HC Deb 21 December 1976 vol 923 cc605-29

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Coleman.]

Mr. Crawford

The Chancellor has not permitted the release of sufficient stocks of whisky from bond to allow this to happen in Scotland. It might be all right for England, but it is not all right for Scotland. I urge the Chancellor to consider increasing the amount of whisky for home use which is released from bond from 40 per cent. to 70 per cent. I assure him that the representations which I and my hon. Friends have had on this matter from whisky interests have made it clear that only this figure will be sufficient to leave enough stocks on the shelves at the old price before the new year.

On the question of the regional employment premium, my hon. Friend the Member for Clackmannan and East Stirling-shire received a telegram from the Scottish Knitwear Council. It said: Crucial to Scottish knitwear industry that regional employment premium is not, repeat not, cut off. These public expenditure cuts outlined by the Chancellor are totally unacceptable to Scotland. I do not mean that they are unacceptable to any one class: they are unacceptable across the board. They are just as unacceptable to business men and farmers as they are to workers and trade unionists.

I end by reading into the record the reasons why the Scottish National Party is against the Government tonight. It is because of the untold damage which the Government are doing by their public expenditure cuts to industrial investment, employment prospects, the social infrastructure and the environment in Scotland. For this reason we shall vote for the Adjournment of the House, as this is the only way we can register our protest for Scotland's sake. We hope that when we have carried that Adjournment, the order for the increase in the duty on whisky will not be carried, and this Scottish industry will be saved from further cuts.

10.2 p.m.

Mr. John Nott (St. Ives)

I am sorry to cut out the hon. Member opposite who wishes to speak, but this has been a long debate. It has been lengthy and interesting, and I must comment on what has been said already. It has been an interesting debate, not least for the very thoughtful and at times moving maiden speech of my hon. Friend the Member for Cambridge (Mr. Rhodes James) who spoke with great feeling about the ever-widening gulf between the developed and under-developed nations. It is appropriate that when we are immersed in, if not obsessed with, our own financial problems in this country, both he and the right hon. Member for Newham, North-East (Mr. Prentice) should draw our attention to the much greater problems of the less developed world.

I think the House will greatly miss my hon. Friend's predecessor, Mr. David Lane, who was one of the most modest, charming and intelligent Members of the House of Commons. My hon. Friend said that David Lane represented Cambridge with distinction. I am equally sure that his successor will do so with equal merit. I hope that he notes that the Conservative Front Bench also increasingly represents Cambridge with distinction, placing that other place in its rather sooty and less important station. I can see that my right hon. Friend the Leader of the Opposition does not agree with me.

This debate, as expected, has shown up some of the tensions which exist on matters of ideology and policy within the Labour Party. Not for the first time I find myself winding up a debate which at times seemed like a private disagreement conducted in public on the other side of the House and in which the Conservative Party did not have much of a rôle to play.

But the nation is interested in these matters particularly at a time when prices and unemployment are rising again. The official Opposition, whether the hon. Gentleman likes it or not, represents a constituency of growing size, spanning all manner and stations of men, as Workington and Walsall demonstrated.

It is hardly surprising that the Chancellor has failed to satisfy his critics, whether they be in the Press or in his own party. This financial crisis—characterised by the collapse of sterling—has been thrust upon him at the most damaging moment by Government ineptitude. About 18 months ago, the Chancellor said that the cuts were "unwise and unnecessary". That was at a time when 800,000 were unemployed. Now, when unemployment is about 1½ million, and rising fast, the Chancellor, at the instigation of our creditors overseas, having placed himself in their hands to the extent of nearly $19,000 million—that is the amount we have borrowed in overseas currency since the Government came to power—has now been forced to inflict further reductions in expenditure and extra tax amounting to about £4½ billion in the current year.

This is at a time when output is stagnant, unemployment is rising and confidence has collapsed. We have had a classic financial crisis pure and simple. Whatever Labour Members may say— and this point was clearly made by the hon. Member for Nottingham, West (Mr. English)—the forecasts of the Treasury on future national income and expenditure are largely irrelevant to the problem we are now facing. This is where I part company just a little with my right hon. Friend the Member for Chipping Barnet (Mr. Maudling) who made an extremely agreeable contribution. I hope that that does not sound patronising. It is not meant to sound patronising.

I read my right hon. Friend's maiden speech from the Front Bench in the last economic debate. He said that our problem was not overspending but under-earning. I, too, would wish to look at the positive side of the account. But the problem is—I am sure we do not differ on this—that our resources are finite. We are overspending, or we were about to overspend, by about £13.2 billion this year. I arrive at that figure by taking the £4½ billion by which the Chancellor has reduced the borrowing requirement this year, plus the £8.7 billion now regarded as being the Budget deficit. Until we go some way to removing that deficit, the economy will be vulnerable, and therefore there cannot be the resources available to put into higher profits and from higher profits into higher investment and lower taxes. The whole economy is vulnerable.

Like my right hon. Friend, I wish to look at the positive side and to consider what we can do to create an incentive. But at the moment we have a major financial problem and not a resources problem on our hands.

The confusion between money, on the one side, and resources, on the other, has come out clearly in the debate. On the one hand, the Government have to create the maximum impact on foreign opinion, and that has been made infinitely more difficult for the Government by a rather strange article in The Times by the Prime Minister's son-in-law which built up expectations overseas and in the City which no democratic Government could conceivably satisfy in any one year. On the other hand, the Government have had to minimise the impact, to pretend that they are not doing what they have been doing—for the benefit of their political creditors in the left wing of the Labour Party and the TUC.

