HER MAJESTY'S GOVERNMENT (OPPOSITION MOTION)

HC Deb 09 June 1976 vol 912 cc1445-566

Mr. Speaker

Before I call the right hon. Lady the Leader of the Opposition to propose her motion, I should tell the House that I have had representations that I should call the Liberal amendment. I gave considerable and careful thought to this question, but I must tell the House that it is a long-standing convention that if the Government give time for the discussion of a motion of no confidence or censure put down by the official Opposition the Government themselves do not table an amendment to the motion, and any amendment tabled by any other party or group in the House is not called.

I take it that the purpose of that convention is to allow an unimpeded and clear decision to be taken for or against the motion. Although it has weighed in my mind that in the present Parliament the number of smaller opposition parties is somewhat larger than it has been in other Parliaments for many years past, that does not affect the principle which I have stated. Therefore, I am unable to accept the amendment today. I hope that the Liberal Party will find some other opportunity to seek a formal decision in its own way.

Mr. A. J. Beith (Berwick-upon Tweed)

On a point of order, Mr. Speaker. I am grateful to you for the careful thought that you have given to our request and to requests from other parties, and for the ample reasons that you have set out. But would it not be desirable for the Procedure Committee to give consideration to the fact—[Interruption.]

Mr. Speaker

Order. May I say that I deplore the growing tendency in the House, on both sides, to shout abusive terms that are really out of harmony with the dignity of the House.

Mr. Beith

I was seeking to ask you, Mr. Speaker, whether you thought in the circumstances you have described that it would be desirable for the Procedure Committee to consider, as it has considered related matters in the past at the suggestion of Mr. Speaker, whether there should not be ways in which the parties now represented in the House which do not have confidence that Her Majesty's Opposition would provide a viable Government could register that view. Would that not ease the difficult decision that you have had to take, given that the Opposition are unlikely to make their Supply Day available for the purpose?

Mr. Speaker

I have no doubt that the Procedure Committee will consider the position of a Parliament in which many minority parties are obviously anxious to express their points of view. I call Mrs. Thatcher.

4.12 p.m.

Mrs. Margaret Thatcher (Finchley)

I beg to move, That this House has no confidence in Her Majesty's Government. This is the first Conservative Opposition motion of no confidence in the Government since 1967. There have been two Socialist motions of no confidence, one in 1972 and one in 1973. I want to make it quite clear that this motion was not put down lightly. The specific occasion arose from the economic situation, but that is not the only subject of our criticism. There is plenty else to criticise in the Government's handling of the nation's affairs.

The debate is about more than a set of statistics, about more than the one figure of 4½ per cent. It is about a whole way of life of which economic policies are but a part. It is about values and standards which are beyond economics. It is about freedom under a just law. It is about parliamentary democracy and about Parliament as the only forum of the whole nation—[HON. MEMBERS: "Hear, hear."] The Government will be voting for us soon. 'The debate is about people who are all equally important but who are all different. Indeed, one can tell a free society from one that is not free by the extent to which variety is cultivated within it.

In the past two years, under the policies of this Government, we have seen a retreat from freedom, a retreat from the rule of law, a retreat from parliamentary democracy, a retreat from a mixed and free enterprise economy and a retreat from living within the nation's means. I note also that it takes a Socialist Government to boast that the pound has now risen to …1.77. It was …1.87 a few weeks ago when the Chancellor of the Exchequer announced his Budget. It takes a Socialist Government to boast that the annual rate of inflation is now down to 18.9 per cent. Such is the state we have arrived at under Socialism.

Under the Socialists, rapid strides have been taken towards the Iron Curtain State. We have seen increased nationalisation measures, increased powers of central Government over both large and small companies, increased levels of tax on the pay packet and on savings alike, and an increased proportion of the national income spent not by the wage-earner but by the Government or Government agencies.

In the result, the Prime Minister has become the first Socialist Minister since the Chancellor of the Exchequer in 1951 to say that his policies will mean a reduced standard of living for our people. As an accurate prediction I do not quarrel with that. But it is clear that Socialist systems are not good at creating wealth; they can only spend the wealth that others create.

The first charge we make against the Government is their mismanagement of the economy. The common characteristic of Socialist Governments is that their expenditure rapidly exceeds the taxpayers' capacity and will to pay. That does not quench the Government's appetite for spending. When the Chancellor runs through the pound in the pocket he goes to the moneylenders. We have a Chancellor who has elevated bluster into a principle of economic policy and borrowing into a way of life.

The Chancellor's Budget continued the course of overspending which he has followed ever since he came to office. He continued his series of spiteful gestures against those very managers he claimed that he wanted to help. However, he included one innovation, for he surrendered the power to decide fiscal policy and the power to determine the course of the economy to an outside body. He left it to the TUC to decide the level of taxes for this year; and in some measure he left it to the TUC to determine the value of the pound. Not surprisingly, the nine weeks since Budget day have been weeks of near disaster, with the reserves depleted and the pound sinking week by week to new lows.

We warned the Chancellor when he introduced his Budget that it was a recipe for disaster, and the whole nation has watched that disaster unfold day by day. Finally, the extent of the potential catastrophe penetrated even his complacency and he took action. It was not thoughtful action, it was reflex action, the action of every Labour Government since the war faced with the consequences of their own policies. The Chancellor fixed up an enormous loan. Once again, a Socialist Government have bought time, or rather have borrowed time, to enable them to postpone the hard decisions, time to enable them to carry on for another six months with policies which have failed. They have borrowed time to get us deeper and deeper into debt.

The Chancellor chooses to claim that the loan that he has been able to fix up is a sign of the confidence that the rest of the world has in his policies. It is not a sign of confidence, it is a sign of patience. The world have given us a little more time. But unless the Government are removed from office we are doomed to see this money going down the drain as so much has before. The Chancellor made the borrowings, not to give us time to make fundamental changes, but to get time to avoid fundamental changes.

The Government dare not tell the truth to their own followers, let alone to the country. At all costs nothing must be done before the special TUC Congress next week.

Already some trade union leaders are getting restive. Indeed only this week, I see from The Times, Alan Fisher warned that if the Government announce fresh public expenditure cuts after the June 16 special Congress, unions would no longer honour the new wage bargaining rules, due to take effect on August 1. Therefore, the Chancellor dare not act before next week. But then he dare not act before the autumn either, because there is a Labour Party conference coming up. So we have the miracle cure—more borrowing while the overspending and the nationalisation goes on. Drift, debt and decay are the whole course of this Government. [HON. MEMBERS: "Shocking."] Yes, that depicts a shocking performance by the Government.

All the time that the Government are staggering in the short term from financial crisis to financial crisis they are damaging the long-term economic prospects of this country. They are putting far too much into the public sector and starving the private sector.

Yesterday, while the Prime Minister at Bournemouth was saying that the private sector had to put its scoop into the same pool as the public sector, the Chancellor was busy announcing a new loan—a loan at a 14 per cent. annual rate of interest. Other nations which handle their affairs competently and prudently can bring their interest rates down, thereby helping their manufacturers to invest. We cannot. We are borrowing so much at such high rates that debt interest is becoming a major problem. It now amounts to 10 per cent. of Government expenditure. It absorbs the whole yield of VAT and corporation tax to finance the debt interest alone. Put another way, half the public sector borrowing requirement goes not to repaying debt but to paying interest on past debt.

The other day the Prime Minister spoke to the CBI about investment and the Price Code. The Price Code is now so complex that one of our major companies recently said that it cast it £500,000 a year to operate it. If industry now has to pay 14 per cent. interest, its profit margins will not be big enough to service the loans.

Will the Prime Minister's promise to improve the profit margins sufficiently to encourage investment be yet another broken pledge? Will the promise to allow prices to increase sufficiently to give a good return on investment be another broken pledge? One thing is certain, as the CBI pointed out to the Prime Minister and the Chancellor: either we have a price code which allows enough profitability or we do not get jobs tomorrow. The choice is as clear as that.

Of course, both the Chancellor and the Prime Minister always pay lip service to profitability, but, when the time comes they fail to take the requisite action. However, they know that it is the key to future prosperity.

Two of the most prosperous countries in the world with two of the strongest free enterprise systems are countries where the role of profit in building pros- perity is encouraged and acknowledged. They are usually two of the countries from which this Government have to borrow money when they need it.

Both the Prime Minister and the Chancellor also pay lip service to the need to encourage small businesses. They know that they will get new jobs from the small businesses of today. They know that they get more jobs from the expansion of small businesses. Yet, although they pay lip service to them, they do not hesitate to put enormous new taxes upon them which penalise and discourage them from expanding. Such taxes encourage a one-generation society and prevent people from passing on the fruits of their labours to their families. If we cut off the continuity of society from the efforts of the past and cut off the continuity to the future we shall get a selfish society. [Interruption.] Of course we shall, because we shall have no incentive to build for future generations.

The Prime Minister and the Chancellor also pay lip service to taxation incentives. They pay lip service to the need for middle management to have more rewards. They pay lip service to their grievances. But what do they do about it? Nothing. These people are the discarded section of society under a Labour Government.

The Government know that people need incentives and rewards. They know, for example, that the middle management person on about £5,000 a year will, after tax, take home about £500 a year more in France than he will in Britain. The Government know full well that the queues of these people to go abroad are increasing; yet they do nothing to help. They do nothing, except pay lip service to their grievances.

It is not only those people who have suffered from the high taxation of a Labour Government. We have the highest rate of taxation on the lowest incomes in the whole of the EEC. We also have the highest rate of taxation on the highest incomes in the whole of the EEC. In fact, we have the highest rate of direct taxation in Europe. It is little wonder that many European countries are forging ahead much faster than we are, because they offer incentives. People in those countries keep more of their pay packets than is kept by our people here.

The Government pay lip service to the mixed economy, but they put up enormous threats of future nationalisation. The Shipbuilding and Aircraft Industries Bill is a total irrelevance to the needs of our modern society. Nothing could be less justified than the pretence that the Government need this measure to save jobs in the shipbuilding and aircraft industries. The Government have all the power that they need. But they are nationalising out of dogma. They pay lip service to the mixed society, but in practice they reduce the mixed society as fast and as far as they can so that in fact we become the fixed society and the complete Socialist state.

Added to that, vast new sections of industry are threatened under Labour's new draft programme for Britain, which has been called a plan for national ruin. Pharmaceuticals, banks, insurance and land are under the threat of nationalisation. As I said earlier, that is a recipe for the complete Iron Curtain State.

We note that the Prime Minister has not disowned, but has only postponed, the programme. The Prime Minister has postponed the extra public expenditure for which the plan called, but yesterday the Leader of the House seemed to want more public expenditure. For him it is the red badge of Socialist courage. For the country it is the red badge of bankruptcy.

Mismanagement of the economy leads not only to economic problems but to falling standards in the social services. Socialists pretend that they are the protectors of the social services, but, by damaging the economy, they are damaging our capacity to help those in need.

Our social services are poorer than in many other countries in Europe, because they have concentrated on increasing prosperity and creating wealth. They have better pension schemes and better unemployment benefit. They spend more on health. They know that every welfare payment, every improved pension help to the elderly, every improved aid to the disabled, every child benefit depends in the last resort on the wealth-creating capacity of industry and the earnings of those who work in it. Therefore, it is not surprising that, with this Government's attitude towards the productive sector of the economy, pensions and child benefit proposals have been adversely affected. Because they had not laid the foundations for increased prosperity this Government have done a deal with pensions, which effectively eliminated increases for six months when price increases were at their peak. They shelved the child benefit scheme. We would have thought that they would at least introduce a scheme under which the same amount as they spend now could be handed to the mother and not to the father. But they did not do so. Apparently fear of the unions paralysed their capacity to act.

If the devaluation of our currency is not enough in itself to justify the motion of no confidence—and I believe that it is —there is a second charge against the Government. They have devalued liberties as well. These days, having a job depends not only on joining a trade union but on joining a particular trade union. Labour would rather throw a person out of a job than let him continue in his job without joining the union.

Mr. William Molloy (Ealing, North)

The Conservatives threw men into gaol.

Mrs. Thatcher

The hon. Gentleman never did understand the rule of law, so his intervention is not surprising.

Mr. Molloy

Does the right hon. Lady deny that she was a member of a Government who put working men in gaol? Then they found themselves in a dilemma and had to be rescued by the Official Solicitor, who got the men out of gaol.

Mrs. Thatcher

The hon. Gentleman does not understand contempt of court. It is operated wholly independently of Parliament. What the hon. Member is proposing is that Parliament should interfere with the impartial administration of the law.

This is how Lord Salmon put the case when he spoke on the Trade Union and Labour Relations (Amendment) Bill and the relevant section of it in March last year: If Section 5 is struck out of the Act, this would strike at the very root of a principle which all my life I have done my best to defend—the principle that the law of England always protects individual liberty and the basic right of every man not to be unreasonably or arbitrarily prevented from earning his living. It protects every man against any threats or abuse of power from whatever quarter those threats may come. For a man to be expelled by his trade union is infinitely more damaging to him than if he is unfairly dismissed by his employers. After all, there are other employers, but if he is expelled by his trade union, he is prevented from earning his living by the skills which he has worked to acquire.'—[Official Report, House of Lords, 10th March 1975; Vol. 358, c. 25.] Nevertheless, this Government struck that section out of the Act, so that we now have coercion and in order to keep a job a person must join a trade union. Many people thought it could never happen here but it did happen here as part of the price of the social contract, or should I say the anti-social contract?

The other way in which the Government have devalued the rule of law is the way in which they bowed—moderates along with those below the Gangway—to the Clay Cross comrades—[Interruption.] It is interesting to note that on this occasion when an election took place the people knew exactly what to do with the Labour candidates who represented that area. The six official Labour candidates at Clay Cross, scene of the events involving those councillors who were in defiance of the Housing Finance Act, were defeated by Ratepayers' candidates for seats on the North-East Derbyshire District Council. It was the first time in 25 years of the Labour Party in Clay Cross that they were not represented on the council. That is what the people thought about the whole episode. What a pity that the Government could not live up to the people's standards. What a pity that the Government, including the moderates, chose to surrender to their own left wing—the Prime Minister, the Chancellor of the Exchequer and all. One of the few people who did not vote, I believe, was the Home Secretary.

Mr. Dennis Skinner (Bolsover)

Is the right hon. Lady aware that when these Ratepayers' candidates took office at Clay Cross the following week, at the first council meeting they barred the whole of the Press and the public and broke three election pledges at a stroke?

Mrs. Thatcher

What I am aware of is that the electorate totally rejected the Labour Party. [HON. MEMBERS: "Answer."] The third charge we level against the Government is the way in which they have devalued our parlia- mentary institutions. We all know the difficulties we had in getting the right numbers of our own people on Committees upstairs. We all know the episode the other night of the tied vote and the vote which was won by one. We all know the willingness of the present Government to abandon the rules of the House when it suits them. I know of no principle of parliamentary democracy which enables a Government to follow the rules when the result suits them but to change the rules at short notice when the result does not suit them.

Mr. Bruce Douglas-Mann (Mitcham and Morden)

When the right hon. Lady refers to the incident of the tied vote and the one vote victory she does so in a manner which suggests that she is still under the impression that there was something improper in it. As she is aware, I raised this matter on the following day because I was unhappy about it and I made it clear to my Whips that unless I was satisfied on this point I would not wish to support the Government on the remaining stages of the Aircraft and Shipbuilding Bill. I have now discussed this matter at length with the Government Chief Whip and I can assure the right hon. Lady that I am completely satisfied. [HON. MEMBERS: "Give him a job."] If hon. Members opposite make assertions about giving me a job they have not followed my actions in this House very closely. I have discussed this matter very carefully and I would suggest that the right hon. Lady discusses it with her Chief Whip. I am sure that she will be satisfied and that she will then make it clear to the House.

Mrs. Thatcher

I only wish I could reciprocate what the hon. Member has said, but I cannot. All along I have stuck strictly to the facts. In statements put out in the Press we have stuck to the facts. I am not satisfied on this matter. I wish I could be.

Mr. Nicholas Fairbairn (Kinross and West Perthshire)

Does my right hon. Friend appreciate that while I was abroad I was paired with a Labour Whip who voted?

Mrs. Thatcher

I was aware of that fact.

Immediately following the Chancellor's Budget I made quite clear what view I took on his innovation about referring certain matters to the TUC. I am sure that the stand I took then was correct, and I endorse it now. I yield to no one on the right of this House to represent all the people. It is the only forum which does represent all the people, and that duty is not discharged by rubber-stamping proposals from the TUC, or any other body. Consultation is quite a different thing from largely handing over authority. It is quite wrong for agreements to be made outside this House and then presented to it as a fait accompli. It is wrong to introduce legislation into this House simply because it is part of an agreement between the Government and the TUC. If the Trades Union Congress, having agreed to legislation, says that it is incumbent upon us to adopt it, I suggest that when a Labour Member writes his next election address it should be in these terms: I promise that at any time when any matter comes before the House I shall act in such matter as the Trades Union Congress instructs me. The Member from whom I am quoting went on to say, That would simplify his election address. He continued, I do not represent the Federation of British Industries, nor do I represent the Trades Union Congress. I happen to represent the constituents of Ebbw Vale. When I go back to my constituents I expect them to hold me to account for what I have done, and I do not expect if they disagree with anything I have done to be able to explain it away by saying that I did it on the instructions of some outside body. I do not want to adopt that alibi. I think it is a dishonourable one, and dangerously subversive of Parliamentary institutions."—[Official Report, 21st October 1943; Vol. 392, c. 1593–4.] That was said by the former Member for Ebbw Vale, Mr. Aneurin Bevan.

Mr. Norman Tebbit (Chingford)

Not that rat.

Mr. Robert Hughes (Aberdeen, North)

On a point of order, Mr. Deputy Speaker. I distinctly heard the hon. Member for Chingford (Mr. Tebbit) say "Not that rat". Is that in order?

Mr. Deputy Speaker (Mr. Bryant Godman Irvine)

I have heard nothing which is out of order.

Mr. Martin Flannery (Sheffield, Hillsborough)

Further to that point of order, Mr. Deputy Speaker. Every one of us over here heard the hon. Member for Chingford (Mr. Tebbit) use the word "rat" about my right hon. Friend the Leader of the House.

Mr. Deputy Speaker

If the hon. Member for Chingford (Mr. Tebbit) did say the word which is alleged, I think he should withdraw it.

Mr. Tebbit

If it makes it easier for the House, Mr. Deputy Speaker, I will say that the expression I used was "Not that rat". I specified no particular person. If it will make it easier I will use the words "One of those who are lower than vermin", to employ a phrase once used by the former Member for Ebbw Vale.

Mrs. Thatcher

The last words in my quotation represented perfectly the situation which we feel, and we regret that that view has been abandoned by the Government and the Labour Party. It seems as though under modern day Socialism we have the trappings of parliamentary democracy, but that we are in danger of losing the substance of it. The Leader of the House would not even allow us to debate the proposed agreement with the TUC, let alone to influence it. The Government are trying to sidestep and debase democracy. I have asked almost every week for a debate and a White Paper. Every week the answer has been "No".

There are many other points that my right hon. and hon. Friends will wish to take up. They will wish to consider questions of defence and security, the pursuit of foreign affaris in areas where we should take an initiative such as Cyprus and Rhodesia, the Government's failure to pursue the interests of our fishermen in the EEC. In all of these, Government actions scarcely give rise to confidence.

If the Liberals wish to abstain rather than risk a General Election in which they might do badly, any claim they have to be a party of principle is destroyed for ever more. A heavy responsibility rests on anyone who chooses to help this disastrous Administration to stagger on for a few more miserable months. If the Liberals wish to endorse more nationalisation, the Dock Work Regulation Bill, the attack on parliamentary democracy, the closed shop, high taxation, perpetual borrowing, higher unemployment than ever before, record inflation and falling living standards, so be it. At least the nation will know where they stand and that when under fire they flee. The nation will also know that the Conservative Party will not flinch or falter and nor does it fear to face the electorate.

People are tired of seeing Britain slipping year by year further behind under Socialism. They know the full extent of our latent talents and abilities and would prefer to use them to forge ahead so that we may hold up our heads with pride instead of just holding out our hands for cash. I believe that the Government are far less ready to face reality than are the people of Britain. I believe that the people have the will and the courage to do anything required of them so long as they believe that it will lead to the rebirth of Britain.

The Prime Minister can hardly be happy with things as they are—devalued currency, devalued standards and a Parliament that his Government disregard when they can and would devalue if they could. In 1967 after his own economic strategy had collapsed the Prime Minister did a very honourable thing and resigned as Chancellor of the Exchequer. He rightly took on himself the responsibility for three years of wrong economic policies, overspending and the decline in the value of the pound. He has not been Prime Minister long, but he has been in the Cabinet since the Government came to office. Now it is he who is presiding over the mismanagement of the economy, the decline in standards and the attack on liberties. Nothing would be more honourable than for him to remember what he did in 1967 and proffer this time not just his own resignation but that of his entire Government. It is time to end this policy of "steady as she sinks."

4.48 p.m.

The Prime Minister (Mr. James Callaghan)

I heard the right hon. Lady the Member for Finchley (Mrs. Thatcher) say that the motion of no confidence was not lightly put down. I did not hear her move it, and I do not know whether that was a Freudian slip. [Hon. Members: "She did move it."] Very well, she did. At any rate, having heard her interesting speech, I can quite understand why the motion was not lightly put down.

Whatever the right hon. Lady's motives in insisting on this vote of no confidence, with the support of a unanimous Shadow Cabinet—[Interruption]—I shall perhaps return to her motives a little later —the debate gives the Government an opportunity to restate their objectives and their strategy and political intentions. [Interruption.] If Opposition Members will do me the courtesy of listening to what I have to say instead of interrupting every half-sentence, I shall do my best to answer the right hon. Lady. I have said on many occasions, and I apply it to both sides of the House, that sedentary interruptions do nothing but lower the tone of the House. I say that to everybody.

The Government's economic objective is to overcome inflation. Already, thanks to the economic and financial policies of the Government, bolstered as they have been by the pay agreement made by the TUC, inflation has been reduced. The right hon. Lady complained that it was far too high at 18.9 per cent. I agree with her that it is far too high, but this is a rate which will continue to decline further throughout the rest of the year and our intention and belief is that by the end of 1977, if we continue with the pay policy which the TUC is proposing to its conference next week and if the Government continue with their existing policy on fiscal and monetary control, we shall be able to reduce the rate of inflation to a figure which will be comparable with that of our major competitors—France, Germany, the United States and Japan. That is the Government's first and overriding objective, and I believe that it will secure the support of the whole House.

Our second objective is to make inroads into the unacceptably high level of unemployment, which has been partially caused by inflation as well as by the world recession, and to reduce it by 1979 to 3 per cent. Our third objective, an overall objective which was agreed between the CBI, the TUC and the Government last autumn at Chequers, is to achieve a high-output, high-productivity, high-wage economy based on full employment.

Our next objective is to foster export led expansion—an expansion which has already begun—and to ensure that this expansion, together with the domestic expansion which is now on the point of beginning, will have room to go on without being hampered by excessive—I repeat the word "excessive"—public expenditure demands next year. Nor must industrial expansion be fuelled by a return of inflation. We therefore have the objective of increasing industrial efficiency and enabling the wealth-producing manufacturing industry to earn sufficient surplus so that it may invest in the necessary new plant and machinery.

Another important objective, and here I part from the right hon. Lady, is to use public expenditure as a means of increasing real personal freedoms. [HON. MEMBERS: "Gobbledegook."] It is not gobbledegook. The areas I was referring to are areas such as the provision of housing, the provision of educational opportunities, the provision of hospital treatment and proper health facilities and the provision of pensions in order to provide security in old age.

When hon. Members say "Gobbledegook" they tempt me to rehearse my own personal position, which I shall do. I was brought up in a family where, after my father died, we lived in two furnished rooms. That was a denial of freedom. I was unable to go to university because my parents could not pay for it. That was a denial of freedom. There was an occasion when I should have had hospital treatment and could not because we could not afford it. That was a denial of freedom. I was not alone in my generation. I am one of the older Members of the House: the new generation, thank God, has those freedoms. That is what public expenditure is about.

Among our objectives will be the underpinning of the necessary industrial regeneration of British industry. We shall seek co-operation on planning agreements. We shall support the industrial regions and we shall use the National Enterprise Board to assist in this purpose. The right hon. Lady was quite right to mention that, in addition to the economic aspects on which she criticised us, a vote of no confidence in the Government should cover much wider fields. First let me say that among our objectives—I do not necessarily put these in order of importance, although the one I am about to enumerate is very important—is the preserving of the integrity of the United Kingdom whilst ensuring that Scotland and Wales enjoy the devolution for which they ask.

I notice that the Scottish nationalists complain that we have not yet introduced the Bill. Even if we had done so I do not think they would not be voting with us tonight, because there is no prospect of satisfying them. Their ultimate objective is separation, is it not? No Bill which we could introduce would satisfy the Scottish nationalists. For the majority of the people in Scotland, however—and I emphasise the word "majority"—let me assure them that we shall be proceeding with a Bill in the autumn to achieve devolution in the next Session of Parliament. The Scottish nationalists now intend to vote with a Conservative Opposition who say that they intend to vote against any devolution Bill that we introduce. That is a very strange alliance between the do-nothing Tories and the all-or-nothing Scottish nationalists in order to bring down a Labour Government.

Mrs. Winifred Ewing (Moray and Nairn)

rose—

The Prime Minister

I think I have put the position perfectly fairly. I have a lot to say, and the hon. Lady will be able to make her speech later.

