INDUSTRY AND EMPLOYMENT

HC Deb 29 November 1976 vol 921 cc487-618

Mr. Speaker

I understand that the hon. Member for Oswestry (Mr. Biffen) is to move the second of the official Opposition amendments. I have also selected the first amendment tabled by the Opposition, at the end of the Question, to add: But humbly regret that the Gracious Speech provides no grounds for confidence in the economic policies of Her Majesty's Government.

3.52 p.m.

Mr. John Biffen (Oswestry)

I beg to move, at the end of the Question, to add: But humbly regret that the Gracious Speech does not contain measures which will inspire industrial and commercial confidence and sustain employment. Although the Gracious Speech properly sets out what will be the major legislative programme of the Government for the year in prospect, we all know that there is a great deal more to political management than what is contained in that document. We hardly need reminding that the debate today proceeds against a background of mounting economic anxiety, which is underlined by the presence of officials of the International Monetary Fund, who have been with us for some while now. I belong to that school which does not believe that we require outsiders to make a diagnosis of our political and social shortcomings. Therefore, I should like to try to secure at least a modicum of common ground by putting forward a diagnosis which, I hope, will unite both sides of the House in confronting the economic and social factors which properly are to take up a great deal of the political life of this House over the coming 12 months.

I am happy to give my assent to the words employed by the Prime Minister when addressing the Labour Party conference at Blackpool in October. His words then—and I think this will be the first time that they have been read into the record of this House—were: We used to think that you could just spend your way out of a recession and increase employment by cutting taxes and boosting Government spending. I tell you in all candour that that option no longer exists and that insofar as it ever did exist, it worked by injecting inflation into the economy. Those are observations of the Prime Minister which I happily endorse.

Mr. Peter Rost (Derbyshire, South-East)

Where is he?

Mr. Biffen

I am doing my best in the absence of the Prime Minister. No doubt he would join my hon. Friends in applauding the echoes of his own words.

There is one further point which has to be covered by the House. On the first day of the debate on the Address, the Prime Minister took a forward look into the likely trend of economic activity and said: the gross national product will grow slightly during the next 12 months".—[0flicial Report. 24th November 1976; Vol. 921, c. 40.] That was a welcome counsel of realism offered by the right hon. Gentleman. I want to examine the reactions to that counsel and what it implies for industrial and commercial policy.

Dr. Jeremy Bray (Motherwell and Wishaw)

The hon. Gentleman has been highly selective in quoting from the Prime Minister's speech at the Labour Party conference. It is a pity that he does not have time to quote the speech in full. If he takes the trouble to read the speech as a whole he will see that it is a defence of the broad industrial and economic strategy of the Labour Party and in no way an endorsement of the monetarist views which are held by the hon. Gentleman and his right hon. and hon. Friends.

Mr. Biffen

No doubt, if the hon. Gentleman is lucky enough to catch your eye, Mr. Speaker, he will be able to make his quotations from the full speech, which I have here. It would strain the patience of the House were I to quote it in full. I believe that the Prime Minister, and certainly his son-in-law, would conclude that I had chosen what were certainly the most perceptive remarks.

I turn to the two reactions which may well develop from that analysis made by the Prime Minister. The first will be one of incredulity and resentment against such a stark deployment of the facts of life. We shall not have to wait long for that reaction. I notice that the TUC has been extremely uneasy about some recent developments in Government policy. I quote a statement made by Mr. Len Murray, reported in the Financial Times of 25th November: All the TUC was saying was that the manifest economic advantages were for maintaining a growth path and there was a feeling that the Cabinet did not fully understand the importance of this. I can well understand those who feel that many of their cherished commitments are being falsified by some of the relentless impact of outside events. But it is a flight from reality to suppose that the Government, by manipulating public expenditure or any other element that is available to them, can jerk the growth path of this country in some way substantially higher than the levels already indicated by the Prime Minister.

Secondly, given the prospect of a relatively low level of demand, I am certain that there will be an increasing call for a tightening of control of the economy. We shall hear more cries for import controls. I am not certain that they will be confined merely to members of the Tribune Group. Certainly we shall have further cries for a return to a fixed exchange rate.

I think it appropriate that among the early advocates of a return to a fixed exchange rate should be the Treasurer of the Labour Party, the hon. Member for Tottenham (Mr. Atkinson). Although I do not see him in his place, I notice that the hon. Member for Sheffield, Heeley (Mr. Hooley) also took the opportunity at Question Time recently to advocate a return to a fixed exchange rate regime. It is the earnest anxiety of my right hon. and hon. Friends and myself that the Government should resist such demands. I do not believe that such a course would do anything to assist the development of a profitable industrial and commercial policy for this country.

I want to make an analysis of my own to add to that of the Prime Minister. I do not believe that we have yet in this country or in the Western world begun fully to appreciate the significance of the tremendous transfer in real wealth that has flowed as an inevitable consequence from the quintupling of oil prices. I believe that inevitably, and within the near future, we will see developed new centres of manufacture in what once would have been regarded, as the developing world, and that what we have experienced in shipbuilding and textiles we will experience increasingly from new centres of manufacturing strength which will have been built up as a consequence of the transfer of real wealth from the developed to the developing world.

It is against that background that I should like to consider what may be the responsibilities of the Government and governmental agencies. Let the House be under no illusion: that challenge will be painful for this country and its economy to accommodate. I do not think that anyone should be under the slightest illusion about that proposition. I believe that governmental agencies will be expected to protect the traditional activities and the traditional patterns of manufacture in this country, and certainly it will not be the general expectation that such agencies will nurture prospective high fliers.

It is in this context that I note with a great deal of interest the passage in the Gracious Speech which read: The National Enterprise Board … and the Planning Agreements system provide essential instruments …". The abiding question will be whether they are essential instruments to preserve a pattern of an economy which is increasingly out of joint with the new times which I believe are developing, or whether they will try to anticipate the future. I must confess that all my experience of politics leads me to believe that they will be institutions on the side of industrial conservatism. But to the extent to which they are employed—to which they are employed on any ambitious scale or to give meaning to the phrase "essential instruments"—they will be a use of resources, and a use of resources which will have been pre-empted by the Government because that will have been a Government choice.

I believe that such a pre-emption of resources can sit only uneasily alongside the commitments contained in the White Paper entitled "An Approach to Industrial Strategy". I remind the House of that words contained in that document, which was presented by the Government in November last year: The Government has made it clear that it accepts the importance of sustaining a vigorous, alert, responsible and profitable private sector of industry. Those are words which I find no great difficulty in accepting. But I look at the hon. Member for Liverpool, Walton (Mr. Heller), the impassive possessor of the conscience of a certain element of the Labour Party. I wonder how those words strike him, for the relationship that will proceed within the uneasy coalition that constitutes the Labour Part will lie at the heart of much of the political debate in the year in prospect.

One thing is certain; the commitment contained in "An Approach to Industrial Strategy" was long overdue, and if I want an argument to sustain it I need go no further than to turn to the Department of Industry itself, quoting from the current economic progress report prepared by the information division of the Treasury, which says: The Department of Industry has estimated that the average real rate of return on capital employed by industrial and commercial companies (i.e. after stock appreciation and after charging capital consumption at replacement cost) has fallen from more than 13 per cent. in 1960 to 8 per cent. in 1970 and to 4 per cent. in 1975.…

Mr. Eric S. Heller (Liverpool, Walton)

The hon. Gentleman is suggesting that my colleagues and I are opposed to profits in industry. I have never argued that if we have the capitalist system there should not be profits. The whole essence of the system is that it should make maximum profits. The argument is not that we should have the capitalist system but that we should move on from there to Government intervention and ultimately to the extension of public ownership. Then the profits could be used for the community as a whole and not for the maintenance and development of the capital- ist system. Surely the hon. Gentleman has understood my argument. If not, have not put it correctly.

Mr. Biffen

I have understood the hon. Gentleman's argument correctly—only too well. That is why I am delighted that he should have restated it in that succinct form and has thus demonstrated why, for a significant section of the Labour Party, there can be no concept of a mixed economy with a flourishing private capital sector. Therefore, a great deal of the analysis on which I have proceeded, and for which I have drawn generously from Government sources, must be repugnant to the hon. Gentleman's thinking and to that of many of his hon. Friends below the Gangway.

I turn now to what seems to be a rather troubled path for this country as it strives to plot its way through the very difficult period ahead. I take as my premise that the painful return to monetary stability is a chance to treat a more propitious circumstance in which a private sector can flourish within a mixed system. I know that I cannot carry the hon. Member for Liverpool, Walton with me on that, but I believe that probably the hon. Member for Hayes and Harlington (Mr. Sandelson) would not entirely deny a legitimaterôlefor a flourishing private sector in a mixed economy.

In outlining what I would seek, I think that there are two broad attitudes of mind which it would be well to be enjoyed by politicians. The first is to be quite agnostic and to confess that we do not know and cannot anticipate our future pattern of success. That is something which will be revealed to us. It is not something that we shall instruct and impose and exhort on others. I do not know what will be the future balance of success for this nation as between industry and commerce, as between manufacture and service, but I know that there is a dynamic, which historically has repeated and reflected and changed all these factors, and I have no reason to suppose that that dynamic can be fossilised and put into a state of suspense.

The other attitude of mind which I urge upon hon. Members I call a candid humility about desirable rates of industrial investment. There is a tendency on the part of almost all politicians to argue as though industrial investment in itself was a self-evident beneficial dimension of total activity. I emphasise my own candid humility in not knowing what is the right and appropriate level of industrial investment.

I was struck by what I read in an article prepared by Mr. Dermot Glynn, the economic director of the CBI, which appears in the November Quarterly Review of the National Westminster Bank. Mr. Glynn argues: Investment in our manufacturing industry as a proportion of net output in manufacturing has compared reasonably with that in the United States, France or Germany. … We compare badly, however, in that the extra production which our investment yields is low. That point should remind all of us that the most valuable resource we have in this country—I say it with all respect to the Scottish National Party, whose sole representative here at the moment is the hon. Member for South Angus (Mr. Welsh), whom I welcome—does not lie under the North Sea. It lies in our human resources. A successful deployment of our human resources is really the only key on which politicians can tolerably operate.

Mr. Andrew Welsh (South Angus)

Will the hon. Gentleman accept that the Scottish National Party also realises the benefit of human and material resources, and that is why we want them put to the service of Scotland? [HON. MEMBERS: "Where are they?"]

Mr. Biffen

We should all like to know where the human resources of the Scottish National Party are.

Mr. Neville Sandelson (Hayes and Harlington)

Is the hon. Gentleman aware that those same human resources were in this country during the 1920s and the 1930s and were sadly neglected by the party for which he now speaks? Does he realise that the reason we seek a flourishing private sector in this country —I do, and the hon. Gentleman singled me out for special reference in that respect—lies in our view that in the past the private sector has failed the nation, and we think it essential that it should play its part towards the industrial regeneration for which the Government are working.

Mr. Biffen

That was a quite a lengthy intervention. Although I singled out the hon. Member, there are others round about and just behind him on whom I could have conferred the accolade. If he and I are to be engaged in a constructive competitive dialogue about how best to create circumstances for a flourishing private sector, I can think of no happier battleground for British politics.

I turn now to what seem to me to be the three prescriptions for policy in the present situation. First, there is the imperative that the Government reduce the public sector borrowing requirement —for this one central reason, that otherwise there can be no prospect of reducing interest rates to something like the level where credit can perform its natural and indispensable part in the whole business and commercial cycle.

One of the most serious condemnations of the Government's present balance of fiscal, monetary and public spending policies is the extent to which their credit and interest rate policy has to bear a burden totally disproportionate to what it can reasonably be expected to support, and the distortions which flow from that are profoudly damaging and, I believe, could be long-lasting in their consequences.

The second prescription of policy which I urge upon the Government is that they acknowledge the very considerable potential that can be played in this country and its economy by smaller companies. Too often, and particularly in the House of Commons, it is the big battalions which are heard.

I urge the Government to read the report of the Economist Advisory Group, recently produced by Mr. Graham Bannock on behalf of the Anglo-German Foundation for the Study of Industrial Society. I believe that I should carry the support at least of the hon. Member for Cornwall, North (Mr. Pardoe) in many of the recommendations made in that document. I quote from just part of it: In Britain, sufficient numbers of new companies are not being formed to seek out and test new products, processes and services, to continue the process of economic specialisation and to offset the continued growth of concentration. A variety of policy recommendations is contained in the document. I alight upon only one, because it happens to be incorporated in Conservative Party policy, that is, the conferring of the new legal status of proprietary company. There is much that can be done to effect a happy and propitious future for the British economy by paying proper regard to therôleof smaller companies.

Third, as a prescription policy, I turn to the whole question of motivation of senior and middle management, and here I am sorry to be—

Mr. Heffer

Is the hon. Gentleman aware that many of us on this side, despite what he said earlier, have argued for a long time the need to assist small companies? Would he not agree that one of the best ways to help small companies would be to give assistance to those in the inner cities so that they could have nursery factories in which to develop? Too many of them have been destroyed in the inner cities, with nothing to replace them. Would not the hon. Gentleman urge that on any Government in order to help small businesses to develop in our cities?

Mr. Biffen

I see that over the coming months there will be a happy relationship struck between the hon. Member and myself, and I already detect an early conversion of mind to a nascent form of private sector capitalism.

Mr. Heffer

Not an early conversion.

Mr. Biffen

Not an early conversion?

Mr. Heffer

The hon. Gentleman does not listen. I have often said it before.

Mr. Biffen

I listen attentively to the hon. Gentleman, but at the moment I have the opinion that he is a slightly confused fundamentalist. Of course, if he seeking a point of agreement with me about the Bannock Economist Advisory Group report, I am sure that there are points in its recommendations on which he and I can join.

I now turn to my third point, about a tax policy to encourage—

Mr. Nicholas Ridley (Cirencester and Tewkesbury)

Is my hon. Friend aware that there are about 200,000 labour-only sub-contractors, which are really the most important small businesses in the country but which the hon. Member for Liverpool, Walton (Mr. Heifer) has persecuted for the whole of his political career? How he can say such things I do not understand.

Mr. Deputy Speaker

I am wondering who is intervening on whom. I have only just taken the Chair.

Mr. Biffen

I think that that incident demonstrates the pitfalls of politics, Mr. Deputy Speaker. I gave a hand of friendship to the hon. Member for Walton, and I lost the friendship of my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley).

The Lord President of the Council and Leader of the House of Commons (Mr. Michael Foot)

It would be a good exchange.

Mr. Biffen

I shall not comment upon that uncharitable comment lest it he recorded in the Official Report.

I turn now to my third prescription of policy—to urge upon the Government tax policies which will encourage the motivation of senior and middle management. I urge this in the absence of the hon. Member for Luton, West (Mr. Sedgemore), whom I regard as a soul-mate of the hon. Member for Walton, and I regret the hon. Gentleman's absence because I was fascinated to hear the discussions on the radio last night about the impact of progressive tax systems upon incentive.

However, I do not rest my proposition that management is thoroughly demoralised in this country on the sole ground of taxation. In my view, management is thoroughly demoralised because it believes that it is operating in an inherently uncongenial political climate, which goes far beyond the question of taxation.

If we are to discuss the question of monetary rewards, I am prepared to rest my case upon the comments addressed to the British Institute of Management in May of this year by Mr. John Lyons, General Secretary of the Electrical Power Engineers' Association, when he said that some unions were vying with each other to demonstrate who is the most virile in terms of the low paid. They have not been successful in helping the low paid. They have been successful in damaging the whole wages structure to the detriment of the skilled, tech nical and managerial worker. Those are comments made by a general secretary of a trade union, and we should do well to take them to heart.

I make this one final additional plea to the Government, who will have the task of restoring confidence, to which the amendment refers. In making my comments on therôle of public spending cuts I am not motivated by any atavistic hostility to public spending as such, but the truth is that we are now in a situation where Government spending relative to Government revenue is giving cause for general and widespread unease.

Mr. Sam Brittan, writing on 25th November last, put it more succinctly than I can when he said: In terms of confidence £1 of expenditure curbs is probably two or three times as effective as £1 of tax increase. It is in that particular context that we must register our dismay over the proposed increase in national insurance employers' contributions. I say to the Government that that particular incident —it underlines the whole thrust of the case from the Conservative Benches—did much to demoralise further the state of malaise and ill-confidence which I believe is widespread in this country today. Yet confidence is the elusive mistress of industrial and commercial policy.

The Treasury Bench has over the years become the miserable victim of its own rhetoric and the expectations to which it has given rise. Now it is—

Mr. Max Madden (Sowerby)

Will the hon. Gentleman take this opportunity of sorting out the confusion which has resulted from certain statements made by the right hon. Lady the Leader of the Opposition at the weekend concerning the Opposition's view of incomes policy? Will he tell us whether she is correct in saying that a future Conservative Government would not introduce a statutory incomes policy? Was it true, was it rubbish, or was it an early indication of yet another U-turn?

Mr. Biffen

The hon. Gentleman tempts me, as I come to the point of my peroration. I advise him first to get hold of the record of what was said. He will find that there was nothing said by my right hon. Friend the Leader of the Opposition which has not been said and which is not consistent with what has been argued from the Conservative Benches over the past 18 months or so. If the argument merely underlines the dangers for Government of a statutory incomes policy, I should have thought that almost the entire Treasury Bench would have said "Amen" to that.

The Treasury Bench has now become the victim of circumstances and of philosophic confusion. Hardly a day goes by without our being given some idea of a Minister who is in some disagreement or some anxiety about what will be the nature of the proposed package. It is as though Ministers have become a political dimension of "The Arehers" —an everyday story of divided people. There is a new technique of government —open disagreement openly arrived at. I hope that the Prime Minister and the Chancellor of the Exchequer will stand together as a firm partnership and impose their will and their strategy, for it is in the interest of the nation that that should be so.

The events of the past year, and certainly of the past 10 days or so, have shown to what extent the gap between Government profession and Government performance has resulted in one major casualty—Government credibility. Certainly there is little or nothing in the Queen's Speech to lead us to suppose that the precious qualities of confidence and credibility can be repossessed. Indeed, all the evidence is to the contrary.

As the debates proceed and become more public, not merely during this afternoon but in the weeks and months ahead —and as we hear from the hon. Member for Walton and many of his hon. Friends who vest their consciences in his voice—the more it will be apparent what a ramshackle coalition is now in possession of the nation's affairs.

It is in that spirit of reflective judgment that this evening we shall divide the House to give our vote of no confidence in this Administration to carry out their obligations in respect of the industrial and commercial policies of this country.

5.27 p.m.

The Secretary of State for Employment (Mr. Albert Booth)

I believe that this is the first debate in which the hon. Member for Oswestry (Mr. Biffen) has addressed the House as the industry spokesman for the official Opposition. I congratulate him on the occasion. As a Member of this House he has consistently pursued his own analysis and his own argument concerning economic matters. He has shown today that he brings the same view with him to the Opposition Front Bench. I want to speak mainly on the subject of employment, as my right hon. Friend the Secretary of State for Industry will be winding up the debate. The context of the Government's approach to employment is to be found in their commitment to achieving a lasting reduction in the current unacceptably high level of unemployment.

At the last full count on 14th October, unemployment in Great Britain stood at 1,321,000. For two months unemployment has fallen—by 45,000 from August to September, and by 75,000 from September to October. The October count showed a fall of over 10,000 in adult unemployment at a time of year when it is normally rising. Employment in a number of production industries has been on the increase since Mareh of this year, and that accounts in large part for the improvement to which I have referred.

Employment has risen in the chemical industry, the vehicle industry, metal goods, textiles, clothing and footwear, bricks and pottery, timber and furniture, but in spite of this I believe that the longer-term trend is still towards much higher productivity and more capital-intensive forms of production. Therefore, a much higher rate of growth of manufacturing output is needed not only to overcome our balance of payments problem but if we are to achieve substantially more jobs in the production sector.

It is clear that the reduction of unemployment on a lasting basis depends very largely on the growth of world trade and on expansion of our share of it. Until a few months ago, we expected that world trade would show a gradual revival this year and next and would provide the opportunity to start the downward trend in unemployment, the pace depending on our ability to compete successfully for the increased trading opportunities. But the expansion of world trade in the past few months has been less than anticipated.

As the Prime Minister indicated last Wednesday, ways of speeding up the growth of world trade will be discussed at The Hague Conference later this month and perhaps later in discussions with the United States Government, all with an eye to reducing unemployment. There are indications that Germany and the United States appreciate the need to step up economic activity in 1977. But, while there are some prospects that the trading situation will brighten, with beneficial consequences for employment, in general the outlook is uncertain. For their part, however, the Government are determined that the need to reduce unemployment is given its rightful priority in national and international policies.

Unemployment, of course, is not an exclusively British problem. In Britain, the level of unemployment is now two and a half times as high as the average between 1962 and 1972, but in Germany it is four times as high, in France a little more than four times, in the United States one and a half times, and in Japan nearly twice. The fact is that we are all caught in a world recession. It is clear from this year's deliberations in the EEC, the OECD and the ILO that the problem of unemployment is a difficult and deep-seated one, and that, for that reason, we shall not arrive at a solution overnight.

Mr. Rost

In giving those examples of our foreign competitors, does the Secretary of State imply that we are doing rather better than those countries. or is he just attempting to cook the figures again?

Mr. Booth

I am merely stating the facts, so that a comparison may be made between the situation in the decade of 1962–72 and the situation today. The figures themselves do not imply that we are necessarily doing better or worse. However, I am happy to give it as my opinion that until now we have done better than most Western European industrial countries in dealing with the problem of unemployment.

Mr. Peter Viggers (Gosport)

Having speculated that we have done better so far, will the right hon. Gentleman look forward and say how he thinks we shall do in the future?

Mr. Booth

I do not want to engage in prophecy, other than to suggest that we are determined to do better than we have until now. Against our background of unemployment, the fact that we have done better in recent years is no justification for suggesting that there can be any slackening of effort. In fact, it is an indication in the reverse direction.

At the national level, both here and in other countries, there is a common recognition that control of inflation is essential to a sound employment situation. In Britain, we recognise the need to overhaul our industrial structure and to revive and strengthen our manufacturing industry, so enabling it to replace the many jobs it lost over the past decade, and, as our industrial base is strengthened, to allow us to resume the expansion of those services which are the mark of a civilised and prosperous community.

This strategy is being strongly pursued in spite of the expenditure constraints. It will take time to achieve its full results, and, in the meantime, we have recognised the need for measures which will both help the industrial strategy and alleviate unemployment.

Since the 1975 Budget, we have made available about £500 million gross for a series of wide-ranging special measures designed to alleviate the worst effects of unemployment, particularly on the young. The net cost to the Exchequer will, of course, be much less, because of savings in benefit and social security payments.

We estimate that these measures will have helped to create or keep open around 500,000 jobs or training places overall. In the course of this Session, we shall be introducing legislation to give effect to our most recent measure, the job release scheme. This scheme, which I announced on 23rd September, encourages older workers close to pensionable age in assisted areas to leave work early and thus release jobs for younger unemployed persons. During its lifetime it should have a substantial effect in reducing the numbers on the unemployed register by up to 65,000 people. The gross cost of the scheme will be more than £70 million, but the net cost to the Exchequer will be about £27 million.

More than 700 applications have already been made by men and women who are within a year of minimum statutory pensionable age, even though payments will not start until 3rd January 1977. Applications may be submitted up to 30th June 1977.

The response to the measures already in operation has been good, and the temporary employment subsidy in particular has exceeded expectations. More than 140,000 workers are covered by approved applications, and it has been of particular assistance to industries such as clothing and footwear, textiles, electrical and mechanical engineering, metal goods, and paper, printing and publishing.

The measures designed to assist the young unemployed have also had a substantial impact including the Job Creation Programme, the Work Experience Programme, and the Youth Employment Subsidy which replaced the earlier recruitment subsidy for school leavers. The Job Creation Programme and the Work Experience Programme were devised and are run by the Manpower Services Commission. Both rely on the active participation of employers, voluntary organisations and trade unions, and I should like to take this opportunity of acknowledging their contributions, particularly those of local authorities, without which the scheme would not have been able to run to anything like the extent that it has run.

At present, under the Job Creation Programme, nearly 5,000 projects have been approved providing jobs for more than 51,000 people, while under the recently-opened Work Experience Programme nearly 400 projects have been approved involving around 4,000 places.

On the training front, the MSC has ensured that existing levels of training have not merely been maintained despite the recession, but also where appropriate they have been raised. Of the £500 million that I have already mentioned, more than £140 million has been directed to expanding the Training Services Agency Training Opportunities Scheme as well as the training undertaken by industry.

Mr. David Madel (Bedfordshire, South)

Will the Secretary of State return for a moment to the Job Release Scheme? I assume that when a young person takes up a job it is to be hoped that a measure of training will go into that job. Therefore, does it make sense to confine the scheme just to assisted areas? Do not we want more trained people who can move round the country? Does not it make sense to extend the scheme to all areas?

Mr. Booth

I do not want to cross swords with the hon. Gentleman on this one. A strong case can be made out for the extension of the Job Swap Scheme nation-wide. But the reason why we introduced it in the first instance in the development areas was that three-quarters of all our unemployed were in the development areas and they tended to be the areas where there were heavy industries and, therefore, the areas where we could best gauge the sort of uptake that there would be with a scheme of this kind. But we do not rule out for later consideration appropriate areas for specific measures. We have been prepared to be flexible about this on other schemes, and I recognise that many may wish to argue the case for running this scheme on a wider basis.

As a result of the number of training completions under the training opportunities scheme, it has been possible to increase the programme. This year alone I am anticipating the completion of 87,000 persons trained under that scheme and more than 41,000 awards and grants made available to trained people in industry in the current training year.

I stress the training activities, not only because they play a part in reducing the number of unemployed but also because they are an essential contribution to industrial efficiency. On the upturn, a far greater number of trained people will prove to be a real asset to the country.

Mr. Welsh

What about those young teachers who were trained and thrown on to the dole?

Mr. Booth

We certainly should not confine training to those areas where vacancies currently exist. To do so would be an unreasonable restriction on the scale of training. The training of teachers, or any other peoples in worthwhile skills, is not wasted. It will enable them, in future, to play a far wider part in the community as a whole and it will open up opportunities for them. I reject any suggestion, if it was implied in the question of the hon. Member for South Angus (Mr. Welsh), that we should train only for known vacancies.

Mr. Welsh

A three-year primary school teacher training equips someone only to be a primary school teacher, because the training is so specific.

Mr. Booth

A number of training courses which are run with Government aid are very specific. There is one which is so specific that it is suitable only for deep-sea divers, but that does not mean that it does not play a valuable part in the total range of training. Teacher training may yet prove to be justifiable. On the upturn in industry, teachers may leave to work in industry, so leaving places for trained teachers. This has been the experience of the country before and it may be so again.