The Government are no less in thrall to their political creditors than to their financial creditors. So they have had to speak with one voice to two audiences which want to hear mutually contradictory things, which has hardly added to the coherence, decisiveness and relevance of this package.

I suppose I say it as a compliment to the Prime Minister when I suggest that, seen in the narrow light of the self-interest of the Labour Party, the package has been a succesful manoeuvre. The right hon. Member for Huyton (Sir H. Wilson) must be proud of his successor. The Prime Minister has got his money, or at least one-quarter of it, subject to monitoring by the IMF in future years. Only the right hon. Member for Newham, North-East has resigned so far, although the Secretary of State for Energy is making more and more outrageous speeches, so perhaps he feels that the climate is right for him to come before the public again. The Parliamentary Labour Party has been denied any opportunity to upset the measures by a vote. All this represents a high degree of political skill, but I cannot say that it is of much benefit to the country.

One of my less discriminating hon. Friends—and I use his indelicate phrase—urged me to go for the Chancellor's jugular. The Chancellor is not always popular among my hon. Friends. But, being a sensitive fellow I do not feel like joining the hyenas on his side of the House, so I will tackle issues rather than the right hon. Gentleman himself. But there is some comparison with a fishing expedition. When one catches a gigantic conger eel, however many times one bashes it on the head, it still thrashes about in the bottom of the boat. The Chancellor—and in a way I admire him for it—seems unable to accept what all of us know is inevitable defeat.

What is astonishing about the right hon. Gentleman's last three Budgets—I will take only three out of his nine—produced in April, July and December, is the extent of the punishment to the economy that he has meted out. In terms of reduced spending and increased taxation, it goes far beyond anything contemplated by the Opposition at the beginning of this year.

In a debate on public expenditure last March, I spelled out what we saw as the necessity at the time. I said: Even with pay restraints and incomes policies, there is not the slightest justification for imagining that private consumption can be held to the level in the resources table. The average rise in consumer spending between 1969 and 1974 was 2.7 per cent. and that is the lowest figure I can get for it. This shows that with Case I in the table, involving 4 per cent. growth over the next three years—2.4 per cent. over the five-year period—we should need to save about £6,650 million of Government expenditure by 1979, at 1975 survey prices, in order to achieve the objectives of the Government."—[Official Report, 10th March 1976; Vol. 907, c. 543.] Since that debate, consumer expenditure is now not going to rise at the level indicated in the March White Paper but is projected to fall by 2 per cent. The lowest figure I could get at that time was a rise of 2.7 per cent. Gross national product is to go up not by 4 per cent., the level projected in case I of the White Paper, but by 2 per cent.

Based on that White Paper, my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) and I foresaw the need to reduce public spending by about £2½ billion in the first year, rising to £7 billion by the end of the quinquennium. We considered that then to be the minimum necessary to restore solvency to our national accounts.

Despite derision from the Chancellor and his hon. Friends about the Conservative Party supposedly seeking unemployment, we were contemplating a considerably smaller decrease in the current year than the Chancellor has now been forced to bring about. My judgment is that if this reduction of about £2½ billion to £3 billion had been implemented at that time instead of the Chancellor having to take three bites at the cherry under force majeure, we would not have had the run on sterling in the autumn which has undermined the Government's forecasts, the increase in taxation amounting to £1.3 billion, mostly falling on middle management and skilled workers—the very people the Chancellor says he wants to help—interest rates of up to 15 per cent., and the humiliation of having our economy placed in the hands of the IMF.

This year the Government have been out in their figures by about £4½ billion. Their growth forecast is 100 per cent. down—from 4 per cent. down to 2 per cent.—in five months. There has been a rise in the inflation forecast of 50 per cent. in six months from 10 per cent. to 15 per cent. We would all be wise to look at the next public expenditure White Paper carefully so that we do not make ourselves look as incompetent and as foolish as the Government have made themselves look in the past few months.

This brings me to the twin pillars of the Government's policy, the social contract and their industrial strategy. As I understand it, the social contract is responsible on the positive side—this was the Prime Minister's claim for it only today—for halving the rate of inflation. I find that extremely confusing. The social contract formed the basis of the Government's promises to the country in October 1974 when the Chancellor said that inflation was running at 8.4 per cent. On the same three-month basis, it is now running at 20 per cent., which seems to me to indicate clearly that the rate of inflation has nearly trebled, not halved. That is the only positive contribution which we understand that the social contract is making.

I come next to the new industrial strategy, which is even more puzzling. We have had it with us for a considerable time now. Output is now stagnant. Since April 1975 levels of production have been below those of the three-day week. In spite of the massive fall in sterling, export volumes fell last month. Today they are hardly higher than they were during the three-day week. Profits have been deplorably low for the past 10 years. All parties have some responsibility for that. At current replacement costs, after stock appreciation, profits now show a 2 per cent. rate of return, one-third of 1973 levels. Investment is about 14½ per cent. down on 1973. In the last two quarters of this year it is 4 per cent. down on 1975. So one can go on. Where is the new industrial strategy in all this?

The extension of the temporary employment subsidy and the job creation schemes are not part of a strategy. No strategy is involved with them. They are desperate measures to hold people in essentially unproductive jobs to stop unemployment rising to 1.8 million next year. What have industrialists to look forward to? I agree that this country has great prospects. There is no reason why it should not be one of the richest in the world, certainly in Europe, during the 1980s. But at this critical time the Government are introducing legislation to deal with Bullock. Is it suggested that that this critical juncture the Government think it necessary to impose by legislation a completely new structure for the control of boards by trade unions?