Mrs. Winifred Ewing

rose—

Mr. Deputy Speaker

Order. The Prime Minister.

Mrs. Winifred Ewing

rose—

Mr. Deputy Speaker

Order. Unless the Prime Minister gives way, the hon. Lady must resume her seat.

The Prime Minister

Thank you, Mr. Deputy Speaker. I have a long speech to make.

Next, we have the overriding objective to persist in the hard and stony path of pacifying Northern Ireland, to assure the people of Northern Ireland that there is no doubt about their position as part of the United Kingdom as long as they wish to remain so but that we shall be ready to envisage a devolved Government in Northern Ireland who have the support of the whole community.

These are our objectives. We shall pursue the objective of ensuring, as far as Parliament can, a society in which racial harmony and tolerance will flourish, and through the medium of the Race Relations Bill, now on its way through Parliament, we shall give legislative backing to that end.

Finally, when we have recovered our economic strength we shall use the influence that we gain from our economic recovery to strengthen our position abroad, to ensure a peaceful solution to world problems through the use of the United Nations and other international organisations, to assist in overcoming the poverty of the Third World and to use our influence in the defence of freedom and to strengthen Europe's voice. These are the overall objectives of the Government. From the beginning our strategy has been to replace the atmosphere of confrontation, which we found when we came to office, by co-operation. The task is so great that no Government can fulfil these major objectives on its own.

Perhaps the greatest condemnation of the previous Administration was that it forfeited the confidence of workers, especially in its ham-fisted handling of industrial relations.

When we were in opposition we devised a social contract. That has been the subject of many sneers, but it was designed for one purpose—and I know because I had some hand in it—namely, the idea of co-operation as opposed to confrontation. The repeal of the Industrial Relations Act, undertaken under the leadership of my right hon. Friend the Lord President of the Council, enabled a fresh and more hopeful start to be made in industry between management and men.

It must be the experience of nearly everybody that the atmosphere in Britain's factories and workshops has much improved since the confrontation of 1973. Evidence of this comes in every day—and, what is more, the record shows it to be so.

During 1975 we lost fewer days through strikes than in any year since 1968. We have kept up the improvement during 1976, and in the first four months of this year little more than half of last year's total of working days was lost, favourable though last year was. If we keep that up in our industrial relations, we shall be on the way to a new era.

Furthermore, the number of stoppages this year is far smaller than the figure last year. It is only the class warriors among the Opposition who cannot see what is happening in industry today.

I agree with the right hon. Lady that the social contract was a unique innovation in our political life. It is a topic to which Parliament must pay attention so that Parliament can be involved in a full discussion of these matters. Even if that situation has not been properly worked out—and I do not think that it has—not even the Leader of the Opposition could deny that the social contract has had remarkable success in improving the atmosphere of this country. We intend to reinforce the situation in due course with a new social contract to enable us to proceed with confidence in the years ahead. The Labour Government must rest not only on trade union and working-class support, as we do, but on the support of a wider group—and, indeed, we need every other group in the country, too.

The CBI knows from my meetings with its representatives that we seek its co-operation in the task of industrial regeneration. The Government cannot do this on their own. The right hon. Lady said that we paid lip-service to the situation that affects the CBI and middle managers. There is a difference between paying lip service and saying "Yes, we recognise your problem, but there are things that must wait." This is the position in which the country finds itself.

Middle managers are a group whose voice has not been much heard, but they have behind them a great deal of experience. They are responsible for procuring new orders and for meeting export deadlines. I know that some of them feel that they have borne the brunt of events in the last few years and have regarded themselves as being between the upper and nether millstones. I wish to assure them that the Government recognise that their contribution, too, is invaluable.

Let me return to the question of group pressure. There are many well-organised and socially-valuable groups who are making clamant demands on the Government. Often, if not always, such demands are entirely justifiable. The middle managers feel that their standards have been cut. Young people in Scotland, England and Wales are finishing their teacher-training and are pressing that every one of them should have a teaching job irrespective of whether the resources exist to provide those jobs, and despite the great improvement in pupil-teacher ratios. Anybody who has examined the figures will know the vast improvement which has taken place under Labour and Conservative Governments, in the last 10 or 15 years.

The Child Poverty Action Group is pressing the Government for full implementation of the new scheme to give large additional allowances to mothers. The pensioners are pressing for an earlier increase in their pensions, and foremen and skilled men in industry feel that their differentials are being squeezed. All have legitimate claims. The common factor is that they are all demanding more.

Mr. Churchill (Stretford)

And the money is not there.

The Prime Minister

A beam of truth has at last emerged from the Opposition, and I thank the hon. Member for Stretford (Mr. Churchill) for his support. There is a sensible growing recognition in the country that not every demand can be satisfied and that some have to be deferred.

Mr. Tebbit

Nationalisation?

The Prime Minister

But in order to secure acquiescence in this situation, our people must feel that there is a sense of underlying fairness and good prospects for the future.

Let me tell the country once again that the first task is to beat inflation. We are well on the way. This, in turn, will enable us to reduce unemployment. Hence, the significance of the special conference of the TUC to be held a week today. At that meeting the trade unions will be pledging themselves to adhere to wage levels that will ensure that we halve the rate of inflation by the end of 1977, even though they take that decision in the full knowledge that this will cause them great difficulties and will increase comparative grievances and bring some hardship to their members. We shall then be on a level with our competitors.

That is their contribution to helping to solve Britain's economic problems. In return, what do they ask? They ask that unemployment should be cut. They ask that expenditure on such matters as housing, education and welfare should not be sacrificed in mad panic cuts. They also ask for a voice in economic and social policies when they are being formulated by the Government. Is that attitude unreasonable?

Mr. Hugh Fraser (Stafford and Stone)

Have an election and find out.

The Prime Minister

Is this agreement with the trade unions worth having? What do the Opposition say?

Mr. Alexander Fletcher (Edinburgh, North)

Ask the people.

The Prime Minister

Does such an agreement offer more prospect than the angry confrontation of the years 1970–74? What do the Opposition think about these matters?

Mr. Michael McNair-Wilson (Newbury)

Will the Prime Minister say what figure of inflation was used in the talks between the Government when obtaining their new pay deal?

The Prime Minister

I am not sure to what figure the hon. Gentleman refers, but what we are hoping to do with these policies is to reduce inflation to something like 7 to 8 per cent. or thereabouts by the end of 1977, which will put us on a level with most of our major competitors. That is an objective well worth reaching, and it is well worth supporting the Government to achieve that.

We all know that the Opposition's policy of confrontation failed. We now have a policy of co-operation and of trying to work things out. Let me ask the Opposition a question. If they could obtain such an agreement, would they be willing to offer in exchange for such an agreement anything—or nothing?

Let me take an example. Let us suppose that there was an industry in distress, with the prospect of a large number of workers being laid off. Let us imagine that such an industry had inadequate financial resources and was in need of drastic reorganisation if it was to face world competition. It could be Rolls-Royce, but it happens to be shipbuilding. Would the Opposition be willing in such circumstances in the national interest to assist the passage of such a Bill to reorganise that industry?

Mr. Tebbit

rose—

The Prime Minister

I shall not give way to the hon. Gentleman. He does not yet speak for the Opposition. He may do one day, but not yet. I am asking these questions of those who will be replying to the debate.

Mr. Tebbit

Chicken!

The Prime Minister

Would they be willing to do so?

If so, and it is in the national interest, I ask them to overcome whatever feelings they may have about the events of a fortnight ago, when clearly there was a genuine feeling of grievance—a feeling which I acknowledged to the Leader of the Opposition. Will they be willing, in the country's interests, to let business proceed? It is the future of this industry we are discussing. It is the future of these men we are discussing. If the Opposition are willing, we shall be ready to hold out a hand so that we can resume discussions. If not, the country will know that the Opposition are still playing at their playground games.

Mrs. Thatcher

Is the right hon. Gentleman prepared to put the grievance right?

The Prime Minister

Yes, I will be willing to discuss the matter with the right hon. Lady at any time. The fact that she has a grievance does not necessarily mean that that grievance is shared. She must come half way and not insist on everything.

Like the right hon. Lady, the Government are particularly concerned about the level of public expenditure. The problem, which she did not state in this way—I will state it in my own way—is obvious. It is that the amount we have spent on social facilities, and our spending on the matters I referred to at the beginning of my speech, have increased very much faster than our national income. Despite difficulties with some of my hon. Friends in the debate in March, the Government have set out, and intend to adhere to, the planned expenditure for 1978–79. They have established a level which provides for very little increase over and beyond the programmes for next year.

The local authority world is very important in this connection because it accounts for about one-third of all public expenditure. Thanks to the new early-warning system for controlling monetary expenditure, the local authorities discovered and informed the Government at this early stage in the financial year—it is only two months old—that if they went on spending as they had begun, they might over-spend by as much as £400 million. The local authorities recognised that that was unacceptable and inconsistent with the programmes and the agreements they reached with the Government at an early stage. They have, therefore, agreed to revise their expenditure programmes and bring them back into line with the agreements to which they put their hand. I recognise that in doing so they will need to take some hard decisions.

My right hon. Friend the Secretary of State for the Environment has asked that there should be full consultation with the trade unions concerned, with full use made of provisions for early retirement and, where appropriate, for the sharing of services and staff between authorities. I believe that local authorities have the intention to keep to the agreed limit. It is in our interests that they should do so, for the reasons that the right hon. Lady gave.

In 1977–78, the forecasts show, manufacturing industry and the basic industries will be seeking funds to carry out fresh and enlarged programmes of new investment in plant and machinery. Manufacturing industry is a creator of wealth. Some of its profits have been very low in recent years. It will, therefore, be in competition with local and central Government when borrowing available funds. Part of the requirements of the nationalised industries for funds for expansion will also fall on the Government.

The Government are very carefully watching the development of these investment plans against the present level of public expenditure. Our policy will be to ensure that there is no return to galloping inflation as a result of the upturn in export-led expansion or in the economy generally. There is no need for panic cuts in public expenditure. We shall take whatever action is necessary to achieve an appropriate balance between public expenditure and the needs of manufacturing industry.

Mr. Ian Gow (Eastbourne)

Will the right hon. Gentleman tell the House whether he thinks that the share of GDP taken by public expenditure could and should go above the present figure of 60 per cent.?

The Prime Minister

The level of public expenditure should not be determined by any arbitrary arithmetical figure. It should be fixed by determining the social needs of people which cannot be met individually and the requirements of manufacturing and basic industries for available funds. To try to take a simple arithmetical figure is to put oneself into a straitjacket. The country should not accept that.

I should like, if the Opposition would excuse me, to say a few words about some of the things that are going right for Britain. I deal first with engineering. The volume of new orders by overseas countries for our products rose by as much as 10 per cent.. in the three months to last February. Commercial vehicle production ordered overseas in the past six months has risen by 11 per cent. New orders for machine tools for export in the three months to February nearly doubled—they rose by 94 per cent. Steel production rose by 18 per cent. in the three months to April. The total value of all our sales of goods to overseas countries rose by 8½ per cent. in the three months to April while our imports in the same period rose much less, by 5½ per cent.

Likewise, the volume of our exports rose by 4 per cent. in the same period, whereas the volume of our imports rose by ½ per cent. I hope that the hon. Member for Stretford approves of that. The result of all this was that we had a substantial surplus in our visible trade balance, excluding oil, of £443 million in the three months to April in addition to a comparable figure of £283 million in the three months before that. Note that last year was only the second year in the past 20 years when Britain increased its volume of world trade. That is the overseas side.

Even if we include high-price oil—and I think that we should now begin to include this because we could tend to deceive ourselves if we excluded it for ever—our current account deficit in the three months to April averaged £52 million a month compared with £150 million a month for 1975. Let us also remember—I know that the Opposition will excuse me for saying such things—that North Sea oil is likely to save us about £1 billion this year alone.

At home we intend to continue with our policy to strengthen industry in the regions. We look for full co-operation on such matters as planning agreements to assist the regeneration of British industry. We shall also try to plan ahead to avoid bottlenecks in skilled manpower and in component requirements.

The National Enterprise Board is already using part of the funds made available to it to avoid bottlenecks in the machine tool industry. Those who have lived through past industrial cycles know that this is always where the difficulty comes. What the board is doing is financing advance orders being placed by firms on a deferred payments basis so that the tools will be manufactured now and will be ready to be taken up as the economy turns up.

The Government are financing the production of steel in advance of requirements. How necessary that is! There are still some long-term contracts from two or three years ago requiring the import of steel. That was when we had the last cramping of steel output. Is this not democratic Socialist planning? Or is this the Gestapo? The Government are taking the lead with the NEB in assisting the formation of consortia of British firms so that they may be in a better position to tender for contracts abroad when they are placed on a turnkey basis.

I think that Opposition Members who deal with these matters know that one of the weaknesses of British industry has been its inability, because of its size—there have not been super-companies—to get together in order to fulfill some of the very large orders, some of which run into £200 million and £300 million for a single project. The National Enterprise Board is taking this on board and in assisting this is filling a very important gap.

I shall not say much about the standby credit announced by the Chancellor earlier this week. I gave the right hon. Lady yesterday my view that this is a valuable reinforcement to the international monetary situation. I have never argued that by itself this is a solution to our domestic difficulties; nor has my right hon. Friend. But, taken in conjunction with the strategy I have already outlined and taken in conjunction with the measures that we are now following, this credit is a powerful reinforcement to what we are doing.

As to the future, when tonight is over we shall press ahead with our plans for legislation for Scotland and Wales next year, and with our policies in Northern Ireland. We shall press ahead with the Race Relations Bill, with the support of all parties, and we shall place that on the statute book. That is our path, and it is deserving of the nation's confidence.

The right hon. Lady does not need to spell out her alternative policies. She asked a lot of questions. What I did not hear stated by her when she asked the questions was what was her policy—I did not hear what was her policy—I am choking on my own words—I did not hear from the right hon. Lady what was her policy on defence, what were her proposals for the fishing industry, or what she would do about Rhodesia. She does not need to spell her policies out, but the country will draw its own conclusions from her failure to do so.

Sir John Eden (Bournemouth, West)

Will the right hon. Gentleman give way?

The Prime Minister

No. With respect, I am addressing these remarks to the right hon. Lady herself.

Sir J. Eden

I may be able to help the Prime Minister with his voice problem.

The Prime Minister

All right. I shall give way.

Sir J. Eden

I should like to raise a point that might help the right hon. Gentleman for a moment or two—and it does not really matter for this purpose what I say.

The right hon. Gentleman has just mentioned Rhodesia. Is he himself taking any new initiative to prevent the development of what appears to be a very ugly scene indeed, or is he relying solely on the initiative being taken by the United States Secretary of State? Does he recognise that first and foremost this is a British responsibility? Will he give some information about what action he has taken?

The Prime Minister

I am very grateful to the right hon. Gentleman.

On the matter of Rhodesia, I think that the next step is that which will be taken as a result of the meeting between Dr. Kissinger and Mr. Vorster. We are, of course, closely in touch with Dr. Kissinger about this. There are also contacts with Mr. Vorster.

That is not to say that we contract out of this situation. However, there are times when the baton has to be handed to others, and we then pick it up again. We have carried it a long way forward. For example, we have influenced American policy considerably in the American attitude towards Rhodesia, and if American strength, in every sense, can be used with South Africa in order to ensure that majority rule is established in Rhodesia, whatever the combination of countries may be, that will be a service to the whole of the people of Rhodesia. My right hon. Friend the Foreign Secretary is very closely in touch with the situation and will continue to be so.

I am much obliged to the right hon. Member for Bournemouth, West (Sir J. Eden).

I hardly like to be unkind to the right hon. Lady the Leader of the Opposition, as she has been so considerate—but I must be, because I have written it down. In political matters, I am afraid that the Opposition, as the right hon. Lady showed by her questions, have a gaping void where there should be a policy on all the matters that I enumerated. We have heard nothing of what the Opposition would do. On economic matters the Conservative Party is split down the middle between the monetarists and the pseudo-Keynesians, with the right hon. Lady oscillating between them, floating from the arms of Leeds, North-East to the arms of Surrey, East, while the right hon. Member for Penrith and The Border (Mr. Whitelaw), looking slightly bewildered and baffled, tries to cut in on this excuse-me dance that is going on.

The right hon. Lady has said that she is in favour of large public expenditure cuts now. They would hit at the young, the improverished, the poor, and they would hurt the sick. Somehow I cannot understand why the right hon. Lady believes that from the conflict and confrontation that would ensue she would then secure support for a Conservative Administration in the country.

The right hon. Lady would throw away the atmosphere that is beginning to pervade British industry and to spread into the rest of the country. Indeed she has already begun with what was grandiloquently called last weekend a parliamentary fight to the death—although after Monday and Tuesday I thought that it was looking a little tattered. Was there ever a more reluctant army wheeled into motion than that on this particular issue this afternoon?

If by some mischance the motion were carried tonight, there would be a General Election. I put on record my own very clear view that whatever party advantage might ensue, a General Election at this time would be against the national interest. This week the miners have pledged their co-operation for another year. The National Union of General and Municipal Workers has done the same, and I see that NALGO has done the same this morning, as have many other unions in previous weeks. Next week the TUC Special Congress will set its seal of approval. Would the right hon. Lady throw all that away? I think not. Her Shadow Cabinet must bear responsibility for not restraining her on this motion of confidence. She was reported in the Daily Express this morning as saying You have either got it or you haven't". The Opposition have got it all right; all of them. In any case, it is not for me to intrude upon the Shadow Cabinet. I leave the hon. Member for Brentwood and Ongar (Mr. McCrindle) to sum up the country's views of the Shadow Cabinet. In case the House missed it, let me repeat what the hon. Gentleman said. I am not surprised that the right hon. Lady herself had to take these decisions. The hon. Member for Brentwood and Ongar summed up the Shadow Cabinet a week or two ago like this: They are an unconvincing lot of also rans". The Government will press ahead with our objectives. The result of the vote tonight will uphold us. I hope that right hon. and hon. Members who come winging back from Afric and Cathay, and Cathay and Afric, will feel that their journey was really necessary. More seriously, I hope that after tonight my right hon. and hon. Friends the Northern Ireland Ministers will be able to return to their posts of duty in Belfast.

For what purpose has all this clamour and clangour been? I say that it is to satisfy an impatient and imperious vanity.

5.30 p.m.

Mr. J. Grimond (Orkney and Shetland)

It appears from the cheers that the Prime Minister has been well received. I was very glad to hear of the importance that the right hon. Lady the Leader of the Conservative Party attaches to the Liberals. She obviously feels that they are pivotal to the whole political life of Britain, but I must remind her that last week the Liberals were all here, Plaid Cymru and the SNP were here, and the Ulster Nationalists were here, but one or two Tories were missing.

I must also remind the right hon. Lady that the real difficulty of the Tory Party is that it has lost the confidence of those who fill what used to be the tame seats of Northern Ireland, and that really it is not for her to complain that other parties—which may be critical of the Government but are not wholly sold on the Tory alternative—take a line of their own.

The right hon. Lady has chosen to move a motion of censure on this particular day. Clearly, it is related to recent events, and particularly to the difficulties of the pound. If it were to result in a General Election it would be taken by foreign observers to mean that the Official Opposition rejected what has been done by the Government. We should have a long period of uncertainty on the economic front, and at the end of the day foreign observers would not know what might replace it. I cannot believe that that would be helpful to the present situation of the pound.

I am not one of those who think that the Opposition have a duty to outline their programme. There are too many programmes in British politics. But it is not as though, when the Conservatives were last in office, their economic or financial policy was a conspicuous success. I want to address a word or two to the Chancellor of the Exchequer. I cannot say that I am an absolutely fully-paid-up admirer of his, but he is a better Chancellor of the Exchequer than Lord Barber. Indeed, Lord Barber was one of the most disastrous Chancellors we have ever had. We cannot, therefore, take it that it would be a good move to go back to the last Tory financial and economic policy. For that reason, although I do not expect a programme from the Tories, I think they should make their position clear on a few issues.

First, what is the Conservatives' present view about a pay policy? Would they like to see the present pay policy thrown out? Would they like to go back to free collective bargaining? What are they saying on this?

Secondly, it will not be forgotten that it was the Tories who immensely increased the public expenditure of this country by, for instance, their changes in local government. Are they prepared to abolish the Scottish regions?

Thirdly, we in Scotland have a considerable interest in what will happen about the Scottish Parliament. I do not think that even the most enthusiastic Tory can possibly say that Tory policy on the Scottish Parliament is clear or makes sense in any regard. The idea that we could have Second Readings in Edinburgh, and Committee stage, and then report back to this House and have a Third Readings here, is a recipe for disaster.

I feel bound to say to the SNP that there would be a very grave danger if there were a General Election and the Tories got back, because, bad as the Government's proposals on devolution may be—I think they are pretty awful—we should then go back to square one, and a Conservative Government would have to think it all out from scratch. In considering all these issues, therefore, I do not think that one can just return to the last Tory Government.

Over the past 25 years history has been extremely repetitive. Every year or two a crisis has been signalled.

In point of fact, it is not the crises that matter, but the gradual slide. The pound used to be worth over 4. Even a year ago it was worth …2.20 or …2.30. It is now considered a great success if the pound goes up from …1.75 to …1.78. The same sort of comment may be made of our efficiency, of our standard of life, and of our position in the world. We slide downwards.

Whenever the slightly phoney crises arise, the same noises are made. Whatever the Government may be, they say that it is not their fault. It is never their fault. It is either the fault of people in Switzerland or of the world in general, or it is just sheer bad luck.

Governments also always say that no measures taken at the particular moment can be effective. This is perfectly true. No cuts in public expenditure would affect us in the next month or two, but they would affect the possibility of the next crisis. Our failure ever really to go to the basic troubles of our economy and put them right means that we have this recurrent slide down hill.

The Opposition always put down a motion of censure in this sort of situation.

These crises recur quite regularly, and the reasons for them are not difficult to see. Non-productive Government expenditure is too big. Public expenditure itself is too big. It is not a question of cutting the social services. My own county of Orkney, with 17,000 people, is about to spend £1 million on new council offices. It already has council offices. Why should it want to do this? The answer is that, with our grant system, it can rightly expect to get 70 per cent. or so of it out of the Government. A great deal of Government expenditure today is not helping the poor or anyone. It is positively harmful.

Next, in a large number of instances in this country there are too many men involved in doing certain jobs. Much of British industry is overmanned compared with similar industries elsewhere. We do not add sufficient value to our imported materials to enable us to take full advantage of our export opportunities.

The Prime Minister pointed to the increase in exports, but it would be a miracle if there had not been an increase. It is a little complacent to say that because we have a 10 per cent. increase in exports, when the pound has gone down to …1.75, this is a triumph.

I suggest that Government would do better to say that the situation is serious and cannot go on, and that they must take responsibility for it. They should say that they are prepared to put right the underlying long-term troubles of our economy.

My main criticism of the Government is that I think they are much too complacent. I think that a standby loan is a good thing to have. I rejoice also in the arrangements made with the trade unions. But the British nation is appallingly complacent, and one can only get through to it when it is told that there is a crisis. If the Prime Minister had said last week "Yes, this is a deplorable situation and we shall now take long-term measures to reverse the whole trend of the British economy", far from losing face, he would have received a very big hand and a lot of support. He should have said, "We shall put all the weight we can behind achieving efficient production".

It is no good giving people more money if there is no improvement in production. I know that the Prime Minister is constantly inundated with letters from people who are demanding more pay. I get them as well. Everyone must have more. I write back saying "Unless there is extra production, you can only get more if somebody else gets less. Who is it to be?" I never get an answer. There is a widespread belief in this country that everybody can get more money, and that somehow this will enable us to produce more potatoes, more suits, more motor cars, and so on. We all know here that it will not.

If there were some general agreement in the House on this, it might get through to people in the country. The temptation is to say—for example, to the people who are sitting in at the teacher training colleges—"Yes, we sympathise with you, but the wicked Government are responsible". It is very tempting to make capital out of our situation. This should stop, but it requires some all-round agreement to do it.

The Prime Minister rightly calls for higher investment, but with inflation at the present rate it is a bad bargain for the ordinary person to save and invest money. I draw the Prime Minister's attention to what is done by the managers of the pension funds of the nationalised industries. They are buying pictures. They are not putting money into machinery. They are not backing the British economy. They are buying paintings by Picasso at …1 million each. This is not done by the upholders of capitalism but by the upholders of Socialism. That is what they think of the prospect for investment. I welcome, therefore, the Prime Minister's indication that he will possibly allow a rather better return on investment.

As a Liberal I am not temperamentally in favour of a pay policy, but I think we have to have it, and that it is here to stay. I do not believe that the next Government, of whatever party, will get rid of the pay policy. They would be unwise to do that. I do not deny that there must be firm monetary controls or that unproductive Government expenditure should be cut, particularly on the capital side.

Until some years ago it was considered that one could link pay in the public sector to that in the private sector and that pay in the private sector would be fixed by bargaining. But the public sector is now too big. It is now setting the pace. The next stage of the pay policy must deal with how rates of pay are fixed in different public occupations and in the professions and it must deal with differentials. Much could be brought about by bargaining, but not all that needs to be done.

We have been brought up to believe that occupations such as coal mining should carry less pay than comfortable office jobs, but I would require three times as much as I get as a Member of this House to be a miner. People will no longer do certain jobs unles the pay is better. Many miners and others who are producing are demanding high pay. If they are given £100 to £200 a week inflation will increase. We must increase effective technology and compensate workers such as the miners. They should be allowed to share in the results of technology and be brought into partnership in their industry. Profits should be shared so that people whose jobs are taken over through technology benefit from it. We have gone some way towards that, but we could go much further. There must be a detailed look at differentials.