All these measures, designed to militate against the worst effects of unemployment, will build up to their maximum effect by Easter of next year. Since world trade has not grown as rapidly as we anticipated, the Government are reviewing the measures to ascertain whether further changes are necessary. Within this wider problem of high unemployment the Government have been particularly concerned about the way it affects young people. This is for two reasons.

During recessions young people tend to be hit harder than do other age groups, because the recession inevitably affects recruitment first and, by the nature of things, young people, and particularly school leavers, are more likely to be seeking jobs than people in other age groups. Unemployment is a harrowing experience for anyone, but in the case of school leavers it hits them hard at a very critical and vulnerable stage, when its damaging effects may last for a very long time.

The transition from school to work is one of the most important phases in life when a youngster enters, what is to him, virtually unknown territory and he is expected to take up a new rôle on which society, rightly or wrong, judges him. This is often a stressful time; all the more devastating if it coincides with a long period of unemployment. Lost training opportunities and failure to negotiate a bridge to a career are likely to represent ground that can never be regained and, moreover, to imply heavy costs for society as well as for the individual youngster. For this reason, we shall have to give very careful consideration to the extent to which we limit access for school leavers to certain vocations. We need to open up channels into training and retraining for certain vocations for 20-year-olds and 30-year-olds, and even those in their forties and fifties. It may be that we are far too inflexible in our approach to certain forms of vocational training. It is because of our concern, particularly with the effects of unemployment on the young, that we have made strenuous efforts to tackle the problem of youth unemployment. This strategy has had three main aims.

First, we have tried to get as many young people as possible into jobs on the open market. The Careers Service has been doing a magnificent job in very trying conditions. We have tried to ease pressure by directly financing 230 additional posts, and we have also sought to give tangible encouragement to employers to engage young people through subsidies. The recruitment subsidy for school leavers, which has just been phased out, helped nearly 30,000 youngsters, over the year it was in operation. We have now introduced the youth employment subsidy which was conceived as a result of what we have learned over the past year. It concentrates incentive efforts on the youngsters most at risk of being demoralised by lengthy unemployment—those who have been unemployed for six months or more.

Next, we have tried to sustain the level of training for young people. Under the guidance of the Manpower Services Commission, a complex range of special training measures has been launched to channel support for training through the Training Services Agency and industrial training boards. This complexity arises from the need to help as many young people as possible and to provide training which is flexible and relevant to the needs of industry and of the young people themselves. The TSA expects to have trained 10,000 young people on its own directly run courses in 1976, and anticipates that by the end of the current financial year its special training measures will have helped 75,000 young people.

Thirdly, we have sought to provide imaginative and useful opportunities for community work and participative learning experiences in industry, on an unprecedented scale.

The MSC's Job Creation Programme has engaged over 36,000 people in its projects, three-fifths of them under 20 years of age. The Commission's new Work Experience Programme, which engages unemployed youngsters aged under 18 in induction and training activities, seeks to mobilise the private sector. The programme has got off to a good start, and we hope it will help 30,000 young people over the next year. We have doubled the capacity of Community Industry over the past year, to 40,000 places. Although CI runs on a much smaller scale than the MSC programmes, it makes particularly intensive and concentrated efforts to rehabilitate those youngsters who have already suffered from spells of unemployment and whose confidence and motivation need rebuilding in order that they will continue to seek work.

The fall in the number of school leavers registered as unemployed fell by about 120,000 between the peak in August this year and October, and this is the most encouraging development on the employment scene at the moment.

Mr. Patrick Cormack (Staffordshire, South-West)

I do not wish to be offensive but the Secretary of State is reading his departmental brief. He would be better advised to deal with the root causes of the situation. Will he, as a Cabinet Minister with a Left-Wing reputation, tell us whether he believes in a mixed economy and a flourishing private sector? Is the Secretary of State prepared to support measures which will lead to proper capacity in that sector, and which will do far more than these measures of which he is now talking, to increase confidence and employment?

Mr. Booth

The hon. Member for Staffordshire, South-West (Mr. Cormack) has very selective hearing. I started my speech by referring to the root causes of unemployment in this country. It was only during the last few passages that I turned to the question of the very special measures that the Department of Employment has undertaken to deal with unemployment and, in particular, those measures directed at dealing with the problems of young people who are seeking work at a time of most serious recession. I would be failing the House and not doing my duty if I failed to make reference to those schemes which are currently of crucial importance to a large number of young people in this country.

Mr. Frank Hooley (Sheffield, Heeley)

There is an impression that the finance for those schemes will terminate on 30th September 1977. Is this correct? If so, will there be an early announcement saying whether the schemes will be continued after that date?

Mr. Booth

It is the case that, as planned, the Work Experience Scheme will terminate in September next year. This is in order that the applications for it can run only up to next Easter for people who will complete six months' work experience.

I hope that I have made clear to the House that the Government are at least listening to some of the words of the hon. Member for Oswestry. We cannot see with crystal clarity every future development in the situation, but we are prepared to look at all these measures again in the light of experience to see whether any should be terminated or extended, or whether some need to be replaced by other schemes. As of now, the straight answer is that it is intended to terminate the Work Experience Programme next September. Many of the other programmes are on-going programmes.

The situation at the end of this year as a result of the application of many of these measures may be only a little worse for school leavers than it was at the same time last year. On a slightly optimistic note, it is possible that the current rate of fall in the number of unemployed school leavers will be sustained, and that there will be fewer unemployed school leavers at the end of this year than there were at the end of last year, despite the fact that there were 50,000 more unemployed school leavers in August of this year.

Careers officers tell us that among those remaining unemployed, both school leavers and others, there are high proportions of youngsters who left school without qualifications. We see very clearly that here is a problem which goes beyond the current recession. Although lack of demand may go far to explain the shockingly high levels of youth unemployment we have experienced, the unqualified youngster will continue to bear a higher risk of unemployment than others, even when the economy recovers.

If there is an underlying development which is discernible and on which we might speculate a forecast, it is that the number of jobs for young people, as a proportion of the total number of jobs, will continue to diminish. I therefore attach a great deal of importance to the introduction of the unified vocational preparation schemes now being launched by the Education Departments and the Training Services Agency to try to tackle the problem of introducing industry to young people and young people to industry, particularly in those areas where young people tend to leave school without qualifications.

Inevitably we are preoccupied at present with our problems and what needs to be done to sort them out. This tends to blind us to the real achievements that the Government have to their credit in employment, whether these are measured on economic or social criteria.

The value of the social contract can perhaps be judged, in part, by reference to the experience of other countries which do not have one, the Guardian editorial of 25th November stated, with reference to Denmark: This morning Prime Minister Jorgensen, his Government, and his party face a crisis every bit as serious as the one that beset Mr. Heath when the miners went on strike. The Danes are an industrious and reasonable people who would not normally tie themselves into knots over money. But without the voluntary self-discipline of an incomes policy which commands consent, inflation can make madmen of us all. This seems to me to underline the importance of our agreement with the TUC on pay.

The effect of the agreement on the economic indicators has been dramatic. Average earnings are increasing at only about half the unsustainable rates of a year ago. This has made a major contribution to cutting the rate of increase in prices to half what it was last summer.

However, the rate of inflation is still too high. This is why the Government have made it clear on many occasions that, in their view, it will be essential to continue some agreed arrangements for pay after July 1977. That is also the view of the TUC on the basis of its congress resolution. We shall be discussing the matter with the TUC and with others concerned, in the context of our continuing discussions on the whole range of economic issues, including unemployment.

In terms of social advance, the Employment Protection Act, whose provisions have been implemented during the year, represents a major step forward. The Act established new machinery to promote the improvement of industrial relations and has given new rights both to trade unions and to individual employees.

On 1st October of this year we continued the commencement orders of the Employment Protection Act by removing the small firms exclusion from the unfair dismissal legislation. The provisions dealing with maternity pay and with itemised pay statements will both come into operation on 6th April 1977.

I have announced a timetable for most of the remaining provisions. The only two now outstanding are those on disclosure of information and time off for trade union duties and activities and public duties, the implementation of which depends on the production of codes of practice by the Advisory, Conciliation and Arbitration Service. Work on these codes is well advanced, and I hope that we shall be able to fix implementation dates for these provisions very early next year.

I want to make it clear that I do not accept that the Employment Protection Act will lead to major increases in employers' costs. I recognise, of course, that there are indirect costs for employers such as those involved in maintaining records, attending tribunal hearings, and so on. The direct costs are unlikely to be more than a small fraction of 1 per cent. on the wages bill. These costs have to be seen against the very substantial savings involved in the reduced level of industrial disputes. The traditional view of Britain as a strike-torn country has been dramatically countered by our industrial relations record over the past 18 months.

Mr. Michael Marshall (Arundel)

The right hon. Gentleman sweeps aside the indirect costs. Does he not recognise that these are absolutely symptomatic of the burdens that are imposed on management throughout the country? What estimate has he of the indirect cost of attending an industrial tribunal? These are major commitments that he is imposing on management.

Mr. Booth

At the time that we first put the Employment Protection Bill before the House, a calculation was made of the total costs of implementation. Some changes have been made in the measure which will probably reduce that figure, but at that time the total cost was worked out at about 10p per worker per week. On that basis it is fair to claim that this is not an appalling burden on employers. It is also worth seeing the cost against the background of the enormous improvement that has taken place in industrial relations.

I have never taken the view that it is possible by counting the number of strikes to tell how bad or how good one's industrial relations are, but, as so much has been made of our industrial relations record, I am entitled to claim that the number of strikes in the first 10 months of this year was the lowest since 1953, that the number of working days lost in the first 10 months of 1976 was down by over 50 per cent. on the same period in 1975, and that not since 1967 has the number of days lost through strikes been lower.

Our labour legislation, in contrast to the divisive Industrial Relations Act, provided the framework within which disputes can be settled by consensus and co-operation rather than conflict and confrontation. The new Advisory, Conciliation and Arbitration Service has made an important and increasing contribution to our improved record. In the first 16 months, settlements were reached in 82 per cent. of the cases in which the service was involved.

Finally, the social contract has helped create an industrial relations climate in which the emphasis is on co-operation to resolve and avoid disputes.

The same spirit of co-operation is required to attain full employment. This alone can make possible the changes, by unions, employers and Government, which will enable new processes to he introduced in industry and commerce in a way which has a proper regard for the social consequences. That the changes are necessary there can be no doubt, for without them part of the nation's most valuable resources—the potential for production and service of working people —will be lost.

5.0 p.m.

Mr. Robin Hodgson (Walsall, North)

The constituency of Walsall, North, which I have the honour to represent, is divided by the M6 motorway, with the main town of Walsall lying to the east and the town of Willenhall to the west. But the constituency is divided by more than the physical presence of the motorway. It is divided by history and background and, most important of all, by the different economic bases on which the prosperity of the two halves of the constituency depend.

Walsall has a tradition of connections with the leather trade. Walsall saddles, bridles and reins have been and are being exported all round the world. In the past 35 to 40 years, as the leather trade, particularly that part of it connected with the horse, has declined, the area has developed links with the metal processing industry. Today, parts are pressed, stamped, forged, founded and generally engineered into a wide variety of pieces and components of items in use in everyday life.

Willenhall is rather different. It began as a wool town many years ago. Indeed, one of my ancestors was engaged in the wool trade in Willenhall over 400 years ago. But the wool trade declined and was replaced by lock manufacturing. Today most of the famous names of the British lock industry are and have their headquarters in Willenhall. Those hon. Members who have motor cars will probably find that their ignition keys and locks were made in Willenhall. When they go to their offices and open their filing cabinets, they will probably find that the filing cabinet locks were made in Willenhall. Indeed, many front door keys and locks were probably made there as well.

The two parts of the constituency are quite different, but they are similar in that they depend on small businesses—that is, businesses employing perhaps fewer than 500 people—for their prosperity. This prevalence of small businesses has led to three particular traditions: first, a tradition of sturdy local independence, of preferring to be left alone to get on with and do their own thing; secondly, a reputation for craftsmanship and quality of product; and, thirdly, a reputation for good sense and harmonious working relationships at all levels in the firms.

In the past two years these small firms have faced particular difficulties. This afternoon I should like to take the opportunity to draw the attention of the Government to some of the difficulties which these firms have faced and are still facing.

Before that, there is one other matter to which I must refer. I am sure that hon. Members would not wish me to dwell on the unhappy circumstances that led to the by-election in Walsall, North. However, I should like to thank the hon. Members for the neighbouring constituencies of Walsall, South (Mr. George) and Aldridge-Brownhills (Mr. Edge) for the work that they have undertaken during the past two and a half years to ensure that the interests of the people of Walsall, North have been safeguarded. I hope that it will not be considered out of turn if, as a very new Member, I say that the work which they undertook, unheralded and unsung, was in the best tradition of service to a constituency on which the House has rightly prided itself over many years.

I turn now to the main point of my remarks. The damage that has been done to small businesses can be grouped under four main headings. The first is the effect of inflation.

Inflation—the decreasing value of money—has meant that each firm has needed more money to finance an unchanged unit volume of trade. Inflation has also reduced the value of those tax concessions which are available to small companies. Above all, inflation and its after effects on general corporate liquidity has increased the cash flow squeeze on small firms because large customers are inclined to spin out the time that they take to pay their bills while larger suppliers, who provide the raw materials from which components are made, are inclined to demand payment promptly. As a result, small businesses have been forced to borrow yet more money.

That, in turn, takes me to the second problem with which small businesses are faced—high interest rates. It is now costing small firms between 16 per cent. and 20 per cent. to borrow money. That is a historically very high rate of interest.

My hon. Friend the Member for Oswestry (Mr. Biffen) drew attention to the commensurate returns which are available and pointed out that the national return on capital employed in industry is now down to 4 per cent. One does not need to be a mathematical genius to know that if a business borrows money at 20 per cent. and invests it at 4 per cent., the end of the business is shortly in sight.

The third area which concerns the small business is the prospect of the extension of municipal trading. People in the West Midlands are particularly conscious of that aspect in the light of legislative proposals which were discussed last year. Naturally, people in the Walsall area have been concerned about the reference in the Queen's Speech to removing unnecessary restrictions on the powers of the local authorities to undertake construction work by direct labour. Many Walsall firms and others throughout the country believe that local authorities are not properly equipped to undertake competitive construction work which should more properly be left to the private sector.

Fourthly, there is the effect of the rising tide of paperwork on small businesses. This subject has been aired on many occasions in the House. I understand that 4,727 different questionnaires are now used by different Departments. That is symptomatic of the fact that the small business man is increasingly feeling that he is being swamped by a tide of requests for information and demands for returns of one kind or another.

Against this background of higher risks and more complex demands, what do we see? We see a climate in which the owner-manager and workers have lower rewards. These lower rewards flow from two results. The first is the effect of a progressive taxation system in a time of inflation and, in particular, the fact that personal taxation rates have in any case been increased.

The second is the effect of the capital transfer tax. It is only right and proper that people should wish to spend their lives building up businesses which they can pass on to their sons and heirs. An enactment such as the capital transfer tax is always in danger of destroying the value of the incentive to people to push their businesses further forward and to create prosperity for themselves, thereby creating prosperity for the constituency within which they operate.

The small business man feels that his requirements are not understood by the Government in Whitehall. I should like to give one brief example. In preparing my remarks for this afternoon I visited the Library of the House and looked up some of the recent publications on small businesses. I noticed a heading New Measures to Assist Small Business. I thought "That is very interesting; I must investigate what is being done". I drew a copy of the Press release put out by the Department of Trade and Industry referring to the new measures. It turned out to be a pilot small firms counselling service scheme.

The Press release is made up of five or six pages. There is a definition of counselling, outline arrangements, eligibility, and several pages on how to apply for schemes. That is no doubt a worthy scheme, but it is not what the small business man is looking for. He wants room to grow and to get on with doing his job. He does not in most cases want more counselling, advice, and help of that kind. He wants to be left alone to get on with the job which he knows well and which he believes will contribute greatly to the country.

I end, as I began, on a local note. The effects of the past two and a half years on small businesses in the West Midlands have been very serious. Perhaps the best way of judging the situation is to consider the numbers of resignations from the chambers of commerce in Walsall. The Walsall Chamber of Commerce has a membership of 1,200. In 1973 there were 14 resignations—about 1 per cent. In 1974 there were 15 resignations—again, about 1 per cent. In 1975 there were 44 resignations—about 4 per cent. In the first three-quarters of 1976 there have been 46 resignations. If that rate is continued through the final quarter of the year, effectively 6 per cent. of the members of the Walsall Chamber of Commerce will be going out of business every year.

That is not special in the Walsall area. I thought it only fair to check on other areas. In the neighbouring town of Wolverhampton, where membership is 800, resignations normally run at about 20 per year, or 2½ per cent. In the 18 months between 1st January 1975 and 22nd June 1976 there were 85 resignations. That amounts to an average of 50 a year, or 6½ per cent.

In the light of these serious statistics I hope that when considering their next set of economic proposals the Government will consider their effect on small businesses, because the prosperity of many constituencies and not only mine depends on them.

5.11 p.m.

Mr. Stan Crowther (Rotherham)

As a relatively new boy myself, I am most happy to congratulate the hon. Member for Walsall, North (Mr. Hodgson) on an extremely able maiden speech. He made a reference to ignition keys: I hope that his speech has sparked off an enjoyable career in the House, although I cannot honestly wish him a long career. We all sympathise with his argument about interest rates and I am sure that my right hon. Friends are conscious of the need to bring down interest rates as soon as possible.

One hears many arguments about investment. It is rather like being against sin: only when one starts following the argument through do some of the disturbing features appear. In local government I learned that the easiest thing is to make policies but that it is implementing them that is difficult. Of course, there is a need for a vast amount of new investment in our existing manufacturing industries. Perhaps if some of the money that went into prestige office building in central London during the past 30 years had been invested in factories in the North and Midlands, we should have fewer problems.

I hope that we can get away from the idea that re-capitalising our existing industries will reduce unemployment. It will not. It will have the opposite effect, and we must accept that. If there is any truth in the assumption, it is only marginal.

For example, the steel industry in Rotherham now employs 6,000 fewer people than it did a few years ago, but it is making more steel than ever. Only the week before last yet another production record was broken at the melting shop in Rotherham when over 46,000 tons were produced. At the new Thrybergh Mill at the Rotherham BSC works the production target of 8,000 tons was reached more than one year before the date fixed. That mill cost £35 million and employs only 450 people, all of whom are drawn from the older mills which have been closed down.

Sometimes hon. Members imagine that we shall deal with the unemployment position at the same time as we deal with re-capitalisation of industry, but that will not work. The only way in which to create new employment is to create new industry.

Many opportunities have been lost in Yorkshire and Humberside. More than 300 companies in the North-East are involved in the oil industry, but the potential has not been fully exploited. If it had been, we should not need to go into the red to import capital equipment for the industry.

Why are we not producing that equipment in this country? If existing industry, either private or public, is not willing or not able to engage in this adventurous move into brand-new fields of manufacture, someone else must do it. That is where I see the National Enterprise Board as saviour. I hope that it will not only engage in rescue operations but act as entrepreneur.

I am worried about the Opposition's obsession with the idea that we can do something about the investment problem by a massive onslaught on public expenditure and by putting thousands of people out of the public service. That would not result in one penny more being invested in manufacturing or in anyone moving into productive industry. One cannot take a social worker, hospital porter or navvy and put him to work as a toolmaker.

Mr. John Stokes (Halesowen and Stourbridge)

Surely people must move about from job to job. Hospital porters can do all kinds of other jobs and social workers should do other jobs.

Mr. Crowther

I cannot accept that. I do not know what the position is in the hon. Member's constituency, but in my area we could do with more social workers because we have many social problems.

People are trained for one skill and they cannot be changed overnight. If one reduces the number of school teachers, one does not increase the number of trained engineers. Industry is short not of men but of skilled men. That is due largely to the shortsightedness of firms which cut down the number of students, apprentices and trainees every time an economic cold wind blows.

I was pleased to hear the Secretary of State refer to the problem of training for skill. Unless there is a comprehensive national approach, we shall never solve the problem. The approach must include a sensible allocation of resources to higher and further education based upon national need rather than personal fancy.

In the past we have failed as a country to grasp the real social implications of technology. We have not started to make it a tool of the community to ensure that every advance makes life a little richer for everyone. Nowhere is that better illustrated than by the successive failures of successive Governments to solve the regional problems that arise largely from structural changes in industry. I hope that the National Enterprise Board will be used to begin to rectify that position.

The Yorkshire and Humberside Development Association, of which I gave up the chairmanship recently, receives an annual grant for promotion purposes of £15,000. The Scottish Council (Development and Industry) receives an annual grant of £150,000 and the Scottish Development Agency will receive another £540,000. There are 165,000 people out of work in Scotland and 126,000 in Yorkshire and Humberside. Yet we are getting only 2 per cent. of the money going to Scotland.

We are a patient lot in Yorkshire. Anyone who has ever been to a match between Yorkshire and Lancashire will know that. Usually we manage to draw. That is why I say that we are very patient. However, I say most seriously to the Government that they cannot go on for ever taking for granted the loyalty of hundreds of thousands of people in the coal and steel areas of Yorkshire while they are pouring the nation's wealth into Scotland in order to try to stem this pernicious tide of separatism. I hope that when the Secretary of State for Industry replies to the debate he will assure me that there will be a brand-new look at regional policy. We need a far more sophisticated and discriminating approach.

Mr. Welsh

Is the hon. Gentleman therefore advocating that less money be spent in Scotland to meet problems such as the worst urban deprivation in the United Kingdom, continuing unemployment, and so on?

Mr. Crowther

I am arguing for a more equitable approach which allocates the available resources on the basis of need, taking into account comparative problems in regions. I am also arguing particularly for a more sophisticated approach which does not regard all of Scotland as a single development area, for example, and which does not say that Aberdeen, for example, the boom town of Britain, should be in a development area. What nonsense that is.

There is a need to look far more closely at these matters and to put the regions under a miscroscope. We need to sort out the problems that need regional aid, and then to give the aid required in a big way, through, I hope, the agency of the NEB. I hope that the NEB will set up subsidiary companies to occupy the advance factories being built under the direction of the Department of Industry, because nothing is worse than getting an advance factory built but having no one in it.

I conclude on that point. I hope that we can have some assurance from my right hon. Friend that there will be a brand-new look at regional policies so that in future public resources are invested in places where they are most needed and where they will do most good.

5.22 p.m.

Mr. John Pardoe (Cornwall, North)

I congratulate the hon. Member for Walsall, North (Mr. Hodgson) on an excellent maiden speech. He told us that his constituency was very largely concerned with manufacturing locks and keys. I could not help thinking that it was, perhaps, good recruitment ground for burglars. I hope that is not so. We heard much from the hon. Gentleman about the problems of small businesses. I hope that he will not mind if I follow up what he said in that regard. I hope that we shall hear him often on that subject, as on his constituency problems, in the future. His constituency has obviously got itself an excellent advocate.

I turn to the remarks of the hon. Member for Rotherham (Mr. Crowther). He will not misunderstand me if I say that a large part of his speech I have often heard previously, from my hon. Friend the Member for Colne Valley (Mr. Wainwright). It is a Yorkshire speech, but it is none the less true for all that.

As a Member for the only other part of England—Cornwall—where the Kilbrandon Commission found a higher level of desire to go its own way and to do its own thing than exists in Wales, I agree entirely with the remarks of the hon. Gentleman about the very high level of public expenditure that has managed to find its way north of the border, largely as a result of the nationalist threat. The more I consider the Government's proposals for devolution, the more I am aware that they are a recipe for the Scottish hand being put into the English pork barrel even deeper than it has been in the past. This is something in which hon. Members from Yorkshire —I am glad that my hon. Friend the Member for Colne Valley has joined us now—will find powerful support.

Mr. Welsh

If the hon. Gentleman is convinced that Scotland is being subsidised in some way and is getting more than its fair share of United Kingdom benefits, surely he should be in favour of Scottish self-government, because in that way he need not subsidise anyone. Scotland would be happy to exist properly on her own resources, owing nothing to anyone.

Mr. Pardoe

That is a view to which I am increasingly coming. At present, however, I personally think that we should go as far as federalism. If we cannot get federalism, I think that Englishmen, Cornishmen and Yorkshire-men would be much better off without Scotland. Increasingly, as the debate on devolution takes its way, large numbers of hon. Members will come to be convinced of these economic facts of life.

I want to deal with what is inevitably a matter of major debate not only in the House but outside it and, as we understand, very much in the Cabinet. All of us are being assaulted with a vast array of expert and not-so-expert opinion on the problem of the public sector borrowing requirement. The first point is that no one seems to know what the PSBR will be next year. That makes it a little difficult to come to a decision on what we should do about it. Secondly, no one is quite sure of the effect that any given level will have, on other aspects of the economy. It is, therefore, difficult to come to a hard and fast decision about the PSBR. I can only suppose that this great uncertainty is the reason why everyone is so dogmatic and certain about the subject—in rather the same way as Hilaire Belloc said, Oh! let us never, never doubt What nobody is sure about! The International Monetary Fund is apparently absolutely sure about the PSBR. It wants cuts. The first question for all of us is, cuts off what? Are they cuts off the £8¼ billion, which the National Institute forecasts it to be, or are they cuts off the £11 billion, which the Treasury forecasts it to be? What exactly are they off? Surely there must be considerable differences in the effect that they will have on the economy, or on the argument for and against them. Or is it that some want cuts—there are hon. Members on the Opposition side of the House, though not on the Liberal Bench, that wants cuts —on much the same basis as the mother in the story who told someone "Go out and find out what Johnny is doing and to tell him to stop." It seems to me that the United States Treasury is telling the IMF—and probably the Cabinet, although I hope that it will not listen—to go out and find out what Britain is spending and tell her to stop.

Some confessions on this matter are in order. The hon. Member for Oswestry (Mr. Biffen) made some. I do not know what the PSBR will be next year, nor am I absolutely certain of the effect that it will have at any given level on other aspects of the British economy. The only definition that seems to make sense is along these lines: first, to calculate the Budget deficit on an assumption of full employment. After all, a crude budget-balancing exercise, which some politicians and economists are urging the Government to adopt, on the 1931 basis, is absolute madness. The present United States budget deficit, on a crude basis, is about $60 billion.

Having done that, the public sector borrowing requirement ought to be no more than can be financed by the higher level of savings which inevitably and always exist in a recession. Why is Government spending good in a recession? To those on the Liberal Bench, as to many Labour Members, Government spending is good in a recession—good, inevitable and right. It is because low private spending and a lack of investment which take place during a recession lead to low demand. Low demand leads to fewer jobs. Fewer jobs lead to rising unemployment and less spending, inevitably. Less spending leads to even lower demand, and so on, down the spiral into slump.

