which has resulted in the company having to be bailed out at enormous expense. On the news today there was the announcement that 2,000 workers producing Jaguars, cars which sell extremely well abroad and which are in great demand, have been laid off because of yet another dispute. It does not seem that the lessons are being learnt. I wonder when the Government will speak out frankly on this issue which has been so undermining the performance of British industry.

Last week we had yet another illustration of the deplorable effect of strikes—namely, the dispute at the Daily Express. Of course we do not read very much about that sort of dispute in the newspapers, because there is an undertaking in the newspaper industry not to refer overmuch to the overmanning problems and the restrictive practices that they have to suffer. We only hear about such matters indirectly.

I understand that 96 maintenance engineers at the Daily Express were dismissed, many of them being superfluous to requirements. Their reply was not only to put a pistol to the head of their employer in the way that Mr. Riccardo was putting a pistol at the Prime Minister's head, but to bring out all the engineers of all the other newspapers, who also put their employers against the wall with machine guns at their heads. It was that sort of threat that made the employers collapse. Yet another victory was secured for a minority within a minority.

That sort of action is not trade unionism: it is a Mafia tactic, a protection-racket tactic. There is too much of that sort of action in British industry and someone some day must say something about it. I believe that the trade unions have developed too much power and that they abuse their power. They do not act in the best long-term interests of their members. Further, they do not act in the best interests of the community. Very often they act irresponsibly.

Faced with that situation, what action do the Government take? Instead of dealing with the problem of the growth of trade union feudalism within our industrial economy, a feudalism which is partly, if not mainly, responsible for our depressing experience in productivity compared with other industrial States, they announce that they will reintroduce legislation to remove the remaining unsatisfactory features of the Industrial Relations Act 1971. They will waste parliamentary time going through all that again when they could have had a Bill enacted last Session with only one serious point excluded from it from the Government's point of view. What was that point? It was the provision that sought to establish a closed shop for journalists. When we are faced with the immense problem of trade union feudalism, why is it that we have the Government wasting time on a proposal to reintroduce legislation for that purpose?

We also have proposals for industrial democracy, with which I agree. However, I hope that that does not mean syndicalism. In many areas in which industrial democracy is applied I believe that there is an attempt by those concerned not to run a viable industry, but to hold others to ransom.

Regrettably, there are signs of that happening within the Post Office, an industry which I knew quite well a few years ago. At that time we came up against many overmanning techniques by the trade unions. Even today restrict- tive practices are still preventing the implementation of new ideas and the use of new machinery. I believe that industrial democracy must mean a greater sense of responsibility on the part of workers and those who participate rather than the impression being given that through this technique they will be able to hold on to restrictive practices which are clearly anathema to the progressive improvement of Britain's economy.

Reference is made in the Gracious Speech to the Post Office banking system. It is important that the Ministers responsible should come clean about the real cost of Giro. During the period when I was the Minister responsible it was my job to take over the Giro proposals which had already been agreed by my colleagues. It was my task to implement the new service. I did so at the time with some misgivings, and I look back with some dismay on what was done at that time and since. Giro has already cost the taxpayer over £30 million. It is a wasteful system. Even today it is wasting money, because it under-estimates the real cost of the service. In particular, it depends so much on the postal services and there is no accurate costing of the postal factor involved. That disguises the true cost of the Giro service.

In introducing the Gracious Speech, the Government have taken on more than they can handle during the next year. I believe that the devolution proposals will need a great deal more consideration than even the Government have imagined. I hope that they will turn their attention away from shibboleths and diversions to tackle at least two of the most serious problems that need to be dealt with if we are to get out of our crisis.

4.50 p.m.

Sir John Eden (Bournemouth, West)

The right hon. Member for Walsall, North (Mr. Stonehouse) said a great deal of interest in his speech, and it is extremely tempting to take up many of his comments. However, before making any comment at all, since the agreed subject for this debate is industry, I owe it to the House to declare a general personal interest.

I read the Gracious Speech with growing disappointment and dismay, and those feelings have now been compounded by hearing the trivialities with which the Secretary of State for Industry tried the House this afternoon. Recently, there had been a number of hopeful signs that at long last the Government were coming to terms with reality. First, there was the more enlightened approach taken by the Chancellor of the Exchequer. Second, there were the encouraging sounds coming from the Chequers meeting. Third, there was the seemingly genuine attempt to identify areas of common concern where action by the Government working in concert with industry might help us out of our difficulties. I agree very much with the right hon. Member for Devon, North (Mr. Thorpe) that one area which requires further attention and effort is the retraining of those who are without employment so as to give the jobless the hope of a more secure future.

Now, all this has gone. It has been chucked away by the Government. It is as though it was never meant to be taken seriously in the first place. The whole exercise seems to have been a contrived charade designed to deceive.

Some hon. Members may have heard recently about the experiences of a West Country business man, a Mr. Bill Poeton, a prominent businessman in Gloucester. He was dismissed from the higher echelons of the CBI for being bold enough to make some sharp comments about its general gullibility towards overtures from the Government. Judging by the reactions of Sir Ralph Bateman to the Gracious Speech it seems that the CBI now is rapidly going through a process of fresh thinking. I hope that, as a result, Mr. Poeton will at the very least be reinstated and that his voice will be heeded to a much greater extent in the future.

The sad fact is that, after all, the Government do not understand what is needed and are not concerned to rescue industry from the consequences of past Government action. What is needed so desperately is a period of calm in which to allow confidence to return. Given confidence, much of the new investment that we now seek would follow pretty quickly. There is no lack of good will on the part of industrialists or managers, the people who have to take these decisions. There is no shortage of enterprise anywhere in the country. There is no dearth of dedication on the part of those who man industry at all levels. But there is a sad absence of confidence.

Men at all levels, those who man the machines and those who manage and direct the policies of their companies, all want a stable situation and less interference. Those are simple requirements which the Government seem incapable of meeting. Like the merchants of Bordeaux when asked by Louis XIV what he should do to help, people in industry in this country also cry out, "Please, leave us alone". Instead, the Government plan to serve up a further 28 Bills to beat down people already submerged in a morass of new laws. They favour yet a further squeeze on company profitability. Instead of extending and reinforcing the activities of the Price Commission they should now be seeking ways of dismantling it. There is already a vast administrative overburden which industry is having to carry and to finance.

On top of it all comes the extravagant absurdity of the National Enterprise Board and all the elaborate apparatus of planning agreements. There seems to be no conception on the part of Ministers of the amount of time of members of management absorbed in having to attend to the requirements of the Government. There is far too much of the time of senior executives taken up in dancing attendance on Ministers instead of in getting on with the job of managing businesses. Now the Government have set up this new National Enterprise Board, and Ministers will have a continuing say in what is to be done at all levels of industry. Ministers, through their own civil servants and through the NEB, will have more direct say over the investment decisions of industry.

Who are these people who, at our expense, will direct us how to invest our money? What specialist knowledge are they, operating from within the protected walls of the Government machine, able to command that is denied to the thousands of men and women who every day of the week test their skills and risk their livelihood in the competitive environment of the market place? As a business colleague of mine from Sheffield, Mr. Leslie Thomas, put it to me this morning, we are suffering from people in high places who wear long beards and think that they are doing God's work. There is far too much of that going on, and there is not enough encouragement given to people to manage their own affairs.

It so happens that, over the past few years and not least during recent months, I have been privileged to visit factories in many parts of the country. I have been struck by the evidence of strength which still exists throughout the country. There is so much that is good there to be seen. There is so much evidence of hard work. There are so many instances where talent and skills are being applied effectively. The Government are in danger of destroying it all.

My hon. Friend the Member for Henley (Mr. Heseltine) referred to the Government's proposals as "the planned Socialist economy". He is right. That could do grievous damage to the enterprise and skills of our people. The Government live in a totally different world from those engaged in the practical problems of running a business. Ministers seem far removed from the reality of industry.

There is one area where the Government could well help, especially this Government. It is in relation to trade union attitudes and trade union conduct. Here, I agree very much with all that was said by the right hon. Member for Walsall, North, but the Government are failing signally to act. To the extent that they are acting at all, they are buttressing extremist attitudes and upholding practices that long since should have been discarded.

The Government must act to help those at all levels in industry, both inside and outside the trade union movement, to curb the more extreme manifestations of the militant Left Wing, which is an increasingly rejected, although still regrettably destructive, relic of the past. Enough has been seen in recent weeks, especially in the recent elections of the AUEW, to demonstrate that such attitudes are no longer appreciated, yet the Government still find it desirable to appease the extreme Left.

That is apparent from the legislative proposals put forward by the Government, about which we shall hear a great deal in the months to come. It was also apparent from the emphasis which the Secretary of State gave this afternoon to his proposals for the nationalisation of the aircraft and shipbuilding industries.

The Government seem to be dedicated to building up industrial power and placing it in the hands of the State, yet that is directly contrary to the genuine wishes of people at all levels of industry. At a time when the desire is for smaller units of production, for the closer identification of people with the decisions and problems of the companies for which they work, and at a time when people are calling for genuine consultation and discussion about the realities of their companies' problems, the Government opt for the irrelevant obscenity of nationalisation.

The Government should facilitate the return of people to productive private enterprise and not draw them more and more into the oppressive and enervating embrace of public ownership. Far from helping British industry to succeed, the Government seem determined to damage it. Through the combination of high public expenditure, excessive taxation and low investment the Government are sapping the economic strength of the nation and cutting the living standards of the people. Edmund Burke said that no Government ought to exist for the purpose of checking the prosperity of their people or to allow such a principle in their policy.

There must be many who, confronted with the proposals in the Gracious Speech, no doubt feel strongly that it were better for the country and for the greater good of all its citizens if this Government no longer existed.

5.4 p.m.

Mr. David Ginsberg (Dewsbury)

The right hon. Member for Bournemouth, West (Sir J. Eden) pleaded for a stable period and a stable situation. I agree. However, he was unfair to the Government. The creation of a stable economic situation is surely the logic of the Chancellor's measures of last July and, even more so, the logic of the Chequers agreement.

The right hon. Gentleman was less than frank. He pinpointed many evils in the present situation. However, he did not acknowledge the Conservative Government's contribution to the twin evils of bureaucracy and the erosion of the manufacturing base of British industry. Both problems may have continued under this administration but they developed at an accelerating rate from 1970 to 1974.

The beginning of a new parliamentary Session is the right occasion not merely for reviewing and commenting on the Government's legislative plans but, more important, for taking stock of our affairs and seeing whether the nation is on a sensible course for the future. The right policies and the right national morale are as vital for the country as legislation. Governments and their advisers in Whitehall are obsessed with legislation. There is always a need for more legislation, but at the same time there is a danger present of having too much legislation. That fault applies not only to this Government but to the previous administration.

One consequence of the heavy burden of legislation now experienced is the almost indecent summer and autumn hurry. That leads inevitably in some cases to bad laws being introduced which have undesirable consequences in the courts. Therefore we welcome the proposals which were outlined yesterday by the Prime Minister to review our arrangements.

We seem to be the helpless prisoners of an inelastic parliamentary year. Perhaps our Sessions could be lengthened. Another device we could turn to would be to make a legislative pre-examination of our Bills the rule rather than the exception. The wealth tax was considered by a Select Committee. Although it failed to gain the recommendation of that Committee, the principle of this type of study—if necessary not by a committee but by the House as a whole—should be widened. There are comparatively few legislative items—I exclude anti-terrorism or emergency measures—which need to be passed in a few weeks, months or even one year and which would not be better if enacted over two years. That is why I welcome the Government's two-Session programme for devolution. We shall be dealing with issues affecting the whole of national and local Government in this country. It is therefore important that we get the answer right and that we therefore do not go too fast.

There is another reason why I want this parliamentary workshop to work more thoroughly but less rapidly. The excess of law-making bears a relationship to one of the nation's major current problems. I refer to the growth of bureaucracy. I did not always hold this view, but clearly there is a serious problem of bureaucracy today. The Prime Minister acknowledged that in a speech elsewhere.

The missing £5,000 million on which Mr. Wyn Godley commented recently before a Select Committee of the House and the apparent loss of control by the Treasury over some sectors of public expenditure reflect partly, though not entirely, the growth of bureaucracy in many of our national institutions. Neither of the major political parties is guiltless in the matter. Indeed Parliament must share some of the blame for what has occurred.

For example, recently the Sunday Times said that there had been an increase of 100 per cent. in the bureaucracy of the National Health Service in the past 10 years compared with a growth in the medical personnel of 25 per cent. Much, if not all, of this expansion can be attributed to the legislation of the previous Secretary of State, the right hon. Member for Leeds, North-East (Sir K. Joseph). I wonder whether in the period 1972 to 1973 we as Members of Parliament asked ourselves whether the measures we were passing would have these consequences in the years ahead. The facts of economic life will, I am afraid, force us to be much more austere in our approach to legislation.

Mr. Ronald Brown (Hackney, South and Shoreditch)

My hon. Friend wondered whether many of us had considered the position. I remind him that many Members of Parliament argued strongly against Crossman Mark I and Crossman Mark II, and Sir K. Joseph Mark I, which was finally passed.

Mr. Ginsberg

I know that my hon. Friend has great knowledge of the National Health Service. He is right. Many people had reservations. Nevertheless, perhaps Members of Parliament did not fully appreciate the situation. Individual Members—I certainly speak for myself—are surprised at the ramifications of the bureaucracy with which we are now dealing.

There is, I submit, a limit to the amount of bureaucracy which our society can carry, and at the same time there is the danger of imbalance between those employed in industry and those in services. This is particularly so because workers in industry are far more exposed to the economic blizzards than are those in services, private or public. I do not suggest that recent Government measures will not bite hard in some sectors of public expenditure—indeed, I fear that they will, and there is, for example, great concern about education cuts—but I believe it to be true nevertheless that the industrial worker and the business man have had a far harder time during these past two years in wrestling with inflation than have many people in the public sector.

I am choosing my words deliberately here, but we now know—I recall the controversies we had with the late Dick Cross-man in the period 1955–59 when Labour's superannuation plan was evolving—that no totally automatic inflation-proofing is possible in modern society. No Government can entirely guarantee the living standards of its citizens against world forces. No private firm, however rich, can continue topping up its pension fund indefinitely.

That basic premise entails that when the mass of the population have to accept some cuts in living standards and in pensions, it is wrong to insulate a small group from the general experience. I refer here to the inflation-proofing of the pensions of senior civil servants. I submit that the attempt to do that by the previous Conservative Government, and continued under this Government, was misguided and immoral. It could even mean pensions of quite astronomical size being paid to retired senior civil servants before very long.

It goes without saying that I support the Government's policy of curbing inflation. The direction is certainly right, but the journey will be long and painful. I do not believe that politicians, or the nation for that matter, fully appreciate in terms of social and economic priorities what is involved in a policy directed to securing a permanent balance of payments surplus.

It goes without saying also that we must shift substantial resources into exports, but in human, as opposed to statistical, terms it means shifting people out of the consumer sector and out of non-productive employment into produc- tive industry and its ancillary services which happen to be export-oriented.

Regrettably, recent years have witnessed a serious erosion of Britain's manufacturing base. Some of this was inevitable, but it has surely now affected our country's export potential. Government help for industry, when it is forthcoming, must give priority to helping exports. This should be the first rationale of the National Enterprise Board. We heard in the earlier interchanges across the Floor that the task of picking winners is exceptionally difficult. The Government are right to make viability a criterion for aid. I concede—I agree here with what has been said by hon. Members opposite—that it is not easy for the State-to know how to intervene to secure higher exports. But equally, the Opposition should admit that there is no guarantee whatever in the situation which we face that in the absence of intervention and in the absence of these instruments we should secure all the exports we want.

That brings me to the vexed question of import controls, for one area in which the Government can operate with some certainty of helping the balance of payments is in selective import controls. I have never liked import controls, and I Go not like them today. We have to maintain our international obligations, of course, but where we are not open to retaliation and where dumping is causing great damage to our industry, there can be a case for selective controls.

At this point, I must refer to the situation in the wool textile industry, the principal industry in my constituency of Dewsbury, which is, I believe, Britain's sixth largest exporting industry. Employers and workers are extremely concerned at the continuing flood of cheap foreign imports, especially from Korea, Taiwan and Eastern Europe. Not only is this continuing flood creating negative trade balances in areas where we previously had positive balances but it is leading to premature closure of mills, to redundancies and to unemployment.

It may be said that some of the units involved would have closed anyway. Of course, the industry must rationalise and become more productive. But an equally serious consequence could be a loss of productive capacity which will hit our export potential when the upswing comes.

Selective controls on these items would not, I suggest, invite serious retaliation, and they would help until we can work out swifter procedures for dealing with dumping. The present process, even where a case is substantiated, is painfully slow.

I hope that the Government will listen to the pleas of an industry which has a fine export record and—I stress this—a record of moderation in industrial relations and of restraint in wage bargaining, and an industry, moreover, on which my constituency and neighbouring constituencies depend greatly for their prosperity.

5.16 p.m.

Mr. Douglas Crawford (Perth and East Perthshire)

The right hon. Member for Bournemouth, West (Sir J. Eden) referred to the 28 Bills due for consideration this Session. Our concern in the Scottish National Party—I am sure that I can speak here also for my hon. Friends in the Welsh national party—is about the twenty-ninth Bill, the Bill which has obviously been pushed out. I refer here, of course, to the Bill for the establishment of the Scottish and Welsh Assemblies.

I was extremely disappointed to hear the Leader of the Liberal Party join in the general call for delay. I remind the House that in their manifestos both the Labour Party and the Conservative Party stated that a Scottish Assembly and a Welsh Assembly would be set up. The shocking backsliding of the Government on this issue was well rehearsed yesterday by my hon. Friends the Members for Western Isles (Mr. Stewart) and for Clackmannan and East Stirlingshire (Mr. Reid). They discussed the politics of it. The economics of it are something else, because, while this Parliament dithers, more jobs are lost in Scotland.

Only the other day, I believe, the Chairman of the British Steel Corporation said that the closures in the steel industry in Scotland which the Government had postponed should be brought forward. We have Chrysler in trouble at present, and, equally, the textile industry in Scotland, as elsewhere in the United Kingdom, is suffering.

It is clearer now than ever before that we can stop the appalling economic slide in Scotland only by establishing a Scottish Assembly with full industrial and economic powers. I realise that the Labour Party is in some difficulty on this issue, for even its more ardent pro-devolutionists—the hon. Members for South Ayrshire (Mr. Sillars), for Central Ayrshire (Mr. Lambie) and for Paisley (Mr. Robertson)—voted against making the Scottish Development Agency responsible to the Scottish Assembly a few months ago. In other words, they did not want the Scottish Assembly to have industrial and economic powers. But that is the only way by which we can halt the economic slide in Scotland.

These are changed days from those at the beginning of the 20th century when young men in Glasgow going out for a night on the town put on not suits but boiler suits, and put grease on their faces, because they were the elite and wished to show that they worked in the engineering industry, the elite industry of Scotland. At that time, Scotland's unemployment was very low. But times are now indeed changed, and for years since then Scotland has slid downhill.

Throughout the 1950s, the Scottish Council (Development and Industry) could not persuade one Minister to come up to Scotland to discuss Scotland's economic problems. Then, at the beginning of the 1960s Neal Ascherson, then with the Observer, wrote an article headed "This divided Kingdom". What happened? Lo and behold, a procession of Ministers immediately began to arrive in Edinburgh. A political initiative was taken, and one article brought a host of Ministers up from London to Scotland. Presumably they were saving their political skins, but the saving or losing of the skins of these Ministers availed nothing, and unemployment rose.

Before hon. Members start to say that the gap between unemployment in Scotland and England is closing, may I say that we do not think that Scottish unemployment should be compared with that of England. It should be compared with that of Norway, Finland, Austria and Switzerland, all of which have unemployment rates below 2 per cent.

We have rehearsed this in the House before, but Scotland does not have an adverse balance of payments problem, and a healthy balance of payments will mean a lower bank interest rate, because we shall not have to fund a deficit. We do not have a deficit and do not require high interest rates to attract money from overseas. Nowhere does the Gracious Speech recognise this.

In Norway, Sweden, Finland and Switzerland the bank rate is 6 per cent. or below. It is almost half of the present United Kingdom interest rate. I ask the House to think what a low bank rate would do for business confidence in Scotland. It is no good the Conservative Party saying that we need more investment. Industry cannot afford it if the cost is so inordinately high.

The people of Scotland will take note of what the Prime Minister said yesterday in the House when castigating the Conservative Party, which was seeking, he said, to deny to the British people their rightful share in the earnings from the North Sea"—[Official Report, 19th November, 1975; Vol. 901, c. 51.]

Mr. Mike Thomas (Newcastle upon Tyne, East)

Before the hon. Gentleman leaves this point, would he tell us what he thinks is the right and proper share of the people of the Northern Region of England in the oil revenue?

Mr. Crawford

Once Scotland is a sovereign State it will be a matter for negotiation, and they will have to deal with their own masters in London.

I should like to make one or two proposals to the Government. I am not sure whether they will take note of them because they do not seem to be interested in Scotland, though the prospect of a massive defeat in Scotland—particularly in the West of Scotland—might concentrate their minds wonderfully.

The steel closures must not be brought forward. The steel industry in Scotland must not be allowed to die the death of a thousand cuts. It is essential that self-governing Scotland shall not be presented with a dismembered steel industry in the same way as the Conservatives have bequeathed to Scotland a dismembered local authority structure.

With regard to Chrysler, I should like to hear some discussion on the possibility of establishing a Scottish Motor Corporation to take under its wing Chrysler, British Leyland and Albion Motors—cars, tractors and trucks. Perhaps it is a job for the Scottish Development Authority.

I fully associate myself with the remarks made by the hon. Member for Clackmannan and East Stirlingshire last week, when he said that the jobs of the men at Linwood should not be sacrificed to save the jobs of the men at Coventry, and if Linwood is saved it will be purely due to the political pull of the Scottish National Party in the West of Scotland.

It is essential that the Scottish Development Agency should have a budget of about £300 million per annum, and authority to borrow overseas up to a limit of £1,000 million on the security of Scottish oil. Scotland is a credit-worthy country. Unfortunately, England at the moment is not. The cynical and dishonest delay in bringing forward the Bill will mean that, if we are not allowed to borrow on the credit of our oil, when self-government comes, there will be fewer jobs even than there are at present.

It is humbug on the part of the Government to say, as the Gracious Speech indicated, that they will give the highest priority to the attack on unemployment. Let them tell that to the people of Strathclyde, Tayside and elsewhere in Scotland.