I hope that the right hon. Member for Leeds, North-East (Sir K. Joseph) is examining these matters from the Tory point of view. There is much to be said for his public statements about the market economy in a free society, but there is a crucial difficulty when there is a large public sector where pay cannot be related to the private sector. Bargaining within the public sector is really just bludgeoning the taxpayer.

It is high time that we made an effort to agree among ourselves in the House on the basic fundamental troubles of the country. Then we could have a useful debate about how to increase production in a free society.

5.44 p.m.

Mr. Douglas Jay (Battersea, North)

Many of us have criticisms to make of the present Government, but I find the official Opposition's attitude positively horrifying. They cannot agree on an economic policy, they cannot agree what forms of expenditure should be cut, and they cannot agree on whether there should be an incomes policy at all.

The right hon. Member for Orkney and Shetland (Mr. Grimond) reminded the House that the Tory Party was the cause of the credit inflation of the years 1972–73 which increased the volume of domestic bank deposits by £20,000 million, or 100 per cent., between 1971 and 1974. Credit inflation was not entirely caused by lending to the Government but largely by lending to private interests, including property investment. That should dispose of the myth that it is only public borrowing that leads to credit inflation. The Opposition decided to spend £800 million on Maplin, another £800 million on the Channel Tunnel, and a further £2,000 million on a number of inner London motorways, all of which would now have been eating up national resources if they had remained in power.

The …5 billion credit obtained without strings by the Government from the central banks last weekend was an excellent example of international monetary cooperation. It is a major success for the Government and is a powerful support for our domestic economy and it should be remembered that the greater part of that sum came from the United States authorities.

Sterling was undervalued at …1.70. I am not a great believer in censuring the wicked speculators for being the cause of our troubles, because normally they rush in when the currency is already weak. In this case, the British Press has a good deal to answer for, because it exaggerated every morsel of bad news and left everything else out of the picture.

The right hon. Member for Orkney and Shetland was a little too pessimistic this afternoon. How many people remember that in 1970 we had a current balance of payments surplus of £730 million and in 1971 over £1,000 million? That was only five years ago. On a longer perspective, how many people remember that British exports were no higher in volume in 1938 or in 1946 than they were in 1900? They are now four and a half times higher in volume than they were in 1946. There has been an enormous rise in the volume of exports in the last 20 years, and it would be useful to praise British industry rather than abuse it for that achievement.

The fault of our present economic policy is not that we are exporting too little but that we are importing too much. Nevertheless, given that we now hold to an exchange rate under …2, and provided that we continue a pay restraint policy—that is the real crux of the situation now —there is no limit to the growth of exports and employment that we can achieve. People have been too pessimistic.

If we restrain the rise in the money supply, which the Government have rightly pledged to do, the level of employment over the next year or two will depend almost entirely on the rates of pay which we give ourselves. It was the mad pay scramble in 1974 which was the cause of today's unemployment. If common sense prevailed, we should desist from giving ourselves any pay increases at all in the next three years, but that would create a universal shock. We live in an imperfect world and we should warmly welcome the pay agreement that has been reached with the TUC.

Since the balance of payments surpluses in 1970 and 1971, three major policy mistakes have been committed by Governments from which we now have to extricate ourselves. The first was the credit inflation of 1972–73. The second was the pay inflation of 1974, which was partly caused by the first mistake. The third was the wholly gratuitous imposition on this country of the lunatic common agricultural policy and our present huge deficit with the rest of the EEC.

On the first, I believe that the Chancellor's present tight hold on the money supply is right, provided we do not delude ourselves into thinking that that wholly depends on the Budget deficit. I would prefer a lower Budget deficit and a lower borrowing requirement than we have now. Here I am at one with the right hon. Gentleman.

Unlike the Leader of the Opposition today, I shall mention two major Budget economies which I think my right hon. Friend the Chancellor could make and should have made this year. First, it is something of a scandal that the mortgage interest tax relief for owner-occupiers is now running at £1,000 million a year. This wildly excessive subsidy is also the main cause of the decline in private rented housing. It should be cut by about £400 million.

To give one other example which the right hon. Gentleman did not give, our present total of road spending is running at the absurd figure of £1,200 million a year, of which £750 million is for new construction and not even for maintenance. That could also be cut by £300 million or £400 million. Those economies together would give us nearly £1,000 million off the present enormous borrowing requirement.

I come, secondly, to pay restraint. It is essential above all—on this our recovery depends—that the present year's pay agreements should be followed by a permanent regime and not by another free-for-all after 1977. That new regime must somehow provide for movements over a time in differentials, not merely between different grades of skill but between different trades and industries. I do not see how that will be done until we have established an effective national pay tribunal which will give the judgments. If anyone else can think of a better way of doing it, I shall be glad to hear it.

Thirdly, we must free ourselves from the suffocating grip of the common agricultural policy and the flood of unwanted manufactured consumer imports which we are now taking from the Continent. The central reason why EEC membership has been one factor in landing us in our present balance of payments deficit is as follows. This country's basic economic policy in the long term should be to import raw materials and food at world prices and to import as few manufactured consumer goods as we can. If we do that, our exports will pay for our imports, as they did as recently as 1970 and 1971. But membership of the EEC on present terms compels us to do exactly the opposite—artificially to raise the price of our food imports and import a flood of manufactured consumer goods which are not really necessary.

It is no longer any good propagandists pretending that the CAP is not the reason why our food prices are above world prices, since the EEC Commission in its agricultural report for 1975 has given the figures. That report shows that on average even in that year EEC grain prices were well above world prices, beef prices were 60 per cent. above, milk powder 40 per cent. above and butter and cheese more than 200 per cent. above. Those are the official EEC figures.

That extra burden is only partly and only temporarily being disguised by the crazy apparatus of monetary compensation agreements, the green pound and all the rest. To have bought our actual volume of food imports in 1975 at the EEC prices as given by the Commission last year, rather than at world prices, would have cost an extra £800 million on our balance of payments. It would almost entirely wipe out the gains on our home-produced oil which we expect to receive this year.

If we also allow for the £2,000 million total deficit on visible trade with the EEC last year and for some overlap on account of food and some minor budget payments one way or the other, we see that the net balance of payments costs of our membership on present terms must be running at between £1,000 million and £2,000 million a year. We read in Saturday's edition of The Times that this has reached the point where the British Government are building up a beef and butter mountain inside the United Kingdom.

It is ludicrous and indefensible that we should be partly holding back, by this gratuitous burden, a recovery which is now within our capacity. The irony is that when it suits them, as in the case of the wine duties, the French simply break the rules, break the law, and carry on. Nobody does anything about it.

We must have an assurance from the Government, tonight if possible, that they mean, as they have promised over and over again, to make an effective attack on the follies of the common agricultural policy. Given that, and with a firmly-held incomes and Budget policy, a genuine export-led growth is now, I believe, nearly within our grasp.

5.57 p.m.

Mr. Hugh Fraser (Stafford and Stone)

After listening to what the Prime Minister said, I am convinced that my right hon. Friend the Leader of the Opposition was entirely justified in moving a motion of censure. I have never heard such an expression of vague sentiments of good intention, with which, alas, the floor of Hell is paved.

I want to speak on two main points—first, the economic manoeuvre which the Government succeeded in making on Monday and, secondly, the need for a new economic policy. I deal first with the economic manoeuvre of obtaining a standby credit of £5,000 million. The right hon. Member for Battersea, North (Mr. Jay) and others who follow economic matters will realise that one of the great changes with a floating rate is that the description of the pound as a national asset, which is what the Prime Minister once called it, is no longer true. The pound is merely a means of recording in the world the estimated value of a commodity. Therefore, the less we wrap ourselves or the Union Jack round the £ sterling, the more sensible we shall be tonight.

Unless the Government take much more severe action than they have taken hitherto, there is the greatest danger that the …5,000 million which has been borrowed will go down the drain in precisely the same way as the …3,000 million which had to be spent by the Bank of England in supporting the pound over the last few months. The House should address itself to that, rather than listening to the Prime Minister's vague aspirations. We are in a considerable crisis, and the needs of the situation demand that steps should be taken.

I do not know whether you have ever lost money in a casino, Mr. Deputy Speaker. It is extremely relevant to what is happening today. In my misspent youth, I lost money in casinos and in those circumstances one has two options —asking the casino for more money or asking one's bank manager for a loan.

The Government did not go to the International Monetary Fund. They went to the casino and asked for a standby credit. If one goes to the bank manager after losing money in a casino, one gets a very different reception from that which one receives from the casino proprietor who, after a good deal of argument, says "Please continue with the money I am giving you. The game must not cease. I do not want some of the rich clients to leave the building."

The Government should have gone to the IMF and said that they needed the money. They did not dare to do that because they knew that the IMF would impose conditions which the Government would find politically impossible to fulfil. The sooner this fact is made clear to the British people, the better.

This great boast of the Chancellor of the Exchequer is a sleight of commerial hand. It gives the Government only a few months before there is another serious and heavy attack on sterling. There will be such an attack because Government indebtedness is still rising and will continue to rise, whatever the Chancellor says, next year and the year after. If we add the interest on borrowings to the expenditure committed by the Government, the sums to be paid out will be larger next year than this year.

It is remarkable to note that in 1964 total Government expenditure was £8,000 million. Next year, the interest on the National Debt alone will be at least £7,000 million and, with the present rates of interest at which the Government are borrowing, it could be £8,000 million.

That is what is wrong with the present Administration. It is no good the Prime Minister talking about great aspirations. The Socialist coalition opposite has gambled on more nationalisation, a social wage which the Government cannot afford to pay, and a social contract which has failed.

I do not know whether the Prime Minister has read the suggestions of his son-in-law, Mr. Peter Jay—the son of the right hon. Member for Battersea, North —in The Times for saving about £3,000 million this year and next year. Perhaps the Prime Minister has not been in touch with his son-in-law. I am told that Mr. Jay is watching the Observer transatlantic yacht race. If he is all at sea, the Chancellor will have no difficulty in getting in touch with him.

Let the Government find out some of the problems assailing our currency and bring forward a proper programme of reform. It is not just a matter of holding out until 16th June when the trade unions go through the rigmarole of accepting a policy forced down their throats by a blustering Chancellor. It is not even a question of cutting Government expenditure. What is needed is even more serious than that.

We need a new approach to our whole economic situation. I have more sympathy with the left wing of the Labour Party than with the great mass of lumpen bourgeoisie in the centre. At least the left wing has a policy of some kind. It may be a policy which we would regard as misery, but that is better than the irreconcilable, invertebrate, adamantine drift we see from the Front Bench opposite. We must have changes. We cannot keep asking international bankers to lend us money and carry on as we did on Monday. The only reason we succeeded was that they did not want a collapse of the whole international organisation of exchanges.

We need a Government who will dare to tell the people the truth, as my right hon. Friend did today, but as this Government will not. We must have a Government who dare to make the necessary cuts in Government expenditure. We will do it, this Government will not. We must have a Government who will dare to restore differentials. Our skilled people and managers are the worst paid in Europe. We must have a Government who dare to realise that increased production is the only way out of our present problems.

Our gross domestic product is now at the same level as in 1973. What is the use of allowing the Government to spend more money when our GDP has not moved because there is no encouragement to invest or to work harder? We need a Government prepared to do the things which this Government are incapable of doing. That is why I back the motion and join my hon. Friends in demanding the earliest possible General Election.

It is no good the Liberals giving us a long discourse on a new form of incomes policy, controlled in some mysterious way by three just men outside. If the Liberals are against this motion, they are merely the running dogs of the broken Socialism we see before us.

6.8 p.m.

Mr. Frank Tomney (Hammersmith, North)

The right hon. Member for Stafford and Stone (Mr. Fraser) has just made an extraordinary speech. He started by saying that in his youth he frequented casinos and lost a lot of money. Anybody who knows anything about arithmetic knows that the odds in casinos are about 40 to one against before the gambler even starts. Yet the right hon. Gentleman is now offering economic and financial advice to the nation. We have heard it before, but it was even worse tonight. He has been advocating a head-on collision with the industrial work force of this country. This has been tried once. It failed then, and it must not be tried again.

The right hon. Gentleman seems not to have noticed what has been happening over the last 25 years and the things for which the electors have consistently voted—under both Governments. Each Government have supported the social policies of their predecessors and in some cases—this included Governments of the right hon. Member's party—improved upon them. These changes are now built into our economic and financial fabric and cannot easily be disregarded.

In that situation, any Government have to take the electorate with them on any policies of radical change affecting the whole nation. That is just what the right hon. Gentleman's approach would not achieve. It has taken us a long time to get here. That is why this motion of censure is fatuous at this time. I can imagine occasions when motions of censure would have been more appropriate and tolerable, but this one is at the wrong time and for the wrong purposes.

My right hon. Friend the Prime Minister delivered a cogent speech in everyday language, easily understandable by those to whom it was addressed—and that does not mean those of us in this Chamber. No longer do the economic, financial and monetary arguments flutter back and forth here. My right hon. Friend's speech was an endeavour to prepare the people for a programme of industrial reorientation. We must compare ourselves with other nations—Japan, France, Germany—and consider what happened to them after the war and how they have drifted into corporate State status.

We have been drifting into corporate State status without people realising it. All the major capital-spending industries of Europe are State-owned, and the same is true of this country. That has to be so. Money cannot be raised on the market to finance the required operations. It can be raised easily for across-the-counter consumers, but industries which make little or no profit and have heavy capital expenditure have only one source for their money, and that is the Government.

It is to the eternal glory of the small saver that, without his knowledge, he has buttressed Government after Government for years and years at low rates of interest, not knowing that he has been losing money. To such people we owe a debt. To upset that balance by the measures suggested by the right hon. Member for Stafford and Stone would put us in queer street.

The Prime Minister's speech today matched the occasion. We must look at ourselves objectively. It has taken years for the trade union movement to reach a relationship of trust with the Government. Harold Macmillan had some success with this approach in his day. The trade union movement has an ideological and political appreciation that if it does not work together with the Government of the day its cause is lost. It has taken long and patient negotiation and a lot of trust to reach that stage, but it has been reached in two consecutive years. As the Prime Minister said, from now on that process, the social contract, has to be expanded.

In the unions themselves there are always diverse ambitions and skills, all wanting their own rewards. On any actuarial judgment of the economic importance of any individual to the community, the coal miner must be top of the list. On any financial assessment he should command £100 a week and could get it if he proved obdurate. It is to the eternal credit of those who lead the National Union of Mineworkers that they know that such a policy would completely upset the cohesion of the trade union movement.

Against a background of an organised labour force of 10 million, the thinking of the right hon. Member for Stafford and Stone is that of Rip Van Winkle. He is 60 years out of date. We now have the difficulty of trying to employ our capital assets in the best way. This may mean a complete change in industry, with round-the-clock shift working. We can get out of our problems by devoted productive work and by an explosion of exports necessitating round-the-clock working.

For the last 25 years there has been no capital investment in industry of any value. During the Macmillan Government, after Suez anyway, when the slogan was "You never had it so good", this country could sell anything to anyone in the world. There was little or no investment in British industry at a time when it was essential. Now, when we are on a wave of rising prices and inflation, we have neither the tools nor the machinery to compete. If we started now from scratch, that would still be our biggest difficulty. Even making new monetary arrangements would not help us to make any great impression on world markets. That is why there has to be a change of economic and industrial policy.

Whichever party is in Government, it will be advisable to ensure that the good will of organised labour, built up over the last three years against a lot of opposition, is further developed. But to meet the labour force with confrontation is just asking for this country to slide further down the drain.

The answer to the main problem is an imponderable one. The fall in sterling has been more dramatic than people envisaged. If we are objective and brutal about it, we could say that the true sterling rate was what it would bring and no more. If we do that, however, we can say goodbye to many of our financial institutions, invisible earnings and exports and a large proportion of the international credit and banking system.

Therefore, the standby loan and the purpose for which it is to be used may create the impression of an Alice-in-Wonderland situation. What we are doing is taking advantage of a facility granted to us by six other Governments for buying our own money to keep it at a stable level. This is a point on which I might differ from some of my hon. Friends. Unless we can hold it at a rate of …1.85 we may have to make some decisions. But if we have to make them we should not do so on the basis of panic brutality outlined by the right hon. Member for Stafford and Stone.

We must take the electorate with us on the basis of past promises and performance and of future achievements. At that juncture the decision may have to be taken, but we hope it never arises. That is why the Prime Minister today was pointing out, for the benefit of those who read the newspapers tomorrow, that a consistent effort must be made by everybody.

One can draw lessons from history. I have been a Member of the House for 25 years. Through making the kind of speech that I am making now, I am under notice to quit by my constituency party. My left wing, or what passes for my left wing does not like the kind of speeches that I make. Those hon. Members who know me know that I have always made this kind of speech, and I shall not stop making it now. It has always been my aim to speak for the people outside.

In 1964 80 per cent. of the electorate voted in the election. Last year 55 per cent. voted, and the Government are in on a 39 per cent. vote. That shows that the great mass of people are deeply critical of and disillusioned with the political parties who operate in this House.

Mr. Donald Stewart (Western Isles)

Hear, hear.

Mr. Tomney

The hon. Member will be going. It is just a question of time until he is left with nothing to do but play the bagpipes beside Loch Ness.

There is disillusionment in every sector of our activity. When we in this Chamber should have been speaking our mind or reflecting the mind of the people, we have shown cowardice and been silent.

Consequently, a feeling of cynicism and intolerance is growing up in the electorate. This must stop, and we must take the people with us on a crusade. Great Britain is a tight island with few resources, but we have a skill—adaptable and ingenious—which we must use.

My solution to the problem is the industrial solution. We must go back to first bases. Since we lost the Empire and Imperial Preference there has been a long slide down, and we are still sliding. We have kept up the pretence of a Commonwealth, and it has always been a heavy financial drain upon our resources. I know that the Commonwealth countries send us raw materials and use our banking facilities, but the sooner we say that the old association with grants-in-aid and financial support must be strictly on an economic, financial and industrial basis, the better it will be both for us and for the Commonwealth countries. We can no longer pour out thousands of millions of pounds for mother India as we have done for the last 40 or 50 years. The people of the country want to know why we cannot mind our own garden for a time and see how we get on.

Our problems can be settled only by the industrial efforts of the country. The censure motion is wrong for that purpose, especially at this time. The Conservative Party knows that it cannot risk another confrontation. The Conservatives have no adequate policies to deal with the economic and international problems, and the world currency market is now calming down.

We are all in the same boat, and the boat is top-heavy and has no sails. It is being pushed along with us all in it. If the motion has an adverse effect on world currency markets it will be deplorable, but if it is defeated by a majority tonight, as I hope it will be, there will still be time for new ideas and for a new purpose in industry, and that is what we are after. That is the kernel. We shall achieve success only by full employment, full production, full export potential, heavy reinvestment and, in the first few years, round-the-clock working. Once we can get that going, the opportunities for the country will be boundless. That is why I welcome the Prime Minister's speech and the manner in which he made it. I have had my belly-full of economists of all natinalities, especially Hungarians. He was at it again this morning in The Times. These people frighten me to death.

What we need is a practical realisation, without economic jargon, of the application of productive processes. The people must be firmly convinced that they are going along with the destiny of the nation. They will then play their part in securing for us the future that should rightly be ours. If we all address our speeches to that theme, we may get somewhere in the next four or five years.

6.24 p.m.

Mr. Donald Stewart (Western Isles)

I apologise to the hon. Member for Hammersmith, North (Mr. Tomney) for having missed the earlier part of his speech, although I was in the Chamber from the start of the debate. I was delighted to listen to the hon. Gentleman although some of his views, even expressed from the Opposition Benches, might seem to be a little eccentric and out of place from a member of the Labour Party. The hon. Gentleman was speaking his mind, having made it up and not being afraid to state it. That is always impressive.

The fact that the Scottish National Party intends to support the official Opposition's motion does not imply that any great advantage would be gained by a switch of the two Front Benches, but we do not go along with the impression given by the Prime Minister that everything in the garden is growing nicely and in a short time the sun will be out again and we shall be on a level keel —and all the other nautical metaphors he used.

We see the spectacle of the Government claiming that the pound is undervalued and at the same time cobbling up another massive loan. The Government, whatever their viewpoint and their ideology, are pushing through legislation which has little support in the United Kingdom as a whole. The right hon. Lady the Leader of the Opposition referred to the nation becoming an Iron Curtain country. That is to pitch it a little high. A Conservative Member said recently that the problem on the Labour Benches was wetness rather than redness, and apart from a small minority of Labour Members that is true. Bit by bit we are becoming a corporate State. Labour Members want what appears on the manifesto to get on to the statute book regardless of the nation and perhaps of the majority of the House. As we saw a fortnight ago, they are not always too careful how they go about it. The Aircraft and Shipbuilding Industries Bill has been taken out of the arena for the moment.

A member of the Labour Party in Scotland, talking about the rail cuts, said in the Sunday Observer of 30th May: If this is what nationalisation does, then the Government could be in danger of losing the vote of all railway MPs for the Bill to nationalise the shipbuilding industry. Our opposition to the Bill is on that basis. When the steel industry in Scotland was nationalised, we warned everyone what the effect would be. The steel industry has been nationalised and jobs have been lost.

The Prime Minister referred to a devolution Bill and said that no Bill would satisfy the SNP. That is incorrect. My party will vote for a devolution bill when it comes before the House if it is broadly in the terms of the White Paper. The Bill will have the support of my party in its passage through Parliament, but when will the Bill appear?

The Prime Minister said he was surprised that the SNP should vote against the Government when they were promising a devolution bill, but the Government have been promising the Bill for a long time. In January 1975 a member of the Government said that the Government were on target and there would be a devolution Bill by the beginning of November 1975 which would be on the statute book by July 1976. There is little hope of reaching that target now. The Prime Minister in referring to the Bill is still talking about pie in the sky and jam tomorrow, if not the week after. The timetable has fallen behind again and again. The Prime Minister should not try to sell us this gold brick for the seventh time. We might buy it once, or perhaps twice, but not seven times. The Government cannot buy us off in that way.

We are opposed to the Governments handling of unemployment in Scotland. The Prime Minister talked about achieving a target of 3 per cent. In Scotland we would think that that was a tremendous achievement. It seems odd when I hear Members talking about unemployment in their constituencies reaching 8 per cent. or 10 per cent. That unemployment must be extremely difficult and unpleasant for them and the people they represent, but it has never been as low as 10 per cent. in the area in which I have lived throughout. It would be a great achievement to reduce unemployment to 3 per cent. in Scotland.

The Government have gone out of their way to say that they put the headquarters of the British National Oil Corporation in Scotland. That is true, but all the business is done at the branch office in London. There is no sign that decisions will be taken in Scotland. Is that the sort of thing on which the Prime Minister and the Chancellor are basing their hopes for the 1980s?

In Scotland we have an education crisis. We know that the country is in a serious financial plight, but more than finance is involved. Governments, both Labour and Conservative, exhorted students and people in other jobs to go in for teaching. Their propaganda gave the impression that there was a market that would never end. It was suggested that if people switched to teaching jobs they would be guaranteed employment for ever and a day. Therefore, the excuse of lack of finance will not wash. The Government have an obligation to see that the teachers leaving the colleges are given jobs.

I heard someone say the other day that teachers had no more right to sympathy than any other section of the unemployed. In some respects that is quite true, but not when Governments have given guarantees or at least made people think that teaching jobs would be secure. Both Labour and Conservative Governments exhorted people to go into teaching and implied that the jobs would never run out. That is why I say that jobs should be made available.

I have fixed on some of the main points that we as a party have against the Government. We could not in any circumstances give them a vote of confidence. Therefore, we shall vote in favour of the motion.

Mr. James Sillars (South Ayrshire)

The character of the debate reflects the situation in which we find ourselves. There was much more of a heightened atmosphere last night on the Education Bill than there is for this marvellous tightrope censure situation. In my view, it is not really serious. Everyone knows who will win the vote this evening. Everyone knows that the Conservative Opposition hope that the Government will win it.

I approach the Government from an entirely different position from the Leader of the Opposition. The right hon. Lady looks across from the Dispatch Box and sees the Prime Minister as "Red Jim". My complaint is that far too often the Prime Minister's grey hair has a blue rinse. I approach the Government from a strictly left-wing point of view. My complaint is that they are not Socialist enough.

The censure motion is not really serious. The Opposition have their reasons for not wanting an election now. It is not that they do not feel that they are ready for government or that they do not have alternative policies. It is that they recognise chat the Labour Government are doing to the working people what no Conservative Government would ever get away with. The Labour Government are doing things against the interests of the working people with the enthusiastic support of trade union leaders who should know better.

No Tory Government would ever get away with 1. million unemployed. When there were 1 million unemployed under the Tories, there were demonstrations in the House as well as outside. If a Tory Government were presiding over 1. million unemployed, the TUC special congress next week would not be meeting to endorse the Government; it would meet to start a massive Labour movement campaign in pursuit of full employment, the right to work and Socialist policies introduced by a Social Government. We have a Labour Government who have raised the threshold of tolerance of unemployment well beyond the million mark. And on Monday afternoon, when the Chancellor of the Exchequer addressed the House, we saw a Labour Government invoking the support of the international bankers.

We have a Labour Government who are pursuing a wages policy that is deliberately designed to cut living standards. Despite what the Prime Minister said in favour of public expenditure this afternoon, we have seen essential cuts in services such as housing and education. Why should the Tories want to take power when in their eyes it is better that the odium for these policies should lie with the Labour Government? The Tories have the additional benefit that such policies get Socialism a bad name at the same time.