Then we have the argument about crowding out. I must put this point. I hope that the Secretary of State for Industry will be able to give us some indication on the matter. I cannot find this great body of British industry that is thirsting to invest, at any interest rate. Frankly, there is a great deal of spare capacity about. When there is spare capacity about, people are not disposed to invest, so the very idea that we should create a large hole in the public sector, in the great, happy belief that someone in the private sector will come along and fill it, is a load of nonsense. It just will not happen. It might have been an argument two or three months ago when, as the right hon. Gentleman has said, all of us rather hoped that there would be an upturn in world trade and we could expect that hole to be filled by the private sector in its great export boom. But it does not seem likely that that export boom will come, in spite of the competitive price level of British products in overseas markets.

If the PSBR is calculated and financed according to these things it will not increase the money supply. That is the answer that I give to the hon. Member for Oswestry when he says that he hopes that the Government will do what the Prime Minister and the Chancellor of the Exchequer want them to do. As I am not certain what the Prime Minister and the Chancellor of the Exchequer want them to do—and I doubt whether the hon. Gentleman is—that is a bit of a guessing game, but the great difference between the high level of public spending today and in 1971 and 1972 is that then the money supply was permitted to increase by 60 per cent. in two years, and now the Government have a tight rein on it. Indeed, we shall have to live with the consequences of that tight rein on the money supply if they make the 12 per cent. target by mid-April, because it has gone up by 9 per cent. since last mid-April, so there is little further to go.

I wonder whether the hon. Member for Oswestry knows who said this: Government spending may or may not be inflationary.… If it is financed by taxes or borrowing from the public, the main effect is not necessarily inflationary. That was Milton Friedman in his article on money in the latest edition of the Encyclopaedia Britannica, which does not sound like a recipe for cutting and cutting again in public spending in the present British situation.

The difficulty is that asking what can be financed is rather like asking how long is a piece of string, and the money supply is not a bad way of assessing this. The right PSBR is what can be financed without a too high expansion of the money supply and without a too high rate of interest. The hon. Gentleman may ask what is a too high rate of interest. He said that he was in favour of bringing down the interest rate. We are all in favour of that, but I wonder whether we ought to be in favour of the Government bringing the interest rate down below the level of inflation.

It does not seem sensible that the level of interest rates should ever be below the level of inflation. As I expect the level of inflation to be about 14 per cent. over the next 12 months—or not much lower —it seems sensible that we ought to provide some positive interest rate, which is what the minimum lending rate does. It is despairing, it is ghastly, and it will have a catastrophic effect on industrial investment—if, indeed, anybody ever again wants to invest—but I think that the hon. Gentleman is putting the cart before the horse. He ought to say that we all want the rate of inflation brought down so that we can bring down the rate of interest. We cannot go the other way.

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

My hon. Friend the Member for Oswestry (Mr. Biffen) can speak for himself, but if there is confidence that the rate of inflation is falling and interest rates will fall, interest rates get lowered ahead of the fall in inflation.

Mr. Pardoe

That is true if we can be sure that there is that expectation, but the trouble is that one of the foremost forecasters, Chase Econometrics, last week forecast an inflation rate of 13 percent. in the United Kingdom over the next 10 years on the basis of present policies. I realise that other forecasters do not agree, but I do not think that we can expect a lower rate of inflation than 12 per cent. or 13 per cent. That is the expected rate of inflation, and we must have a positive interest rate of at least 1 per cent. about that.

Part of the answer is to finance the PSBR from indexed lending. Indexation would be better than high interest rates. Not only would the PSBR be easier to finance without an increase in the money supply; it would show that a great deal of what makes up the present PSBR is not a real figure but a matter of presentation. It is £7 billion debt interest and most of that is not interest in any real term. It is the cost of refinancing between £4 billion and £5 billion if we were doing our accounts in a proper manner and recognising inflation.

Having quoted from one side of the argument, I should like now to quote from an article that appeared in The Times on 15th November, which seems to have caused a flurry in the Whitehall dovecots and may have had a significant effect in the Cabinet. It is by six academic economists, though I suppose one ought to say that nearly all of them have had experience of government. The article said: So long as private savings remain high, corporate liquidity low, a collective oil deficit persists, and the economy remains slack, it is perfectly rational to plan a substantial budget deficit.…". I agree entirely with those words, but that is hardly surprising since three of the six are members of the Liberal Party, whose advice I seek and take on a fairly regular basis. I hope that does not mean that the Government will regard that doctrine as suspect. It is the pure milk of Keynesianism.

Most people outside, and most hon. Members of this House, are in favour of public spending cuts in general but opposed to them in particular. In the present economic circumstances I am in the opposite camp. I am in favour of high public spending in general, but opposed to it in particular. The House would do better if it concentrated on the particulars of public spending rather than on debating somewhat metaphysical matters relating to its overall size, as it is not how much we spend but how we spend it that matters.

Recently we had a speech from the Secretary-General of NEDO about unproductive public spending. Last week I asked the Prime Minister what was unproductive public spending, and he was honest enough to say that he did not know the difference between unproductive and productive public spending. That is one of our problems.

Public spending is not unproductive if it puts people to work making and doing useful things when they would otherwise be unemployed. But the "useful things" do not including propping up desks or the unbridled growth of bureaucracy. We have a new local newspaper in Cornwall. It has only recently come into being, but it has managed to put two new words into the English language—"bureautic" and "crats", the latter being short for bureaucrats, and happily it rhymes with the two words which have the effect on my complacent Labrador of driving him through plate-glass windows. That is the effect that it ought to have on complacent parliamentarians, because we have too many "crats", and far too much public spending has gone into the growth of "crattery". That is where the cuts have to come, if they are to come anywhere at all.

Not all public spending has created useful and productive employment. I instance road building. The right hon. Gentleman is responsible for employment. He is probably more responsible for unemployment at the moment, but he would like to be responsible for employment. If he drives along the roads in the West Country he will pass many road works and he will probably rub his hands with glee at seeing people being put to work. He would probably say that that was good for his Department, but he would be wrong. He will see rows of vast imported and expensive earthmoving equipment, all using enormous quantities of imported energy and mostly driven by Irishmen—but I do not resent that. That is not part of my problem.

It seems to me that what we ought to do in times of recession such as this, and particularly in development areas, is to give road building contracts on the basis not of how quickly they are done, how much imported expensive machinery is used, and how much energy is used, but on the basis of how many people off the dole can be used.

This is not a permanent recipe for Britain's economy, but in development areas and during a recession we need more labour-intensive public works. It is a question not of spending more public money but of making the money that we are spending on public works employ more people in those areas where we do not have to compete directly with overseas markets. In manufacturing industry, where we have to manufacture goods competitively to price them against the Germans, the Japanese, and so on, productivity is essential, but in road building we are not in competition with anybody, and that kind of productivity is not essential. I put it to the right hon. Gentleman that that would be a massive improvement on the job creation schemes that he has come up with so far, and would go well beyond what he proposes.

I despair about youth unemployment in areas such as North Cornwall. I had a letter only last week from a careers officer in a secondary school in my constituency in which he said that at the end of last June only six school leavers were without a definite place in employment or further education. By the beginning of the new school year approximately 15 young people under 18 were officially unemployed, which number rose to 25 by the end of October, and had now reached around the half century, with the season completely over. Those are pretty despairing figures for a careers officer and, indeed, for a Member of Parliament looking at his own constituency. I have no doubt that nothing other than a massive programme of labour-intensive public works in the development areas will solve this problem.

Mr. Booth

Does the hon. Gentleman appreciate that the job creation scheme is specifically designed to be labourintensive? Of the money that is paid by Government, no more than 10 per cent. can go towards the cost of materials and administration.

Mr. Pardoe

Yes, I am absolutely aware of that, but the right hon. Gentleman, with all the pride of Department that he can bring to bear, will recognise that the Job Creation Programme is but a pinprick in the problem. I do not resent that. The Job Creation Programme is doing good work, but on a fairly minimal scale, bearing in mind the size of the problem.

I urge the right hon. Gentleman to take over the whole road building programme in the development areas and run it on an employment basis for so long as this recession lasts and so long as the present rate of unemployment lasts.

Mr. Joseph Dean (Leeds, West)

The hon. Gentleman has quoted some interesting statistics regarding his own constituency, about making major road construction labour-intensive. He has not produced any evidence that any of the youngsters he talked about who cannot find jobs are prepared to build roads. I doubt if there would be many offers.

Mr. Pardoe

I do not have quite so low an opinion of my constituents as the hon. Gentleman does, but I agree that there may be a problem on the margin. I am quite prepared to face that challenge when it comes. I shall tell the Government exactly what they should do. They should reduce the level of unemployment benefit for those who will not work and substantially increase the remuneration for those who will. [An HON. MEMBER: "Forced labour."] It is not forced labour; it is using the market intelligently. The great majority of people would welcome a job of any sort, but some of them may be a bit workshy. I do not think they would be in my constituency, but they may be in the constituency of the hon. Member for Leeds, West (Mr. Dean). I expect they have been represented by Labour for too long, but in my area people actually want to work.

I am not doctrinaire about import controls. We should look at these with regard to the balance of advantage. For any country so dependent on world trade as we are it seems madness to invite retaliation unless it is absolutely necessary. But there is a real question mark over a vast range of manufacturing goods which are now coming into the United Kingdom. I suggest that the Government adopt the Bill on dumping which my hon. Friend the Member for Colne Valley introduced last Session. They should set my hon. Friend in a back room in the Department of Trade with that Bill and with no staff, and provide him with a telephone. He could save £500 million on imports next year without breaching GATT or giving legitimate grounds for offence to anyone. By enacting that Bill, all we would be doing is what every other industrialised country in the world is doing to us, poor British mugs. That is why I believe that we can deal with this as a dumping problem rather than by introducing either selective or across-the-board import controls.

However, import saving is a more ambitious scheme. We could do far more by going for import substitution than we could ever do by selective or across-the-board import controls or, indeed, antidumping duties. Nowhere is this more so than in respect of food. It is time that we put agriculture in the context of the national economy. It has been thought of as a piece of pork-barrel politics. The British economy is unsound. We import too much and add too little value to it. We must switch from low value-added, low technology industries to high value-added, high technology industries.

One of our major imports is food. Indeed, the total cost of importing agriculturally produced goods in 1975 was little more than the energy deficit—about £200 million more. I know that I am talking about agriculturally produced goods in a very broad field, and including forestry and tobacco, but even food and beverages form an enormous slice of our import bill. If only we could reduce the dependence on imported food we could make a massive change in the structure of the economy. The Government seem to be in total confusion about their policy on food self-sufficiency and food import saving.

When I asked the Prime Minister the other day whether high prices for food or low prices for food would do more to bring about agricultural self-sufficiency he said that he did not know. At least that is honest. But it was not a catch question.

Government Ministers came back from Brussels not long ago and told us about their great victory, because they had managed to secure subsidies for Britain's imported food. Just imagine if those same people had come back and said "We have won a great victory. We have secured Common Market subsidies for all cars imported into the United Kingdom." Everyone would know that was mad. It is just as mad to do that in respect of food.

The whole point of deflation is that it will put up the price of imports and, therefore encourage import substitution. The Government have allowed devaluation to take place and yet they have minimised the good effect of that devaluation over a vast section of the food imports.

I asked where the growth was to come from which would put to work all the people for whom the Secretary of State for Employment and his Department are responsible. It will not come from large enterprises. They are not interested in the new products that we need if we are to achieve that employment. The nationalised industries are not allowed to diversify into new products and private companies do not want to do so even when they are encouraged to.

Not long ago I went to a large British public company and introduced the new products director—a grandiose title—to the White Fish Authority. It was at the time when fish farming had reached the technological point of breakthrough. But I was told "This is not for us. We only want to take over things which have actually been developed and built up". That is true of most British companies.

The most depressing economic news in the last week, as far as I am concerned, had nothing to do with macro-economics. It was the announcement that Sinclair Radionics had gone to the National Enterprise Board for £650,000. It was depressing, not because I am against the National Enterprise Board. I hope that the Conservative Party will not allow petty politics to destroy it. The NEB has a sound place in the British economy, but it is not there to finance concerns which ought to be able to raise their money on the market such as Sinclair Radionics.

About four or five years ago, at the Canton Trade Fair, I produced a Sinclair calculator from my pocket. I was immediately surrounded by Japanese business men, who wanted to know where they could buy it—a little like taking coals to Newcastle. It was a splendid experience. When I came back, I found out what this firm was, and some time later met Mr. Sinclair himself. He talked a great deal of sense about the difficulty of obtaining risk capital for new businesses.

The hon. Member for Oswestry has mentioned the report of the AngloGerman Foundation, "Small Firms in Britain and Germany". That shows that the Bolton Report was far too optimistic. The decline that Bolton noted has continued ever since. Nothing has been done about it and it is in this area that the growth of new products will happen—nowhere else. That is where we must concentrate our taxation changes.

I would make one suggestion to the Secretary of State, although it is not specifically his responsibility. Too many individuals pay taxes above 50 per cent., which is pretty crazy and virtually confiscatory. I am not asking the Government to move in one step to the abolition of all taxes over 50 per cent.—I only wish they would—but if they brought in a scheme under which anyone could put a top slice of his income into a new company for the development of new products—the phrase "new company" would have to be carefully defined—[An HON. MEMBER: "It certainly would."]—it is not impossible to define—that would make an enormous amount of money available for enterprise in small businesses.

New businesses would spring up, creating new products and going into the new markets that we require. It is no good the hon. Member for Oswestry laughing. He quoted some figures about profitability in British industry. He said that the return on capital was 13 per cent. in 1960, 8 per cent. in 1970 and 4 per cent. in 1975. If he had carefully studied the years from 1970 to 1975, he would have noted that the decline in profitability, far from being halted, actually accelerated under a Conservative Government. The Conservative Government did nothing to encourage enterprise in small industry. I do not look to the return of the Conservative Party for the salvation of British industry.

Several Hon. Members

rose—

Mr. Deputy Speaker

In about three hours, the winding-up speeches will begin, and there are still 26 hon. Members who are anxious to take part in this debate. I therefore make the appeal that brevity would be a shining example of the consideration of one hon. Member for another.

5.52 p.m.

Mr. Andrew Welsh (South Angus)

I thank you for your guidance, Mr. Deputy Speaker. I shall be very quick and will no doubt improve on my usual pace of 12,000 words a second!

Economic matters arise in the framework of our democratic Parliament, so it is worth while to spend some time considering how carefully to reshape and improve our democratic institutions. The devolution measures are one such attempt to modernise and improve the United Kingdom system—I hope for the better.

Scotland's rôlein the modern world demands greater control over our own affairs. The present democratic and peaceful resurgence of Scotland's political awareness and conscience marks the return to Scotland of political decision-making by Scots for Scots and in our own country. That is a highly desirable and logical process. The pity is that there is not to be also an equal return of economic and commercial powers, which would allow our Assembly—or, better still, our Parliament—to get to the roots of Scotland's long-standing social and economic problems.

This lack of economic powers has been noted by the Scottish people themselves. I hope that every hon. Member has a good read of Scotland's largest selling daily newspaper, the Daily Record, which published an opinion poll showing that 44 per cent. of its readers wanted independence for Scotland. That is what they think of the present inadequate devolution measures.

I should like to see moves towards better government in Scotland. One such move would be to take a look at the highly expensive reorganised local government system. Industry and individuals now face heavy rate burdens through the expansion of bureaucracy caused by the disastrous reorganisation of local government. That must be looked into. How can anyone, apart from the highly-paid officials themselves, feel any affection for monsters like Strathclyde and Tayside? We must start thinking of the point of view of the individual citizen when he has to go to these bureaucratic monsters, and has to deal with a myriad of offices, sub-offices and counter officials whose job it is to fob him off. That has a debilitating effect on the individual's attitude to government.

Small is beautiful, and by returning to decent sized governmental institutions I hope that we shall get back to the idea that government exists to serve the people and that it cannot do so without the maximum possible decentralisation. But I see our democracy positively endangered by the appearance of powerful, non-elected, nominated bodies: the trends are in fact in the opposite direction.

There are now boards which take all kinds of decisions affecting our daily lives. One example in my own constituency is the regional health board, which is intent on destroying the very popular and efficient Arbroath Infirmary. In spite of peaceful democratic protest by two-thirds of the local general practitioners and the industry of the town, which realises the infirmary's importance, by over 7,000 citizens who attended a protest and 8,000 who signed a petition, in spite of the representations by regional and district councillors against the decision, the views of all these people will apparently be ignored. When an estimated 40,000 people in the highest population centre in the whole of Angus protest in this fashion and their protest is seemingly ignored, there must be something wrong with our system.

Many people are now seriously wondering whether we still live in a democracy. Today officials are giving us a poorer hospital service at a greater cost than the existing popular one, and they refuse to acknowledge the overwhelming will of the people. This is part of the malaise which is affecting our country and our people's attitude to government, to industry and so on.

Surely, in a democratic system, the planners, whether for industry or for health and so on, must take their ideal plan and adapt it to suit the needs of ordinary individuals. I hope that the Government will not let ordinary people down in this way.

As with individuals, so with industry and commerce. In this coming year, I ask the Government to listen to the people and to serve them. There are vast groups of law-abiding individuals out there, whether in business or in private affairs, who wonder what kind of society we are now living in. The self-employed and small businesses, for example, are hedged in with an almost mind-bending myriad of ever-increasing rules and regulations—[An HON. MEMBER: "Rubbish."]—like those emanating from the Common Market, which may be rubbish according to the hon. Member but which must be added to the huge total of rules from this Parliament which encumber ordinary folk. Some rules are designed for the best of reasons, but in total they bind down and discourage the professional man or woman who is only trying to go about his or her daily business.

Mr. Douglas Crawford (Perth and East Perthshire)

Is my hon. Friend aware that the levy on the self-employed was first proposed by the Conservative Party in 1973, and that that was one of the worst proposals in this area?

Mr. Welsh

I am well aware that the so-called protectors of the small man—the Conservative Party—first introduced such a concept. These rules and regulations, this red tape and bureacracy, are holding this country back.

An example is the new safety at sea regulations for fishermen. At heavy expense, a mass of relatively trivial and impractical rules and regulations are being forced on the fishermen, and they are making my local fishermen extremely angry—[Interruption.] I would advise the hon. Member for Aberdeen, North (Mr. Hughes) to go and talk to the fishermen. These are their views.

On top of that is the quota system for haddock which threatens the very livelihoods of many of my small local businessmen, fishermen and fish buyers whose source of supply is about to dry up. The cry from Arbroath to the Government is simple: "Save our smokies". This matter needs urgent action and I hope that it is looked into.

Small business men and the self-employed are threatened by this deluge of paperwork, whether it is VAT returns or the vast network of other Government form-filling. They ask Governments of all parties simply to get off their backs. This important economic sector is asking for help but it is simply not asking for interference.

The best help of all is self-help. I wish to see our Scottish Government giving the maximum encouragement to the self-employed and small business men. We must learn the lesson of the agency set up in the United States to deal with small businesses. We must boost the present pigmy-sized Government Small Firms Division. Gallant though its efforts may be, it is inadequate to meet the task. Such a high-powered agency is vitally needed to examine methods of simplifying government and bureacracy-spun regulations that shower on small business men.

I should like to see a review and reform of the present tax structure as it affects small businesses and the self-employed. Such an agency would demand a new deal for that sector in terms of social benefits and the social welfare system. It would seek improvements in education and the availability of expert specialised knowledge within small firms.

I hope that such an agency would lead to the stimulation of new enterprises and growth through incentives and the availability of appropriate sources of finance. In other words, help of the best kind should be afforded to allow those enterprises to develop with the aid of a certain amount of self-help. In this way Scotland and the United Kingdom can reap great benefits. We should also encourage small businesses to generate goods and services.

I hope that in the coming parliamentary Session the Government will take immediate steps to encourage far more than they do at present the self-employed and small businesses. Above all, I hope that the Government will set their own governmental house in order.

6.2 p.m.

Mr. Ronald Atkins (Preston, North)

Opposition Members, including the hon. Member for Oswestry (Mr. Biffen), have spoken a great deal about slow growth and low levels of industrial investment as being new phenomena associated only with Labour Governments. That is not the case. Industrial decline has been taking place over a long time. An official report in 1913, following a study of this problem, concluded that there was more skilled labour in the United Kingdom and more obsolete machinery than in the rest of the world put together. This has long been a problem and we have been suffering from its effects for at least three-quarters of a century.

In those earlier days we at least had monetary stability, and the hon. Member for Oswestry spoke of the importance of that aspect of a nation's economy. Such stability existed in Great Britain in the early years of this century and in the 1920s. Indeed, it was too strong in the 1920s because Winston Churchill overvalued the pound in trying to keep it too high in terms of its pre-war parity with the dollar. However, Britain continued to decline industrially. There were great management incentives in those days and there were the greatest inequalities in income of all time. Yet despite those considerations Britain continued to decline both industrially and economically.

Tory Governments of the day did not help. Although the Conservatives blame recent Labour Governments for the present state of Britain, they had many opportunities in the 1920s and 1930s to put Britain on the right road. They had special opportunities in the 1950s when the terms of world trade turned in Britain's favour. However, investment in the 1950s occurred mainly in property speculation rather than in industry. The last Tory Government in 1970–74 did not do very much to get us out of that situation. They went out for incentives for management and to private industry, but investment remained grossly inadequate.

The hon. Member for Oswestry spoke of the profligacy of Labour Governments. No party in office was more profligate in spending money than the Tory Government in the period from 1970 to 1974. Money supply then increased by as much as 28 per cent. in one year. Indeed, some of our present difficulties result from that early Tory policy.

The cause of the United Kingdom's industrial and financial difficulties has been the feeling of lethargy in private industry for many years, and that situation still persists. We have had many examples of decline in British industries because of lack of enterprise in the private sector. Indeed, the Conservative Government saved Rolls-Royce because they realised that Government assistance was necessary. There were occasions in the early years of this century and in the 1920s and 1930s when Conservative Governments decided to go to the assistance of industries which, without that assistance, would have perished.

All these difficulties will not be removed by cuts in public expenditure That argument applies particularly to investment in industry especially in nationalised industry. A number of our basic industries have been nationalised because they would have died if that had not happened. This is true of the shipbuilding industry, which is being nationalised to stop it dying.

Mr. Alexander Fletcher (Edinburgh, North)

Are jobs being secured?

Mr. Atkins

I am not saying they are, but certainly many more jobs would have been lost because of the closure of yards if industry had not been nationalised. I am saying that the shipbuilding industry is being nationalised to save its life—just as the steel industry, Rolls-Royce and other industries were saved to save their lives. It is a great pity that the nationalised industries are so often the subject of Opposition "Aunt Sallys". This does not happen in other countries, and that is one reason for foreign suecesses. In Western Germany, Japan and France great co-operation takes place between Government and industry. That is their salvation. It is only in the United Kingdom and in the United States from the beginning of, industrialisation that we have seen a philosophy so addicted to laissez-faire. Many of the great successes enjoyed by our overseas competitors have arisen from the great degree of co-operation between private industry and Government—and sometimes this has em- braced nationalisation. This has happened in Europe and elsewhere. Again, it is a great pity that doctrinaire attitudes have spoiled the debate on industrial problems.

If the suggestions offered by the Conservatives were implemented, the unemployment figure would probably rise to 3 million. Unemployment is in itself inflationary when a large body of consumers is created which itself does not produce goods. Professor Keynes in his "General Theory" asserted that in depressions it was the duty of the Government to expand their activities and to create additional income by programmes of public works. That was in direct contrast to the then Treasury view, which was described by Winston Churchill in 1929 as follows: The orthodox Treasury doctrine has steadfastly held that, whatever might be the political or social advantages, very little additional employment and no permanent additional employment can be created by State borrowing and State expenditure. That official view did not change throughout the years of depression. One of the authorities on the period, Professor Sidney Pollard, in his book entitled "The Development of the British Economy 1914–1967", states: It followed from Keynes's now generally accepted doctrine"— let us not forget that Keynes was made Financial Secretary to the Treasury in the early years of the war— that budgetary policy in the inter-war years was of a nature to aggravate the ill effects of the trade cycle. That lesson has not been learned today, despite the authoritative views of the National Institute of Economic and Social Research, a body that has been so authoritative in the past.

The Government should increase and not reduce expenditure in the nationalised industries. If some of our policies were accepted—namely, import controls and the prevention of capital going abroad, which are not merely policies of the Left Wing of the Labour Party but policies accepted by some members of the CBI, apart from the TUC, and representing the views that have been expressed in the Financial Times by Gordon Tether and nowadays in the Observer—our financial problem and the need to borrow would be much reduced. That would be the result if we did not allow excessive imports of manufactured and semi-manufactured goods, the type of goods that other countries restrict in various ways, covertly if not openly. It is for us to use the same tactics.

Japan is a most notable example of a country that has based its prosperity on import restrictions of various types. At a time when there is tremendous surplus capacity and a large number of unemployed, we believe that this is the moment to develop and invest in industry, especially in the nationalised industries. Many nationalised industries were taken over when they were declining to the point of death. Such industries need a great deal of investment. Existing investment must be retained and increased in time for the next boom so that we shall not be flooded, as in the past, with ever-increasing quantities of manufactured goods and semi-manufactured goods once consumer demand increases.

I shall refer to two industries where investment and modernisation is necessary. I have a special interest in railways, and I am well aware that railways are not performing as they should. Indeed, they have not done so for some time. That is because of a lack of investment in the past and today. For example, we have fewer electrified lines than any comparable country Western Germany has a roughly similar population and about 20,000 miles of railway lines, almost twice as many as we have. There is a great need for investment. Given the limited targets of the British Railways Board of a few years ago, we are running at about two-thirds of the expenditure that we should be undertaking to make British Rail even moderately efficient

The second industry to which I refer is that represented by the ports. My hon. Friend the Member for Preston, South (Mr. Thorne) and I are worried about Preston docks and the Tory-dominated Preston council The docks are municipally owned. Although the docks have been open and useful to the country for a long time, we are worried that they will be closed.

In 1966 the Labour Party manifesto said: In order to speed up the vital flow of exports Labour will reorganise and modernise the nation's ports on the basis of a strong National Ports Authority and publiciy owned regional ports authorities. That manifesto of 10 years ago showed an awareness of the vital part that British ports will play in the regeneration of British industry and trade.

In 1974 the Labour manifesto stated: Proposals have been issued to bring all commercial ports and cargo handling into public ownership and control with a radical extension of worker participation in the industry. There was no mention of that in the Gracious Speech in early and late 1974. Indeed, it was not mentioned in 1975, and certainly not on 24th November 1976. We have had 10 years of wasted opportunity.