Next there is the problem of bureaucracy. Yesterday my hon. Friend the Member for Hitchin (Mr. Stewart) described in a remarkable speech all the bureaucracy and rules and regulations in industry. The Minister of State, Department of Industry described what he said, which is echoed by every business man in the country, as trivial and pathetic.

Then there is the wealth tax. The Government have looked at it and decided that they want to put it aside. But now we have a joint committee on which the hon. Members for Tottenham (Mr. Atkinson) and Bethnal Green and Bow (Mr. Mikardo) will serve. How can industrialists have any confidence when that is going on?

We have heard from hon. Members on both sides of the House of the problems of the construction industry. That has been the main theme running through this debate. Yet in the Queen's Speech the Government announced a proposal to extend local authorities' direct labour departments. One thing after another is in total contradiction to the new industrial strategy for which we have been waiting for so long.

I come to the question of tax and incentives. The whole thrust of the Chancellor's speech last week was that if we were patient his next Budget would contain measures to create incentives, to deal with the poverty trap, restore differentials and widen the margin between those in work and those out of work. In his remarkable and notable speech, which will be widely read, the right hon. Member for Newham, North-East remarked on that. How will the Chancellor reduce tax at the lower end?

To reduce taxation by raising the threshold to family income supplement levels—and that is not very high—would cost £5,000 million. How it is possible for the Chancellor to deal with income tax at that lower end at costs like that, especially now that he has the targets for the public sector borrowing requirement imposed upon him by the IMF and the DCE targets? He can do it only by a switch from direct to indirect taxation. But is it suggested that he will nearly treble the existing rate of value added tax? This £5,000 million is purely to raise the tax threshold to FIS levels. Will he go along to the TUC for stage 3 and advocate this switch? I hardly think that he will. If he does, I do not think that he will get a very polite answer in return.

The problem of the poverty trap, which grows worse and worse, can be solved by the substitution of child credits, but it can be done only as part of a system where the benefits are taxed. We had some leaks coming from the Government that the Chancellor of the Exchequer and others were proposing the taxation of benefits, and it looked as though for the first time the Government intended to tackle the problem of the cross-over of social security and tax benefits at the lower level. Certainly it is impossible to do it by child benefits unless benefits are taxed. Nothing has been said about that.

The most telling section of the speech of the right hon. Member for Newham, North-East came when he pleaded with the Government to re-examine their stance on social benefits. He said that when the Government came to office they rushed ahead with increased transfer payments at the expense of the social fabric of the nation. This is the central area where a genuine re-examination of the Government's priorities is required. I hope that I can say that if the Chancellor came forward with courageous legislation on benefits to overcome this problem, my own party would not seek to disagree with it. It is a major necessity for the country.

That deals with the lower income groups. I come now to the middle income groups. We have heard a great deal about the problems of differentials and about the problems of skilled workers and those in middle management. However, as the Chancellor was about to deliver his speech on Wednesday, the Government came out with an increase in the employee's stamp for those on middle management earnings. It represents an increase in tax of £100 million on middle management at a time when the National Insurance Fund is £900 million in surplus. Of all the events of the last week or so, that is the most cynical measure of this Government. They increase the middle management and skilled employee's stamps, when the National Insurance Fund is £900 million in surplus, for no additional benefits. It has been done purely to help finance the Government's borrowing requirement.

The Prime Minister's problem is not that he is boxed in by the economy but that he is boxed in by his colleagues. This morning, I received from Conservative Central Office the transcript of a radio broadcast which was made the other day. I am afraid that it is very difficult to read, but it goes something like this: Voice over: I would like to tell you the story of the Honourable —it is difficult to read but it looks like "Anthony"—

Mr. Sedgemore

Algernon.

Mr. Nott

I thought that it was "Anthony". I was referring to the right hon. Member for Bristol South-East Mr. Benn. I was confusing it because the hon. Member for Bassetlaw (Mr. Ashton) was taking part in the broadcast and, naturally, I thought that he was referring to his own ex-master— … the Honourable Anthony who was born with a silver spoon in his mouth. He is called 'Honourable' because his father was a Lord. He does not need social security. He has got private investments to solve his problems. So it goes on.

At the other extreme of the Labour Party there is the Chancellor of the Duchy of Lancaster, who has done everything possible to sabotage the Chancellor's original proposals. It is the right hon. Gentleman who at every cocktail party west of Baghdad, from the Palace Hotel in St. Moritz to the Cocoa Room in the House of Commons, has gone around ever since I have been a Member of this House telling the world that international debts are not debts at all but are purely book entries and that a moratorium on the repayment of international debts can be achieved just like that. This is the man whom the Prime Minister sent to Washington to see the Federal Reserve Bank and help in the raising of another $5 billion for this country. It is the Prime Minister's colleagues that box him in, not the economy. We could find our way out of our economic problems were it not for the difficulties of the Government and their diverse views.