One of the ironies of the present situation is that the one thing on which the Leader of the Opposition and the Prime Minister have agreed is that we are getting Socialist policies from the Labour Government. The Leader of the Opposition goes round the country saying "This is what Socialism means". This afternoon the Prime Minister said that this is an Administration of democratic Socialism. Labour's performance does not correspond with my idea of what a democratic Socialist Government should be doing in economic or social spheres.

I do not think that the Tories want to win tonight. Neither do the hon. Member for Western Isles (Mr. Stewart) and the SNP.

Mr. Donald Stewart

We do.

Mr. Sillars

We all know why the SNP is voting this evening in favour of the motion. It is doing so because it made a fatal blunder at Motherwell. It let the hon. Member for Aberdeenshire, East (Mr. Henderson) get in front of the television cameras and the microphones. The hon. Gentleman was stimulated by all the kilts, the symbolic thistles, the saltire, the lion rampant and the symbols of chauvinistic nationalism. He was carried away by the surroundings and he made a fascinating but most revealing speech. His speech was transmitted on BBC television and Scottish television and was heard throughout the United Kingdom. Having brought about 1,000 delegates to their feet with the call "Do you want a General Election now?", when the censure motion was tabled the SNP leadership had no alternative but to say that it would vote for the Opposition.

Mr. Donald Stewart

The hon. Gentleman will agree that the SNP, whatever its reasoning, was voting against the Government on the Aircraft and Shipbuilding Industries Bill. The other night there was a bit of a cliff-hanger and the Government might well have been defeated. We did not stay back from the brink on that occasion. Why should the hon. Gentleman think that our attitude has changed?

Mr. Sillars

I think that there is a special quality about a censure motion. Tonight we shall determine whether there is to be a General Election. It is one thing to vote against a specific measure, but it is a different matter to vote to determine whether there is to be a General Election and the fall of the Government. The hon. Member for Western Isles is an ingenious chap—most people from the Western Isles are—but the folk from Scotland who know the internal political situation in Scotland know full well the reasons for the SNP's vote this evening. In fact, it does not correspond with SNP policy.

It may be of interest to English and Welsh Members to know that the hon. Member for Aberdeenshire, East did not carry the SNP conference. He carried the delegates inasmuch as they got to their feet, but he did not carry them in the vote. The much more reasonable and sensible words of the hon. Member for Clackmannan and East Stirlingshire (Mr. Reid) were what carried the day at the SNP conference.

As I understand the SNP's policy—I am open to correction—it is prepared to accept an Assembly as a first step to its version of independence. There is no chance of getting that kind of Assembly from a Conservative Government or, possibly, from any Government this side of a General Election. However, the hon. Member for Western Isles can sit back and be as relaxed as anyone else this evening because that is not going to happen. The Government will not fall.

There is no real move to censure the Government. In my view, they will survive tonight. They are likely to survive at least well into the autumn, unless July 1976 reflects some of the things that happened in July 1966.

I offer my right hon. Friends a couple of general observations and one specific observation concerning the attitude to the problems we face within the United Kingdom. First, I believe it is foolish to see the present crisis as one borne of current or recent developments. A series of mistakes and misjudgments over the past 15 years has contributed to the decline of the economic performance and otherwise of the United Kingdom. The problem goes deeper than the mistakes of the Macmillan-Wilson-Heath era. We must probe much deeper in our analysis to find the real cause of the malaise that grips the United Kingdom.

I believe that there will be some sort of economic recovery. The United Kingdom now stands in relation to the world economy as the Scottish economy used to stand in relation to the United Kingdom economy before oil was discovered. Incidentally, oil is a gift of God. It has nothing to do with good government from Westminster. Scotland's position used to be so weak that it was first into the recession and last out of it. I think that that is liable to be the future of the United Kingdom in relation to the world unless some in-depth analysis is done and a basic fundamental strategy for recovery is fashioned by the Government.

In my view, the problem lies in the fact that no major leadership group in society has yet come to terms with the facts of post-Empire Britain. As yet, there has been no major adjustment to the loss of Empire with all that it implies for economic policy, trade, finance, defence and, indeed, the rest of international relations.

We are experiencing in 1976 the culmination of a failure to understand and adjust to the post-1945 years, especially the years after 1956. We learned some things from Suez, but we missed some important lessons at that time. That criticism applies to every United Kingdom political party in this country.

Post-Empire Britain is an overcrowded island with a massive population, massive dependence on imports and no captive markets for raw material inflow and outflow of finished manufactured goods. It is a country with an inadequate economic base to support a big population and meet the growth expectations which are rightly there among the people of this country unless fundamental things hap- pen. To expand the base of the economy and strengthen it to the point where it can support the population means that there can be no overseas investment until home needs are met in full—and those needs are massive.

My right hon. Friend the Prime Minister repeated words that I have heard year after year inside the Labour movement about the objective being a high-wage, high-productivity economy. But a prerequisite for that is an exceptional high investment level in our industrial capacity.

To meet the objective of a sufficient economic base and to attain the necessary level of constant high investment and reinvestment implies a planned economy with control of internal capital flow being as necessary as the control of external capital flow. That implies a much truer Socialist approach than we have had from this or any other Labour Government in our history. But a prerequisite for those kinds of policies is a recognition by a Labour Government, which has the benefit of ideological guidance not available to the Conservatives, that we carry too many of the past practices of Empire, especially on capital flow, which the post-Empire Britain cannot afford.

My second general observation concerns the bargaining power available to the Government throughout the rest of this year, especially if they are forced in the direction of the International Monetary Fund with all those dreadful strings about which we are all concerned. Should that occur, the Government's position will be far from hopeless. In a sense, the Government stand on the brink of a very high-level game of "Call my bluff". In the past, the tragedy of Labour Governments has been that their bluff has been called time after time by the organisations of international capital. I do not believe that it need be the same now.

The Government do not have a strong economic card—that goes almost without saying—but they are not without tactical or strategic advantage if they are willing to insert the odd irreverent Socialist thought into the rule book by which the capitalist system operates. I ask my right hon. Friend to recognise that the Government are dealing with a capitalist system which is still not certain about the permanency of its recovery and is nervous about general political and financial developments. The word "Italy" automatically comes to mind.

I do not believe that the IMF or any other group will risk bringing down Britain in the financial sense, because the day after we go Italy follows and a whole number of others follow as well. I never believed in the domino theory in the Far East, but I believe in the domino theory inside the international capitalist system. I think that that system believes in it as well.

The capitalist system is extremely nervous. With the political developments now manifest in the Western world, I believe that bringing down Britain financially is a risk that it dare not run.

I now turn to a specific observation that concerns me as a trade unionist—wages policy. It is obviously too late for the Government to turn back from their present course of folly. The TUC will do its stuff at the special congress, and another expediency will be born next week which will haunt its creators as all other rigid wages policies have done and will do.

For political reasons, the Government may feel compelled to pat themselves on the back in public—no doubt the Royal sword will touch the shoulders of trade union leaders in some future honours list—but in private, inside the confines of the Socialist movement, I hope it is not seen in that rosy light by the Government.

The current wages policy is sowing a minefield of future trouble. There is too much rigidity in the wages policy at a time when some parts of the economy are starting to expand. Rigid wages policy and the dynamic of an industrial sector in growth cannot be reconciled. My right hon. Friend the Lord President of the Council knows that better than anyone else because he was Secretary of State for Employment from February to October 1974. He knows that the most dynamic part of the economy then was in North-East Scotland under the influence of oil. I suggest that he also knows that the dynamic there could not be reconciled with the rigidity of the incomes policy that he inherited. Even people from that area in support of the incomes policy were going to him, day in, day out, pleading special cases for one group or another. The tensions and strain will develop and a new set of industrial problems will be created posing far greater difficulty than some Ministers yet seem to realise.

Then there is the threshold nature of the present and future awards. There must ultimately be consolidation of basic rates. In some industries it will mean talking about consolidating £10 a week into the basic wage rates at about this time next year. That will become a trade union imperative as workers see overtime rates, holiday pay and pension rights, which are an extremely important factor, erode in real terms when the thresholds are held outwith the basic calculations.

My plea is for a return to a flexible wages policy as a matter of the utmost urgency. The one bright thing in the Prime Minister's speech today was that we might get a genuine social contract mark 2. I believe that it was a tragedy to desert the first social contract.

As I said at the beginning of my remarks, the Government will survive tonight, probably into the autumn and perhaps beyond that as well. They should use the time between now and the autumn before the next onslaught—if one can describe that pathetic performance this afternoon as an onslaught —for deep analysis and the construction of a Socialist strategy for an economic recovery. I believe that it can be done. But time is running out for a Labour Government, although, thankfully it will never run out for Socialism.

6.48 p.m.

Mr. Geoffrey Rippon (Hexham)

I hope that I shall be forgiven for not following the hon. Member for South Ayrshire (Mr. Sillars) into an analysis of the internal divisions in the Labour Party. Moderates and extremists alike in the Labour Party are collectively responsible for the circumstances which have led to this censure motion. As my right hon. Friend the Leader of the Opposition said, there is a mass of issues on which the Government stand condemned—the subversion of parliamentary democracy and the rule of law, the divisive and irrelevant nationalisation proposals, and the failure to take initiatives in Europe, in Rhodesia or in Cyprus.

The Leader of the Liberal Party—sitting on the fence—was correct when he said that it is the financial and economic crisis which must concern this House and the country today. I thought that the Prime Minister did not devote enough attention to that matter. That, no doubt, was deliberate, because it is difficult ground for him to fight on, but we should be concerned at the frightening complacency with which he dismissed inflation and public expenditure in a few paragraphs in his speech.

On inflation, the right hon. Gentleman simply said that it had been reduced and that the Government hoped to bring it down still further. If the Chancellor of the Exchequer was not lying in October 1974 when he said that the rate of inflation was 8.4 per cent., within a year we knew that it had risen to well over 20 per cent., and we know that it is now down to about 19 per cent. In fact, all the Prime Minister told the House and the country today was that the Government were hoping to bring down the level of inflation to what it was when they started in office.

On public expenditure he said that planned expenditure was really quite reasonable, and very little more than at present. In fact, the Government are planning for an increase of no less than 17 per cent. in public expenditure in both real and money terms compared with the level in 1973–74. In their White Paper they call this a plateau, but public expenditure on that level can only be justified if, in fact, we have earned the money. The serious aspect of our situation is that gross domestic product is not rising sufficiently, and neither is production.

We are right to be concerned about the way in which money is spent. The right hon. Member for Battersea, North (Mr. Jay) suggested some reductions which might be made. Reductions could be made in housing subsidies, and in all general subsidies which tend to disguise from people the real value of what they are consuming. I do not disagree with the right hon. Member when he says that expenditure on roads could be cut. In fact, the previous Conservative Government agreed that we should not go ahead with urban road expenditure on the level which some people wanted. On the other hand one has to have the construction industries sensibly employed building motorways and bypasses—in other words, engaged in productive building investment. We have to stop building things that are unproductive, such as new town halls, and other projects which can be easily postponed.

For the last two years our economy has been going down hill rapidly with the value of the pound, both at home and abroad, falling steadily. It really is not helpful to say the pound is rallying when all the time it is rallying downward. Every Member of this House must be desperately concerned about this general downward tendency. There is now, in dealing with inflation no way which will not hurt, and all parties will have to cooperate with the Government if they bring in measures that will work. Drastic action must be taken if the real value of everyone's wages, savings and pensions is not to erode any further as the value of our money disintegrates.

The Government cannot claim to have secured a major triumph because they have the opportunity of borrowing another 5 billion dollars. Another borrowing spree will make our position much worse. As my right hon. Friend the Leader of the Opposition said, the debt servicing now, with 14 per cent. rates of interest, amounts to 10 per cent. of public expenditure. This is a major defeat, not only for the Government but for the country. We find ourselves in a situation where we shall misjudge at our peril the latest rescue operation mounted by the central banks to avert disaster for the pound. Without it, as Dr Emminger, President of the Deutsche Bank, said, No power on earth could have averted the headlong fall. We all want to improve the social services. There is no difference between the major parties here, but there is now a gap of 20 per cent. between what we are spending and what we are getting in revenue. In other words, we borrow £1 for every £4 we spend. That has got to stop.

I agree with the right hon. Member for Battersea, North that all this means a return to more orthodox budgeting in which we accept that there must be a time when the books have to be balanced. They can only be balanced by raising taxation still further or by cutting expenditure. At both the top and bottom ends of the scale our tax rates are so high now that any increase in direct taxation would seem to be impossible.

Many people outside this House like to sit back, shrug their shoulders and put the blame on someone else. Liberals, for example, always want to opt out of any responsibility for anything. There are many other people who like to say that it is the fault of successive Governments. Perhaps we play into their hands by continually blaming our political opponents. I do not believe that everything the last Conservative Government did was right, or that everything everyone else does is wrong, but if we do not face up to the real issues this country will drift towards disaster.

I have a certain amount of sympathy for the hon. Member for Hammersmith, North (Mr. Tomney) who said he was fed up with economists. Whenever we have economic difficulties we are in danger of trying to get economists to give us a formula with talk about M1 or M3—or "Go west down the M4". People talk a lot of jargon about two-year monetary lags—though I must point out that there was no two-year lag between the Chancellor's 8.4 per cent. inflation and the 26 per cent. inflation we ended up with less than a year later. It all depends on particular circumstances.

Anyone can grasp the simple fact that a Government have so much revenue and can spend so much money, and at the end of the year they will either have a surplus or a deficit which is calculable. If the Government go on indefinitely with a deficit the time must come when no one will lend us any more money and we shall have to balance our books.

The present Government's record on inflation is worse than that of the previous Conservative Government. We had to deal with a situation of rising world commodity prices. Given a fourfold increase in oil prices, in December 1973 Lord Barber came forward with public expenditure cuts which in real and money terms were larger than ever before. We were criticised by the Labour Party for doing so, and almost immediately afterwards that opposite restored these cuts and thus helped to spark off a further round of inflation. As a result, under the present Government inflation has been running generally at double, and at times even treble, the rate under a Con- servative Government compared with our major overseas competitors. We held inflation rates broadly in line with those in our main industrial competitors. The Prime Minister says that this is still the Government's aim. If The Times is right when it says that it looks as if there may be some improvement in the future, and we are now only 50 per cent., according to the OECD, above our competitors I would suggest that this is still not good enough.

Of course the trade figures are better for the moment. How can our exports fail to increase when the value of the pound is falling? But the import bill still has to be faced. I believe that there is a very grave danger in the way in which all Governments look at the monthly figures on a short-term basis when they are subject to so many distorting factors. There is a tendency for any favourable signs to be seized upon as opening up new possibilities. If the figures are unfavourable there is a tendency to hang on like Mr. Micawber in the hope that something will eventually turn up.

We have failed time and time again as a country to face the underlying trends. If we had no more statistics than Mr. Gladstone had we would know where we stood. We have to look at the figures of our earnings, our spending and our borrowing. I believe that the Labour Government's heavy international borrowing has been a major factor in the loss of confidence which has led to a falling pound and rising prices.

Between May 1970 and February 1974 the Conservative Government repaid international debts to the extent of …4,500 million—debts which had been accumulated under the former Labour Government. By comparison, between March 1974 and April 1976 this Government had a net borrowing of …3,600 million. That is the critical difference between the financial policies of the two Governments. Now the Government propose to increase that …3,600 million by an indefinite amount up to …5,000 million standby credit, and the Chancellor said that if necessary he will go back to the IMF.

Mr. Jay

The right hon. and learned Gentleman's figures are extremely misleading. It was the balance of payments current surplus of over £1,000 million in 1971—due to the Labour Government's policies in previous years—which made it possible to repay some debt in subsequent years.

Mr. Rippon

The figures are correct and they cover the whole period. It clearly makes a difference to overseas confidence if one Government, steadily in all circumstances, repays debt, while another, steadily in all circumstances, incurs it.

Mr. F. A. Burden (Gillingham)

Is my right hon. and learned Friend aware that I put down a Question asking for the sterling amount borrowed between 1st March 1974 and 29th April 1976 for loans repayable in dollars? I asked what it would cost in sterling to repay them at the nearest date. I was told that the original debt was £3,300 million and that if repaid on 10th March this year the cost would have been £4,000 million, a £700 million increase in the period.

Mr. Rippon

Naturally we would be affected by the fall of the value of the pound.

It is against the background of the Conservatives repaying debt and Labour incurring it that one can understand that, whereas the value of the pound against the dollar at the close of play on 19th May was …1.8082, that compared with …2.3988, and …2.3945 on 1st June 1970 and 29th March 1974 respectively. In other words, during the time of Conservative Government there was a fall of only 0.2 per cent. in the value of the pound against the dollar. The figures are not so good in relation to the basket of currencies, but they are very much better than the fall of over 30 per cent. which has taken place under the Labour Government.

The …5,000 million standby credit has meant only that there has been some improvement in the value of the pound to something less than it was on 19th May when it was already lower than ever before. It is still more than 30 per cent. lower than it was when the Labour Government took over. Even as we speak we hear that it is not back to …1.80. The rate was …1.77 while the Prime Minister was speaking and by now it may be …1.75. It is no good having headlines in these circumstances saying that the pound is rallying. People cannot understand the crisis when they are told first that the pound is under pressure and then that it is rallying. Nevertheless, all the time there is the persistent downward trend.

Why is this happening? It is not just that the Government borrow so much money. It is also that they are spending so much. The Government are now spending £25,000 million a year more than in March 1974. Putting it another way, and allowing for the fall in the value of money, that is 60 per cent. of the gross domestic product compared with 51.1 per cent. in 1973. That cannot be justified in present economic circumstances. It is that which has encouraged inflation and which is creating unemployment. It is that which has raised the Government's borrowing requirement to £12,000 million this year, and that does not encourage people to hold sterling.

That increase in public expenditure and the increased borrowing requirement have led the Government to impose an additional £2,000 million of taxation, whereas the Conservative Government reduced taxation by £2,500 million. We lowered direct taxes. I do not believe that we can get this country moving unless we restore the differentials at every level, and that means allowing people to retain a higher proportion of their direct income.

Even at this stage the Prime Minister said nothing about a fresh look at the level of public expenditure. I do not think that it will be two years before we feel the effect of the further borrowing and further expenditure. We shall have to do something about it. Nations, like individuals, can live for a time first on capital and then on aid from benevolent friends, but a nation which sets out, as we have done, consciously and willingly on such a course is doomed to disaster.

So the sooner the Government quit the scene the better, but whatever happens we must all try to work together. That does not mean we must have a coalition Government—I do not think that that would work—but it means that we should in a debate of this kind show a common objective in dealing with the situation. That means cutting borrowing and spending as fast as we can. The initiative lies with the Government. If they fail to take it they should give way to those who will.

Several hon. Members

rose—

Mr. Speaker

Order. Before I call the next hon. Member to speak I ask the House to bear in mind that 17 hon. Members have indicated their desire to take part in the debate in the next two hours. It is possible for them all to do so if there is self-discipline.

7.8 p.m.

Mr. Eric S. Heller (Liverpool, Walton)

The Leader of the Opposition said that the Conservative motion was not put down lightly. Having listened to her remarkable speech, I think she probably regrets that it ever was put down. It will have about as much effect in the country as a wet fluke on a slab.

It was an hysterical speech of the sort we are becoming increasingly accustomed to hearing from the Conservatives. We heard it from the moderate from Hexham, but he did not show much of his moderation the other evening, although that is another matter. We are regularly treated to philosophical dissertations from the right hon. Member for Leeds, North-East (Sir K. Joseph). The essence of all the Conservative arguments is that we are now living under a Socialist Government who are moving us increasingly towards the bureaucratic dictatorships of Eastern Europe.

Mr. Alexander Fletcher

Hear, hear.

Mr. Jay

Just like the Gestapo.

Mr. Heffer

My right hon. Friend the Member for Battersea, North (Mr. Jay) recalls correctly the hysterical outbursts of our war leader, Winston Churchill, who after the war accused the Labour Government of wanting to bring in a Gestapo system. We were involved in a four-and-a-half to five-year bitter struggle to wipe out Fascism, and I hope that I played some small part in that, just as other hon. Members did.

As far as the Conservative Party is concerned for a long time the equation has been that the Labour Party means dictatorship. It has been repeated over and over again that if one persists in electing Labour Governments, one will lose one's basic freedom. That is the argument and it needs to be answered. I would point out to Conservative Members that it is not correct to equate the capitalist system with political and human freedom. I do not mean that just in respect of the terms so brilliantly spelled out by the Prime Minister this afternoon when he gave good examples from his own background of the denials of freedom under the capitalist system.

Hon. Members opposite have always said that those who work hard should be rewarded. My father was a boot repairer. He worked the whole of his life and when he died he ended up with sixpence in the Post Office Savings Bank and a bag of tools. Incidentally, he also got the Military Medal during the First World War, fighting for his country. He worked hard under the capitalist system and he never got any real fruits from it. But he did not complain. He did not have any politics of envy. He worked for the Labour movement in order to ensure that, increasingly, working people got a share in the fruits of their labours.

I would develop this theme by referring to some of the capitalist countries where human and political freedom has been totally destroyed. I was in Chile when President Allende was in office when that country had a free Press, a free trade union movement and an elected Parliament. It was destroyed by a military dictatorship which accepted the totally capitalist views of Milton Friedman. Thanks to that military dictatorship, human freedom has been stamped out in Chile.

Spain is a capitalist country. It is a country where the basis of society is capitalism and it has no free institutions. Conservative Members have to understand that we on this side of the House are as much opposed to the bureaucratic dictatorship of the Soviet Union and Eastern Europe as we are to the Chilean and Spanish dictatorships.

It is easy to say that if one has a Socialised economy, one has solved all one's problems, but that is not so. We find that the so-called European Socialist countries have public ownership, but they do not have political freedom. We have political freedom, which is being constantly undermined by very sinister forces, but we have not got a Socialised economy allowing for the planned development of our society. We have to solve that problem.

Mr. Alexander Fletcher

rose—

Mr. Heffer

I will not give way just now if the hon. Gentleman does not mind, but I shall give way in a few minutes.

That is the problem that we have to face as Socialists. It is the sort of problem that is not helped by hysterical outbursts from Conservative Members who, in their own way, whether they like it or understand it, are helping to undermine the basis of our democratic freedoms by constantly saying that the Labour Government, the Labour Party, my right hon. Friend the Lord President, and others, are hacking away at our democratic rights and liberties.

Mr. Alexander Fletcher

In view of the hon. Gentleman's enthusiasm for a Socialist economy, would he like to tell me which country which has a Socialist economy contributed to the $5 billion loan which has just been organised to bail out his Government?

Mr. Heffer

If the hon. Gentleman cannot follow my arguments, it is about time he gave up, because that question is totally irrelevant to the point I am making. I shall explain why. Incidentally, I believe that it is far better to get the loan in the way that we have—financial credits—rather than from the IMF, because the IMF would clearly lay down certain conditions.

Conservative Members are very pleased that our internal policy should be determined by outside forces, but I am not prepared to welcome outside bankers determining the internal policies of this country. However, the Government having got the loan, I would tell my hon. Friends that it is only a breathing space. We are still faced with the basic problems which existed beforehand.

That brings me to the point made by the right hon. Member for Stafford and Stone (Mr. Fraser), with whose speech I totally disagreed except for one point. He said that at least the left wing of the Labour Party had an alternative policy. That is absolutely true. The present situation has to be seen merely as a breathing space while we move towards the alternative economic strategy which we have argued for the last 18 months since the problems began to arise. That is how we see the situation.

We are not attacking the Government for what they have done in any way. We believe that in the circumstances the Government have done a good job, but it has to be seen only as a temporary measure and we have to move to the alternative strategy. What is the alternative strategy?

I would frankly say to my right hon. Friends that the pay policy is acceptable to the mass of the trade union movement although it may not be acceptable to everyone in it, or to certain hon. Members. The movement accepts the situation. We are democrats. If the movement accepts it, we go along with the view in the movement.

We have achieved a pay policy which will result in a reduction in living standards of working people. Since working people have accepted a sacrifice, part of the alternative economic strategy means that there must also be a sacrifice on the part of those who have been doing very well indeed under the capitalist system. The other side of the coin must be the introduction of a wealth tax at the earliest possible moment.

Equally, there needs to be an extension of the powers of the National Enterprise Board. That means the provision of more money and certainly more teeth for the board. Teeth must be provided to replace those extracted earlier, and money must be made available to extend the NEB's activities.

How are we to solve our investment problems? Opposition Members believe that all investment problems arise because confidence has ebbed away. But what happened to investment under a Tory Government? When that Government carried out almost everything asked of them by the CBI, why did the country not achieve investment at that moment? My hon. Friend the Member for Ayrshire, South (Mr. Sillars) rightly pointed out that we need a planned economic approach to our resources. Therefore, the breathing space is essential so that we may move towards a planned economic situation.

I emphasise that planning must not lead to total bureaucracy and loss of human freedom. That is the problem which must be faced by the Labour movement. We must solve that problem.

Mr. Hugh Fraser

How?

Mr. Heffer

I believe that we can solve it. The hon. Member for Stafford and Stone and his colleagues should not equate capitalism with human freedom and Socialism with dictatorship. We have to find a way between those two alternatives. That is why we believe in a democratic Socialist approach to this subject.