The situation at Preston is that the port is to be closed—admittedly there was a large loss in this year of recession —although for at least 10 years, in my estimation, the borrowing of money will be such that it will cost more to close the dock than to keep it open. The amount of money that will have to be borrowed, and the interest charges paid on it, will cost more than the cost of keeping the port open, notwithstanding the improved trade that can be expected with the revival of trade that we are bound to see take place.

As Lord Gifford said, all ports are needed. The Government should give them financial assistance, as they assist private industry, to enable them to keep going, or carry out their election pledge of 1974 and take the ports into public ownership. My hon. Friend the Member for Preston, South and I feel that that is owed to the electors of Preston, who have heard us make various statements or pledges. I did so in 1966, and my hon. Friend and I made a similar statement in 1974. We believe that the port at Preston, as so often in the past, will contribute, to the country's general prosperity. We urge the Government to save jobs in Preston.

Mr. Stan Thorne (Preston, South)

Perhaps my hon. Friend will give the House the figures. I think it is entitled to know them. The House—particularly my right hon. Friend the Secretary of State for Employment—should know of the increased unemployment in the Preston travel-to-work area. It has increased by 1 per cent. in 12 months, and the likelihood is that there will be 2,000 more unemployed through the closure of the port. This will mean a very serious employment problem in the Preston area.

Mr. Atkins

I am grateful to my hon. Friend for reminding me of those matters, especially as the unemployment to which he refers will be male unemployment. There is all too little of that employment in Preston. We have a good deal of female employment in the mail order firms and certain other industries, but the male unemployment situation is extremely serious.

Preston has changed from having unemployment figures that were rather better than the national average to figures that are worse. I can see a situation developing in which the position will be much worse. Preston has survived with difficulty a rundown in the textile industries but other industries are in danger. industries that are employment-intensive. It is essential that the port, which does not merely bring employment within its own boundaries but business to ancillary trades, helps Preston to develop.

Preston is the centre of a designated area that is regarded as the Central Lancashire New Town. Whether the new town is a success depends to a large extent upon the facilities provided in Preston. The port authority is one of them, as the Central Lancashire New Town authority has so often said in its advertisements. I beg the Government to do something to save Preston port. It has an honourable history and I am sure that it will contribute much, not only to the surrounding area, but the whole country when the revival in trade occurs.

Mr. Deputy Speaker

I remind hon. Members that I have appealed for brevity.

6.20 p.m.

Mr. John Wakeham (Maldon)

There was not much in the Gracious Speech about industrial policy other than mention of the national objectives of tackling inflation, unemployment and industrial performance. There was no clue in either the Gracious Speech or the Prime Minister's speech about what the Government would do if one or other of these interrelated problems needed a solution which was incompatible with another. Certainly the Government stress the importance of these objectives but they have said virtually nothing about how to achieve them. We receive the same stock answer —more and more exhortations to invest. If the Government do not get the investment they would like to see, they ought not to be surprised.

I should not be surprised if we did not get increased investment. The reason is easy to see. There are a number of factors but the greatest is uncertainty. Business needs confidence if it is to invest. The damage done to industry when the minimum lending rate was jacked up to 15 per cent. recently lay not so much in the extra cost for industry, serious and important though that was to the cash flow position in the short term, but in the fact that such a thing could happen. There was a sudden change of policy which will take years to live down—a sudden overturning of plans as a result of Government action. This goes to the heart of the problem of uncertainty in industry.

The Government may well be critical of industry for not entering into planning agreements. The Prime Minister referred to this in his speech. How can industry enter into detailed planning agreements in view of the rate of inflation, the level of demand, the rates of interest, pricing policies and increasing costs for such things as national insurance contributions? There is still some debate whether these extra costs can be allowed in the Price Code. All of these things are in the hands of the Government. industry will respond to certainty but plans can be made only on an estimate of basic data which must come from Government.

Many companies have to plan in an area of uncertainty, not knowing what the Government will do or whether they will survive and get their legislation through the Cabinet. It may be that the discussions of Cabinet policy we read about in the newspapers are good for democracy. Those in the board rooms of this country find that these discussions add to uncertainty. Why, for example, should business men have to find out that the Government appear to be planning a rate of inflation of more than 15 per cent. by looking at paragraphs 8 and 9 of the statement made by the Secretary of State for the Environment to the local authorities when discussing the level of the rate support grant?

There must be a much greater effort to tell the British people, particularly those faced with investment decisions, what the Government's plans are. Further, there must be the resolve to stick to them. Industry despairs of getting the right relationship with the Government. The Prime Minister correctly said in his speech that with 100 per cent. investment relief and stock appreciation relief very few companies are paying mainstream corporation tax. However, he failed to point out that these reliefs are now appearing in the balance sheets as liabilities under deferred taxation. They represent a massive unknown liability which bankers, directors and investors have to view cautiously when assessing the credit worthiness of companies or the ability of companies to make investment decisions, particularly with small companies.

I do not believe that the Government have sufficiently realised how much the collapse of the capital market has meant in that the only practical source of additional capital for many businesses now is through the banking system which is being asked to put up money of a sort which it would not normally be called upon to lend. No one should underestimate the effect on industry of sustained inflation and price controls. This affects the ability of companies to invest. The effect has been that no company, however big or efficient, can finance any expansion out of retained profits. With inflation running at more than 15 per cent., net profits before tax need to be at some massive figure on capital employed —about 40 per cent. or 50 per cent.— before a company has any margin for investment, after paying tax and retaining capital to pay for inflation. At present industry is not sufficiently profitable to do the job required of it in an inflationary period. Either we get inflation under control or substantial increases in profitability in industry will be required, not to expand, but to survive.

The Government ought to take this seriously into consideration. Industry is working on the basis that inflation and unemployment will increase, that there will be cuts in public expenditure which will find their way into the private sector, and that there will be lay-offs and a low level of demand. In these circumstances, the Government have to do considerably more than they have done if they wish to encourage industry to make the investment which is called for in the Gracious Speech and which appears to be the only positive proposal contained in it.

6.27 p.m.

Mr. Ivor Clemitson (Luton, East)

I detect a fair amount of common ground behind the obvious differences in various parts of the House. There is a fair amount of agreement that we must give high priority to manufacturing industry and that we must reverse the decline in that industry—what is called de-industrialisation in the current jargon. There is much agreement with the suggestion that we need to increase investment. There is agreement that we need to increase productivity and become more competitive. Naturally there is a great deal of disagreement about the means of obtaining these ends.

We disagree about where the investment is to come from, what controls, if any, are to be imposed, and so on. There is a commonly-held assumption, which I wish to challenge, that more investment in manufacturing industry will necessarily create more jobs in that industry. Along with that is the assumption that production increases in direct ratio to the number of bodies employed in the production process. In my view, the word "de-industrialisation" has been quite wrongly used to describe a decline in the number of people employed in manufacturing industry instead of to describe a situation in which manufacturing industry has declined in other comparative senses, that is, in terms of how much wealth is produced by it.

The assumption, which is shared across the political spectrum, that if we increase investment in manufacturing industry there will be more jobs flies in the face of logic and experience. Logically, it is questionable because the purpose of investment, simply and crudely, is to create wealth, not jobs.

The experience of those industries which have invested more than the average over the past 10 or 15 years is that, while investment and output have increased considerably, employment has fallen. An obvious example is oil refining and chemicals, which, in the decade from 1964, increased capital by 58 per cent. and output by 71 per cent., while the work force fell by 8½ per cent. If it be argued that I am being selective in choosing a capital-intensive industry, I point out that the same is true of all other industries because all industries are moving from the labour-intensive end of the spectrum to the capital intensive end at a slower or faster rate.

Of course there are arguments against my case. One of them stems from international comparison. It is argued that during the 1960s Japan, West Germany and France all increased the number of people working in manufacturing industry and that with it went a big increase in production. But, over the decade of the late 1960s and early 1970s, in France and West Germany, exactly the same number of people were employed in industry at the end of that period as at the beginning in percentage terms, and only Japan noticeably increased the proportion. But even at the end of that period they were still well below us in having considerably smaller proportions of the work force in manufacturing than we had.

Let us look at that argument in terms of the balance between the agricultural, industrial and service sectors. It is noticeable that over the period in France and Japan the percentage of people employed in service industries increased more than it did in this country and in Germany only marginally less. Clearly, France, West Germany and Japan all had very large agricultural sectors on which to draw, and there is no case on record in modern times of any advanced industrial country expanding its industrial sector at the expense of its service sector.

In any case, is it not rather nonsensical to base plans for the late 1970s and 1980s on the experience of other countries in the 1960s? That is entirely to ignore the advances in technology which have taken place and are taking place. We cannot kill two birds with one stone.

Of course we need more investment and higher productivity and the rest, but if we think that this will necessarily lead us back to full employment, we are deluding ourselves. I plead for us to be forward looking rather than backward looking, for us to look at what is happen- ing in long-term structural terms to the economy, and not just at the short term. Do not let us just think that we are in a short-term recession and that once we get over it everything in the garden will be lovely. Long-term things have been happening for a long time, and they are beginning to come to the surface. We must take serious note of them. One of the main influences, which is changing all the time, is technology, and we must take into account it and its effects.

The situation we are getting into gives us enormous potential in advancing human welfare. Many options are opening up to us. I believe, for example, that we have to adopt a positive and not a negative attitude to public service employment. I am not talking about bureaucrats. It may well be true that there are too many bureaucrats. I would agree. But it is also true that there are not enough bus drivers and not enough hospital workers and not enough people in a whole range of other occupations—labour-intensive occupations—in the public service sector on the face to face level, and it is to such jobs that we should be looking over a time to expand, because having more people in the public service is a sign of a civilised society, not the reverse. The argument being put forward by Bacon and Eltis in The Sunday Times, portraying people in the public sector as being non-productive, is quite nonsensical economically and quite scandalous in its implications.

Another thing that we could do is to reduce the size of the work force. We could have earlier retirement. We could, for example, encourage more young people to stay on in full-time education. We could begin to look at the possibilities of education throughout life. Why is it that the only people who get sabbatical leaves are, apparently, university professors, who need them least? It is a strange irony. Again, in the small business sector, why not give greater and more positive encouragement to workers' co-operatives and common ownership enterprises? There is a long list of things that we could do.

I am not saying that any of these things is better than or worse than or preferable to others. But some have been suggested, unfortunately, as short-term reactions to a situation rather than from a positive point of view. Of course there will be arguments about cost. But let us please develop the argument of net cost as opposed to gross cost. We used that argument in the Chrysler case. We said that it was worth £162½ million because the alternative was 50,000 people on the street, which would cost us, in redundancy pay, unemployment benefit and loss of tax revenue, nearly as much as £162½ million. Why not apply that kind of reasoning on a far wider basis than in the past?

The argument I am putting about the changing ratio between capital and labour in industry is crucial, not only because of its obvious and direct effects on employment. It is also important because of its great significance for a whole range of our policies. For example, if we ask for greater public control of investment merely because we say that it will produce more jobs, we are arguing on the weakest possible ground. The real case for greater public control of investment is much broader and much more appealing—that it will ensure a better supply of investment, that it has to do with controlling the areas, geographical and industrial, into which the investment is to be put, and that it has also to do with using limited national resources in a better way and with control over the wealth produced by investment and so on. That is a much broader and appealing if more complex argument.

Then there is the question of public expenditure cuts. There may or may not be a case that the public sector pre-empts too much of the money—I do not want to get involved in that argument now— but it has become hopelessly confused with the argument that the public sector pre-empts too many of the people in the work force, and that argument is nonsensical.

Take, again, the question of industrial democracy. How can we hope to develop industrial democracy if the background is one of fear and suspicion? The fear and suspicion will be there as long as jobs are under threat and the only alternative is a lengthening dole queue.

I am not arguing that we have not suffered comparative economic decline. Of course we have. But I believe that that decline must not be measured merely in terms of the numbers employed in industry rather than in terms of the wealth produced by industry. I am not arguing that we do not need more investment. Of course we do. I am arguing that to look to investment as the panacea which will solve all our unemployment ills by creating more jobs in industry flies in the face of logic and experience.

The total demand for work is falling, certainly in manufacturing industry and arguably over the whole economy. We have failed to appreciate what has been happening over the past 15 or 20 years. The unemployment figures have been on an upward trend for the last 15 or 20 years. Although they have taken a sharp rise due to the recession over the last two years, there has been a longterm upward trend. We desperately need a totally new perspective, and that can come only if we radically reinterpret the place which work has in human life.

We have interpreted work far too narrowly. We have seen work as the only means by which people can make a contribution to society, I believe that they make a contribution to society in many different ways. It is, in a sense, ironic that, if we interpret full employment in a too narrow and backward-looking a way, we may be blocking off the very advances that the present situation is opening up to us.

If we can create more material wealth by less blood, sweat and tears, what is so terrible about that? I believe that that would be an advance. The possibilities are opening up to us a far richer, more satisfying life for a great number of people. We should look at the many possible options opening up to us, choose between them and cost them. If we do not do that, as from now we shall be heading for trouble. If we are diverted from that task by false hopes that some economic upturn will solve all our unemployment problems and all will be well, we shall be living on the falsest of hopes and missing the greatest of opportunities.

Mr. Deputy Speaker

I make no apology for again appealing for brevity, on behalf of the many hon. Members still anxious to take part in the debate.

6.43 p.m.

Mr. Robert J. Bradford (Belfast, South)

I hope that the House will understand if my brief intervention is rather parochial in nature. Although I found the speech of the hon. Member for South Angus (Mr. Welsh) interesting, my contribution will be in marked contrast to his. I and my hon. Friends believe that there is an indivisibility about the United Kingdom, and that the United Kingdom has a political and economic unity which must be maintained at all costs.

Having said that, I draw to the attention of the House the suspicion which in Northern Ireland is gathering great momentum and which must be apparent to Ministers in the Northern Ireland Office. The rumour is that there is economic withdrawal from our part of the United Kingdom, and that it is not inadvertent but is deliberate and premeditated. My hon. Friends and I do not want to believe that there is economic withdrawal from Northern Ireland, but some of the events which have taken place over the past two years make it very difficult for us to gainsay such an argument. Therefore, I draw to the attention of the Government Front Bench the kind of occurrences which make a rational argument against that suspicion well-nigh impossible.

We appreciate that in times of economic stringency and industrial recession there must he a contraction to the centre, and very often the contraction must take place in such a way that the peripheral areas which incur the greatest expenditure must suffer. We appreciate those bald economic facts, but when we see the closures, such as the defence closures which have been proposed for Antrim. Sydenham and Aldergrove, or the impending closure of Rolls-Royce, part of the total combine which has made a very good profit during its existence, and when we hear the retort of the Minister of State, Department of Industry, that it would not matter if Rolls-Royce in Northern Ireland could prove that it is a viable part of the combine and it would still be closed— when we hear of all that sort of thing— it is difficult for us to gainsay that economic withdrawal is taking place.

Not only does this kind of industrial problem bring us—indeed, force us—into the wider orbit of political withdrawal but it adds to the chronic problem of unemployment in Northern Ireland. About 27,000 technologically based jobs have been lost in Northern Ireland since the beginning of direct rule in 1972. The fact that this loss is added to the area of the United Kingdom that has the highest rate of unemployment—twice what obtains in the rest of the Kingdom —greatly undermines our attempts to argue that the House is anxious and is committed to maintain the indivisibility of the Kingdom and the political and economic unity of the Kingdom.

In Northern Ireland we have the great problem of transportation costs and power or heating costs. Perhaps not many hon. Members realise that those industries that are powered by gas have to pay some 300 per cent. more than their counterparts in any other part of the United Kingdom, and those powered by electricity have to pay at least 40 per cent. more than their counterparts in any other part of the United Kingdom. When this problem is placed alongside the extra cost of transportation and alongside the great contraction which has understandably taken place in the private sector we have a right to ask the Government to answer one or two fundamental questions.

Northern Ireland represents approximately one-fortieth of the population of the United Kingdom, and our first question, therefore, is this. What research and thinking have been applied to the possibility of introducing approximately one-fortieth of the industrial life of the whole nation into Northern Ireland? We heard from a former member of the Northern Ireland Office that Northern Ireland needed a broadly based industry and a widening of the economic base. We hear all this repeatedly, but I find no evidence in the administration of this Government of any successful attempt to widen the economic base.

My second fundamental question is to ask the Government whether there is enough money available to the Northern Ireland Development Agency to tackle this problem of according to Northern Ireland one-fortieth of the industrial and economic life to which Northern Ireland is entitled.

I realise that time is of the essence, so I conclude on this notice. The ancient Greek philosophers were wise enough to make peace the mother of prosperity. I make a plea to this Government to realise that there can be no hope of economic stability, let along economic prosperity, in Northern Ireland unless the defeat of the terrorists there takes place immediately.

If the Government will not underwrite their economic confidence in the future of Northern Ireland by keeping those industries under their control there, how in heaven's name can we expect to attract outsiders to create jobs and industry in Northern Ireland? There is a twofold problem of underwriting economic confidence and of infusing and injecting peace immediately by means of proper constitutional and militaristic policies.

6.50 p.m.

Mr. Fred Silvester (Manchester, Withington)

One of the great advantages of sitting on the Whips' Bench is that, having heard most of the speeches several times over a period of two years, I have learnt that it is unnecessary for me to bore the House by repeating all the learned arguments which are trotted out on these occasions concerning industry, commerce and the economy.

It seems to me, however, that two important things arising from the Queen's Speech ought to be said. They arise because we are not, as the hon. Member for Luton, East (Mr. Clemitson) suggested, dealing with long-term threats, although they are very important and very interesting. Nor are we dealing with an exciting exhibition of fireworks, as we might be led to believe having listened to the hon. Member for Cornwall, North (Mr. Pardoe). The hon. Gentleman managed to speak in favour of different policies in different parts of the same speech, and he did not seem to worry whether they were related to one another. But we must recognise that we face a real and immediate problem on which, whatever views we may have about the long-term stituation, we require to take a much more immediate view.

I shall not go into the whole question of public expenditure, which has been dealt with at length, but one important feature ought to be made clear to the Government. It is not simply a matter of economic facts. What is important is the state of mind which prevails at the present time. I am increasingly convinced that there is a debilitating sense of depression in this country, and that what we need most of all is a touch of success.

I am not suggesting that that is easy to achieve, but I do not think that it is likely to be helped along by constantly carving up the economic statistics and arguing about the minor points, when we all know perfectly well what is the basic problem facing us. Over the weekend even the Chief Secretary to the Treasury has acknowledged the package of measures which we are to face, and there is a good deal of understanding on both sides of the House as to the sort of action which will have to be taken in the near future.

In the Queen's Speech there was, as I recall, no particular mention of what is happening in the regions. The North-West, the North-East and Humberside suffer, as all our commentators agree, in direct proportion to the state of the economy. We can pump in regional aid and come up with new devices—I do not underestimate what the Secretary of State is trying to do—but those areas continue to be damaged directly and more violently as a result of the economic depression from which we are now suffering.

The period since 1966 is generally reckoned to be one in which a most active regional policy has been followed by both Labour and Conservative Governments. However, when we look at the figures for that period, we find that the proportion of the wealth of this country enjoyed by the area north of the Wash and the Bristol Channel and south of Hadrian's Wall is still diminishing, despite all the effort that has been made, compared with the southern part of the country.

As the devolution debate takes place in this House we shall find that it will provide motive power for the growing feeling of resentment and the deepening of depression in those areas. The people who live in them feel that the policies which have been pursued have left them holding the baby.

I began by saying that there is an atmosphere of depression in the country. Obviously, I have no particular faith in what the Government have done up to now. Among people in business, in ordinary walks of life, among my own friends and even among Members here privately, I find a general feeling of depression developing in this country.

Over many years we have pursued a policy of turning to Government Departments, to this House, to various reports, and to experts of various kinds in the mistaken belief that in one way or other they would be able to tackle successfully some of the long-term problems mentioned by the hon. Member for Luton, East. Unfortunately, as a result of this policy, over the years we have grouped further and further up a blind alley. It should be obvious by now that this alley has a blind end and that it is pointless to continue on this course.

The places where the desire for free enterprise is doing well are showing enthusiasm, showing that there is a way forward. Hon. Members on both sides of the House have mentioned the small industries, the entrepreneurs and those who will go out and do something with energy and enthusiasm. No one in his heart of hearts really believes that the people to lead us out of our present position are in the Civil Service, in the National Enterprise Board, or those who seem to be in a position to make decisions concerning one industry as against another. The decisions are best made by people who have a belief in something which they can see growing and developing, and which is able to stimulate enthusiasm.

The hon. Member for Rotherham (Mr. Crowther) said that it is not possible to make an industrial worker into a teacher or the other way round. We know that there are all sorts of difficulties of that kind in reducing public expenditure. But we also know that unless we borrow money we will have to get it by taxation, and taxation is now one of the key elements in the depressive situation in this country.

We have to face the fact that in the present circumstances, recognising that the areas in which the Government can now move are limited—they have got themselves into this box—they must not simply add up the figures in working out their policy. They must also consider what effect they will have on the enthusiasm and the mind of the British people. The people are in a desperate state and badly need something to be cheerful about.

6.59 p.m.

Mr. John P. Mackintosh (Berwick and East Lothian)

I agree entirely with the sentiments of the hon. Member for Manchester, Withington (Mr. Silvester). He is quite right in saying that the regional policy is in difficulty. Regional policy depends upon achieving growth and then shovelling some of the growth into the regions. If the country is in a depressed situation there is no growth to move, and nothing to put into those areas. They feel deeply depressed because of their situation and because of Government policy.

I sympathised a great deal with the hon. Member for Belfast, South (Mr. Bradford). He was right to make an appeal for his area, but he knows as well as any of us that, if the Government control certain industries and try to implant them in an area, it cannot work in a free society unless there are skilled workers and managers prepared to go there. Even in Scotland I have seen disaster when a skilled industry was implanted in a derelict part of Clydeside. It died because no one would go to work there. The hon. Member knows that the problem in Northern Ireland far surpasses that which I have just mentioned.

I wish to make one further point on this regional question. It picks up the argument of the hon. Member for Cornwall, North (Mr. Pardoe), who said, in his rather contradictory speech, that the amount of money given to Scotland for regional development was a function of nationalism. It would be a pity if that myth were allowed to continue. The additional money for an area such as Scotland dates from the period before the Scottish National Party won a single by-election, and the injections into the area were made on the basis of need.

Mr. Crawford

My party's first by-election victory was in 1945.

Mr. Mackintosh

The hon. Member for Perth and East Perthshire (Mr. Crawford) is getting more and more boring if he insists on making that piffling point. There was an agreement between the parties to contest no seats, and that seat was won as a minor matter. But I am talking about the upsurge of the Scottish National Party. The regional assist- ance for Scotland and Wales and the deprived areas pre-dates that, and we should recognise it.

However, I do not wish to be drawn into a discussion of regional policy, important though that is. This debate and, I suspect, the present Session will be over-shadowed by the broader economic situation facing the country.

I feel that there is a curious anticlimax about our discussing economic policy when the key economic issues facing the country are being settled between the IMF and the Government, between the Prime Minister and the Prime Ministers of the other countries which will provide the loan and, as far as I can see, between members of the Cabinet. That is the situation that we face. I understand that the crunch decisions will come on Wednesday and Thursday of this week. There will be some time before the Group of Ten handles the matter.

However, I hope that there will be an announcement to the House before the Christmas Recess and that we shall debate the matter. It is only right that those of us who are deeply concerned about our economic future should be given an opportunity to say what we are prepared to support in this House by way of a package deal so that when discussions are going on in the Cabinet they are against the background of what can or cannot be put through this House in the days ahead. Therefore, I set out the criteria which, in my view, the Government should adopt when they are considering what is to be an acceptable package under their arrangements.

The first criterion, which is vitally important, is that the package must be the final one. We cannot have a package, whatever its nature, which does not stop the run on the pound. I appeal to members of the Cabinet to think this through, because it is one thing to have a tough and unpleasant package now, but it is quite another for the package to be treated with disbelief, for there to be another run on the pound and another package in April or May of next year. There is a limit to what the public will take and I agree with the Financial Times that the Government have one more package left in them. We have had too many dribs and drabs. Whatever its contents, this package must meet the situation. On the basis of it we must be in a position to set off on the road to economic recovery with the confidence that there will be no need to repeat the exercise in the lifetime of this Parliament.

My second criterion is that it is vital that we should be in a position to peg the pound. Originally, in 1967, I was a supporter of devaluation. In 1971, I thought that it was a clever move to float the pound. But we cannot persist with the present uncertainty in the commercial, business and trading community which has been created by a 50 per cent. collapse in the value of the pound since 1971. It must be pegged, preferably to the deutschemark or to the Snake, in order to get back to a relationship with the major European currencies and to choose a relationship which we can hold and stick to.

There is a great deal in the Press and in the mouths of Government spokesmen about how wonderful it would be if we could fund the sterling balances and the overhang of £6 billion of sterling which has caused our trouble. But the £6 billion of sterling balances was not an imperial legacy. It was money which we invited from the oil countries to enable us to live beyond our means for a few years longer.

There is no obligation on the international community now to bail us out. I hope that they help us, but I trust that we see this in perspective. If we are able to cope with our economic problems and to restore confidence, if we can peg the pound and guarantee to people holding sterling what they will get for it, there is no need to fund the balances and people will continue to lend us money on the basis on which they lent in the past—that sterling is safe and reliable. If sterling is not safe and reliable, funding the balances will not help because then we shall get a huge loan, we shall hold on to the loan, no one will have confidence in our economic management, the loan will be spent repaying the balances, we shall face the accumulated debt, and our children will face that debt for years to come.

It is one of the curious policies advocated partially as a method of solving our problems when the key problem is a package which will convince people at home as well as abroad that we have faced our problems and one which will enable us to peg the pound and stick at that point. Then if we get some international guarantee for sterline, well and good. But it is not a substitute for a sound economic policy on the part of the Government.

I come to my third criterion of a sensible and reasonable package. Somehow we must try to get the British economy expanding or growth-oriented again. We have a mixed economy. We must accept that the area of the British economy preponderantly depressed is the private sector, and we must do something about it. Some Opposition Members would like to see a permanent change in the mixed economy, with a larger private sector and a smaller public sector. Some of my hon. Friends below the Gangway believe that the mixed economy is a stepping stone to a totally publicly-owned one. I do not enter that argument.

I Say merely that the private part of the mixed economy employs 6 million people and that we shall not cope with the short-run economic and unemployment problems unless the private sector gets going again. At the moment, that sector is declining. It is bearing the heavy burdens, and those burdens are the 15 per cent.—in practice, nearly 20 per cent.—lending rate, a credit squeeze of undue proportions and an additional £1,000 millions of taxes in the shape of the increased employers' national insurance contributions.