I conclude on this note. The Labour Party has always boasted, with some justification in the past, of its social conscience. Some of us on this side of the House feel that it has rather worn its conscience on its sleeve. In the current difficulties the Labour Party, the Chancellor the Prime Minister and the Cabinet all know that they have to reduce living standards. The Prime Minister, with some courage, has warned that we cannot go on borrowing at the current level and that we must reduce our living standards. Yet in this package the Government have not dared to touch rent subsidies at all—food subsidies yes, but rent subsidies no. A sum of £1 billion a year in housing subsidies now go to the better off and the worse off alike. There are many families—up to 1 million of them—living in council houses who have incomes of over £100 a week. This goes to the heart of what was said by the right hon. Member for Newham, North-East. A man earning £100 a week and living in a council house receives more in one week than most recipients of British aid overseas receive in one year. Over 60 per cent. of British aid goes to countries that have a gross national product of less than £70 per head per year.

The IMF Board contains representatives not only from Germany, Japan and the richer countries but from the less developed countries. Yet we are asking the Board to lend this country—potentially one of the richest countries in the world—£5 billion so that the Government can continue spending beyond the nation's means. I consider the loan, for which we have applied, to be humiliating to this country. It would be unnecessary if only the Government had taken the necessary measures at the beginning of this year or last year. For having applied for the loan and for having arrived at the circumstances that the country now faces, the Government must stand condemned.

10.28 p.m.

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

I join the hon. Member for St. Ives (Mr. Nott) in voicing congratulations to the hon. Member for Cambridge (Mr. Rhodes James) on making his maiden speech. He had some interesting things to say about industry, economic affairs and small businesses. We shall study his speech. I do not say this in any patronising way because he made many useful suggestions. We were also taken with what he said about his predecessor, Mr. David Lane, who was highly respected on both sides of the House. The hon. Gentleman has taken on a difficult ask, and we wish him well.

We also heard another interesting speech, which was repeatedly commented on by hon. Members on both sides of the House—that of my right hon. Friend the Member for Newham, North-East (Mr. Prentice). If I get time towards the end of the debate I may say something about it. [Interruption.] I think that I probably ought to comment in my own time, but I do have more time now than on the last occasion that I wound up a debate and it may be that I shall have an opportunity of referring to his speech.

We have been debating the measures that the Chancellor announced last week to help us solve the monetary crisis that the country faces. There is no doubt that the crisis is severe and that it is both the cause and effect of the recession and inflation with which we have to contend.

But however severe they are—and they are severe—the monetary crisis, the recession and the inflation will pass. When they have passed, we shall still have the industrial problem to deal with—again a difficult one. It is a deep-seated problem, as the right hon. Member for Chipping Barnet (Mr. Maudling) said.

This matter was referred to in the Tory Party's publication "The Right Approach" which made the matter abundantly clear: It is sustained recovery that is needed. For the troubles of our economy are by now longstanding and deep-seated. To make the structural changes that are necessary to restore the dynamic of a mixed economy will need a settled approach over a long hard haul. Last year's Labour Party policy document said almost the same thing: Our manufacturing industry is caught in a spiral of contraction and decline". To deal with the country's fundamental problem we must deal with the industrial problem.

The key to our economic success lies in the performance of our manufacturing industry. That has been the aim of the Labour Government ever since the publication of the White Paper "The Regeneration of British Industry" more than two years ago. The current problem does not make our industrial problems less relevant—far from it. Indeed, they are more relevant than ever. It is significant that, in the often unpalatable measures which my right hon. Friend the Chancellor of the Exchequer has had to take, we have ensured that our industrial policies continue intact.

The problem, as both parties have recognised, is considerable. It is not that we have not made progress in the last 20 years or so. Progress certainly has been made in certain areas. But the relative performance of British industry, and manufacturing industry in particular, has been poor. But in the last 2¾ years we have begun to make a positive and favourable impact.

I accept immediately, as many of my hon. Friends have said, that there remains a good deal more to be done in industrial policies. The Industry Act 1972, which we have used since coming to office, and the Industry Act 1975 have provided us with some of the necessary instruments. I do not want to be controversial at this stage, but I must point out that the Aircraft and Shipbuilding Industries Bill, when enacted, will make a contribution to two vital sectors of the economy. I shall show in a moment or two how this will make an impact.

The right hon. and learned Member for Surrey, East (Sir G. Howe) had some disparaging things to say about our industrial strategy, but it is only through our approach, which we are developing through the framework of the National Economic Development Council, that we shall ensure a coherent approach on a sectoral basis with the full co-operation of the TUC and the CBI. It is a question of creating the wealth on which our future depends. That is what the industrial strategy is all about.

The right hon. Member for Chipping Barnet said that he was not opposed to public expenditure, and my hon. Friend the Member for Bristol, North-West (Mr. Thomas) claimed that it was a matter of making progress on planning agreements and industrial democracy. I agree that we have not made sufficient progress in that respect. In fact I am fed up with companies and hon. Members opposite who refuse to consider these ways of approaching problems in a spirit of partnership.

Opposition Members claim that even when our investment and our technology is comparable with our overseas competitors, we still do not get the best out of it. They say that we should return to the Tory industrial relations legislation and set up the paraphernalia of the industrial court and make trade unions behave. I know that that view is not universally shared by the Opposition Front Bench. But instead of trying to channel these matters through the good offices of the trade unions, planning agreements and industrial democracy, the Conservatives want only to put the clock back and say "We are not having any of these ideas."

The hon. Member for St. Ives said that we should forget about moving towards industrial democracy and should not burden industry. I say we must get the sort of progress and improvement in industrial performance we are seeking by involving the work force much more than it has been in the past few years. The aim is to end contraction in our manufacturing base and to spotlight areas where we can expand.