Mr. Bob Cryer (Keighley)

Does my hon. Friend agree that the right hon. Lady the Leader of the Opposition was trying to scare people by talking about an iron curtain country at a time when many of her colleagues are complaining that too many people are coming into the United Kingdom? Is not the whole argument illogical?

Mr. Heffer

I agree with my hon. Friend that the right hon. Lady's argument is most illogical. We have not in this country a Socialist society with a system that equates with a Socialist system. We have a Labour Government. The Government are trying democratically, step by step, pushed by me and many others, to move in a Socialist direction. That is the reality of what is happening—nothing more and nothing less. Therefore, it is absolute rubbish to say that we have a Socialist State and a Socialist Government, and the right hon. Lady knows it. The way in which she put her argument can only scare the people of this country.

I must conclude, because I know that many other hon. Members wish to take part in this debate. In closing, I wish to emphasise that we must have a system of planned investment. Planned investment means the expansion and development of the NEB. It also means that we must in the long run control the ownership of the banks and financial institutions.

When one makes such a statement, Opposition Members and their friends in the country immediately scream blue murder. Why should this mean the end of democracy? After all, the wealth within those banking and financial institutions has been created by the people. If that is regarded as the end of democracy, it is a strange democracy indeed.

In these matters, power and privilege are at stake and that is the real issue. The Opposition are all for defending the power and privilege that go with that type of economic system, and the alternatives are sharply before us. On the one hand, we can have a Conservative Government that will even knock away the props that have shored up capitalism in the last 20 or 30 years. That is quite different from Macmillan's concept of the middle way. The Opposition would like to see the elimination of those props so that we may have a return to unfettered laissez-faire capitalism.

The alternative is to move from our semi-controlled capitalist system into a controlled Socialist society, planning our investment policies and our economic development, and at the same time ensuring that we retain our human freedoms. That is the answer to the problems faced by the nation.

7.26 p.m.

Mr. Paul Dean (Somerset, North)

I detected in the speech of the hon. Member for Liverpool, Walton (Mr. Heffer) the authentic voice of Socialism. Its case is always well expressed and keenly argued, and we were not disappointed in that respect. The solution is always that of more Socialism. That is put forward as the answer to our problems. I shall return to that matter in a few moments.

I am glad that the right hon. Gentleman the Leader of the House is now present, because I should like him to know that I believe that the most disturbing thing about this Government is that they can no longer be trusted to observe the rules. When their policies and failures have been forgotten, this Government will be remembered as the Government who violated the traditions on which our parliamentary government is based.

The arguments of expediency which we have heard from the right hon. Gentleman in the last few weeks have been deeply shocking. We have been told that the end justifies the means and that the will of the Labour Government is too important to be held up by the House of Commons. These are arguments of the tyrant through the ages, and it is sad to hear them being used in the mother of Parliaments.

I turn to the Government's social services programme. Who are the victims of Socialist mismanagement? As always, they are those least able to protect themselves, those who lack the bargaining power of the big trade unions. The victims are the pensioners, the widows, the childern, and the patients.

Which programmes are the Government failing to honour under pressure of events? They are not failing to honour their Socialist programmes. They are failing to honour their social programmes. They can still afford £500 million to nationalise aircraft and shipbuilding, but they cannot afford to expend £500 million to honour their pledges to pensioners. They have an odd sense of priorities. Socialism must march on regardless of cost. However, social programmes are cut back, and apparently the Liberals have decided to support that policy by abstaining this evening.

I wish to illustrate my argument by putting forward four examples. First, I wish to mention pensioners, who have been offered a £2 increase in November. That sounds generous, but it fails to honour the repeated pledges made by the Labour Government to protect pensioners from inflation. The increase should be £3 rather than £2 in order to protect the pensioners from inflation. It should be £500 million more than the Government are offering.

The Government have altered the basis of the calculation to suit their own ends. A tricky little dodge has been used with the method of calculation. Why did the Government not come to the House and say, frankly that they could not afford to fulfil their pledge to pensioners, could not afford the full increase, rather than bend the rules? It would have been better to do that, to confess rather than to use the subterfuge which they adopted.

I am sorry that the Chief Secretary to the Treasury, who was on the Government Front Bench until recently, has now left the Chamber, because I wish to refer to the Finance Bill. The age allowances are being increased in the Finance Bill by £130 for a married pensioner. This sounds generous, but it is less than the pension increase.

What will the effect be? Many pensioners with other income will find that they are paying more tax or are being brought into tax for the first time. They will be worse off as a result of these proposals. Those who will suffer worst of all will be the thrifty ones, those who are receiving occupational pensions or the benefits of other savings, or those who are continuing to work after normal retirement age.

My second example is that of widows who continue to work. They are now paying tax on virtually every pound that they earn over and above their pension. They are trapped by the combination of a low tax threshold and a high tax rate. In many cases they are also paying national insurance contributions. Altogether it means that from every pound they earn they pay 40p in tax. What sort of priority is it which clobbers working widows like this but can afford £400 million to nationalise building land?

My third example concerns children. What has happened to the Government's child benefit scheme? It has been postponed by the Secretary of State for Social Services—or, more accurately, to use the phrase of the right hon. Member for Blackburn (Mrs. Castle), it has been abandoned. No wonder there is the motion on the Order Paper, signed by over 100 Members, which reads: That this House calls upon Her Majesty's Government to honour its commitment to implement the Child Benefit Scheme in full from April 1977. Here was a far-sighted reform, pioneered by the previous Conservative Government, abandoned by the Labour Government, reintroduced by them under another name and now dropped. Here is another solemn pledge affecting the social services which has been broken. This reform would have brought substantial help to mothers and to the poorest families. It would have helped to relieve the poverty traps which engulf so many of the poorer families. It could have been done at no extra cost whatever above the cost involved in the Government's inferior substitute.

My final example deals with the mentally ill. The Government produced a White Paper a little time ago called "Better services for the mentally ill". The cost of implementing the proposals in that White Paper would be about £40 million. Clearly there is not much hope of getting that sort of money unless it is taken from elsewhere in the social services. At exactly the same time the Government are throwing away £40 million a year in revenue by phasing out pay beds from National Health Service hospitals.

At a time when the health service is crying out for money, this important revenue is being sacrificed. Politics are being put before patients. It is all very well for Labour Members to laugh. They know only too well that it is time that these broken pledges were exposed. Now that they are being exposed, they do not like it.

No one who heard the Chancellor's Budget speech some weeks ago would have believed that these were the sort of measures he was inflicting on the pensioners and the other groups I have mentioned. These are some of the victims of Socialism in the social services, the pensioners, widows, children and patients. Social programmes are being abandoned because of the failure of the Government to manage the economy effectively. Social pledges are being broken but Socialism marches on regardless of the cost.

What a strange sense of priorities! The cost is too great. There are far too many innocent victims. It is for these reasons, among others, that I shall vote for this censure motion tonight.

7.35 p.m.

Mr. William Molloy (Ealing, North)

I want to refer briefly to the speech of the hon. Member for Somerset, North (Mr. Dean), who referred to the abolition of pay beds and to the absurd slogan that is to be seen on car windows about putting patients before politics. No one would ever believe that the hon. Gentleman belonged to the party which opposed the establishment of the National Health Service root and branch. The Conservative Party voted against it in every Division. If it had not been for a Socialist Administration and Aneurin Bevan, who had to fight the medical profession and the Tory Party, there would not be any National Health Service for the hon. Gentleman to criticise.

It is not always realised that not only was the National Health Service introduced by a Labour Government, but so also was the great social security measure of Jim Griffiths. One of the most recent of great Labour measures was the Chronically Sick and Disabled Persons Act. This has done much for so many unfortunate persons. The Conservatives could have done this in the 13 years before we came to power. They did not, yet they have the gall to say that we have not approached perfection now.

This great debate of no confidence was finished when the Prime Minister sat down this afternoon. His speech was one of the neatest demolition jobs ever done on the Tories and on any Tory leader over the past few decades. When the Prime Minister sat down this afternoon, the Leader of the Opposition and those behind her were vanquished. As a result we have had some amazing admissions.

I listened to the speech of the right hon. Member for Stafford and Stone (Mr. Fraser). He regaled us with the tales of his youth when he was wandering round casinos squandering hundreds of thousands of pounds. Perhaps that was in the 1930s. How many millions of ordinary people were wasting hundreds of thousands of pounds in casinos at that time? Perhaps instead they were standing in the dole queues created by the Tories. It may be that because ordinary working people have decided that they will have their fair share there lingers in the minds of some Tories the thought that if the wicked workers want a health service, proper education for their children, holidays and motor cars, they will have to put up with less. Therefore, the right hon. Member for Stafford and Stone was really giving support for the obnoxious and vulgar doctrine of having bags of private opulence for a small minority and loads of public squalor for the overwhelming majority.

It is in that context that I can appreciate the difficult task of the Leader of the Opposition. That is why her speech can be described as being not merely inane and innate but totally inapposite to our problems today. If ever there was a non-event, it is this debate, which has been initiated by the official Opposition on a motion of no confidence in the Government. There is just one thing that terrifies the Opposition. They have a sneaking, terrible fear that, if by some awful catastrophe they should win, the resignations would be piling in from all over the country.

The Tories know full well that we are beginning to overcome our difficulties. They know that we can cite the Financial Times and the survey of business opinion earlier this week from Model International, which is saying horrifying things to Tory ears. For instance, it is saying that it is because of the endeavours and the restraint of British workers—not the politicians and the clever people who prognosticate about what will happen, but men and women working in the mines, on the shop floor and in all forms of industry—that in two years' time Britain will be the leading European country.

One would have thought that from the patriotic party—the Tory Party—there would have been great cheers. Instead, however, we have had today a speech from the Leader of the Opposition that was solemn, inapposite, senseless and on the verge of not caring about Britain.

We hear statements made about how the pound is going down or coming up. Even if it is a fact that when a Labour Chancellor or a Labour Prime Minister sits down the pound increases against the dollar, it is an absurdity, or when it goes down it is an absurdity. Ordinary people who rise at 6 a.m. to be at work by 7 a.m. and who return home by 5 p.m., or those doing shift work, want to know why it is that, notwithstanding what they do to redouble their efforts, some faceless name somewhere—I am sorry that the right hon. Member for Stafford and Stone is not present—some useless casino-type speculator or gambler, can make a few remarks and the value of the pound sinks. To their utter shame, this gains some applause from some sections of the Tory Party.

Mr. Nigel Forman (Carshalton)

rose—

Mr. Molloy

I say this to those who are so keen to knock Great Britain. Let us not forget that there are very many countries, inside and outside the EEC, that are still very grateful for the contribution that Britain is making to the North Atlantic Treaty Organisation. There are some of us, on both sides of the House, who believe that our contribution, though vital, is too much. I believe that we should reduce it. However, we want a fairer examination of the contribution that we are making to the defence of Western Europe. When we got into economic difficulties, those same people who had to be grateful for our contribution tried to rub our noses in our own difficulties. I was about to give way to the hon. Member for Carshalton (Mr. Forman), but I presume that he has now had an answer.

We have heard much talk about the record. The record reveals—I do not know whether we on the Socialist Benches ought to be proud of this—that we are much better administrators than the Tories. Let me back that up with some official figures. When a Labour Government took over after 13 years of Tory rule, there was a deficit in the United Kingdom balance of payments of £355 million. In 1966, after 18 months of so-called wicked Socialism, that deficit had been translated into a surplus of £100 million. Then we went through to 1970. They were difficult times. Nevertheless, there then came that magnificent democratic promise to all the housewives of Great Britain: "If you return a Tory Government, prices will be cut at a stroke." Of course, they all fell for it, so the Tories came back into office.

Then what happened to the public administration of our nation? When the Tories came back, they inherited a balance of payments surplus of £735 million. When they got booted out in 1974, they left us with a deficit of £3,668 million. These are the facts that organs such as the BBC, ITA and all the newspapers which want the truth and nothing but the truth ought to be pressing home a little more firmly instead of concentrating on every little strike that takes place.

The record of industrial relations achievements of the present Government has been extraordinarily good in very difficult circumstances. It is on that aspect that I cannot understand the attitude of the Scottish and Welsh Nationals. I would never have believed that any working-class Scottish or Welsh representative would be labelled—as they might be tonight—as not merely the friend of the lairds' party and the bosses' party but, what is worse, the lackey of the lairds' and the bosses' party. That is the danger they face tonight. It is our responsibility to see that that message goes home to the people who have been misled.

Mr. Andrew Welsh (South Angus)

Will the hon. Gentleman give way?

Mr. Molloy

It is with great reluctance that I give way to the lairds' lackey.

Mr. Welsh

I am certainly not a lairds' lackey or anyone else's lackey. In laying out the record of Labour Governments, the hon. Gentleman did not point to the unemployment records, which have been just as bad under Tory Governments as under Labour Governments, who have both equally failed Scotland.

Mr. Molloy

The hon. Gentleman has made a very good point on behalf of his bosses' party. I am talking about the situation in 1974, when it was already reaching in that direction. Although I do not believe that the Government have done sufficient to erase the scourge of unemployment, that will be done. It would never have been done under any Tory Government.

We are all apt to talk about economic reports. When they favour our argument, we are pleased with them. We are all human enough to be susceptible to that sort of behaviour. However, I am rapidly coming to the conclusion that if all the economists in the world were laid end to end they would not reach a conclusion and that they are not worth bothering about.

Britain has been saved not by the geniuses or economists. Britain has been put back on its feet by the restraint and sacrifice of working people led by the trade union movement. It pains me when Opposition Members laugh and deride the fact that a British Government should talk to the representatives of 8 million working Britons rather than that they should run to the faceless capitalists who operate against the pound in Europe. I find that very disturbing. What will put this country back on its feet—we are on our way—is the sort of attitude that the present Government have shown in co-operating with the trade union movement and in replacing the senseless policy of confrontation by a policy of sensible co-operation.

As for this facade of a motion put down by the Leader of the Opposition—and, to their shame, some of the nationalists are to adopt the rôle of lackey in supporting it—it really amounts to this. The fundamental case put by the Conservative Party against the Labour Government is that they have achieved co- operation not only with the TUC but also with the CBI and with anyone who wants to see the country put back on its feet. This is what really irks and annoys the party which believes that it was born to rule. I am afraid that it will have a few more decades in which to learn to understand the niceties of Opposition.

Working people know the score. They realise the seriousness of the situation and are prepared to make sacrifices, because they know that in the end they will get a square and honest deal from this Government. When they say that they are backing Britain, what they mean is that they are backing also a Labour Government, because they know that that is where the future of the ordinary people of this island lies. I believe that events will prove beyond doubt the correctness of the judgment of ordinary working people in this country.

Mr. Deputy Speaker (Sir Myer Galpern)

I remind the House that the winding-up speeches are due to begin at 9 o'clock. Fourteen hon. Members are still anxious to take part in the debate. Hon. Members will therefore understand why I have made this announcement.

7.52 p.m.

Sir Frederic Bennett (Torbay)

As one of the 14, Mr. Deputy Speaker, I shall do my best to make sure that the other 13 also get their opportunity.

The hon. Member for Ealing, North (Mr. Molloy) and I are old friends and contenders, and I always respect his sincerity, but I feel sometimes that he has a capacity for becoming so emotive that he really ignores the facts of the situation. I think that his best friends here would usually describe his speeches as being somewhat in that vein.

Today the hon. Gentleman was very loyal to his leader, which is a credit. But, in the absence of my right hon. Friend the Member for Stafford and Stone (Mr. Fraser), I do not think that it was altogether fair of the hon. Gentleman to say what he said. I have never myself believed that only one section of society goes in for gambling. I have known working men gamble on the dogs and also on the football pools. If the football pools today were to rely on the support of my right hon. Friend the Member for Stafford and Stone and his friends, they would not be as prosperous as they are. It is a pity that the hon. Gentleman made quite so much of that point.

As to the hon. Gentleman's statement about the Scots being lackeys, they are well able to take care of themselves, but it is a novel constitutional doctrine that because a party believes that a Government no longer serves a useful purpose, it should not do its best to get rid of it and have one that is more to its liking, at the same time taking account of its own likely success as a party. It is odd to describe someone as a lackey because he takes a particular view of the existing Government. This has certainly never been my doctrine. However, as I have said, the Scots are quite capable of looking after themselves.

With regard to the main theme of the debate, I am very tempted to follow the wide-ranging arguments put forward by the Leader of the Opposition, who touched not just on the monetary situation but on a large number of other matters. But in view of your request, Mr. Deputy Speaker, I shall have to forgo making many of the remarks I should like to have made about, for example, deceit on the defence question and deceit as to the double standards observed internationally. I recall the welcome that the TUC gave to Mr. Shelepin from the Soviet Union, who is one of the biggest murderers of all time, while doing its best to prevent young men from Rhodesia and South Africa coming here to play cricket.

I shall concentrate on the economic situation, and I must take issue with the hon. Member for Ealing, North, who should get out of the habit of referring to those to whom we have to go cap in hand as faceless speculators. It is not the best way in which to raise a loan. In fact, they are not faceless at all.

I quote in aid the words of the Chancellor of the Exchequer, who has some knowledge of the international exchange market. In fact, speculation by United Kingdom residents in this country is totally impossible unless they wish to resort to committing a criminal offence, in which event, like anybody else, they are liable to be tried and punished according to the law of the land. The Chancellor of the Exchequer mentioned this a couple of days ago and repeated it in a parliamentary answer.

The faceless men, whoever they are, are not United Kingdom residents. But if they are, their existence is the fault of those who have failed to prosecute them. It certainly is not a matter for general condemnation. [Interruption.] The hon. Member for Bolsover (Mr. Skinner) spends a great deal more of his time talking from both a sedentary and an upright position than I do, and for once he must shut up and listen to what I say. I know that he will shortly resort to his favourite posture of making ridiculous remarks from a seated position, but that will not alter my decision.

As to the faceless speculators, we ought to set the record straight. The £ sterling has for a very long time been one of the world's principal reserve currencies. Many countries in the Third World as well as in the industrialised world have decided that they would like to keep a significant proportion of their reserves in sterling. In just the same sort of way, we at this moment take pride in the fact that our Chancellor of the Exchequer and the Governor of the Bank of England have enough sense to put a substantial proportion of our reserves into US dollars, Swiss francs and German marks.

If we are to say that it is faceless speculators who choose the best available currency, in their considered view, in which to put their reserves, we should start criticising the Bank of England and our own Chancellor of the Exchequer. We ourselves keep our reserves in some of the harder currencies of the world at the moment, rightly or wrongly, and so do they.

These are not "gnomes" of Zurich, but small Caribbean and Middle East countries, and small Asian countries, as well as the big ones, and for a long time, under successive Governments, both Conservative and Labour, they have come to the conclusion that far too high a proportion of their reserves have been held in sterling, which they regarded, rightly or wrongly, as having an uncertain future. I ask hon. Gentlemen opposite—rhetorically so that I do not tempt someone to get up—what they would feel about a British Chancellor of the Exchequer who authorised keeping a large amount of our reserves in a currency which was likely in his view to go into a steep decline.

If a British Chancellor of the Exchequer decided that some of the South American currencies were the right ones in which to put our reserves, he would get into very serious trouble. There are no faceless men or gnomes but countries and central banks which decide at any given time that they would prefer to have a higher proportion of their reserves in one currency rather than another. That is what it is all about, and the Chancellor of the Exchequer, if he were here, would agree with me.

We heard the other day of the granting of the $5,000 million credit standby. It is not, of course, a loan. It has been said that it is a vote of confidence in the British Government. It is not; neither is it a vote against the Government. It is not the case that the people granting this credit standby either have a great deal of faith in this country and its policies or that they do not.

What they know is that a large amount of the reserves of their corporate clients and of themselves are held in sterling, and they do not want to see those reserves dissipate in value. Therefore they take action to sustain the value of their own reserves. If that is speculation, it is a novel name for what we in this country regard as basic prudence.

It is tragic that hon. Members should regard as a boasting point the fact that a currency which was $4 to the pound over 30 years ago is now under $2. It is tragic that we should take it as a tribute to either side of the House that the pound has gone up just one point to $1.77. If that is worth boasting about, I feel deeply ashamed.

The credit standby has acted, for the time being, to prevent that $1.77 from becoming $1.75. It is as had when the headlines declare that the pound is bouncing back as it is to say that the pound is crashing. We must establish a global situation in which countries in all parts of the world are content to hold a larger proportion of their reserves in sterling than they do now. That is what it is all about and it has nothing to do with gnomes or speculators or anything else.

The latest figure for the pound is $1.76 or $1.77. But one must look at the small print, which in this case is the dollar premium. That is what one has to pay in this country to buy a dollar security and that is what the Government and the Bank of England must also pay. The Premium is 47⅝ per cent. We have, therefore, a dollar pound, except for 10 cents, and that should be a matter of concern to everyone.

The tragedy is that Ministers keep on getting up—and it applied to Conservative Ministers when they were in office—saying that devaluation helps exports. That is about the same as saying that a shot of heroin helps a dope addict. It temporarily helps to sell exports at a competitive price, but it also brings in less return in the currency in which one is paid.

There is also the additional problem of how to replace the copper, manganese or other raw materials which have gone into the sold article. I stand almost alone in my consistent opposition to a floating pound because I believe that democratic government, subject to democratic pressures, without the discipline of a fixed parity, is liable to do the kind of things which Governments have done over the last 20 years and which this Government have done more than any other.

Our greatest task is to restore the outside world's confidence in the value of our currency as one of the standby reserves. If we succeed in that, we shall win. If we fail in that, we shall lose. No speeches from hon. Members will alter that one jot or tittle.

The debate has been called a charade. I do not know whether it is, but the electorate is sick and tired of the rôle that Parliament is playing in our affairs. Electors no longer have faith in parliamentary institutions. No hon. Member can argue against that. Whatever the result of the vote tonight—and I do not expect that we shall win—the debate will have served a useful purpose if the message is carried outside that hon. Members on both sides at least realise the true and appalling gravity of the situation.

8.5 p.m.

Mr. Robert Hughes (Aberdeen, North)

It is not worth discussing whether the debate is a charade, but it is not the great parliamentary occasion that we were promised last week when the trail blazers were saying in the Press that the Government were in a cliffhanger situation and were likely to be defeated. The Leader of the Opposition said that the censure motion had not been tabled lightly. No doubt she has worked hard on her speech, which contained passages of purple alliteration and quotation.

The right hon. Lady has done much research, but her timing was not spot on. As she gracefully resumed her seat, she used the phrase "steady as she sinks", which is precisely what happened to her. The right hon. Lady had the effrontery to quote some words written and spoken by Nye Bevan. She would never have dared to quote what he said when he was alive or crossed swords with him on the importance of parliamentary democracy.

I shall quote Nye Bevan because the right hon. Lady complained that the ending of democracy and the movement of this country towards becoming an Iron Curtain State was being laid at the door of the British electorate. In his last major speech before he died, Nye Bevan said in 1959: parliamentary institutions have not been destroyed because the Left was too vigorous; they have been destroyed because the Left was too inert. You cannot give me a single illustration in the Western world where Fascism conquered because Socialism was too violent. You cannot give me a single illustration where representative government has been undermined because the representatives of the people asked for too much. But I can give you instance after instance we are faced with today where representative government has been rendered helpless because the representatives of the people did not ask enough. We have never suffered from too much vitality; we have suffered from too little. The Left in this country has suffered only because it has not demanded enough of parliamentary democracy and institutions. The country is not threatened by the Left, because it has defended democracy and individual rights far more than the Opposition have done.

The Leader of the Opposition devoted much of her speech to the Government's willingness to bring the rules of the House into a modern age to deal with the Aircraft and Shipbuilding Industries Bill. She said that there was no reason to change our rules to suit the circumstances of the situation. I urge hon. Members to cast their minds back to 1972, when the Conservative Government introduced a Northern Ireland Bill which went through all its stages in one day. The rules were changed on that occasion.

Why was it necessary to do that? The Bill set aside a decision of the High Court in Northern Ireland and provided that the law should be applied as if it had applied since 1920 and that no one could bring an action for habeas corpus against the Government. That was retrospective legislation, but when I challenged the Minister at the time he said that the issue was different because it was a non-contentious measure. It was contentious. Many hon. Members fought it all through the night and voted against it.

It is curious that if everyone agrees that something must be put right, that is all right and is not against the interests of democracy. But when some minorities are against a proposition it is taken to be against democracy. Opposition Memmers must realise that majorities as well as minorities have rights. What we were doing on the Aircraft and Shipbuilding Industries Bill was necessary to move the Bill along its parliamentary processes and to see that there were job opportunities and reasonable prospects for the people who work in those industries.

It has been suggested that high public expenditure rates are also contrary to democracy. The right hon. Lady said—and to this extent I agree with her—that someone must pay for high public expenditure. There certainly must be increases in taxation. One may quarrel, as I sometimes do, about the precise way in which taxation is raised. There is certainly no crock of gold at the end of the rainbow. People must be willing to pay not only through taxation but out of the wealth that is created. The Opposition say that that means that manufacturing should be fostered in order to increase wealth. We entirely agree, but when we establish the British National Oil Corporation to get into the business of North Sea oil at an early stage do we receive any thinks? Of course not.

Some people say that there is a curious alliance—though I do not find it curious —of Tories and the SNP in opposition to any possibility of nationalised industries being profitable. They want us to be involved only in the loss leaders, the industries which have faced difficult times and which must be taken over to keep them going. We believe that a nationalised industry should be profitable and that we should not be nationalising only derelict industries. There is a fundamental difference of opinion between the two sides of the House on that.