I am always puzzled by my hon. Friends who, like the National Executive of the Labour Party, are prepared to run demonstrations because of cuts in public expenditure. I sympathise. I do not want to see teachers. the keepers of public parks and school cleaners laid off. No one wants that. We know what a crisis it is for them. People say that this is a deliberate act of Government policy. But when small engineering companies close down because of the minimum lending rate and their cash flow problems, that, too, is clearly a result of public policy. Why do we discriminate in favour of NUPE workers and against AUEW workers? Yet I see no demonstrations marching down Whitehall demanding that the burden be lifted from the private part of the mixed economy to allow it to get going.

This argument has been raging in The Times. In his rather contradictory speech, the hon. Member for Cornwall. North said that he could see no crowding out and that there was no problem about it because no one wanted to invest. Then he ended his speech by saying that we must do what we can for small business men because therein lay the future of the country. There is a slight contradiction.

We do not want to penalise investment. Investment in the private sector in the first quarter of this year is running at the rate of 15 per cent. below the level of 1973. Next year it may well be 25 per cent.

There may be no evidence of new desire to invest, but it is surely wrong to stop investment that would otherwise have taken place. I cannot think that is sensible. The current interest rate is high in order to finance the public sector borrowing requirement. This is a different situation from that in the 1920s when the economy was operating at a low level, the balance of payments was satisfactory and prices were not rising.

Burdens are placed on the private sector in order to finance the public sector borrowing requirement. I want to keep the public sector borrowing requirement high and I want public expenditure, but I see no reason why we should pitch the requirement at a level which throttles the wealth-creating sectors of the economy. If that continues, this country's depression will get deeper.

This must be the end of packages of this kind. This package must allow us to peg the pound and to hold it at one point for a reasonable period into the future. We must have a revival of the wealth-creating sectors of the economy. Those are the criteria for the package which the Cabinet is chewing over and which, I hope, they will announce this week.

Hon. Members may accept this but want me to produce the figures. For the public sector borrowing requirement, there are two criteria that one can apply to the actual amount of money. The first is that the amount must satisfy our external creditors and the people who hold sterling in this country. I know it is normal to condemn those people as speculators, to say that they are gnomes, but in fact, they are almost everyone who holds sterling, whether British or non-British.

Hon. Members may have heard about the interesting deal made by the British Aircraft Corporation. It is selling missiles to Iran but has to pay for raw materials through the exchanges in order to make the missiles. BAC is demanding payment from Iran in oil which will be sold in third and fourth countries so that BAC will have hard currency which it will be able to keep abroad. This is not criminal or a wicked act, although it may be mildly unpatriotic. It is a method that the company is pursuing because it thinks it is the only way in which it can safeguard itself, given the present position of sterling on world exchanges.

We have to produce a situation in which sterling holds at home and abroad accept the package as adequate and do not reject it, possibly resulting in a further run on the pound.

We must cut the total amount of the borrowing requirement to a level such that we can finance with a minimum lending rate that drops to 10 per cent. or thereabouts this year. Soon we must move to a minimum lending rate which is no higher than that of our major industrial competitors. These are the criteria which I hope the Government will bear in mind.

I hear the leaks coming out from the Cabinet and I hear about the spectrum of opinion between the Minister of Overseas Development and the Secretary of State for Trade at one end. Then there is the Chancellor of the Exchequer. Then there is the Prime Minister begging no one to shove a wedge between him and the Chancellor. Then I hear the Tribune Group wanting an alternative strategy and another mixed group in between wanting no further inflation. No one will envy the Cabinet its task over the coming weeks, but I hope it is not thinking what I believe some people are thinking and that is, "What package can we get through the Labour Party?"

That is not the correct question. Ministers should ask, "What will meet the problems of this country?" If a package is produced to meet the needs of the situation there will be a majority for it in this House. If one is produced which is designed only to get through a party situation but does not meet the needs of the country, it will fail totally, it will fail the country, and it will not get a majority within the party.

7.14 p.m.

Mr. Michael Hamilton (Salisbury)

The hon. Member for Berwick and East Lothian (Mr. Mackintosh) has made a most stimulating speech, and I know he will forgive me if I say that during the last three weeks all right hon. and hon. Members, not just Conservatives, have listened to his speeches with enhanced respect.

I listened to the Gracious Speech from the Gallery in another place and I was conscious that the word "defence" did not figure in it. So I would like to spend a few moments speaking about the Microbiological Research Establishment at Porton over which a shadow has fallen. I should like the House to know about it.

It was the Attlee Government, just after the war, who recognised the dangers to our population of bacteriological warfare and who set up one of the largest brick buildings of modern times. It is sited in the open country of Salisbury Plain within sight of the cathedral spire. The whole place is like a hospital. The ground and first floors are supplied with filtered air, there are large windows, the floors are highly polished, and the whole place is curiously silent. It is here that scientists, in teams of two, three or four, work for the Ministry of Defence and for the Department of Health. All their work is in the interests of the community.

This month, an infinitely small accident had major consequences. The House will know that an experienced scientist, Mr. Geoffrey Platt, who was working on the Marburg disease virus, contracted the disease himself. He was the first man living in this country ever to have this illness. The accident served to remind us that these scientists, men and women alike, despite all the safety precautions, are facing death and danger, as do our armed forces in Londonderry and Belfast of whom we heard earlier in this debate.

The accident has meant that four doctors and 22 nurses at the isolation hospital have been in self-imposed quarantine for some weeks. It has also meant that the scientist's family, together with some 40 of my constituents, have been in self-imposed isolation, receiving daily medical checks. The House will realise that these have been anxious weeks. Mr. Platt is making progress, the trouble appears to have been contained, and an inquiry is in progress. It would not be appropriate to comment till the inquiry's findings are known, but I would like to make two observations, one in praise and one in criticism.

First, the three Departments involved, the Ministry of Defence, the Department of Health and Social Security, and the Foreign and Commonwealth Office, have made in close concert a superb contribution to save the life and speed the recovery of this scientist. The House may know that there was recently a major outbreak of Marburg disease in Zaire—what we used to call the Congo—and this month one of the few people who survived the disease was traced and serum was flown to the scientist's bedside. Similarly, vital supplies were flown in from Scandinavia. I am sure the House would wish to pay tribute to those civil servants involved and to the staff of the isolation hospital for their work in this emergency.

Secondly, on the very day that Marburg disease was confirmed the Ministry of Defence chose to announce plans to close the building where this scientist worked. So Mr. Platt may never return to the laboratory where the accident occurred. That was, to say the least, unfortunate timing.

Further, the Minister chose—no credit to him for it—to announce these plans in answer to a Question for Written Answer tabled by the hon. Member for Putney (Mr. Jenkins). I notified the hon. Member that I intended to raise this matter, and he sent me a courteous letter. I will, therefore, say no more than that, if he will concentrate on the problems of the citizens of Putney, I shall continue to concentrate on the problems of the citizens of Salisbury, and I think that he and I will get on much more happily together.

I turn to the centre of my comments —the future of the Microbiological Research Establishment, which is a subject of far greater importance. I wish that this Government had something of the same understanding that the Attlee Government had of the work that is done there. I raised the matter on the Adjournment on 1st April 1976 and ended my remarks by saying: I ask the Minister forreassurance that the essential work at Porton will not be impaired. In his reply the Minister, speaking of his review, said: I am convinced that it will result eventually in arrangements that will take the interests of the staff fully into account and aim to make the best use in the defence and national interest of Porton's experience and expertise and facilities."—[Official Report, 1st April 1976; Vol. 908, c. 1760-4.] Only a few months later we learn that the buildings look like being closed down, that nine-tenths of the work is to cease, and that highly skilled and dedicated scientists are to be dispensed with. The, House will judge how far that accords with the Minister's words.

It might be thought that the world is no longer a dangerous place. Yet every week we are visited here by Soviet long-range surveillance aircraft flying 10, perhaps 15, miles up. It is an infinitely simple and cheap operation to disseminate disease germs from a spray tank. One aircraft—I stress that—making use of prevailing winds can have a major impact on this island. Airborne microorganisms can be neither seen nor smelt. Delivery by one bomber of 10 tons of a biological agent on an unprotected population will affect an area several hundred times greater than will a one megaton nuclear bomb.

There are plenty of diseases that lend themselves to military use. Anthrax is a good example. There is an anti-anthrax serum, provided that scientists are available to make it; but without it the disease is almost always fatal. Alternatively, there is plague. There is cholera. There is viral encephalitis. All of those germs are easily manufactured. All are horrific. All are cheap. Biological warfare is bargain basement stuff.

Porton is a modest insurance policy—no more, no less. It is there to mitigate disaster and to protect the civil population. A Government who threatened only this month to withdraw our forces from Germany seem to me to be capable of almost any act of folly. I believe that it would be a comparable act to leave this densely populated island exposed to the threat of disease germs without even the protective effort of the scientists at Porton to devise countermeasures. I therefore beg the Government to face up to realities and to rethink their priorities.

7.25 p.m.

Miss Joan Lestor (Eton and Slough)

My constituency of Eton and Slough is an area of complexity. It has over 700 factories, some of which are very small. Many of them are light engineering factories. It also has some large concerns such as a branch of ICI, Aspro, or Nicholas Products, as Aspro-Nicholas is now known, Mars, Berlei, and many other far larger organisations.

Eton and Slough has also one of the highest concentrations in Britain of people who originally came from outside the area. This started with the Welsh in the 1930s going right through with West Indians, Pakistanis, Indians and a host of others.

As many people are anxious to draw a parallel between unemployment and immigration, I must point out that we also have one of the lowest unemployment rates in the country.

My few comments are related to what I see happening in my constituency and are also connected with what was said by my hon. Friend the Member for Berwick and East Lothian (Mr. Mackintosh), who called on the Government to make their final package hard and strong and to make it bite.

On the contrary, I, despite the problems and the arguments that are now taking place within the Cabinet and the International Monetary Fund about the proposed loan, hope that the Government's hand has been strengthened by the forecasts of the National Institute of Economic and Social Research. The Institute argued that there was very little case for further cuts in expenditure and for any taxation increases at present.

I, too, take the view that many people have lost hope. Most people are convinced that there has been enough deflation and that every few months for the past few years successive Chancellors have had to come to the House and argue that the economy is anaemic and that the only cure for the illness is to take more blood from the economy. The weaker the patient becomes, the more we go on applying the same cure. This has been what has happened for many years. I wonder whether it is not beginning to kill the patient rather than rekindle our economy and serve the interests that everybody here is anxious to revitalise.

We are frequently told that we need more wealth. I have never understood the sense of a policy which calls for more wealth and for a concentration of investment in certain industries when it means having more people out of work than we have had out of work in key industries for a long time. That seems a very strange answer to improving the health of the economy.

I am one of those who have frequently called for further investment, and I do not detract from that. However, I am told by people in large and small firms in my constituency that increased investment will not necessarily mean that more of the unemployed will get back to work. These people look at the matter, not so much from the point of view of Eton and Slough, which has a very low unemployment rate, but from the point of view of the effect that unemployment in other areas has on Eton and Slough, in that more and more people tend to move into Slough because they know that there is likely to be more work there. But the investment which is taking place and is likely to take place is more likely to be in capital-intensive than in labour-intensive industries.

I suggest that we need not only more investment for higher productivity—that is, more produced by fewer people—but more production so that more of our unemployed can be put back at work. Therefore, we must look closely at how we get more investment. Although the social contract and the cuts which have followed were designed to move money from the public sector into manufacturing industry, it has not taken place and there are no signs that it will take place. Therefore, when the Government consider any future package they must be able to show, if there is any hope at all, that investment of the kind needed to reduce unemployment is likely to take place.

The Government have received unparalleled support over wages from the trade union movement. There has not been a major break in the voluntary wage restraint policy since it was introduced in 1975. Recently, the Prime Minister said that this restraint must continue for the coming winter at least. If so, workers have the right to some incentive for a continuation of this policy which, as we are all aware, will lead to a reduction in living standards. Many people are prepared to accept a reduction in the standard of living if there is any hope that, at the end of the day, the applied policy will result in the fruits which it is designed to bring.

I should have thought that if the Chancellor of the Exchequer feels that he needs to heed those who call for bigger cuts in public expenditure—I hope that he does not—the biggest cut should be in unemployment benefit. Surely such a cut is both economically and socially desirable. If half a million of the people who are now unemployed were in work and paying income tax and making the other contributions which workers normally make rather than receiving unemployment benefit, which is not their fault, the public sector borrowing requirement would be considerably reduced. If the Chancellor were concerned to reduce public expenditure, I suggest that he should consider how to reduce unemployment, because the funding of unemployment benefit is one of the largest areas of public expenditure today.

We hear about schemes which are coming forward to prevent young people from being unemployed and hanging about on the streets. At the same time we hear about the necessity to revitalise industry and the economy. If we could reduce unemployment and thereby reduce public expenditure by way of unemployment benefit, we should at the same time increase the wealth of the nation rather than continue along this demoralising path which brings no hope to anybody.

We are constantly told by economists that this nation's great need—I accept this—is to be more competitive. But if over 1 million workers are unemployed, often in the industries in which we need to be more competitive, we are not making the goods which we need to make to compete in export markets to make us competitive again.

If we need to export more—that is another cry that we constantly hear, and it is correct—we need to produce more. If we are to produce more goods for export, we need more people back at work to produce those goods and to get us back into the export drive.

I do not think that the policies that the Government have been partly forced into and are now pursuing religiously down one single track will produce the employment, the investment in industry and the rekindled and buoyant economy that we need. That is supposed to be the objective of the policies which are now under way.

The arguments about reducing inflation to single figures—now ruled out—are being seen by many people as the carrot which had no hope of being reached. The Government may have felt that inflation would be reduced to single figures, but it has not happened. That is now seen by many people as part of the persuasion used by the Government to secure the unions' agreement to voluntary wage restraint. However, it has not happened. Those who have argued over the years that increases in wages were the cause of inflation and that, if we could do something about wages, inflation would fall now have to explain why, in the second year of wage restraint, which has been honourably accepted by the trade union movement, we have had increases in prices far greater than increases in wages which have not been accompanied by the fall in inflation to which the policy was supposed to lead.

In a sense, we are back where we started. My hon. Friend the Member for Berwick and East Lothian, who always makes lively contributions to economic debates, and others are now saying that we need more of the cuts that we had in the past. Some small business men in my constituency have argued along similar lines about incentives for greater investment and productivity. But more are arguing that, even with investment, they need to produce and to export more if the economy is to become buoyant again.

It seems to me that the Chancellor of the Exchequer, when looking at whatever demands are being made of him by the IMF, must consider that if we are to get ourselves working and competitive again—certainly our economy has declined and we are now facing competition which we never faced before because we reigned supreme in certain areas—the key to success lies in getting people back to work and producing more. We should not continue with policies which will further increase unemployment, reduce production and make us poorer than we were and bring us back in a vicious circle to the situation where we are not competitive and are no longer able to produce the goods that we need.

7.39 p.m.

Mr. Timothy Raison (Aylesbury)

I followed with interest the speech by the hon. Member for Eton and Slough (Miss Lestor). However, I think that the prescription suggested by the hon. Member for Berwick and East Lothian (Mr. Mackintosh) seems more likely to work. The hon. Gentleman forcefully put his argument, not for a final solution, but for a tough and effective package. I had a lot of sympathy with what he said on that matter.

I also had a lot of sympathy with what was said by my hon. Friend the Member for Manchester, Withington (Mr. Silvester) in a speech which contained a high degree of good sense, not least when he told the House—I believe this to be profoundly true—that we need some confidence or feeling of hope as well as the misery which has become our familiar diet.

What I want to talk about can be pegged to a phrase in the Gracious Speech: My Government attach great importance to strengthening the democratic processes of our society. That apparently refers to devolution and industrial democracy. Frankly, I am sceptical about the democratic validity of either of those aims, but perhaps particularly industrial democracy.

I want to talk about an even more basic or more truly democratic activity—the functioning of Parliament and, in particular, its ability to grapple with our industrial and economic problems. That is relevant to today's debate and it has been discussed by hon. Members on both sides. All of us have a certain uneasiness about the rôle and place of Parliament today. The hon. Member for Huddersfield, East (Mr. Mallalieu), who is a constituent of mine, talked about one worrying aspect—our behaviour as illiterate and ill-mannered schoolchildren. That criticism has some force, but there are deeper worries than that. in a sense, they are nothing new. They have been around for a while.

I have been reading a book called "Representative Government and a Parliament of Industry", published by the Fabian Society in 1923 and written by Herman. Finer, who said: All the panaceas offered just before the war"— —that is, the 1914 war reform of the House of Commons' procedure. devolution, reform of the Second Chamber, Proportional Representation, the resuscitation of the Royal Veto, the Referendum, Round Table Conferences—spoke the same language: before vital problems the old machine of party government, upon which Parliamentary and Cabinet government rest, inaugurated by the introduction of practically universal suffrage, was breaking down. That is interesting, because we have talked for so long about what seems to be our contemporary problems.

We must face the fact that there is a widespread feeling that, while Parliament may he capable of doing a job which is not bad over individual and some social issues, it is not the master of our economic and industrial policies.

We must ask whether today's debate will make any difference to the economy or industry of this country. There are a number of familiar signs to illustrate what I am saying. There are signs of power passing from Parliament and that the real arguments have taken place elsewhere. One of those signs is the development of so-called tripartism which has taken place under successive Governments over past decades. There is the notion of a partnership between the Government, the trade unions and the CBI; the notion of the NEDC being used as a type of national forum which will decide how much money we may have in our pockets. Another example is the social contract.

A matter was brought to my attention which struck me deeply when I read a passage in a courteous letter from the Minister of State at the Department of Employment. I had taken up with him the question whether sick pay schemes should be regarded as an exception to the pay policy. His letter ended: I hope I have made clear, the exception of sick pay schemes from the policy simply reflects the decision of the TUC Special Congress in June. Our incomes policies are often to be found in documents like the annex to Acts which set out policies and which are written by the TUC. That is something which becomes binding on all of us and it epitomises the way in which, under the social contract, for instance, power has passed outside Parliament. That situation must depress us all. There is a feeling that Parliament is incapable of representing the power blocs and certainly not of controlling them.

I do not want to embark on an academic discussion of corporatism and the corporate State, but I see signs of them developing in our society. They are nearly always provoked by the development of incomes policies.

There are, in broad terms, two forms of corporatism. There is the form in which the State tries to use bodies like the TUC and the CBI as their agents. There is also the bargaining version in which the corporations negotiate with the State. The latter version is closer to what we have at present in systems such as the social contract. Either of those forms is destructive of the workings of Parliament.

Mr. John Lee (Birmingham, Handsworth)

Does the hon. Member agree that another form is our affiliation to the Common Market? The agricultural policy is being decided by bargaining and sufferance by fellow members.

Mr. Raison

I do not agree. Bargaining between equal States is different from the system that exists in a corporate State.

We must ask ourselves whether Parliament could do more to control the economy of the country and whether Parliament can cope with the powerful forces that exist. No one sees Parliament as a body which should intervene with the daily management of industry or trade unions. That is not its job. Equally, it cannot run the powerful outside bodies such as the EEC or the IMF. What it can and must do is to make the political and legislative judgments and decisions about our internal economic policies which are all too often being decided outside.

I want power to be brought back to Parliament and away from outside corporate bargaining. What does that mean in practice? It does not mean that Gov- ernment must cease to govern. We need less government but stronger government. Parliament cannot act as executive, but it could be used more effectively to mediate, debate and ultimately decide.

To achieve that we do not necessarily need institutional changes in the working of Parliament, though there are some changes that are worth discussion, such as the merging of Standing and Select Committees. That is one reform that might amount to something. But the answer does not lie in institutional change. It lies in a change of attitude. We must make our debates a reality. We must listen to what is said and respond where appropriate rather than bulldoze stuff through the House of Commons regardless. Perhaps we were occasionally guilty when in power—over the Industrial Relations Act, for instance—of bulldozing too much. The present Government bulldozed on many occasions, particularly in the last Session, and that was gravely damaging to Parliament.

Can we expect a change of heart from the Government? Some argue that the present knife-edge balance between the two sides may force the Government to a change of heart, force them to be more sensitive to the House and to listen to what is said here. But I feel that they will not, for several reasons.

First, the Government have to pay too much attention to the rôle of the Left of the Labour Party. The Left places hard Socialism, and even in some cases the notion of the dictatorship of the proletariat, above the ideas of liberty. Second, the Prime Minister is too much a party man to think in the terms I am speaking of. Third, the Leader of the House is no longer capable of giving the necessary lead. In the past we thought him to be a great parliamentarian, but now he is an admittedly eloquent parliamentary agent for an outside body.

All that I can say is that Government and Parliament will make a great mistake if we do not respond to the challenge to use Parliament as a debating and a mediating instrument, something which is capable of providing agreement as well as disagreement. In our society today—I think that we all meet this outside—there is a desperate desire for stable conditions. People in industry, in education, in the health services, and so on, all want stable conditions. They are not getting them. There is, frankly, a growing disillusionment with adversary politics.

I do not want for one moment to end our party system. I am not a great enthusiast for proportional representation or for coalitions, and I believe that Oppositions must oppose. There is no doubt about that. However, I also believe that this place must assert itself and even take command of the great economic and industrial problems that beset us.

As my hon. Friend the Member for Oswestry (Mr. Biffen) said in his very powerful and charming speech, we must find and express some kind of common will if we are to grapple with these dreadful problems of unemployment, low productivity, excessive borrowing and inflation. If we do not do that, power will slide more and more away from individuals to the big battalions outside. The Government must give the lead in this. They must give it by listening to and working through this place. Otherwise, they will simply be seen, in Shelley's words, as Rulers who neither see, nor feel, nor know, But leech-like to their fainting country cling.

7.52 p.m.

Mr. Ioan Evans (Aberdare)

The hon. Member for Aylesbury (Mr. Raison) has made an able contribution to the debate. I did not agree with all that he said but I agreed with parts of it. He conceded that the Tory Party had bulldozed through the House the Industrial Relations Act. I think that he would agree, on reflection, that the Tory Party bulldozed through the House the legislation on local government reorganisation and the health services and a number of other things. Certainly the Tory Party bulldozed through our entry into the Common Market, upon which hon. Members are now reflecting.

With the changes that have taken place in the Tory Party, it is perhaps a reflection that the hon. Gentleman is not now on the Front Bench. He has been put back on to the Back Benches because the present Leader of the Opposition has lurched to the Right. There is a swing to the Right wing throughout the Tory Party. To see the Opposition amendment on the Order Paper, one would think that it was drawn up before the Queen's Speech had been read, because it talks about there being no measures taken to deal with the question of sustaining employment.

On page 4 of the Queen's Speech we see the part that relates to the economic situation and employment. Six of the first seven paragraphs relate to this very question. At the beginning, it says, My Government are pledged and determined to continue the attack on inflation, working to this end in close conjunction with the Trades Union Congress and the Confederation of British Industry. I believe that the Government have gone a long way to bring about far greater cooperation between the trade union movement and British industry than we have had for a very long time.

Reference has been made to the social contract. That is one of the great achievements of the present Government. In this period of very great difficulty they have succeeded in getting the co-operation of the trade union movement in moderating demands for increases in personal incomes. If we are to get the recovery that we require, this will play an important part.

The Queen's Speech goes on to say, My Ministers are convinced that the key to a better economic future for the British people lies in improved levels of industrial output and productivity, a higher level of industrial investment". The Government have taken measures to bring about a higher level of industrial investment. The measures already taken by the Government in setting up the National Enterprise Board and the Welsh, Scottish and Northern Ireland Development Agencies will play a great part in getting the investment in industry that is a prerequisite of industrial recovery.

Already the NEB has moved in and taken over British Leyland. Surely that was an important measure to maintain employment in the car industry. It would be interesting to hear the present attitude of the Tory Party towards maintaining that sector of the car industry under public enterprise. What would have happened to the 200,000 workers in the car industry and to the many component industries that stretch the length and breadth of this island if we had taken the doctrinaire attitude that the Tory Party was taking and said that we should not get involved in that industry?

Arguments are now taking place about public expenditure. There are differing forms of public expenditure. Under successive Governments the private sector has failed to invest in manufacturing industry. When the right hon. Member for Sidcup (Mr. Heath) was Prime Minister, he stated that the Conservative Government had done this, that and the other but that there had been no response from private enterprise. Private enterprise failed abjectly to invest in manufacturing industry. Of course, we had the property boom and property speculation taking place. Millions of pounds were made out of that under the Tory Party. However, that did not add one penny to the real wealth of this nation. It added to an inflationary situation and we had the then Chancellor of the Exchequer producing money as his contribution to the situation. We did not have the necessary investment in the manufacturing sector under the Tory Party.

We must have public investment in the manufacturing sector. Just as we have it in British Leyland, so, too, the NEB must be given increased resources. The Welsh, Scottish and Northern Ireland Development Agencies must be given greater resources to invest in industry.

The Queen's Speech goes on to say, My Government will reintroduce the Bill to bring into public ownership the aircraft and guided weapons, shipbuilding, ship-repairing and marine engine building industries. Is that not a measure that will affect employment greatly? I warn Tory Members that if they are successful in preventing the Bill from reaching the statute book, we shall see within those two sectors a great development of unemployment in the years ahead.

These industries will be brought into public ownership and rationalised. In a year or two's time Tory Members will try to say that all the faults of those industries are due to the fact that they have been brought into public ownership. However, bringing them into public ownership is the only thing that will save them. If the shipbuilding industry remains under private enterprise it will be in a shocking situation in the years ahead.

The Queen's Speech talks about Further opportunities for the exploration and development of the nation's valuable petroleum resources. Here is an area in which money will be invested in these enterprises and they will be developed for the benefit of the community. We have heard the Tory Party saying that we should not bring these into the public sector but should leave them for private enterprise to develop. The constant argument that we hear from the Tory Party is that if something is not paying its way one can bring it into public ownership, but if vast profits are to be made the sector must be left to private exploitation.

However, where is the ownership of the developments in the North Sea to lie? Are we to allow foreign countries to have their investment, so that its benefit will not come to the British public but will go out to overseas investors? I am glad that the Government have taken action to ensure that at least 51 per cent. of the shareholding in these developments in the North Sea will come back to the British public.

We are talking about the problems that beset us as a nation. I do not think that that will be the answer to all our problems, but I believe that as benefits flow from the development of the oil in the North Sea that will have a great effect on our economy and industry.

