THE ECONOMY, PAY AND PRICES

HC Deb 22 May 1979 vol 967 cc874-1012

Mr. Speaker

I have selected the amendment in the name of the right hon. Gentleman the Leader of the Opposition. I must inform the House that the same considerations apply today as applied yesterday.

I fear that all the hon. Members who seek to make maiden speeches will not be able to do so, in view of the very large number wishing to participate in the debate.

3.31 p.m.

Mr. Denis Healey (Leeds, East)

I beg to move, at the end of the Question, to add: But humbly regret that the Gracious Speech commits Her Majesty's Government to policies that will divide the nation, inflict grave damage on Britain's economic performance, raise prices, and increase unemployment. We are today concluding a debate which, by general consent, marks the biggest reversal of policy that any Government have undertaken for 50 years. The right hon. Lady opened it last week by laying claim to a position on what she called the extreme centre. Her extremism is clear enough, but where is her centre? Her claim to represent the middle way is almost as bizarre as her choice of a quotation from St. Francis—the humble apostle of poverty and equality—to sanctify a doctrine that glories in the conviction that the only valid motive force for social and economic endeavour is naked materialism and selfish greed. Her hymn to human liberty last Wednesday would have been more effective if she did not always address her audience as though they were the inmates of a women's reformatory. Still, if her colleagues can put up with this sort of hectoring at close quarters every day at No. 10, I suppose that we in the House will have to learn to put up with it.

I must say that the right hon. Lady has chosen some remarkable companions for her new Order of St. Francis. She has chosen 14 peers to make sure that her kitchen Cabinet is "fit for the Ritz", to quote her leading admirer in the Conservative newspapers. [Interruption.] The key Members, who have been paraded in front of us during the debate in the last few days, are more suitable for the "Dirty Dozen" than for a monastic order. We had Brother Michael at the Department of the Environment—[HON. MEMBERS: "Cheap."]—undertaking to make sure that the poor man would never get a lodging for the night. We had Brother Keith, at the Department of Industry, promising yesterday to galvanise entrepreneurs with massive injections of Schumpeter. We had Brother Peter at the Foreign Office, still searching in vain to find one foreign statesman to welcome the right hon. Lady's election, other than Franz Josef Strauss and Ian Smith.

We shall listen this afternoon to Brother Geoffrey at the Treasury, who has been locked up in the same cell with the right hon. Member for Oswestry (Mr. Biffen), the hon. Member for Blaby (Mr. Lawson), the hon. and learned Member for Dover and Deal (Mr. Rees), and Lord Cockfield—[Interruption.]—all planted there to make sure that he does not allow common sense or morality to divert him from the pursuit of the right hon. Lady's only true religion.

Mr. Speaker

Order. Hon. Members must realise that part of being in this place is listening to things with which one does not agree. It is the right of everyone to put his point of view forward and to be heard.

Mr. Healey

Thank you, Mr. Speaker. I must say that it is odd that a Chancellor of the Exchequer who has committed himself to less government and lower public expenditure should start by increasing his ministerial team at the Treasury by 33 per cent. He is obviously finding life at the Treasury a little uncomfortable already, because we have heard in the last week or two a clumsily orchestrated lobby briefing which shows that he is trying to find some way of excusing himself to his Prime Minister, if not to the electorate, for his obvious inability to fulfil the promises that he made in the general election. He cannot, of course, make his sums come out, because they never added up in the first place. But it is a little thick for him to come along now and tell us that he is astonished at what he found.

The Chancellor of the Exchequer said that he was astonished at the £1,000 million cost to Britain of membership of the Common Market, but that figure was published months ago by the Commission and was repeatedly discussed in this House by the last Government. If he is really concerned to do something about this intolerable burden on the British Exchequer, he had better get his skates on, for if he does not get a firm commitment from the June Council—which I assume the right hon. Lady will be attending—to correct the position, there will be no chance of progress on it until well into next year.

The Chancellor of the Exchequer said that he was astonished at the effect on inflation of the wages free-for-all, which he spent the last five years in promoting. He said that he was astonished at the effect of a harsh winter on food prices and of events in the Middle East on the price of oil. If he is astonished about anything in relation to inflation, it must be at the fact that, despite these blows that the country has suffered in recent months, inflation is still well below the level of 13.2 per cent., year on year, which the last Government inherited from the Government of which he was last a member in 1974. If he is really astonished at all—

Mr. John Bruce-Gardyne (Knutsford)

Will the right hon. Gentleman tell the House whether it is still his opinion—he expressed it in January—that if wages rose by 15 per cent. in the latest wage round, as they have, we would be heading for a return to the confetti money of 1975?

Mr. Healey

I shall be dealing with that point in detail in a moment. But let me commiserate with the hon. Gentleman for failing to make the grade, in spite of the glowing words that his leader pronounced about him as being fit material for the Cabinet when he won his by-election not very long ago.

If the Chancellor of the Exchequer has been really astonished at anything, it must have been at the fact that the inheritance that we left him was far more favourable to his purposes than was indicated by his moaning when we discussed the situation, before the election campaign began, on 3 April. The Chancellor inherited a strong pound, although it has weakened dramatically since he took office. He inherited reserves that are three times higher than when his party was last in power, although the last Government paid off, ahead of time, all their debts to the International Monetary Fund arising from the events of 1976. He inherited a surplus on the balance of payments, despite the soaring deficit which we inherited from his Government in 1974. He inherited a level of investment in private manufacturing industry which is growing strongly in volume for the third year running, as it never did when his party was last in power.

The Chancellor told us last week that industrial production had been rising strongly after the events of the winter. The money supply is moving exactly as I predicted it would on 3 April. Over the last 12 months it has been in the middle of the range that I set a year ago, as I think the Prime Minister admitted a moment ago, although when the Conservatives were last in office it was rising not at 10½ per cent. but nearer 30 per cent., and that for three years before they finally left power in 1974.

The Chancellor inherited a public expenditure programme that was under firm control and a smaller percentage of our gross domestic product than in most European countries, a fact that the European Commission has just verified. He inherited a public sector borrowing requirement which is a lower percentage of gross domestic product than we inherited from the last Conservative Government, although the last Conservative Government inherited a surplus on public account from its Labour predecessor. He inherited interest rates which, though still uncomfortably high, are nevertheless lower than they were when I took office as Chancellor in 1974. He inherited an unemployment level which, though far too high, had been falling steadily for 20 months, and he inherited a level of employment that was rising faster—indeed, there were 100,000 more people at work in Britain last December than we inherited in March 1974.

None of these facts should have astonished the Chancellor. I described all of them in our debate on 3 April. There are, however, genuine grounds for concern with regard to our economy, which I also described on 3 April. Abroad there is an increasingly sluggish outlook for world trade and strong inflationary pressures world-wide, both deriving in the main from the continuing increase in oil prices. At home we still have the failure of industry to respond fast enough to increased demand and the effect of wage inflation on prices in general and industrial costs in particular.

One area in respect of which I may have been too optimistic on 3 April is that of wages. These may be rising faster in the private sector than I then expected. The new Government have given a boost to wage increases in the public sector by paying out ahead of time an increase of over 30 per cent. to the Armed Forces and an increase of about 20 per cent. to the police.

As a result, the outturn on earnings—this deals with the point raised by the hon. Member for Knutsford (Mr. Bruce-Gardyne) a moment ago could well prove to be closer to a 15 per cent. increase in the current round than that which I expected six weeks ago. This may have a serious effect on jobs before long, unless the present Government can get inflation under better control.

I want to concentrate my remarks this afternoon on the central problem of inflation and jobs and to consider the prospect for both with the right hon. and learned Gentleman at the Treasury. He saddled himself with a string of election promises which simpy do not add up and cannot be made to add up without catastrophic consequences for jobs and prices. Yet he has fuelled expectations throughout the country, not least in Conservative newspapers, which it would be quite impossible for him to meet. He may recall an article in The Sun newspaper during the election campaign, which read: Tax cuts are promised 'in the first budget'. They must be dramatic tax cuts. We want no nonsense about four-year plans, no pie in the sky. The feeling of let-down throughout the country would be enormous. The Sun was right. The Daily Telegraph made the same point in its leader yesterday, as did the Evening Standard and the Daily Express.

On top of the Chancellor's promise to cut income tax, his half-baked dedication to the grosser excesses of monetarist theory has led him to commit himself to monetary targets below the 8–12 per cent. to which the previous Government were committed—he appears to be talking of 7–11 per cent.—and to a public sector borrowing requirement lower than the £8½ billion to which the previous Government committed themselves, and a figure of £7.9 billion has been widely discussed in the newspapers on the basis of Government briefing.

The Chancellor must be bitterly regretting these self-inflicted wounds. Already the CBI has told him to forget about a further reduction in the borrowing requirement and, of all newspapers, The Daily Telegraph was yesterday recommending that he should fix PSBR at £9 billion this year—an increase of £500 million over the target set by the previous Government. I must warn him—I am sure that he knows this—that he must reject that advice. If, in the present circumstances, he sought to achieve a public sector borrowing requirement above the £8½ billion to which the Government have committed themselves, the very fragile state of financial and business confidence would be utterly destroyed. I see the hon. Member for Blaby nodding his head in agreement to that.

What I want to try to do this afternoon is to describe the nature of the dilemma which I know the Chancellor faces. As I explained to the House on 25 January, an increase in pay over the current round of about 15 per cent. is likely to increase the PSBR this year by over £1 billion above the £8½ billion that it would have been on the assumptions in the last autumn forecast. That is to say that personal allowances were raised in accordance with the Rooker-Wise amendment and specific duties were revalorised to the real level of a year ago.

In the caretaker Budget that I introduced just before the election, the Chancellor very reluctantly accepted the Rooker-Wise amendment. He had said in an interview with Reuters a few days earlier that he would not accept it. Indeed, his right hon. Friend the Secretary of State for the Environment told us during the election campaign that the present Government were not committed in any way to raising personal allowances as envisaged in the caretaker Budget. If the Chancellor goes through with the Rooker-Wise amendment—so far he has made no commitment to revalorization—this would increase the PSBR by about £500 million. Therefore, on these assumptions the PSBR would be about £10½ billion before he formulated his Budget.

We recognised the problems that would be created by excessive increases in pay in the current round before the election and took some steps to deal with them, for which I hope the Chancellor is duly grateful. First, we decided on the strict application of cash limits in the public sector that would reduce public expenditure by about £350 million below what it would otherwise have been. We persuaded the trustee savings banks to play a part in financing export credit, which would have cut another £200 million off public expenditure. I also left—I dare say that the Chancellor will be grateful—a contingency reserve of about £600 million, which is three times bigger than we had at Budget time last year, although this counts as public expenditure.

As a result of what I did and what has happened in recent months, I would have expected the PSBR today to stand at about £9.9 billion. So the Chancellor must find £2,000 million by increasing taxes or cutting public expenditure if he wants to reach his PSBR target of £7.9 billion, even before he begins to finance any of the cuts in income tax which he repeatedly promised in recent weeks, going beyond the Rooker-Wise amendment.

As the Chancellor has pointed out many times—including when we debated these matters on 3 April—the Rooker-Wise amendment is not a cut in income tax. It simply restores the level of income tax to the real levels of a year ago.

Let us look at the cuts in income tax which the Chancellor—even more his hon. Friend the Financial Secretary—led his supporters to expect during the general election. He told us that there would be cuts across the board at every level.

To reduce the highest rate to 60 per cent. from 83 per cent. would cost £400 million. It would cost £1,200 million to cut the basic rate to at least 30p. To raise tax thresholds to the level at which they stood in 1973 would cost £1,400 million on top of the Rooker-Wise amendment. Therefore, the Chancellor must find another £3 billion on top of the first £2 billion if he is to carry out his promises to cut income tax, and that is without counting in the promises that he has also made to reduce capital gains tax—it would cost £250 million to index that—to reduce the investment income surcharge and to abolish the earnings rule. I am delighted to see the Financial Secretary to the Treasury looking so thoughtful and rueful as I list these elements in the problem with which the Chancellor has saddled himself.

The right hon. and learned Gentleman told us that if he is to carry out his election promises and make these cuts in income tax he will have to raise £5 billion in all. He told us that he will do so by increasing taxes on what we buy, or by cutting public expenditure, or both. Why has he apparently ruled out increases in other taxes? For example, what about company taxation? He has given a firm undertaking not to increase the national insurance surcharge, but why not increase advance corporation tax? He could get really substantial help here, and, of course, ACT is levied only on companies that distribute dividends. There should be a lot more of them if the right hon. and learned Gentleman carries out his promise to reduce or abolish the control of dividends in his current Budget.

Why not defer the payment of regional development grants, particularly if the Chancellor is planning to phase them out altogether in any case? Why not increase the taxes on betting, particularly on casinos? We could find some very useful help there. Why not make a further increase in the petroleum revenue tax? The increase in oil prices is certain substantially to increase the profits of the oil companies. Apparently the right hon. and learned Gentleman has set his mind against all these ways of raising money. From what he said during and since the election, he has confined himself exclusively to increasing indirect taxation and cutting public expenditure.

Now let us look at the problems that the Chancellor faces there. He has a special problem in raising indirect taxes, because he forced an election just before my normal Budget in April and is now taking six weeks to prepare his own. So the yield from any increases in indirect taxes on which he may decide in his Budget will be only about two-thirds of the full-year yield, although their effect on prices will be immediate. He will raise prices "at a stroke", to quote his previous leader, the ex-future Ambassador to Washington, on an earlier occasion.