In addition, we recognise that we cannot turn from a controlled capitalist society to a Socialist society and a planned economy overnight. There must be intermediate stages. There are times when we display our impatience with the Government for not going far enough and fast enough. I hope that our impatience will always show when that happens. But we have set up the National Enterprise Board with the object of having planning agreements and ensuring that investment is properly directed.

One of the biggest charges against the previous Tory Government is that they set the economy free, in their words, and allowed investment to go where it would, where there was the best profit, without any concern for the rights of the nation.

Mr. Teddy Taylor (Glasgow, Cathcart)

It would help the House if the hon. Gentleman would say which industries or commercial enterprises he thinks should not be nationalised in the long term.

Mr. Hughes

I am content to rest on the phrase used by Nye Bevan that we should take over the commanding heights of the economy. I entirely agree with the latest proposals prepared by the National Executive of the Labour Party for submission to the October conference. A substantial part of manufacturing industry should be taken over by public enterprise.

I do not find the alliance between the Tory Party and the SNP in the least curious because they both represent the selfish in our society. They are concerned only with what they get out of society, not with what they can put in. Therefore, it was hypocritical for the Leader of the Opposition to talk about selfish motives. The right hon. Lady believes in the right of the strong to become stronger, of the rich to become richer and of the unequal to become more unequal.

What is the position of the SNP? Why do I class its supporters along with the Tories as selfish? It is because they still persist with the cry "It's Scottish oil", although that cry has become somewhat muted in recent months. By an accident of geography there is off the coast of Scotland, including the East Coast, a great deal of oil. Members of the SNP say that the oil and the wealth which flows from it should go only to the people of Scotland. I am nauseated when I see members of the SNP going to the annual conference of Plaid Cymru, speaking of the Celtic brotherhood of nations standing together to throw off the yoke of English imperialism and then saying "It's Scottish oil. We're friends, but you won't a ha'p'orth of it." Hypocritical selfishness is the baseline from which the SNP operates.

Mr. Welsh

It is strange that there should be talk of selfishness from a party which asks not "What can we do for Scotland", but, in electoral terms, "What can Scotland do for us?".

Mr. Hughes

It is never a question of asking what Scots people can do for us. I have asked them to vote for the Labour Party because I believe in democratic Socialism, which knows no bounds of race, colour, nationality or religion. The wealth of this country should be put to the benefit of the people who produce it—the working class. I am not one of those who masquerade as a Scottish patriot but will pay higher wages to his employees in London than in Glasgow. The alliance between the Tory Party and the SNP is not in the least curious. It is a natural alliance. Therefore, I welcome the fact that they are prepared to stand against us tonight.

The burden of the motion is that the country is suffering from too much Socialism. I wish that some of what the right hon. Lady said about the Government's motives in proceeding fast with Socialism was as true as she said. What is wrong with this country is that we do not have enough Socialism. The sooner we work towards a Socialist democracy, the sooner we shall provide individual liberties and be able to make our influence felt much more widely in the world, producing real human freedoms which cannot be denied and which must be obtained at all costs.

8.19 p.m.

Mr. Russell Fairgrieve (Aberdeenshire, West)

It would not be proper for me to start without referring to the remarks made by the hon. Member for Aberdeen, North (Mr. Huges) when he was extolling the virtues of moving towards more Socialism. He talked about lion Curtain States and Eastern European democratic countries. This takes us into the economic argument that we heard from the Labour Benches about a siege economy, control of imports because we cannot face up to competition, and lower living standards for all, provided we are all Socialists.

The end of that road is easy to see. It is the Berlin Wall, which was put up not to stop down-trodden workers from free-enterprise countries getting into Eastern Europe but to stop the serfs of totalitarianism getting out of their Socialist paradise. I am surprised that we have gone on for so long without a censure motion against the Government.

Consider what happened before the February 1974 General Election. There were winks and nods to certain trade union leaders to continue pushing on with wage increases that were bound to lead to inflation. Then the Labour Party bought two elections. We had 30 per cent. wage increases and raging inflation which resulted in unemployment. The Labour Party is now the natural party of high taxation and high unemployment.

We have a £12 billion borrowing requirement and now a £3,000 million standby credit. It is not for me to try to emulate the sensible speech of my hon. Friend the Member for Torbay (Sir F. Bennett), who informed the House about the view taken of sterling abroad. I would just add that it is not a case of faceless bureaucrats and speculators at work. These same people would be operating against the franc, the deutschemark or the dollar if those currencies were weak. But those currencies are not weak—only the pound is weak.

As my right hon. Friend the Leader of the Opposition said, it is not only financial mismanagement but other forms of mismanagement also for which we condemn the Government. There are the questions of law and order, the closed shop—the right to work or not to work —and irrelevant nationalisation merely for dogmatic reasons, as in aircraft and shipbuilding. All this is being done at a time when the country is facing far more important problems.

I am not blaming the Government entirely, but we are getting in Great Britain a sick society. There is a Chinese proverb that a tree rots from the top. Whether we like it or not, the present Government are the leaders of the country.

Mr. George Cunningham (Islington, South and Finsbury)

Trees do not rot from the top.

Mr. Fairgrieve

There are double standards in the Government according to whether the totalitarianism is from the Left or from the Right, and we have also had the cases of the Shrewsbury pickets and the Clay Cross councillors.

Mr. George Cunningham

The former Chairman of the Conservative Party, Lord Carrington, was a Minister of the Crown at the only time in the history of this country when, with the knowledge of Ministers, British personnel did things that were criminal in Northern Ireland. I refer to interrogation in depth, as torture was then called. Lord Carrington either procured the commission of criminal offences or conspired to commit them. He has never been required to pay one penny towards the cost of compensation for the victims of those criminal activities, for which he shared a high degree of responsibility.

Mr. Fairgrieve

I do not accept what the hon. Member has said. It is nothing more than a slur on British troops. His intervention was unnecessary, obscene and irrelevant.

If by some miraculous event a person who had been dead for 50 years could have popped up from his grave, I wonder what he would have thought of a front page story in today's newspapers about a security guard who lost his job because he was doing too well in preventing pilfering. Pressure was exerted by trade unions for him to be moved, the management did not come to his rescue, and we sit here silent. That is what I mean when I talk about the sick society to which we have contributed.

There is also the question of the attack on individuals who, after paying their taxes and rates, decide to use what is left to pay for medical insurance or their children's education. Apparently that is wrong. It seems that money is not for saving. Presumably it is for bingo.

Another of this country's problems is the continual attack on profits. Profit brings employment. If there were not the continual attack on profit and if every small business took on one more employee, unemployment would be solved forthwith.

But where is the encouragement from the Government? If a person builds up a successful business he is pilloried. Capital transfer tax ensures that he cannot pass it on to his children, even though he may have worked seven days a week to build it up. But if someone makes a mess of a business, the Government prop up the company. I do not claim that all the cases we hear about are not exaggerated, but there are circumstances in which it is only marginally better to work than not to work.

It should not be a censure motion that we pass tonight. The Government should be put in the stocks and pilloried.

8.26 p.m.

Mr. Brian Sedgemore (Luton, West)

The speeches from the Opposition have confirmed my view that the Press will describe this debate tomorrow as the great debacle. Having guaranteed that they will lose the vote, the members of the Opposition Front Bench team have ordered their troops out of the trenches, on to the open plains and into their graves.

This is an extraordinary censure motion. Like the Conservative Party, censure motions are an anachronism. When they are designed to suggest virility in a barren and sterile Opposition, they are only an insult to the intelligence of the British public. The fact that the motion is in the name of the chicken lady who leads the Opposition and who least wants to be Prime Minister can only cause bewilderment among Conservative Party supporters throughout the land similar to the bewilderment caused when she won the leadership stakes.

What a temptress and tease she has turned out to be. It would be tragic were it not for the fact that the British public can see through phoneys very quickly.

The motion was put down in a fit of tantrum. Not content with challenging the supreme authority of this House by stealing and brawling over the Mace, the strangely inflected distaff of speeches knocking Great Britain overseas, the encouragement of speculators to damage the international payments system beyond repair, unhappy that the Government have not announced any further public expenditure cuts in this debate and angry with the dismal performance of their Front Bench since Monday this week, a number of hon. Members have decided to threaten democracy as can any Opposition by a series of practices which could bring government to a halt.

It is a pity that some of them seem to have lost the sense of the meaning of the word "patriotism". I will accept that the Conservative Party was once a great political party in this country, but I cannot help feeling that we shall be talking about the trahison des Bourbons to our granchildren with great regret. That treachery of the Bourbons is eloquently, if deliberately, pointed up by the whining and whinnying of the Poujadism of the Leader of the Opposition.

The Opposition are in a rage about public expenditure. They have waged a campaign down three decades in this country against public expenditure which has no counterpart elsewhere in Western Europe. The idea that public expenditure is somehow wrong or evil burns very deeply in the Conservative soul, yet even there there is ambivalence. Their attitude is redolent with hypocrisy. It is based on what the Prime Minister described as class antagonism.

When one analyses their attitude, one sees that they are against subsidies for council tenants but for mortgage tax relief for £100,000 three-acre executive houses. We had that debate in Committee on the Finance Bill at which both I and the hon. Member for Aberdeenshire, West (Mr. Fairgrieve) were present. They are against social security benefits for the families of those involved in industrial disputes, but they are for subsidies, grants, handouts and tax reliefs for free enterprise firms which no one could describe as either free or enterprising. They are against free milk for the kiddies but for tax relief on insurance premiums for the better-off.

They are against the cost of raising the school leaving age, but they are for tax relief to enable the middle classes to fulfil their fantasies by sending their offspring to independent and private schools. They are against building nursery schools and hospitals, but they are for subsidising national insurance stamps for the self-employed. They are against setting up a police complaints board, but all in favour of actions which will force up expenditure on the police by the nasty racialist speeches of some of their Back Benchers, which have already led to trouble on our streets.

They are against public expenditure in general, but they are for the election bribes to end all election bribes of open-ended mortgage subsidies and the £3 billion a year tax credits scheme. So far as the poorest and weakest in our society are concerned, they cry halt and they bay sacrifice; so far as the richest and most powerful people are concerned, when it comes to public expenditure, they cry rights and they bay incentives.

In order to get their attitude on to the psyche of the British people they use deceit. They use deceit about the level of taxation in this country, deceit about the effects of taxation on incentives, deceit about the unprogressive nature of our tax system, deceit about the tax evasion and tax avoidance which they succour, deceit about the middle-class nature of our Welfare State, deceit about public expenditure pricing, deceit about the popularity of public enterprise elsewhere in Western Europe.

But worse than all that, they use deceit about the economic argument concerning public expenditure. They really do know, the more intelligent on their Front Bench, that public expenditure cuts now will not help our economy. They have seen the pound rise without public expenditure cuts and they know that the borrowing requirement at this time is not too high. They know that it is being financed comfortably and without printing money. They know that it is being financed without raising interest rates and without crowding resources out of manufacturing industry.

It is about time that the Tories dropped all this voodoo which concerns public expenditure. They really must know that further public expenditure cuts now can only increase unemployment. But apparently, the pursuit of unemployment, like the pursuit of inequality, lies deep in the Conservative heart.

The one positive thing which has come out of the last few weeks is the growing unity, at least in theory, about how we on this side should approach public expenditure. I was genuinely happy to hear the Prime Minister today, in a few moving phrases, develop the idea of the positive concept of freedom. That positive concept runs through Socialism in every country in the world. I was glad to hear him say that, effectively, most forms of public expenditure cuts were a denial of human freedom.

That links up with a recent Fabian pamphlet whose criticism of the Tory establishment's view of public expenditure cuts makes the criticisms of the Tribune Group look very tame indeed. I was pleased to see that Howard Glennister and Paul Ormerod from the National Institute of Economic and Social Research slammed the orthodox Tory attitude to public expenditure cuts. A few weeks ago I heard the Foreign Secretary also break down the central argument about further public expenditure cuts. I read with interest last week that the Secretary of State for Energy said that it would be totally wrong for this Government to cut public expenditure further. Therefore it seems that there is a growing unity in our party.

All that I ask of the Government Front Bench, if this growing unity exists and if the philosphy is coming together, is a simple statement tonight that Whitehall will not carry out a review designed to see what the effects will be of a further £2 billion per annum of public expenditure cuts.

At least we have the philosophy right, and I hope that we shall get the practice right. But the stench of hypocrisy in this debate is in danger of inducing nausea in the Chamber and in the country at large. I hope that we shall reject this censure motion with the absolute and bitter contempt it deserves. It sums up all the sourness and bitterness embodied in modern Conservatives.

8.35 p.m.

Mr. Michael McNair-Wilson (Newbury)

I shall not attempt to follow the speech of the hon. Member for Luton, West (Mr. Sedgemore), except to say that a whiff of the stench of the envy in his heart reached my nostrils, and I did not enjoy it.

I support the motion of no confidence in the Government for a number of reasons. What happened in the penultimate week before the Whitsun Recess represented a form of parliamentary gerrymandering. It was not the first attempt by a Labour Government.

Those of us who represented London constituencies will not forget the attempt to gerrymander the boundaries of London seats in 1969–70. We shall not forget the doubt that arose over the Committee of Selection and the number of hon. Members serving on Standing Committees. We shall not forget the vote at the end of the debate on the Aircraft and Shipbuilding Industries Bill. When I heard my hon. Friend say that he believed that he had been paired with the Whip who fianlly voted, my doubts were revived and all my suspicions re-aroused. I hope that whoever winds up for the Government tonight will set at rest those doubts for, if he does not, the Government stand condemned.

I also condemn the Government because their economic policy is leading nowhere. Excuses may be offered for the stand by credit, but no one has yet borrowed his way out of the sort of difficulties in which we are, and I do not see the will on the Government's part to achieve that target.

The hon. Member for Luton, West may say what he likes about public expenditure, and whether or not it should be cut. I say that but we would not need to cut it if the Government did not spend in the wanton and profligate way in which they are doing. If they did not do that we should be able to live within our means and achieve those changes in our society that so many of us want.

The Government sit in the House on a minority vote, the smallest vote ever to uphold a Government in office. Sixty per cent. of the population did not want Socialism in October 1974 and do not want Socialism now. Yet the Government, who lecture the Rhodesians about unimpeded progress to majority rule, flout the will of the majority in the country as if it did not exist. As for the majority in Northern Ireland, they are not to be listened to. They must not even have the Government they want but must share power.

What do the Government mean by "democracy"? Do they mean simply the ability to do in this Parliament what they choose to do because the Labour Party has more Members of Parliament than has any other party, or do they feel somewhere deep in their conscience that they should recognise that only four out of every 10 people voted for them? And from that recognition they should so change their policies as at least to recognise that it was not Socialism that the majority of the people voted for. They wanted a Government who represented Britain without Socialism.

I recognise that with their majority the Government can do as they will, as we have already seen, I understand that the language of Socialism is social priorities. But have the Government and their supporters achieved social priorities of which they can be proud? Let us think of the programme that they sometimes like to tell us they are getting on the statute book, and then let us think what the country really needs. We all know about the needs of the widows and the pensioners. We have heard about the hoped for child benefit and we know about the problems of the disabled, the deaf and the blind. I also know that a small Bill of mine—it would have cost £10,000 and would have helped the deaf —could not find its way on to the statute book because the Home Office did not want it. However, this is the Government who pose as caring about people in distress.

I wonder to myself how the Government dare to pose as representing the under-privileged and those who have not had equality of chance when they can find time to enact four Bills to make the trade unions a special elite such as we have never had before in Industry. Even if we did not need proof that the trade unions had power, we now know that they have the majesty of the law to back their power.

And then what of society generally. We all know that crimes of violence are on the increase. We know that in 1975, for the first time in our history, there were over 2 million indictable crimes in England and Wales. We know that the police force in London is 400 below its 1921 strength, when crime in London was 5 per cent. of what it is now.

Mr. Arthur Lewis (Newham, North-West)

Look at all the aids that the police have.

Mr. McNair-Wilson

We know that the Home Secretary told the police force at its conference that if it wanted more police it could not have more prisons, and vice versa. But do we not also know that the police believe that if there were more policemen, there would be fewer people going to prison because crime would not pay? But the Home Secretary in his priorities believes that more guardians of our society are not as vital as all that although violence is within our society, although our colleagues are sent letter bombs and although many people are rather concerned about walking the streets of London at night, or travelling in tubes and buses. However, money is not to be spent on that social priority.

What of education? We heard one Scottish Member talk about young teachers who thought they were going to find a place in education to improve the quality of the education our young people receive. But those young teachers are not going to find jobs, thanks to this Government. Then look at the housing record. Housing starts in England and Wales—this includes houses and fiats—in 1975 were down on the number of starts achieved in the last year of the Conservative Government. The National Health Service is creaking, but all the Government can think of doing is to bring in some spiteful piece of Socialism about pay beds that the bulk of the people do not want to deny £30 million that will have to come from elsewhere.

The Government ignore the will of 60 per cent. of the population so that they can pursue the doctrine which they hold so dear to their hearts, even though the ship of State has its bows under the water and all of us wonder what the future holds. The Government say "Look, we have got on with the organised ranks of labour. We have achieved a pay deal and we are reducing inflation."

I must ask the Government whether they will allay a new fear which backs my lack of confidence in them and which arises from an answer given me by the Prime Minister today. On 1st July 1975 the Chancellor of the Exchequer said: We are determined to bring the rate of domestic inflation down to 10 per cent. by the end of the next pay round and to single figures by the end of 1976."—[Official Report, 1st July 1975; Vol. 894, c. 1189.] I asked the Prime Minister what figure he had used in his pay talks with the unions to get this new pay deal. He said —more honestly than the Chancellor, for he would not give me a figure—7 per cent. to 8 per cent.

We also know from what the Chancellor said at the beginning of the week that, to start with, we shall not reach single figures until the end of 1977—one year later than I have just read out. The right hon. Gentleman said that we should halve the present rate. The present rate is 18.9 per cent., so that gives a figure of about 9.4 per cent. In other words, not only have we slipped on our achievement of a cut in the inflation rate to single figures, which is central to the Government's economic policy, but I wonder whether the trade unions have taken on board that the figure on which they were settling their pay deal is no longer the figure on which the Government are operating.

I should like an explanation from the Government of what has happened and what their inflation target is. Is it in any sense within their programme? Why should they imagine that those who have lent us this standby credit should have more confidence in the £ sterling as a result of this slippage on this crucial programme than when they made this money available so that the Chancellor could tell us about it?

The Government stand condemned by their own actions. They have failed the people of this country because they are blind to our real social needs. The greatest need of all is to end the arguments that divide our nation. Just for once, the Government should speak for everybody without the trace of envy, jealousy and spite that seeks to split the nation into "us" and "them".

8.47 p.m.

Mr. John Watkinson (Gloucestershire, West)

We have just listened to a classic Conservative speech based on the thesis that, irrespective of the need for legislation, never is the right time to legislate. I believe that the Government have been right to pursue the programme that they laid before the people of the country in their manifesto.

I want to turn first to a remark made by the representative of the Scottish Labour Party, the hon. Member for South Ayrshire (Mr. Sillars). He spoke of the problems of this country as stemming from the fact that we had not appreciated that we had lost an Empire and had not yet found a new role for ourselves. One of the overriding aims of policy on both sides of the House should be to come to grips with one of the remaining features of our old role as empire builders and controllers—namely, as banker to the world. It is time that we asked ourselves whether as a nation we can afford to go on in the role of banker to the world.

In the nineteenth century we were the great producers of goods for the world. We could afford the role of banker to the world. We had the assets and the power to back it up. Now, however, we must face the fact that circumstances have changed during this century. We are no longer a leading first-class economic Power. We must realise that we are a banker to the world at a time when we cannot afford to back up that role.

Governments must face the prospect that sooner or later we must end our rôle as a reserve currency in the world. At present, we are caught within the logic of the system. We are a banker to the world and we suffer from sterling crises. From the time that I first became involved in politics we have been confronted by crisis after crisis.

It may be instructive to consider the repercussions and the causes of the fall in the value of the pound. I should like to point to two benefits to our economy. First, there is the well-known benefit that it has given a major boost to our exports. As has been pointed out, we now have the best opportunity in decades for export-led growth.

The other factor is this. Hon. Members may have seen the recent study by Cambridge economists in which they pointed to the problem of unemployment in this country and the relationship between unemployment and the balance of pay- ments. They illustrated what would have been involved in reaching a level of full employment, which we all want to see, at the exchange rate which existed just a few months ago. The figure they produced was that there would be a balance of payments deficit of more than £5,000 million. One of the benefits of the fall in the value of the pound must be the fact that we shall be able to move towards a fuller level of employment without the burden which was previously anticipated on our balance of payments.

In all honesty we should ask ourselves what is the cause of the fall in the value of the pound, particularly in circumstances in which the British economy appears to be improving. It is generally agreed that we have one of the best wage agreements anywhere in the Western world. If one reads the Financial Times economic survey, one sees that British industry is poised to move forward into a sustained boom on all fronts. The survey also shows that investment is picking up, and we heard today that the balance of payments position is improving considerably.

Therefore, what is the cause? The simple fact is that we have to face the consequences of our public sector borrowing requirement and the risks engendered to the money supply because of that requirement. This has caused considerable concern both at home ond overseas, and it is inescapable. The Chancellor of the Exchequer frequently twits the Opposition because of their mismanagement of the economy under Chancellor Barber in 1972, when the money supply went out of control. The banking system was released in competition from the credit control measures which were introduced. The public sector borrowing requirement was expanded, and the net result was that in 1972 the money supply expanded by 25 per cent. Two years later we had to face the necessary consequences.

Therefore, we must consider the effect on our economy of a possible explosion in our money supply. As far as I am concerned, in the last two years Government policy has been correct in so far as is necessary to run a high level of public sector borrowing requirement. For a number of obvious reasons, it was right to pump liquidity into the economy during the recession. It was right in order to counteract the deflationary effect of the enormous oil price increases and to add to the public sector borrowing requirement. It was right to take up the surplus liquidity to fuel our social programmes.

Not only were the Government right. They were also lucky, because they were able to finance the enormous public sector borrowing requirement without recourse to the banking sector. We were able to get money without going to the banks because industry was not borrowing. We now have to face the consequences, and it is inescapable that we are poised in a position in which industry and the Government are ready to join battle on available monetary resources in our economy. The net result could be massive increases in the money supply and in rates of interest.

It is important for the Labour movement, including my right hon. and hon. Friends, to recognise that we are now poised at the beginning of another vast inflationary cycle unless we take the necessary measures.

Mr. John Biffen (Oswestry)

Hear, hear.

Mr. Watkinson

I am glad to have the approval of the hon. Member for Oswestry (Mr. Biffen), although I do not go along with him in his total reliance on monetarism. Any sensible policy must involve an element of it, but it cannot depend upon it totally. The net result of simply turning off the money supply, as some of the hon. Member's supporters would suggest, would be large-scale unemployment and bankruptcies.

The Government's policy is correct in so far as it has sought to control the level of consumption through an agreement with the trade union movement. We have said clearly now that we have to control the level of public expenditure, not because we want to do so, because we would all want to spend more on our public services, but because a consequence of the logic of our system is that the dangers are so enormous. The Government have quite rightly nailed their colours to the mast and have said that we must go for industrial expansion. That is our aim and priority. With a low-growth economy we cannot kid our people that we can increase consumption, public expenditure and investment all at the same time. A choice must be made, and the Government have made the right choice in so far as they are going for expansion of the industrial base. That must be the key to the way forward.

Let us therefore review the rôle of sterling as a reserve currency and decide whether we can any longer afford that rôle. Let us be aware of the dangers which confront us and let us continue with our avowed aim of expanding and extending the industrial base of our economy.

Several Hon. Members

rose—

Mr. Deputy Speaker

Order. I remind hon. Members that the winding-up speeches are due to begin at 9 o'clock.

8.58 p.m.

Lord James Douglas-Hamilton (Edinburgh, West)

One of the reasons we support the motion is the deplorable employment figures in Scotland. In May 1976 there were 52,000 more unemployed in Scotland than at the time of the last Conservative Government.

In particular, two groups in Scotland wholeheartedly condemn the Government. The first group consists of those who are leaving school. There will be 71,000 of them in the summer and many have no prospect of getting a job. The others are those who are leaving teacher-training colleges who will be particularly affected. About 2,500 teachers in Scotland who have graduated have no prospect of a job under present Government schemes.

It seems incredible that so many men and women should have worked so hard for their qualifications only to find that their services will not be required, and that at a time when the Strathclyde Region has advertised for teachers to come over from Canada. It is a disgrace that the Government should have spent so much on training these teachers and then not provided them with jobs.

Dunfermline College in my constituency is the only one which provides training for physical education for women. It is one of the finest colleges of its kind in Western Europe. Never before this year did any graduate leave that college without a job to go to. This year out of the 140 graduates who will pass out only 40 will go on to jobs. What sort of world are these people preparing for when they have no hope or opportunity of a job?

I appreciate only too well that the Government prefer to subsidise school meals and school milk rather than provide jobs for teachers with smaller classes and better education.

If the Government want to know what we would cut, I would briefly mention one or two items. We could scrap the Aircraft and Shipbuilding Industries Bill and save £550 million. We could scrap the Dock Work Regulation Bill and save £30 million and we could scrap the Community Land Act and save £400 million in one year. That makes up a modest £980 million. There are indiscriminate food subsidies and housing subsidies. We would scrap the Health Services Bill, which deprives the National Health Service of considerable income.