Several warnings and various forms of advice have been given to the Cabinet about what should be done to solve our problems. I hope that we shall not fall into the trap of thinking that cutting public expenditure will solve our difficulties. President-elect Carter fought the recent American elections on a programme of greater investment in the public sector. He said that he would strive to bring down the record high levels of unemployment in the United States. I hope that before he makes his inaugural address he will cast his mind back to a similar situation in the American economy at the time when President Roosevelt made his first inaugural address. The economy of the United States at that time was falling to pieces. At the time that President Roosevelt was elected, stockbrokers were throwing themselves off the tallest buildings in New York. The whole economic system was crashing around their ears. President Roosevelt said that there must be more public investment and that the problem of unemployment must be tackled.

I recognise that the Government have done a great deal to tackle the unemployment situation. There is a Job Creation Programme, the temporary employment subsidy, the school leavers' subsidy, the newly-created Work Experience Programme, the Job Swap Scheme, the early retirement scheme, and so on, but much more requires to be done, because if the Government are to be judged on anything it will be on whether, realising that there is a world economic recession, we can return to a situation in which we have full employment and give high priority to creating more jobs. I hope that that will be paramount in the mind of the Cabinet.

To suggest glibly that cutting public expenditure is an answer to our problems is nonsense. By cutting expenditure in certain areas we may solve one problem, but we shall create a problem for those who are benefiting from that public expenditure. I do not think that we shall get economic recovery in this country by creating unemployment and by reducing the benefits paid to the disabled and pensioners.

Conservative Members harp on the need to cut public expenditure, yet they want to increase defence spending. If there is one area of expenditure that should be examined, it is defence. Even if we do not make a permanent cut in our defence spending, because of our present financial difficulties we should think of making a reduction in that area. Germany has a tremendous balance of payments surplus, and I think that we should make some arrangements to alter the method of payment for the Rhine Army.

Maintaining public expenditure is part of the social contract which can be regarded as one of the greatest achievements of this Government. I remind the House of the document submitted by the TUC to Congress, in which it said: In the 1976 TUC Economic Review the TUC set out import penetration ratios for the major sectors in the Government's industrial strategy, and called for ceilings to be placed on import penetration in these sectors. In certain sectors, which are particularly sensitive to imports, the TUC is calling for selective import controls…". A joint deputation from the CBI and the TUC has been to see the Government. There has been a demand that certain action should be taken on imports. Many hon. Members have received representations from companies in their constituencies. The managing director of a large electronics firm in my constituency has been to see me and given me chapter and verse to prove penetration by Japanese firms into the electronics industry. It is not a question of facing certain difficulties because of fair competition. The problem is that our industries will be squeezed out of manufacturing unless some action is taken at an early date. If the Cabinet is having discussions on a package of actions for the future, I hope that consideration will be given to imposing selective import controls.

As well as the amendment by the Tory Party, there is an amendment tabled by the nationalists. I presume that it will not be called today, but I want to refer briefly to it. The nationalists' argument is that we can solve our problems by separation.

Mr. Crawford

That is right.

Mr. Evans

Not long ago it was said that all our problems would be solved if we joined the Common Market. That was to be the answer to our prayers. The arguments are still ringing in our ears. It was said that by going into the Common Market there would be tremendous opportunities for trade with Europe, that our goods would flow into European markets, and that capital would flow into this country. We were told that wages would rise tremendously and that our living standards would be improved greatly.

In my opinion, the Common Market was a form of escapism. What we as a nation have to do is to get down to the fundamental issues of the relationship between industry and the people of this country and how we can make industry more accountable. It is all very well for the Leader of the Opposition to talk about a contradiction between Socialism and freedom. To our minds, Socialism is an extension of freedom into the industrial field, because it means that that accountability is acknowledged politically in the ballot box. If we can bring industry into social ownership the result will be greater accountability to the public.

The Government have done a lot to create employment, but of course more needs to be done, and it is regrettable that in this Session—and I agree with the hon. Member for Aylesbury that there must not be any bulldozing through of legislation—so much time is to be devoted to the issue of devolution.

Mr. Crawford

Both the Labour and Conservative Parties committed themselves in their manifestos to implementing a Bill to give power to the Welsh and Scottish Assemblies

Mr. Evans

I am coming to that. One development that I find regrettable is this growth of support for the SNP in Scotland, the nationalists in Wales and the National Front in England. I believe that some of the views that they are putting forward are detrimental to the people of this country. The Labour Party believes in the economic and political unity of the people of these islands. Joining the Common Market was a form of escapism, but the idea that it is possible to establish a border between the Scots, the English and the Welsh, or between the Welsh and the English, is like going into a cul-de-sac. It will lead us nowhere, and it is not the answer to our problems.

Mr. Crawford

rose—

Mr. Evans

The hon. Gentleman will have a chance to make his own speech if he rises and catches the eye of the Chair. However, I give way to the hon. Gentleman.

Mr. Crawford

I am obliged to the hon. Gentleman. I should like to put it on record that both the SNP and Plaid Cymru are totally opposed to the National Front, which is anathema to us.

Mr. Evans

I am glad that the SNP and the Welsh nationalists disagree completely with the English nationalists, but I think that if one examines their policies one sees certain Fascist tinges in the proposals put forward by the SNP and the Welsh nationalists. When the Labour Party was advocating a change for Wales, we were thinking of a top tier elected council for the Principality.

We wanted to reorganise local government in Wales and create a top tier with a single tier underneath. The Tory Party has already reformed local government and we must have regard to that. We would be in a difficult situation if the Government said on the one hand "We do not want to get people into administration, we want to get them into manufacturing "while at the same time they maintained the existing local government structure and put on top of it another administrative unit for the whole of Wales.

People will be terribly confused when they find that they have to elect the community council—which the Tory Party has created—the district council, the county council, a council for the whole of Wales, and the House of Commons. In addition, this year we shall be considering a Bill directly electing people to the EEC.

In Europe we can see a great growth in bureaucracy. Socialism wants to avoid bureaucracy. [HON. MEMBERS: "Oh".] Oh yes, we want to remove bureaucracy. We want to create greater efficiency. When we look at the devolution proposals we must assert ourselves and examine the Bill in detail, clause by clause, to ensure that we shall not have a measure which is bulldozed through the House and which will not lead to the greater economic and political unity of this country. We must avoid creating a platform in Cardiff and Edinburgh which will be divisive to the unity of our people.

Despite the difficulties that confront us I believe that we shall win through in the economic battle. I believe that the tides of history will go with the Socialist movement throughout the world. Hon. Members opposite may not accept that. But when one considers the progressive powers now emerging on the five continents one must accept that we are moving forward to a world which will be either Socialism without democracy or Socialism with democracy. I hope that we shall get Socialism with democracy.

I believe that the Government must be more determined in solving the economic problems they face. We must get back to a policy of full employment. We must not listen to the so-called financial experts who think that we can solve our problems by cutting public expenditure. I believe that as time goes on not only the people of this country but people throughout the world will recognise that a democratic Socialist world is what we should be aiming at. We should not be creating new boundaries to separate one group of people in this island from another.

8.13 p.m.

Mr. Hector Monro (Dumfries)

I shall not follow the hon. Member for Aberdare (Mr. Evans), who spent a long time saying very little. The hon. Gentleman's argument can easily be refuted. Many of my hon. Friends who have sat here all afternoon would like to take part in the debate. Many of us are extremely disappointed that there is very little in the Queen's Speech which gives any indication that help will be forthcoming to deal with the chronic malaise of unemployment and inflation.

The problem is serious in my own constituency as it is in many other constituencies. I illustrate the problem by using figures which affect my own constituency at present. They are extremely serious. There are over 500 more unemployed people than a year ago and 1,000 more unemployed than there were in October 1974 when Labour Ministers bribed the electorate with hopes of full employment and an 8½ per cent. rate of inflation.

The massive increase in figures can be repeated for the whole of Scotland and, of course, for the United Kingdom generally. It is no use the Government complaining of a legacy—which there was not—because the Government had been in office for six months. They had seen the books and knew the score and still they went to the country and told stories of great hopes about the future which have not been fulfilled.

It is particularly sad in the northern area of my constituency where in the mid-1960s we had an unemployment rate of 25 per cent. due to pit closures. With the help of incentives to the special development districts, as they then were, and with help from the Department of Trade, the local authorities and the building of advance factories, substantial progress was made. In order to help areas which now have exceptionally high unemployment, would it not be worth reconsidering a special incentive to the special development districts—the small pockets in areas of very high unemploy- ment—rather than the blanket incentive that we have today?

In the northern area of my constituency we worked hard and got the unemployment rate down from 25 per cent. in the mid-1960s to 11 per cent. by the early 1970s. But we are now back at 21 per cent. unemployment and still rising. An advance factory is empty and there are question marks over the coal mine and another factory in the area.

This generally disastrous position is not confined to one industry. It is a general overall increase in unemployment due to lack of confidence and the lack of buoyancy in the economy. The situation is not helped by the 2 per cent. payroll tax, extra national insurance contributions, and so on. If every shopkeeper and every employer took on even one more worker there would be a significant improvement. But they have not been helped by the Government's Employment Protection Act.

I have mentioned small businesses and, in that context, I include the self-employed. Shops are standing empty all over the place and the centres of some towns are indeed depressing sights. The Government should make a real contribution towards helping the self-employed. They deserve support. But instead of help they are now getting high taxation, high rates, high interest rates, high national insurance contributions and monumental bureaucracy. [Interruption.] The hon. Member for Perth and East Perthshire (Mr. Crawford) is perhaps one of the rudest Members in this House. He continually interrupts people during the debate and occasionally drifts in and out and makes more sedentary observations. It is high time that the hon. Gentleman behaved properly in this place.

Mr. Welsh

Will the hon. Gentleman give way?

Mr. Monro

No, I shall not.

It is quite right that this large and important group—the self-employed—should be consulted just as much as the TUC and the CBI.

In its effort to provide jobs, the South-West Scotland Development Authority is most active in its work. But can any hon. Member recall a more difficult moment to expect investment in a new factory or even in new machinery? Certainly the Job Creation Programme has had a small but welcome effect. Indeed, I must be honest and say that not everything is black.

We have a welcome development near the town of Annan and the construction of a new plant at Chapelcross Nuclear Power Station. This is a debate on unemployment and not on the environment. But I must say this because it is important in terms of employment to my area. I support the Magnox nuclear generating station, providing about 600 jobs. It operates efficiently and safely and is covered by Acts of Parliament and by the work of the Safety Inspectorate. It is most important to the economy of the area and there is no criticism in the Royal Commission Report. I deprecate the activities of those who wish to close it down.

I also support the announcement of the tritium plant earlier this year. It is not a new process. Tritium has been manufactured for years. Again, this is covered by stringent safety precautions, whether nuclear or terrorist activities. Those who oppose it should make it clear whether they do so on safety grounds or because they are against the nuclear deterrent which is the linchpin of our national defence.

There has been a further announcement by the Minister concerning the long-term disposal of nuclear waste. One area mentioned was the southern uplands of Scotland. Any decision may be a long way off, but I should like an assurance that there will be a full-scale discussion paper long before any decisions are taken. If South-West Scotland remains on the possible list, it will want a decisive say on the programme. Until that happens, it will be better to forgo emotive reactions which may be based on inaccurate information.

On jobs, I want to express the gravest concern at the position of the local authorities. There will be an increase of 30 per cent. or more in the rates this year. That is a most unreasonable impost. The Government are shifting spending cuts which they should make on to the local authorities and the ratepayer will carry the can. I hope that ratepayers will realise that the real cause is Government expenditure.

It is unfortunate that local government reorganisation has exactly coincided with mounting inflation under the Labour Government, running up to 30 per cent. The old authorities would have been hit just as hard. Some authorities in Scotland do not deserve the attacks which they have suffered recently from the Government. It is of more than passing interest that the authorities which have done best in cutting expenditure are nonpolitical—for example, Dumfries and Galloway—or Conservative authorities in the North-East.

Naturally, the cuts in local authority expenditure have caused grave concern to NALGO members. Of course, economies can be made in any large organisation, but I know from my constituency mail, my surgeries and walk-abouts in the area that services like social work and housing are already stretched to the limit. The same applies to capital projects like schools and roads. The Prime Minister talks of raising standards in education: he wants to tell that to the education authorities on the ground.

In Scotland particularly the Government have gerrymandered the rate support grant formula, so that it very much favours the urban areas against rural areas such as Dumfries and Galloway. Of course, the Government should make cuts, and any number of my hon. Friends have explained where they should take place. But the Government should not make cuts by forcing on local authorities policies which they know to be virtually impossible.

The Minister of State, Scottish Office (Mr. Gregor MacKenzie)

The hon. Gentleman said that a number of his hon. Friends would be prepared from time to time to say where these cuts in public expenditure can be made. I am sure that we should all he more than anxious to hear his own thoughts on where local authorities can make cuts.

Mr. Monro

What I said was that a switch in priorities is needed, cutting out some Government expenditure. We had a host of nationalisation Bills in the last Session and are likely to have more in this one. That money could he saved and used to help local authorities which are facing grave difficulties. Surely the Minister is well enough versed in Government policy to know what I am talking about.

I cannot over-emphasise the importance to any area of getting our structure plans right. In rural areas, that means communications. If the Minister cannot reply tonight, perhaps he could write to me scotching the rumour that the CarlisleDumfries-Glasgow railway line is in jeopardy.

There is an interesting point following what the hon. Member for Belfast, South (Mr. Bradford) said about communications on the A75 from Carlisle to Stranraer, the main artery of industrial transport between Northern Ireland and England. This road now carries an immense number of container vehicles and has become a monumental traffic jam most of the year round. A ring road must be built in the near future around Dumfries. I hope that the Minister will give that urgent consideration; it is the most important communication problem in the area.

The House knows that I strongly support devolution and the establishment of an Assembly—matters on which we shall spend a great deal of this Session. This is a constitutional issue of the greatest importance to the United Kingdom, which must at all costs remain united. But we should make it clear that whatever we do this year, next year or the year after by way of constitutional change will have no dramatic impact on unemployment in Scotland or on inflation. It is important to bring that home to people, or expectations may not be fulfilled in the next two or three years.

Time is short and many of my hon. Friends urgently want to speak. I should have liked to talk about problems of agriculture in relation to costs, of forestry in relation to capital taxation and of fishing, especially inshore fishing, which certainly affects my constituency. All in all, the picture is gloomy. The Government must allow the individual and industry to retain more of their own money—in fact, allow industry to make more profits. Taxation is far too high. Government spending is far too high and must be lowered. Industry must have confidence to reinvest, to expand and to take up the vast number of unemployed in Scotland.

My hon. Friend the Member for Oswestry (Mr. Biffen) said that we wanted to see some real enthusiasm in industry. It is up to the Government to try to provide that. We now want to know what action that the Government propose to take.

8.27 p.m.

Mr. Eddie Loyden (Liverpool, Garston)

I want not to follow the hon. Member for Dumfries (Mr. Monro) but to take up some other points which have been raised. There seems to have been a complete disregard of the wider implications for this country. This whole debate seems to have been conducted against the narrow background of the British economy. One Conservative Member argued that this terrible situation was the result of a Labour Government being in power. But we all know that there has been a world-wide recession over which Governments of all political complexion have presided—in the United States, Latin America and most European countries.

This is not just a question of the Government in power. Different circumstances in the world lead to different Governments. I do not think that anyone would argue that the United States has a Left-wing Marxist Government or that the problems in that country flow from the application of Socialist ideas or the public ownership of industry. Yet the United States has had 8½ to 9 million unemployed, a massive recession, urban decay and all the problems which flow from the difficulties faced by the whole Western world.

To argue that this is merely a British sickness is misleading, for it must be seen against a background of world crisis. In the past, certainly in the 1950s and 1960s when British industry was being reconstructed, Great Britain faced a dilemma and from that period to the present day we have been in the throes of a crisis. The only difference between the present crisis and that which existed in earlier years in the 1920s and 1930s relates to the frequency and depth of our situation. Therefore, I conclude that our problems flow not from the failure or otherwise of Government policies but from the system under which we live.

The Labour Government came to power against a background of a manifesto which gave to the Labour movement the strong feeling that we were moving towards a process of irreversible change. The manifesto envisaged the use of economic power to the advantage of those who produce our wealth rather than of those who accumulate it. Against that background, it was the Government's job in the first instance to create the basis to carry those policies forward.

The dilemma faced by the United Kingdom, and indeed by the whole of the Western world, is that the industrial scene has changed dramatically in the past 15 or 20 years. It is now possible to produce goods without employing large labour forces. We have moved away from labour-intensive to capital-intensive industries. It has produced a situation in which fewer and fewer people are needed to produce our domestic needs or to export those goods which in turn will pay for the raw materials without which we cannot survive.

The dilemma of our system is that we have lived in an unplanned economy. Those who suggest that the nationalised industries in their present form are run on socialistic lines do not know what they are talking about. The nationalised industries were brought into being to sustain a mixed economy and to provide the services for capitalism which it would not otherwise have obtained. The nationalisation of the mines, transport and railways was a necessity if post-war capitalism were to continue. Our industrial position has developed to a point at which we are incapable of expansion to any great degree because the laws of capitalism have not changed. What happens is that once the nation begins to expand and to create growth, the economy becomes overheated and we face, as we are now facing, the problem of inflation.

We know that in the regions the rate of unemployment is now running at 11.6 per cent., which is the figure on Merseyside. We know that certain regulators are being used by the Government to deal with areas of high unemployment. However, there is nothing any Government can do in the system under which we live to cajole, coax or even direct industry into those areas. Areas of high unemployment will remain, and we see more evidence of that as the years go by. None of the regulators used in regional terms has reduced the unemployment figure. Therefore, the private enterprise system is inadequate to cope with questions of industrial obsolescence and decay, and it has failed to bring any semblance of order to an area or to create a balanced society. The private enterprise system sends its industries where it will, and leaves behind it the depredations and obsolescence that are so rampant in all our major conurbations.

It is at least significant that these matters are being taken seriously. It is not solely a matter of industrial obsolescence because the spin-off from the situation has meant that large parts of our populations are moving out of the cities. In Liverpool, Glasgow and elsewhere we see a form of advanced decay which presents serious problems. We cannot separate the industrial decay from the decay that is now so advanced in our city centres. It is pleasing to know that the Government are paying some attention—and indeed the present Government are probably the first Government to do so—to the problems of depopulation and decay in our city centres. In that respect the distribution of industry becomes extremely important.

I want to know whether we shall see the development of at least one basic and fundamental regulator that can be usefully applied to industry—namely, the National Enterprise Board. We were promised that there would be greater intervention by the Board in areas of high unemployment where there had been a constant decline of native industries. So far we have seen no clear indication of positive policies being followed in that direction.

It is apparent that without State intervention of that sort the problems of the major cities will worsen year by year, reaching serious proportions in the not-too-distant future. There is no indication that private enterprise is responding. The areas that supplied the nation's wealth should once again be inhabited by industry and developed in the way that everyone wants to see.

In future, for the reasons I have stated, I see the Government's rôle not as being less interventionist but as carrying out greater intervention. It is said that the direction of public expenditure is one of the reasons for us being in our present situation. We must face the facts, and if as a result of technological and scientific change in industry there is no longer the requirement for armies of workers, we must consider new areas in which people can be usefully employed, sectors that have been starved of resources over the generations.

If technological and scientific advances mean that we no longer require armies of labour to produce the things that we want, the labour force should be trained for other purposes. Let people have the entitlement to play their part in society. That can he done in a planned economy. It can be done not by damping down the public sector but by building it up and having more places in schools, fewer pupils per teacher, better hospitals, a better National Health Service, better roads and a better environment. The public sector is an area of our society that has suffered over generations.

Only by moving towards a greater control of the economy can we begin to establish those objectives. The Government were elected on the basis that they would at least begin the transformation of our society in moving towards those goals. I remind the Government that it is no use talking about the organisation of industry because they cannot control what they do not own. Therefore, it is in our interests to ensure greater State intervention and greater planning. In that way we can produce the answers and solve our industrial and economic problems.

8.38 p.m.

Mr. Tim Renton (Mid-Sussex)

The essential difference between the hon Member for Liverpool, Garston (Mr. Loyden) and myself on industrial development and planning lies in his belief that Ministers, by divine right, can decide where factories should be established and make the right decisions. I believe the opposite. I think that Ministers usually get it wrong. The evidence of history is very much on my side.

The sorrow of the Gracious Speech lies in the irrelevance of the legislation that it promises, bearing in mind the real needs of British industry. Our industry requires freedom from political dogma for a long and continuous period. It requires free- dom from Ministers who might decide to nationalise and other Ministers who decide subsequently to denationalise, or to take different decisions.

The hon. Member for Eton and Slough (Miss Lestor) referred to the anaemic condition of British industry. Much of the anaemia is due to us politicians. It is we who, like leechs, have fastened on the body corporate of industry and—applied at times for regenerative purposes —have sucked the blood out of industry, sucked British industry of its ideas, time and profit and left it exhausted.

The needs and problems of British industry are simple. There is desperately low productivity and gross overmanning by any international standards. Because of this, when new capital is invested it still yields low productivity. Let me give one international comparison.

Productivity at British Steel's new Anchor development at Scunthorpe is 350 tons per man year. Productivity at the Kimitsu works of Nippon Steel, comparable in many ways to Anchor, is over 600 tons per man year. If the potential benefits of new investment are to be frittered away in wage negotiations or removed by Government insistence on a higher social wage, it does not matter whether the new investment is undertaken by private or public industry. The result will be the same—productivity will remain low.

I want to talk about how we deal with the interface between Government and industry. There are two routes available other than the purely Socialist route put forward by the hon. Member for Garston, which I reject. One is the American route, where the Federal Administration, the executive arm of the Government, is in a state of perpetual war with big business. Using, above all, anti-trust legislation, the Administration tries to curb the power of big business. Business is strong enough to fight back and is involved in continual law suits with the Government. That is not the way we should go.

Alternatively, there is the Japanese and French model, which involves constant discussion between civil servants, bankers and industrialists, all of whom know and respect each other's views and judgment. Out of this continuing dialogue a consensus is arrived at as to where growth, major capital investment, is to take place. Although this consensus is not mandatory, it is in some extraordinary way followed very closely.

My hon. Friend the Member for Arundel (Mr. Marshall) and I have just returned from Japan as members of the Select Committee on the Nationalised Industries. I know that you. Mr. Deputy Speaker, would not expect me to anticipate the report of the Select Committee which will be published next year. During our visit we talked to unions, trade associations, banks and steel companies about the development of the steel industry, which is as important to Japan as our steel industry is to this country. The one thing that struck me in those talks was that I never heard the name of a single Minister mentioned. No one ever said to me "The Minister decided this "or "The Minister cancelled that project."

There was certainly a great deal of talk about civil servants in the Ministry of International Trade and Industry, the Economic Planning Agency and the Ministry of Finance. All of the civil servants and business men who are in constant dialogue seemed to come from a common background. the law department of the Tokyo University. This has a parallel with the French, for example, where all the leading business men and civil servants come from one or other of the Ecoles Superieures. Having come out of this same educational background, they stay in touch. They have a high degree of respect for each other's judgments.

I found the same respect very much in evidence in Japan between the single, company-wide unions and their management. There is an unwritten understanding between the large companies there and their unions that, in return for the unions' help in bringing in the most modern, automated labour-saving equipment available, the work force will be guaranteed lifelong employment. However automated the equipment, the men know that there will be no redundancies, and flowing from this inherent understanding comes capital investment on a massive scale, and very high productivity. This is thanks to the consensus of all those involved.

I come back to a theme mentioned by my hon. Friend the Member for Aylesbury (Mr. Raison). The vital forces in Japanese society all pull together in the same direction with a common goal—to make a success of what they are doing—and all are involved in achieving it. In the last four months, Japanese shipyards have received 85 per cent. of all new shipbuilding orders placed throughout the world. It is worth pausing to think why. It is not because their wage rates are low. By international comparison, except with the United States, they are now high. It is because they have found the right formula in their highly industralised society for continuing growth and success.

How do we achieve something of the same success here? We should review the nationalisation Acts in order further to restict the powers of Ministers and of hon. Members to interfere in the nationalised industries. We should ensure that Ministers are unable to interfere in those industries' pricing policies or in the day-to-day management, which is nominally left to the industries but which often does not happen in reality. Perhaps we should also insist that the highflying civil servants of the Treasury and of the Departments of Industry and Trade should have a degree in business management or economics and spend five years in industry learning what it is really about.

Above all, we need the long reign of a Government who are friendly to private industry, who talk to it continuously without commanding it. I repeat that phrase "long reign" because the time scale of politicians is so very different from that of industry. The Minister is worrying about his replies to Questions next day or next week. Perhaps that makes him take a wrong decision affecting industry. At the very least, he is often thinking of the next Budget in a few weeks or months. But industry has to plan its investment in five-year or even 10-year terms, which is totally out of order with our time scale in politics.

My hon. Friend the Member for Oswestry (Mr. Biffen) referred to the necessity for a common will throughout the country. He may remember that in elementary mathematics we were taught about the lowest common denominators and the highest common factors. I believe that the essential need for our country is to find the highest common factor between the unions, Whitehall, management and bankers that will achieve growth at home and in exports in our industry. Until we achieve that, we are whistling in the dark about the scale of Japanese imports. They will go on and they will continue to seize world markets at our expense, because the Japanese in their society have found a formula for success that has eluded us and will continue to elude us as long as we have a Socialist Government bent on intervention and nationalisation that industry itself does not want.

8.50 p.m.

Mr. Hugh Jenkins (Putney)

The hon. Member for Salisbury (Mr. Hamilton) was kind enough to tell me that he would mention my name in his speech. I was unable to be in the Chamber at the time, but I readily recognise his great interest in what has taken place at Porton, not only in the very sad accident which took place there and resulted in the serious illness of one of the scientists and grave worry to those connected with him—fellow scientists and family—but also in the generality of what occurs at Porton. If the hon. Gentleman were able to be here now, he would probably agree that in any one of our constituencies things may take place which are of general importance and which must concern every hon. Member because of their significance and the implications which they may have for every man, woman and child in the country.

For some time now, microbiological research and chemical research has been carried on at Porton. In pursuit of that research, animals have been imported. and vivisection has taken place on a large scale. I am not an anti-vivisectionist. In certain circumstances. animal vivisection is justified. But I believe that what has been going on at Porton on a large scale ought to give us pause, not only because of what happened to the scientist concerned in one accident but also because of the very nature of what is done there.

I asked a Question about this and was told that experienments were carried out on 452 living monkeys at Porton in 1975. I asked also whether the warnings in the report of the Medical Research Council about the dangers of practising vivisection on imported primates were known at Porton. I was told that they were—that the report with the title "Laboratory Work on Non-Human Primates for Biomedical Research in the United Kingdom, a Report to the Medical Research Council on Existing Provision and Future Needs" was known at Porton.