Inevitably, in any evolving industrial economy there must be some contraction and change. The British trade union movement has never been afraid of change. But the economy can tolerate contraction only if there is expansion elsewhere. Hon. Members laugh at my remarks about trade unions, but I can give instances where they have always been able to accept change and have welcomed it.

Rationalisation certainly has taken place. What my constituents worry about is that rationalisation must not become a synonym for redundancy. Increased productivity must not be the road to the dole queue. Provided we can convince workers that we are making a real contribution and expanding job opportunities, they will be willing to accept change. They have done so. Diversification and retraining must be the instruments of transition. That transition must be gradual. It cannot be too sudden and must not be brutal. That is the aim of the Government's industrial and economic strategy. The purpose of Government action is to ease the strains of change. It is working out pretty successfully.

The Tory Party—certainly until the right hon. Member for Worcester (Mr. Walker) issued his new policy—believed that the free market was the answer. That was the instrument to regenerate British industry. The trouble is that it tried that when the right hon. Member for Sidcup (Mr. Heath) was Prime Minister and it was a disaster. It quickly abandoned that policy. Only an interventionist policy based on consultation and consent can have any hope of success.

First, we have to look at industries with problems and see how changes can be made and necessary improvements brought about. My hon. Friend the Member for South Shields (Mr. Blenkinsop) mentioned the shipbuilding industry. I said that I did not want to be unnecessarily controversial, but the British shipbuilding industy is an example of an industry that has been starved of investment, that has had a low productivity record and indifferent industrial relations. The industry has suffered the worst international crisis for nearly half a century. It is an industry which everyone knows will waste away without Government assistance and a national strategy.

No matter whether one talks to those who own the shipyards or to the workers it is generally agreed that only nationalisation can save the industry and only public ownership can enable assistance to be provided within the context of a plan instead of being doled out in a series of panic measures such as were proposed by Lord Carrington in another place and the hon. Member for Henley (Mr. Heseltine) when he was Opposition spokesman on industry.

It is significant that the proposed deal with Poland, one of the most hopeful developments for our shipbuilding industry for a long time, owes much to the initiative and energy of the Organising Committee for British Shipbuilders. It owes much to Mr. Graham Day, who has now been driven out of the Organising Committee because we cannot get the legislation on to the statute book.

There are other problem industries where neglect and improvidence have mortgaged a promising future. If the Opposition had their way we would no longer have an indigenous motor car industry. We took no satisfaction out of the problems of British Leyland and Chrysler. But if it had been left to the Opposition, these two companies would have gone. The market would have been carved up between the multinationals and the importers. The Tory Party would have been prepared to let them go. They make no bones about that. Even now they niggle at every forward-looking proposal that is brought before the House for British Leyland, while at the same time they complain about Government intervention in the publicly-owned industry.

A third strand of our policy is to provide incentives for privately-owned industry to invest. If past results are anything to go by, we can expect that industry will welcome the Chancellor's proposals to make another £100 million available for the selective investment scheme. Assistance will be given on a selective basis for major projects which will improve industrial performance and will fulfil the aims of our industrial strategy. Assistance will be directed towards the manufacturing sector, with particular emphasis on engineering. The experience of the accelerated projects scheme has shown that assistance can be used effectively on a highly selective basis to encourage companies to push for more ambitious targets. The increased public expenditure which has been announced represents, in the context of the Government's recent measures, a clear recognition of priority for manufacturing industry, and this kind of help will pay off within our industrial strategy.

I know that some people believe that we should not have embarked upon the ferrous foundry industry scheme or set up the accelerated projects scheme. They believe that the projects which have benefited British industry should not have been developed. But that is not the view of British industry. Industry has welcomed them and has urged us to come forward with further industry schemes. If hon. Gentlemen have any doubts about that, they should talk to their friends in industry.

These projects should benefit the balance of payments to the extent of £500 million a year by 1980 and should create thousands of jobs. The projects are spread over many individual sectors. The NEDC, through the industrial strategy and the working parties, has identified potential shortages. Over half the assistance is for projects in the assisted areas. These are schemes for which the Government are offering incentives, and they will have a direct influence on industrial performance.

It was mentioned this afternoon, particularly by my right hon. Friend the Member for Newham, North-East, that there had been some cutback in the investment programmes of the nationalised industries. Others of my hon. Friends put questions on the subject when the Chancellor made his statement a week ago. It is true that there has been some rephasing of these programmes. But the investment programmes for the nationalised industries are higher now than ever before. Then the investment programmes have provided valuable business and employment for many privately-owned companies. The publicly-owned industries have been subject to stringent financial disciplines, but their investment and development plans are going ahead at record levels.

For example, there is the Plan for Coal.

Mr. Peter Rees (Dover and Deal)

On a point of order, Mr. Speaker. Will you give guidance to the House? Are we debating the Chancellor's ninth Budget or the Government's economic strategy?

Mr. Speaker

There has been a very wide discussion today.

Mr. Varley

I do not know whether the hon. and learned Member for Dover and Deal (Mr. Rees) was in the Chamber, but when the right hon. and learned Member for Surrey, East was addressing the House, he specifically asked the Government to say something about industrial strategy. That is what I am trying to do. The hon. and learned Gentleman has been missing for most of the day. Perhaps he should go back to the place he has just left if that is the best intervention he can make.