I would remind hon. Members opposite of the words of Aneurin Bevan who said that the language of priorities was the religion of Socialism. The Socialists have shown such a rotten sense of priorities in support of their anachronistic policies of nationalisation that we can only put the position right by voting for this motion tonight.

9.1 p.m.

Sir Geoffrey Howe (Surrey, East)

The purpose of today's debate is at the heart of the purpose of Parliament, because it is the function of this House to see that this country is governed by a Government who can secure and continue to command the confidence of this House and, through this House, the confidence of the people. It is here and, if not here, through the ballot box that we can change this Government as we should. If that does not come within our grasp this evening, certainly it must be part of our function to change the policies of this or any Government.

Before the Chancellor guffaws too loudly or characteristically let me commend to him and the rest of his colleagues that he should approach this task and this question with a degree of humility. He is charged—and it is a difficult responsibility—with the task of managing the economy and financial affairs on behalf of this country. His party, like my own, received the active support of less than 30 per cent. of the electorate. Before the Liberals crow too loudly, they received about one-eighth.

The motion we bring before the House for the Government and the House to consider is not just a bare assertion of the Shadow Cabinet or the Conservative Party. It expresses a view which the Government have to face up to—that there is no good reason for this country or the world outside to have confidence in the way in which this Government are managing our affairs.

When the Chancellor made his announcement on Monday, he reacted forthwith, and not for the first time, to my own questions to him by suggesting that I should fall about with enthusiastic praise for every aspect of his policy and that it was my patriotic duty to do so. He suggested that I had no alternative but to applaud him.

But the Chancellor has no monopoly of patriotism. He must recognise that we are all here in this House because we care about the condition and the future of this country and I hope the Chancellor will not, if I may borrow a phrase with which the Prime Minister closed his speech, demonstrate impatient and imperious vanity by depriving us of our right to challenge what he says and does. Of course, if things are going right for this country, it is our right and duty to say so, but if matters are being wrongly handled, and look like going on being wrongly handled, it is plainly our duty on behalf of the people of this country to say that, too. The Opposition, loyal to Her Majesty and the country, would be doing no service whatever if they sought to conceal and fudge the truth.

What judgment are we to reach about the Prime Minister's speech and the policy of the Government he leads? The objectives which he outlined at the beginning of his speech are to any reasonable person beyond reproach. We all want a period of stability and prosperity for the people of this country. We want to see an end to the strife and conflict in Northern Ireland. We want to see an end to the conflict stirred up throughout our country by inflation, and we all know that inflation should be the first and foremost economic objective.

We, no less than Labour Members, wish to see the end to the indignity of unemployment. We wish to see a rise in living standards and a restoration of self-confidence among our people so that we can care for the sick, the weak and the frail, as we want to do. There is no difference between us about those matters, because we share those objectives.

Let us consider the yardsticks of success set before the House by the Prime Minister. It does nobody any good to seek to suggest that the shortcomings of our country must be laid on the shoulders of our people. If we praise or do not praise success in exports, we are not passing judgment on people whom we seek with humility to lead and govern. Of course people want to strive hard and do well, and they are entitled to say that those who try to govern them must not let them down in one respect or another. Let that be clear.

The Prime Minister is right to say that exports are rising. Indeed, it would be dreadful if they were not rising. With the pound at its present low value, of course the fall in the exchange rate will lead to an expansion of export trade. As world trade picks up, an expansion should be taking place. We welcome the fact that it is doing so. But do not let us get the matter out of perspective. Investment once again is beginning to pick up. Again, it would be disastrous if that were not to happen. The level of investment has never sunk lower in our history. It has nowhere else to go except up. Let us hope that it will go on doing so. Similarly, industrial output is going up. Do not let us become overwhelmed with enthusiasm, because the level of industrial output is now lower than that achieved at the time of the three-day week, and it has a long way to go yet.

Let us acknowledge that inflation is down, but when it was roaring, as the Government are fond of saying, at a figure in excess of 30 per cent. last year, that, too, had nowhere else to go except down—[HON. MEMBERS: "Oh."] Labour Members seem to have a modest expectation of their own Government. It could have gone up under this Government.

Let me remind Labour Members of the history of this matter. When we were fighting the election in February 1974, the rate of inflation was running at below 10 per cent. We were fighting through our policies to try to contain that figure. We introduced reductions in Government spending. They were sharp and harsh reductions amounting to £1,200 million. We were denounced by Labour Members for doing so. In the two years that followed the Chancellor claimed a figure of 8.4 per cent, but the figure went roaring ahead at four times that rate. It later came down to 18.9 per cent.

How are we to react to the good news that there is still a long way to go. Emphatically, we must not react in the way in which the Prime Minister and the Chancellor of the Exchequer find it easy to do. The Prime Minister this afternoon, in phrases reminiscent of many he used when Chancellor of the Exchequer, said that we were on our way, well on our way, and that we were on the verge of a new era. Throughout the months during which we have had to listen to the Prime Minister and the Chancellor we have been besotted with phrases of this kind—"the transformation of our progress," "home and dry in 18 months," "on our way to the economic miracle", "the credit-worthiness has increased by leaps and bounds" and so on. The Chancellor generates these phrases with the speed of a penny novelettist. It is a most dangerous and alarming thing to do.

The news may be good. We may be beginning to go in the right direction. It is profoundly unhelpful to the people of this country to react euphorically, to believe that we are breaking through long before time. If I may say so, again with some humility, we have all been here before. We who have been in Government on either side of the House are impatient for success. We are all anxious to present the best aspects of what is being achieved. But it is no good whatever deceiving ourselves and thereby believe that we deceive the people.

There is a much wider degree of insight inside and outside this House into the gravity of our economic condition and a much greater willingness to understand the seriousness of the situation and to continue with the necessary hard tasks. People are not anxious to be deceived by premature euphoria. The Leader of the Liberal Party dealt with this clearly, as did the right hon. Member for Battersea, North (Mr. Jay). Many of the speeches made, not just in this debate but in others, understand the nature of the problems and are not looking to the Prime Minister or the Chancellor for premature euphoria.

The hon. Member for Birmingham, Ladywood (Mr. Walden) writing in the News of the World not many weeks back, and it is none the worse a paper for that —it is read by many people—had this to say, and it bears thinking about by the Prime Minister and the Chancellor: If you feel ashamed of our puny pound today you have got more sense than the people who govern the country. That is true. There is a greater understanding outside this House than we often give people credit for. Let the Government not deceive themselves.

When we come to consider the deal the Chancellor was able to arrange during the weekend for the additional credit facilities, what should our reaction be? Of course it was the right thing to try to do. Of course it was necessary, as the Chancellor told us, to restore a degree of stability to the money markets. I pay tribute to the skill with which it was arranged by the banking authorities.

Do not let us deceive ourselves as to why it was arranged in the first place: the people outside this country who participated in the deal were doing so in their interests as much as ours. They have an interest in securing the stability of this country and the stability of the international banking systems. Let no one regard that deal as a solution.

As my right hon. and learned Friend the Member for Hexham (Mr. Rippon) and my hon. Friend the Member for Torbay (Sir F. Bennett) pointed out, at best this deal produces a breathing space. It certainly does not solve any of our problems. Yet the reaction of some Labour Members, including the Chancellor, does not greatly dispel our fears in that respect. Of course it was an anxious week for the Chancellor, perhaps an anxious two or three weeks. One can understand his rushing euphorically out of the Chamber after he had made the announcement saying that the pound had gone up by four or five points. The arrangement has provided only a breathing space and nothing resembling a cure.

Our worry, and all the evidence we see about the Government's policies confirm this worry, is that this arrangement could too easily be used to justify still further steps along the same road as we have trodden earlier. We have been here before. The present Prime Minister in 1964 secured international currency support to the tune of $3 billion and yet three years later it led to devaluation. The right hon. Gentleman knows as well as anyone else that this arrangement could be nothing more than a further step along the road to disaster. The question is—

Mrs. Winifred Ewing

Tell us about devolution.

Sir G. Howe

We can have a debate about devolution some other time.

The question is whether the Government will use the time given by this arrangement well, in the way in which the people want them to use it. The people of Scotland have as much interest in this question as the people in the rest of the United Kingdom. Our economies are bound together. The people of Scotland depend upon confidence in this Government as much as anyone else does. It is all too likely that the Government will not use this time well.

Let me take one example of exactly how not to react to the news. The house journal of the Government, the Daily Mirror, on the day after the announcement, appeared with the dramatic headlines "Big boost for sterling" and "They're backing Britain". It said, It was Sunshine Britain yesterday. It was a day, when, for once, things started to go right. Looking at the report inside the newspaper, we read, Hard-up Britain was given its biggest-ever overdraft yesterday. The money has been made available by nine countries—with good ol' Uncle Sam leading the way. News of the massive loan was cheered by Labour MPs when it was announced in the Commons by Chancellor Denis Healey. That is all too true. The Labour Party, when Labour is in Government, has to get into the habit of cheering new approaches of their Chancellors to get new international borrowing. All too often they have learned to cheer some new advance. It is a curious insight into their temperament that whereas they are denouncing bankers and capitalists one week, singing the Red Flag until they are red in the face, only the next week they are all too ready to cheer the bankers and financiers to the echo.

The symptoms of weakness in the Government's approach that concern us are all too clear. The euphoria that twinkles across the Chancellor's face whenever he fails to suppress it disturbs us. Sunny Jim disturbs us. The failure of the Chancellor, in fact, to control the public sector borrowing requirement disturbs us.

Even when the Chancellor demonstrates an insight, his will has failed him, year after year. In each Budget Statement he has made he has told the House that it would be taking grave risks to allow the borrowing requirement to remain as high and still worse to get larger, yet in each year it has gone beyond that. Time after time, the Government have shifted away from tough objectives, shrunk from hard tasks and failed to apply the solution. Too often, when the Conservative Party has been in Government, Labour Members have been prone to denounce those who stand and try to assert the truth about our economic problems. They try to convolute the truth.

The Prime Minister was saying today that he wanted to place conciliation in place of confrontation. If he does not recognise that everyone who has had responsibility in Britain wants to achieve that as well, he does less than justice to what we have been trying to do. [Interruption.] Labour Members shout remarks such as "Industrial Relations Act", but they themselves had to grapple with and face exactly the same issues. When my right hon. Friend the Member for Sidcup (Mr. Heath) was steering this country from 1970 to 1974, he was trying then—and those of us who were supporting him were doing the same thing—to confront the British people with the truth. The truth still remains to be confronted —of course with conciliation too.

What is wrong in the long term? We know—we have heard it in speeches today and in many other debates—that as a country we are still over-manned. That is not deniable. [Interruption.] I do not know why Labour Members shout about that. We all know the industries in Britain that are over-manned and under-invested and need to be put right. We have too little innovation here and too many restrictions are applying. There is too little reward for those who work hard and succeed. There is too little willingness to recognise success. On the other side, there is still too much government, too much spending, too much taxation, and too much borrowing.

The Prime Minister is right to say that Government spending can be good. Of course Government spending can in certain circumstances do what we all want to do, which is to abate poverty and extend freedom—but not if it is of the wrong kind, on the wrong scale, and taking place without discipline, always as a soft option.

Let me take housing, for example At no time in our history has more money been spent on housing than today, yet at no time in our history, probably has homelessness been so widespread. Instead, a great deal of the public money is going to people who are not in any sense in the condition that the Prime Minister was talking about.

Incidentally, yesterday there were complaints about £67,500 being spent on the provision of one dwelling in the London borough of Camden. Generous housing subsidies go to people with incomes well above £100 a week as to people with incomes below that figure. Public spending takes place as though from a kind of universal cornucopia, but we can no longer, regard it as beneficient.

We respect the Prime Minister's views in favour of public spending as a way of enlarging freedom, but not all public spending in all circumstances and of all kinds achieves this end. The world has changed. It is no longer the world that the Prime Minister was talking about. All too often the consequences of public spending and high taxation serve to restrict freedom and to restrict people's choice.

Mr. Emlyn Hooson (Montgomery)

Does not the right hon. and learned Gentleman agree that the real trouble with public spending arises from the great change in the salaries paid in the public sector, which arose directly from the reform of local government? Will he not agree that the real scope for containing public expenditure is in this sector?

Sir G. Howe

I fancy that the hon. and learned Gentleman seeks to make a small point. He evidently did not hear—nor did hon. Members opposite—the speech of the Leader of the Liberal Party, who drew attention to one particular aspect of public spending in his own constituency.

Of course, local government is one of the big spending agents, but hon. Members must not try to over-simplify. They have only to look around the country to see the lengths to which public spending has gone—for example, in South Wales. This is an area where industry was once thriving. The tin plate industry once thrived there. But the boom industry in South Wales now is the vehicle licensing centre in Swansea.

Let hon. Members go to London and see the derelict conditions of dockland and contrast them with the towering office blocks of Whitehall and the Greater London Council. Let them go to Merseyside and see the closed factories at Skelmersdale and the expanding computer centre of the Inland Revenue. Let them go to Newcastle, to Washington, or to Clydeside, where the growth industries are those of bureaucracy.

Public spending is subsidising jobs in over-manned, over-subsidised railroads, steel works, motor factories, and even area health authorities. It is taking place alongside the abandonment by the Government of social programmes to which the Labour Party attaches prime importance. The Government are unable to go ahead with programmes of child benefits because of expenditure on subsidising over-manned industries and jobs.

The Government have been obliged, as my hon. Friend the Member for Somerset, North (Mr. Dean) pointed out, to welsh on their undertaking to the pensioners. They have welshed on their undertaking to the pensioners because of their continued failure to control other public spending programmes.

Here we see the unacceptable face of Socialism. Public money cannot be spent, as we should wish, on the young, the sick and the old because it is being spent on the idle, the selfish and the inefficient. People know this to be so. Those who have listened to the debate know it. Many hon. Members on both sides know it. They have no confidence that the Gov- ernment, when it comes to the point, will face up to the truth and the reality of these matters.

I quote from a broadcast made two or three days ago: The only way you will stop that is in one of two ways. You either make immediate cuts in public spending, which is the honest thing to do, or you try to trick the Labour Party and the unions by talking about the money supply, giving a keynote for the currency dealings, when what you mean to do is to cut public spending once you have got the TUC conference out of the way. This is the crisis of confidence. They don't trust us. They don't trust Brian Sedgemore. They don't trust the Government. They have a horrible feeling that we don't intend to pay our way in the world, and that what we intend to do is to increase public spending, whether we can afford to do so or whether we can't. Those are the words not of an hon. Member from this side of the House but of the hon. Member for Ladywood, and they give an insight into why there should be concern. Of course we need control over public spending but not the panic cuts that have been imposed by the present Government in the last two years. To get it under control we need a deliberate strategy for public spending. Our concern is as it has always been, but there is no sign that correct measures are being put in hand.

Of course we need to secure a restraint on pay. There is no argument about that. That can only be achieved by consultation with, and the consent and understanding of, working people. Our complaint involves whether it is right to put the whole responsibility on to the TUC to the extent that the Government have. To cast the TUC in a dual rôle to that extent places an unfair burden on the TUC which is unrepresentative of its membership and of the country and it threatens to destroy the true social contract—the contract between this House and the people. It leads to coercion of the House, to deceit, and in order to fulfill deals of that kind the Government have to drive measures through the House which should not go through.

The Prime Minister asked the Opposition what we regarded as the proper price to pay for an understanding on restraint. We welcome the agreement but the problem cannot be solved as easily as the Leader of the Liberal Party suggested by thinking seriously about differentials. Lower spending should be offered as part of the deal. The people want that, less borrowing—because they understand that—less taxation, more profit, more jobs—that is what the Prime Minister should be giving as part of his social contract but it is what he has failed to give.

Because of the widespread and growing agreement about that, it should be the function of the House to reflect that agreement. Because the Government are not doing that, we find it difficult to have confidence in them. Indeed, if one presses the Government further one finds that we are being governed by an alliance bound to take us, as it has so far, in the wrong direction and down the wrong road. On the one hand, there are Marxists; on the other, there are Social Democrats. We have a pattern of half-baked Socialism. We have found that Socialist Governments destroy the dynamic of a free society, not putting in its place the discipline of a Marxist society. That is the worst of both worlds.

The Home Secretary said that he would be concerned about public spending if it went beyond 60 per cent. of national wealth. The Leader of the House said that the sky was the limit and the Prime Minister, kicking for touch, said that he was reluctant to put a figure on it at all.

That is our anxiety about the Labour Party. It is not a party that can restore the dynamic and authority of a free society. It is a party that continues to move in the wrong direction, bidding fair to wreck a free society by equivocation.

Finally, it insists on driving through the House measures for nationalisation which are doing no good whatever for the people. What is more, there are more programmes to that effect being made by the minute, the hour and the day at Transport House. Again the Prime Minister seeks to avoid giving an answer.

The Labour Party must make up its mind, for the sake of itself as well as the country, what kind of party it is going to be. The Labour Party produced a programme a fortnight ago for the expenditure of £8 billion-worth more of public money for the nationalisation of industry after industry. Do Labour Members go along with that? Do they intend to take us further in that direction?

The Prime Minister dealt with that in a characteristically robust way in a speech to his own union on Monday. He said "Not for the moment, however desirable these things may be." That is the equivocation at the heart of the Labour Party. We do not have confidence in their capacity to govern the country as a free society.

The Prime Minister this afternoon made an overture about the future of the shipbuilding and aviation industries. Whatever he may say, he cannot get away from the fact that the Bill to nationalise them has reached its present point as a result of a plainly broken pledge about the voting. Any overture he might make would, of course, be considered, but it would have to be something put forward plainly to my right hon. Friend the Leader of the Opposition or through the Leader of the House, and we should have to know what it was about.

A fortnight ago the Prime Minister made a speech in Westminster Hall trumpeting the virtues of Magna Carta as the great charter which was the foundation of our freedom. Within 36 hours he was content to take a vote secured by a cheat. If he wishes to convince our party or the people of his good faith about any of these matters, let alone his capacity to govern the country, we shall look for a great deal more than words. We shall look for deeds, and we have no confidence that we shall get them.

9.32 p.m.

The Chancellor of the Exchequer (Mr. Denis Healey)

No one who listened to the speech of the right hon. and learned Member for Surrey, East (Sir G. Howe) would realise that this debate marks the end of a week of critical importance to the British people and their economy, a week in which sterling was under heavy and unjustified pressure, a week in which the Government's view of the situation was confirmed by the central banks of the leading industrial countries not just by words but by deeds. They put their money where their mouth was—$5,300 million of it. Many people have found it difficult to understand why the Conservative Party in Parliament should have chosen to celebrate the world's endorsement of the Government's view—its support for sterling—by describing it as a defeat for the Government.

I am glad that the right hon. and learned Gentleman did something to retreat from the position which the Leader of the Opposition took yesterday. I know that the right hon. Lady is in a difficult situation because it is already clear—they have made it clear—that many Members of her party in Parliament feel that her action in putting down the motion was a grave political blunder. According to the newspapers, that is a view held by many members of the Shadow Cabinet. I am not surprised that the right hon. Member for Penrith and The Border (Mr. Whitelaw) has chosen not to be here this evening snorting away like a bashful sealion in his usual way.

We must ask ourselves why the right hon. Lady did it, especially as she had nothing more to offer this afternoon than a nervous recital of a rambling monologue clearly written by someone else. It certainly did nothing to rally the dispirited troops behind and beside her, as we who were watching could see. I suspect that the reports are true and that the right hon. Lady was committed to this folly by an over-excited Opposition Chief Whip, who believed, like some of his hon. Friends, that there might be a chance to exploit national difficulty for party advantage.

The Opposition Chief Whip told the country on the radio over the weekend that he was going to declare total war on the Government. He is not a very good general. He could not even find two Tellers for a vote against the Government earlier this week.

When the right hon. Lady put down the motion, she presumably thought that there was a chance of winning the vote. She must have known, as the Leader of the Liberal Party said, that nothing would do more damage to sterling than a General Election at this time. Everybody in the country knows it. Everything that the right hon. Lady and her right hon. Friends have said and done against sterling in recent weeks, if not calculated to do it, has had the effect of sapping confidence in the country's currency.

There are signs that the Opposition have learned their lesson. The tone of tonight's speech by the right hon. and learned Member for Surrey, East was very different from the tone he adopted yesterday and in recent debates. He may call my right hon. Friend the Prime Minister Sunny Jim, but, by God, the right hon. and learned Member was Soggy Geoff tonight. The right hon. and learned Member was right to adopt a tone of humility. How could he fail to do so considering his record as a Minister and the record of the Government of which he was a member? At one point in his speech I was reminded of the famous remark made by, I think, a Dominican who said "When it comes to humility, we are tops".

Of course the Opposition have the right to challenge the Government on our management of the economy, and of course the economy faces enormous problems. We have a long way to go before we can feel satisfied. But the country feels that the mistake of the right hon. and learned Member for Surrey, East and his right hon. Friends has been to ignore or disparage the real progress which has been made in the last two years, and particularly in the last 12 months—the progress which led the central banks of the world to take the view that the recent behaviour of the foreign exchange markets was impossible to justify by economic argument. It is progress of which we all should be proud, irrespective of our party or political view.

Mr. James Prior (Lowestoft)

The right hon. Gentleman talks about humility, but would it not be quite a good idea if he had a little more humility about the 1.2 million unemployed people in this country and the fact that at the October 1974 General Election his party said that unemployment was falling and inflation was under control? Look what has happened since.

Mr. Healey

The right hon. Gentleman's concern for the unemployed would be more convincing if he and his colleagues were not, day in and day out, asking for policies which would double the rate of unemployment.

We have made substantial progress in the last 12 months. We have halved the rate of inflation, despite increases in the money supply in 1973 which, according to the right hon. Member for Leeds, North-East (Sir K. Joseph), were still exercising a powerful effect on inflation until the end of 1975. We shall halve it again by the end of 1977.

Sir Geoffrey Howe

It would be helpful if the Chancellor could tell us something about his own view. If he really believes what he has just said in that last remark, how in any sense whatever can he possibly justify his demonstrably disastrous assertion that inflation was running at 8.4 per cent.? There is no shred of justification for that. He simply cannot assert that alongside what he has just said about my right hon. Friend.

Mr. Healey

The right hon. and learned Gentleman is a little more excited now than he was when he was speaking. He clearly sent himself to sleep as well as most of those on the Benches behind him who were listening to him.

We shall halve the rate of inflation again by the end of 1977, and the 4½ per cent. pay limit is recognised throughout the world as being likely to give us the lowest rate of wage settlements of any industrial country over the next pay round. As the newspapers have been reporting in recent weeks, all our neighbours in Europe would give their eye teeth for an agreement of this nature with the trade unions.

However, the right hon. and learned Gentleman described the agreement—which is one of the foundations of the confidence which is felt in us by central banks abroad—as an onslaught upon our standard of living and freedom generated and forced down their throats by ageing doctrinaire, prejudiced, Socialist trade union leaders."—[Official Report, 11th May 1976; Vol. 911, c. 375.] I am interested to see that there are no cheers for those words tonight. There were plenty of cheers for them when the right hon. and learned Gentleman spoke them a month ago. I ask him again whether he will not apologise publicly for those disgraceful words. Will he not at least write a letter to Mr. Len Murray, in hospital, apologising at this time?

Now I turn to the balance of payments, which is the next critical element in our economic performance. The deficit was more than halved last year compared with 1974. With respect to the right hon. and learned Gentleman, the exchange rate was steady during that year. It was very nearly halved again in the first four months of this year compared with the same period last year, although again the fall in rate did not begin until March and will not, even by now, be reflected in the trade figures.

If he poses as Shadow Chancellor, the right hon. and learned Gentleman should know this and not make the ridiculous remark that our magnificent export performance last year—only the second year since the war in which we have actually increased our share of world trade—was due to movements in the rate. That was not the case. Last year again, we lost only a fraction as many days through strikes as were lost in the last year of the Tory Government. They were the lowest number of days lost since 1968.

Mr. Rippon

rose—

Mr. Healey

I shall deal with the right hon. and learned Member for Hexham (Mr. Rippon) in a moment. After I have referred to him, I shall be delighted to give way if he cares to come back at me.

The money supply, of which, like reformed drunkards, the Opposition Front Bench make a great deal now, was last year running at just over a quarter of what it was in the last full year that the Conservative Party was in power.

Mr. Rippon

rose

Mr. Healey

I shall give way to the right hon. and learned Gentleman when I have had a word or two to say about him. I am very interested in his position and his views, and I shall take the opportunity to invite his comments on what I have to say about him personally in a moment.

This country has suffered from the world recession in the same way as all other industrial countries but less so than many. That is a remarkable achievement in view of the fact that we entered the world recession in the year of the oil crisis with an economy more severely distorted by the profligacy and economic mismanagement of the Conservative Party than that of any other major country.

Unemployment is now increasing far more slowly, and the level of unemployment is far lower than it was thought likely to be at this time.

Mr. Prior

Well done.

Mr. Healey

The right hon. Member for Lowestoft (Mr. Prior) is always the Lord North of the Opposition Front Bench. We deserve praise for this, and we get a great deal of praise from the 100,000 people who now have jobs as a result of measures taken by the Government over the past 12 months and who otherwise would not have jobs These are facts of immense importance, yet they are always ignored or disparaged by the Conservative Party, which concentrates exclusively on the problem of public expenditure.

There is a basic philosophical disagreement between the major parties in the House on the rôle of public expenditure in a humane society. The Conservatives have a perfect right to the views they express, as we have a perfect right to ours, but when we are discussing economic management the question is whether the level of public expenditure or the way in which it is financed is compatible with the path we have set for the recovery of the economy. My judgment —and right hon. Gentlemen have a perfect right to disagree with it—is that there is no economic case whatever for further cuts in public expenditure during the present year, although it will be essential for the Government to see that the limits they set in the White Paper are not exceeded, above all in local authority expenditure.