The Chancellor can raise a few hundred million pounds by revalorising the duties on petrol, drink and tobacco, but that would add about ½ per cent. to the retail price index. He can increase, and clearly intends to increase, VAT. In an article of stupefying frankness, in The Daily Telegraph, published only the day before polling day, he told us that he would not double the rate of VAT, but he said that a single rate of 12½ per cent. would bring in a certain amount of money and would increase the retail price index by about 2¼ per cent.

Well, of course, if the Chancellor does that—I suspect that it was in his mind the day before the country went to the polls—it would bring in well under £2 billion in the current fiscal year. Therefore, all this together is unlikely to cut the public sector borrowing requirement by more than about 1½ billion out of the £5 billion he needs if he is to satisfy his supporters and carry out his election promises.

Everything clearly depends on the extent to which the right hon. and learned Gentleman is able to cut public expenditure this year. The Financial Secretary to the Treasury, whose frankness was one of the more agreeable elements in the election campaign, told us at that time that his party was committed to reducing public expenditure to the 1977–78 level, in real terms. That would mean a net cut in the current year of £5,000 million.

The Financial Secretary to the Treasury (Mr. Nigel Lawson)

indicated dissent.

Mr. Healey

I stress the word "net", because so far the Conservative Party has told us only how it proposes to increase public expenditure. It has already spent £165 million on the police and the Armed Services, and during the last week we have had promises from Government Ministers of more expenditure on defence. The Under-Secretary of State for Defence who is responsible for the Navy said last week that he had promised NATO that Britain would achieve a growing maritime role in the Atlantic, and the Secretary of State for Defence has apparently promised to modernise the theatre nuclear forces of NATO and to spend more on Britain's nuclear deterrent. Therefore, where will the cuts come from?

Mr. Lawson

To correct all the right hon. Gentleman's inaccuracies—not to use a stronger word—would be tedious, but may I point out that when I said that it was our intention to try to reduce public expenditure, in real terms, to the level of 1977–78, I specifically stated that this would have to be done over a period and could not be done in the first year? This was made absolutely clear and explicit.

Mr. Healey

Yes, but I was trying to be kind to the Chancellor. If he is to cut it to that level over several years, he will have to cut currently planned expenditure for 1982 by £9,000 million and not by £5,000 million. If he does not make a good start this year, I do not know how the hell he will do it over the following two or three years, and I suspect that he does not have the slightest idea, either.

We are hoping to get some information from the Chancellor about where the cuts will come from. We know where the increases will come from. The Chancellor knows that it is not easy to cut major spending programmes. There is not much scope for further cuts in capital spending. Indeed, the right hon. and learned Gentleman spent the last five years telling us that we have cut capital spending in the public sector too much. But cuts in current spending mean throwing people out of work, paying unemployment pay and in many cases making very heavy redundancy payments. Therefore, such cuts take time to carry out and bring little immediate financial benefit, at least in the first 12 months. Of course, what they fail to do is at the cost of immediate human suffering.

The Chancellor's right hon. Friend, the Lord President of the Council and Leader of the House of Lords, has already announced that he is cutting the Civil Service staff by 3 per cent., although in the small print it said that there would be exceptions. We do not know how far these exceptions will run. We gather that the Government certainly will not cut Customs and Excise staff. I gather that that has been announced. It will be interesting to see what will happen to the Inland Revenue staff if the right hon. and learned Gentleman carries out his undertaking to tax short-term benefits, because that could add at least 10,000 to the Inland Revenue staff—again, at a stroke.

During the election campaign the Conservatives talked a lot about cutting industrial aid. They have talked very much less about it since. When I was speaking in Ayr during the campaign, I discovered that the present Secretary of State for Scotland spent the last five years pressing the Labour Government for more public expenditure in his part of Scotland. However, the Prime Minister went to the Conservative Party conference in Scotland, along with the Secretary of State for Scotland, and sang a very different tune about public expenditure there. She promised to maintain activities at present being buttressed by Government aid, and we even had the "mad monk" telling us yesterday that we must not expect any significant cuts in industrial aid in the next 12 months because of "prior commitments".

It is clear that one of the Chancellor's secret weapons is the sell-out of the century—an attempt to auction off public property for the most money he can raise. He is not likely to get much money when he is going to the auction desperate for that money. This is an extraordinary example of Conservative financing, another example of the reversal in traditional Conservative policies, to sell capital assets to finance current expenditure. Neville Chamberlain must be turning in his grave.

How much money does the right hon. and learned Gentleman expect to raise by this route? The Secretary of State for the Environment told us a great deal last week about selling off council housing at a discount. But Mr. Tag Taylor, the chairman of the Association of Metropolitan Authorities, has already told him that the councils would expect the Government to reimburse them for any losses caused by sales at a discount. That would lead to an increase, not a fall, in public expenditure.

The Chancellor has talked—indeed, the Conservatives committed themselves in the manifesto to this course of action—of selling off British Shipbuilders, but no one will buy British Shipbuilders—those responsible for the previous private companies have made this clear—unless the Government guarantee the contracts upon which British shipbuilding will depend.

The same is true of British Aerospace. It depends almost entirely on Government contracts. The Secretary of State for the Environment talked of selling off bits of British Airways, but, as the Financial Times pointed out the next day, it would be crazy to sell shares in British Airways now when they will be worth a great deal more in four or five years.

There is then the mystery surrounding the Government's policy on BP. Conservative Central Office issued a statement during the election campaign saying that there was no truth in the idea that the Tory Party was thinking of selling shares in BP, although the right hon. and learned Gentleman who is now the Chancellor told the House last year that his party was planning to sell such shares. Will the Chancellor explain why he is planning to liquidate Churchill's last legacy just at the time when world economic forces are making the value of British Petroleum shares rocket and when the importance of British Petroleum to the nation's economy is at its height?

Mr. Peter Hordern (Horsham and Crawley)

The right hon. Gentleman will recollect that it was his Government who sold a large proportion of British Petroleum shares. What was he doing about the country's assets at that time?

Mr. Healey

We were selling off the equivalent of the value of the Burmah shares, which are still the subject of litigation. However, we retained a substantial majority holding in British Petroleum even after that sale. If the Chancellor attempts sales of shares now on the scale that he has been discussing, or on any scale that will make a significant contribution to funding his deficit, he risks losing control of British Petroleum completely, just at the moment when a new oil crisis, which could not have been foreseen in 1976, is increasing to the maximum the value of the shares in that company.

In all these cases major purchasers of the shares of these public companies are bound to be the same financial institutions upon whose purchase of gilts the financing of the PSBR is bound to depend. The Chancellor may therefore gain nothing in relation to the money supply and the financing of the borrowing requirement. The one certainty is that to dump this enormous public asset on the market at this time would lead to an indigestion that would be likely to rule out the rights issues upon which British industry depends for new investment. [HON. MEMBERS: "Why?"] If hon. Members want to know why, they should read the Lex column in the Financial Times over the next few weeks.

The loss to private purchasers—perhaps to purchasers abroad—of the profitable parts of public industry is bound to increase the public expenditure needed to finance the less profitable parts that are left in the Government's hands. The fact is that the asset stripping on a mammoth scale to which the Government appear to have committed themselves would be financially unrewarding and economically disastrous.

The only alternative left to the right hon. and learned Gentleman if he wants to finance his income tax cuts is a massive attack on the living standards of the British people, particularly the poor, the unemployed and the pensioners.

Mr. Lawson

There is no point. They are not going to elect the right hon. Gentleman leader anyway.

Mr. Healey

The poor old fellow. I apologise, Mr. Speaker. I was addressing myself to the Financial Secretary, and not to you, as you will recognise.

Are the Government planning to cut transfer payments? It is time, now that we are reaching the end of the debate on the Queen's Speech, in which this matter has been raised repeatedly without drawing an intelligible reply from the Government, for the Chancellor to tell us frankly whether, like the previous Government, he intends to raise pensions and other benefits in line with earnings, or only in line with prices. He may be aware that the present Secretary of State for Defence, in one of the more comic interludes in the last general election campaign, when he appeared, in "Panorama", to be mercilessly bullied—perhaps it is unfair to use that word—by two of my hon. Friends, committed his future Government to raising long-term benefits in line with earnings, not prices. Is that the Government's position? The Secretary of State for Education, when speaking on the matter last Thursday, seemed totally unclear as to what his Government's policy was, and I do not blame him for being so.

If the Chancellor does not cut transfer payments, the only way in which he can raise money will be to increase charges, or inflict new charges, for services provided in the public sector. He has already decided to abolish the Price Commission to clear the way. That is why, last week, there was the 8½ per cent. increase in gas and electricity prices, timed to begin on 1 June. But what will follow? What will happen to the increase in railway fares, council rents, school meals and, above all, National Health Service charges? In Opposition, the current Minister committed himself to raising them substantially and to imposing entirely new types of charges.

Every £1,000 million that the Government seek to raise in this way will add 1 per cent. to the retail price index. If the Chancellor seeks, therefore, to find, say, £2 billion by increasing charges, the total increase in the retail price index, on top of the indirect tax increases to which he appears to have committed himself, will be 4½ per cent. In the week after the Budget, therefore, inflation will be running at nearly 15 per cent. if the Chancellor has his way.

That, however, is not the end of the story on prices. The right hon. and learned Gentleman has freed the private sector to increase prices to whatever level the market will permit. Bread went up by 2p for a large loaf only yesterday. The Government's agriculture policy will put an extra halfpenny on milk on 3 June. In addition, they are committed to devaluation of the green pound so as to increase the price of butter by 10½p per pound, bread by another 1½p, cheese by 9p and so on, adding another half per cent. to the retail price index.

In other words, if the right hon. and learned Gentleman attempts to carry out his policies to satisfy the expectations of those who voted for him, and those who wrote for him during the election campaign, he will have to finance them by means that increase the cost of living by 5 per cent. at a stroke.

The benefit of the income tax cuts will go mainly to the better off. The damage caused by the price increases will fall mainly on the lower paid, the sick, the unemployed and children at school. As one of my right hon. Friends pointed out during the election campaign, only one wage earner out of 10 will be better off, but the man earning £1,000 a week will be getting an extra £152 a week in consequence.

What will happen to pay in this situation, in the rest of this round and in the next round? The right hon. Lady has promised on many occasions that she will not intervene in any way in pay bargaining—with one exception, to which I shall return in a moment. At least, however, she has now agreed to talk about pay policy in some great new forum that includes employers, consumers, trade unionists—the lot.

According to the Secretary of State for Employment, this is to be an enormous experiment in adult education. But mathematics will not be on the curriculum, because the Secretary of State for Employment has made clear, contrary to the views that he took when he himself was in Opposition—I know that his views were not shared by his party—that there will be no attempt to introduce figuring into the pay-prices equation. He will rely simply on spreading through the nation a better understanding of the facts.

I have a great deal of sympathy with the Secretary of State's approach to these matters, but the Chancellor of the Exchequer will have to play a central role in any discussions of that nature, not only because pay policy is central to the whole of economic management in this country but because, if he wants to reach an understanding with the trade unions on this matter, he will have to be prepared to discuss not only pay but taxation, prices and many other matters.

Understanding is a two-way process, and the right hon. and learned Gentleman will not get far with the trade union movement if he treats its leaders and members as lepers. Again and again, he went out of his way over the past five years to insult the trade union leadership—"Ageing doctrinaire prejudiced Socialist trade union leaders", he called them, and the nicest phrase that he could find was to call them medieval barons.

The trade union leaders—I know how uncomfortable the right hon. and learned Gentleman is about all these questions—are prejudiced. They are committed by those who elected them to protect their members' living standards. They are not barons. As one of my hon. Friends pointed out in the debate last week, one of the problems of industrial policy is not the strength of the trade union leadership but its inability to compel or persuade its members in many cases to do what the leadership thinks best.

I suggest to the right hon. Lady, who herself will have to play a central role in these discussions, that if she is not prepared to talk to the TUC she should at least talk to the Conservative trade unionists—to Lulu and Pete Murray—and see whether they can get their own Conservative members to work with a Government who are deliberately throwing them out of work and forcing prices up to record heights.

The nature of the problem that the Government face here is daunting. I do not deny that. The last Government were half-way through real discussions, with figures, with the TUC and CBI when the general election was called. It was already obvious that if we were to get inflation down to 5 per cent.—an objective shared with the last Labour Government by the right hon. and learned Gentleman—by the beginning of 1982—that, I think, is a common target between both sides of the House—we should need an increase in the nation's earnings no higher than 7 per cent. in the pay round after next; in other words, an increase of only half what looks like the current rate.

Unless there is to be a superhuman and miraculous fall in the level of earnings in 1980–81, we shall have to get at least half-way there in the next pay round which begins in August, only two months hence. That would mean settlements in the next pay round averaging no more than about 7 per cent., or, indeed, perhaps less, given the effect of comparability in the public services and the great boost to pay claims in the public sector created by the present Government's decision to pay out 30 per cent. to the Armed Services at a stroke.

Yet the right hon. and learned Gentleman has put himself into the position in which, if he is to carry out his Budget promises, he is liable to bring the increase in the cost of living to 15 per cent. or 16 per cent. before the next round begins. I am sure that that must be the reason—at least, I put this to him as a question—why the right hon. Lady refused to rule out a pay freeze. But if she sought to introduce a pay freeze at the beginning of the next pay round, she would be forcing the biggest fall in living standards on working people which this country has ever known in a single year.

Does the right hon. Lady really think that she can make a pay freeze stick without industrial disruption on a scale that would dwarf even that which occurred during the three-day working week? Even if she made it stick, what would take its place? It would be bound to be followed by the father and mother of all wage explosions.

Mr. Peter Tapsell (Horncastle)

The right hon. Gentleman has devoted the whole of his speech to describing the extraordinarily difficult legacy that he has handed to his successor in office as Chancellor. But who has been responsible by his stewardship for creating this state of affairs over the past five years?