It is equally humbug of the Conservatives to say that they will cut public expenditure. In relation to Scotland, what will they cut—hospitals, schools, roads, social services, housing, or all of these? We do not know. We are in the dark about this.

The Conservatives were silent on the subject of the Scottish Assembly. I remind them that it was also in their General Election manifesto. I hope that that party will take note that the hon. Member for Rutland and Stamford (Mr. Lewis) was a little wide of the mark yesterday when he said that the SNP would keep this Government in power. I hope he will note what we decided subsequently—that we intend to do all we can to bring this Government down, because it has betrayed its manifesto pledge. I understand that the right hon. Member for Penrith and The Border (Mr. Whitelaw) said in a broadcast at lunch time that the SNP's voting record is not very good. It is better than that of the Conservatives in the last Parliament.

The Gracious Speech has prompted considerable sorrow and no little anger in Scotland. As it is going slow on the Scottish Assembly, and there is no indication whether the SDA will have industrial and economic powers, this will only result in continuing stagnation of investment in Scotland.

The Secretary of State for Scotland said some while ago that he would resign if unemployment reached 100,000 or exceeded it. He has not done this, nor did the Secretary of State for Employment respond to our invitation to him to resign on behalf of the Secretary of State for Scotland.

I suggest that the Prime Minister should do the honourable thing and put the Secretary of State for Scotland out to grass. He has had a long working life, and I am sure that he would enjoy retirement. He has seen most of what he has strived for turning to dust and he must be a very sad man, with unemployment in Scotland as high as it is today.

This Gracious Speech will go down in history as the opening of the last chapter of the Treaty of Union of 1707 and the beginning of a new chapter in great new economic prosperity for Scotland. When the union is ended—and sooner rather than later—hon. Members representing English constituencies will find that in a self-governing Scotland England will have lost a surly neighbour and found an understanding friend.

5.26 p.m.

Mr. Ronald Brown (Hackney, South and Shoreditch)

I do not want to take up the points made by the hon. Member for Perth and East Perthshire (Mr. Crawford), but I have not quite understood how he expects to get all the Scots men and Scots women back from London. I suppose there will be some kind of tourist board set up for the purpose.

I do not think the hon. Member's contribution will do much for the prosperity of this country, if I may say so. The hon. Lady the Member for Moray and Nairn (Mrs. Ewing), who was intervening yesterday, had to run out of the Chamber in order to attend to the wants of nature. This morning it was described as a "walk-out". It would seem that her publicity machine is now working.

I thought that both the Opposition speakers today were a bit cheeky, to say the least of it, for both of them have presided over departmental catastrophies. The hon. Member for Henley (Mr. Heseltine) was the aerospace Minister and we remember his having to come to the Dispatch Box and remind us that he had told a fib. This is the hon. Gentleman who has the effrontery to talk today in strong terms about the importance of doing things for the country. What he did was to destroy one of the finest pieces of technology we ever had—the hovertrain. It would have been worse if he had destroyed something that he understood, but he did not understand what he was destroying. I take it very hardly, therefore, when the hon. Member criticises my right hon. Friend.

Having said that, I must say that I did not quite understand my right hon. Friend's view on the National Plan. He was reading from The Sunday Times—and I accept that. In fact The Sunday Times gave rather general support to it, saying that the National Plan of 1965 was broadly right. My right hon. Friend's remarks today indicated to me once again that very few people understood what the National Plan was about. It was a working tool, to be used and to be updated. It was to be brought into function as a management tool. It was not supposed to be a set-piece that every-body looked at, arguing that it was either right or wrong.

I have re-read it today, and I have looked at the document published by my right hon. Friend. I find that there are whole chunks or sections taken directly out of the National Plan. Even the check-list is from the National Plan. The argument that this is a new approach to industrial strategy, and defines how it should be done, is again exactly what is in the National Plan. The only difference between the two documents is that the National Plan went into great detail in order to identify weak areas where help was needed, and areas from which perhaps help could be taken away because it had no further use. It also identified action areas. The new document, while it mentions a new approach to industrial strategy, does not exactly describe how it is to be done or which means are to be adopted. I think it was wrong to describe the National Plan as "over-rigid". On the contrary, the document established for the first time those areas of industry in which help was required

The Minister will need to obtain information that is sadly lacking. The information in the National Plan is now 10 years old. I am sad that the Gracious Speech does not envisage any further action in this respect. It envisages setting up further inquiries, and this will involve more and more people looking into other matters. We want basic, up-to-date information from industry, and I hope that it will be used as a launching pad to improve industry.

In the document that came from Chequers we were told that the prime objective was to seek a high-output high-level wage economy. That is what the National Plan set out to do. It set out the possible benefits of higher productivity and said that industry must itself seek to improve its own management. It also instanced areas in which management was at fault. The plan said that the stock and work-in-progress situation could be improved, and that unnecessary stocks and an unnecessary variety of products could be avoided. The plan criticised the wasteful use of men, machines and materials. It showed how savings could be made to pay in the development of industry. With that kind of efficiency we could achieve higher output and lower unit costs. The plan envisaged a viable home market and, what is more important, an opportunity to be competitive in the export market, leading to a profit on our balance of trade.

I should like the Minister to consider whether, as outlined in that plan, we can pursue a campaign to encourage industry to accept some of the advice that is available to it. There is a whole range of organisations in the Minister's own Department whose staff could be of help to industrialists if only they would understand that they need those services. It has always been the principal problem in many firms that they do not recognise the need to take advice. Therefore, the Department of Industry should initiate a campaign to encourage firms to take advice on how to improve their effectiveness and put right their deficiencies.

Another matter in the Gracious Speech that is of fundamental importance is the question of co-operation in industrial relations. I was a little saddened to see in the speech such a negative reference to that subject. The impression is that we are about to set up another inquiry, to which anyone can give evidence, aimed at seeing how best we can achieve industrial democracy. Since we already have so many inquiries under way—and I have sat on many a committee—involving more and more experts discussing various matters, I do not understand why we want yet another committee to take evidence.

Mr. J. W. Rooker (Birmingham, PerryBarr)

I would remind my hon. Friend that the committee of inquiry was promised in July this year, but throughout the Summer Recess there has been wrangling over its terms of reference and its chairman. If we do not get that inquiry soon, it will be a waste of time anyway.

Mr. Brown

I can understand Conservative Governments setting up inquiries because they do not understand these matters, but I do not understand why the Labour Government need to set up a further inquiry. We set up sub-committees in our party organisation and the members work hard in producing papers and putting forward plans only to find that years later we face yet another inquiry involving a further set of people looking at the same subject. No doubt eventually that body will reach the same conclusions as those we have already agreed. I hope that the Minister will set up the appropriate committee urgently. Its work should not take too long to reach the views which the Minister and I want, and I hope that he will do his best to push matters along.

The Under-Seeretary of State for Industry (Mr. Gerald Kaufman)

I would remind my hon. Friend that when my right hon. Friend the Secretary of State for Trade announced the inquiry, he also said that it would precede legislation in what will now be the next Session of Parliament. Therefore, legislation is contemplated for the Session of Parliament after this.

Mr. Brown

I am grateful to my hon. Friend for that assurance, but it is a little late. The keystone to any improvement or development in industry is the furtherance of industrial democracy. If the Minister believes that we can make an impact by taking what is outlined in the Gracious Speech, along with all the other items of armoury with which we have provided his Department in the last Session, and that we should then have to wait for another year before we get cracking, he cannot regard the subject as that important.

Mr. Ted Leadbitter (Hartlepool)

The subject dealt with by my hon. Friend is not the only area of policy-making that is experiencing some delay. The same argument has applied for nearly a decade to the subject of the reorganisation of the ports on which Labour has a policy, and indeed it is set out in our manifesto.

Mr. Brown

I do not want to lead a general revolution against the Government. I was merely seeking to emphasise that we seem to be wasting a lot of time in our efforts to improve industrial democracy. Although I appreciate the need to involve the whole of industry, in previous discussions we have looked at these matters on a much smaller scale.

There are one or two other omissions from the Gracious Speech to which I wish to refer. One important omission relates to the problem of noise in industry. In November 1974 we enacted regulations dealing with wood-working machines. For the first time ever those regulations contained a reference to the problem of noise and sought to define noise levels in woodworking areas. I am the parliamentary adviser to the Furniture, Timber and Allied Trade Union and we felt that we could have this matter prescribed as an industrial disease alongside the foundry-workers. I am now told that this will not happen because an inquiry is to take place into the whole problem. This means that action will be delayed even further. I do not see how the Government can even argue this case.

We have a set of regulations identifying a particular job as being harmful to the hearing of workers. Those regulations now have the force of law and the Factory Inspectorate must implement them, and yet, although men suffer from noise factors, the matter is not to be prescribed as an industrial disease. Surely action on this matter should be expedited, because once a man's hearing is damaged, that worker may be completely isolated from the world. I hope that the Minister will examine this matter further and I hope that he will see that the vital phrase in the Gracious Speech Other measures will be laid before you will include regulations to ensure that woodworkers using noisy machinery can be included in the provisions relating to industrial diseases.

I welcome the item in the Gracious Speech dealing with prices and my right hon. Friend the Secretary of State for Prices and Consumer Protection is carrying out a first-class job in an extremely difficult area of activity. However, I would invite her to consider again the situation in the furniture industry. We have done a great deal to encourage employers and trade unions in the industry to co-operate and to harmonise industrial relations, and we are an industry in which there is not much industrial strife or indeed many problems.

Therefore, it is annoying that after we use modern techniques to reduce our costs in furniture manufacture, we find that by the time the goods reach the shops they are marked up by as much as 100 percent, in price. The workers in the industry want to know why this has happened. They know how much it costs to manufacture furniture and they know what they and their wives have to pay to purchase it in the shops. I invite my hon. Friend to look at this aspect of the matter.

A most extraordinary ocurrence took place under the previous administration during the change-over to VAT. Their propaganda in the newspapers and elsewhere detailed the areas where they thought that prices should go down, remain the same or go up. To my horror, I discovered that furniture was included in the category of prices that should go up. I asked the then Ministers how that situation could arise. If we start from the first premise that purchase tax on furniture was 11⅓ per cent., added to which was 2 per cent. SET, I did not understand how, when VAT was only 8 per cent., the price could be put up.

The situation was explained to me. Apparently at secret meetings between the retailers and the Government of the day, agreement was reached that the retailers could add to their price, upon which VAT would be paid, purchase tax and SET.

There was the cost of the furniture ex-works. They added to that nearly a 100 per cent. mark-up, plus purchase tax, and SET, and then VAT was added to the total. Lo and behold, the price went up. It was a most extraordinary state of affairs.

I invite my hon. Friends to examine that aspect and to see whether we cannot do our people proud by allowing them the benefit of the use of all the modern techniques in technology and good industrial relations between employer and employee in the manufacturing of furniture in this country.

I also noted that there are no proposals to deal with the most dangerous of materials—namely, polyurethane foam. I constantly draw to the attention of hon. Members the proliferation of this material. Every time there is a fire I listen to the description on the radio and I can nearly always tell whether polyurethane foam was present.

Every fire where men, women and children are burned involves the burning of polyurethane foam. This material is distinct from any other. It has a high burning rate and reaches a temperature of approximately 650° C. The foam heats the atmosphere and produces an enormous amount of smoke. It is the heated smoke which asphyxiates people. Within seconds of a fire taking place people are asphyxiated. They are burned only as a secondary effect.

If a home contains furniture which is filled with polyurethane foam and that furniture catches fire, a person has as much chance of getting out of the door as flying. It is an impossible task. It is time that the Government took action on this matter to ensure that either we get rid of this foam or we produce a new generation of foam which is safe. It is a highly dangerous material and the sooner the Government come to terms with it the better.

The Gracious Speech will have my support, although I have some reservations which I have tried to indicate. However, if the country can unite behind the Government in their attempt to right the economy—and I believe they are moving in the right direction—I hope that eventually we shall get out of this difficult period and return to prosperity.

5.44 p.m.

Mr. Kenneth Lewis (Rutland and Stamford)

The Gracious Speech indicated that the Government are as schizophrenic as ever about what kind of policies they intend to pursue to get the country out of its present difficulties. I have no doubt that the Government and all Labour Members want to do the best they can for the country and to solve our national problems. They want to stimulate the economy, to get rid of unemployment and to do all the things that would lead us to an improved situation.

The truth is that although the Gracious Speech may help in one direction, in another it is contrary to the efforts being made to improve our position. For example, the Prime Minister, the Secretary of State for Prices and Consumer Protection and many other hon. and right hon. Gentlemen have expressed the wish that a mixed economy should be allowed to work and that we should have such an economy in this country for the next few years. However, the present Queen's Speech, following the last, is a further push towards Left-wing policies. The Government moderates have lost the battle against those extremists who want to steer the country more and more towards the Left and eventually to what they call a Socialist society; and a Socialist society, as it progresses, travels more and more towards a Communist society.

One can graduate towards a Communist society in two ways. The first is to have a revolution. The second is to introduce it slowly over a period, and that is what the Labour Party is doing. Furthermore, that is what large sections of industry know the Labour Party is doing. This kind of posture is bound to create a situation in which, despite the protestations, a mixed economy will not work. Such an economy will run down because of lack of confidence and a mixed economy cannot work unless there is confidence.

For example, at present the Government are approximately £10 billion over the top in expenditure over income. A few months ago I wrote to the Chancellor and told him that the figure that he announced in his Budget Statement would be wrong by £2 billion or £3 billion. He wrote back and said that was my figure, not his. He has not yet given the figure indicating how much the Government are over the top.

There is nothing in the Queen's Speech to suggest any determination on the part of the Chancellor or the Government to cut back on the £10 billion that we are spending over the top of our ability to tax plus our ability to borrow. On the contrary, there is a plus cost built into the Queen's Speech in a number of areas. There is a plus cost with the proposed abolition of pay beds. The several million pounds now coming out of private pockets will be added to the Chancellor's bill. Yet the Government are proceeding with this policy.

There is also a cost plus in respect of nationalisation. The nationalisation of shipbuilding and aviation is bound to cost money. If the pattern of other nationalised industries is to be any basis upon which we may judge the matter, there will be an ongoing process of expenditure which will last for ever.

Even a simple matter such as the proposed registration of all dock workers portends an increasing cost to the taxpayer in the future. There are dock companies throughout the country that negotiate pay scales quite unrelated to any scheme now organised by the Government. Once we introduce a scheme to include all the dockers throughout the country, two hazards will arise: first, the rate will go up, because there will be no competition and we shall be dealing with one employer against one negotiating body; secondly, on the basis of one out, all out, we shall have the disastrous position that if there is a strike, it will not just be in Liverpool or London, but throughout the country, covering all the ports.

The proposal regarding the dock workers is probably the most irresponsible proposal, even in terms of the Labour Party itself, ever to be written into a Queen's Speech. My guess is that if the Government remain in office for another two or three years, they will bitterly regret having put it into effect.

The Government are overspending and unemployment is rising. In the old days all Governments wanted to be able to prime the pump when unemployment rose. Now hon. Gentlemen opposite are asking their Government to prime the pump. They are saying "We want unemployment reduced. Therefore, we want the Government to spend more money." But the Government have not got the money. They have overspent so much that there is no money available to prime the pump. That is the tragedy of the present situation. Even if the Government wanted to cut back on unemployment, they are in no position to do so, because they cannot find the wherewithal.

The Socialist push has gone so far that the Government are unable to stem the tide. We are slowly moving towards a position in which we shall not need a revolution, because there will be a strangulation of the private sector of the economy, which is the only sector that gives us a plus and creates the profits out of which the Government get their money and subsidise the nationalised industries.

I was interested in a television interview which took place last night with Lord Ryder, the Chairman of the National Enterprise Board. Incidentally, the Secretary of State made an extraordinary remark at the Dispatch Box in opening the debate. The right hon. Gentleman said that he would announce the names of the members of the NEB on 27th of this month—the very day on which it is to meet. I should have thought that the House of Commons would be given the names of the members of the Board in advance of the first meeting. Perhaps the right hon. Lady will look into this matter. I may have misunderstood what her colleague said. I thought that he said that we should be given the names of the members on the day on which the NEB has its first meeting.

Lord Ryder painted a picture of moderation in terms of what his Board intended to do. I have no doubt that he will attempt, through the Board, to be moderate since he needs the co-operation of industry and presumably wants to be a success. One comment which particularly struck me was his determination to see that any industries into which the Board put money would appoint the best managers. He said that it was important that there should be the best direction from the top. Nobody can cavil at that—provided that he can get the best managers to serve.

Lord Ryder was asked "What will you do if the managers are not good enough? Will you sack them?" He said, "Yes. We pay them well. We give them the best incentive there is, because that is what it is all about, and, if they do not shape up, we sack them." That has not happened in nationalised industries in the past. Once a man gets on the board of a nationalised industry, the worse that industry performs, the longer he stays. At least, that has been the pattern.

Mr. Rooker

What about the Post Office and Lord Hall?

Mr. Lewis

I have not seen any change in this pattern under any Government. They all stay there as long as they can. The problems get worse, but no one thinks of putting in other people to see whether they can do better. I am delighted that Lord Ryder intends to make a change in that respect. The most interesting point that he made was "We pay them well, we give them the incentive, and we sack them if they do not make out."

Mr. Mike Thomas

Before leaving this topic, will the hon. Gentleman tell us what Lord Ryder was doing before he became Chairman of the National Enterprise Board? This matter has caused comment among my hon. Friends. My impression, from what the hon. Gentleman said, was that Lord Ryder had arrived straight from Moscow.

Mr. Lewis

No. Lord Ryder was in the centre of industry and understands perfectly well that somebody in a top job who does not make out well goes out. He is used to that kind of situation. Lord Ryder said "We look after them, we make sure that they have all the incentive in the world, and, if they do not do well, they go."

But, one must ask, what incentive is being provided by the Government for people employed in any industry today? I received a missive from the income tax man with a list telling me what the Finance Act 1975 had done to my income and other incomes through income tax. The notional income of a Member of Parliament is in the £8,000 to £10,000 band. We pay 53 per cent. tax on £8,000. On £10,000 we would pay 58 per cent. tax. Top executives in industry, about whom Lord Ryder is concerned, earning between £10,000 and £12,000—not quite up to the level of Ministers—pay 63 per cent. tax. People earning between £12,000 and £15,000 pay 68 per cent. to 70 per cent.

Taxation on the salaries of top executives in industry is now so high that it has removed incentive. The Government have no option but to impose higher taxation because they are spending so much. But if we want top people in industry to have the incentive about which Lord Ryder was speaking, we must make sure that they keep a fair margin of the money they earn. Otherwise they will simply say "If we have the problems and the Government take the money, we might as well refuse to take on the problems."

When taxation becomes penal, leading towards the equal society that hon. Members talk about, it erodes incentive. This way we shall not need a revolution to bring about a Communist society, because it will be there already. [Laughter.] Hon. Gentlemen opposite may laugh. The trouble with this country is that incentive is being eroded.

If we have a revolution, fast or slow, into a Communist society, we shall still find, as in Russia, that the people at the top are given incentives because they become the higher-paid functionaries of the State, whether in industry, commerce, or anything else. Those functionaries are given incentives. They get all the perks and the larger untaxed incomes.

Mr. Rooker

Is the hon. Gentleman in favour of that?

Mr. Lewis

No, of course not.

Mr. John Mendelson (Penistone)

We had better have that on the record.

Mr. Lewis

I am not in favour of a Communist society. Yet, if we erode the differentials—that word is well known to trade union members—to the extent of creating a disincentive rather than incentive, we shall lose the impetus which comes from the mixed economy which hon. Gentlemen opposite say they want. That is all and clear.

The Government constantly tell us that they want people to invest. There is a 10 per cent. or 15 per cent. surcharge on investment income. This means that anyone who has invested in industry by putting his money into shares pays a higher rate of tax. If his rate of tax is 70 per cent., it goes up to 85 per cent. on investment income. Where is the incentive to invest? Many people put small sums into shares—perhaps £2,000 or £3,000. Today they have no incentive to invest in any company. There is no incentive, for instance, if a company were to put an issue on to the market, for people to back that issue. When issues have been put on the market recently, they have been left with the underwriters.

If hon. Members opposite want a mixed economy to work, they must recognise that their Government have to see that the encouragement is there. I have recently been abroad and met some people involved in export. A number of them were connected with comparatively small businesses in this country. They spend their lives going abroad—[HON. MEM-BERS: "Very glamorous."] Hon Members think that it is glamorous. These people will tell him, and I know, that it is bloody hard work. It is just hard graft by these people who try to get the orders for this country, for the factories necessary to keep our people in employment.

When the hon. Member is away from his family for any period, they miss him. The people of whom I am speaking are often away. Their families may do without them for months on end. Yet when they go abroad, they see people employed in similar positions, as directors or managers, keeping 20 per cent., 30 per cent. or 40 per cent. more of their incomes. They are working hard only to be clobbered.

The Gracious Speech does nothing to give the country at leadership level in industry and business the kind of incentive that it needs. Without a Queen's Speech that does that, that realistically appreciates that a mixed industrial complex can work only on the basis of encouraging people to do the best they can, we shall get no progress towards solving this country's problems. These problems have been created by hon. Members opposite and they will be made worse by the proposals in this Speech.

6.4 p.m.

Mr. Mike Thomas (Newcastle-upon-Tyne, East)

I hope that the hon. Member for Rutland and Stamford (Mr. Lewis) will forgive me if I do not directly follow the train of his argument but return instead to that of my hon. Friend the Member for Hackney, South and Shoreditch (Mr. Brown). I join him in congratulating the Secretary of State for Prices and Consumer Protection upon what she has been able to do so far on the prices front. It is prices that I want to talk about, because they are crucial to the Government's present strategy.

The Government have promised, above all to the trade union movement, that, by the summer of next year, the rate of price increases will have slowed down to 10 per cent. or thereabouts and that by the end of 1976 we shall be in single figure inflation. I believe that to be a crucial target for the Government—crucial to their credibility. If the Secretary of State and the hon. Member for Gloucester (Mrs. Oppenheim) will forgive me the play on words, as we come to negotiate the second stage of the Government's policy on incomes, the phrase to which we shall have to give attention is "Hell hath no fury like a trade unionist scorned".

That does not mean that I do not appreciate my right hon. Friend's problems. On the one hand, I represent the interests of the co-operative movement, and, on the other, I have consistently been concerned about the impact of the increase in the price of essential goods—rents, rates, fuel, food and clothing—on those in the community who have low incomes, who are living on benefits or are low paid. The numbers are not small. On one estimate, those currently earning or getting on or about the supplementary benefit level total about 3 million families. If we take the more realistic poverty line of the supplementary benefit level plus 20 per cent., we are talking, probably about 5 million families. Many of them will be single-person pensioner families, but, even so, 5 million families is a substantial proportion of the population.