In the last year of the previous Conservative Government, local authority expenditure exceeded by 9 per cent. the limits which had been set. We must keep within the limits this year and we must consider carefully, as I said on Monday, whether we can maintain the limits we set for future years or whether the speed at which recovery accelerates requires us to consider some revision of those plans.

I am grateful to my hon. Friend the Member for Gloucestershire, West (Mr. Watkinson), who, in a thoughtful speech, drew attention to the real problem here, which is one that the Government are considering in the course of the annual public expenditure review. But there is no case—there never has been a case—on any economic grounds for savage and indiscriminate cuts this year.

Last week, however, we were faced with an orchestrated campaign of pressure by the newspapers and the Conservative Party to force us into panic measures which had no economic justification and which could only have wrecked the basis on which we have made so much progress in the past 12 months. We have had this campaign at regular intervals and it has come to a climax over the past 12 months. At about this time last year, the newspapers were full of stories that the July Budget with expenditure cuts —[Interruption.] I suggest that the hon. and learned Member for Kinross and West Perthshire (Mr. Fairbairn) joins the other comics on the Opposition Front Bench.

Mrs. Winifred Ewing

rose—

Mr. Healey

I shall give way in a moment.

Mr. Fairbairn

rose—

Mr. Healey

Until the hon. and learned Gentleman made his entrance a moment ago, we never had such a din, such a monstrous cacophony, as we had last week. We even had that gargantuan economic intellect, Bernard Levin, squeaking away in the undergrowth like a demented vole. But we did not lose our nerve. We did not panic. We stood firm, and our judgment has now received massive endorsement by those—

Mr. Rippon

rose—

Mr. Healey

—who are not primarily concerned—

Mrs. Winifred Ewing

rose—

Mr. Rippon

rose—

Mr. Healey

I suggest that the right hon. and learned Member for Hexham gives way to his lady friend and does not involve me in his amours.

Mr. Rippon

Will the right hon. Gentleman give way?

Mr. Healey

Yes, in a moment, when I have referred to the right hon. and learned Gentleman personally.

Mr. Rippon

rose—

Mr. Healey

I give way to the right hon. and learned Gentleman.

Mr. Rippon

Will the Chancellor explain why the central bankers do not buy sterling if they are so pleased with us? If the Government's record has been so good, will he also explain why under a Conservative Government the value of the pound against the dollar fell by only 0.2 per cent. while it has fallen by over 30 per cent. under a Labour Government?

Mr. Healey

The right hon. and learned Gentleman is a bit of a card—[HON. MEMBERS: "Answer".] I shall answer his question. The right hon. and learned Gentleman should know that most central bankers are forbidden by their statutes from buying foreign currency. However, he will have noticed in the past few days that there has been a great deal of buyers of sterling by bankers all over the world. That, of course, is why the rate has leapt up. Secondly, I remind him—I cannot remember whether he still commanded the confidence of his leader at the time, but I think he was a member of the administration—that when the Conservative Government set the pound floating in 1972 it went down—I cannot remember the exact figure—by about 15 points in a month. I suggest that in future he confines himself to calling the leaders of British industry lazy, greedy poltroons and generally to strengthening the relationship between the Conservative Party and the CBI in that way.

Mrs. Winifred Ewing

The entrance of the wearer of ancient garb diverted the Chancellor a short while ago, but will he consider a matter which is of great concern to my hon. Friends and myself —namely, the slippage of promises about the Scottish devolution Bill? We were at least pleased that a new promise had been made about an autumn Bill. Will he confirm that the Government intend to fulfil that promise?

Mr. Healey

I hope that next time the hon. Lady has a chance to address the House she will explain why she and her hon. Friends are allying themselves tonight with a party sworn to slash public expenditure, expenditure from which the average Scot is receiving 30 per cent. more than the average inhabitant of the area in which I live. Perhaps she will explain why she and her hon. Friends are allying themselves with the party which has refused to make any move of a significant nature towards devolution in Scotland.

Mr. Gordon Wilson (Dundee, East)

rose—

Mr. Speaker

Order. It seems that the Chancellor is not giving way. There is only five minutes left.

Mr. Gordon Wilson

rose—

Mr. Healey

What astonishes many people in the country, and some Members on both sides of the House is that the Conservative Party, when it is net fighting itself—for example, the hon. Member for St. Ives (Mr. Nott) fighting with the right hon. Member for Worcester (Mr. Walker) in Committee on the Finance Bill and turning the proceedings into a shambles—should declare war on both sides of British industry at the one time. It has declared war on the trade union movement by the use of disgraceful words and on the captains of industry by the words used by the right hon. and learned Member for Hexham. Those words, incidentally, have elicited some important and useful opinions from some of those captains of industry.

I should like to refer in particular to the noble Lords now in prominent positions in industry who were members of past Conservative Governments. First there is Lord Alport, whose letter to The Times was an interesting read, I should have thought, for the Opposition Front Bench.

The noble Lord, Lord Watkinson said that they were making a great mistake in selling Britain short. Indeed, I understand that this afternoon Lord Aldington has allied himself fully with us on the pay policy as official spokesman for the Opposition in the other place in total contradiction of what the right hon. and learned Gentleman said in recent weeks.

The Opposition have given not only the Labour Party and Labour supporters but also their own natural supporters the impression that they have no leadership and no policy but simply a posture which would send this country back to a state of social anarchy such as, unfortunately, we had to suffer in the first two months of 1974.

The Conservative Party has come to a pretty pass when the newly-elected Chairman of Tube Investments can say: But what would they do if they came back to power? I would be fearful that they would reinstate all the perks and benefits in kind and that it would be a bonanza for the get rich quick kind of fraternity. What will they think when they read in this week's Spectator the head of a major consulting firm saying: The Labour Party communicates to its followers and to us who listen but do not necessarily agree with what we hear. But at least in doing so the Labour Party lets businessmen and women know the score, and nothing generates confidence in the business community as much as knowledge of what is going to happen, however unpalatable. He went on to say: And so far as Mr. Rippon's criticism of business leaders is concerned, we will have plenty to say when Tory leaders first tell us what the party is going to do. This is the question to which not only Conservative business men and women but ordinary men and women all over the country want to know the answer. We have a bunch of also-rans on the Opposition Front Bench, a total lack of leadership and public squabbles, accord-

ing to reports in the Press. We are told by the person who gave the right hon. Lady the title of the Iron Lady that she was forced into the statement she made about trade union reform by her own Shadow Cabinet against her will. Today we find that the right hon. Lady is forced into a censure motion by her own Chief Whip against the wishes of her Shadow Cabinet.

The Opposition have some apologies to make to the country and to the House. By putting down a censure motion against the Government at this time, they have revealed a total bankruptcy of policy and a total failure of leadership. I ask the House to reject the motion with the contempt that it deserves.

Question put,

That this House has no confidence in Her Majesty's Government:—

The House divided: Ayes 290, Noes 309.

Division No. 173.]	AYES	[10.0 p.m.
Adley, Robert	Cormack, Patrick	Gow, Ian (Eastbourne)
Aitken, Jonathan	Corrie, John	Gower, Sir Raymond (Barry)
Alison, Michael	Costain, A. P.	Grant, Anthony (Harrow C)
Amery, Rt Hon Julian	Crawford, Douglas	Gray, Hamish
Arnold, Tom	Critchley, Julian	Grieve, Percy
Atkins, Rt Hon H. (Spelthorne)	Crouch, David	Griffiths, Eldon
Awdry, Daniel	Crowder, F. P.	Grist, Ian
Bain, Mrs Margaret	Davies, Rt Hon J. (Knutsford)	Grylls, Michael
Baker, Kenneth	Dean, Paul (N Somerset)	Hall, Sir John
Banks, Robert	Dodsworth, Geoffrey	Hall-Davis, A. G. F.
Bell, Ronald	Douglas-Hamilton, Lord James	Hamilton, Michael (Salisbury)
Bennett, Sir Frederic (Torbay)	Drayson, Burnaby	Hampson, Dr Keith
Bennett, Dr Reginald (Fareham)	du Cann, Rt Hon Edward	Hannam, John
Benyon, W.	Durant, Tony	Harrison, Col Sir Harwood (Eye)
Berry, Hon Anthony	Dykes, Hugh	Harvie Anderson, Rt Hon Miss
Biffen, John	Eden, Rt Hon Sir John	Hastings, Stephen
Biggs-Davison, John	Edwards, Nicholas (Pembroke)	Havers, Sir Michael
Blaker, Peter	Elliott, Sir William	Hawkins, Paul
Body, Richard	Emery, Peter	Hayhoe, Barney
Boscawen, Hon Robert	Evans, Gwynfor (Carmarthen)	Heath, Rt Hon Edward
Bottomley, Peter	Ewing, Mrs Winifred (Moray)	Henderson, Douglas
Bowden, A. (Brighton, Kemptown)	Eyre, Reginald	Heseltine, Michael
Boyson, Dr Rhodes (Brent)	Falrbairn, Nicholas	Hicks, Robert
Braine, Sir Bernard	Fairgrieve, Russell	Higgins, Terence L.
Brittan, Leon	Farr, John	Holland, Philip
Brocklebank-Fowler, C.	Fell, Anthony	Hordern, Peter
Brotherton, Michael	Finsberg, Geoffrey	Howe, Rt Hon Sir Geoffrey
Brown, Sir Edward (Bath)	Fisher, Sir Nigel	Howell, David (Guildford)
Bryan, Sir Paul	Fletcher, Alex (Edinburgh N)	Howell, Ralph (North Norfolk)
Buchanan-Smith, Alick	Fletcher-Cooke, Charles	Hunt, David (Wirral)
Buck, Antony	Fookes, Miss Janet	Hunt, John
Budgen, Nick	Forman, Nigel	Hurd, Douglas
Bulmer, Esmond	Fowler, Norman (Sutton C'f'd)	Hutchison, Michael Clark
Burden, F. A.	Fox, Marcus	Irving, Charles (Cheltenham)
Butler, Adam (Bosworth)	Fraser, Rt Hon H. (Stafford & St)	James, David
Carlisle, Mark	Fry, Peter	Jenkin, Rt Hn P. (Wanst'd & W'df'd)
Chalker, Mrs Lynda	Galbraith, Hon. T. G. D.	Jessel, Toby
Channon, Paul	Gardiner, George (Reigate)	Johnson Smith, G. (E Grinstead)
Churchill, W. S.	Gardner, Edward (S Fylde)	Jones, Arthur (Deventry)
Clark, Alan (Plymouth, Sutton)	Gilmour, Rt Hon Ian (Chesham)	Jopling, Michael
Clark, William (Croydon S)	Gilmour, Sir John (East Fife)	Joseph, Rt Hon Sir Keith
Clarke, Kenneth (Rushcliffe)	Glyn, Dr. Alan	Kaberry, Sir Donald
Clegg, Walter	Godber, Rt Hon Joseph	Kellert-Bowman, Mrs Elaine
Cockcroft, John	Goodhart, Philip	Kershaw, Anthony
Cooke, Robert (Bristol W)	Goodhew, Victor	Kilfedder, James
Cope, John	Goodlad, Alastair	Kimball, Marcus
Cordle, John H.	Gorst, John	King, Evelyn (South Dorset)
King, Tom (Bridgwater)	Nelson, Anthony	Spence, John
Kirk, Sir Peter	Neubert, Michael	Spicer, Jim (W Dorset)
Kitson, Sir Timothy	Newton, Tony	Spicer, Michael (S Worcester)
Knight, Mrs Jill	Normanton, Tom	Sproat, Iain
Knox, David	Nott, John	Stainton, Keith
Lamont, Norman	Onslow, Cranley	Stanbrook, Ivor
Lane, David	Oppenheim, Mrs Sally	Stanley, John
Langlord-Holt, Sir John	Osborn, John	Steen, Anthony (Wavertree)
Latham, Michael (Melton)	Page, John (Harrow West)	Stewart, Donald (Western Isles)
Lawrence, Ivan	Page, Rt Hon R. Graham (Crosby)	Stewart, Ian (Hitchin)
Lawson, Nigel	Pattie, Geoffrey	Stokes, John
Lester, Jim (Beeston)	Percival, Ian	Stonehouse, Rt Hon John
Lewis, Kenneth (Rutland)	Peyton, Rt Hon John	Stradling, Thomas J.
Lloyd, Ian	Pink, R. Bonner	Tapsell, Peter
Loveridge, John	Price, David (Eastleigh)	Taylor, R. (Croydon NW)
Luce, Richard	Prior, Rt Hon James	Taylor, Teddy (Cathcart)
McAdden, Sir Stephen	Pym, Rt Hon Francis	Tebbit, Norman
MacCormick, Iain	Raison, Timothy	Temple-Morris, Peter
McCrindle, Robert	Rathbone, Tim	Thatcher, Rt Hon Margaret
Macfarlane, Neil	Rawlinson, Rt Hon Sir Peter	Thomas, Dafydd (Merioneth)
MacGregor, John	Rees, Peter (Dover & Deal)	Thomas, Rt Hon P. (Hendon S)
Macmillan, Rt Hon M. (Farnham)	Rees-Davies, W. R.	Thompson, George
McNair-Wilson, M. (Newbury)	Reid, George	Townsend, Cyril D.
McNair-Wllson, P. (New Forest)	Renlon, Rt Hon Sir D. (Hunts)	Trotter, Neville
Madel, David	Renton, Tim (Mid-Sussex)	Tugendhat, Christopher
Marshall, Michael (Arundel)	Rhys Williams, Sir Brandon	van Straubenzee, W. R.
Marten, Neil	Ridley, Hon Nicholas	Vaughan, Dr Gerard
Mates, Michael	Ridsdale, Julian	Viggers, Peter
Mather, Carol	Rifkind, Malcolm	Wakeham, John
Maude, Angus	Rippon, Rt Hon Geoffrey	Walder, David (Clitheroe)
Maudling, Rt Hon Reginald	Roberts, Michael (Cardiff NW)	Walker, Rt Hon P. (Worcester)
Mawby, Ray	Roberts, Wyn (Conway)	Walker-Smith, Rt Hon Sir Derek
Maxwell-Hyslop, Robin	Rodgers, Sir John (Sevenoaks)	Wall, Patrick
Mayhew, Patrick	Rossi, Hugh (Hornsey)	Walters, Dennis
Meyer, Sir Anthony	Rost, Peter (SE Derbyshire)	Warren, Kenneth
Miller, Hal (Bromsgrove)	Royle, Sir Anthony	Watt, Hamish
Mills, Peter	Sainsbury, Tim	Weatherill, Bernard
Miscampbell, Norman	St. John-Stevas, Norman	Wells, John
Mitchell, David (Basingstoke)	Scott, Nicholas	Welsh, Andrew
Moate, Roger	Scott-Hopkins, James	Whitelaw, Rt Hon William
Monro, Hector	Shaw, Giles (Pudsey)	Wiggin, Jerry
Montgomery, Fergus	Shaw, Michael (Scarborough)	Wigley, Dafydd
Moore, John (Croydon C)	Shelton, William (Streatham)	Wilson, Gordon (Dundee E)
More, Jasper (Ludlow)	Shepherd, Colin	Wimerton, Nicholas
Morgan, Geraint	Shersby, Michael	Wood, Rt Hon Richard
Morgan-Giles, Rear-Admiral	Silvester, Fred	Young, Sir G. (Ealing, Acton)
Morris, Michael (Northampton S)	Sims, Roger	Younger, Hon George
Morrison, Charles (Devizes)	Sinclair, Sir George	TELLERS FOR THE AYES:
Morrison, Hon Peter (Chester)	Skeet, T. H. H.
Mudd, David	Smith, Dudley (Warwick)	Mr. Spencer Le Marchant and Mr. Cecil Parkinson.
Neave, Alrey	Speed, Keith
NOES
Abse, Leo	Buchan, Norman	Dalyell, Tam
Allaun, Frank	Buchanan, Richard	Davidson, Arthur
Anderson, Donald	Butler, Mrs Joyce (Wood Green)	Davles, Bryan (Enfield N)
Archer, Peter	Callaghan, Rt Hon J. (Cardiff SE)	Davies, Denzil (Lianelli)
Armstrong, Ernest	Callaghan, Jim (Middleton & P)	Davles, Ifor (Gower)
Ashley, Jack	Campbell, Ian	Davis, Clinton (Hackney C)
Ashton, Joe	Canavan, Dennis	Deakins, Eric
Atkins, Ronald (Preston N)	Cant, R. B.	Dean, Joseph (Leeds West)
Atkinson, Norman	Carmichael, Neil	de Freitas, Rt Hon Sir Geoffrey
Bagier, Gordon A. T.	Carter, Ray	Dell, Rt Hon Edmund
Barnett, Guy (Greenwich)	Carter-Jones, Lewis	Dempsey, James
Barnett, Rt Hon Joel (Heywood)	Cartwright, John	Doig, Peter
Bates, Alf	Castle, Rt Hon Barbara	Dormand, J. D.
Bean, R. E.	Clemitson, Ivor	Douglas-Mann, Bruce
Benn, Rt Hon Anthony Wedgwood	Cocks, Michael (Bristol S)	Duffy, A. E. P.
Bennett, Andrew (Stockport N)	Cohen, Stanley	Dunn, James A.
Bidwell, Sydney	Coleman, Donald	Dunnett, Jack
Bishop, E. S.	Colquhoun, Ms Maureen	Dunwoody, Mrs Gwyneth
Blenkinsop, Arthur	Concannon, J. D.	Eadie, Alex
Boardman, H.	Conlan, Bernard	Edge, Geoff
Booth, Rt Hon Albert	Cook, Robin F. (Edin C)	Edwards, Robert (Wolv SE)
Boothroyd, Miss Betty	Corbett, Robin	Ellis, John (Brigg & Scun)
Bottomley, Rt Hon Arthur	Cox, Thomas (Tooting)	Ellis, Tom (Wrexham)
Boyden, James (Bish Auck)	Craigen, J. M. (Maryhill)	English, Michael
Bradley, Tom	Crawshaw, Richard	Ennals, David
Bray, Dr Jeremy	Cronin, John	Evans, Fred (Caerphilly)
Broughton, Sir Alfred	Crosland, Rt Hon Anthony	Evans, loan (Aberdare)
Brown, Hugh D. (Provan)	Cryer, Bob	Evans John (Newton)
Brown, Robert C. (Newcastle W)	Cunningham, G. (Islington S)	Ewing, Harry (Stirling)
Brown, Ronald (Hackney S)	Cunningham, Dr J. (Whlteh)	Faulds, Andrew

Fernyhough, Rt Hon E.	Litterick, Tom	Rodgers, William (Stockton)
Fitch, Alan (Wigan)	Lomas, Kenneth	Rooker, J. W.
Fitt, Gerard (Belfast W)	Loyden, Eddie	Roper, John
Flannery, Martin	Luard, Evan	Rose, Paul B.
Fletcher, Raymond (Ilkeston)	Lyons, Edward (Bradford W)	Ross, Rt Hon W. (Kilmarnock)
Fletcher, Ted (Darlington)	Mabon, Dr. J. Dickson	Rowlands, Ted
Foot, Rt Hon Michael	McCartney, Hugh	Sandelson, Neville
Ford, Ben	McElhone, Frank	Sedgemore, Brian
Forrester, John	MacFarquhar, Roderick	Selby, Harry
Fowler, Gerald (The Wrekin)	McGuire, Michael (Ince)	Shaw, Arnold (Ilford South)
Fraser, John (Lambeth, N'w'd)	Mackenzie, Gregor	Sheldon, Robert (Ashton-u-Lyne)
Freeson, Reginald	Mackintosh, John P.	Shore, Rt Hon Peter
Garrett, John (Norwich S)	Maclennan, Robert	Short, Rt Hon E. (Newcastle C)
Garrett, W. E. (Wallsend)	McMillan, Tom (Glasgow C)	Short, Mrs Renée (Wolv NE)
George, Bruce	McNamara, Kevin	Silkin, Rt Hon John (Deptford)
Gilbert, Dr John	Madden, Max	Silkin, Rt Hon S. C. (Dulwich)
Ginsburg, David	Magee, Bryan	Sillars, James
Golding, John	Maguire, Frank (Fermanagh)	Silverman, Julius
Gould, Bryan	Mahon, Simon	Skinner, Dennis
Gourlay, Harry	Mallaileu, J. P. W.	Small, William
Graham, Ted	Marks, Kenneth	Smith, John (N Lanarkshire)
Grant, George (Morpeth)	Marquand, David	Snape, Peter
Grant, John (Islington C)	Marshall, Dr. Edmund (Goole)	Spearing, Nigel
Grocott, Bruce	Marshall, Jim (Leicester S)	Stallard, A. W.
Hamilton, W. W. (Central Fife)	Mason, Rt Hon Roy	Stewart, Rt Hon M. (Fulham)
Hardy, Peter	Maynard, Miss Joan	Stoddart, David
Harrison, Walter (Wakefield)	Meacher, Michael	Stott, Roger
Hart, Rt Hon Judith	Melllsh, Rt Hon Robert	Strang, Gavin
Hattersley, Rt Hon Roy	Mendelson, John	Strauss, Rt Hn G. R.
Hatton, Frank	Mikardo, Ian	Summerskill, Hon Dr Shirley
Hayman, Mrs Helene	Millan, Bruce	Swain, Thomas
Healey, Rt Hon Denis	Miller, Dr M. S. (E Kilbride)	Taylor, Mrs Ann (Bolton W)
Heffer, Eric S.	Miller, Mrs Millie (Ilford N)	Thomas, Jeffrey (Abertillery)
Hooley, Frank	Mitchell, R. C. (Soton, Itchen)	Thomas, Mike (Newcastle E)
Horam, John	Molloy, William	Thomas, Ron (Bristol NW)
Howell, Rt Hon Denis	Moonman, Eric	Thorne, Stan (Preston South)
Hoyle, Doug (Nelson)	Morris, Alfred (Wythenshawe)	Tierney, Sydney
Huckfield, Les	Morris, Charles R. (Openshaw)	Tinn, James
Hughes, Rt Hon C. (Anglesey)	Morris, Rt Hon J. (Aberavon)	Tomlinson, John
Hughes, Mark (Durham)	Moyle, Roland	Tomney, Frank
Hughes, Robert (Aberdeen N)	Mulley, Rt Hon Frederick	Torney, Tom
Hughes, Roy (Newport)	Murray, Rt Hon Ronald King	Tuck, Raphael
Hunter, Adam	Newens, Stanley	Urwin, T. W.
Irvine, Rt Hon Sir A. (Edge Hill)	Noble, Mike	Varley, Rt Hon Eric G.
Irving, Rt Hon S. (Dartford)	Oakes, Gordon	Wainwright, Edwin (Dearne V)
Jackson, Colin (Brighouse)	Ogden, Eric	Walden, Brian (B'ham, L'dyw'd)
Jackson, Miss Margaret (Lincoln)	O'Halloran, Michael	Walker, Harold (Doncaster)
Janner, Greville	Orbach, Maurice	Walker, Terry (Kingswood)
Jay, Rt Hon Douglas	Orme, Rt Hon Stanley	Ward, Michael
Jeger, Mrs. Lena	Ovenden, John	Watkins, David
Jenkins, Hugh (Putney)	Owen, Dr David	Watkinson, John
Jenkins, Rt Hon Roy (Stechford)	Padley, Walter	Weetch, Ken
John, Brynmor	Palmer, Arthur	Weitzman, David
Johnson, James (Hull West)	Park, George	Wellbeloved, James
Johnson, Walter (Derby S)	Parker, John	White, Frank R. (Bury)
Jones, Barry (East Flint)	Parry, Robert	White, James (Pollok)
Jones, Dan (Burnley)	Pavitt, Laurie	Whitehead, Phillip
Judd, Frank	Peart, Rt Hon Fred	Whitlock, William
Kaufman, Gerald	Pendry, Tom	Willey, Rt Hon Frederick
Kelley, Richard	Perry, Ernest	Williams, Alan (Swansea W)
Kerr, Russell	Phipps, Dr Colin	Williams, Alan Lee (Hornch'ch)
Kilroy-Silk, Robert	Prentice, Rt Hon Reg	Williams, Rt Hon Shirley (Hertford)
Kinnock, Neil	Prescott, John	Williams, Sir Thomas
Lamble, David	Price, C. (Lewisham W)	Wilson, Alexander (Hamilton)
Lamborn, Harry	Price, William (Rugby)	Wilson, Rt Hon H. (Huyton)
Lamond, James	Radice, Giles	Wilson, William (Coventry SE)
Latham, Arthur (Paddington)	Rees, Rt Hon Merlyn (Leeds S)	Wise, Mrs Audrey
Leadbitter, Ted	Richardson, Miss Jo	Woodall, Alec
Lee, John	Roberts, Albert (Normanton)	Woof, Robert
Lestor, Miss Joan (Eton & Slough)	Roberts, Gwilym (Cannock)	Wrigglesworth, Ian
Lever, Rt Hon Harold	Robertson, John (Paisley)	Young, David (Bolton E)
Lewis, Arthur (Newham N)	Robinson, Geoffrey	TELLERS FOR THE NOES:
Lewis, Ron (Carlisle)	Roderick, Caerwyn	Mr. James Hamilton and Mr. Joseph Harper.
Llpton, Marcus	Rodgers, George (Chorley)

Question accordingly negatived.