Mr. Healey

I think that the House will agree that what I have been describing is the dilemma in which the Government have put themselves by irresponsible electioneering promises in the past week or two. I do not know how the right hon. Lady will escape from the box in which she has locked herself. I doubt that she does, either. Certainly, the financial markets do not. That is why gilts, equities and the pound have all fallen since the general election, as the implications of Conservative election promises have begun to sink in.

Will the right hon. Lady go on battering her head against the brick wall of facts in the hope that it will collapse before her skull cracks, or will she follow the precedent set by her predecessor and perform yet another U-turn, followed dutifully by the whole of her Front Bench as her predecessor was followed by her and by the right hon. and learned Gentleman?

Either way, the British people, I fear, are in for a painful lesson, because all the policies to which the right hon. Lady committed herself at the time of the election were tried by her predecessor and failed. Why does she expect to succeed where the right hon. Member for Sidcup (Mr. Heath) was forced to admit failure within 18 months? He, after all, was a paragon of pragmatism and flexibility compared with her. The problems that our country faces today demand patience, humanity and understanding. The right hon. Lady approaches them with all the one-dimensional subtlety of a comic strip. She is bound to fail. I only pray that her failure does not cost our country too much.

4.19 p.m.

The Chancellor of the Exchequer (Sir Geoffrey Howe)

The right hon. Member for Leeds, East (Mr. Healey) made a characteristic speech, and perhaps nothing was quite so characteristic as the way in which he closed—he of all people least qualified to do so—calling for patience, humanity and understanding.

The right hon. Gentleman asked me a number of questions about the way in which we were preparing our plans for the Budget. I must tell him at the outset that it is not my purpose, save in respect of one or two matters of pressing importance, to announce decisions today, since those will be for announcement in the Budget Statement next month, and the House will not expect me—neither would the right hon. Gentleman himself—to anticipate it on this occasion.

There were several other curious qualities about the right hon. Gentleman's speech. I must say that the invective with which he started was less amusing and less attractive than usual—the product of a great deal of monastic midnight oil and intense study of the saints of the Church—and by the conclusion of it he had succeeded in driving his right hon. Friend the former Government Chief Whip into a deep comatose slumber, which was a fair judgment on it.

But there were some remarkable insights in the right hon. Gentleman's speech. I noticed that whereas throughout the general election campaign, when asked questions about the public sector borrowing requirement and about his own plans for dealing with it, he was about as unforthcoming as a Trappist monk, unwilling to tell the nation or the electorate one word about the forecasts that he was then making, today he was only too ready to belabour and batter those of us on the Government side of the House with the horrors that he had left behind him but was unwilling to reveal to the nation at the time of the general election.

An even more characteristic transformation on the right hon. Gentleman's part was the way in which, throughout the general election, he trumpeted from one end of the country to the other about his enormous generosity in having cut income tax by £1,000 million. My hon. Friends will remember well the boast of the cuts that he had made—thousands of millions of pounds—before that. Today the scene is transformed and he tells us, with a candour that the nation did not get at the time of the general election, that the implementation of the Rooker-Wise amendment was not a cut in income tax at all. This is surely very characteristic of the right hon. Gentleman. [Interruption.] Why, in heaven's name, did the right hon. Gentleman spend the entire election campaign, in broadcast after broadcast, boasting about his generosity if it were not so?

The right hon. Gentleman appeared to have some sense of grievance at the decision of this House of Commons, before the election, to deprive him of the opportunity of what he was pleased to describe as his "normal" Budget on 3 April. I must say that he takes a great deal of satisfying, because during his tenure of the Exchequer he introduced five "normal" Budgets and 10 "abnormal" Budgets, and for most of us that was more than enough.

It is possible now to appreciate a great deal more clearly than we have done throughout the last five years the magnitude of the task that the right hon. Gentleman and his colleagues have left for us to undertake, because we are no longer now obliged to view the landscape solely through the distorting lens that he so often held up for us. That is an important change that we have achieved.

Of course, there have been other changes that the House might like to notice in the familiar case in these debates as a result of the successes achieved by my hon. Friends in the general election campaign. Victory in Cornwall, North and Luton, West has simultaneously struck down the economic spokesmen for the Liberal Party and the Tribune Group. I dare say that we shall learn to live without those estimable gentlemen.

Success by my hon. Friend the Member for Southampton, Test (Mr. Hill) makes it—I hope, at least—less likely that the distinguished former Member for that constituency will be able in the future, in a single speech, to knock two cents off the dollar exchange rate. I hope that my hon. Friend the Member for Test will not seek to emulate that achievement of his predecessor.

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

Smear.

Mr. Healey

Will the right hon. and learned Gentleman admit that if he looks at the figures he will find that he has knocked more than that off the exchange rate by his own actions in the last fortnight?

Sir G. Howe

The right hon. Gentleman knows that we have taken no actions yet and that they are for announcement at the time of my Budget. The changes that have taken place—the improvement in the exchange rate—were no doubt due to the expectation of our arrival in office. The subsequent deterioration was due to the realisation of the nature of the legacy that the right hon. Gentleman had left behind him.

It is important for the whole House and, indeed, for the country to understand the gravity of our condition. It has become increasingly fashionable—often in speeches from Opposition Members—and all to easy to claim that our economy has been in decline for at least a century. In a sense, that is true, because in the Industrial Revolution we started ahead of other people. Certainly the growth of our economy has for many years lagged behind that of other European countries, but that is too comforting and too easy an alibi.

If we look back to 1950, we find that even at that time Britain was still one of the world's great commercial and industrial nations. We accounted at that time for one-quarter of the world's trade. Our standard of living then was almost the highest in the world—almost twice as high as that in Germany or in France. Our rate of growth, be it remembered, between 1950 and 1960 was faster than in any decade for which records exist. So much for the oft-repeated myth of the so-called 13 wasted years.

It is during the last 15 years that the deterioration has become serious. Our share of world trade has fallen to less than 10 per cent. This has been accompanied by a steady decline of some of our major industries. We produced no more iron and steel last year than in 1957. Last year we produced no more cars than we did in 1960. In the past 15 years, our share of world markets for cars, ships and steel has been halved. Over the same period, more than 1 million jobs have been lost in manufacturing.

Those trends have been made much worse by the developments of the last five years. The general decline of our manufacturing industry has accelerated in those five years. Manufacturing output last year was more than 4 per cent. down on what it was in 1973. Over the same period, productivity in manufacturing rose by a meagre half per cent. a year.

None of that was changed by last year's brief spurt in living standards. On the contrary, foreign competitors have continued to gain an increased share of our domestic market. Last year, consumers' expenditure rose by 5½ per cent., but manufacturing output rose by less than 1 per cent. Last year the volume of manufactured imports rose by 13 per cent., but the volume of manufactured exports rose by less than 2 per cent.

Some hon. Members may have read the fascinating and, I thought, rather disenchanted lecture given just 12 days ago by the former Secretary of State for Trade, the former Member for Birkenhead, Edmund Dell. In view of the facts that I have just quoted about the events of the last five years, they may agree with me that the former Secretary of State for Trade was unduly kind in describing the previous Government's industrial strategy as "stillborn". Opposition Members seek today to accuse the present Government of inflicting grave damage on Britain's economic performance. We could not dare to match their achievements in that respect.

Only the advent of North Sea oil has prevented the deterioration in our industrial performance being translated forthwith into sharply falling living standards and a seriously adverse balance of payments.

The right hon. Gentleman appeared to think that I had no right to be astonished. I was certainly astonished to hear him today seeking to boast about and to take credit for his achievements in respect of the balance of payments. He should remember that just two and a half years ago he told the International Monetary Fund that he expected last year, 1978, a current account surplus of between £2 billion and £3 billion. In the result, and notwithstanding a contribution from North Sea oil and gas of £3½ billion, last year's external account was barely in balance. On the external side we still have inherited overseas debts of more than $20 billion. All these things are part of the legacy that the right hon. Gentleman has left for us.

North Sea oil may have masked some of the consequences of our industrial decline but it has not prevented exceptionally high unemployment, which reached a post-war peak of 1,435,000. The Opposition amendment ventures to argue that our policies will increase unemployment. Once again, least of all are they entitled to make that charge in the light of their record.

Mr. Harry Ewing (Stirling, Falkirk and Grangemouth)

Can the Chancellor say that his policies will not increase unemployment?

Sir G. Howe

We must address ourselves to the problems with a view to transforming the underlying performance of our economy. The former Secretary of State for Education is no longer in this House, but her article about the results of the last election in effect said that the Labour Party is bereft of any solution to the problems. We believe that our solutions will improve prosperity, employment and living standards in this country.

During the last Administration, in sharp contrast to what has happened in almost every comparable country, real post-tax incomes in Britain rose by less than 1 per cent. a year over the past five years. Price inflation over the past five years has been faster than in any of our major competitors except Italy and retail prices have more than doubled. The rate of increase slowed down last year because of the favourable movement of world commodity prices and the effect of North Sea oil upon the strength of sterling. In April, however, retail prices were 10 per cent. higher than a year earlier and going up. That is without taking account of the last Government's attempt to doctor the price index by holding down until the election was well out of the way price increases on everything from gas to electricity, bread to beer and industrial gas to Weetabix.

It would be unfair not to acknowledge that my predecessor had some understanding of the importance of limiting the rate of growth of the money supply. His insight was, however, much more strongly supported by the International Monetary Fund than ever it was by his own party. One can understand that, whenever he refers to monetarism, he seeks to link it with some term of abuse, so that he can, on the one hand, claim credit for being associated with it and, on the other, look as though he has never soiled his hands by having anything to do with it. Even the modest control of the monetary aggregates that he attempted has been achieved only at a heavy cost in terms of high interest rates, which were needed to finance the last Government's excessive borrowing at times of persistently high rates of inflation. During the past five years the outgoing Government borrowed more than £40 billion at average interest rates of 13 per cent., thereby adding a huge burden to the debt to be borne by future generations.

I also draw attention to the serious fall in profitability under the last Administration. Average pre-tax real rates of return on capital had fallen last year to 4½ per cent. and in manufacturing industry were even lower.

In these circumstances, it is indeed remarkable to read in the latter-day election manifesto of the Labour Party the bold claim: Over the past five years, the Labour Government has laid the foundations of a stronger economy. My hon. Friends and I have had a good look for those foundations and have so far been able to find very little trace of them. A more accurate verdict on the last Government's record is to be found in an interesting news sheet, sponsored by the hon. Member for Oldham, West (Mr. Meacher) and the hon. Member for Vauxhall (Mr. Holland) among others, called "Labour Activist". In that publication the judgment is as follows: Labour's economic bequest … has been living standards among the lowest in Europe, nearly the worst inflation and unemployment which is forecast to rise from 1½ to 2 million in the next five years. It is clear from the decision that was taken on 3 May that the British people have come to the same conclusion and delivered a similiar verdict. They recognised, as my hon. Friends and I certainly do, that we have indeed been left with a dismal inheritance.

In those circumstances, it would be irresponsible and counter-productive for me or anyone else to suggest that our condition can be quickly transformed. We certainly have not suggested, nor do we, that an economic miracle is now in prospect. That kind of political currency has been savagely devalued by my predecessor. I do not intend to follow his example.

The Leader of the Opposition may remember using these words at the Labour Party conference in 1976: We have lived for too long on borrowed time, borrowed money and even borrowed ideas and we live in too troubled a world to be able in a matter of months or even of a couple of years to enter the promised land. The route is long and hard. It was true then, and he must bitterly regret today that he did not keep these words more firmly in mind.

Mr. James Callaghan (Cardiff, South-East)

The difference is that I said it before an election but the right hon. and learned Gentleman has waited until after an election to tell the truth.

Sir G. Howe

In speech after speech my right hon. Friends and I have spelt out the difficulties that will face us. As Chancellor of the Exchequer, in Budget speech after Budget speech the right hon. Gentleman spoke to the British people of the economic miracle that was just around the corner. The Leader of the Opposition spoke of the golden decade that was about to open for us. The harsh honest words that he uttered at that Labour Party conference, which were the first words that he spoke as leader, were forgotten. He must regret that he did not keep them in mind. I certainly shall not be found repeating the other error so often committed by my predecessor of suggesting that we can look for easy or automatic relief from hopeful changes in the international climate.

The prospect facing us is for continued slow growth of world trade of about 5 per cent. a year compared with 9 per cent. in the 10 years before the increase in the price of oil. So we cannot look for significant help from increased demand.

Growth in the major industrial countries is likely indeed to be slower this year than last. Save in a handful of economies, the problem of inflation remains severe. An important factor that has contributed to those prospects has been the sharp increase in oil prices. When account is taken of the various surcharges that are being imposed, the price of oil is now nearly 25 per cent. higher than it was in December. I mention that to make clear the reality of the world in which we live. Unlike the previous Chancellor, I shall not be coming to this House from time to time to say that, whatever I have been doing to the economy in this country, the world will float us off the rocks. The Chancellor all too often sought to present that sort of world.

In these circumstances, I look forward to discussion with my colleagues in other countries about our common task in struggling to improve that rather sombre prospect. Our search for common objectives will not mean common policies, because our circumstances differ, but shared understanding can help our policies to be compatible. The Government will therefore play their full part at the next economic summit to be held in Tokyo in June.

I look forward also to a close and fruitful association with fellow Ministers of the European Community. As my right hon. Friend the Prime Minister has already explained, that does not mean that this Government will be slow to look after United Kingdom interests in the Community or elsewhere. I have already made it clear at last week's meeting of the European Finance Council that we need urgently a change in the budgetary arrangements of the Community, which leave us at present with a net contribution to the Community quite disproportionate to our resources. [HON. MEMBERS: "Hear, hear."]