The root of the present policy is not found in the Queen's Speech, where it is merely reiterated, but in the White Paper "The Attack on Inflation", where in paragraph 33, under the heading "Family Budgets", the Government said: Certain goods are of special importance in family expenditure. Large price increases on such goods bear especially harshly on low-income families. Once it is clear that the pay limit is being effectively observed, the Government intend to ensure that the rate of price increase for a range of these goods will be held at about 10 per cent. I wonder whether my right hon. Friend can give us some idea of when she feels that that caveat of the rate of price increases starting to come under control will have been observed. I understand that we are now over the 2 million mark in the number of people who have settled within the £6 limit. I should like some indication of when she feels she will be able to go ahead from a position of strength, on the basis of deals done in the pay field, to get the other half of the bargain under way.

In the debate on the White Paper I was critical, not of the policy as a whole, which, broadly, I support, but of the problems of implementing the Government's prices policy. In that speech, on 21st July, I argued for a Government-subsidised "Essentials Budget", deliberately controlling the prices of essential goods. I also made the case for specific changes in nationalised industry prices, particularly of energy, to lessen their discriminatory impact on those on lower incomes.

We now have the Government's consultation document on selective price restraint, reaffirming the White Paper 10 per cent. figure, and the inclusion of the nationalised industries in the scheme, and we have the firm commitment in the Queen's Speech: The present price controls will continue to be vigorously enforced, and the programme of price display and unit pricing will be accelerated. A programme of price stabilisation of more essential goods will be introduced once cost increases decline. Again the caveat, and again I must ask the Secretary of State when she will decide that cost increases have started to decline. I do not underestimate the difficulties, but the case for my right hon. Friend's policy on family budgets is overwhelming, and since the White Paper debate in July there has been a remarkable volume of evidence in its favour. I should like to draw on one or two sources to illustrate that.

For its first congress in Manchester the National Consumer Council produced a paper entitled "For Richer, for Poorer" to try to illustrate how differently the prices of products bear on the low-income groups as compared with those of us—we here must all in honesty include our-selves—who have reasonable incomes. I shall give some examples. The National Consumer Council quoted a Research Institute for Consumer Affairs study, which found that, because the old, poor and handicapped often are more limited in their shopping opportunities than those of us who can get in the car and go to a large supermarket or hypermarket, they pay well over the odds for the items they buy.

The survey of small-shop prices as compared to supermarket prices in urban areas which the RICA carried out shows that a shopping basket that could be bought for £7.35 in a supermarket cost £7.82 in a small shop, a difference of about 6 per cent. I shall enumerate a few startling differences. It is important that we know what this means in terms of nuts and bolts to the ordinary people who shop.

Mrs. Sally Oppenheim (Gloucester)

The hon. Gentleman has quoted a difference of 6 per cent. Is he prepared to quote the difference involved and the savings made by those who shop at their local shop or otherwise have to use public transport? In some cases this is deliberate, is it not?

Mr. Thomas

Yes, indeed. The hon. Lady is correct. One of the reasons those with low incomes, especially in rural areas, are forced to shop at the local shop is that the level of public transport fares makes it uneconomic to travel to an urban centre or to a supermarket.

I return to my argument. Some of the examples given in the study are staggering. For example, a 10-oz. tin of garden peas was on average 29 per cent dearer in a small shop than in a supermarket; six standard eggs were 21 per cent. dearer; half a pound of margarine and £ lb. tea was 20 per cent. dearer. There is a list of products including flour, marmalade, tinned pork and ham, lard, baked beans, cream crackers, instant coffee, cheese, tinned peaches and so on in which there are differences of well over 10 per cent. in the prices charged in a supermarket compared with those charged by a small local shop.

For rural consumers the situation was almost exactly the same, with the exacerbation, as the hon. Member for Gloucester has mentioned, of the public transport problem. Again, the shopping basket costs £7.38 in the supermarket of a market town, but about £7.75 in the local village shop, a difference of about 5 per cent. The differences in individual products were staggering. Cheese was 30 per cent. dearer in the small shops, marmalade 29 per cent., eggs 20 per cent., baked beans 27 per cent. and so on, down a substantial list of basic commodities all of which were dearer to buy in the small shop which, often, the low-income consumer is forced to use.

However, the matter does not stop there. Very often the low-income consumer is forced to buy small packs of goods and, in particular, small portions of meat. The National Consumer Council reports that a 5-oz. tin of baked beans cost on average 71 per cent. more per ounce than a 15½-oz. tin in the same supermarket. In other words, the pensioner who is forced to buy baked beans in a small tin pays approaching 75 per cent. more for the product in terms of real value than someone who can afford to buy the big tin, open it and keep it in the "fridge". Similar differences are spread over a whole range of products which includes peaches, cornflakes, and so on. Hon. Members may read the report if they wish, but the differences are startling.

Mr. Leadbitter

I do not want to minimise the importance of the comparison that my hon. Friend is making, but it is important to remind the House that the small shopkeeper is usually a low-income consumer with special problems. Therefore, there should be an investigation into the problems of the small shopkeeper and small business man before we make these comparisons.

Mr. Thomas

I do not disagree with my hon. Friend on these matters. The co-operative movement—and the same applies to small independent traders—has a substantial problem in keeping small shops open. I know very well the economic problems involved. I am trying to point out the significance of this for those who start with far less money than most of us and have to pay higher prices for almost everything they buy.

Another example is the cost of credit. Those who are able to get a bank loan or a similar arrangement can generally borrow at interest rates and have repayment facilities which are much more advantageous in financial terms than those who are forced to go to check traders, money lenders, pawnbrokers or enter into straight hire-purchase agreements, all of which are nearly always more expensive than the straight bank loan.

I am especially glad that the nationalised industries are to be included because it is in this area that we find the most glaring examples of discriminatory prices. The poor spend more on fuel as a proportion of their incomes than those who are better off. Those who earn or receive between £15 and £20 a week spend about 10 per cent. of that income on electricity, gas or coal bills. Those who earn between £70 and £80 a week spend rather less than 5 per cent. The impact of fuel prices is considerably harsher on the poor than it is on the main band of the community.

Also, small consumers of electricity and gas, in particular those who wish to consume through a pre-payment meter, pay substantially more per unit for their electricity and gas than those who are on a credit meter or on the gold tariff and so on. If one consumes 1,500 therms of gas a year one pays less than half the rate per therm for it than the customer who consumes only 100 therms of gas a year. In real terms that means that those who are fortunate enough to have lots of fires and central heating buy gas at roughly half the rate per therm of those who only have one gas fire or gas cooker.

I congratulate my right hon. Friend the Secretary of State on the determined attempt by her Department in the past 12 to 18 months to do something about this. There has been a little tilting of the tariff to aid the small consumer. On the whole, increases have been loaded rather more on to the large consumer than the small consumer. That tilting can only be slight when the representatives of the Electricity Council and the Gas Corporation can say to a Select Committee in open hearing that it is so slight that they have not even bothered to cost it; they could not tell the Select Committee on Nationalised Industries what that tilting costs.

I now understand from the Gas Corporation that there is a legal problem because in law it is required not to discriminate in favour of one set of consumers as against another. I regard that as disreputable. When it has suited the corporation it has consistently discriminated in favour of different classes of consumer. It has discriminated in favour of ICI, for example, on a massive contract. Today is not the time to enter into an argument on that. When the corporation wanted to promote the sale of North Sea gas it discriminated in favour of almost anyone who would convert to gas. It has consistently discriminated against the low-income consumer. It is a little like the multiples and the supermarkets saying to my right hon. Friend that they are not prepared to play a part—I am not accusing them of this because they have not said it—in the price restraint scheme because it involves cross-subsidisation. We know that through loss leaders, which are the most dramatic example, those large stores cross-subsidise from one product to another. It is a form of hypocrisy that I wish we did not see in these nationalised industries at present.

The impact of the increases in energy prices over the past 18 months has been so bad that the Secretary of State for Energy has been driven to write to the chairman of the Electricity Council asking him to go easy on disconnections. This indicates the difficulty that many low-income consumers must be in, and how bad the situation must be. Hon. Members will be faced with this problem at their surgeries when the first winter quarter's bills begin to come in. The consultation document argues for cross-subsidisation. In the energy industry there is some case for believing that at present the poor subsidise the rich. I believe that we could reverse this. We could do a number of different things. We could follow the Irish scheme, in which pensioners are given an allowance of free units. We could follow the Japanese scheme in which there is an inverse tariff, by which electricity, the most obvious example, gets dearer the more one buys. There is a good case for that on energy conservation grounds.

We could follow the scheme put forward only last week by Professor Peter Odell in the Stamp Memorial Lecture, when he said—and I agree with him wholeheartedly—that every household could be given an energy rating and allowed to consume up to that rating at reasonable prices but above that level the householder would pay substantially more. I even believe, contrary to the mythology spread by the Department of Energy and the nationalised industry boards, that that could be done relatively easily. Every house already has a rateable value. If every house were to be allocated an energy rating on the basis of that and people were to opt to take it in electricity or gas, the scheme could be got off the ground quite easily.

What I complain about is the lack of response from the nationalised industries to all of these suggestions, even when the Price Commission, in its latest report, 1st June to 31st August, is saying this about nationalised industries' prices: The combined deficits of the nationalised industries concerned, when the control started, were less than they are today. The size of recent price increases cannot therefore have been significantly affected by deficits incurred before 1973. The explanation of the current level of nationalised industry prices must therefore be sought in the level of nationalised industry costs. This situation must be a matter of great concern. There is evidence that the pace of inflation in the private sector is abating. In the public sector it has got worse. As a result we are not seeing the improvement in the inflationary situation we ought to be seeing. Those chickens ought to go very firmly home to roost in the nationalised industries. I find it offensive that at a time when the nationalised industries are being criticised in that way they are prepared to load on to the poorest in our community the heaviest burden. This is precisely the reverse of what the present Government said they would do about inflation when they came to office. I acquit my right hon. Friend the Secretary of State for Prices and Consumer Protection of any responsibility in this matter, because I believe that she has fought hard on the other side of the argument. However, one day she will have to answer for the lethargy of her colleagues at the Department of Energy and, this specific matter, for the lethargy of the Chancellor of the Exchequer. I hope that the day will come shortly when she is able to persuade them that her approach to these matters is the right approach.

As I said at the outet, I am aware of the situation in which the Secretary of State for Prices and Consumer Protection finds herself as regards price control generally. My colleagues in the co-operative movement are most anxious to co-operate with her in a price restraint policy. However, perhaps I may make some comments from the other side of the fence—as poacher turned gamekeeper, in this speech at least. My colleagues in the movement hope that her overall policy will be carried out with flexibility to make possible her objectives on essentials and at the same time to preserve the overall viability of the retail sector.

As regards profit margins, the quarterly report of the Price Commission tells us that in the period ended 31st August 1975 distributors' gross profit margins were on average 1.8 per centage points below reference levels. That represented a saving to consumers of about £440 million a year. Even with the safeguard under the Price Code for distributors—the increase in the permitted gross margin to 105 per cent.—to help distributors to reach reference levels, this at least shows that competition is having an effect in the retail sector. No one can accuse the retail sector of excessive profit. It operates on the basis of historic accounting, and existing profits are overstated. Again, we hope that my right hon. Friend will look at the Sandilands Report and see whether she can give some help in that respect.

However, the central point in all of that is that profits in this sector are what will make my right hon. Friend's policy of cross-subsidisation possible. If there are no profits, there will be no way in which the co-operative movement, or indeed any part of the retail sector, can cross-subsidise and achieve the objectives that she wants.

I conclude with one further and quite separate matter. This is a debate on the Queen's Speech, and in my capacity as a representative of the co-operative movement I must briefly express our disappointment that proposals for a co-operative development agency are not included in the Government's programme of legislation for this year—at least, in so far as this has been anounced in the Queen's Speech. Perhaps I may ask my right hon. Friend to consult her colleague the Undersecretary of State for Industry, and perhaps in her winding-up speech she will give an indication of the Government's policy on this. I hope that she will be able to say that there is some prospect of legislation upon it being included in the "other measures" to be laid before us.

6.26 p.m.

Mr John Wells (Maidstone)

We all look at the debate on the Queen's Speech through the eyes of our constituents. We have heard the speech of the hon. Member for Hackney, South and Shoreditch (Mr. Brown), who spoke warmly, or anxiously, about the furniture-making industry. We have just heard the speech of the hon. Member for Newcastle-upon-Tyne, East (Mr. Thomas) looking at matters partly through the eyes of the co-operative movement. However, I shall look at the Queen's Speech not only through the eyes of my constituents but in the broader context.

I deplore the fact that in this Queen's Speech there is no attempt to control the ever-pervading bureaucracy that is coming up and up upon the backs of our industrialists. The hon. Member for New-castle-upon-Tyne, East made a certain play with the small corner shop, and he said that prices were high. But the small private business man is bullied and badgered by bureaucrats of every sort. The movement that we have seen in recent months among the self-employed and smaller business man, complaining about VAT or the collection of VAT and about their national insurance contributions, and all the fears and anxieties that the self-employed have been voicing, are nothing as compared with the way in which they are bullied and badgered by bureaucracy.

We ought to look at the growth of the Civil Service. It is very difficult to obtain a comparison year with year because some people are civil servants one year and are not in the next year. Some are drawn into it and pushed out alternately. However, as far as one can tell, the Civil Service is more top heavy than ever before. I have some figures on this matter, which the Library kindly provided, but it is very difficult to get an accurate comparison. By and large, however, there are more civil servants than ever before.

What is certain is that there are too many. One can be absolutely certain about the phenomenal growth of local government employees, from 803,000 in 1966 to 986,000 last year, as far as one can tell—a phenomenal army of useless, lazy people. I say that most advisedly. With county hall—

Mr. Leadbitter

Will the hon. Gentleman give way?

Mr. Wells

No, I shall not.

Mr. Leadbitter

Why not try?

Mr. Wells

No. I say that quite advisedly, and with a vast number of my constituents employed in local government: therefore, I shall no doubt get stick from them. I would much rather get stick from my constituents than from the hon. Gentleman, because I believe that in their hearts they know that there are too many civil servants.

There are too many of them for two reasons. First, they go empire building around their own little periphery. Secondly, we in the House put more and more burdens upon them. My hon. Friend the Member for Romford (Mr. Neubert) has had a distinguished career in local government and he will probably seek to raise these two matters. However, I believe that local government officials proliferate because of the way that Parliament puts extra and unnecessary burdens upon them. Therefore, I deplore the fact that in this Gracious Speech there is no attempt to control or to reduce the activity of local government, or indeed, to reduce the burdens that we put upon it.

I believe that the Scottish and Welsh nationalists who are so keen on devolution are in part simply fed up with the central bureaucracy of Westminster. I believe that they would be, if not satisfied, at least more content if we could reduce the central bureaucracy in all its forms. The nationalists think that they have a special problem. They have no more of a problem than we have in Kent. We dislike central bureaucracy. We dislike Westminster every bit as much as the entire Scottish National Party does. Incidentally, it is most noticeable the way the Members of that party come in to listen to the sound of their own voices and disappear when they have made their great orations. They are not particularly anxious to hear what anyone else thinks. This arrogance comes strangely from those who set themselves up as such great democrats.

If the nationalists think that they are in a peculiar position, I would point out to them that there are at least two member countries of the United Nations which have populations considerably smaller than the population in my constituency. I see no reason why Scotland and Wales should not go it alone. Equally, I see no reason why Maidstone should not go it alone. I am beginning to come to the nub of my speech.

If we could get rid of people like the hon. Member for Luton, West (Mr. Sedgemore) and move to an independent Maidstone, we should not be bothered by the utterances in the Financial Times of such people as the hon. Member and things might improve. If we were allowed to get on with our own business and attend to our own affairs, operating our prosperous and successful division of Chrysler, instead of suffering interference from people outside, or these idle, incompetent and greedy motor industry workers in Scotland and elsewhere—[Hon. Members: "Oh."]—yes, idle, incompetent and greedy—things would be better. The Chrysler employees in Maidstone have a long tradition of service. They have an excellent machine shop, which is fully viable. Yet we see statements by Members of Parliament representing other parts of the United Kingdom saying that the Maidstone plant is expendable and should go out of the window.

The Secretary of State was right to thank hon. Members for our forbearance in not badgering him about the Chrysler situation. He rather let himself down, however, when he attacked my hon. Friend the Member for Henley (Mr. Heseltine) for not having made any statement about this subject. My hon. Friend had expressly gone along the path of moderation, waiting to see what would be said. The point I am anxious to drive home is that my constituency has a bigger population than at least two members of the United Nations. We have a viable and successful industry. We are self-sufficient in horticultural and agricultural produce.

Mr. Rooker

Have you got your own Navy?

Mr. Wells

If it were not for the rather silly paragraph in the Gracious Speech about the Bill to introduce comprehensive employment safeguards for dock workers, we would be happier still. This is another maddening interference from Whitehall. We do not have any dock workers in Maidstone, thank God, and we do not want them. My constituents would be a great deal better off if we went it alone.

This may cause hilarity among Labour Members, but I trust that they will do me the honour of seeing that there is a grain of good sense underlying what I am saying. We have too many bureaucrats, like everyone else. Let us cut them down. We have a successful and viable area. The people in my constituency who work in the paper mills—not for excessive wages but for a fair and good pay packet—have worked there loyally for many years. In nearly all cases the management comprises those who have risen from within the company. There is only one, lamentably lapsed, employee from my constituency who has now been promoted to the National Enterprise Board—Lord Ryder. He is someone we have gladly exported from Maidstone.

If it is possible for small areas like mine to be successful and prosperous, why, when people like Mr. Riccardo come over to discuss matters with the Secretary of State, cannot priority be given to the thoughtful and efficient work done in my constituency rather than to the feckless people who have been wasting Chrysler's money and the taxpayer's money in other areas throughout the country? I ask the Secretary of State for Prices and Consumer Protection to draw the attention of her right hon. Friend to the sincere belief of the work people in my constituency that they are being neglected by him. My constituents believe that the Chrysler management—English and American, as opposed to the Maidstone management—is doing them a grave disservice. I hope that when Maidstone declares UDI, we shall be able to export our cars to England.

6.37 p.m.

Mr. Raphael Tuck (Watford)

May I assure the hon. Member for Maidstone (Mr. Wells) that the Scottish nationalists are not the only Members who like the sound of their own voices? I am not referring to the hon. Member for Maid-stone in that connection but to other hon. Member who dilate for about half an hour or more with a complete lack of consideration for those who are to follow.

I searched the Gracious Speech in vain for a mention of transport. I looked in vain for a day or a part of a day in which the House was to debate this subject during the debate on the Gracious Speech. I must, however, talk about transport. I am sorry that the Minister for Transport is not present. Transport is in a parlous situation and is likely to get worse. British Rail is making substantial cuts in essential and already overcrowded services.

Let me give one example in which I have an interest, that of the Watford to Euston DC line, the slow line with stops at all stations. In 1955, between 7.15 a.m. and 8.45 a.m., there were 30 trains from Bushey and Oxhey to London. In 1975 there were only 18. It is this already severely curtailed service that is to be cut again by 40 per cent., presumably to 11 trains. The coaches are to number three instead of six. We shall have just over half the number of trains. I wrote to the Secretary of State for the Environment and received a letter from the Undersecretary telling me that the trains were only half full. That is a dangerous half-truth. They are only half full on the late evening service. Because of that British Rail is taking the brilliant step of reducing the service by 40 per cent., not just for the late evening but throughout the whole of the day.

I know very well that more passengers are using the main line as opposed to the DC line. That does not help those who have no access to the main line service and who must rely on the DC line. They will have to travel during rush hours in conditions which the RSPCA would never countenance for animals. Housewives will have to wait longer and travel in more crowded trains when they go shopping. Passengers using the service on Saturdays and Sundays will have to do likewise. These cuts are parallel to those which were used to reduce the North London line between Broad Street and Richmond from a rail passenger service to the present apology for a service. The trains are already vastly overcrowded. As I said when I unsuccessfully asked leave to move the Adjournment of the House under Standing Order No. 9, if there is much more overcrowding on the trains the passengers will have to be pushed in with bulldozers.

We talk of the Ice Age and the Stone Age. This is the Beeching age, but it is even worse than Beeching. What has happened to the Labour Party manifesto of October 1974? It stated that one of Labour's objectives was to move as much traffic as possible from road to rail and water, and to develop transport so as to make us less dependent on the private car. The cuts that British Rail is putting into operation will spill out people from an already overcrowded rail service to bus transport, which is also already over-crowded, and force even more people to use the private car. If cuts are to be made, they should be made judiciously. When cutting down a tree one does not cut down the very branch on which one is sitting because if one did, one would find oneself in difficulties, if one lived to tell the tale.

We are spending £600 million on roads and only £140 million on railway investment. Something is wrong. I must press my right hon. Friend the Secretary of State to make the statement on transport which he promised in July. I hope that it will be forthcoming in the very near future and that he will prevail on British Rail not to cut essential services, which are, incidentally, breaking even.

I come now to buses. The London Country Bus Service is in a parlous state. The deficit for the financial year for London Transport is £160,000 and for London Country Bus Services £1,498,442. Again, something is wrong. I suggest that the county councils have been given responsibility without power. The bus industry is operating under severe difficulties.

The availability of new vehicles to replace obsolete buses is severely limited. The House may be surprised to know that London Country Bus Services has not yet received the first vehicle of its 1974–75 order. If the Government's policy of expanding public transport—by which I mean intensifying existing ser-vices and introducing new services—is to be pursued, many more buses will be required. That implies the long-termplanning of public transport vehicle production, with rapid expansion over the next four or five years. At present there is difficulty in replacing an aging fleet of vehicles. That leads to more frequent breakdowns and increased maintenance. All these factors lead to the curtailment of scheduled services and contribute to unreliability.

What has gone wrong? Why has the major part of the transport supplementary grant for this year gone to metropolitan authorities? London received a transport supplementary grant of £11.71 per head of the population. The metropolitan counties received a grant of £7.10 per head, but the non-metropolitan counties received only £2.70 per head.

The problem, I think, arises from the Transport Act 1968 which set up the National Bus Company and said that, taking one year with another, the company must not make a loss. The result in a time of inflation has been chaos. We cannot break even and we have to reduce services. In fact the solution proposed by the London Country Bus Services appears to be the reduction of services and increased fares. The company admits this and admits also that it is self-defeating. Therefore, the 1968 Act seems to be the fly in the ointment.