The truth is that this report, made earlier this year, reveals that there are grave dangers in the importing of primates, dangers which have hitherto not been fully realised, and that in experimentation with primates there is the danger of the transmission of diseases which are not understood.

Unhappily, it is not true that man in his natural state is very healthy. In his natural state, man is often unhealthy, and this applies also to other primates. Indeed, if reality had been portrayed in the Tarzan stories, Jane would have been horrified at the repulsively diseased creature who presented himself as Tarzan and would have wanted nothing to do with him.

The importation into this country of diseased primates is a matter of great concern, yet 12,000 monkeys and other primates were imported last year, largely for experimentation. One of those experiments went wrong. No one knows how many of the other monkeys and apes were diseased as well.

We must ask ourselves whether this is not a rather strange business. What is the nature of this microbiological and chemical research? Is it not rather strange that research about which some of us have doubts, wondering whether its purposes are justified, seems to involve means which are themselves evil or seem to have evil consequences?

It behoves all of us to ask where we are going in this connection, and I hope, therefore, that the hon. Member for Salisbury will understand that this matter must be regarded as of wide and general concern, about which any hon. Member is entitled to question the Government.

Is it true that we are researching only for defence purposes, only to see what the consequences of the use of microbiological or chemical warfare on ourselves would be? Is it very hard to draw the line between research carried out for defensive purposes in this dread area and research carried out for offensive purposes? Is it difficult to draw that line? I suspect that it is, and the House is entitled to know whether that line is drawn.

We know that the line is not drawn in regard to the use of animals. The Cruelty to Animals Act 1876 is now 100 years old. In the year in which it was introduced 350 animals were used for vivisectional purposes. Last year the number was nearly 5 million. The scale is astounding: 5 million experiments on living animals during the course of last year. But in the whole 100 years there has not been one prosecution for cruelty to an animal. Yet there has been cruelty. The researchers themselves recognise that in certain circumstances they put animals to pain to see what are the consequences. Are we saying that if the cause is for the benefit of the human race, we are entitled to be cruel to animals on this scale?

It is time that the Littlewood Report was implemented, and also the recommendations of the noble Lord Lord Houghton. It is time that the Government asked what is going on here. Most of us recognise that vivisection is justified in certain circumstances, but have we slipped into the position of accepting that any sort of vivisection is justified in any circumstances? We are dangerously near that point.

The hon. Member for Dumfries (Mr. Monro) referred with some satisfaction to the development and extension of the plant at Chapelcross in his constituency, where tritium is being produced. I hope that my right hon. Friend in reply will tell us why tritium is being produced at Chapelcross. What sudden need has been discovered for the production of tritium, under the aegis of a Government committed to a policy of winding down and not stepping up our nuclear commitment?

The Government are supposed to be committed to the removal of the American Polaris base at Holy Loch. We have not yet seen any sign of that. The base is still there. I do not think that my right hon. Friends have asked for the base to be removed. There has not even been a polite squeak. They have not even said "Would you mind possibly thinking at some time in the future of taking your nuclear submarines away? "As far as I know, not a word has been said about this. Instead, we are producing tritium. What is the purpose of this when the Government have said that they have no intention of introducing a new generation of nuclear weapons? Does it mean that we are developing a new type of warhead for existing nuclear weapons?

Things can happen in any one of our constituencies and we are all entitled to ask about them. I hope that if my right hon. Friend is not able to reply to the two points I have raised, he will give me an assurance that he will draw the attention of his right hon. Friend and hon. Friends to these very important matters, and will ensure that answers are given.

8.59 p.m.

Mr. Michael Marshall (Arundel)

We have had a generally constructive debate, but if, as mentioned by some earlier speakers, we are to find ways in which our procedures can be improved, it is reasonable to suggest that we ought to address ourselves to the basic thrust of the debate. I say this with no disrespect to the hon. Member for Putney (Mr. Jenkins), who has made his own special case. But it is a matter which might perhaps be considered by the Select Committee on Procedure.

If I may follow my hon. Friend the Member for Mid-Sussex (Mr. Renton), those of us who visited the United States and Japan with the Select Committee on Nationalised Industries returned last week with the impact of what we saw fresh in our minds. I hope that it may be of some help to the House, in considering the Queen's Speech, to reflect perhaps on some of the things which are happening in the wider world outside, and to try to think in what way they might influence not just the work of this Government but the work of all Governments.

I want to single out one area which could assist the country at a time of great difficulty. especially in the matter of investment in manufacturing industry. I have in mind the opportunities which lie open to us to attract foreign investment into our manufacturing industry, and I am thinking of the wider opportunities within the EEC for bringing in investment, perhaps in joint ventures. But, because of a recent visit to the United States, I am also thinking of the opportunities to attract American capital into the country.

Anyone who looks at the background does not need the argument in favour of this principle laid out in great detail. I see that the Prime Minister made this point strongly in a speech to the American Chamber of Commerce only a few weeks ago. He argued that Britain was now what he described as an open door to both the EEC and to the Commonwealth. If that is the general line of the Government's thinking, we do not need to extend the argument too far. However, it is important to put it in the context of the strength of American investment and in the context of Britain's own relationship to the multinational worldwide.

At the last count, in 1972, about £3,800 million of foreign investment in this country was paralleled by more than £8,000 million of British investment overseas. It is evident that Britain has an extremely powerful need, therefore, not only to attract investment but also to benefit from its own investments overseas.

Earlier today, the hon. Member for Aberdare (Mr. Evans) said that we had to consider the development of the North Sea and he tried to suggest that we should all be urging the siphoning off of the profits of those companies. However, I put it to him that were it not for private enterprise, largely American companies, the development of North Sea oil in the time scale in which it has happened could not have been possible. That is a typical example of the way in which we should attract positive private investment from overseas to assist us, especially where there is technology to bring to bear as well as capital.

If our tax system is any good and reflects a reasonable balance, we should gain our share of the wealth in that way. If we do not accept that kind of thinking, we live in cloud-cuckoo-land in a world in which we must trade and in which we have to compete.

I ask the House to consider some of the impacts that American capital has had on this country. Let me take the case of Scotland, which has loomed large in our debate today. It was Lord Taylor of Gryfe who said not long ago in another place that the value of American investment in Scotland in the engineering industry was now almost half and employed almost one-third of the work force. He went on to say that Scotland had attracted some 40 per cent. of all American overseas investment since the war. Thinking of Scotland in terms of about one-tenth of the country's economy, that indicates how foreign investment has played a notable part in our regional development.

Therefore, when I argue that American investment is an important part of our economic scene and that investment from that source should be encouraged, it is not simply to bridge the gap in investment per se but also because of the additional employment that that investment could create.

If I stress that as being a worthwhile approach for this Government and relate it to the possibilities of investment from within the EEC—I see no difference between the conditions which would specify American capital or other European capital—it is right to ask what it is that is holding back American investment at present. Those of us who had an opportunity to visit America in recent weeks could not help being impressed by the way in which American industry is once more moving ahead and, under private enterprise, seems to have grappled resiliently, despite conditions of world recession, with getting on the move again. We saw examples of investment made against the trend, looking towards the upturn. This is something often argued about in this Chamber but which simply does not happen in this country. We saw the way in which American industry has taken the opportunity to streamline.

For example, in talking to American steel workers my hon. Friend the Member for Mid-Sussex and I were impressed with the fact that the attitude of trade union leaders, at a time of world recession and high competition, particularly from Japan was to seek greater productivity. They said "We accept that that will mean streamlining some of the work force, but we are looking towards the greater good for all our members". If that thinking were reflected in our industry, we would do well.

What is holding back investment by America in this country? I should like to quote briefly from a report in "Business Around the World" of 22nd November which encapsulates the problems of attracting such investment. US investors are leery of new stakes in Britain today. As they see it, the wobbly pound and steep interest rates are burden enough. Add fears what nationalisation will spread, swallow up foreign units or create rivals for them. The Labour Government continues to push for a grip on shipbuilding and aircraft firms despite a mere one-vote victory in Parliament on November 8th … Steep British income taxes also irk the executives. Levies on even junior-management pay are deemed so high that they cripple operations, push talent abroad. …A topsy-turvy corporate-tax system adds woes. Since World War II's end a businessman in Britain has had to cope with some 50 major changes in tax law. In the time available I have given briefly the objections I heard from all sides of American industry about investment possibilities in this country. It is in the face of these objections that one has to look at the Queen's Speech. Once more we have a Government riding in blinkers, determined to press for nationalisation of aerospace and shipbuilding, bankrupt of any ideas or alternatives.

Were the Government to come to the House with suggestions for joint ventures to carry forward our industries, they would find a receptive audience. They do not seek to justify their belief in nationalisation on the grounds of the success of nationalisation in other manufacturing industries. The problems, as with the British Steel Corporation which is still losing £5 million a week, are too well known to need retelling. The Government are not willing to bend their minds to an alternative strategy for nationalisation. We saw that the ways in which both the United States and Japan approach their steel industries are totally opposed to this sort of doctrinaire, one-viewpoint thinking.

On taxation and fiscal policy, there is little recognition in the Speech that the Government are prepared to take into account the real difficulties which our industry faces on account of taxation because of both its complexity and its overall burden. I shall be interested to hear what the Minister says in winding up the debate tonight.

These are some of the many problems our industry faces, which are not faced in other countries, and which are a disincentive to foreign investment. I hope that we shall hear some assurance from the Government tonight but I fear that we shall not, and that is why I shall vote for the amendment.

9.14 p.m.

Mr. James Prior (Lowestoft)

My hon. Friend the Member for Arundel (Mr. Marshall) reminds me of the time in 1972 when my right hon. Friend the Member for Knutsford (Mr. Davies), then Secretary of State for Trade and Industry and President of the Board of Trade, went to Japan to study the steel industry. When he returned from his visit, we in the Cabinet asked him for a comparison between the steel industry in Japan and that in Britain. He said that amongst other places he had visited was a green-field site which produced 10 million tons of steel a year and employed 7,500 men. We asked him how many men would be required to produce 10 million tons of steel in Britain. The answer was 75,000.

That illustrates the problem which Britain faces and which was brought out in the speeches of my hon. Friends the Members for Arundel and for Mid-Sussex (Mr. Renton). It is, perhaps, the background to what we should be discussing tonight.

All hon. Members on this side—indeed, perhaps all Members of the House—were delighted with the maiden speech of my hon. Friend the Member for Walsall, North (Mr. Hodgson). My hon. Friend won a remarkable victory on which we all warmly congratulate him. He also had the right sense of touch in the House, in that he paid a tribute to the two hon. Members opposite who for two and a half years looked after the constituency of Walsall, North and carried out duties as a constituency Member which were not carried out by the Member himself but which will now, we believe, be in much better hands and be much more ably carried out.

It is usual on these occasions to say that we hope that we shall hear from my hon. Friend on other occasions. I hope that we shall hear from him for many years, because I think that he will remain the Member for Walsall, North for many years, as he set about it in the right way. Not only his speech today but the remarks he made on television after his election were exactly what we would expect from someone who is a good Conservative and who will also be a good Member of Parliament. Therefore, we warmly congratulate my hon. Friend on what he has done and what he has said.

My hon. Friend talked about the importance of small businesses—a subject to which my hon. Friend the Member for Oswcstry (Mr. Biffen) devoted a good deal of time. My hon. Friend the Member for Walsall, North also spoke about the importance of the car component industry in his constituency. It is an interesting reflection that the car component industry is, perhaps, the most efficient industry of its sort in Europe. It does excellent business throughout Europe and is another example of the way in which the British can compete and export where they have the will to do so.

Much of the debate has had an air of unreality about it. Hon. Members come here and talk. I am not certain that they are listened to—that is. not to any extent. The decisions are made elsewhere. The International Monetary Fund is at present deciding our future and we in the House have precious little to do with it.

Great speeches were made by Ministers when they were in Opposition. At that time the right hon. Member for Ebbw Vale (Mr. Foot) talked about the Common Market taking away our sovereignty There has been no greater taking away of sovereignty from the House than what has happened in the past two years under this Government, for as far as I can see the IMF now controls everything that we do.

Mr. Crowther

The right hon. Gentleman referred to the suggestion that it would take 75,000 British steel workers to produce 10 million tons of steel per annum. If it was produced at the rate at which the Rotherham steel workers produce it, it would take 25,000 workers.

Mr. Prior

I listened to the hon. Gentleman's speech. I am aware of the improvement which is taking place in certain parts of the steel industry as a result of investment and greater co-operation between management and unions. That I entirely applaud. However, I shall not be satisfied until the figure of 25,000 is reduced to 7,500 or even lower. I agree that we are beginning to make progress, but we have some way to make up.

The hon. Gentleman will know that the queston whether to nationalise or denationalise has created many problems. The lack of confidence in the steel industry which resulted from the threat of nationalisation which was held over its head for so many years meant less investment being made in the industry than should have been made. I hope that Labour Members, who are so keen to nationalise almost anything in sight, will remember the effect that nationalisation can have on industries which they wish to support.

The real point of the debate is the Government's total indecision on their policy. Earlier today the hon. Member for Liverpool, Walton (Mr. Helfer) and later the hon. Member for Liverpool, Garston (Mr. Loyden) talked about complete socialisation. At the moment we have half the Government and half the Labour Party following a policy which might be described as Friedman-like and the other half wishing to follow a policy of total socialisation. The Bible says that a house divided against itself shall inherit the wind. That is about all that the Government are likely to inherit.

The chickens are coming home to roost. The Government failed to act 18 months or two years ago when we told them that public expenditure was too high and that they would have to take action. They failed to act then. Now they are being forced to act in a climate which is far less favourable to them than it was even two years ago. They will have to take action now, but it will be far more painful in its effects on employment and on the standard of living of everyone in this country than if they had taken action when they should have taken it two to two and a half years ago.

At that time the right hon. Member for Huyton (Sir H. Wilson) and others of his right hon and hon. Friends were accusing the Conservative Party of wishing to cause unemployment. But what we were saying then, when employment was 650,000, we are still having to say when unemployment is 1.3 million and increasing.

We are likely to have a sluggish demand in the New Year. This week the Economist says that nil growth is turning to negative growth. Therefore, we face a more difficult situation now than if the action which as to be taken had been taken at the right time.

My hon. Friend the Member for Manchester, Withington (Mr. Silvester), having been a distinguished Whip for two years, has sat through innumerable discussions on the Employment Protection and the Trade Union and Labour Relations Bills hardly daring to say a word because he had to keep my hon. Friends in order. It was nice to hear him speak again in this House and, what is more, to put forward the fact that, given the right policies—whether regional or national—we could get out of our difficulties. Undoubtedly, as he said, the country is depressed and needs some hope for the future. It will not get much hope for the future from some of the remarks which I have seen attributed to Ministers.

I gave notice to the Chancellor of the Duchy of Lancaster that I proposed to refer to him in my speech. I was astonished to read an article by Peregrine Worsthorne in the Sunday Telegraph of 7th November in which he described a dinner party that he attended at which the Chancellor of the Duchy, defending the Government's policy of borrowing, compared our plight to that of a small Manchester tailor in need of a loan so as to keep going in the face of larger-scale competition. If the Chancellor of the Duchy thinks that that is what the problems are about I am sure that not one hon. Member will agree with him. The shame of constantly borrowing money to get ourselves out of trouble is deep. I shall return to that matter later.

The hon. Member for Cornwall, North (Mr. Pardoe) said that he was worried not so much about the level of Government expenditure but how we spent it. Let us examine how we have been spending in the last three years. One of the few growth industries has been the insolvency examiners of the Department of Trade. I have an advertisement which reads: Make a career in accountancy. Why confine yourself to figures? Far better, of course, to become an insolvency examiner with the Department of Trade. If we have this Government much longer, that is about all the growth we shall get in our economy.

If one examines the way in which the Government are spending their money and considers the growth of bureaucracy over the last few years one gets some idea of why we believe that public expenditure should be reduced. The number of additional people employed in education between 1974 and 1975 was 83,000—a total of 1,776.000 now compared with 960,000 in 1961. If anyone tells me that we are that much better educated than we were in 1961 I cannot agree with him.

Employment in the medical services increased by 89,000 between 1974 and 1975 and in public administration employment was up by 57,000. While employment in those areas is increasing employment in manufacturing industry is falling. It fell by 379,000 between 1974 and 1975.

Mr. Pardoe

The right hon. Member has just quoted some alarming statistics about increases in public sector employment between 1974 and 1975. Does he believe that any Government can increase employment in those sectors by that much as a result of decisions it takes in the one year since being elected? Is it not more likely that these increases were the result of decisions taken in the period from 1970 to 1974 when the present Leader of the Opposition was patting herself on the back for increasing employment in education?

Mr. Prior

There is an element of that in it. But, what of a Government who complain of the steps which we took in the reorganisation of local government and the health service, yet allow this increase in numbers to continue? It must be stopped. The Government could have stopped it, but they did not. Why did the Government not take the necessary action? Why have they left it until now to take any action?

We are simply not producing enough as a nation. We have fewer people producing and more people consuming. That was the point made by the hon. Member for Berwick and East Lothian (Mr. Mackintosh) in his forthright speech. The public sector has retained its workers more successfully than the private sector. As the hon. Member pointed out, the demonstrations last week by NALGO, NUPE and other public sector unions were an outward sign of what has happened in the public sector. But that is nothing compared with what is happening in the private sector where there have been wholesale closures and reductions in employment without, comparatively, so much as a murmur.

In the short run, it is perhaps a fact that there will be higher unemployment. But that is something that we pointed out two and half years ago. My hon. Friend the Member for Maldon (Mr. Wakeham) mentioned the higher interest rates, cuts in investment rather than revenue, the added payroll tax and the lack of private investment. They are the sort of things that have been the hallmark of the present Government. As he said, industrial confidence has to be restored, and investment will not come without it. It alone can create the wealth that will give employment either in manufacturing industry or in service industries.

When the hon. Member for Luton, East (Mr. Clemitson) says that investment by itself will not result in more jobs, up to a point he is right. However, until one creates the wealth, and wealth through more investment, one will not get jobs in either private industry or the public services. That is what must be realised.

If one looks at the experience of France and Germany over the period from 1968 to 1973, one finds that the overall growth in France per annum was 7.5 per cent., growth in productivity per head was 6.2 per cent., and the increase in employment was 1.2 per cent. In Germany the figures are comparable. However, in Britain our overall growth was 2.1 per cent., our productivity growth was 3.6 per cent., and our employment went down by 1.4 per cent. Therefore, if one does not get the investment and the growth, one gets a lower employment figure. That is an important factor to remember, and that is why we have supported policies of greater investment and why we believe that that is so important.

Mr. Clemitson

I was not for a moment arguing against higher investment. I was arguing in favour of higher investment. I was saying that the argument that higher investment in manufacturing industry necessarily creates more employment in manufacturing industry is highly questionable.

If the right hon. Gentleman will allow me one more moment, may I say that between 1971 and 1973 production in manufacturing industry in Britain increased by 11 per cent., which is a very good record. Productivity increased by 14 per cent. Would the right hon. Gentleman care to comment on what the OECD said in its report on Sweden for 1975—[HON. MEMBERS: "Oh."]

Mr. Speaker

This is a very long interruption in a winding-up speech.

Mr. Prior

One could go on with this for ever. However, the fact is that if one does not get the investment, one will not get the wealth in the future. Even in the period from 1971 to 1973, regrettably we were not getting the levels of investment that we hoped to get or that Britain required. One of the reasons for that was simply that profit became such a dirty word in Britain that no one was prepared to invest or the money was not there to invest. Until we have a public that is better educated about the rôle of profit in society, we shall not make much progress. However, even once one has got the investment and is creating the wealth, that does not necessarily mean that one will be getting the employment coming out of the manufacturing side but one will then have a much broader base for employment to come out of the service sick and the public side as well.

As we know too well, in Britain over the last few years we have been quite happy and contented to pay ourselves more for doing no more work, thereby denying ourselves the investment that we need. We know that profits have fallen from 15 per cent. in 1964 to 6 per cent. in 1975. I hope that hon. Members will read the speech made by my hon. Friend the Member for Kidderminster (Mr. Bulmer) last Thursday. I believe that the need for consultation and co-operation—or the true need for industrial democracy, as it is now called—is much more a question of starting on the factory floor and building it up from there.

I do not believe that employee participation has anything to do with worker directors on the board imposed by statute. This is a total fallacy, and one of the factors that will hold back confidence in British industry more than anything else is if we think that we can take the German system, which is totally unproved on the issue of industrial democracy, and impose on our system the employee-director system that one finds in that country. I hope that we shall not fall for that, because it would be the greatest possible mistake if we did.

If the right hon. Gentleman wishes to say that we should accept a number of other factors that the Germans have in their trade union movement, whether it be industrial unions, or that contracts entered into between unions and employers are enforceable at law, we might be getting somewhere, but if all we are to do is to impose the German system on our system we are on to a dead duck, and the sooner that is pointed out the better.

What is the problem that we are facing with unemployment? The Government claim that they have created 500,000 jobs by spending money, by job creation schemes and by keeping open jobs of one sort or another. We know that over the next four years until 1980 an additional 700,000 people will come on to the employment market. We know, too, that the Government have a policy of reducing unemployment to 700,000 by 1980. That means, in effect, that during that time 2 million new jobs will have to be created.

I do not think that the Government have an idea of how they will create those 2 million new jobs. They will not create them by the measures that they have announced. They will not create them by the measures set out in the Queen's Speech. They will not create them by their present attitude to industry. If one looks through the Queen's Speech one can pick out item after item that will prevent employment and hold it back rather than increase it.

I now come to the question of the IMF loan. As I have said, I consider this to be a humiliating position for hon. Members. What did the Prime Minister have to say at Blackpool? He said: We have lived for too long on borrowed time, borrowed money and even borrowed ideas … For too long this country has trodden the primrose path and borrowed money from abroad—it still goes on—instead of grappling with the fundamental problems of British industry. It is not just the IMF loan, because we are now talking about an even more massive loan to fund the sterling balances.

We go to the IMF and assure it that we shall be tough and purposeful and get on top of our problems; but then we learn that the resolve starts to weaken. We read the Press day by day and find out what is happening. We know that the Chancellor of the Duchy of Lancaster telephones the editors, and that the Prime Minister sniffs the wind and Roes where the numbers are. We read in the Sun this morning that the Prime Minister is not certain whether he will support the Chancellor of the Exchequer because he is drawn towards the other members of the Cabinet. [Interruption.] For all the sense that Iget out of the Government's policies I might as well look at page 3. At least I get a little enjoyment out of it.

The Prime Minister and the Cabinet look as though they are joining the so-called anti-deflationists, and eventually a package is arrived at, but, as the hon. Member for Berwick and East Lothian said, it is likely to be too little and too late. The hon. Gentleman felt that this package must be the final one because year after year we have had a whole series of Government packages. He felt that the Government might put party before it put the country and that might result in what the party could get away with rather than what the country needed. But who suffers in this? It is the unemployed and those who have still to lose their jobs. They are the ones who suffer.

Government vaccilation and irresolution is penalising the unemployed and putting off the day when they start work again.

Mr. J. Enoch Powell (Down, South)

Before leaving the matter of the loan, would my right hon. Friend tell the House whether it is the advice of the Opposition that at this point the IMF loan should be accepted?

Mr. Prior

We must accept the loan. We have no alternative but to accept it. But we must also decide for ourselves the terms on which the loan is possible. I believe myself that the terms on which the loan is possible are only those by which we reduce the borrowing requirement of the Government, thereby enabling private industry to expand and the interest rate burden to come down. I believe that we have no alternative at this stage but to accept the loan. We are pretty well bust if we do not. I am not certain whether we are bust if we do, but we are certainly bust if we do not.

From time to time the Prime Minister has shown an understanding of the problems that face us. He seemed to be saying that at Blackpool. But the National Executive of the Labour Party and the Tribune Group appear to have knocked him off his stride. Only the other day on "Panorama" we heard the right hon. Gentleman talking about the German's responsibility for helping us over the question of the sterling balances because of the vast reserves they possess. From what the right hon. Gentleman said. it sounded as though the Germans had found these reserves floating down the Rhine in a barrel. The Germans have these reserves because they do not spend more than they earn, because they help profitable industry and because their tax system encourages enterprise. Even with a Social Democratic Government they follow policies diametrically opposed to those pursued by the British Government.

The Government are a sick Government. They have the smell of defeat about them in everything that they do. They are a divided Government. They have a divided party. They are incapable of giving this country the lead that it needs. The best thing this Government could do would be to go and allow in a party which would carry the support of the nation and carry the support which my hon. Friend the Member for Walsall, North, in his maiden speech, told the House was available and which he had received in Walsall, North. That is the only hope for our country. The Government are incapable of pursuing policies which can either unite the nation or create for Britain the chance of getting full employment again.

If so few hon. Members opposite can sit through a debate on unemployment, and if they show the lack of interest that they have shown in our affairs today, they have no right to be in charge of the country. The sooner they go the better.

9.39 p.m.

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

I join the right hon. Member for Lowestoft (Mr. Prior) in congratulating his hon. Friend the Member for Walsall, North (Mr. Hodgson) on his maiden speech. It was a forthright speech and well delivered. It was a controversial speech, but I do not make any complaint about that.

The hon. Gentleman concentrated on small firms. He had some rather selective quotations and rather forgot the discriminatory help on corporation tax and capital transfer tax given by the Chancellor of the Exchequer in his Budget and specifically designed to assist small firms. We must not forget the Industrial Common. Ownership Bill piloted on to the statute book by my hon. Friend the Member for Consett (Mr. Watkins).

The hon. Gentleman was generous in paying tribute to his colleagues in the House of Commons, particularly my hon. Friend the Member for Walsall, South (Mr. George), for the way in which they represented his constituency during the period when it was otherwise without representation. We are grateful to him for that.

The right hon. Member for Lowestoft said that he hoped that his hon. Friend would stay a long time in the House. Some of us can remember Orpington in 1962, Dudley in 1968 and Bromsgrove in 1971. Our advice to the hon. Member is not to make any long-term plans but to look for a safe Conservative seat. I am sure that there will be some changes.

My hon. Friend the Member for Rotherham (Mr. Crowther) had some powerful things to say about regional policy and how it affected his constituency. We shall consider carefully what he has said. He was right to point out, particularly to those who have just been to Japan and elsewhere, the importance of the Thrybergh steel works, which has broken all records in commissioning, coming in on time and production.