Right hon. Gentlemen opposite may say "Hear, hear", but that position is notwithstanding the financial mechanism for which the former Prime Minister took such credit and which gave him such pride when he negotiated it in 1975. The right hon. Gentleman was saying that I was astonished to find that. I said that anyone who had been concerned with the negotiations between 1971 and 1973—which includes the former Prime Minister when he was negotiating the financial meachanism—would have been astonished that, notwithstanding that, this was the outcome. It is justification for inviting our Community partners to consider seriously the matters that we press upon them from both sides of the House.

Mr. Douglas Jay (Battersea, North)

The right hon. and learned Gentleman introduced the European Communities Bill into this House. Can he therefore explain what astonished him last week at Brussels?

Sir G. Howe

I answered the right hon. Gentleman's question before it was asked. The former Prime Minister was nodding his assent. When he negotiated the financial mechanism, he thought, as we did in 1971–72, that that would not be the outcome. I venture to suggest that that view was also held by most of our Community partners. It is for that reason that we press our case as strongly as we do.

The difference between our approach and that of the Opposition is that we shall be approaching this issue in a constructive rather than a destructive spirit, showing that we want to engage fully and actively with our partners in developing the Community.

The problems that face us both at home and abroad are serious. I shall be making no rash promises. [HON. MEMBERS: "Oh."] No, I shall not do so—unlike my predecessor. Nor shall I fall into the habit of my predecessor of uttering vindictive threats. We shall be moving as quickly as possible, but we shall not allow short-term considerations to deflect us from our longer-term programme. Our concern will be with a policy for a Parliament—and a policy for the Parliament after that as well.

It is crucial in the first instance to conquer inflation. That calls for the firm maintenance of rigorous monetary targets and for the maintenance of consistent fiscal, spending and borrowing policies. It is essential to sustain that firm policy over several years. The first limb of this Government's strategy is an absolute commitment to a programme of that kind.

Mr. Denzil Davies (Llanelli)

rose—

Sir G. Howe

No. I have given way a number of times.

If properly sustained, such a programme can help not only to control inflation but to create conditions conducive to growth. Those engaged in determining wages and prices know that money will not be available to finance irresponsible increases. Businesses know that, provided public borrowing is controlled, finance for investment will be available—

Mr. Denzil Davies

rose—

Hon. Members

Give way.

Mr. Speaker

Order. It is quite clear that the Chancellor of the Exchequer is not giving way.

Sir G. Howe

I have been pressed, with some persistence, and in view of that I am not giving way. I have been giving way a good deal as I have made my speech. I repeat that businesses know that, provided public borrowing is controlled, finance for investment will be available on terms they can afford.

If this programme is to be effective, the public sector must, of course, accept its discipline. The strain of meeting targets of this kind must not all be borne by the private sector, whether through higher taxation, higher interest rates or credit rationing. The former Member for Birkenhead said: The structure of government in this country reinforces pressure for high public expenditure and the lack of any constitutional limit on borrowing reduces the pressure on a government to face up at once to the tax consequences of its own profligacy. The former Secretary of State has precisely identified the main failure of the Labour Government. They were unwilling to subject themselves to the same financial discipline as they prescribed for others.

The new Government will make sure that financial disciplines are applied to the public sector as much as to the private. Only in this way will the wealth-creating sector of the economy enjoy the assurance to which it should be entitled. It is important that this approach should be fully understood by those involved in pay bargaining.

It is evident that the overall rate of pay increases this year has been as high as last year, representing an increase of earnings of over 14 per cent. That is incompatible with our approach, and higher indeed than our predecessors hoped and intended. I must stress that excessive pay increases will lead, and can only lead, to the loss of jobs. That is the case for much greater moderation, realism, and responsibility in pay bargaining.

We intend to avoid detailed interference with the pay bargaining process. Our task—and it is vital—will be to create the right climate, particularly the disciplined financial conditions, within which the bargaining process must take place. Of course, the Government will necessarily be more closely concerned with pay bargaining in the public sector where they are directly involved, either as employer or as the provider of a large part of any settlement.

For it is essential here—as it is for similar reasons in the private sector—to reconcile the consequences of pay bargaining with the resources that are available, which are necessarily not unlimited. Thus my predecessor explained, on 25 January this year, his own determination to keep the public sector borrowing requirement this year within the limit of £8.5 billion. I shall be announcing my own conclusions in that respect when I come to make my own Budget Statement.

One thing is already plain—namely, that we shall need to secure a substantial reduction in the spending plans which we have inherited. That is indeed a central element in our strategy. For only in that way can we make room for reductions in personal taxation and maintain the firm monetary discipline that is needed.

One other thing that astonished me about the right hon. Gentleman's speech was his claim that he had left behind him a public spending programme that was well balanced and under control. The Labour Government's spending plans were already out of date by the time they were published in January's White Paper. The White Paper showed an increase in public spending in volume terms between 1977–78 and 1978–79 of over 6 per cent. The previous Government's plan was for a further rise of over 2 per cent. in the current year, giving a total increase of almost 8½ per cent. over the two years.

It was amply clear, even to the Labour Government, that the prospects for economic growth simply could not sustain increased spending on the scale which they had planned in their White Paper. The outgoing Government would certainly have had to cut their spending plans.

It is interesting to note that, when the right hon. Member for Leeds, East was seeking to warn people against the necessity for such a reduction in public spending that might be administered by a Conservative Government or to reject advice to that end, he immediately reached for such phrases as "such spending cuts would cause gross and immediate human suffering". All the emotional epithets came readily to his tongue. Yet when he finally announced in 1976, under pressure from the IMF, the huge public spending cuts he was obliged to make at that time, he said, as blandly as ever, "The cuts which I have announced this afternoon will create more jobs than they destroy."

Mr. T. W. Urwin (Houghton-le-Spring)

Now that the right hon. and learned Gentleman is on the subject of expenditure cuts, I am sure he will recall with clarity, as I do, the catastrophic effect on jobs following the massive public expenditure cuts by Chancellor Barber in the earlier period of Conservative government. Will he now tell the House how much unemployment is likely to arise as a result of the massive cuts which he now proposes to make, and to which he has referred repeatedly this afteroon?

Sir G. Howe

I do not understand the right hon. Gentleman's intervention, because Chancellor Barber, as he calls him, left office with very substantially fewer people out of work than when he took office. Indeed, in that respect every Conservative Government have been the same, in contrast to every Labour Government, since the war.

I am dealing with the background against which the right hon. Member for Leeds, East made his statement on 25 January. He said on that occasion that the Labour Government would not accommodate excessive wage increases in the public sector by increasing cash limits accordingly. He went on to explain: To the extent that reductions in volume were not brought about automatically by sticking to cash limits in the programmes concerned, they would have to be met by other cuts in public expenditure."—[Official Report. 25 January 1979; Vol. 961, c. 754–7.] Those conclusions were inescapable and right.

The total reductions in public spending that are necessary will need to be achieved progressively over the next few years. But we must make a substantial start at once and I shall announce in the Budget specific cuts in the previous plans for this year.

We shall also use cash limits vigorously, exactly as intended by the last Government, as an effective control on public spending. No increase will be made in the published cash limits for this year—either for central or local government—to accommodate higher price increases.

On pay, we propose an increase in the defence cash limit to meet the cost of the Armed Forces award and we will honour the commitments made by the previous Government to the health authorities and the universities. In the Civil Service, we intend to make economies in manpower costs this year, and these will offset part of the cost of the pay awards and be reflected in the relevant cash limits. My hon. Friend the Minister of State, Civil Service Department is answering a Question about this today. I shall have more to say on our approach to this year's cash limits in the course of my Budget Statement.

We shall make a similar approach to local authority expenditure, where there is also need for substantial economies. Here the Government's contribution is made through the rate support grant. We shall take account of pay settlements in calculating the increase orders for the rate support grant. But we shall make a significant across-the-board reduction from the total thus calculated so that, as with the Civil Service, we shall not allow the whole cost of the pay awards to be reflected in the cash limits. It will be for the local authorities themselves to decide how to make the necessary economies.

Mr. John Morris (Aberavon)

After the statement that he has just made about the rate support grant, will the right hon. and learned Gentleman give an indication of the likely increase in rates?

Sir G. Howe

I cannot give the House an indication of that kind because we do not yet know what the outturn of pay settlements and pay discussions will be. But the right hon. Member for Leeds, East will recall—indeed, he reminded the House today—that he gave indications as long ago as 25 January of the substantial impact both on rates and on the public sector borrowing requirement of substantial pay increases in the public sector. Those are some of the matters of which we are taking account in the measures that I have announced.

Of course, on their own those measures are not enough. The other key question—the right hon. Gentleman revealed how little he appears to understand this, even now—is how to achieve a major improvement on the supply side of the economy. He complained that in spite of what has happened in the past 12 months manufacturing industry is still sluggish at responding to growth in demand. It is for that reason that we attach as much importance as we do to improvements on the supply side of the economy to encouraging companies and individuals to produce more goods and services, and to produce them more efficiently.

Mr. Bruce-Gardyne

Before my right hon. and learned Friend goes on to the supply side, will he make it clear that if we continue to maintain the comparability Commission any awards that it may make will have to be accommodated within the cash limits that he will be announcing in the Budget?

Sir G. Howe

I have already made clear that, having made the calculations consequent on such pay increases as appear to be in the pipeline we shall make across-the-board reductions in cash limits so as to ensure that they are not fully accommodated. I have said that there will be no increase in cash limits to take account of variations in the price forecasts, but we shall be taking account of the pay increases and then making offsetting reductions, which will be announced in due course. [HON. MEMBERS: "When?"] As I have told the House, I shall have more to say on the approach to this year's cash limits, in all their aspects, in the course of my Budget Statement. The House will have to contain itself until then.

Mr. Kevin McNamara (Kingston-upon-Hull, Central)

Will the right hon. and learned Gentleman indicate those services supplied by local authorities that he intends should be cut or will have to bear an increase in rates in order to be sustained as a result of his action?

Sir G. Howe

The hon. Gentleman understands that the main central Government support for local authorities is through the rate support grant, which is not allocated to programmes. That is why I said that it would be for the local authorities themselves to decide how to make the necessary economies.

I now turn to our analysis of the supply side of the economy. The previous Government placed their faith in State finance and intervention, yet in spite of vast expenditure over the years on support for nationalised industries and subsidies and grants in other directions, the decline of British industry has accelerated. The truth is that State finance and intervention, by frustrating the market forces that channel resources towards where they are most productive, have been a major cause of our industrial difficulties. The high levels of taxation needed to finance State subsidies have on balance done more damage to industry than the subsidies have done good.

During the past five years more than £10 billion at present prices has been absorbed by public corporations in operating and investment subsidies and in debt write-offs, and a further £9 billion has been spent on industrial and regional subsidies and grants. The total assistance under these headings is now running at almost £3 billion a year. Moreover, the lion's share of that expenditure has been aimed at temporarily deferring the collapse of old jobs.

We are convinced that the main thrust in creating new jobs and new prosperity must come from new processes and new firms. That is why we attach such great importance to the role of small businesses. Recent studies in the United States, which is an economy a great deal healthier than that which we have had, show that two-thirds of all new jobs in that country come from companies employing fewer than 20 people. The same studies show that no fewer than four-fifths of such new jobs in the United States have come from firms less than five years old. We in this country reject that lesson at our peril.

Mr. Robert Kilroy-Silk (Ormskirk)

There are about 14,000 jobs in my constituency alone which are supported by grants under the Industry Act and the Labour Government's temporary employment measures. The comments that the right hon. and learned Gentleman and his colleagues made during the election about ending those subsidies and grants have led to a great deal of anxiety and uncertainty among my constituents. Will he end that uncertainty now by indicating clearly and specifically what subsidies and grants, which he has just spoken about in a very derogatory way, his Government intend to end?

Sir G. Howe

Nothing that was said by my colleagues and me in the election campaign did half as much to spread alarm and despondency thoughout the hon. Gentleman's constituency as the leaflet which I saw circulating on his behalf in that constituency threatening pensioners with a reduction in their pensions, threatening the introduction of hospital charges, and threatening the outright abolition of all industrial subsidies. The hon. Gentleman is the last person in the House to begin making claims of that kind.

Mr. Dennis Canavan (West Stirlingshire)

The right hon. and learned Gentleman should answer the question.

Sir G. Howe

We remain convinced that new jobs are more likely to come from new small businesses than from the large State agencies.

That brings me to the last point in our strategy—substantial reductions in personal taxation. This Government share the widely-held belief that lower personal taxes are an important ingredient of changes and the prospect of prosperity. After all, it was my predecessor who said: I definitely do think the present level of taxation serves as a disincentive and that rates must come down. The previous Chancellor of the Duchy of Lancaster agreed in particular, in a long and extended interview with Brian Walden, about the necessity of cutting the higher rates of income tax. He said: Of course that has to be done. Otherwise the consequences will be damaging to our economy. The previous Chief Secretary was even more explicit when he proclaimed on a television programme last autumn: How can one be happy with a tax system as unfair as this? Yet he remained happy with it for five years in the Treasury.

The Leader of the Opposition was yet more to the point when he told his party's national executive committee just over a year ago: If you want to retain power you have got to listen to what people—our people—say and what they want. If you talk to people in the factories and the clubs, they all want to pay less tax. They are more interested in that than the Government giving money away in other directions. What a pity the former Prime Minister did not take his own advice! They may have been Labour's people then. They are our people now.

Of course, the reduction in personal taxes cannot be achieved in one jump. Nor can it be financed entirely through reductions in public spending. That is why we are prepared to switch to some extent from direct to indirect taxation. But that change will offer more choice and greater incentives to individuals. It will return to people more of what is theirs, and allow them to do with it what they want, and not what politicians think they ought to do with it.