The Transport and General Workers' Union at Garston in my constituency has complained that since the union was divorced from London Transport under the 1968 Act wages and conditions have gradually worsened. There has been a 50 per cent. increase in fares to the travelling public. The whole set-up is depressing. At a time of increasing energy shortage the Government seem to be determined to reduce the capacity of people to move from place to place. The AEC works at British Leyland, Southall, which should be producing spares for buses, are being run down and redundancy is currently in progress. The services are bad enough now, but there is a serious possibility that because of the limited amount of money available, there will be a withdrawal or pruning of existing services on a significant scale rather than rationalisation, co-ordination and improvement of services.

Surely it is time to retrace our steps and cease to rely on county councils which cannot give us what is urgently necessary, namely, a satisfactory level of passenger services for all communities throughout the United Kingdom. To achieve that it is necessary to give the responsibility to central Government, and, perhaps, to make grants from the Road Transport Fund to subsidise passenger transport. We must have long-term planning for transport, and for that I repeat we must rely on central Government.

In conclusion, at some time or other we must come to the view that transport is a social service, just as much as all the other social services, and the sooner we arrive at that conclusion the better.

6.47 p.m.

Mr. Michael Neubert (Romford)

It is evident that the start of a new Session signalled by the Queen's Speech is welcomed by Ministers and back benchers alike. To Ministers it gives the opportunity to clear desks and embark on a new batch of largely avoidable and unnecessary legislation. Back benchers no longer face the prospect of all-night sittings, with the Chinese torture of being awakened by the Division bells as they lapse into the deepest recesses of sleep. They can look forward to a few Second Reading debates ending with a Division at the civilised hour of 10 o'clock.

Unlike the hon. Member for Dewsbury (Mr. Ginsburg), I cannot welcome the Government's proposals to reform our procedures. It seems to me to be quite unnecessary. The simplest solution is staring us all in the face. It is that there should be fewer Bills. It may prick the vanity of Ministers to be told that their legislation is not indispenable, but, on an independent judgment, that is the case.

If I may reflect on the comments of the hon. Member for Perth and East Perthshire (Mr. Crawford), the one argument for devolution that strikes a chord in my heart is the prospect that if there is a Scottish Assembly, English Members will have to spend fewer hours listening to speeches by Scotsmen and Scotswomen in this House about a country that I have yet to visit. After their immediate departure from the House as soon as they have made their comments, the English are yielded the Floor.

It is an anniversary when the Queen's Speech comes around, but anniversaries should not be occasions for reflecting on the melancholy process of ageing. They should be occasions for measuring the achievements of the past 12 months. When we take the all-important subject of inflation, it is instructive to see what was said in the Queen's Speech in October of last year on the subject—namely: …My Government, in view of the gravity of the economic situation, will as their most urgent task seek the fulfilment of the social contract as an essential element in their strategy for curbing inflation". That was the only mention of inflation in last year's Gracious Speech.

If we are to judge the achievements of the past 12 months in terms of the Gov- ernment's fight against inflation, it is clear that the Government have failed lamentably. Although some hopes are rising following the announcement of the rise in prices in the past two months, let us not forget that prices are still rising. The only sign of relief is that they are not rising quite so fast. The annual rate of inflation is running at 26 per cent. It is a measure of the fulfilment of that one-sided social contract that it allowed wage increases overall to reach a peak of 35 per cent. In turn that created a level of inflation that we had never known in the past and that we had associated only with South American countries.

I do not normally wish to discourage effort and enthusiasm, but I find it difficult to share the fulsome congratulations that have been heaped upon the Secretary of State for Prices and Consumer Protection. I do not wish to be discourteous, unchivalrous, or discouraging, but if I were the Secretary of State responsible for protecting consumers, and if I were still in office at the end of a year that had seen a rise in the cost of living of 26 per cent., I should feel a shade depressed. However, there is no sign of depression on the Government Benches. Indeed, at the Labour Party conference at Blackpool, in reward for the right hon. Lady's efforts and enthusiasm, she increased her vote on the National Executive.

One is left in some bemusement at the turn of events. Inflation remains a serious matter. It is clearly among the unfinished business of last Session. Inflation has meant that the value of money has declined in the past year by no less than one quarter. That damage is irreversible. Individual personal losses in savings and loss of purchasing power are irrecoverable. Let us not forget last year's legacy.

In the course of our discussions the argument put forward from the Government benches has changed. Throughout last year we were told confidently that wage increases played little part in raising prices, but now we know differently. The Remuneration, Charges and Grants Act was introduced at short notice in an attempt to secure voluntary restraint of wage increases. As an Opposition we pointed out the danger of spiralling, uninhibited wage increases in terms of the cost of living. We have seen the consequences and we must welcome any attempt to restrain wage claims beyond what can be afforded and earned.

At the same time, it will not do for the Prime Minister to criticise the Opposition for not supporting his rag-bag measures. It was rather like the fair-ground huckster offering to sell a gold watch for £15 provided that the buyer was prepared to buy the rest of the shoddy items in his basket. Surely it is possible to support one part of a policy while severely criticising the rest. Many of us did not wish to support a policy in the division lobby that would set so many reprehensible precedents. We must be grateful in so far as it achieved an abatement of wage claims. We wait and hope for the improvement in the cost of living to show. There is little else in the Queen's Speech that offers the prospect of abating inflation.

Some minor measures are proposed in an attempt to abate inflation. For example, there is unit pricing. That is already under way with some goods. It may be welcomed as an extension of the programme, but it will not make much of a contribution except, as the hon. Member for Bolton, West (Mrs. Taylor), the seconder of the Address, mentioned yesterday, as a possible preparation for metrication, although there is no mention of that in the Gracious Speech.

There is also a proposal for price displays. If one believes, as the Government obviously believe, that by papering the wall of grocers' shops with price displays one will secure the avid reading of the displays by customers before they make their purchases, I suppose that that, too, is a good thing, but to the shopkeeper it may well appear to be further bureaucracy that is unlikely to achieve very much.

It seems that the scapegoat nowadays for our problems is no longer wage increases but investment. On this aspect I find the Gracious Speech quite breath-taking in its effrontery. The Government are calling for the achievement of a satisfactory level of productive investment while saying in virtually the same breath that the present price controls will continue to be vigorously enforced. If it is the Government's intention to mainttain price controls at their present restrictive and rigorous levels, there is precious little chance of an improvement in investment.

Investment is not the failure of capitalism. My right hon. and hon. Friends are castigated for the crisis of capitalism, but it is not capitalism that is at fault. Capitalism struggles while being suffocated by Socialism. Up to now there have been two main factors that have led to a lack of investment. One factor has been over-taxation. At last, and to his credit, the Chancellor of the Exchequer now realises that he has gone as far as he can go in increasing the intolerable level of taxation on British companies. The other factor is overmanning.

Apparently it is accepted at Chequers and elsewhere that overmanning is one of the most serious endemic problems facing industry. However, on the Prime Minister's own authority, at a time of high unemployment, this is not the time to deal with the problem of overmanning. If we are not now to take advantage of the bitter lessons of unemployment to create more fluidity in the labour market, when are we to do so? We could not do so in the years of high employment.

The Secretary of State referred to ossification. Nowhere is ossification more evident than in the labour staffing practives in many industries. If we cannot change them now, what hope is there of ever changing them?

To those two factors there must be added price control. That brings about a trinity of iniquity. We have overtaxation, overmanning and price control. In an interesting speech, which could have been made from either side of the House, the hon. Member for Newcastle-upon-Tyne, East (Mr. Thomas) departed from those views which might have accorded with those of his colleagues by putting forward the views of the co-operative movement, which apparently find a great chord of acclaim in the House. The hon. Gentleman made a passionate plea for profit. He pointed out that from profit we must look for investment. It is impossible to invest a deficit. Perhaps it is necessary to present such truisms to some Labour Members. I hope that I am not doing the Government an injustice, but it may not be sheer nerve on their part that they call for improved investment at the same time as reinforcing price control; it may be sheer ignorance of the economic facts of life.

From time to time a remote tribe is found in a distant jungle apparently so unaware of the facts of life that it does not connect the sexual act with the birth of a child nine months later. It may be that the Government are guilty of the same sublime innocence. It may be that they do not realise how much investment depends upon profitability. Perhaps it is necessary for us to point out the economic facts of life. Until we obtain higher profits, we are unlikely to have improved investment. As we are now being told, improved investment means more jobs, a better balance of payments, a higher volume of exports and all the other things that we should like to see.

In waiting for the constructive benefits of a restraint in wage increases and income levels to come through—it is a benefit that will not be apparent for some time as we are promised that it will be a hard winter and it certainly will be—it is important not to conceal the truth from the British people. They will respect the truth if they are told it plainly.

We have yet another scheme which attempts to ameliorate the immediate position by appearing to do something about prices. I refer to the selective price restraint scheme. This is to be widened to include a variety of items, some 100 of which are presented for discussion. We had a passionate advocacy of such a scheme by the hon. Member for Newcastle-upon-Tyne, East. But I am concerned that once again this will involve subsidy, because a cross-subsidy is a subsidy like any other. One of its disadvantages is that it conceals the true state of the cost of living and the way in which prices are rising.

If we are to have a wide-ranging cross-subsidy in essential goods, it may affect the retail price index. I need not remind hon. Members that that index is used in the House as a measure of the rise in the cost of living. But we know it to be a very imperfect instrument of measurement. It attempts to represent the average family's expenditure.

No one doubts the sincerity of those who want to help people who are less well off and who have the greatest need. The Opposition have urged constantly that the way to do that is to be selective in terms of benefits and not to intro- duce across-the-board subsidies for rich and poor alike. Even the Secretary of State for Social Services has been converted to this view and has decided to abandon the Christmas bonus for the very reason that she can see no argument for giving a tax-free bonus to people all the way up the income scale.

Although the analysis made by the hon. Member for Newcastle-upon-Tyne, East was correct, he drew quite the wrong conclusion. It is not possible to re-write the rules of economics and make the small shopkeeper charge less for goods which cost more to provide. Instead, we must help those who need to buy from his shop who might otherwise not be able to afford the price of goods in that locality. Rather than trying to re-write the rules of economics, we should be helping people selectively.

In terms of the retail price index, the Government have set themselves a very tight target. By the end of next summer, or by the end of the next pay round, which is commonly taken to be 1st September, the rate of inflation is to be down to 10 per cent. per annum, and it is currently running at an annual rate of 26 per cent. What is more, they say that by the end of the year it will be down to single figures.

The Government will always be tempted to achieve that target one way or the other. I was apprehensive about an earlier reduction this year when mortgages were included in the retail price index. It may be that mortgage payments are a justifiable element in family expenditure which should be brought into the retail price index. However, the effect of doing so has been to stablise the index, because mortgage interest payments have not gone up. If there is too much tampering with the economic facts of life and too many items on the retail price index are kept down to an uneconomic or unreal level, there may be some falsification of the index—

Mr. Rooker

By and large, it is not the Government who alter the items appearing on the retail price index. There is a body known as the Retail Price Index Advisory Committee, and the reason why mortgages were included was that a member of the previous administration, when at the Department of Employment, said that they should be included and he asked the committee to look into the possibility of doing so.

Mr. Neubert

I have no doubt that the committee was dispassionate in its advice on this matter. However it is not beyond the experience of any of us that, when given advice, Governments tend to take only the advice that they like. If they are offered an option that would have this effect, they may be tempted to go along with it. I say no more on the subject except that there are some elements that need clarification. We are told that in respect of essentials, the rate of increase is to be limited to 5 per cent. But we have to remember that that is for six months only and that the annual rate is 10 per cent.

Although we wish the Secretary of State well in her attempts to persuade her colleagues that this course has a chance of achieving success, I hope that she will realise that 12 months from now we shall be looking again at the record of efforts of the Government in the fight against inflation.

7.6 p.m.

Mr. Alf Bates (Bebington and Ellesmere Port)

There are a number of very important themes in the Gracious Speech. During the coming year we shall be discussing a number of major constitutional issues, and we shall be carrying out what Government supporters consider to be sweeping social changes. However, the subject of today's debate is one of the most important. Without a considerable improvement in the effectiveness of our industrial base we shall not be able to carry out any of the social improvements which we wish to see. What is more, there is not much point in talking, for example, about a redistribution of wealth if at the same time we do not look at areas of wealth creation and ensure that they are effective. Nor can we tackle the sore of unemployment which is festering on the body of our economy.

My constituency is highly industrialised and it has been hit severely by the recent rise in unemployment, especially in terms of youth unemployment. I do not want to describe the full nature of the industrial background of my constituency. However, the difficulties of the car industry have contributed greatly to the high rate of local unemployment.

The hon. Member for Maidstone (Mr. Wells) described car workers as "idle, incompetent and greedy". In my view, he threw an open insult at car workers everywhere. If he had not rushed out of the Chamber as soon as he finished his insolent utterances I would have said to him that car workers were not idle, incompetent or greedy, and that he and others should look sometimes at the money the motor industry earns for the country from its exports. It is not the fault of car workers that over the years their industry has suffered a lack of investment which has cause it to lose much of its competitive edge. Despite that, we earn a great deal of foreign exchange from the car industry, and we should be looking at methods of improving it rather than trying to make scapegoats of a few workers.

Because of unemployment difficulties many of my hon. Friends have suggested that we ought to attempt an immediate reflation of the economy. However, in general terms, I do not believe that to be possible at present. It would cause severe balance of payments difficulties. We would have to bring in a considerable amount of additional energy and raw materials which we could not afford. In that sense, it is necessary to ensure that any reflation is part of a general world reflation and that it is led by countries with strong balance of payments surpluses and more self-contained economies.

Contrary to what the Leader of the Opposition said yesterday, that dos not involve asking other countries to bail us out. The right hon. Lady made a cheap comment. We are a trading nation and it is necessary for us to export strongly to finance our imports of energy and raw materials. We must improve our competitive edge to achieve those exports.

A number of my hon. Friends have suggested that to overcome those difficulties we impose general import controls. However, that will not solve the fundamental problem of industry, which is its lack of competitiveness. Indeed, it may mask the problem and make it worse. It will not help us to sell our products in competition with other countries. We should face the serious possibility of retaliation by other countries. For instance, it is known that the Americans are considering imposing anti-dumping measures against British and European cars. If we spurred that process on by imposing our own import controls on cars, where on earth would that leave our car industry? It would be in a far worse position than it is now.

I accept that in a few areas it may be necessary, for temporary or particular reasons, to impose import controls. There must be a stronger application of antidumping regulations, but I do not believe that import controls, as a matter of general policy, would do anything other than harm to our industry in the long term. In the end they would probably cause more unemployment.

The solution to our industrial problems lies in an increase in the competitiveness and effectiveness of our industrial base. There must be greater investment in industry and a much better use of that investment when it occurs. I hope that the Government will ensure that we do not continue to waste money on industry that we know to be failing. As the Secretary of State for Industry said, we do not wish to ossify the structure of our industrial pattern and retain old and outdated industry.

We should deploy our investment resources in three areas. Hon. Members on both sides will agree that there are a number of industries essential to the economy and to the nation, and which we should not allow to collapse even though they are not profitable. I think of defence industries. The previous Conservative Government recognised that it was not acceptable to allow aircraft or shipbuilding firms to go into liquidation. They either nationalised those industries or helped them out in other ways.

Many of my constituents work in the shipbuilding firm of Cammell Laird in Birkenhead. Proposals have been made to nationalise the shipbuilding and aircraft industries. The hon. Member for Henley (Mr. Heseltine) put forward the peculiar argument that he was opposed to the nationalisation of one firm because it was doing well, and of another because it was doing badly. If he is opposed to nationalisation for an intrinsic political reason he should say so, but he cannot use opposite cases to support his argument.

The shipbuilding industry faces problems. There is over-capacity in the shipbuilding industry throughout the world. We must face that. Whether in public or private hands, the shipbuilding industry will continue to face problems. It will be better equipped to face its serious employment difficulties if it is taken into public ownership.

Cammell Laird faced a severe difficulty until it was helped by a previous Labour Government. It was only as a result of the actions of, and the money put in by, a previous Labour Government that that company ever started to modernise its equipment. I inspected the Cammell Laird site this summer. The company was taking out a piece of equipment which had been installed in 1909 and replacing it with a modern machine tool which was purchased with public money.

Try as they might, the Opposition are not able to blame the lack of investment since 1909 on the present Government or on the trend towards Socialism. Our problems result from the past failure of management to invest. We must ensure that that changes. We must invest in an industry which is in a temporary difficulty or which faces temporarily severe competition. To some extent we should begin to use the new American experience of job retraining and moving people to new jobs. The Americans are starting new schemes, which, I hope, we shall examine with some care to see whether they might benefit us.

Next, we must concentrate our effort on industry with a growth potential. We must ensure that we use that kind of industry to provide job growth in areas of high unemployment. I agree that it is not possible to invest a deficit; a degree of profit must be retained for investment purposes. Experience has shown us that there has been insufficient investment. However, the existence of profit does not guarantee sufficient investment in an industry or that the investment goes to the right places. That is why it is important that the Government, in developing their industrial strategy, should plan with industry where that development will take place.

The hon. Member for Henley seemed to suggest that until last year our economy was totally free of planning and was based on the free enterprise model. His analysis was pre-Keynesian, if not Dickensian. Our economy has been planned for a considerable time, though most of the planning has occurred within industry. It is our objective to ensure that that planning takes place as part of a combined effort between industry and Government. That is the strategy behind the Government's industrial policy. I believe that it will be welcomed by Parliament, by both sides of industry and by the country.

7.18 p.m.

Mr. Julian Critchley (Aldershot)

On 5th November the Ministers of Defence of the Alliance met in The Hague. The purpose of the meeting was to discuss the future of arms procurement in Europe. Thirteen Ministers met, although the fourteenth, M. Bourges, the French Minister of Defence, was absent in Paris. That meeting, at which our Secretary of State was in the chair, concluded with the suggestion that a secretariat should be formed on which the problem of European armament procurement might centre. The second proposal was that there should be a long-term study of all the tasks faced by the Alliance in that instance.

The question is whether France will join. The need to achieve standardisation by rationalisation and specialisation of weapons is now widely recognised, and so, too, I believe, is the fact that there can be no real progress on this matter without French participation. I suspect, however, that the French answer will be "No".

The secretariat initiative is the child of the Euro-group. While Giscard himself, were he a free agent, would accept the invitation for France to attend, he is dependent for his majority in the Chambre on the Gaullist Party, on the UDR, and any such move by France at this juncture would be seen to be a return to the military organisation of NATO itself.

It remains true, nevertheless, that an initiative on the European arms procurement issue must come from France eventually, and it appears from indications of French opinion that the initiative, when it comes, will be based on the Commission, the EEC, rather than in the Euro-group.

The need for the standardisation of weapons in the Alliance is easily stated. Inflation has meant that only one-third of all our defence budgets is in fact spent on arms, and each new set of arms is much more expensive than the last. NATO's sole advantage over the Warsaw Pact countries lies in the quality of its equipment, but that gap is being steadily eroded as the Soviets re-equip their own armies, and those of the Warsaw Pact countries.

The armies of the allied coalition in central Europe are not inter-operable, and there has been a vast wastage of human and financial resources owing to the duplication and multiplication of weapons projects. Our European armaments industries suffer also from short production lines, which mean low profits, with the inevitable consequence that we, and the French in particular, are obliged to export arms to third countries, and notably to the Middle East. There is great risk involved in the uncontrolled export of arms into areas such as the Middle East for no better reason than to render our own armaments industry reasonably profitable.

The case for standardisation is, therefore, proven. We could have military forces in the West 30 per cent. more effective for the same amount of money as we now spend on defence. How will that standardisation be achieved? There are, perhaps, three ways of approaching that question.

The first line of approach is a carefully reached agreement on joint production of a particular weapon system. This is the conventional way. The results have been valuable, but limited.

The second choice, if we are to achieve armaments standardisation in Europe, is the setting up of an institution, a political institution, which would impose rationalisation upon the European armaments industry.

The third choice is the simple, though undesirable one, that all we need do is purchase American equipment of every kind. Just as the countries of the Warsaw Pact all buy Soviet equipment, and thus achieve standardisation, we could, at least in theory, all purchase American equipment, but, clearly, this is undesirable. No one in Europe would wish it. Nevertheless, it remains true that if Europe is ever to compete with the United States in an Atlantic-wide market for defence the first condition must be the setting up of a European arms procurement agency.

How does one set up a European arms procurement agency? A common defence in Europe implies a common foreign policy. Once this slow process began towards a common foreign and defence policy, the United States would be likely to insist that Europe be responsible for the conventional defence of the Alliance, and would limit the American rôle to the defence of the flanks, and the strategic nuclear guarantee. This loosening of United States commitment would oblige Europe to merge its research and development in defence, to rationalise the production of arms, and to specialise in those arms which would be suitable for the conventional defence of Europe—specialised aircraft, laser-guided missiles, air-to-air and ground-to-ground—and such a division of allied labour, with the United States withdrawing slightly, but at the same time retaining its commitment to the defence of Europe, would be the precondition of French participation. We should thus be able to create that institution which would, in fact, rationalise European defence.

In the meantime, which of the three ways open to us is the most attractive? The secretariat, the initiative of our Secretary of State for Defence, has the support of all allied countries save France, yet France has the largest armaments industry in Europe. It is true that the purchase of the YF16, instead of the French aircraft, has weakened the confidence of the French armaments industry, and there are now rumours in Paris that the French are trying to do a deal with the United States in order to produce a third generation fighter aircraft. But even were that idea to succeed it would not be enough in the long term to sustain the French nationally-based armaments industry, and I think that French opinion is coming to realise that.

If the French are not to join the secretariat, the Mason initiative of 5th November, what other alternatives might we use? In theory, we could resurrect the standing armaments committee of Western European Union. This was last discussed by M. Jobert in 1973, when he suggested it at a meeting in Paris, but recent statements by the French Government have dropped all reference to Western European Union, and France, while she still says that the standardisa- tion of arms in Europe is desirable in itself, seems to be implying that the solution to this problem, if there be one, must come from the EEC.

In my view, it would now be best were the Foreign Ministers of the Nine to consider how a European defence procurement agency might be set up. One step might be to adopt the d'Avignon idea—the working of that body which, although it is separate, is linked to the Community through the European Council.

Without the political will there will never be created an institution, and an institution is the only method whereby rationalisation—the pre-condition of standardisation—will ever be imposed upon the European armaments industry. Giscard is unable to move any closer to NATO, but he has altered French policy towards the Community in a quite radical way, and it is most disappointing that no other leader in the Eight has seized the opportunity which Giscard has offered.