I join the Secretary of State for Employment in welcoming the hon. Member for Oswestry (Mr. Biffen) to his new assignment. The hon. Member is popular in the House. Some of us think that he is more popular on our side than on his own. He spent a good deal of the period 1970–74 voting against the very policies that the right hon. Member for Lowestoft was pushing through the House. Some of us will recall his endeavours during debates on the 1972 Industry Act and the strenuous efforts of his new colleague on the Front Bench, the right hon. Member for Knutsford (Mr. Davies), who was at his wit's end when the hon. Member for Oswestry and Mr. Jock Bruce-Gardyne and other frustrated progress on that Bill.

The hon. Member for Oswestry made a very good speech. It is rare to have decent jokes from that Dispatch Box, and his were extremely good. I cannot agree with everything he said. For example, when it comes to public expenditure cuts, he would wield the axe in the same way as the hon. Member for Henley (Mr. Heseltine) used to wield the Mace. We know that the Mace will be safe in the hon. Member's hands.

Perhaps the hon. Gentleman has been appointed industry spokesman because the Leader of the Opposition is trying to rewrite Tory history as fast as possible. The hon. Gentleman is a very good eraser. He will get rid of that very quickly. But we on this side of the House will not allow him or his hon. and right hon. Friends to get away with it. The Tories imply—the right hon. Member for Lowestoft tried to imply today—that if only they were in power they could pluck from the air industrial policies which would transform our situation, restore overseas confidence, reduce unemployment and bring down the rate of inflation. We all know how phoney that kind of argument is. No one believes it.

Between 1970 and 1974 they tried every Tory policy in the book and in some measure they produced the situation in which we now find ourselves. First, we had the Selsdon period and its tremendous failure. That was swept hurriedly away together with that typical symbol, the hon. Member for Cirencester and Tewkesbury (Mr. Ridley). I am sorry that he has not taken part in this debate, although I think he made an intervention in another hon. Member's speech.

Then they tried what some commentators have described as the period of "wet intervention" under the faltering leadership of the right hon. Member for Knutsford. That was the period of the Industry Act 1972, the nationalisation of Rolls-Royce and the nationalisation of Govan Shipbuilders.

When I hear some Conservative speeches to the effect that nationalisation is so foreign to Tory political thinking, I wonder where some of the Conservatives have been in the last few years. That period was brusquely dismissed by the Tory policy document "The Right Approach" which said: Our aim is to make it much more difficult for Governments to become involved in support of unviable industrial concerns. Those policies did not work either, and in turn the interventionist and Selsdon periods were succeeded by the Barber period involving panic resort to the printing press. I shall not say too much about that matter because no modest words of mine could be as devastating as were the words used by the hon. Member for Oswestry this afternoon in this debate. I am sorry that there were not as many Members on the Conservative Benches as there are now to hear what he said about that period.

No wonder the Tory document "The Right Approach" complained One of the main difficulties against which industry has been struggling for years in this country has been endless change. Yet if any policy at all can be discerned from the muddled verbiage in "The Right Approach", it appears that there is to be more change simply for the sake of change.

That Tory document also says that a Conservative Government would repeal the 1975 Industry Act but the Tories will put nothing whatever in its place. They will abolish the National Enterprise Board, although every day I am visited in the Department of Industry by very good industrialists who say how useful a source of investment and innovation the NEB is, and how they wish to know more about it.

Furthermore, the Tories scrapped the Industrial Reorganisation Corporation and ever since then industrialists have wished that it could be brought back. The Tory policy contained in "The Right Approach" seeks to repeal, abolish and scrap—

Mr. Crawford

rose—

Mr. Varley

I cannot give way, because I still have a great deal to say.

Mr. Crawford

rose—

Mr. Varley

The hon. Gentleman did not take part in the debate, he has been out of the Chamber for most of the time, and therefore I do not see why I should give way to him now.

The Tories say that they would sell off as much as possible of British Shipbuilders and British Aerospace after we have brought them into public ownership. But I have a feeling that, even if the Tories were to take over, the civil aircraft industry, the merchant shipbuilders and some of the ship repairers in assisted areas would remain in public ownership. I suppose what would happen is that the Tories would quickly hand over guided missiles and would hand back to private industry the building of warships because they are the profitable sectors—[Interruption.] The hon. Member for Blaby (Mr. Lawson) should remember that he is a Whip and should not interrupt. Whips are appointed to sit quietly in the corner, and that is exactly what should happen.

I was interested the other day to read a pamphlet written by the hon. Member for Oswestry. It was based on a speech he made to the Tory Party conference on 6th October. [HON. MEMBERS: "Reply to the debate."] We are now debating a Tory Opposition amendment tabled to the Queen's Speech. I must reply to the debate in that vein. The hon. Member for Oswestry said at the Tory Party conference The mood of national doubt will be intensified when the authority of the House of Commons is demonstrably infringed and circumscribed. I agree with that. I hope that on Wednesday, when we debate the Aircraft and Shipbuilding Industries Bill, the hon. Gentleman will be voting with us against the unelected House of Lords and supporting the Government.

The fact is that between 1970 and 1974 the Tories did not have an industry policy. They do not have an industry policy now and, what is more, they are incapable of having an industry policy. There is a yawning gap between the robust individualism of the hon. Member for Oswestry and the cautious interventionism of the right hon. Member for Lowestoft.

It is said that the Labour Party is divided, but I read weekend speeches and speeches made in the House, and I read that the right hon. Member for Worcester (Mr. Walker) says that there must be an incomes policy, while the Leader of the Opposition said in Wales We shall never have any kind of incomes policy. I should like to know exactly where the Tories stand.

Mrs. Margaret Thatcher (Finchley)

Will the right hon. Gentleman quote what I said, or has he not checked?

Mr. Varley

I do not have very much time but I am prepared to strike a bargain with the right hon. Lady. I am prepared to give up two minutes of my time so that she can tell us whether she believes in a voluntary incomes policy, a statutory incomes policy or no incomes policy?

Mrs. Thatcher

The right hon. Gentleman clearly did not check what I said—[HON. MEMBERS: "Answer."] Of course I shall answer. Unlike the right hon. Gentleman, I check my facts and I check transcripts. I said during the passage of the Bill through the House last year that I do not believe in a statutory incomes policy. I thought that the Government Front Bench did not either. I do not believe in a statutory incomes policy but I believe in a voluntary incomes policy.

Mr. Varley

I am sure that in the next few days and weeks we shall study what the right hon. Lady has to say. I am sure that the country will study what she has to say. Clearly the right hon. Lady and her Shadow team have no policy on inflation and how to bring down the rate of inflation.

The hon. Member for Cornwall, North (Mr. Pardoe) made an interesting speech. He had a great deal to say about the nationalised industries, which are an important component of British industry. The hon. Member for Oswestry in his book and the Tories in "The Right Approach" state that there will never be any interference with the nationalised industries. They say that there will be no intervention in pricing policy.

That has been echoed today by the hon. Member for Mid-Sussex (Mr. Renton). He said that there will be no intervention in pricing policy. It is a pity that the hon. Gentleman was not in the House during the Tory years of 1970–74. If he had been, he would have witnessed the most deliberate intervention in pricing policy, which created some of the difficulties of the nationalised industries and the rest of the industrial sector. That was the disastrous intervention policy of the right hon. Member for Sidcup (Mr. Heath) and the present Leader of the Opposition, who was a member of the Conservative Cabinet. Their deliberate policy of controlling the pricing policy of the nationalised industries resulted in subsidies to those industries having to be handed over and paid for by this Government when we took office, subsidies of £1,250 million. That was public expenditure incurred when the Tories were in power. We are determined to put that right.

Since that time we have started to put things right. Last year the electricity industry, the Gas Board and the National Coal Board made a profit. In 1974–75 the British Steel Corporation made a profit, and if it had not been for the worst world recession the industry has ever suffered it would have made a profit in the past financial year, too. Costs and profitability have been brought into line. We get these thrusting speeches from the right hon. Member for Lowestoft about standing on one's own feet and no intervention, which prove that he has a very short memory. I know that that is not the sort of line that would be taken by the hon. Member for Oswestry.

The nationalised industries nave maintained their investment. If it were not for the investment that has taken place in the nationalised industries, private industry would be in an even worse plight. Investment in the nationalised industries in 1975–76 was 10 per cent. up over the last year. If we had that kind of investment record in private industry we would not be in our present difficulties. The public sector, representing 11 per cent. of our GDP, is responsible for 19 per cent. of the total fixed investment.

Another important element of our industrial strategy is the investment schemes which have been widely welcomed. One of the cornerstones of our industrial strategy is the National Enterprise Board. It is playing a valuable and important rôle in rebuilding British industry. The hon. Member for Cornwall, North referred to the fact that the NEB last week took a major equity stake in Sinclair Radionics. That was just the sort of thrusting firm one would have expected the City or some of the institutions to support. But they would not do so. That firm went to the institutions and the banks but could not get support. It would have been in severe financial difficulties had it not been for the NEB.

I understand that the Tory Opposition want to make exactly the same mistake with the NEB as they made with the IRC. Last month the NEB supported Reed and Smith, the specialist paper-makers, and enabled new technology to be introduced.

We see industrial democracy as an important part of our industrial strategy. Complaint has been made time and again in the debate about our poor economic performance. It is said that we do not get enough out of our investment, even where our technology is comparable to that existing elsewhere. The best way of getting the most out of our investment is for management to take workers much more into their confidence. That can be done only through the extension of industrial democracy and the planning agreement system.

I am extremely dissatisfied that further progress has not been made with planning agreements. The Government will not abdicate their rôle in industrial policy. The Tories do not have any strategy. Their approach is a complete abdication. They are getting into the ludicrous position they were in before the 1970 election, and we know what disastrous mistakes they made then.

Mr. Humphrey Atkins (Spelthorne)

rose in his place and claimed to move, That the Question be now put.

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

Question put accordingly, That the amendment be made:—

The House divided: Ayes 269, Noes 277.

Division No. 1.]	AYES	[10.00 p.m.
Altken, Jonathan	Goodlad, Alastair	More, Jasper (Ludlow)
Alison, Michael	Gorst, John	Morgan, Geraint
Amery, Rt Hon Jullan	Gow, Ian (Eastbourne)	Morgan-Giles, Rear-Admiral
Arnold, Tom	Gower, Sir Raymond (Barry)	Morris, Michael (Northampton S)
Atkins, Rt Hon H. (Spelthorne)	Grant, Anthony (Horrow C)	Morrison, Hon Peter (Chester)
Awdry, Daniel	Gray, Hamish	Mudd, David
Bain, Mrs Margaret	Griffiths, Eldon	Neave, Airey
Baker, Kenneth	Grimond, Rt Hon J.	Nelson, Anthony
Banks, Robert	Grist, Ian	Neubert, Michael
Bell, Ronald	Grylls, Michael	Newton, Tony
Bennett, Dr Reginald (Fareham)	Hall-Davis, A. G. F.	Nott, John
Benyon, W.	Hamilton, Michael (Salisbury)	Onslow, Cranley
Berry, Hon Anthony	Hampson, Dr Keith	Oppenheim, Mrs Sally
Biffen, John	Hannam, John	Page, Rt Hon R. Graham (Crosby)
Biggs-Davison, John	Harvie Anderson, Rt Hon Miss	Page, Richard (Workington)
Blaker, peter	Hastings, Stephen	Paisley, Rev Ian
Body, Richard	Havers, Sir Michael	Pardoe, John
Boscawen, Hon Robert	Hayhoe, Barney	Parkinson, Cecil
Bettomley, Peter	Heath, Rt Hon Edward	Pattie, Geoffrey
Bowden, A. (Brighton, Kemptown)	Henderson, Douglas	Penhaligon, David
Boyson, Dr Rhodes (Brent)	Heseltine, Michael	Percival, Ian
Bradford, Rev Robert	Hicks, Robert	Peyton, Rt Hon John
Braine, Sir Bernard	Higgins, Terence L.	Pink, R. Bonner
Brittan, Leon	Hodgson, Robin	Powell, Rt Hon J. Enoch
Brocklebank-Fowler, C.	Holland, Philip	Price, David (Eastleigh)
Brotherton, Michael	Hooson, Emlyn	Prior, Rt Hon James
Brown, Sir Edward (Bath)	Hordern, Peter	Pym, Rt Hon Francis
Bryan, Sir Paul	Howe, Rt Hon Sir Geoffrey	Raison, Timothy
Buchanan-Smith, Alick	Howell, David (Guildford)	Rathbone, Tim
Budgen, Nick	Howell, Ralph (North Norfolk)	Rawlinson, Rt Hon Sir Peter
Bulmer, Esmond	Howells, Geraint (Cardigan)	Rees, Peter (Dover & Deal)
Burden, F. A.	Hunt, David (Wirral)	Rees-Davies, W. R.
Butler, Adam (Bosworth)	Hurd, Douglas	Reid, George
Carlisle, Mark	Hutchison, Michael Clark	Renton, Rt Hon Sir D. (Hunts)
Carson, John	Irving, Charles (Cheltenham)	Renton, Tim (Mid_Sussex)
Chalker, Mrs Lynda	James, David	Rhys Williams, Sir Brandon
Clark, Alan (Plymouth, Sutton)	Jenkin, Rt Hon P. (Wanst'd & W'df'd)	Ridley, Hon Nicholas
Clark, William (Croydon S)	Johnson Smith, G. (E Grinstead)	Ridsdale, Julian
Clegg, Walter	Johnston, Russell (Inverness)	Rifkind, Malcolm
Cockcroft, John	Jones, Arthur (Daventry)	Rippon, Rt Hon Geoffrey
Cooke, Robert (Bristol W)	Jopling, Michael	Roberts, Michael (Cardiff NW)
Cope, John	Joseph, Rt Hon Sir Keith	Roberts, Wyn (Conway)
Cormack, Patrick	Kaberry, Sir Donald	Ross, Stephen (Isle of Wight)
Corrie, John	Kellett-Bowman, Mrs Elaine	Rossi, Hugh (Hornsey)
Costain, A. P.	Kershaw, Anthony	Rost, Peter (SE Derbyshire)
Crawford, Douglas	Kilfedder, James	Royle, Sir Anthony
Crouch, David	King, Evelyn (South Dorset)	Sainsbury, Tim
Crowder, F. P.	King, Tom (Bridgwater)	St. John-Stevas, Norman
Dean, Paul (N Somerset)	Kirk, Sir Peter	Shaw, Giles (Pudsey)
Dodsworth, Geoffrey	Kitson, Sir Timothy	Shelton, William (Streatham)
Douglas-Hamilton, Lord James	Knight, Mrs Jill	Shepherd, Colin
Drayson, Burnaby	Knox, David	Shersby, Michael
du Cann, Rt Hon Edward	Lamont, Norman	Silvester, Fred
Dunlop, John	Langford-Holt, Sir John	Sims, Roger
Dykes, Hugh	Latham, Michael (Melton)	Skeet, T. H. H.
Eden, Rt Hon Sir John	Lawrence, Ivan	Smith, Dudley (Warwick)
Edwards, Nicholas (Pembroke)	Lawson, Nigel	Speed, Keith
Elliott, Sir William	Lewis, Kenneth (Rutland)	Spence, John
Emery, Peter	Lloyd, Ian	Spicer, Jim (W Dorset)
Ewing, Mrs Winifred (Moray)	Loveridge, John	Spicer, Michael (S Worcester)
Eyre, Reginald	McAdden, Sir Stephen	Sproat, lain
Fairbairn, Nicholas	McCrindle, Robert	Stainton, Keith
Fairgrieve, Russell	Macfarlane, Neil	Stanbrook, Ivor
Fell, Anthony	MacGregor, John	Stanley, John
Finsberg, Geoffrey	Macmillan, Rt Hon M. (Farnham)	Steel, David (Roxburgh)
Fisher, Sir Nigel	McNair-Wilson, M. (Newbury)	Steen, Anthony (Wavertree)
Fletcher, Alex (Edinburgh N)	McNair-Wilson, P. (New Forest)	Stewart, Donald (Western Isles)
Fletcher-Cooke, Charles	Madel, David	Stewart, Ian (Hitchin)
Fookes, Miss Janet	Marshall, Michael (Arundel)	Stokes, John
Forman, Nigel	Marten, Nell	Stradling Thomas, J.
Fowler, Norman (Sutton C'f'd)	Maude, Angus	Tapsell, Peter
Fox, Marcus	Maudling, Rt Hon Reginald	Taylor, R. (Croydon NW)
Fraser, Rt Hon H. (Stafford & St)	Mawby, Ray	Taylor, Teddy (Cathcart)
Freud, Clement	Maxwell-Hyslop, Robin	Tebbit, Norman
Fry, Peter	Mayhew, Patrick	Thatcher, Rt Hors Margaret
Galbraith, Hon. T. G. D.	Meyer, Sir Anthony	Thomas, Rt Hon P. (Hendon s)
Gardiner, George (Reigate)	Miller, Hal (Bromsgrove)	Thompson, George
Gardner, Edward (S Fylde)	Mills, Peter	Thorpe, Rt Hon Jeremy (N Devon)
Gilmour, Rt Hon Ian (Chesham)	Mitchell, David (Basingstoke)	Townsend, Cyril D.
Gilmour, Sir John (East Fife)	Moate, Roger	Trotter, Neville
Glyn, Dr Alan	Molyneaux, James	Tugendhat, Christopher
Godber, Rt Hon Joseph	Monro, Hector	van Straubenzee, W. R.
Goodhart, Philip	Montgomery, Fergus	Vaughan, Dr Gerald
Goodhew, Victor	Moore, John (Croydon C)	Viggers, Peter

Wainwright, Richard (Colne V)	Weatherill, Bernard	Wood, Rt Hon Richard
Wakeham, John	Wells, John	Young. Sir G. (Ealing, Acton)
Walder, David (Clitheroe)	Welsh, Andrew	Younger, Hon George
Walker, Rt Hon P.(Worcester)	Whitelaw, Rt Hon William
Walker-Smith, Rt Hon Sir Derek	Wiggin, Jerry	TELLERS FOR THE AYES:
Wall, Patrick	Wilson, Gordon (Dundee E)	Mr. Spencer Le Marchant and
Walters, Dennis	Winterton, Nicholas	Mr. Carol Mather

NOES
Allaun, Frank	Evans, Fred (Caerphilly)	Mabon, Dr J. Dickson
Anderson, Donald	Evans, Ioan (Aberdare)	McCartney, Hugh
Archer, Peter	Evans, John (Newton)	McDonald, Dr Oonagh
Armstrong, Ernest	Ewing, Harry (Stirling)	McElhone, Frank
Ashley, Jack	Fernyhough, Rt Hon E.	MacFarquhar, Roderick
Ashton, Joe	Fitch, Alan (Wigan)	McGuire, Michael (Ince)
Atkins, Ronald (Preston N)	Flannery, Martin	MacKenzie, Gregor
Atkinson, Norman	Fletcher, L. R. (Ilkeston)	Mackintosh, John P.
Barnett, Guy (Greenwich)	Fletcher, Ted (Darlington)	Maclennan, Robert
Barnett, Rt Hon Joel (Heywood)	Foot, Rt Hon Michael	McMillan, Tom (Glasgow C)
Bates, Alf	Ford, Ben	Madden, Max
Bean, R. E.	Forrester, John	Magee, Bryan
Benn, Rt Hon Anthony Wedgwood	Fowler, Gerald (The Wrekin)	Mahon, Simon
Bennett, Andrew (Stockport N)	Fraser, John (Lambeth, N'w'd)	Melialieu, J. P. W.
Bidwell, Sydney	Freeson, Reginald	Marks, Kenneth
Bishop, E. S.	Garrett, John (Norwich S)	Marquand, David
Blenkinsop, Arthur	Garrett, W. E. (Wallsend)	Marshall, Dr Edmund (Goole)
Boardman, H.	George, Bruce	Marshall, Jim (Leicester S)
Booth, Rt Hon Albert	Gilbert, Dr John	Maynard, Miss Joan
Boothroyd, Miss Betty	Ginsburg, David	Meacher, Michael
Bottomley, Rt Hon Arthur	Golding, John	Mikardo, Ian
Boyden, James (Blsh Auck)	Gould, Bryan	Millan, Rt Hon Bruce
Bradley, Tom	Gourlay, Harry	Miller, Dr M. S. (E Kilbride)
Bray, Dr Jeremy	Graham, Ted	Miller, Mrs Millie (Ilford N)
Brown, Hugh D. (Proven)	Grant, George (Morpeth)	Molloy, William
Brown, Robert C. (Newcastle W)	Grant, John (Islington C)	Moonman, Eric
Buchan, Norman	Grocott, Bruce	Morris, Alfred (Wythenshawe)
Buchanan, Richard	Harrison, Walter (Wakefield)	Morris, Charles R. (Openshaw)
Butler, Mrs Joyce (Wood Green)	Hart, Rt Hon Judith	Morris, Rt Hon J. (Aberavon)
Callaghan, Jim (Middleton & P)	Hattersley, Rt Hon Roy	Moyle, Roland
Cambell, Ian	Hatton, Frank	Mulley, Rt Hon Frederick
Canavan, Dennis	Hayman, Mrs Helene	Newens, Stanley
Cant R. B.	Healey, Rt Hon Dents	Noble, Mike
Carmichael, Neil	Heffer, Eric S.	Oakes, Gordon
Carter, Ray	Hooley, Frank	Ogden, Eric
Cartwright. John	Horam, John	O'Halloran, Michael
Castle, Rt Hon Barbara	Howell, Rt Hon Dents (B'ham, Sm H)	Orme, Rt Hon Stanley
Clemitson, Ivor	Hoyle, Doug (Nelson)	Ovenden, John
Cocks, Rt Hon Michael (Bristol S)	Huckfield, Les	Owen, Rt Hon Dr David
Cohen, Stanley	Hughes, Rt Hon C. (Anglesey)	Padley, Walter
Coleman, Donald	Hughes, Mark (Durham)	Palmer, Arthur
Colquhoun, Ms Maureen	Hughes, Robert (Aberdeen N)	Park, George
Concannon, J. D.	Hughes, Roy (Newport)	Parker, John
Conlan, Bernard	Irvine, Rt Hon Sir A. (Edge Hill)	Parry, Robert
Cook, Robin F. (Edin C)	Irving, Rt Hon S. (Dartford)	Pavitt, Laurie
Corbett, Robin	Jackson, Colin (Brighouse)	Pendry, Tom
Cowons, Harry	Jackson, Miss Margaret (Lincoln)	Perry, Ernest
Cox, Thomas (Tooting)	Janner, Greville	Prentice, Rt Hon Reg
Crawshaw, Richard	Jay, Rt Hon Douglas	Prescott, John
Cronin, John	Jenkins, Hugh (Putney)	Price, C. (Lewisham W)
Crowther, Stan (Rotherham)	Jenkins, Rt Hon Roy (Stechford)	Price, William (Rugby)
Cryer, Bob	John, Brynmor	Radice, Giles
Cunningham, G. (Islington S)	Johnson, James (Hull West)	Rees, Rt Hon Merlyn (Leeds S)
Cunningham, Dr J. (Whiteh)	Johnson, Walter (Derby S)	Richardson, Miss Jo
Davidson, Arthur	Jones, Alec (Rhondda)	Roberts, Albert (Normanton)
Davies, Bryan (Enfield N)	Jones, Dan (Burnley)	Roberts, Gwilym (Cannock)
Davies, Denzil (Llanelli)	Judd, Frank	Robertson, John (Paisley)
Davies, Ifor (Gower)	Kaufman, Gerald	Robinson, Geoffrey
Davis, Clinton (Hackney C)	Kelley, Richard	Roderick, Caerwyn
Deakins, Eric	Kerr, Russell	Rodgers George (Chorley)
Dean, Joseph (Leeds West)	Kilroy-Silk, Robert	Rodgers, Rt Hon William (Stockton)
Dell, Rt Hon Edmund	Kinnock, Neil	Rooker, J. W.
Dempsey, James	Lambie, David	Rose, Paul B.
Doig, Peter	Lamborn, Harry	Ross, Rt Hon W. (Kilmarnock)
Dormand, J. D.	Lomond, James	Rowlands, Ted
Douglas-Mann, Bruce	Latham, Arthur (Paddington)	Ryman, John
Duffy, A. E. P.	Leadbitter, Ted	Sandelson, Neville
Dunn, James A.	Lee, John	Sedgemore, Brian
Dunnett, Jack	Lestor, Miss Joan (Eton & Slough)	Selby, Harry
Dunwoody, Mrs Gwyneth	Lever, Rt Hon Harold	Shaw, Arnold (Ilford South)
Eadie, Alex	Lipton, Marcus	Sheldon, Robert (Ashton-u-Lyne)
Edge, Geoff	Litterick, Tom	Shore, Rt Hon Peter
Edwards, Robert (Wolv SE)	Loyden, Eddie	Short, Mrs Renée (Wolv NE)
Ellis, John (Brigg & Scun)	Luard, Evan	Silkin, Rt Hon John (Deptford)
English, Michael	Lyon, Alexander (York)	Silkin, Rt Hon S. C. (Dulwich)
Ennals, David	Lyons, Edward (Bradford W)	Sillars, James

Silverman, Julius	Thorne, Stan (Preston South)	Willey, Rt Hon Frederick
Skinner, Dennis	Tierney, Sydney	Williams, Alan (Swansea W)
Small, William	Tinn, James	Williams, Alan Lee (Hornch'ch)
Smith, John (N Lanarkshire)	Tomlinson, John	Williams, Rt Hon Shirley (Hertford)
Snape, Peter	Torney, Tom	Williams, Sir Thomas (Warrington)
Spearing, Nigel	Tuck, Raphael	Wilson, Alexander (Hamilton)
Spriggs, Leslie	Varley, Rt Hon Eric G.	Wilson, Rt Hon Sir Harold (Huyton)
Stallard, A. W.	Walden, Brian (B'ham, L'dyw'd)	Wilson, William (Coventry SE)
Stewart, Rt Hon M. (Fulham)	Walker, Harold (Doncaster)	Wise, Mrs Audrey
Stoddart, David	Walker, Terry (Kingswood)	Woodall, Alec
Stott, Roger	Ward, Michael	Woof, Robert
Strang, Gavin	Watkins, David	Wrigglesworth, Ian
Strauss, Rt. Hon G. R.	Weetch, Ken	Young, David (Bolton E)
Summerskill, Hon Dr Shirley	Weitzman, David
Swain, Thomas	Welibeloved, James	TELLERS FOR THE NOES
Thomas, Jeffrey (Abertillery)	White, Frank R. (Bury)	Mr. James Hamilton and
Thomas, Mike (Newcastle E)	White, James (Pollock)	Mr. Joseph Harper
Thomas, Ron (Bristol NW)	Whitlock, William

Question accordingly negatived.

Main Question again proposed.

It being after Ten o'clock, the debate stood adjourned.

Debate to be resumed tomorrow.