Those are the policies which we shall pursue, and that is the background against which I shall be framing my budgetary and other policies in the coming weeks—and months, and years. They are policies that will create new opportunities for industry and individuals. They are policies that will enable us to nurse back to health the sick economy that has been entrusted to our care.

I urge the House to reject the amendment.

4.58 p.m.

Mr. Don Dixon (Jarrow)

After listening to the eloquent speeches of right hon. and hon. Members on both sides of the House over the past few days, it is with trepidation that I make this, my maiden speech. It may be appropriate, as I come from Jarrow, that I make my first speech in a debate on employment. Jarrow knew unemployment as high as 70 per cent. during the free market days of the 1930s.

Like the hon. Member for Birmingham, Handsworth (Miss Wright), who made her maiden speech last week, I have received many words of advice from hon. Members on how to make my speech. I feel that all this worthy advice falls into four categories. The first is this. Do not upset Mr. Speaker or Mr. Deputy Speaker, and say something complimentary about catching the eye of the Chair. I am told that that is an investment for the future. Taking that advice comes fairly easily, because on the basis of what I have heard and seen of Mr. Speaker and Mr. Deputy Speaker, and the assistance I have received, I would compliment them on behalf of all new Members.

Secondly, I was advised "Say some nice things about your predecessor." To be truthful, I know nothing other than nice things to say about Ernie Fernyhough. Ernie is a person of great courage. He is a great character with a great sense of loyalty to the Labour movement.

Jarrow has been very fortunate with its representation in this House, certainly up to now. From 1935, we were represented by Ellen Wilkinson, a person loved by the people of Jarrow. She was a great little fighter who reached the highest positions in the land. When she died in 1947, we thought that no one could replace "Wee Ellen", as she was affectionately known in the constituency. Then along came Ernie Fernyhough, who quickly won the affection of the Jarrow people.

Ernie is a very humane person who had his feet planted firmly on the ground no matter what position of responsibility he held, and he held many. He was a full-time official of USDAW from 1939 until he was elected to represent Jarrow in this House in 1947. He was Parliamentary Private Secretary to the Prime Minister from 1964 to 1967. He was Under-Secretary of State at the Department of Employment and Productivity from 1967 to 1969, and he was made a Privy Councillor in 1970.

Ernie has served this House, the people of Jarrow and the Labour movement with great distinction. I have been a personal friend of his for many years and had the honour of being made a freeman of the borough of Jarrow with him in 1972. His wisdom will be missed greatly in this House.

Thirdly, I was told "Speak about the constituency." I am in a fairly good position to do so as I was born, bred and educated in the constituency. I have lived in no other place. Jarrow is an industrial constituency on the south bank of the river Tyne. We have coal mines, shipyards, factories and an unemployment rate which is far too high. Jarrow is well known for the ships it has built, the men it has bred and the march which took place in the 1930s for the right to work. It is a proud constituency, populated by honest and hardworking men—by miners, not millionaires, by builders, not bankers, by engineers, not racketeers, and by shipbuilders, not ship owners.

Having said that, however, I say that no one should get the idea that Jarrow is all smokey chimneys and cobblestones. The Labour-controlled local authority within that constituency has built new housing estates, new community centres, new shopping centres, and this week I shall be opening an extension to the Bede art gallery, which is known nationally.

I was proud when the Labour Party selected me, a local lad with an elementary education who has worked in the shipbuilding industry all his life. The constituency could have chosen one or other of the academics who applied for the seat when Ernie decided to retire—men who, incidentally, had more letters behind their names than I have in mine. I was doubly proud when I was elected with such a big majority by the people of Jarrow. Another endearing feature about Jarrow is that we have two Labour voters for every Tory voter.

Fourthly, it was suggested to me that I pick a topic from the Gracious Speech which could affect my constituency, but I was advised "Whatever you do, try not to be controversial." We Geordie shipyard workers are known for our bluntness and for calling a spade a spade—not to be controversial but to be truthful. So I say to Her Majesty's Government "Keep your hands off the shipbuilding industry." The workers in that industry have waited generations to see it nationalised, and they will not sit on one side and see it thrown back to the vultures of private enterprise who have no regard for the social consequences that unemployment brings. I wonder how many of those people know the humility of standing in a dole queue and signing the book with a pencil one and a half inches long tied to a length of string, which I and many others have had to do on a number of occasions.

We in Jarrow saw the asset strippers of the 1930s in action. They murdered our town through National Shipbuilders Security Limited, which bought up the old Jarrow Palmers shipyard, sold the assets, and put a 40-year embargo on the building of ships. My grandfather and my father were thrown on the streets along with many thousands of other good hardworking men.

Many of the problems in the industry today are there as a result of private enterprise. If it had not been for nationalisation, it is doubtful whether there would be any shipbuilding industry in the country today. When I hear right hon. and hon. Members talking about artificial jobs, I wish that they would come to my constituency to visit the dock bottom in the Mercantile dry dock, or the bowels of a ship at Hawthorn Leslie, and tell the men working in atrocious conditions there that they were doing artificial jobs.

It has been said that the profitable parts of the shipbuilding industry will be sold. I ask, what do the Government propose to do with the non-profitable parts? Shipbuilding faces worldwide competition at a time when there is a world recession in shipping. Many other countries which are competing with us for orders receive support of one kind or another from their Governments. One has only to think of Germany, Japan, France, Italy and the United States. What shipbuilding wants today is assistance, not the threat that is hanging over its head at the moment.

I remind the Government that the last Conservative Administration did their first U-turn when they tried to ignore the closures of the Upper Clyde shipyards, and the present Government will face the same problems if they try to denationalise and rape our shipbuilding industry.

In moving the Loyal Address, the hon. Member for Newcastle upon Tyne, North (Sir W. Elliott) said that many young students in his constituency had voted for him. I cannot argue about that. However, the young people of today are not so steeped in democracy that they will accept the solutions of the 1930s to the problems of the 1980s.

I turn to another topic. It has nothing to do with the subject of today's debate but it is a matter of concern to many of my constituents. In doing so, I remind you, Mr. Deputy Speaker, that in reply to the first point of order raised in this new Parliament, Mr. Speaker said that if hon. Members caught his eye they were free to speak on any subject which they thought ought to be in the Gracious Speech.

Will the Secretary of State for the Home Department please reconsider the phasing out of television fees for all retirement pensioners? I ask this because of the many anomalies which exist in my constituency. A retired person who lives in accommodation provided under part V of the Housing Act 1957 and is provided with a warden or communal facilities by the local authority can acquire a concessionary television licence, yet someone who has not got these facilities, who is retired and who lives across the road cannot get it. We hear about millions of pounds of tax concessions. Surely it would not be too much to ask for the additional money for this purpose.

My grandfather, who was a plater's helper in the old Palmer shipyard, told me when I first became involved in trade union affairs many years ago "If you intend to speak, always think first and make sure that what you have to say is an improvement on the silence." I hope that I shall do that during my time in this House.

5.9 p.m.

Mr. Maurice Macmillan (Farnham)

One of the pleasures of speaking in this House is to be able to congratulate an hon. Member on his maiden speech. I do so on this occasion with particular personal pleasure because although my own political start was made not so much on Tyneside as on Teesside and the first general election I contested was a little further south at Seaham Harbour, I had the benefit of the advice and help then, and at other elections afterwards, of a Tory trade unionist. He came from the constituency of the hon. Member for Jarrow (Mr. Dixon) and, like him, he made his political start, as a Tory, in Jarrow. If he were alive today, he would be one of the quarter who did not vote for the hon. Member.

The hon. Member for Jarrow follows in a great tradition of Members speaking out for the people of his constituency and for others in similar situations. From what we have heard today, we can say without much doubt that the hon. Member will follow in that tradition, saying what he believes to be true regardless of whether it is popular with his colleagues or with the Government. He has made, if I may say so without impertinence, a good outspoken start. I know that the whole House will look forward to hearing from him again.

In the period since the Second World War, there has been a continuation of growth: in the national product; in the expansion of public policies; in the take-home money available—that is, in net profits, rents and savings income as well as in wages and salaries. There has been a triple expansion of national output, public spending on public policies, and money left in the pockets of individuals. This expansion applies more or less to all the countries within OECD but the three elements of growth do not apply evenly within one country or as between different countries.

I take public policies as an example. In the period from 1951 to 1976, Sweden and Italy doubled the proportion of the gross domestic product that went on public policies. In Germany, the proportion rose by 15 per cent., from 31 per cent. to 46 per cent. In Britain, it also rose by 15 per cent. from 34 per cent. to 49 per cent. Britain and Germany had a directly comparable rise in the proportion of the gross national product going to public policies, although we ended with a rather higher proportion than the Germans.

If we look at the growth of gross domestic product over the same period, we see that German growth was at the rate of 6.1 per cent. a year, with a total growth of 310 per cent. over the whole period. Britain could achieve a rate of growth in the gross domestic product of only 2.8 per cent. a year—a total of 102 per cent.

The effect of these disparate rates on take-home pay is clear. The money left in the hands of individuals in Germany during that period went up by 4.5 per cent. a year. By contrast, the equivalent increase in Britain was 2.1 per cent. a year. Over the whole period, take-home pay in Germany rose by 175 per cent. per head compared with only 51 per cent. per head in Britain. That is partly due to the different approach of the German Government to the problem of direct taxation.

Unfortunately, the Chancellor of the Exchequer has to contend with a rate of growth that is slowing down. In the six years from 1970 to 1976 the rate of growth of the German economy—the gross domestic product—averaged 2.5 per cent. a year rather than 6.1 per cent. and in Britain 1.9 per cent. rather than 2.8 per cent. One figure that is not going down is the rate of increase of public policies. Those policies are continuing to expand at a rate faster than the expansion of the gross domestic product. At the same time, the demands to maintain take-home pay at a level that is increasing in real terms have produced a grossly overloaded political economy with which the Chancellor has to deal.

The Chancellor of the Exchequer has somehow to relate past commitments in public policies to present resources. One of the difficulties he faces, it must be admitted, is that public policies, like motor cars, are difficult to maintain and the older they are, the more expensive they are to maintain. Policies initiated at a level that seemed quite reasonable and within the compass of the political economy have a tendency over the years to become open-ended commitments trying to meet not only needs but wants out of the public purse. This is an area on which the Chancellor must operate quickly and make savings as rapidly as possible. If he cannot make enough savings immediately, he must commit himself to a firm timetable.

Secondly, the Chancellor has to try to encourage a higher rate of growth of our national output without adding to inflation by accelerating the demand for funds at a time when people are finding it difficult to save and when industry is not producing the profits for reinvestment. I say to right hon. and hon. Members on the Labour Benches that the ownership of industry—whether it is publicly or privately owned—in this analysis is totally irrelevant. Unless industry is generating funds to contribute to the growth of the national output, it is nothing but a drain on the taxpayer. That drain on the taxpayer may be reasonable for certain purposes. It is reasonable in the case of pensions. But there must be no illusion that any industry, because it receives public investment and exists in the so-called public sector, is necessarily for that reason making a contribution towards the rate of growth of the economy as a whole. It is much more likely to be doing the reverse.

The third element in the Chancellor's problem is to protect take-home money. This is necessary to move people back into the regular economy. A large number of people are now doing jobs for cash rather than pay tax. Who can blame them when, for most people, £1 cash paid without tax is worth £3 of regular taxed earnings? We must take steps to reduce direct taxation and so protect take-home pay. In that way, we have some hope of making wage demands more realistic and diminishing the cost-push element in inflation. Who can blame people for putting in high wage demands when their increased earnings are taxed at an increased rate and they get relatively less out of greater effort, which buys less in the shops because of the rate of inflation?

The other reason for protecting take-home money is to leave in industry the profits that are required to finance not only new investment but increased output from existing investment. I know of no country that has succeeded without cutting direct tax rates considerably at the same time as public policies are reduced. The right hon. Member for Bristol, South-East (Mr. Benn) yesterday implied that this line of thinking was inhuman and almost anti-Christian. He rather conveniently ignored the parable of the ten talents. He also ignored the fact that the modern Welfare State benefits everyone, not just a few, and by no means necessarily the poorest element of the community. I am not casting blame on anyone. Over the years it has got to the point where we are attempting to meet through the Welfare State organisation people's wants as well as people's needs. This is bound to overload the political economy to the point of near collapse.

The right hon. Gentleman also ignored just who pays income tax. It is easy for the Chancellor of the Exchequer to cut the higher rates of tax. If he reduces the top rate to 60 per cent., all he loses in revenue is about £240 million—1.3 per cent. of the total yield. If he cuts it to 50 per cent., he loses £445 million—about 2.5 per cent. of the total yield.

The cruel fact is that, of the £19 billion which is raised in income tax, all but £1 billion comes from taxpayers paying at the rate of 33 per cent. or less. The total yield from people paying 34 per cent. and upwards is only £980 million. Therefore, the great burden of direct taxation falls on the average and below-average earner, which must mean raising the tax thresholds as well as cutting the rates of tax.

The right hon. Member for Bristol, South-East in his astonishing speech yesterday also quoted "The Middle Way", I gather, with some approval. He seemed to forget that the policies set out in that admirable book were designed to deal with a general depression caused by a failure of the United States stock market which in turn was caused by Hoover's tariff policies and by the fact that in 1922 he raised taxation in the United States to near 1920 levels.

The right hon. Gentleman did not take his history any further back. If he had, he would have seen that the Republican Government, immediately after the First World War, cut direct taxation considerably. In the period 1921 to 1929 there was an enormous rise in the gross national product of the United States—about 54 per cent. in real terms—because prices fell at the same time. There was a higher yield from lower tax rates, and the United States national debt was reduced from $24.3 billion to $16.9 billion. That flowed from a cut in direct tax and liberal economic policies, which were reversed by the policies Mr. Hoover brought in—policies which Opposition Members are advocating.