The hon. and learned Gentleman should understand the Plan for Coal as he purports from time to time to represent miners. Three years ago, that industry was thoroughly demoralised. Some people regarded it as a fringe industry that no one wanted and that should be got rid of as quickly as possible. That situation has been transformed. Under the investment programme, there have been 80 major projects to provide over half the 42 million tons of the new capacity under the plan. These projects are financed up to the level of £750 million. The National Coal Board investment programme is running at more than £300 million over the next few years, and is providing jobs in British manufacturing industry. [Interruption.] I do not see why the hon. Member for Chingford (Mr. Tebbit) should disparage that. I know that he wants investment to go ahead.

Mr. Norman Tebbit (Chingford)

I was not disparaging the Secretary of State's argument. I was just observing to my neighbour that the Prime Minister has caught the yawning disease from the Chief Secretary to the Treasury, and it is not surprising.

Mr. Varley

A few weks ago I made a pledge never to give way to the hon. Member for Chingford. I am sorry that I broke that pledge. The hon. Gentleman never makes a serious contribution to the debate—only a stream of insulting abuse. I probably should renew my promise never to give way to him.

Investment in the steel industry this year is running at a record level of £600 million and is acknowledged by the European Commission as the highest steel investment in the Community. In three years the Government have approved steel investment of £1,400 million.

The Iron and Steel (Amendment) Act 1976 increased the finance potentially available for the steel industry development plan to £4,000 million. It is typical of the Tories that when that measure came before the House the hon. Member for Bridgwater (Mr. King), who was leading for the Opposition, for opportunistic reasons decided to vote against it. Further finance will be made available there.

The same opportunities will be made available under public ownership to the aircraft industry, with proper arrangements for public accountability and the necessary commercial approach. We can win a share of the $50 billion market expected in the next few years only by investment in the British airframe industry. The Organising Committee of British Aerospace is playing an active part. In that industry the choice is between continued stagnation under present ownership and the real hope of new prospects under public ownership.

Mr. Ian Lloyd (Havant and Waterloo)

As approximately $40 billion of the $50 billion aerospace market will be supplied in almost all circumstances by the private enterprise United States aircraft industry, what proof has the right hon. Gentleman that the other 10 billion dollars will be more effectively supplied by the nationalised industry in Britain?

Mr. Varley

The hon. Gentleman should know that there have already been discussions between the American and European airframe industries and the Organising Committee. The American and European industries want to know when the industry will come into public ownership so that they can take advantage of the collaborative arrangements. They have asked the Government whether they can get involved in these collaborative arrangements, not only for airframes but for aero-engines made by Rolls-Royce, which was nationalised by the previous Conservative Government.

There are other things I could mention on the industrial strategy. I want to say something specific, however, about the measures announced to assist employment and industry by the Chancellor in his package. For example, he announced details of the £120 million increase in 1977–78 in spending on employment measures. Of this, it is estimated that about £60 million will go to an extension of the temporary employment subsidy for the four months to the end of next April, and £15 million to additional resources for extending the period of application under the Manpower Services Commission's job creation programme to the same date, while the distribution of the remaining £45 million will be decided in the light of the review which will be carried out of these and other schemes which have been introduced recently.

My right hon. Friend the Secretary of State for Employment estimates that this extra money will mean that under the temporary employment subsidy we expect that 70,000 additional jobs will be saved and under the job creation programme about 10,000 extra temporary jobs will be created. Overall, the employment effects of these two measures will be substantial. We expect that about 270,000 jobs will have been saved by the temporary employment subsidy and up to 80,000 created under the job creation scheme by next April.

During the debate, many of my hon. Friends have complained about reductions in public expenditure in areas of public policy particularly close to their hearts. I do not grumble about those complaints. I do not think that it would do much good if I did. Indeed, there would be something wrong with a Labour Government and with Labour Members of Parliament if they did not voice complaints. There is not a member of the Cabinet, including my right hon. Friend the Chancellor of the Exchequer, who does not sympathise with those complaints.

But as a Labour movement we have decided that the regeneration of British industry must take priority over all other policy objectives. We stated that firmly in our policy document "Labour and Industry—the Next Steps", which was endorsed by the conference last year. This stated that we must ensure that the necessary resources and savings are made available within the economy.

Mr. English

I do not think that we are so much disputing my right hon. Friend's argument about industry. The central question of the debate, to which I should like an answer, is why the Cabinet chose that in 1977–78, excluding nationalised industry investment, public capital investment should fall by 15 per cent., and why it chose at the same time that pensioners should not conform to the pay policy.

Mr. Varley

I am coming to that point about public expenditure. I am not ducking the question. It is germane to what I want to say.

Since the Government came to power 2¾ years ago, against a background of world recession and mounting economic difficulty, we have provided £1,524 million for our regional policy compared with £878 million in the previous three years. I know that the hon. Member for Cornwall, North (Mr. Pardoe) had something to say about the regional employment premium and the rest, but regional aid has gone up very substantially.

Since April 1975, the Government have made available over £140 million for maintaining and expanding both the training undertaken by industry and the Training Services Agency's Training Opportunities Scheme. That is public expenditure. To date, the Government have spent £216 million on the temporary employment subsidy and approved job creation projects. That is public expenditure as well.

We have allocated £450 million for Industry Act schemes. That, too, is public expenditure. We have provided £600 million altogether for British Leyland, Chrysler, Alfred Herbert, Ferranti, workers' co-operatives, Rolls-Royce, Marathon, KTM and for shipyards. All that is public expenditure also. We have set up the National Enterprise Board, the SDA and the WDA and allocated more money to them.