I see no reason why the United States should not extend its whole concept of the two-way street, in arms sales and purchases, with all the generosity which it entails, to an evolving European armaments industry—a gesture which would be a symbol not of American withdrawal but of a far larger European contribution to our common defence.

I suspect that my thesis, that if we are ever to achieve co-operation, rationalisation and standardisation, the initiative must eventually come, and can only come, through the Common Market, is not likely to appeal to hon. Members on the Government side. Given the nature of the Labour Party coalition, anything that smacks of European integration, in the sense of a common foreign policy, with its implied defence policy also in common, would, for the majority of Labour Members, be almost impossible.

Therefore, one looks to the Conservative Party. I say to my hon. Friends, all of whom are as cold from sitting in this freezing Chamber as I am, and just as hungry, that they might use their influence on our Front Bench colleagues to suggest that if the Conservative Party is anything it is a European party, and that it is initiatives of this kind that must come from us and not, unfortunately, from the Labour Party.

Several hon. Members rose—

Mr. Deputy Speaker (Mr. George Thomas)

I am grateful to the hon. Member for Aldershot (Mr. Critchley) for limiting his speech. I should like the co-operation of the House, as a large number of hon. Members wish to speak and there is only an hour and a half left for Back Bench speeches.

7.31 p.m.

Mr. Ted Leadbitter (Hartlepool)

Apart from looking hopefully to the Tory Party for our salvation, as suggested by the hon. Member for Aldershot (Mr. Critchley), Members on the Government Benches are anxiously looking to the Labour Government to deal with certain omissions from the Gracious Speech, not the least of which is the important question of the reorganisation of the ports.

During the past decade remarkable changes have been achieved in the port industry by both the work force and the management, and these have been accepted by men who have seen thousands of their colleagues leave the industry. The policy of change has been pursued in the interests of efficiency and rationalisation and of getting the best out of the equipment that they have in order to meet the increased competitiveness of European ports. What has been lacking, however, is support from Governments—I mean all Governments, not just the Labour Government. There has been no back-up for this remarkable example set by people in the industry, and the Government should provide the necessary help so that we do not fall too far behind in competition with the Common Market ports.

What is more, we owe it to the men who work in the industry to remove the anomalies that exist. Serious differences of security provision arise because of the fragmentation of the industry. There are differences in pension rights, in the treatment of voluntary severance payments and in the payment of sickness benefits in the various areas. But those are merely the fringe of the differences which affect proud men who feel that there is much to be done following what they have set afoot in order to provide job satisfaction.

As everybody knows, there is no greater pride in work than that found in some of the basic industries. Talk to a railway man, and he will say that he is proud to work on the railways. Talk to a coal-miner, and he will say that he is proud to be a miner. Talk to a docker, and he will say that he is proud of the fact that he is a docker. I have mentioned three major occupations that are essential to the economy of the country, yet the men in those jobs have often been vilified in the national Press and have often, for political purposes, not been fairly treated by the Opposition.

However, we are in a forgiving mood. We do not want to upset things when we are asking the Government to do something. We are faced with a threat from the Scottish nationalists, who have been absent for most of the day. We have also noted the total absence of Members of the Liberal Party and of the Welsh nationalist party. We have also noted the absence until very recently of any representative from Northern Ire-land. We need a little bit of response from the major Opposition party, and I am therefore in a mood to be reasonably forgiving.

I think that, having set such a fine example, the men in the industry with which I am mainly concerned are entitled to ask the Labour Government to reorganise the ports. We mentioned this in our manifesto in 1974, and over the years, particularly since 1964, we have given assurances that we would deal with the situation in the ports. To prolong the decision to reorganise would be harmfull for several special reasons.

It would be harmful because it would create uncertainty about the final objectives of port activity. Failure to take a decision would create investment problems. It would also lead to problems affecting the employment of those who remain in the industry—by that I mean the shift of trade from one port to another. Indecision would also introduce acrimony between the ports, with one port setting itself against another in the competition for trade. We should make the ports of Great Britain competitive so that we can win our share of world trade, rather than dissipate our energies through competition between the ports.

There is a simple lesson to be learned. We are not pursuing a dogma. We are talking about extending the public ownership that exists. The British Transport Docks Board is a substantial, public accountability-based port undertaking, and a profitable one to boot. After all, it has just made an offer to Felixstowe which that port has grasped with alacrity. Earlier this year, the port authority there was saying that such a thing as public ownership would never darken its doors, but has been quick to grasp the offer of 150p a share and come into public ownership.

On the other hand, there may be more in it than that. There may be something in this that has escaped our notice. It may be that the British Transport Docks Board does not want to be absorbed. The question that the House has to answer is whether the thinking of Felixstowe is to be the determinant, or whether the issue is to be decided by the Board. When two such diverse port authorities enter into a holy marriage—or, for that matter, an unholy one—we should consider whether we can be more consistent and say that having sown the seed of public ownership in some of the ports, the time has come to make the nationalisation of all the ports a national objective.

Europe is spending the equivalent of millions of pounds on Hamburg, Rotterdam, Dunkirk and Le Havre. We are treading a dangerous path because if the European ports attract the major shipping lanes we run the risk of becoming mere feeder ports.

That would be a tremendously unfortunate thing for this country. It would be a tragedy, because there is something far more fundamental in the plea for the Government to set themselves on the road towards the reorganisation of the ports—something they undertook to do. There is a greater concept of economic health and prosperity which can arise only if we have an integrated transport and port system.

I want to free myself from the arguments about a laissez-faire economy or the accountability of the economy in terms of public ownership, and make the plea that private enterprise and public ownership can be complementary for the public good. What we have to talk about is the movement of goods, which all our industries, privately or publicly owned, can produce, and the movement of people, in order that internally and externally that movement can be efficient.

We must have an umbrella. We need a national transport planning board so that, with a proper integrated road, rail and port system—remember that the ports are the termini between our seaways and our roadways—we can sharpen the edge of our national competitiveness and more than match what is happening in Europe.

I therefore say to the House, and certainly to the Government, that it is a matter of great regret that there has been a lack of courage here. "It is self evident" as Lord Rothschild, who was the big white chief of the "Think Tank", would say. Why is it that we have a delay in implementing a policy which even the Director-General of the Port of London Authority wants, which without exception now all the port workers want, and which a large slice of port management wants? Why is it that, when something is as self-evident as this, the Government have not been able to pluck up the courage to do what is obvious and necessary for the national good, if we are after real economic prosperity? Why can we not give to our industries the means of moving their goods? The answer lies, I suspect, in the Ministry of Transport—that most backward backwater of all the Government Departments in Whitehall. It has been the graveyard of Minister after Minister.

I am not prepared to be drawn into the language of the hon. Member for Maidstone (Mr. Wells), with which my hon. Friend has already dealt. I do not want to make imputations about the personal standing of civil servants in the Ministry of Transport. What I am saying is that these highly commendable men, these honourable and competent men, as they must be, have got themselves into a state of administrative constipation, because they are part of a system which does not want change. They are afraid of it.

I suggest that the Government should therefore look at the Gracious Speech, and especially at the important words that I have found in relation to what I have had to say about the ports. I refer the House very seriously to the last page, and I hope to have complete attention, especially since the Scottish nationalists have come back. The last words are: Other measures will be laid before you. For God's sake, please, Government, bring those other measures forward, including the reorganisation of the ports.

7.45 p.m.

Mr. Dafydd Wigley (Caernarvon)

lt will be no surprise to the House that before dealing with industrial aspects I want to spend a moment or two on the constitutional implications of the Queen's Speech which, as I am sure hon. Members are well aware, concern our party very considerably indeed. The news contained in the Gracious Speech yesterday—that the constitutional proposals of the Government are to be delayed yet further—has come as a shock to Wales and to all those who interest themselves in the development of the machinery of government in Wales. Indeed, there are many of us on this bench, and particularly in Plaid Cymru, who feel that we have been led down the garden path on this issue.

I can remember, following the February election, the meetings that we had almost at weekly intervals then, knowing that there was another General Election coming shortly, with the Minister then in charge of devolution, Lord Crowther-Hunt. I remember all the assurances that we had, week after week, every month, in three months' time, every thing would be moving. "We shall have a Bill within the year" we were told, "It will be in force by 1st March 1976." How easily we were misled!

I suppose that we came to this Chamber young and slightly naive. We have been taught a very hard lesson by the Government. We have been taught it once. We shall not be taught it again. No more shall we believe the pledges that at the end of two years, we shall have some devolution. We know exactly where we stand, and the people of Wales know where they stand. They know the options open to them. They know that the choice is between a Conservative Government who, although they offer us nothing constitutionally, are at least honest about it and say so, and a dishonest Labour Government who fought the last election in Wales, in constituency after constituency, with candidates going to the country saying that the Assembly would be brought in, with meaningful powers—even legislative powers, some candidates said, and they won seats on that basis.

There will be a day of reckoning when the next General Election comes, and for me and my party that day cannot be too soon. We shall do everything we can to bring it about. But other parties in this Chamber do not want to see a General Election now. I suspect that some parties, on this side certainly, do not. But it will not be our fault if there is not a General Election. We shall do our atmost in that respect.

We shall equally welcome a referendum on this issue so that it may be taken in its own right and away from the brainwashing that goes on in a General Election. We should like to have the issue standing on its own two feet, and we should welcome a referendum giving the people of Wales all the options and the opportunity of fighting on that front.

I turn to the industrial debate that we are having today. The establishment of a Welsh Assembly, as at one time hon. Members opposite used to believe, is not something in a vacuum. It is not enough just to set up some national institution in Cardiff. It should have a purpose, and that purpose ought to be to give us the mechanism of government so that we may start solving the problems that have bedevilled us in Wales one generation after the other. We want meaningful self-government for Wales, as does the TUC in Wales, and it is pressing for a legislative assembly and for real economic powers to solve the problems that successive Governments of all colours have failed to solve.

The tragedy at this time is that the constructive energies existing in Wales, which could be channelled into solving our own problems instead of letting them fester on, will be diverted from this opportunity. They will have no channel through which to work. I am very sad that that is the situation. There has been a failure in this place over generations to solve our economic problems. We do not necessarily complain about mat. We do not expect the guy next door to do our work for us. If we are entitled to ask for a solution, we are entitled also to expect to be given responsibility for finding that solution ourselves.

In Wales today there has been a failure to develop an industrial base for the development of new industries. Between 1925 and 1950 we lost almost a million people by net emigration from Wales. Our per capita personal income at this stage is 85 per cent. of the average of the United Kingdom, and in some parts substantially less. The average personal wealth is 70 per cent. of that of the United Kingdom. We have had a rundown of industries. The coal industry has been run down from employing a quarter of a million in 1925 to 40,000 today. We have a rundown in the slate industry in my constituency from 20,000 at the turn of the century to a figure of 400 today.

Yet we have failed to obtain the necessary growth in other industries to make up for it. Furthermore, we have not been given the infrastructure of roads, industrial sites and the services necessary to keep the economy moving. In other words, we have had no co-ordinated economic planning. The Labour Party pays lip service to a belief in economic planning. This has been done by Labour in election after election. But we do not see it happening in Wales, and we must pay the price for that.

There was an opportunity in the 1960s for economic plans for Wales to be brought forward. That opportunity was missed. I suspect that the real problem is a lack of motivation. There has been no serious concentration on the problems of Wales, nor any effort to arrive at a coordinated economic plan to solve our problems. We have only 20 miles of motorway in the whole of Wales. Our railways have been closed down over the last 10 years to the extent of some 200 to 250 miles. The closures have meant the disappearance of 100 railway stations, industrial sites and no co-ordinated way of bringing forward industrial facilities.

The Government may reply "All will be well because we have now established the Welsh Development Agency." I wish Sir David Davies well as Chairman of the Agency, but there is some danger that the Agency will not be effective. First, the Agency will lack the necessary finance to do its job. It will receive £100 million over an unspecified time scale and that will be the amount with which it will be expected to solve the problems of Wales. The Welsh TUC specified for this purpose the sum of £500 million. That figure is very much closer to the needs of Wales. But the Government at present cannot afford to give more money to Wales because they need so much money to be allocated to Concorde, MRCA and to the ludicrous level of defence expenditure. As a result, the people of Wales are suffering.

The second problem that faces the Agency is the possibility of a lack of dynamism.

Mr. Peter Viggers (Gosport)

Is the hon. Gentleman suggesting that if Wales has its own tribunal or Parliament, it will not have its own defence forces and will rely on its neighbours to defend it?

Mr. Wigley

I am grateful for that helpful intervention. I am not sure what the hon. Gentleman means by a "tribunal". I appreciate that there are only three members of my party in the House, but I suspect that there will be a great many more members of a Welsh Assembly. If we were to have our own Government, we would cut down such projects to a sane level of defence expenditure equivalent to that deployed in other European countries. It would certainly not amount to so high a figure in terms of our nation's GNP.

Returning to the subject of dynamism, we have heard that the Welsh Development Agency will be answerable to the Secretary of State. But the Secretary of State has been there for 10 years. He has had many opportunities to bring forward some economic plan for Wales. Certainly the Welsh Water Authority is answerable to somebody, but still nothing positive happens and our problems persist.

I am afraid that because there is no motivation we shall not obtain the fruits that we have been promised from this Agency. The Agency could mean so much, but I am afraid that it will mean very little because the Government will not commit themselves to anything. The answer lies in our having our own national Assembly.

We have no control of our industrial life. Our industrial sectors are dominated from outside. Private companies close branch factories at the first ill-wind and in the public sector things have been allowed to run down. Furthermore, we have seen chaos in the steel industry because the right decisions have not been made. The social consequences of events in Shotton, Ebbw Vale and East Moors have not been fully weighed and there is uncertainty about the future. We have seen a rundown on the railways and a failure in the gas industry to provide the necessary supplies to industry.

In my own constituency there was a great potential for a new factory which was to provide employment for a large number of people. That did not happen because there were no gas supplies. It was a potential growth centre, but it failed because of a lack of economic planning for such necessary industrial services.

We have also experienced closure of coal pits. We appreciate that in some circumstances closures are inevitable, but if a pit is to close, what matters is that other employment is planned in an area to take its place. Active planning on this score has not been adequate and we are paying the price in our communities.

In my constituency the CEGB has a pump storage scheme which is urgently needed. We have know about the scheme for the last two years, but this month the whole area is in crisis. The contract cannot be signed because the details were not worked out. If that is what is meant by economic planning, the whole system needs a thorough shake-up. That is what happens when events in Wales are controlled from this place.

We know that the CEGB had a programme for atomic power stations some years ago at Trawsfynydd and Wylfa. There were opportunities for the employment of up to 5,000 workers. If we had effective planning we could have provided factories for those persons when the schemes finished, but because that work has not been forthcoming, the work force had to go to Slough, Ellesmere Port, or wherever the work was. That is the price we have to pay for lack of planning.

Furthermore, there is a ridiculous situation in regard to civil aviation. We have a modern complex at Rhoose which should be an attraction to industry, yet that development has been starved of funds. There has been no support for that airport and there is a danger of its running down. Again, there has been a lack of co-ordination.

The tragedy in Wales is that various bodies have produced their reports and studies, but nobody has implemented them. That is why we need a body such as a national Assembly. We had in Wales recently a 17-point plan and it was approved by the Welsh TUC, but nothing has happened to that plan, because we do not have power to implement it.

The Gracious Speech has been largely irrelevant to Wales as far as industry is concerned. So many of the points contained within it do not touch the real problems of Wales in any way. Nationalisation of aircraft and shipbuilding may or may not be the right thing to do. It will only touch the fringes of the Welsh economy. I fear that the nationalisation of the aircraft industry will involve the Government in expending more and more public money poured into spurious aircraft projects, as we have seen in the last 15 years.

The Gracious Speech refers to "orderly development" of resources. I should like to ask what "orderly" means. A recent report dealt with the oil resources under the Celtic Sea. Does "orderly development" relate to those resources? It appears that all the money at present is being poured into the North Sea. Perhaps the Government are very wary of matters relating to opening up politically another oil front. As a result the people of Wales will lose out in terms of jobs. This may well be a political decision and Wales will pay the price.

A most important matter is not mentioned in the Queen's Speech, and I refer to the subject of industrial democracy. That aspect could have been mentioned in the Speech. The subject was developed in a Bill in the last Session, but it is certainly not in the present Speech. That is a tragedy.

I believe that nothing in the Gracious Speech will solve the problems of Wales in terms of our work force, or of industrial democracy or economic planning. If this place cannot do the job, we have no alternative but to do the job ourselves.

London is living in cloud-cuckoo-land—borrowing millions to live in a fool's paradise of a bygone imperial era. Self-government can give Wales some hope. This city, this Chamber and this Government can offer us nothing but hopelessness.

8.0 p.m.

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

I shall not comment on the observations of the hon. Member for Caernarvon (Mr. Wigley) on devolution but, apart from that, I agree with most of what he said.

I shall obey the injunction to keep to 10 minutes, but I wish to raise a small matter in the context of our industrial problems, namely, the present acute shortage of people being trained in engineering and allied subjects in the higher education institutions, a shortage which will have a disastrous effect on the future of industry. This position is causing a lack of interest amongst those who are still at school. Indeed, the position is bordering on disaster. I wish to give one or two examples to bring this matter to the attention of the House. I also wish to put forward some solutions which the Government may wish to take on board.

A letter appeared in the Mechanical Engineering News of November 1975 signed by 11 professors of mechanical and production engineering in what appeared to be northern universities. Those professors had written to the northern counties headmasters and headmistresses stating that basically they were concerned about the lack of good candidates coming forward from schools in the northern part of the country who would be even suitable to take on as undergraduates in the engineering faculties. This situation has caused much concern.

They wrote to the heads of schools to find out what was going wrong, or what was not happening in the schools. They wanted to know why youngsters were being put off careers in manufacturing industry. They see in their own departments at present a take-up of 25 per cent. to 50 per cent. of places.

One of my hon. Friends referred to some departments in universities as being the "parasitic departments". I should not go as far as that, but certainly there are some departments in some universities bulging at the seams. At the end of the day there will be no contribution to the productive ends of our economy from those departments and yet in many universities and polytechnics there are mechanical, production, and electrical engineering departments where there is a take-up of places of only between 25 per cent. and 50 per cent. There is a massive misuse of resources.

There seems to be a free market place. In the end, those who are running industry will look at my right hon. Friend's new industrial strategy and then at the situation in their own factories. They will then consider the people who are coming forward to fill the jobs in their factories and they will say what the director of production engineering for Leyland cars told some hon. Members two or three weeks ago. Mr. A. J. Sanders said: Surely our ability to generate national wealth must depend still to a very large extent upon our ability to manufacture and export goods, and yet so many of our people, so much of our potential talent and a great proportion of our wealth, is being channeled into non-productive occupations. I remind hon. Members that I am quoting one of the directors of Leyland cars. He went on: Let me quote an example. Out of 32 graduate entrants into my own company this month,"— he is referring to October this year— we were only able to obtain three graduates in Production Engineering, compared with 29 graduates in economics, sociology, business studies and the liberal arts. I took up this matter with him and reminded him that British Leyland had still taken on the 29 graduates. I said that it was all very well for him to complain to politicians that he could get only three graduates in production engineering, but in effect was he putting his ideas where his mouth was concerning his own colleagues in his own company? I am sure that all hon. Members will bear me out when I say that he said that he was putting this forward in the company. However, it does not alter the fact that there is a massive imbalance of people not interested in entering manufacturing industry.

Therefore, the fine words and ideas—some of which are misguided being put forward in the new industrial strategy will amount to nothing in a few years' time if we have reached the point where industry complains that there are no good engineers or designers, or that technicians are not suitable because our educational system has trained everyone to go in for the so-called liberal arts.

This crisis has been borne out by the National Economic Development Office which published in October 1975 a document entitled "The Shortage of Qualified Engineers". That organisation for the past two years has considered the position of mechanical and chemical engineering and metallurgy, because managers of industry and the trade unions have been complaining that there is a shortage of qualified manpower. We do not hear such complaints about the liberal arts, or what has been described as the "parasitic" occupations. About 7 million people in productive industry are supporting about 12 million or 13 million in non-productive occupations.

The position will get worse, because between now and 1980 it is forecast that there will be ½ million fewer jobs in manufacturing industry than at present and a likewise increase in all the non-productive jobs. Unless we do something before people go into industry, all the fine words and phrases that we hear from the Government Front Bench and read in all the documents will be worthless, because the industrial heart of this country is being torn out. In my own constituency in the West Midlands it has been decimated.

Jobs are disappearing every hour of the day from productive industry. They are being replaced by warehousing and distribution facilities, hotels and night clubs—"You name it, but you cannot export it" is basically the criterion.

Jobs are disappearing but nothing appears to be done in the West Midlands to replace them. The inaction of the civil servants in the Department of Industry over what, in their view, are minor matters is quite astonishing. I should like to quote one example affecting about 4,000 people throughout the country and 1,600 in Birmingham—namely, the people who work in the British zip fastener industry.

Many people laugh when this subject is discussed, but that industry sent to the Department of Industry on 22nd January this year a report pointing out some of that industry's problems. The report was put together with the full knowledge of the work force and the industry. It set out some concrete proposals for assistance, not just concerning port controls or antidumping legislation, but positive ideas. Since that date there has not been a single statement from a Minister in that Department. Every month Questions are tabled and about a dozen hon. Members write to the Minister, but no statement is made. If that is the way in which a relatively small part of industry is being treated, I am only too happy to take on board the criticism from my hon. Friends concerned about the textile and footwear industries and the inaction of our own Department of Industry.

The qualified manpower situation gives us great cause for concern. I do not hold all Ministers responsible, but I point the finger at the civil servants who are doing the preplanning. It is there that we want to see the changes. They are the people who have probably come up through the liberal arts departments in the universities and who have not, by and large, become qualified in manufacturing industry and manufacturing technologies.

There are some—I have spoken to them—who are qualified. One can recognise an engineer. He does not still have grease on his hands, but one can recognise an engineer whether he be a civil servant in a striped suit or not. However, they are few and far between in the Department. That is the root cause of our problem.

We must tackle the problem of qualified manpower—it is almost heresy in some quarters on this side of the House to say this—by guiding the choice of people who enter higher education so that they cannot have a free choice in what they do. Lord Crowther-Hunt was atacked by the educational lobby when he used those words. We must have economic use of our manpower and resources. This is one way in which we can make a contribution.

8.10 p.m.