Mr. Eric S. Heffer (Liverpool, Walton)

The right hon. Gentleman referred to his father's book "The Middle Way". It may be some time since the right hon. Gentleman read it. Is it not clear that an essential aspect of "The Middle Way" is that it argues for economic planning? It is impossible to deal with the economic problems of capitalism and to maintain capitalism without a measure of economic planning. I am sure that my right hon. Friend the Member for Bristol, South-East (Mr. Benn) was arguing that point in relation to "The Middle Way".

Mr. Macmillan

"The Middle Way" was dealing with a particular situation.

Mr. Heffer

I shall quote from it.

Mr. Macmillan

It did believe in planning. Conservative philosophy has never been anti-interventionist. We are not and never have been Manchester school liberals.

The right hon. Member for Bristol, South-East went on to quote the extent to which the German Government have been interventionist and have been successful in intervening. But he did not quote what they did earlier. He did not refer to the massive reductions in direct taxation made by Chancellor Erhard, starting in June 1948 and continuing in 1951, 1954, 1955 and 1958. Enormous reductions in direct taxation in those years produced a higher yield—the so-called German economic miracle—and an increase in revenues which enabled the Germans to construct a better Welfare State than ours on a sounder foundation and make a considerable defence effort on their own account. Therefore, I hope that nothing will deter the Chancellor of the Exchequer from cutting direct tax rates.

No amount of planning, however well carried out, will make things better if the marginal rates of tax at every level are too high. Perhaps I may quote the most planned country in the world—the Soviet Union. The agricultural system there is based on workers on collective farms being provided with all that they need by way of capital, equipment, housing and food and being allowed to keep 10 per cent. of the output of the collective. They are therefore taxed at a marginal rate of 90 per cent. and, as a result, they put in minimal effort. The result of that effective marginal tax rate of 90 per cent. is that the Soviet Union's output is not sufficient to feed itself. About 14 per cent. of Soviet workers are engaged in agriculture compared with 2 per cent. in the United States, but the United States' surplus is about a quarter of the output of the Soviet Union.

We see the same effect when we look at the other side of Soviet agriculture. People working on collective farms are allowed to keep the entire output of their own individual plots of about an acre. In other words, their output from those plots is taxed at a zero rate. As a result, although private land in the hands of workers is only 1 per cent. of the total agricultural land, it produces about 27 per cent. of the total agricultural value. That is the difference between very high marginal rates of tax and no marginal rates of tax.

That can be even more strongly illustrated. When Mr. Khrushchev effectively increased the marginal rate of tax on peasant workers on collective farms by halving the acreage which was allowed to them, it had a disastrous result. Output fell even further not only from the privately held land but from the collective farms. It was not until Mr. Brezhnev restored the situation that things got better.

The point that I make to the Chancellor is that fiscal conservatism demands that a smaller proportion of the national output should go to public policies. The very high proportion going to public policies is starving the more productive end of the economy. That is so whether it is in private or in public hands. Ownership is irrelevant.

Fiscal conservatism does not mean that the Chancellor has to have a balanced Budget. I regard the need to cut taxation to achieve the results that I have described in other countries as of overriding importance. It may be that he will have to put up value added tax. I think that he could well put up the tax on drink and tobacco. But I hope he will not go too far.

For I am not so concerned as many others about the short-term effect of adding to the borrowing requirement. The effect on individuals is very much the same as any other method of financing, for the real tax on people is public spending—public policies. One way or another we pay: by very high rates of tax falling largely on the lower rather than on the higher earners; through inflation; through interest on borrowed money. So long as public policies take up such a high proportion of the national output, it is we, the people, who pay, because there is no one else to do it.

I should prefer to see the Chancellor boldly cut direct taxation in his first Budget, even it means adding rather more than he would like to the borrowing requirement short-term. I believe that would release the kind of energies that it has released elsewhere and lead to the expansion of the economy, without which it is not possible to pay off debt long-term. He would be wise to set targets for reducing the borrowing requirement, but he will achieve those targets only from an expanded economy.

Whatever point of view we may have, it is no good trying to pretend that an overloaded political economy is the consequence of inflation. That is not so. Inflation is the consequence of an overloaded political economy. Our economy is heavily overloaded. It can be dealt with only on the lines that I have suggested. It will be difficult and perhaps there will be an element of risk. However, the risk of doing nothing, of trying to continue in much the same way as before with slight alterations or small tax reductions, is far greater.

Britain, perhaps Italy, and Sweden are further down the road of overloading their political economies than other industrial countries. We can no longer afford the luxury of doing nothing while pretending to take action.

5.31 p.m.

Mr. Michael Meacher (Oldham, West)

I think that we must show some sympathy for the Chancellor of the Exchequer, because he was speaking before delivering his Budget next month. To that extent he could not be very enlightening, and he certainly was not.

In the first part of his speech the right hon. and learned Gentleman fell back on the traditional device of Chancellors who have overcommitted themselves during an election and who have to meet their commitments—namely, blaming one's predecessors. I felt that there was a strong smell of retreat in the earlier part of his speech. He seemed to be retreating from manifesto promises and from some of the undoubtedly considerable expectations that have been built up in the electorate. There was nothing he said and nothing that he could seriously have learnt in the past two or three weeks that he did not know before the election. He has made some important promises and he will not now be able so easily to evade them.

The Chancellor gave no indication of how increased commitments in terms of tax cuts and increased salary awards via the comparability Commission are to be compatible with cutting the public sector borrowing requirement by at least £2,000 million, if not rather more than that, in addition to the revalorisation of allowances. Instead, in the latter part of his speech he insisted on talking broadly—to some extent the right hon. Member for Farnham (Mr. Macmillan) did the same—about producing the right environment and drawing more on the philosophy in the Queen's Speech.

The Queen's Speech is rather a thin document, but to its credit it at least purports to be addressed to the fundamental problem of reversing Britain's industrial and economic decline. However, the Government's case, the Chancellor's case and the case for fiscal conservatism advanced by the right hon. Member for Farnham—fiscal reductions combined with cutting public expenditure—are based on four main premises, all of which are false and can be shown to be false. They are built on myth and not on fact. Even if they were correct, I believe that the conclusions that they draw, and the remedy that the Chancellor proposes on their basis, would not redress the central problem that he diagnoses.

Nobody questions the fact of British decline over the past 20 years. Industrial production in France, Italy and Germany has increased threefold or fourfold. It has increased in Japan by a staggering tenfold. In the United Kingdom it has scarcely doubled. The causes—as the Queen's Speech rightly acknowledges—lie in the low level of investment and the poor utilisation of such capital investment as there has been.

The Queen's Speech emphasises the Government's belief that the main reason for the lower level of investment lies in lack of incentives and in low profits. The reasons that the Chancellor and many other Conservatives habitually advance for low profits are that there are too many strikes, too high taxation, too much public expenditure and too low a level of productivity.

Overall, the British strike record has been worse than that in West Germany, France and Japan, but it has been rather better than in the United States, Canada and Australia. The strike figures are more or less insignificant when they are set against the overall effect on production. A recent Department of Employment report revealed that only one in every 50 firms in Britain has a strike in the average year. Therefore, strikes cannot be the main cause of the differences in output that I have mentioned.

Secondly, there is taxation, which will be a favourite subject of this Parliament. Direct and indirect taxation and social security payments, when we consider the facts as opposed to convenient myths, form a lower proportion of national income in Britain than in any other industrial nation except Japan and the United States. Furthermore, Britain is the one country in the Western world where taxes and social security contributions decreased in the 1970s. In the economies of our main competitors they increased.

Company taxation in Britain is effectively the lowest in the industrial world. In that respect the incentive to invest in Britain can hardly be higher. Conservative propagandists—I include the right hon. Member for Farnham in that category—always stress the supposedly punitive effect of an 83 per cent. marginal rate of tax on the top slice of income. Everybody attacks that level of taxation, but they ignore the huge allowances against tax that now amount to about £4,000 million a year. That is the value of allowances against direct taxes. The actual rates of tax for any high earner who has his head screwed on are considerably reduced. I took the precaution of studying the latest issue of Economic Trends, a Government publication. I found that a man on over £10,000 a year, which is the highest income category in the report, pays only 24 per cent. of his gross income in tax and national insurance in a year. That is rather different from 83 per cent.

The Tory argument about high public expenditure does not hold water when we consider the facts. A Treasury answer of 7 February showed that total general Government expenditure in the United Kingdom was almost exactly the EEC average. It is certainly not higher than the EEC average. It is only fractionally higher by 1 per cent. than in France or Germany.

Fourthly, I refer to productivity. Output per man in British manufacturing industry increased as industrial manpower declined. In the decade to 1965, productivity increased by about 3 per cent. a year. In the decade after that, it increased by 4 per cent. a year. What let Britain down was not low productivity, as has been so often conveniently said, but rather the fact that industrial investment has been so low that it was unable to absorb the labour savings from existing productivity schemes.

Mr. Percy Grieve (Solihull)

Will the hon. Gentleman tell us on what basis productivity increased by 3 per cent.? Is not it right that our productivity is still amongst the lowest per man in the Western world?

Mr. Meacher

No. Output per man hour in manufacturing has been increasing faster than that of many of our competitor countries. It is convenient for Government supporters to take the view that low productivity, which they so easily equate with strikes, is our main problem. That is not what international figures, drawn up on an independent basis, show. The four main pillars of Tory policy for expansion are shown to be misguided on the evidence of the facts.

The crucial sentence in the Queen's Speech says: By reducing the burden of direct taxation and restricting the claims of the public sector on the nation's resources they"— the Government— will start to restore incentives, encourage efficiency and create a climate in which commerce and industry can flourish. That sentence does not measure up to the real facts of the world. This country does not have a disproportionately high-rate burden of direct taxation net of allowances—what people pay counts—nor does it have a disproportionately high level of public expenditure.

The second part of the case against the Government is that, even supposing that those facts were true, as the Government said, their policies would still not provide the remedies. Nye Bevan had a telling phrase when he said that there was no need to gaze into the crystal ball when we could read the book. We may read the book of history well. I do not think only of the fact that the last burst of Tory expansion was dissipated in a property and asset-stripping boom.

There is a much better test of the Government's contention that to raise profits and increase incentives will provide those who own and manage capital with the necessary incentive to invest in production. I refer to the years 1955 to 1965, the most prosperous decade in post-war British history. Those were Tory years, when the industrial rate of profit after tax was higher than at present. It did not fall in that time, It stayed at around 10 per cent. Those were the days when inflation never topped 3 per cent. or 4 per cent. a year and when interest rates were still, judged by today's standards, very low.

Although profits in those good years were high in the United Kingdom, our rates of manufacturing investment in the best decade since the war remained substantially lower than those of all our main competitors. Our manufacturing investment stood at about 4 per cent. of GNP compared with 5 per cent. to 7 per cent. in France, 7 per cent. in Germany, 7 per cent. to 8 per cent. in Italy and 8 per cent. to 11 per cent. in Japan. It was considerably higher in the main competing countries. However inconvenient, the truth must be faced. Industrial investment here has always been low and only marginally affected by the rate of profit.

Will the Government give an answer to the question on which the Government's strategy, as set out in the Queen's Speech, seems to hinge? Why do the Government now expect manufacturing investment, on which they base their strategy, to revive by increasing profits in conditions of higher inflation, higher interest rates and more depressed international trading conditions today, when 10 to 20 years ago—when all those conditions were more favourable and profits higher than now—manufacturing investment did not increase in a private market system?

The Government must answer that question. In the absence of an answer, we are being served up with fraud and deception in the Queen's Speech. It gives expectations about what can be achieved within the private market which do not stand up to the realities of modern industrial life in Britain.

What are the reasons for low manufacturing investment? There are many. First, I cite the scale and the nature of Britain's former empire. It left us with a network of international commitments that led to excessively high expenditure that we could no longer afford. That was mainly in the area of defence and in the international role of the pound and overseas investment. Yet those are areas in which, with incredible folly, the Government now propose to increase our commitments.

The second reason—more directly—is responsibility for our low investment. I agree with the acknowledged view in the Queen's Speech that this is at the base root of our poor industrial performance. The responsibility must be shared in three ways. First, it lies with the financial institutions, and those who manage them, for their reluctance or refusal to play a serious part in the reconstruction of our industrial nation and a preference that they have exhibited so often in the past for quick profits through property, land and overseas speculation. Secondly, it lies with industry for failing to demand of our institutions the services, especially in the provision of medium and long-term finance, which are taken for granted abroad.

Thirdly, the fault lies with the Government for failing to compel—it is a word that is accurate about the experience of Governments in France, Germany and Sweden—or induce our financial institutions to play a full part in supporting British industry. It is illusion to assume that this deep-seated problem may be remedied by increasing incentives within the private market. Yet that is the philosophy with which the Government came to power.

Already, corporation tax is almost negligible. It accounts for 5 per cent. of trading income. In 1975, the rate fell below 1 per cent.

Mr. A. P. Costain (Folkestone and Hythe)

Does the hon. Gentleman appreciate that in world competition conditions we are working at margins of 1 or 2 per cent.? Does he realise that 5 per cent. is a great deal of money in terms of competition?

Mr. Meacher

The hon. Gentleman refers to 5 per cent. of trading profits. Ten years ago, industry was able to pay, and did pay, 20 per cent. to 25 per cent. of trading profits. That shows how far the rate has slipped. Not only that. The Labour Government gave immense assistance through their stock relief scheme, which was worth several billions of pounds. They gave a great deal of liquidity to British industry—an advantage which was not shared abroad.