By the end of our first three years in office we shall have invested over £10,000 million at constant prices in the nationalised industries. I can go through the industries. We have invested about £840 million in British Rail, £2,070 million in the CEGB, £375 million in BNOC and £2,924 million in posts and telecommunications. These are colossal sums. Every penny of these thousands of millions of pounds has been deliberately spent on industrial development in pursuance of industrial policies that we were elected to carry out.

Of course, we can all think of other urgent needs for that money. Some of my hon. Friends have said that the money should be used for housing, schools, hospitals and overseas aid, but it is the wealth created by the industrial programmes of today that will provide expanded social programmes for the future. Even so, we should remember that the nearly £30,000 million of expenditure on social programmes next year will still be about 14 per cent. higher in real terms than when we took office.

I promised that I would mention my right hon. Friend the Member for Newham, North-East. My right hon. Friend made an interesting speech. I always listen to my right hon. Friend's speeches and I read them with great interest. Of course, this is not the first time that he has resigned. He resigned in 1969. My attention at that time was drawn to an article that he wrote for "Political Quarterly" in the April-June issue of 1970. He wrote that we were not Socialist enough and that there had been mistaken policies. He continued: Let me give a few examples of policies which ought never to have been followed by a Labour Government: the pursuit of orthodox Treasury inspired restrictions … the rigid application of public expenditure cuts—also Treasury inspired … the re-introduction of health service charges. I could go on and on. My right hon. Friend summed up by saying that one of the lessons for the future is that The Labour Government … should use its power to promote the policies for which it was elected. It should pay less attention to the spokesmen of vested interests, examine official advice more critically, worry less about the floating voters and pay more attention to the policies and aspirations of all sections of the Labour movement. That was only a short time ago, and I know that my right hon. Friend is sincere in what he says and in what he believes. I know that it must have been a difficult speech for him to deliver today, but I do not think that he had any reason to lay down strictures to my right hon. Friend and other colleagues in the Cabinet as he did today.

My right hon. Friend the Chancellor of the Exchequer has made a powerful speech today in defence of the Government's policies. What is more, in view of what I have said about the diversion of public resources of a massive kind to manufacturing industry and the fact that our social programme will still be 14 per cent. above what it was three years ago—

Mr. Douglas Henderson (Aberdeenshire, East) rose in his place and claimed to move, That the Question be now put.

Question put, That the Question be now put:—

The House proceeded to a Division—

Mr. MIKARDO and Mr. ALEXANDER W. LYON were appointed Tellers for the Ayes but, no Member being willing to act as

Teller for the Noes, Mr. SPEAKER declared that the Ayes had it.

Question put accordingly, That this House do now adjourn:—

The House divided: Ayes 51, Noes 219.