Mr. Giles Shaw (Pudsey)

I am glad to follow the hon. Member for Birmingham, Perry Barr (Mr. Rooker) in what he has been saying about the dead hand of Government or Government Departments when it comes to dealing with industrial matters. The hon. Gentleman and I share mutual problems when it comes to trying to get simple answers to relatively simple questions.

Throughout this Government's proposed legislation we are dealing with an increase in the interface between the Government, Government Departments and industry—the people who are trying day by day, hour by hour, to produce goods to sell abroad, and about whom the hon. Member for Birmingham, Perry Barr was right to speak so proudly.

I should like to comment first on the Government's pricing policy. I think we would all agree with the portion of the Gracious Speech which commences, My Government will continue to give the highest priority to the attack on inflation and unemployment. Hon. Members on both sides of the House have said that each action now proposed by the Government in this Session should be judged primarily by those two criteria, and probably by those two criteria alone. Will it contribute to the attack on inflation? Will it contribute to reducing unemployment?

The Government's pricing proposals outlined in the Gracious Speech have several aspects. First, there is vigorous enforcement of price controls, which is promised to continue. Secondly, there is the price stabilisation programme. Thirdly, there is reference to the programme of price display and unit pricing.

Will unit pricing involve metrication? It will presumably be necessary for unit pricing and possibly fixed weight pricing and metrication to be seen in the same context rather than to drag industry piecemeal through this tortuous process.

I should like to concentrate mainly on the vigorous enforcement of price controls and on the price stabilisation programme. My hon. Friend the Member for Romford (Mr. Neubert) has already made clear our disappointment that the recent Chequers discussion appears to have been forgotten in the drawing up of the Government's pricing policy. We understood that the importance of profits was recognised as the only way to generate new investment.

I remind the Under-Secretary, although I know that he will be bored with my saying it, that the Price Commission, in report after report, keeps drawing anxious attention to the low rate of profitability in industry as a whole. It is no joy to see that the reference level mark has moved from an average of 54 per cent. to 56 per cent., bearing in mind that those reference levels were set in 1973. If there is to be a continuation of vigorous price control, it must have a major bearing on the ability of industry to invest and to protect and improve the employment situation.

The first question is whether the Government's continuation of price controls will be ameliorated in relation to investment. The Secretary of State talked about amendments to the Price Code to assist investment. Will she be more forthcoming tonight and let us know whether she has anything in mind to do this?

Secondly, the right hon. Lady has gone on record as saying that she does not wish to make amendments to the Price Code. Indeed, she suggested that industry would prefer no amendments to continual amendments. The pace of inflation and the difficulties of industry are such that we would prefer to see amendments to the Price Code which went some way to meeting some of the difficulties facing industry today.

I turn now to the price stabilisation programme which was outlined in the consultative document produced by the Department of Prices and Consumer Protection on 5th November. The Department has set itself a difficult undertaking. It is seeking to get general agreement to a voluntary limitation of 5 per cent. increases on a certain list of essential items whereas it is proposing to amend the Price Code, yet again, to allow manufacturers to pass on the increased costs on other lines.

The cross-subsidisation policy is not new. I am sure that the Under-Secretary of State will remind the House that intrinsic in the Price Code is the recovery of costs across a range of products by differential price adjustment. What seems new is to instil in the Price Code a requirement that, for a given range of articles, the true cost should not be reflected in prices, but for another range of articles, where the true costs are not so justified, they shall be reflected in prices. We are having encapsulated in the Price Code a requirement to distort the pricing process. I warn the Government of the iniquity of distorting the pricing process in this way.

The hon. Member for Newcastle-upon-Tyne, East (Mr. Thomas) made a good point in questioning the Government's action regarding the lower paid and the pensioner. The consequences of what the Government are embarking upon will have their most adverse effects on the ability of small shopkeepers to survive and on pensioners to obtain smaller quantities and varieties of goods. If I understand the proposition correctly, the Government say that they want essential items which are in wide demand—the brand leaders in major markets of food or household articles—in the essential 5 per cent. only category, and those which are in lower demand, which by definition must be those which the vast purchasing public does not necessarily buy in large quantities, can be increased in price.

I ask the Under-Secretary to inquire of his right hon. Friend whether she expects the smaller packets, for example, to be in the essential or the less essential list. Will she take, for example, the standard loaf or the smaller loaf? Will she take the large pack of cornflakes or the smaller pack? It would seem to have a critical bearing on the extent to which pensioners and those on low incomes will be able to purchase small amounts.

The hon. Member for Newcastle-upon-Tyne, East compared the figures of supermarket and small shop pricing. We know that supermarket pricing depends on large-scale purchasing by the consumer. Traditionally pensioners and those on low incomes—not only in rural areas, but in many urban areas—go to the corner shop. I should like more explanation of what is meant by ensuring that essential items are kept down in price whereas less essential items, which may be smaller varieties and brands, will be allowed to increase in price.

There will be certain consequences. First, there will be destocking by retailers of items which go up in price. That must follow if the price gap widens significantly over a range of important items. Secondly, there will be destocking by manufacturers producing those items. That will result in some reduction in jobs and it will most certainly result in a reduction of choice for the consumer.

The Government must recognise that if they interfere with market forces for consumer goods, they cannot easily categorise brands and not expect the effect to spill over into the running of the enterprise as a whole.

People in industry are used to making detailed and difficult decisions in marketing their products. People in Government are less used to making those decisions. It is a charade to imagine that the price stabilisation programme can have the effect which the Government believe it will have.

There is reference in the Gracious Speech to the widespread publicity which will be given. One might be forgiven for forgetting that the Government are already the largest advertisers in the country. They have displaced Unilever Ltd. in this respect and now spend £15 million or more. We are to have a new publicity programme which, in the words of the White Paper, "at shop level", will describe the prices in the stabilisation programme, so that, somewhere between Caithness and Cornwall, the consumer may be made aware that a small tin of Heinz baked beans is in the essential list and a large tin is not, or vice versa. May we know what resources will be put behind this publicity drive and what the Government's estimate is of how frequently they will have to alter the contents of the advertisements to keep up with what the distributors may have done in the meantime?

This price stabilisation programme in my judgment will not add a jot or tittle to the real attack on inflation. It will confuse consumers, who will be told that one list is price sensitive and kept down while other products will not. At the end of the year, they may have brought much the same range of articles, but one lot will have been significantly more expensive than another.

Is this justice and democracy entering the market process? It is not. It is the Government wriggling as ever to try to avoid coming to grips with the problem of inflation, which arose elsewhere than in the shopping basket so gallantly proposed by the right hon. Lady.

8.21 p.m.

Mr. Roderick MacFarquhar (Belper)

I hope that the hon. Member for Pudsey (Mr. Shaw) will forgive me if in the interests of time I do not follow him on prices but return to industry. The Prime Minister yesterday referred to the problem of there being too many chiefs and too few Indians in local government. Few hon. Members would disagree with that analysis, although it would be unfair to suggest that this is the only sector of our national life in which this problem exists, although it is perhaps a very extensive and visible one. There are also too many chiefs and too few Indians in British industry.

The picture has got worse over the past 10 years. In 1964, the number of administrative staff as a percentage of total employees in manufacturing industry was only 23.1 per cent., but by 1974 it was 27 per cent. I give those figures for manufacturing industry because I wish in my speech to be critical of a nationalised industry—mining—and I would not want the few hon. Members opposite to believe that the kind of criticisms that I level at this industry could not be made equally against private enterprise. In the case of the figure that I have just cited, the record of the NCB is better than that of manufacturing industry.

My constituency has now only one pit, but we still boast several thousand miners who go out from the constituency to work in pits nearby. Every time that I have been down a pit or talked to miners about their job, I have found one consistent complaint. In precisely the Prime Minister's words, it is that there are too many chiefs and too few Indians.

At my request, the NCB has done some lengthy research and has come up with what seems to me to be some of the operative figures which illustrate this problem, particularly in the East Midlands. I gratefully acknowledge the National Coal Board's help, although it would probably not endorse the conclusions that I draw.

Let me start with some national figures. In 1964, there were 534 pits. By 1974, that number had been reduced by 54 per cent. to 246. However, during the same period, output went down only by 36 per cent.—from 183.7 million tons to 115 million tons. In other words, output per pit went up. But to achieve this, national headquarters staff, whether in London or in Doncaster, was reduced by only 1.4 per cent., from 1,926 to 1,898. So while in 1964 it took one staff member at headquarters to "give birth" to 95,000 tons of coal, in 1974 one staff member was capable of giving birth to only 60,000 tons.

Since that was the national example, it is not surprising that at the East Midlands area level some figures were also dismaying—although not, interestingly, in this aspect. The number of pits in the area between 1964 and 1974 decreased by 38 per cent., but output was down 28 per cent. so one gets the same picture of the pits that remain producing more. The East Midlands head-quarters staff also decreased by 28 per cent. Although the figures are not directly comparable with the national ones, it is instructive that the East Midlands staff were consistent in "producing" about 13,000 tons of coal per head both in 1964 and 1974.

But during this decade of sharp percentage drops in these items—pits, head-quarters staff and output—non-industrial colliery staff, administrative and clerical, increased in numbers by 6 per cent.; and while the industrial grades—face workers and others—dropped by 40 per cent., the drop in industrial supervisory grades during the same period was only 11 per cent.

Let me spell out some of the implications of those latter figures. It means that in this period the ratio of managerial, administrative and clerical staff, at both headquarters and colliery level, to non-supervisory industrial staff went down from 1 to 12.4 in 1964 to 1 to 8.7 in 1974. The ratio of colliery management, technical and administrative staff to non-supervisory industrial staff also went down from a ratio of 1 to 29 in 1964 to 1 to 16 in 1974.

But the most striking figure that the NCB research has uncovered is the ratio which most worries my miner constituents, the ratio of deputies and other senior staff underground and elsewhere—industrial supervisory grades—to other industrial workers, including the surface workers and craftsmen. In 1964 the ratio of industrial supervisory grades to other industrial workers in the East Midlands pits was 1 to 4; in 1974 it was 1 to 2. In other words, the number of supervisory industrial staff precisely doubled; yet the East Midlands has a justifiable reputation for efficiency.

What is the NCB explanation of such figures? I should like to quote from a couple of letters that I have received from the chairman. He emphasises …the revolutionary changes in the nature of mining, which have taken place over the last two decades and says that it is appropriate that the demands on workpeople, the relations between grades, and the skills required have changed also. He says that if the British mining industry is to be efficient and modern in outlook, …we must also recognise the desirability of an objective of developing a highly trained labour force with an adequate ladder of promotion for those who are able to play a part in the supervision, design and direction of the incrasingly complex systems which we operate. In an earlier letter, he says that sophisticated and advanced technology equipment have led inevitably to an increase in the ratios of management, technical staff and supervisors to mine workers.

I accept much of what Sir Derek has said and I certainly applaud the record of the NCB in promoting modernisation. This country would be in a far better economic condition if many parts of private manufacturing industry had as good a record. In particular, I praise the effort which has been put into safety, and I certainly do not wish to suggest that colliery overmen and deputies are inefficient or idle. The fault is not theirs: it lies not with men but with management.

The fact is, as Sir Derek must know—he must be told it every time he goes down a pit, every time he talks to NUM leaders—that the ratio of chiefs to Indians is now grotesquely out of line, even allowing for technological advance. The national headquarters staff who, in true Parkinsonian fashion, have remained almost static in numbers during the past decade, must justify their existence by altering this ratio. If a modern mining industry requires a higher level of technological competence, surely the answer is to have better trained Indians, not to increase the number of supervisory chiefs to ensure that things do not go wrong.

I am staggered that the tripartite examination of the coal industry conducted last year by the Government, unions and the NCB, does not appear to have dealt with this problem. I hope that my right hon. Friend the Secretary of State for Energy will ensure that this lacuna is remedied. If we are to achieve the industrial regeneration advocated in the Gracious Speech, we must greatly reduce the number of chiefs to Indians not just in local government, and not just in the coal mining industry, but throughout the whole range of British industry.

8.30 p.m.

Mr. Nicholas Winterton (Macclesfield)

This is the first time in the four years that I have been a Member of Parliament that I have participated in a debate on the Queen's Speech. A combination of fury, anger and sadness moves me to rise during this debate. Having studied some of the history of this place, I feel that never has a Session begun when the political outlook for democracy in this country has been so bleak.

It is true to say that one or two glimmers of light have appeared recently in the remarks of Labour Members. I refer in particular to the contribution made by the hon. Member for Birmingham, Perry Barr (Mr. Rooker). His reference to industry and education and the number of social science courses offered in so many colleges, polytechnics and universities has been a great service to this House. Courses in engineering and subjects allied more closely to industry should be offered.

Likewise, I pay tribute to the remarks of the hon. Member for Belper (Mr. MacFarquhar). It is very revealing to hear Labour Members referring to too many chiefs and not enough Indians. From my limited experience of the coal mining industry I have encountered this same complaint from many who were doing the graft underground. There are too many up top and not enough down below. At one time I represented a county council division in North Warwickshire which was surrounded by a number of pits and I made it my job to go down each and every one of them. The hon. Member for Belper has done a service to the House by portraying this complaint which has existed for many years. Perhaps there are reasons for it, but this evening I do not wish to go into them.

Instead of hope and encouragement being given to industry, the Government are prepared to destroy, demolish and denude British industry of the clothes of interprise and reward. The Gracious Speech would be more truthfully termed a "catalogue of catastrophe" which aims not at promoting legislation for the good of the people of this country, but at spreading the cancerous disease of egalitarian, irrelevant, divisive, destructive, costly bureaucratic Socialism. In short, in my words—I make no apology for them—it is another unpalatable dose of Marxist medicine.

For the sake of clarity and communication I feel like issuing a translation of the Gracious Speech for the benefit of those outside this hallowed Chamber. My hon. Friend the Member for Romford (Mr. Neubert) referred to the people of this country being told the truth. Perhaps in the translation which I hope you, Mr. Deputy Speaker, will allow me to make this evening, the people of this country will have a greater understanding of some of the sections of the Gracious Speech.

This is my translation of a section of the Gracious Speech. "A Bill will be introduced to ensure that dockers are given a stranglehold over our food supplies and other essential raw material supplies. They will be given powers out of all recognition to hold to ransom the distribution of goods in and out of this country. If this Bill is enacted there will be further unemployment and strangulation of those of our ports that have proved themselves successful." Many representations have been made to me, not only by employers but also by representatives of trade unions in various industries outside the ports who are deeply concerned about this proposal in the Gracious Speech. I could go a great deal further into this particular matter but I shall move on.

I quote my translation of a further section of the Queen's Speech. "In furtherance of my Government's comprehensive policy for the destruction of private property and for the confiscation of private land, my Government do not feel that the Community Land Act is sufficient. Not enough people will be harmed and bankrupted in sufficient numbers. It is, therefore, necessary for my Government to add to this disruption by introducing a punitive development land tax. Although my Government say that they are in favour of building more private and public houses, they are quite prepared to cause a housing famine by drying up the incentive for the development of land. They are quite prepared in reality to be responsible for creating an even greater shortage than that which already exists."

The Gracious Speech might then lead on to the nationalisation proposals as follows. "My Government intend to destroy the remaining profitable sectors of the aircraft industry so that these become in the long term inefficient, incompetent and a drag on the rest of the British economy. My Government, fully aware of the capability of the aero-space industry in earning £600 million a year in exports, are quite prepared to indulge in hypocrisy."

I should like to refer to a constituency interest. Hawker Siddeley is, perhaps, one of the few remaining profitable sectors of the aerospace industry and a fine example of the entrepreneur in that industry. It produces wonderful aircraft which have tremendous export potential—the HS748, the HS146, the Harrier and the Nimrod. Too often the Government, which could be a window for the exports of this country, buy equipment which they need far too late in the day. I wonder how many orders for Harriers we would have received by now if the Government had acted much sooner in buying the Harrier which the Armed Forces so desperately needed. This question may well be answered by the Minister when she replies, but I have my doubts.

I return to my translation of the Gracious Speech. "Although the Government are aware of the recent Chequers statement on the need for a strong profitable private sector, they are quite prepared to apply cynical, double standards and sacrifice one of the most profitable high-exporting private industries to the altar of Left-wing Socialism." I am referring to the aerospace industry, which is a substantial employer in my constituency. I know that people on both sides of the industrial fence—the unions and the management—perhaps, even the third side, those who invest in Hawker Siddeley—are deeply concerned about the Government's intentions, the delay that has been caused and the uncertainty that has resulted from the Government interfering in an industry when that industry is quite capable of coping with its own problems. This indicates the present Government's lack of knowledge of how industry operates. The Bill did not go through in the last Session and the Government have said that they will introduce it early this Session.

That is the interpretation that I put upon the Gracious Speech. That the Government will be prepared to fiddle while Rome burns is shown throughout the proposals which I had the unfortunate opportunity of listening to yesterday, instead of devoting themselves to dealing with the evils of inflation, they do no more than pay lip service and go on to promote irrelevant public ownership proposals which will cost this country very dear.

The Government vacillate over import controls and fail to take a decision. No doubt in this area I shall have a great deal of support from those below the Gangway on the other side of the House. If the Government introduce selective import controls or quantitative controls, why do they not make a decision, take a positive step and make an announcement in this debate tonight? If such controls are being considered in one form or another to assist ailing Government-owned companies—perhaps one may mention British Leyland—why not implement policies which will benefit the textile industry? This industry is one of the largest employers of labour in Britain and is a highly efficient industry as well.

The textile industry has striven and struggled—I know that I shall get support on this point from Labour Members—in spite of being strangled by Government taxation policies and inadequate anti-dumping legislation, and it has been successful in earning a living. However, the Government do not pay attention to the real needs of the industry. Instead of taking positive steps the Government would rather evade the real issues and waste the nation's time on extending the outrageous activities of the National Enterprise Board or confiscating the few industries that remain in the hands of private operators.

The textile industry is a big industry. In my constituency of Macclesfield, in Congleton two mills have had to close. The Conlowe Mill in Congleton has closed, putting 130 people out of work, and the Adelphi Mill in Bollington, just outside Macclesfield, has closed, putting 250 people out of work. These are people who are skilled and on a relatively low wage. They do a jolly good day's work for nothing more than a fair day's pay, and they have had to compete with imports from countries which have very low wage costs. The actual raw material often comes in at a price with which it is hopeless for this country to compete. In addition, a shirt can be brought into this country at less than the price of the material that goes into a British-made shirt. That is an indication of the sort of problem facing the textile industry.

The Department of Trade has sent out a letter to many firms in the textile industry almost urging them to take up the remaining allocation of Turkish yarn available in the current year. The letter was sent from the Department's import-licensing branch. I find it extraordinary that when the British textile industry is facing such terrible times and such severe competition—unfair competition—a British Government Department should write to companies urging them to take up the full allocation of Turkish yarn for this year. Perhaps the Minister will direct some of his remarks to that point.

In my view, the Gracious Speech is characterised by diversions from the real issues facing the country now. The Government are prepared to waste the time of this House on making it a criminal offence to maintain a good standard in education. They are prepared to waste legislative time on erroneous and fallacious measures to prevent people spending money on a decent standard of medical care.

Perhaps it would be right to mention here the many hard-pressed executives in industry who, whatever their politics, need speedy medical care with an element of privacy. Very often their companies are prepared to pay for this, within the National Health Service, by using private beds. But the present Government are determined, for reasons of dogma, to force these people to look elsewhere. However, in announcing this proposal they issue a further warning that they will be restricting the number of private hospitals operating outside the National Health Service, by some form of licensing and regulation. Is this what British industry really wants? Surely it wants those able, talented, qualified executives, engineers and others back within the ranks of industry again as quickly as possible.

I view with foreboding the future of this nation if this catalogue of catastrophe which is contained within the Gracious Speech is implemented within this Parliament. How can a Government be so blind and waste much valuable time with the country in such chaos and disorder? We shall be voting against this Gracious Speech on Tuesday next. I shall go into the Lobby against it with great relish because it is irrelevant to the needs of Britain.

8.44 p.m.

Mr. John Garrett (Norwich, South)

There are a number of things to welcome in the Gracious Speech. I am especially pleased to see that on the distant horizon there is some prospect of reform in the practice and procedure of Parliament and of the amendment of the Official Secrets Act. In my view, drastic reform on both fronts is necessary if we are to strengthen parliamentary democracy in Britain.

However, I believe that the crucial problems facing this country are economic, and that the central issue of economic policy must be the de-industrialisation of Britain—by which I mean the inability of British industry to compete abroad and to resist the growing flood of manufactured goods coming into this country. We have to ask ourselves what measures proposed in the Gracious Speech are designed to reverse the trend towards the progressive collapse of British manufacturing industry.

The symptoms of the disease are many and they are perfectly well known. In the past decade the value of new investment per worker in Britain has been far lower than that of our competitors. The proportion of gross national product devoted to private consumption was higher in Britain than it was in most other countries. The investment funds, when available, were diverted overseas rather than to productive manufacturing here. What new investment is carried out in Britain has an extraordinarily low rate of return—half of that achieved in Germany and in Japan, for example.

British labour productivity is exceptionally low and, in general, we have failed to provide jobs in the old industrial areas. In addition to this starvation of investment, British industry has a poor record for developing new products for which world demand grows most quickly. Our heavy research effort has had little pay-off by way of increased exports. To these factors we might add less tangible ones, such as an amateurish and untrained management cadre, and a low level of technical training for supervisory staff. What impresses me about American factories is the technical strength of the graduate foreman—a type almost never encountered in British industry.

In the face of these severe and crucial industrial problems what prescription do we read in the Gracious Speech? There is first the National Enterprise Board, which I welcome. However, it is unlikely to have any pronounced effect on industrial investment for some years, given the portfolio of companies in difficulties with which it starts life. Secondly, there are voluntary planning agreements with major companies. The general idea of planning agreements, that there should be some congruence of objectives between corporate and national enterprises, seems to be a good one.

However, I am not persuaded of the ability of the Department of Industry to handle the Government end of planning agreements. The Civil Service has many strengths, but managerial or planning skills are not among them. I doubt the ability of Government Departments to scrutinise and comment upon corporate plans in any meaningful way.

Thirdly, the Government in their document presented at the Chequers conference, "An Approach to an Industrial Strategy", seem to be aiming at planning by discussion group. A series of quadripartite discussions of industrial problems are held among the CBI, the TUC, NEDO and the Government which in turn lead to discussions aimed at influencing Treasury policy. What we end up with is an overloaded NEB, voluntary discussions about plans of individual companies and discussions about discussions in NEDO. There are no plans, no programmes of action, no monitoring of performance.