Already, mainsteam corporation tax is down to as little as £2 billion a year. It is almost equalled by Government handouts to industry which I thought totalled about £1¼ billion a year. However, I think that the Chancellor referred to the total value as being £3 billion. To withdraw or reduce those handouts, as the Government seem determined to do, can only make matters worse. We apparently have a Government with a Secretary of State for Industry who recommends his officials to read Adam Smith. We have a Prime Minister who, if she recommends anyone to undertake any reading at all, can only recommend them, judging by what we have heard of her, to read Samuel Smiles's "Self Help". But that was written in 1840 or thereabouts, and the world has moved on since then.

The Labour Party, in its programme, has faced up to these realities and has developed a set of instruments which take full account of the collapse of private market mechanisms. But what this Government seem hell-bent on doing, that is, to return to a bygone industrial era—which, according to the Secretary of State for Industry, was a world of perfect or near-perfect competition between galvanised entrepreneurs—shows every sign of turning out, like most Conservative endeavours, to be a costly attempt to perpetuate the past on borrowed money and borrowed time.

5.51 p.m.

Mr. John Heddle (Lichfield and Tamworth)

May 1, Mr. Deputy Speaker, express to right hon. and hon. Members on both sides of the Chamber, and to the Officers of this place, my sincere gratitude, as a new Member, for all the kindness, courtesy and consideration which I have been shown during the past two rather bewildering but awe-inspiring weeks?

I come here to represent the 102,591 electors of Lichfield and Tamworth. I come here following in the footsteps of former hon. Members of considerable parliamentary stature. Many right hon. and hon. Members on each side of the House will harbour fond memories of and affection for the former Mr. Julian Snow, now Lord Burntwood, Major-General Jack d'Avigdor-Goldsmid and, more recently, Mr. Bruce Grocott. I am assured, Mr. Deputy Speaker, that they all managed to catch Mr. Speaker's eye because they were considerably higher than 6 ft. in stature. While I am unable to match them in height, I will endeavour to match them—for whatever time those 102,591 electors allow me to represent them—with the same amount of vigour, determination, dedication and commitment as they showed in their time.

The cathedral city of Lichfield—Dr. Johnson's birthplace—thrives upon tourism. Any right hon. or hon. Member who finds time on his hands in the recess which lies before us will, if he visits that cathedral city, be assured, from whichever side of the Chamber he comes, of a warm and hospitable welcome.

The constituency also comprises the expanding towns of Tamworth—Sir Robert Peel's former constituency—and Burntwood, which are commuter towns for Birmingham and for the Midlands conurbation. Surrounding those towns are 500 square miles of fertile agricultural land, garnered and husbanded by small and profitable farmers. Set in the heart of England, Lichfield and Tamworth can be fairly described as a cross-section of industrial, commercial and rural Britain but, like that of Great Britain as a whole, the prosperity of Lichfield and Tamworth depends upon vibrant and healthy industry and profitable small businesses. It is to the encouragement of these vital arteries of our national bloodstream—indeed, of our whole country's future— that I believe the Government's programme is rightly directed.

That is why I welcome the Government's commitment to repeal the Community Land Act 1975 and to amend the oppressive development land tax, because the pages of our immediate past history show that small private builders, employing skilled labour, have just not been able to provide first-time homes for first-time buyers, those people who wish to realise their lifetime's ambition of standing on their own feet, of home ownership, and being independent of the State.

That is why I welcome the reference in the Gracious Speech to the encouragement of short-term lettings, for it is only by allowing mobility of labour that people will be able to move from one part of the country to the other and transfer their human energies to the presently depressed areas. That is why I welcome measures designed to restore incentives—sadly derided by some speakers elsewhere in the Chamber—and so create a climate in which private industry, commerce and small businesses can flourish in the Midlands generally and in Lichfield and Tamworth in particular. The small business sector—all 900,000 firms—hold the key to our future prosperity. Only those 900,000 small firms can provide jobs for those poor people who are at present in the dole queues in the West Midlands and elsewhere who would dearly like to have the opportunity to go to work next Monday morning.

If each of these 900,000 small firms were given the incentives—as, indeed, the Gracious Speech outlines—to employ just one person, whether that person be a school leaver or a family man, our appalling and immediate unemployment could be reduced dramatically and quickly. Not only would pride be restored to the life of that family man, but hope and optimism for the future would be restored to that school leaver's vision. At the same time, the overburdened taxpayer would not have to find the £40 per week, or £2,000 per year, which the State pays out to each of the 900,000 at present in the unemployment queue—and £2,000 a year times 900,000 is £1.8 billion Such a saving could go towards the personal tax cuts which are so desperately needed to provide the encouragement and the incentive for people in Lichfield and Tamworth, and to people in the West Midlands and further afield, to work harder for their greater personal fulfilment and for the greater good of the country.

This is the message that I am receiving from people who work in Reliant Motors in Tamworth, in GKN in Lichfield, and from other small firms throughout the constituency. I shall not join the pessimistic chorus of those who say "It cannot be done". West Germany did it, Japan did it and France did it. Great Britain, given the will and the incentive, can still do it.

What is in it for us? We are all "us". We are all one people, if only we will allow ourselves to be. For the unemployed, for the disabled, for the low-paid, for the elderly, and for those in my constituency who have been waiting for two years to be admitted to hospital, there will be no future, there will be nothing, unless we start to balance our books now.

5.58 p.m.

Mr. George Foulkes (South Ayrshire)

As a new Member, Mr. Deputy Speaker, I should also like to put on record my gratitude to hon. Members and Officers who have shown me around the complexities of this House. I agree with the hon. Member for Lichfield and Tamworth (Mr. Heddle) with alacrity on that, for, having heard his subsequent remarks, I think that it will be one of the few matters on which I shall agree with him. With the name of Foulkes and the initial G, perhaps I should be particularly pleased that I received a warm welcome, and also that I arrived in May and not early in November.

I understand that, as a matter of protocol and precedent, maiden speakers comment upon their predecessors. I aim to be no exception to that. However, the position in South Ayrshire is somewhat unusual, for I defeated someone who originally stood for the same party as myself but who chose to leave it and stood—unsuccessfully, I am glad to say—under another banner. Nevertheless, undoubtedly Jim Sillars served South Ayrshire well for many years, and one of my aims is to serve South Ayrshire as he did for those years.

South Ayrshire is a great constituency. I believe that my colleagues on the Opposition Benches will confirm that it is almost legendary in the Labour movement. It is not just where Keir Hardie began his political career. It is a longstanding Labour constituency and one which has returned a Labour Member most of this century, with a minor aberration in the 1930s. It is also famous for Robert Burns, James Boswell—which is a link I also have with Lichfield—and for William Murdock, who invented the gas light, something which may be recalled by some hon. Members though more right hon. Members will recall it.

South Ayrshire is a constituency which has contributed, and does contribute, much more than its fair share to the wealth of this country, through its primary production in the coal industry, fishing and farming. It is a constituency which has a hard-working people with great strength of character. Yet I regret to say that it has not had its fair share of investment and has an unduly high rate of unemployment and that the undoubted talents of its people are not fully used.

That is why the Scottish Development Agency, which is not yet fully in gear, is vital to the future of my constituency. That is why investment in the coal industry for the exploration of new workable seams of coal, and the development of those seams, is vital, for those reserves of coal will be there long after the much-vaunted oil reserves have gone. That is why the Co-operative Development Agency is important to my constituency and why I am proud to be a Co-operative as well as a Labour Member of Parliament. I am proud to represent the Co-operative movement, which is an integral part of the Labour movement.

I hope that Conservative Members will remember the pledges they gave when the Co-operative Development Agency was introduced. The hon. Member for Rushcliffe (Mr. Clarke), then spokesman for the Conservatives and now Parliamentary Secretary to the Ministry of Transport, said on Second Reading of the Bill that he gave a cautious welcome to the agency. In Committee, he said: we see workers' co-operatives, founded on sensible competitive bases, as a valuable additional source of new enterprise—small business entrepreneurship"— those are phrases we have heard a lot of recently— in this country. We can see a valuable role for this agency in promoting the development of such co-operatives."—[Official Report, Standing Committee D, 18 April 1978; c. 6.] I hope that hon. Members opposite will recall those words and that we shall see the encouragement and development of the Co-operative Development Agency.

Another area to which I should like to refer, which is mentioned in the Queen's Speech, and which I know will not find favour with the hon. Member for Fife, Central (Mr. Hamilton) is the question of the government of Scotland. I hope that the Conservatives will not consider that devolution was a port to go into in a storm, and that there will be no danger of amnesia with regard to devolution. The House spent almost the whole of the final two Sessions of the last Parliament discussing the government of Scotland, yet it has figured very little in the discussion of the Queen's Speech. In the day-to-day difficulties which hon. Members opposite clearly will have to overcome, I hope that they will not be led to forget the issue of the government of Scotland. It would be unwise so to do.

We heard a great deal from my hon. Friend the Member for West Lothian (Mr. Dalyell), about the instability of the Scotland Act. I ask hon. Members to consider the instability of the current situation where Scotland voted Labour yet has a Tory Secretary of State, where there will be the forced sale of council houses when Scotland voted against it, where there will be help for the privileged in private education when Scotland voted against it and where there will be cuts in public expenditure when Scotland voted against them. There is great potential for conflict there and great potential for the revival of the forces of separation unless we take some action regarding the government of Scotland.

I regret that there is a commitment in the Queen's Speech to repeal the Scotland Act. I am afraid that that is inevitable, given the provisions of that Act. But I welcome the commitment to all-party talks. If we are to have meaningful talks on the government of Scotland, we must have an agenda. We must have papers for consideration during those talks.

What do the Tories have to table before those talks? Are they to table the thoughts of the late lamented Member for Glasgow, Cathcart, Mr. Teddy Taylor, or those of the hon. Member for Edinburgh, Pentlands (Mr. Rifkind), now Under-Secretary of State for Scotland? Perhaps it would be more appropriate for them to table the recommendations of the committee which the former Prime Minister, the right hon. Member for Sid-cup (Mr. Heath), set up and which was chaired by Lord Home.

I quote from the report of the committee: there should be an assembly of persons directly elected. We describe the functions which the assembly could usefully fulfil. One is to provide a focus for the discussion in public of Scotland's affairs; the other is to provide a forum in which Bills which are purely Scottish in character can be debated and taken through their important legislative stages in Scotland. The assembly, which we propose should be named 'The Scottish Convention', would undertake much of the work at present done by the Scottish Grand and Standing Committees. Even that will not go far enough for some of the people—perhaps most of the people—in Scotland. Anything less will be considered by most of the people in Scotland as a total sell-out. The Secretary of State for Scotland must soon give a definitive statement to the House of what the Government intend to put to the all-party talks, or the people of Scotland will place little faith in them. I can assure the House that, as long as I am a Member, the issue of devolution will not be far from the forefront in the forum of the House.

I had intended to stop at that point until I heard the Chancellor of the Exchequer talking about the effect of increases in the salaries and wages of local government officials on the rate support grant. I am not yet sure that all right hon. and hon. Members have fully realised the enormity of the effect of that announcement. I have served in local government for nine years, and if local government is to absorb all the wage and salary increases which have been announced or are in process of being announced, without any increase in the cost limits, which is what the Chancellor said, there will be either massive redundancies of local government staff—teachers, street sweepers and cleaners—or a very substantial increase in the rates. That is the enormity of what the Chancellor said. Even if Members do not do so, I hope that people outside will realise the effect that it will have on local government services.

I hope I have not gone beyond the bounds of the normal procedures with regard to maiden speakers. If I have, I crave the indulgence of the House and you, Mr. Deputy Speaker.

6.8 p.m.

Mr. Percy Grieve (Solihull)

In my first speech in the new House of Commons, may I first of all do publicly what I have already done privately and congratulate you personally, Mr. Deputy Speaker, upon your accession to your new high office? I am quite sure that all your friends in the House wish you, in that office, a continuance of the happiness and success that you have enjoyed throughout your parliamentary career.

My second and happy duty is to congratulate two maiden speakers. First, I congratulate my hon. Friend the Member for Lichfield and Tamworth (Mr. Heddle), who made a cogent and humane contribution to our debate and who spoke, as he said, as the successor to a number of Members who have made an important contribution to debates in the House since I have been a Member. I am sure that we shall hear him often. He will always be a welcome speaker and I am sure that he will have an important contribution to make to future debates.

Secondly, I should like to congratulate the hon. Member for South Ayrshire (Mr. Foulkes). He comes from a constituency which I know well. My stepfather, who was the only father I knew, was a Cunningham from Ayrshire. I know the beauty of that constituency and some of its problems. I do not go there often now, but obviously has those problems much at heart. He said a great deal regarding devolution on which I would join issue with him. The tendency nowadays is for maiden speakers to be rather more robust at the loss of their maiden head than was the tradition in earlier days in the House of Commons. I am sure that he, too, has many an important contribution to make to our debates and that all hon. Members welcome him here this afternoon.

I now turn to the brief contribution that I wish to make. It is a pleasant thing to be in the House of Commons and to be able to give an unmitigated welcome to the Gracious Speech. When one sits in the House of Commons for many years, one hears many Gracious Speeches that contain much of which one disapproves. But on this occasion there was hardly a comma or colon with which I would have taken issue. I congratulate my right hon. Friend the Prime Minister and the Government on putting into the Gracious Speech for implementation in this Session of Parliament so many of the policies which we put clearly and soundly before the electorate, which resulted in the majority which the Conservative Party now enjoys in the House.