Division No. 23.] AYES [11.2 p.m.
Allaun, Frank Johnston, Russell (Inverness) Ross, Stephen (Isle of Wight)
Atkins, Ronald (Preston N) Kerr, Russell Selby, Harry
Bain, Mrs Margaret Kilfedder, James Sillars, James
Beith, A. J. Lambie, David Skinner, Dennis
Bennett, Andrew(Stockport N) Latham, Arthur (Paddington) Stewart, Donald (Western Isles)
Canavan, Dennis Lee, John Thomas, Ron (Bristol NW)
Colquhoun, Ms Maureen Litterick, Tom Thompson, George
Cook, Robin F. (Edin C) Loyden, Eddie Thorne, Stan (Preston South)
Crawford, Douglas MacCormick, Iain Thorpe, Rt Hon Jeremy (N Devon)
Edge, Geoff McDonald, Dr Oonagh Watt, Hamish
Evans, Gwynfor (Carmarthen) Maynard, Miss Joan Welsh, Andrew
Ewing, Mrs Winifred (Moray) Newens, Stanley Wigley, Dafydd
Flannery, Martin Pardoe, John Wilson, Gordon (Dundee E)
Freud, Clement Parry, Robert Wise, Mrs Audrey
Grimond, Rt Hon J. Penhaligon, David
Henderson, Douglas Reid, George TELLERS FOR THE AYES:
Hooson, Emlyn Richardson, Miss Jo Mr. Ian Mikardo and
Howells, Geraint (Cardigan) Rodgers, George (Chorley) Mr. Alexander Lyons.
Hoyle, Doug (Nelson)
NOES
Abse, Leo de Freitas, Rt Hon Sir Geoffrey Jenkins, Rt Hon Roy (Stechford)
Anderson, Donald Dell, Rt Hon Edmund John, Brynmor
Archer, Peter Dempsey, James Johnson, James (Hull West)
Armstrong, Ernest Doig, Peter Johnson, Walter (Derby S)
Ashley, Jack Dormand, J. D. Jones, Alec (Rhondda)
Ashton, Joe Douglas-Mann, Bruce Jones, Barry (East Flint)
Bagier, Gordon A. T. Duffy, A. E. P. Jones, Dan (Burnley)
Barnett, Guy (Greenwich) Dunn, James A. Judd, Frank
Barnett, Rt Hon Joel (Heywood) Dunwoody, Mrs Gwyneth Kaufman, Gerald
Bates, Alf Eadie, Alex Lamborn, Harry
Benn, Rt Hon Anthony Wedgwood Ellis, Tom (Wrexham) Leadbitter, Ted
Bishop, E. S. English, Michael Lever, Rt Hon Harold
Blenkinsop, Arthur Ennals, David Lewis, Ron (Carlisle)
Boardman, H. Evans, John (Newton) Lipton, Marcus
Booth, Rt Hon Albert Ewing, Harry (Stirling) Lomas, Kenneth
Boothroyd, Miss Betty Faulds, Andrew Luard, Evan
Boyden, James (Bish Auck) Fernyhough, Rt Hon E. Lyons, Edward (Bradford W)
Bradley, Tom Fitch, Alan (Wigan) Mabon, Dr J. Dickson
Bray, Dr Jeremy Foot, Rt Hon Michael McCartney, Hugh
Brown, Hugh D. (Provan) Ford, Ben McElhone, Frank
Brown, Robert C. (Newcastle W) Forrester, John MacFarquhar, Roderick
Buchanan, Richard Fraser, John (Lambeth, N'w'd) McGuire, Michael (Ince)
Butler, Mrs Joyce (Wood Green) Freeson, Reginald MacKenzie, Gregor
Callaghan, Rt Hon J. (Cardiff SE) George, Bruce Maclennan, Robert
Campbell, Ian Gilbert, Dr John McNamara, Kevin
Cant, R. B. Ginsburg, David Magee, Bryan
Carter, Ray Golding, John Mallalieu, J. P. W.
Carter-Jones, Lewis Gourlay, Harry Marks, Kenneth
Cartwright, John Graham, Ted Marquand, David
Cocks, Rt Hon Michael Grant, George (Morpeth) Marshall, Dr Edmund (Goole)
Cohen, Stanley Grant, John (Islington C) Meacher, Michael
Coleman, Donald Grocott, Bruce Mellish, Rt Hon Robert
Concannon, J. D. Hamilton, James (Bothwell) Millan, Rt Hon Bruce
Conlan, Bernard Hardy, Peter Mitchell, R. C. (Soton, ltchen)
Corbett, Robin Harper, Joseph Molloy, William
Cowans, Harry Harrison, Walter (Wakefield) Moonman, Eric
Cox, Thomas (Tooting) Hattersley, Rt Hon Roy Morris, Alfred (Wythenshawe)
Cronin, John Hayman, Mrs Helene Morris, Charles R. (Openshaw)
Crosland, Rt Hon Anthony Healey, Rt Hon Denis Morris, Rt Hon J. (Aberavon)
Crowther, Stan (Rotherham) Horam, John Moyle, Roland
Cryer, Bob Howell, Rt Hon Denis (B'ham, Sm H) Mulley, Rt Hon Frederick
Cunningham, G. (Islington S) Hughes, Rt Hon C. (Anglesey) Murray, Rt Hon Ronald King
Cunningham, Dr J. (Whiteh) Hughes, Mark (Durham) Noble, Mike
Dalyell, Tam Hunter, Adam Oakes, Gordon
Davidson, Arthur Irvine, Rt Hon Sir A. (Edge Hill) Ogden, Eric
Davies, Bryan(Enfield N) Irving, Rt Hon S.(Dartford) O'Halloran, Michael
Davies, Denzil (Lianeili) Jackson, Colin (Brighouse) Orme, Rt Hon Stanley
Davies, Ifor (Gower) Jackson, Miss Margaret (Lincoln) Ovenden, John
Davis, Clinton (Hackney C) Janner, Greville Owen, Rt Hon Dr David
Deakins, Eric Jay, Rt Hon Douglas Padley, Walter
Dean, Joseph (Leeds West) Jeger, Mrs Lena Palmer, Arthur
Park, George Spearing, Nigel Weetch, Ken
Parker, John Spriggs, Leslie Weitzman, David
Pavitt, Laurie Stallard, A. W. Wellbeloved, James
Pendry, Tom Stewart, Rt Hon M. (Fulham) White, Frank R. (Bury)
Phipps, Dr Colin Stott, Roger White, James (Pollok)
Prentice, Rt Hon Reg Strang, Gavin Whitehead, Phillip
Prescott, John Strauss, Rt Hon G. R. Whitlock, William
Price, William (Rugby) Summerskill, Hon Dr Shirley Willey, Rt Hon Frederick
Radice, Giles Taylor, Mrs Ann (Bolton W) Williams, Alan (Swansea W)
Rees, Rt Hon Merlyn (Leeds S) Thomas, Jeffrey (Abertillery) Williams, Alan Lee (Hornch'ch)
Robinson, Geoffrey Thomas, Mike (Newcastle E) Williams, Rt Hon Shirley (Hertford)
Roderick, Caerwyn Tomlinson, John Williams, Sir Thomas (Warrington)
Rodgers, Rt Hon William (Stockton) Tomney, Frank Wilson, Alexander (Hamilton)
Rooker, J. W. Torney, Tom Wilson, Rt Hon Sir Harold (Huyton)
Ross, Rt Hon W. (Kilmarnock) Urwin, T. W. Wilson, William (Coventry SE)
Rowlands, Ted Varley, Rt Hon Eric G. Woodall, Alec
Sandelson, Neville Wainwright, Edwin (Dearne V) Woof, Robert
Shaw, Arnold (Ilford South) Walden, Brian (B'ham L'dyw'd) Wrigglesworth, Ian
Sheldon, Robert (Ashton-u-Lyne) Walker, Harold (Doncaster) Young, David (Bolton E)
Shore, Rt Hon Peter Walker, Terry (Klngswood)
Silkin, Rt Hon S. C. (Dulwich) Ward, Michael TELLERS FOR THE NOES:
Small, William Watkins, David Mr. James Tinn and
Smith, John (N Lanarkshire) Watkinson, John Mr. David Stoddart.
Snape, Peter

Question accordingly negatived.