This tentative approach to the reconstruction of British industry appears to spring from an unwillingness to face up to the challenge of national economic and industrial planning. The conventional wisdom in Whitehall seems to be that because the last attempt at a national plan was abandoned 10 years ago because of a balance of payments deficit which, with hindsight, seems to have been of no great magnitude, national planning will not work in a British context. The adjectives "bureaucratic" and "inflexible" always precede any reference to a national plan.

I was sorry that my right hon. Friend the Secretary of State referred today to the 1965 plan as having been too rigid. I would have thought that it was too exhortatory and not sufficiently accompanied by analysis and direction. In my view this is a grave error. If we need a massive investment in manufacturing, particularly in industry for which there is a prospect of success, if we need to create thousands of jobs in the regions, if we need a systematic approach to import substitution and a rapid improvement in the productivity of labour and capital, we must have a rational and systematic long-term plan for mobilising and allocating investment resources. We must be able to develop manpower and establish a national system of objectives and priorities.

In my experience, only an organisation with a planned view of its future is ever in a position to adjust rapidly to changes in its environment. A national plan should be controlled by a new Government agency staffed by specialists in planning and reporting to the Prime Minister's Department. It should systematically analyse the strengths and weaknesses of our industrial structure. It should pick the areas for growth and the areas in which we need to create industry. It should analyse the demand for imported manufactures and set about creating alternative sources of supply. It should spin off manpower plans, trade and regional plans so that weaknesses in all of these areas could be tackled on the basis of analysis and a consideration of alternative courses of action.

None of this is hostile to private industry. In the days when I was a corporate planner, the industries in which I worked would have benefited greatly from guidance and advice on national objectives and priorities. To overcome 150 years of industrial history is too big a task for private industry alone. The investment required in plant and people is too great. The weight of the past is too heavy. The only way left open to us is a rigorously anaylystical, carefully programmed national plan.

It is inescapable that in the early years of the planned reconstruction of British industry those trades which have a viable future but which cannot at the moment hold their own against imports must have the protection of import control. I represent a footwear manufacturing constituency, and the footwear trade is declining rapidly because of competition from imported footwear. Much of the blame must rest with management for failing to develop and market its products competitively.

I confidently predict that within a year or so the Government-sponsored Foot-wear Study Group will produce recommendations for the revival of the industry to which the industry will respond. Unless the industry has protection now, preferably through an import deposit scheme, it will be too weak to respond and its decline will be irreversible. I regret the need for import restrictions and I hope they will be temporary, but they are essential to save the industry as part of a long-term plan for its reconstruction.

Endless reasons have been given for the decline in the competitiveness of British industry for the best part of a century. Many prescriptions have been tried and abandoned. National planning based on worker participation and public ownership is the only rational way. In all the discussions about the right direction for British industry, or, for that matter, any other aspect of national policy, one considers the rôle of Parliament. I therefore welcome the proposals in the Gracious Speech for a major review of the practice and procedure of Parliament.

As with so many other of our national institutions, I believe that our procedures and practices are thoroughly amateurish. A legislature which focuses on the debating chamber as heavily as ours does encourages the Thespian school of politics—the excitement and superficiality of the great debate. Our institutions are essentially nineteenth century creations trying to cope with twentieth century government. The Government today try to manage the economy. They are obliged to intervene in industry and run the Welfare State. I cannot see how the legislature can examine the activities of the executive machine.

We have to create a system of powerful investigatory committees, each with expert staff, manned by full-time Members of Parliament if we are ever to get to the roots of policy and examine its implementation. Today's debate on industrial policy, for example, allows a discursive discussion at a high level of generality, but we are none the wiser at the end. There is no substitute for an industrial policy committee of the House examining the way in which policy is formulated, why certain options are chosen and others discarded and who is accountable for the results. I hope that the inquiry into Parliamentary practice will think through the rôle of a modern Parliament and the requirement to hold the executive to account.

8.54 p.m.

Mr. Max Madden (Sowerby)

Time hardly permits me to say anything, let alone to comment on the melodramatic, distorted and extravagant comments made by the hon. Members for Maidstone (Mr. Wells) and Macclesfield (Mr. Winterton), but I shall take this opportunity to say a few words about an industry which is highly relevant to the debate, namely, the textile industry. I do not want to dwell on the need for controls, which will be discussed when the industry meets the Prime Minister on Monday. I hope that we shall have an early statement setting out the Government's new policy on import controls. In the time that remains to me I shall comment on matters of concern within the industry apart from import controls, especially the operation of the wool textile scheme.

The scheme, which is financed by up to £15 million of public money, was designed and introduced to create modernisation and a more viable wool sector. There is growing concern that this objective is not being met. The main effect is increased unemployment, thereby fuelling emigration of population. That has had serious results in my area of Yorkshire and Lancashire, including increasing problems of environmental decay.

There is an urgent need to review the effects on employment of the wool textile scheme, and especially through the realisation aspects of the scheme whereby textile machinery is scrapped and companies are closed. More than 100 textile companies have been closed so far and more are to close shortly. Approximately £1.4 million compensation has been paid. Firms receive £3 in respect of each spindle scrapped and £275 for each loom falling to the hammer. More than 4,000 full-time and part-time textile workers have lost their jobs, including 3,000 in West Yorkshire. Only a small proportion has so far been redeployed. Many older workers have an extremely bleak future.

The bleakness of the future can be appreciated when I tell the House that in Bradford, for example, 24 companies have closed. Further, 28 companies have closed in Huddersfield and 11 in Halifax. The House will understand what effect that magnitude of closures has had on relatively small communities and small economies.

We must examine the effect on the employment of other categories. So far approximately 900 other textile workers have become redundant as a result of other categories of the scheme—apart from the 4,000 I have already mentioned. Concern about these matters is such that the Calderdale District Council—it is my local authority and Conservative controlled—has made representations to the Economic Development Council for the Wool Textile Industry in these terms: the picture before us is one in which the wool textile scheme is seen to be effective in industrial efficiency terms, but the scheme is also shown to create secondary problems for the community. These problems include unemployment, emigration, environmental decay and, above all, continued population decline. Its representations conclude: It may be sensible at this time of high unemployment to remove 'realisation' from the scheme in order to reduce the level of redundancy. I ask the House, and especially the Ministers concerned with industry, to consider the basic anxieties in the wool textile industry. The wool industry wants a clear assurance from the Government as to the rôle it will have in future. If it is thought to be expendable, the industry wants to know what industry and jobs will replace those now being displaced. If it is not thought to be expendable, the industry wants to be told by the Government what support will be forthcoming to maintain it.

The industry welcomes the sections of the Gracious Speech dealing with the National Enterprise Board and planning agreements, which it considers highly relevant and appropriate to its problems. Above all, what is needed—I join forces with my hon. Friend the Member for Norwich, South (Mr. Garrett)—is a commitment to coherent planning. We need to know the place of textiles in the manufacturing and industrial spectrum as other industries need to know their rôles and responsibilities. That is the challenge before the Government. I hope that from this debate they will be able to meet it.

8.59 p.m.

Mrs. Sally Oppenheim (Gloucester)

In my somewhat limited experience I have never known a Gracious Speech received with such a lukewarm welcome from Government Members. The tepid contribution of the Secretary of State for Industry was followed by a notable absence of enthusiasm on the part of his back-bench colleagues.

That is not to say that the standard of the debate has not been extremely high. Speeches from both sides of the House have been very good. Practically every speech from the Government benches has been thoughtful, interesting and constructive. I want especially to single out the speech of my hon. Friend the Member for Henley (Mr. Heseltine). It was a superb contribution to the debate. Then I mention the speech of my hon. Friend the Member for Macclesfield (Mr. Winterton). I am quite prepared to accept his interpretation of the Gracious Speech.

However, it is not surprising that the reaction to the Gracious Speech has been that which we have heard several times today. The Times editorial singularly underwrites the nastiness of it. Not only is it notable for its irrelevance. It is notable for its damaging effects. But, above all, it represents a manifestation of the need of any Labour Government to feed the voracious appetites of their left-wingers by measures which are nothing more nor less than vindictive. What has been notable about this debate is that the scraps with which they have been provided have not satisfied their appetite, and not one of them has spoken today.

Notwithstanding that this debate began on the subject of industry, we are pleased to have this opportunity to introduce the subject of prices into the second half, not only because there are references to the Government's prices policy in the Gracious Speech, but because there are a number of questions on ministerial statements about policy which have been made outside the House and which I should like to have answered today. I hope that the Under-Secretary of State noted the very important matters raised by my hon. Friend the Member for Pudsey (Mr. Shaw) and that we shall have replies to them from the Secretary of State.

Every right hon. and hon. Member must welcome the fact that at last, and not before time, there seems to be a slight moderation in the rate of price increases. However, I do not share the complacency of the Secretary of State, because my fear is that the deceleration in price increases is not occurring fast enough for the Government's target to be reached by the end of next year. What are the Government doing, therefore? What new measures are they proposing to accelerate the process? Quite apart from the fact that there is evidence in the Gracious Speech that public spending is to continue completely out of control and totally unabated, what contingency plans and supplementary policies of moment do we see emanating from the Department of Prices and Consumer Protection and appearing in the Gracious Speech?

First, we have unit pricing. That is a useful measure, but it is hardly a new or a highly significant innovation in the battle against inflation. The Prices Act, in which unit pricing was first legislated for, received the Royal Assent in July 1974. It appeared in the Gracious Speech of March 1974. Yet, at the end of 1975, even allowing for the consultation processes, there have been only two orders made on unit pricing, one on offal and the other on fruit and vegetables. So it is not surprising—but hardly a reason for including such a measure in the Gracious Speech—that the Government intend to accelerate their programme on unit pricing. In any event, I am not satisfied that the way in which they intend to apply it will be acceptable.

Then there is the reference to the acceleration of another measure of very marginal significance in the battle against inflation which is referred to in the Gracious Speech as "the programme of price display". I am not against the principle of price-comparison information for consumers. It can be useful, but it can lead to confusion. I am against the way in which the Government are presenting it.

First, they are presenting it in the wrong place, with their proposals for supermarkets and shopping centres. That is too late for consumers to receive this information. The proper place for them to receive it is in their homes, through the media, through advertising and through local radio. I also object to the way in which this is being presented throughout the country by people who are not sufficiently expert to give true differences of quality or to explain why prices may be higher in smaller shops, and why they may not necessarily be worse value to the consumers, especially if shoppers are not obliged to spend money on transport to city centres. It is ironic that this scheme should have come under heavy criticism in the constituency of the Minister of State, Department of Prices and Consumer Protection according to the Western Mail, which on 8th November reported that an irate local trader said: Take the price of toilet rolls. The guide says that the cheapest are sold by another store at 16p and ours are 23p. But the guide does not say that the cheaper rolls have only 180 sheets and others have 280. The same goes for other producers. We sell a top quality coffee at 36p and another sells rubbish for 28p. In reply Mr. Stokes, consumer protection officer said it had been impossible to take quality into account and consequently the lowest price did not necessarily indicate the best value. I submit that if public and local authority funds are being wasted on this sort of thing, the right hon. Lady should abandon the policy.

Mr. Mike Thomas

Will the hon. Lady say unequivocally whether she supports the development of the local price surveys?

Mrs. Oppenheim

I said that I was not against price-comparison information for consumers. That can help to clear confusion. If presented accurately and dealt with in the right way, it can stimulate a great deal of added competition where necessary.

I now turn to the third item, which is likely to be even less significant. The point was dwelt on by my hon. Friend the Member for Pudsey in another of the excellent speeches made by members of the Opposition. About two weeks ago, with a roll of drums and a fanfare of trumpets, followed quickly by a cacophony of contradiction from other Ministers, the Secretary of State and the Minister of State for Prices announced their latest piece of hocus-pocus, the selective price restraint scheme—Shirley's shopping basket Mark II, which is an extended version of last year's model.

I say this to those who congratulated the right hon. Lady on what she did about prices over the past year: if the right hon. Lady will accept my invitation to come to any High Street or shopping centre and see how many congratulations she receives from shoppers on her shopping basket and on what she has done about prices over the past year, I shall be delighted to accompany her. That is not only an invitation: indeed, it is a challenge.

We are told in the new version of the shopping basket that retailers, distributors and manufacturers are to be asked, with a pistol at their heads, to agree to it. If they do not agree, the Price Code will be amended to extend the pre-notification period. One of the most distasteful aspects of the Government is the political terrorism which they have imposed on industry and trade by for ever threatening to do this, that, or the other, if trade and industry do not agree to co-operate.

With a pistol at their heads, industry and trade have been asked for a six-month period starting next February to limit to 5 per cent. the price increases of a wide range of goods which bear harshly on the incomes of low budget families.

At this point Ministers assume a much lower profile. The prices of other items are to be allowed to rise to compensate for the prices which are held, and the Price Code will be amended to allow for that. Therefore, what consumers gain on the swings, they will lose on the roundabouts. The sense of unreality is heightened by the list published by the Department of Prices and Consumer Protection with its consultative document listing items to be included in consideration of price restraint and from which a final list will be selected.

This list of goods of importance to the low budget households includes such items as table wines, jewellery, photographic and optical equipment, hotel accommodation, holidays, beer and entertainment—to mention only a few—as well as those items which the Chancellor described in his last Budget Statement as less necessary when he slapped 25 per cent. VAT on such things as colour television sets and electrical appliances.

I am sure that low income families throughout the country will be delighted and comforted to know that the prices of these articles are to be restrained. No doubt, they will accept that this is a splendid system of cross-subsidisation. One can only hope that the right hon. Lady will tell us tonight, since this is not yet clear, the minimum number of items she is prepared to accept in her cross-subsidisation policy. If she is not in a position to give even an approximate figure, we shall not find even that aspect of her policy remotely credible.

The truth is that this is not a policy to help consumers. It is not meant to weight things favourably for low income families. It is a device, as my hon. Friend the Member for Romford (Mr. Neubert) rightly said, to select for restraint items which are heavily weighted in the retail price index. It is not, therefore, a policy for low income families or for consumers. It is a means by which the Government will attempt to put the retail price index into a corrective corset to disguise its natural curves, and in my view this is nothing more than a cheat. It may create a temporary illusion, but it will not help any low income families or consumers when realisation of the truth finally bursts upon them.

Moreover, as my hon. Friend the Member for Pudsey pointed out, the cross-subsidisation will in any case have to vary from sector to sector, from item to item, from size to size and from company to company. Consumers will not be able to discern whether it is being applied. It is not possible to enforce it, and it is not possible to tell whether it is being observed. Already, the food manufacturers have said that they cannot co-operate with it because their profit margins are now so squeezed that they have no scope left, and others will inevitably follow.

However, although the scheme is nothing more than a mirage for consumers, it can present real difficulties for companies and create severe distortions. What will happen, for example, in the case of a smaller company which has to put up the prices of certain goods to compensate for prices held on others if those are the very goods on which it is subject to the keenest competition? That is just one of the anomalies and distortions likely to arise. Moreover, what will be the view of those with index-linked savings and index-linked benefits about this artificial manipulating of the retail price index? What is more, to add insult to injury, the taxpayer will be called in to help the Government perpetrate this confidence trick on consumers, because the taxpayer will have to pay for the Government's publicity and advertising which is to go on throughout the campaign. In the light of the price which everyone has already had to pay for the Government's deceptions of last year, and for their failure to tackle inflation properly and in time, the least we are entitled to ask of the right hon. Lady is that she should forget all this tinkering about with the retail price index and the political gimmickry and get down to dealing with the real problems of structural inflation.

Perhaps the most depressing aspect of the Gracious Speech, especially that part of it devoted to prices, is its monumental irrelevance to, and its complete disregard of, the main source of inflation in this country today and the sector in which most urgent action is needed, that is, nationalised industries' costs and prices. There is no attempt to deal with that. On the contrary, there is a programme for further nationalisation, and how the right hon. Lady, knowing as she must that nationalisation is synonymous with yet further inflationary forces, could have supported such a measure and still claim to be a Social Democrat I simply do not know. [Interruption.] We all know the views of the Secretary of State for Industry, but I do not think that they are necessarily shared by the Secretary of State for Prices and Consumer Protection.

The right hon. Lady's only acknowledgement of the significance of the rate of price and cost increases in the nationalised industries has been to include them in some curious way in her cross-subsidisation programme to which I have referred and to which reference was also made by the hon. Member for Newcastle-upon-Tyne, East (Mr. Thomas). We look forward to hearing an explanation of what the right hon. Lady proposes. Is she thinking of the three-tier scheme, to which her hon. Friend referred, of curtailing prices for low-income families and loading the difference on to industrial consumers and others?

If that is the case it is total nonsense, because if business and industry have to pay more for nationalised industries' goods and services, they are allowed to pass those on in higher prices and in allowable costs, which they would do within a reasonably short time but—and here is the cunning and sleight of hand again—not during the crucial six-month period, although it will hit consumers in the face shortly afterwards.

I say to the hon. Member for Newcastle-upon-Tyne, East that to try to concentrate a multi-tier scheme of cross-subsidisation of nationalised industries' prices purely among domestic users is not viable, because there are not enough domestic users at the top end of the bracket to subsidise the lower and average income families whom he wishes to protect.

Mr. Mike Thomas

I shall not interrupt the hon. Lady again, but she will appreciate my interest in this matter. The assumption in all this is that the distribution of costs and prices is correct. I dispute that heartily. I think that the distribution is extremely distorted in favour of those most able to pay.

Mrs. Oppenheim

I agree with the hon. Gentleman that the distribution is distorted. What I am saying is that, for practical reasons, it is not possible for the kind of cross-subsidisation that he would like to see to end the discrimination to which he referred.

If all that the right hon. Lady has to offer is this curious scheme of cross-subsidisation—and no doubt she will tell us about the nationalised industries—she is again tinkering with a grave problem, because consumers of nationalised industries' goods and services have had to meet perhaps the most shattering price increases in our history in respect of those goods and services, and they have had to suffer consequential hardship. In many cases this is caused, we are told by the Price Commission, by increased costs; costs which have risen far faster than in the private sector, and there are further price increases on the way.

Mr. Varley

What about the Conservative Government's price restraint?

Mrs. Oppenheim

I am coming to that. Many Labour Members, the right hon. Lady and the Prime Minister have tried to attribute the level of price increases and costs in the nationalised industries to price restraint in the past, but that is not correct. The Price Commission's report and the facts show that it is not so. If the right hon. Lady wants to repudiate the Price Commission's report, no doubt she will do so publicly and not snipe at the Commission sideways by not accepting what it said.

We support, and in fact initiated, the Government's policy of phasing out subsidies and artificial price restraint in the nationalised industries. This policy was initiated by Lord Barber, as he now is—

Mr. Varley

He did not do anything about it.

Mrs. Oppenheim

He initiated the policy of doing so.

Mr. Varley

He made a speech on 17th December 1973 in which he said he would phase out subsidies to nationalised industries, but he did not do a thing about it, and the Conservative Government ran to the country in February 1974.

Mrs. Oppenheim

I shall not be drawn into discussing the right hon. Gentleman's ridiculous intervention. As he knows, there was a General Election shortly after my right hon. Friend's statement.

As I was saying, we support the Government's policy of phasing out subsidies and price restraint in the nationalised industries. What we do not accept is their contention that price restraint in the past has been a contributing factor to price increases in the public sector. Under two Statutory Corporation Acts compensation has been paid for price restraint. Indeed, we claim that over-compensation has been paid.

For example, in the recent debate on 11th November on price compensation for the Post Office, the Minister of State, Department of Industry tried unsuccessfully to enlighten the House as to the basis on which this compensation was calculated and paid. My hon. Friend the Member for Bridgwater (Mr. King) and my hon. Friend the Member for Tonbridge and Mailing (Mr. Stanley) quite rightly refused to accept his view, and claimed that in each case the sums paid covered far more than the actual sums needed to compensate for price restraint itself—not least because of what my hon. Friend the Member for Bridgwater rightly described as the "deadly coincidence" of the sums paid in compensation with the total losses.

I now have figures to explain and substantiate what he said. In the Post Office, the total loss in 1971–73 was £7.5 million. Compensation for price restraint was £9.7 million. The total loss in 1974 was £128 million. Compensation for price restraint was £123.6 million. In 1975 the total loss was £306.6 million and—can hon. Members guess?—compensation for price restraint was £307 million.

In the gas industry in 1974 the total loss was £41.3 million. Compensation for price restraint was exactly £41.3 million. In 1975 the total loss was £44.2 million, and compensation for price restraint was £44.2 million.

In the electricity industry the loss in 1971–73 was £102.8 million. Compensation for price restraint was £102.7 million. In 1974 the loss was £176.3 million. Compensation for price restraint was £176.3 million. In 1975 the loss was £251.6 million. Compensation for price restraint was £257.6 million.

Mr. Varley

During the period of whatever phase it was, as the hon Lady knows, every time the then Government wanted to do something about it, they fudged and funked it. Behind the hon. Lady sits the right hon. Member for Bournemouth, West (Sir J. Eden), who was principally responsible for all the deficits in the Post Office.

Mrs. Oppenheim

I do not think that the right hon. Gentleman has referred to a single point that is relevant, or to the point I was making with those figures, which is simply that the nationalised industries have been more than compensated for their price restraint programmes and have been compensated out of all proportion to those forgone price increases.

Let us have no more nonsense from the right hon. Member, from the Prime Minister, or from anybody else about price restraint in the past being respon- sible for price increases today, or for the size of deficits in the nationalised industries, because they have been more than compensated, and, as I have shown, the shortfall caused by price restraint can have been nothing like the total deficit estimated and compensated for. Furthermore, the deficits are wider today than during the period of price restraint itself, and if there is an explanation for that contrary to the one which exists in the Price Commission's Report, I shall be very pleased to hear it from the Secretary of State.

Every consumer in the country is a taxpayer and has to pay twice for nationalised industries goods and services—first, through prices and, secondly, through taxes. Even the poorest consumer is a taxpayer. This is doubly inflationary. Indeed, there is a third inflationary influence. When the right hon. Gentleman is defending public ownership, he should recall that the third inflationary influence is the effect of these deficits, compensation, written-off debts and hidden subsidies on the public sector borrowing requirement. There are other inflationary effects as well. Clearly the whole subject is something with which the right hon. Lady should concern herself much more urgently than she seems prepared to do today.

The Minister of State, Department of Industry announced blandly in the debate on 10th November 1975 that it was the aim for consumers to pay the true cost of the goods that they consumed in the nationalised industries. We would not quarrel with that. But on behalf of consumers and taxpayers we are entitled to ask, "What if the true costs are much too high and are unjustified? What if these costs and prices are too high because there is none of the financial disciplines that apply in the private sector because the public is always there to foot the bill?".

Mr. Mike Thomas rose—

Mr. Deputy Speaker

Order. The hon. Gentleman addressed the House for 20 minutes and the hon. Lady is winding up.

Mrs. Oppenheim

No doubt I can anticipate what the hon. Gentleman was about to say by saying that there is a big difference in the size of the deficit now and the deficit that the Government took over in respect of the nationalised industries. What if costs and prices are too high because some of those monopoly suppliers of goods and services are not subject to any form of competition, when that might well be introduced? These are the questions the right hon. Lady not only should be asking but should be pursuing and answering as urgently as possible if we are to take the Government's counter-inflationary policies seriously.

The fact is that there has never been a comprehensive audit to ascertain whether financial and manpower resources within the nationalised industries are being deployed as cost-effectively as possible.

Mr. Kaufman

The hon. Lady appears to complain that there has been no audit. I would remind her that the Conservative Government were in office for three years and eight months and did not carry out any such audit.

Mrs. Oppenheim

I ask the hon. Gentleman to look at the present scale of the deficit and to remember that at that time the nationalised industries were not the main source of inflation in the country as they are today and nor was the level of inflation as serious as it now is. We all know the kind of statements contained in our postbags from constituents who claim the converse of cost-effectiveness in the nationalised industries. I do not blame those who run and work in the nationalised industries who may be wrongly accused of wastefulness, extravagance and over manning, but in their interests I believe that such information should be sought and made public as soon as possible. I do not blame those people because the problem is in the nature of the beast—it lies in the stifling bureaucracy of the organisation and its structure, which cause these deficiences.

There are a number of things we already know. We know that there are powerful work forces in the nationalised industry. We know that the pay in the public sector has risen faster than that in the private sector. We know that productivity is usually lower in the public sector than in the private sector—[HON. MEMBERS: "Not true."] We have only to look at the report of the Price Com- mission to discover that. We know that capital investment per man is usually higher in the public sector than it is in the private sector.

The Government have a wages policy. It is a policy that threatens workers in the private sector with unemployment because of the forced bankruptcy of firms. But the real problem of inflation is not in the private sector, but in the public sector. The public sector cannot be bankrupted because no strict cash limits have been imposed. Therefore, that policy does not apply to nationalised industries, although that is the place where it should apply.

Apart from the multiple inflationary effects of price costs and deficits in the nationalised industries, apart from the burdens imposed on taxpayers and consumers generally, it is the poorest members of the community who are hardest hit by all these factors. Not only do they have to pay higher prices and taxes, but, because every pound spent in paying off the losses, deficits and hidden subsidies means that less will eventually be available to spend on health, education and welfare priorities, they are triply deprived by the public sector.

The question is often raised as to what aspect of nationalised industries' losses might be described as part of their social function. Whenever that question is put it is never defined. Nobody ever says where the money is to come from to pay for it.

The Secretary of State is unable to demonstrate that she is willing to take appropriate action to safeguard the consumer and the taxpayer unless she has proposals when she winds up. Cross-subsidisation is not the answer. The setting up of an independent review board is not the answer. The consumer bodies in nationalised industries have neither the power nor the means to carry out the kind of investigation that should take place.

The right hon. Lady has power under the Fair Trading Act to refer the nationalised industries to the Director General of Fair Trading to see whether their monopoly position is operating against the financial and economic interests of the consumer. I recommend her to do so without delay. She should have all aspects of costs in the nationalised industries analysed as to their justification and then she should decide whether these should be "allowable costs" under the Price Code, or whether the productivity deductions should be more stringently applied in the case of the nationalised industries.

She should call upon her Cabinet col-leagues to impose cash limits without further delay. There have been some welcome early signs in the battle against inflation, but it would be a tragic waste of time, effort and sacrifice if the level of costs in the nationalised industries were permitted to undermine all this. Indeed, the words in the Queen's Speech about the priority of dealing with and fighting inflation would be rendered hollow and empty.

Therefore, if the right hon. Lady does not take effective action quickly, she will be failing in her duty to consumers and guilty of imposing double standards on consumers by giving more protection in respect of the private sector where it is less necessary and less protection in respect of the public sector where it is more necessary. I assure the right hon. Lady that such a course is acceptable neither to the House nor to the country.

9.31 p.m.

The Secretary of State for Prices and Consumer Protection (Mrs. Shirley Williams)

We have heard yet another speech from the hon. Lady the Member for Gloucester (Mrs. Oppenheim) which is typical of all the speeches which she makes in the House. It was a wholly negative and destructive speech which contained not a single positive idea and consisted entirely of nagging at all the positive proposals that the Government have put forward to deal with inflation.

The hon. Lady had the cheek to refer to what she called the hardest hit families. However, when it comes to the price restraint programme, the comparative price surveys and the efforts to try to assist them, where is the hon. Lady? She is not to be found. All she can do is produce negative arguments.

When we consider whether we should trouble the trade by making comparisons to show where shops can offer the best value for money, where the lowest prices can be found, where troubled housewives who are trying to make budgets meet can get the best possible assistance by having adequate information, where is the hon. Lady? She is carping as ever. However, then the hon. Lady suddenly decides that may be there is a bit of political capital to be gained by not opposing the proposals, so she does what she always does—namely, accepts it in principle and disagrees with it in practice.

Mrs. Sally Oppenheim

The right hon. Lady might be interested to know that my principles may be a good deal higher than hers, because far from opposing the proposal in principle and accepting it in practice, I condemned my own Conservative local authority publicly for not adopting it.

Mrs. Shirley Williams

One up to the hon. Lady. I am not one to question her principles and I should not dream of doing so. However, I say directly that one of the best-known games in politics is to accept in principle what one rejects in practice, and frankly that is a very easy way out. I ask the hon. Lady whether she is with us in practice or only in principle, because if she is with us only in principle then she is not with us at all and we know what that is worth.

On the question of the price-comparison studies, all the evidence in my Department is that there can be savings of up to 20p in the pound as a result of shopping in the shops which offer the keenest prices. That evidence is less conclusive than that produced by the Consumers' Association which shows that the savings are even greater than that. I ask the Opposition and the hon. Lady whether they have the faintest idea what it is like for a great many of their constituents, as well as ours, to try to live within the straightened situation of a household budget which is nothing but a worry from week to week. I am bound to ask whether savings of 20p in the pound are not worth having.

It is simply not true that we pay no attention to quality, because we do. We cite the same grades, the same quality and in some cases the identical brand of goods. We are willing to discuss with the trade, and the trade knows that that is so. I shall not reject a weapon which has proved itself in such countries as Canada and the Federal Republic of Germany to be an effective way of dealing with inflation, on the ground that it actually takes what people say about competition seriously. If the Opposition believe in competition, why do they object to information about it? Surely those who believe in competition must stand up and be counted.

Secondly, I should like to mention the price restraint scheme. It is not a deception. If it were a deception, does anyone think that there would be any difficulties about bringing it in? It is not a cosmetic exercise. It is a real attempt to try to protect those who are least well off in our society from the ravages of inflation.

I sometimes wonder, when the Opposition attack these efforts to try to give some indication that restraint is worth while and brings rewards, whether they think what they are playing with. Believe me, they are playing with what will happen to this country over the next few years.

The most crucial single problem is to beat inflation. It will not do to come up with one carping criticism after another and no single reasonable idea for dealing with it. We are trying genuinely and honestly to put forward ideas for dealing with inflation. Indeed, not just ideas. We have already shown, after three and a half months of the exercise of this policy, a quite remarkable degree of voluntary acceptance of it. Incidentally, that acceptance goes beyond the adherents of my party and takes in the adherents of other parties in this House. Can the Conservative Opposition—I do not believe this is true of the other Opposition parties—not see the significance of the national effort that we have to try to make to uphold this massive voluntary response instead of trying to shoot at it, knock it apart, and bring it down at every stage.

Let us see what has happened on the wages side. Over 2 million work people have now accepted the £6 limit. In some cases, to come within that limit, they have had to renegotiate agreements which were already signed.

Standard Telephones and Cables—the only instance we have of a company which breached the limit—at the request of the Secretary of State for Employment went back to the trade unions in Northern Ireland and renegotiated the contract to bring it within the £6 limit. This is a remarkable record of adherence to what for many people is a difficult thing to accept—the deliberate restraint of their own power in collective bargaining for the sake of the country.

Mr. Heseltine rose—

Mrs. Shirley Williams

I will give way to the hon. Gentleman later. Surely we are capable of a response as generous and as recognising of national need as that response has been.

Mr. Heseltine

Before the right hon. Lady gets carried away with this sanctimonious humbug, perhaps she will recall that in 1973, when 10 million people accepted the restraints of the Conservative Government, it was the Labour Party which throughout the country did everything possible to undermine the authority of the party in power.

Mrs. Shirley Williams

Perhaps the hon. Gentleman will have the decency to admit that the Conservative Government divided the country on a policy—[HON. MEMBERS: "You did."] The Conservative Party knows that it divided the country over the Industrial Relations Act—[Interruption]—whereas we have tried to seek consensus. Hon. Gentlemen opposite should be ashamed—[Interruption.]

Mr. Speaker

Order. I ask the House to be calm.

Mrs. Shirley Williams

I will go back to commenting on the record of what has happened in the last three and a quarter months. I have already mentioned what has happened on the wages and incomes front.

I believe that almost everybody in this country, with the possible exception of the Opposition, regards this as a remarkable turn-round in the national attitude towards inflation. I also believe that we are now seeing the beginning of a turn-round regarding prices.

In the last three months there has been a fall, month by month, in the level of the food index, and in the last two months there has been a fall in the level of prices. I do not deny that we still have a long way to go. We still have a number of difficulties to meet, and I will mention some of them.

For example, we are seeing a renewal of pressure on the prices of raw materials. We are seeing some increases in fuel costs, which have already shown up in an increase in input costs of 3¾ per cent. in October, two-thirds of it flowing directly from the increases in oil costs as a result of the recent decisions taken by the OPEC countries. All these are problems which we shall have to meet, but I believe that we can meet them if we retain our nerve, because we shall begin to see substantial cost savings coming through as a result of incomes restraint.

Again, there are signs of an improvement in investment and corporate liquidity generally. The CBI's last survey showed, for the third survey running, an improvement in corporate liquidity and something of an improvement, although nothing like as much as we would wish, in investment, to which I shall return in a few moments.

There has also been a small improvement in profit margins. I mention this because I made it clear to those with whom I was discussing the price restraint programme that a turn-round in margins and costs was a factor that we should have to take into account in reaching agreement. But, as the Financial Times pointed out in a leader today which is much more reasoned than anything we have heard from the Opposition Front Bench, if one wants to sustain income restraint over the whole year, there must be some reflection in prices of the restraint that people are showing in incomes.

It is absolute nonsense to believe that one can sustain a counter-inflation policy which is based entirely upon restraint on the one side which is not reflected in restraint on the other. Almost all of us who are fair-minded admit that. We have recognised the problems that industry faces. We know, and we have said, that the major deterioration in margins—to be fair, some of my hon. Friends might recognise just how great that deterioration has been in the last couple of years—does not enable industries to invest on the scale that we want in order to safeguard employment.

But it is legitimate for us to say to industry that, if margins begin to turn up as a result of wage restraint—the evidence is clearly that they will do so—then some part of that improvement in margins must be returned to those who are responsible for the wage restraint in the form of restraint over prices also. I do not believe that that is an unreasonable suggestion—

Mr. Heseltine

Or investment.

Mrs. Shirley Williams

I will come to investment. I did say "some part". The other part must go into investment—and I will come to that.

The hon. Member for Gloucester made great play with public expenditure, as did her hon. Friend the Member for Rutland and Stamford (Mr. Lewis). But again, the Opposition might confirm that if we take just one aspect of public expenditure—that of expenditure by local government—the record while the Conservative Party was in office was one of an increase year by year, while in the two years that we have been in office, the increase has fallen from 10 per cent. in 1974–75 to 5 per cent. in the current year, with a prospect of nil growth in the year beyond that. The restraints on manpower, in both central and local government, are much more tight than they were under that administration which presided over the single act which did most to increase the administrative overload in this country—namely, the so-called reform of local government, to which they added the reform of the National Health Service, which also added a great administrative tail to that service in terms of public expenditure. It does not lie in the mouths of the Conservative Opposition to talk about public expenditure in a situation in which there has been a 67 per cent. increase in the staffs of central and local government over the last 15 years, in the majority of which they were the administration of this country. We are now introducing very tight restraints in public expenditure, and, above all, cash limits in both the nationalised industries and local government. This has been made clear in the White Paper and subsequently. But we should be under no illusion about the difficulty of holding cash limits in this field. The Secretary of State for the Environment will be making a further statement about this in the debate tomorrow.

Mr. W. R. Rees-Davies (Thanet, West)

The right hon. Lady is on a very important point about the nationalised industries. Is she saying that electricity, transport and the other nationalised industries will now be subject to definite cash limits —[Interruption.] Can she also say some-thing in reply to the suggestions of my hon. Friend—[Interruption.] On a point of order, Mr. Speaker. May I ask for some silence from the treadmill on the Left to be able to put the point that I want to put to the Secretary of State?

Will the question of the cash limits apply to the electricity and other industries? Secondly, has the Secretary of State anything to say about the suggestion by my hon. Friend the Member for Gloucester (Mrs. Oppenheim) that there should be some kind of audit and that the Government should examine the manpower situation in the nationalised industries, particularly in the electricity, gas and rail industries?

Mrs. Shirley Williams

I have made it clear that the cash limits apply to public expenditure in the central and local government area. The restraints that apply to nationalised industries are identical to those that apply to private industry, with the addition that the Government have taken steps to phase out the subsidies to the nationalised industries which were such a feature of the previous Conservative administration.

Mrs. Sally Oppenheim rose—

Mrs. Williams

I cannot keep giving way. The hon. Lady overran her time and I cannot give way.

Several hon. Members rose—

Mr. Speaker

Order. I wish the House would listen occasionally.

Mrs. Sally Oppenheim

On a point of order, Mr. Speaker. As the right hon. Lady has specifically contradicted what she said only two minutes ago and as she will not give way to answer a quesion—

Mr. Speaker

Order. That point of order does not get off the ground at all. It is not a matter for me.

Mrs. Shirley Williams

I was endeavouring to reply to the hon. and learned Member for Thanet, West (Mr. Rees-Davies). The hon. Lady made a great deal of play about nationalised industry prices. She referred, perfectly rightly, to the fact that the withdrawal of the major subsidies offered to nationalised industries under her administration was not the sole reason for the recent increase in prices in those industries. However, she neglected two other significant factors. One is that the increase in fuel costs has been particularly significant for the nationalised industries, two of the major ones being gas and electricity. Secondly, she neglected the fact that these industries are peculiarly labour-intensive and that traditionally many of them have been low-paid industries.

We make no apology for the fact that as part of our policy under the social contract we gave special pay increases to teachers and nurses, which has meant that there have been expenditure increases in the public sector which have not been wholly matched in the private sector. However, it will not do for the Opposition, which when in Government was responsible for presiding over the total destruction of the commercial goals of nationalised industries, to return to their complaints in the way demonstrated today. Anyone who examines their record in this area will recognise the extent to which they undermine the managerial responsibility of nationalised industries.

Mr. Heseltine

Perhaps the Secretary of State would prefer to name one nationalised industry that before 1970 made a full commercial return on the money invested in it under her Government?

Mrs. Shirley Williams

The hon. Gentleman knows perfectly well that when the previous Conservative administration left office subsidies of £900 million rising to £1,400 million were being given to the nationalised industries.

Mr. Heseltine rose—

Mrs. Shirley Williams

The hon. Gentleman knows perfectly well that he can pursue this matter with those who are responsible to the industries. He cannot reasonably expect to get an immediate answer to a historic question about the pre-1970 situation.

I have said repeatedly on many occasions that it is not our intention to make fundamental changes in the Price Code controls before the end of the current counter-inflation year. There have been a good many reports in the newspapers over the past two days objecting to this part of the Queen's Speech. However, I remind the House of what I said on 16th October, more than a month ago.

Mr. Wells

On a point of order, Mr. Speaker. Will the right hon. Lady make some slight attempt to answer the debate instead of reminiscing about—

Mr. Speaker

Order. The hon. Gentleman has been a Member of the House for a long time, and he knows that, whatever else is a matter for the Chair, that is not.

Mrs. Shirley Williams

It is a question for me, and the hon. Member for Maid-stone (Mr. Wells), who made a speech about Maidstone UDI to which I shall not reply, may have forgotten the fact that no fewer than three Conservative Members and several Labour Members referred directly to the Price Code. Therefore, it will not do for the hon. Gentleman to say that I am not attempting to answer the debate. It is a little difficult to do so—and not because of obstruction from my side of the House.

As regards price controls, what I said on 16th October was this: First, it is not my intention to make any fundamental changes in the price controls before the end of the current phase of the pay and prices policy, which lasts only till next summer. Indeed, it would be extremely foolish to do so. I went on to say: I do not want to give the impression that I would wish to go till the summer of 1977. Obviously, prices policy must be closely related to how the economy develops."—[Official Report, 16th October 1975; Vol. 897, c. 1670.] I should like to say to the hon. Member for Pudsey (Mr. Shaw)—who spoke on this matter in, I regret to say, my absence—that there is no change from that position. It is exactly the same now as it was then. If he has read the Queen's Speech in any other way I should like to assure him that that remains the position.

We have pointed out that we shall vigorously pursue the question of price controls. We are talking about the price controls as they exist at present, and I repeat that it is not our intention to change them before the end of the current phase of the counter-inflation policy, which lasts until July 1976.

Mr. Giles Shaw

Perhaps the right hon. Lady will answer two very quick points. The point I made was in relation to the price restraint programme which requires cross-subsidisation to be written into the code. Does that mean an amendment? Secondly, in relation to accounting, particularly Sandilands, which was omitted from the Queen's Speech, I think that in the debate on 16th October the right hon. Lady referred to her hope that there might be an early statement about that.

Mrs. Shirley Williams

As regards Sandilands, the statement is a matter for my right hon. Friend the Chancellor of the Exchequer. I understand that he may be making a statement to the House fairly shortly. But the hon. Gentleman will know that the date set in the Sandilands Report would not in any way involve a date as early as July 1976.

Secondly, with regard to the matter of cross-subsidisation, that would require an amendment to the Price Code, although not a very significant amendment. However, this is a matter being discussed between ourselves, on the one hand, and the CBI, the Retail Consortium and other representatives of the trade, on the other hand. It is a proposal about which they may agree or disagree. I do not know what their views on the matter will be. It would not be imposed upon them.

As to the future of price controls, this will be one of the matters that we shall decide in consultation with both sides of the industry and in discussions on the Government's counter-inflation policy.

I have said before, and I repeat, that one of the points that I believe absolutely essential in any successor to the present counter-inflation policy is that far more emphasis should be laid upon investment and job opportunities than is the case in the present Price Code or the code that I inherited. It has been a perpetual matter of regret to me that the Price Code that I inherited had no reference whatsoever to investment. The references to investment have been made entirely by the present Government. We intend to make investment the centre of any changes to that policy.

Mrs. Winifred Ewing (Moray and Nairn)

Does the right hon. Lady intend to answer the points made on behalf of Scotland and Wales from this Bench today, or is she going to ignore these two countries in this very important debate about industry? Bearing in mind that Scotland is self-sufficient in food and energy, is it not noticeable that there is only one Member on the Labour Benches from Scotland, and not one Welshman? [Interruption.] Would the right hon. Lady, therefore, care to make up for the lack of attention given to these two countries? [Interruption.] Eleven Scottish nationalist Members represents a very high proportion of attendance. Will the right hon. Lady comment on the speeches that we have made?

Mrs. Shirley Williams

The hon. Lady will know very well that another later speaker will be speaking on the matter of Scotland and Wales, and that this debate on industry and prices was at the request of the Opposition. Therefore, she will not expect me to reply in relation to Scotland and Wales, beyond saying that inflation is as much a matter for Scotland and Wales as it is for England, and that the Scots are no more insulated from inflation than anyone else. It is not true, of course, that Scotland—or England—is self-sufficient, at any time, in food.

Mrs. Winifred Ewing

Yes.

Mrs. Shirley Williams

I was not aware that the Scots grew tea or coffee or produced margarine. Scotland imports a great deal of its food.

In the last few moments of the debate I turn to the significance and importance of investment, which has been one of the central themes of the debate. The hon. Member for Henley (Mr. Heseltine) said that he believed that there had been an improvement in the state of investment after 1970. I have had the opportunity, perhaps unfairly, of looking up what the position was after the Conservative Government came into power in 1970. I will explain what happened. There was a 20 per cent. fall in the volume of manufacturing investment in 1971 and in 1972. In 1973 there was a slight improvement which led to a 10 per cent. fall. It was 1974 before the 1970 position was recovered—not much of a record to be proud of.

That makes me ask seriously whether it is true that such things as planning agreements, the NEB or, for that matter, even the continuation of the Price Code are reasons for this country's poor investment record. I suspect that the problem runs much deeper and that it will not do to try to find a particular scapegoat. I suspect that It arises from causes many generations past.

If we are to change the situation we need to create hope for the future. There are two ways in which we can do that. It is here that I believe that the Gracious Speech is highly relevant. The first way is to create a context in which we once again recognise the need to regenerate our industry, above all its strongest parts. Second, the industrial democracy aspect of the Gracious Speech, touched on by one or two Members, is absolutely central to the change in the atmosphere in this country which will enable us to resume a policy of growth.

Let me conclude by pointing out that as a percentage of gross domestic product, at factor cost, manufacturing industry between 1968 and 1972—bridging two years of Labour and two years of Conservative Government—achieved a figure of 4.4 per cent. on average. In 1973 the figure was 3.9 per cent.—the high tide of Heath Mark II, as the Leader of the Liberal Party described it. In 1974 there was a recovery to 4.5 per cent. of gross domestic product—not enough, but already a marked improvement.

We hear about the depressed state of the private sector from the Opposition. We hear from them about the steps the Government are taking to make investment less likely. I am bound to say that the Opposition's record is one of encouraging investment where it was least needed, in property and in services, but not in manufacturing. This is not the kind of record to use as a base from which to launch the criticisms we have heard today.

The most crucial aim of the Government, and, I would have thought, of the country—parties apart—is to bring inflation down to a level where we are able to compete across the world and, when we have achieved that, to go on with a policy of reconstruction and growth. The Opposition's arguments today have been of such a degree of negativism, backwardness and dogmatism as to lead us to think that they have made out a poor case for their claim to be able to succeed in the management of our economy.

Debate adjourned.—[Mr. Pendry.]

Debate to be resumed tomorrow.