Today we are discussing primarily the financial matters in the Gracious Speech. In contradistinction to the hon. Member for Oldham, West (Mr. Meacher), I entirely approve of that early passage at the beginning of the Gracious Speech speaking of the intention of this Government to reduce the burden of direct taxation and restrict the claims of the public sector on the nation's resources, thereby starting to restore incentives.

If there has been one thing which has stood out over the years in the recent history of our country, it is that we have been the victims of a wholly excessive burden of direct taxation. It is not possible to fudge the figures by looking at the overall burden of taxation. I concede at once that our taxes in the aggregate may not be higher than those of some of the competing countries in the Western world. But our direct tax burden is without exception, and in many particulars, the very highest in the whole of the Western world. The truth is that under the Labour Government the former Chancellor of the Exchequer sought in his first year in office to increase the burden of direct taxation. Since that time he has sought over and over again to give himself the credit for the small ways in which he has sought to mitigate that burden, because even he has been brought to see that that burden was excessive and was grinding our country into a level of poverty compared with that of our other West European neighbours and our partners in the EEC.

From whatever view one looks at this country's present burden of direct taxation, from which, I hope, we should soon be relieved, it is grossly excessive. There is no doubt that in the recent election campaign in my constituency, as in the whole of the West Midlands, the Conservative Party enjoyed the support of a large number of workers in the motor car industry. Certainly, my own majority in Solihull could not have been what it was had it not been for a large accession of votes from workers in the Rover works. It is easy to see why. The differentials of the skilled men have been eroded, and they are paying the highest rate of direct taxation of any comparable workers in the Western world.

I give the figures compared with France, which I know well. The average wage of a Rover worker on the shop floor is about £90 a week. At £80 a week, a married man with two children already pays about £740 a year in tax and national insurance contributions. His opposite number in the Renault or Peugeot works in France pays only £105 upon a similar wage. The difference is staggering. Although I concede at once that lesser differences prevail between this country, Germany, the Netherlands and others of our partners, the difference with France is quite staggering.

At the upper end, the weight of taxation in this country is without question the highest in the Western world. When a man has reached just over £20,000 a year, he already begins to pay 83 per cent. income tax. If, in the course of rising to that eminence as an executive, he has saved for his old age, he finds himself paying, in addition, a 15 per cent. investment income surcharge upon those savings. The result is that very soon, not long after reaching the £20,000 bracket, he is paying tax at 98p in the pound. It is not possible to contend that tax at that level on that sort of means in modern society, allowing for the tremendous inroads on the value of money that have been made by inflation, is anything other than confiscatory, penal and bitterly unjust.

It is for this reason that over recent years we have seen a flood of people going to live abroad. This does not apply only to people in the star class, the cinema, the theatre, painting and the arts. Very often such people go to live abroad against their will. Very often they would much rather be here at home. But this also applies to working men.

Not long ago, at Rome airport, I met three working men who were working on the oil wells at Abu Dhabi in the Persian Gulf. They were on their way for their fortnight off—they worked six weeks on and two weeks off. One was a Geordie, one came from London, but I cannot remember where the other came from. I asked where they were going and they replied "We are going to Malta". I asked "Why Malta?" and they told me "Well, we cannot afford to live in England." There were some of our finest technical men, exported all over the world, as they are, and for fiscal reasons they could not afford to come home.

It is easy for Labour Members to contend that there is no relationship between this and our low level of productivity, or our increasing poverty compared with our Western European partners. But we do not have to look much further than lack of incentive for at least part of the cause. Here I entirely join issue with the speech made by the hon. Member for Oldham, West, who spoke of the collapse of private market mechanisms. Private market mechanisms have not collapsed of their own accord. They have been eroded by Socialist policies. Socialist policies have been eating away at the foundations.

In his speech to the House yesterday afternoon, the right hon. Member for Bristol, South-East (Mr. Benn) asked: Who benefits from the system? This is his system— We would all suffer if it collapsed, but the House knows that the people who pressed for it most were the industrialists. I have sat many times beside my television set and watched City bankers at big dinners denouncing public intervention. I have seen the very same men in my office the following morning, when I was Minister of Technology or Secretary of State for Industry or for Energy, pleading for cash."—[Official Report, 21 May 1979; Vol. 967, c. 719.] That does not show any lack of principle in those industrialists, or any desire to have the interventionist, Socialist State for which the right hon. Gentleman was contending. It merely shows that when he and his friends are in power, those who must keep the machinery of industry working have to go to them. No doubt they enjoy the power and the patronage which they can give in consequence. I believe that this also applies to the tax system.

It is easy to say "We shall decide what is best for the people. We shall decide what they ought to have in their purses. We shall decide how much money they should have to spend. We shall give them the social services, and the services that are not absolutely essential, which we think the public ought to provide, and we shall take the money from them to do it." That has been the essence of Socialist Government in this country for the last five years. That is wholly wrong. It destroys incentive, initiative and the motivation which enables a society to get on its feet.

I applaud the words of my right hon. Friend the Prime Minister when she said that the desire of the individual to benefit himself and to provide for his children represents one of the principal motivations of society. It always has been so throughout the ages. To erode that is to cut at the very root of society. That destroys initiative and the desire to provide not only for oneself but for society. That is what our tax system has been doing, certainly for the past five years, if not for much longer than that.

That is why I applaud the emphasis in the Gracious Speech on the need to cut taxation. We shall have to cut Government expenditure and, no doubt, raise indirect taxes to some extent, but surely the emphasis of taxation should be on spending—not spending on necessities. In addition, greater emphasis should be placed upon saving, which should be encouraged for the greater benefit of the community and society.

These policies must be carried out over the period of a five-year Parliament. However, I hope that my right hon. and learned Friend the Chancellor will take a bold step this year, because I believe that the country expects him to make much more than a token reduction in direct taxation. I ask him also to consider, as the years pass, the position of women under the tax system. It is antediluvian and grossly unfair that women should still be regarded as one with their husbands for the purposes of taxation, and that there should still be a serious tax upon marriage where a woman has any fortune of her own. I hope that over the years we shall be able to remedy that.

6.22 p.m.

Mr. A. E. P. Duffy (Sheffield, Attercliffe)

The hon. and learned Member for Solihull (Mr. Grieve) claims popular endorsement for the Gracious Speech and for the policies that are now flowing from it. I remind him that, whatever majority his party may enjoy, only one out of every three of the electorate voted for those policies. There is every promise, or perhaps threat, that those policies will throw a strain on one-tenth of the British people and perhaps upon our social fabric. As the Opposition amendment states, they might in the end divide society. That last point will be my main concern this evening.

The Chancellor made the customary Conservative charge against an outgoing Labour Administration—that he has inherited a deplorable economic legacy. The right hon. and learned Gentleman described his inheritance as dismal. My right hon. Friend the Member for Leeds, East (Mr. Healey) anticipated and, in a powerful speech, refuted that claim.

I want to touch upon only one comparative index of economic performance, though there are others. The balance of payments showed enormous improvement under Labour. Last year, for example, there was a small surplus of £250 million. The deficit when the Tories left office five years ago was running at over £3,000 million a year. When one allows for inflation, that is now worth over £6,000 million a year. One-third of that huge deficit could not be explained away by the oil price rise of 1973.

In the past 15 years Tory Governments have consistently left growing deficits in Britain's overseas payments, and Labour Governments have consistently turned them round into a surplus. I could touch upon other comparative indices such as GDP, exports or investment. They have already been touched upon by my right hon. Friend the Member for Leeds, East and my hon. Friend the Member for Oldham, West (Mr. Meacher), and no doubt others of my hon. Friends will be returning to the theme.

I want to look forward to the kind of scenario that most of us now envisage for the 1980s. I want to show how we had promised the electorate we would approach and handle that scenario. I want to contrast it with the Government's apparent intentions.

In indicating the configuration of the 1980s I need do no more than remind the House both of the problems that are shaping up and of the opportunities that are offered. In the latter I include both North Sea oil exploration and microelectronics as well as other innovations that stem from contemporary industrial performance.

Unhappily there is the other side of the coin—the challenge to our older manufacturing industries from the industrialising countries of the Third world. These brief references to the 1980s can give us all a picture of the opportunities and the problems with which the Government will have to deal.

Let me remind the House of the strategy that my party offered during the recent campaign. We believed that whatever change was involved—and undoubtedly there will be profound change during the next few years—it must be approached where possible on a planned basis. This explains our creation of the British National Oil Corporation—the publicly accountable custodian of our oil wealth—and the National Enterprise Board with its attention to Inmos, Britain's own microelectronics enterprise.

Labour's strategy was also intended to ensure that any cost that arose from the profound changes must be eased where possible for individual workers through retraining and through regional policies. The third prong of our strategy was that co-operation with the trade union movement and, preferably, an early instalment of industrial democracy were vital to ensure that any change took place on the basis of consent and with a growing participation by, greater information for and, therefore, the practical and genuine involvement of all those most closely affected by the change.

Let me sum up Labour's policies as they were summed up in our manifesto. Our aim was to overcome the evils of inequality and poverty, on the one hand, while, on the other, going forward towards making Britain truly one nation.

Tory policies have already divided Britain into two distinct voting blocs—North and South. They now threaten to divide Britain into two nations, the rich and the poor, for there can be no one in the House who, having heard the Chancellor today, can believe that in his forthcoming Budget he does not intend that his tax proposals will give most to those who have most. Moreover, recalling the speech of the Secretary of State for Industry yesterday, we are confirmed in our fear—the evidence has come out already in the speeches from the hon. and learned Member for Solihull and the right hon. Member for Farnham (Mr. Macmillan)—of the consequences of the Tory approach to our nation's affairs.

The Tories' general approach to the economy presents a clear threat of measures which could put the economy into recession. The Chancellor speaks of the need for proper monetary discipline, with the implication of a reduction in the public sector borrowing requirement. Given the magnitude of the reduction that he must surely be contemplating, and given also the arithmetic so plainly presented today by my right hon. Friend the Member for Leeds, East, it seems inevitable that the Chancellor will cut public spending by more than he cuts taxation. This in itself will tend to deflate the economy, to cut output and to hit employment.

But there is also the strongest presumption that, pound for pound, cuts in public spending will destroy more jobs than tax cuts will create, a point which seems to have been overlooked by the hon. and learned Member for Solihull and his right hon. Friend. Thus, the Tory tax and spending policies and the Chancellor's pledge of a much more vigorous use of cash limits undoubtedly add up to a threat to employment. The Chancellor's speech today was deeply informed with the spirit of Proposition 13.

In addition, the Tory Government's industrial policies, as we learnt yesterday, pose further threats to jobs in particular areas. The Secretary of State for Industry could not be drawn yesterday any more than the Chancellor could be drawn today, but we on these Benches fear what he will do in respect of job-saving measures. Certainly there was a veiled threat yesterday afternoon to cut regional development grants in the assisted areas, and every right hon. and hon. Member, not merely on the Opposition Benches, who comes from an assisted area must think out the implications of that veiled threat not only for his region but for his own constituency.

The Tory approach, I repeat, is fundamentally different from ours. In place of a positive industrial policy they now offer merely an act of faith. If taxes are cut, if industrial subsidies are axed, and if the blind forces of the market place are left to their own devices, so the Secretary of State for Industry argued yesterday, everything will somehow work out for the best. But, as the right hon. Gentleman was reminded by my right hon. Friend the Member for Bristol, South-East (Mr. Benn), Government intervention is a fact of life throughout the industrialised world. Public ownership is widespread and all Governments use public funds to support industry and jobs. After all, as we were reminded yesterday, the development of microelectronics was pioneered not by private enterprise but on the back of massive public spending on the United States defence and aerospace programmes in the 1960s.

Again, in the context of public enterprise, there is a strong Tory commitment to denationalise. I warn the Government that any attempt to sell off the aerospace and shipbuilding industries will not be in the public interest. However, I hope that if they persist the Government will engage in the fullest consultation with management and men in those industries. I do not expect them to find a manager or a man in those industries who will support their policies.

Mr. Cranley Onslow (Woking)

Rubbish.

Mr. Duffy

I ask the hon. Member who calls out "Rubbish" to tell me, were the Government actually to achieve disposals in these industries and elsewhere, where they would effect a sale at other than a knock-down price.

Mr. Onslow

Since the hon. Gentleman is so confident that there is neither a manager nor a man in those industries who would support their denationalisation, will he tell us how many managers and men he has spoken to, and will he explain why he thinks that these industries would not attract considerable public support and interest from people who want to see their savings go into truly profitable investment?

Mr. Duffy

I repeat my assertion. I cannot believe that there is a manager or a man in aerospace or in shipbuilding who will support the Government's policy of denationalisation. I notice that the hon. Gentleman did not reply to my question: where can these industries be disposed of by the Government save at knock-down prices and merely to pension funds? So much for an extension of that industrial democracy which we have heard is still so much revered by the Tory Party.

There is no one on the Opposition Benches who does not believe that the right hon. Lady's U-turn will come—I do not suppose that any one of us would give her more than two years—and I hope that, when it comes, all her colleagues on the Government Front Bench, not merely those associated with the Chancellor's team, will go with her into political oblivion.

Labour's strategy, in contrast—this is its most important foundation—is to rebuild and modernise our industries so that our workers in the 1980s will have the plant, the machinery and the investment to compete on equal terms with the best in the world. But the first short-term task is still to beat inflation. One is entitled to ask whether the Government have made a helpful start here by accelerating preferred pay claims. That is why it is vital for the Government to reach a renewed understanding with the TUC for the next 12 months. But how will they effect that with a promise of increased VAT pushing up the retail price index?

Secondly, Labour's strategy for the years ahead must look to the new industries, to the expanding firms and to the building of modern plants. But we believe that this investment must be planned and that all regions must get their share. How can this be achieved, however, under the industrial policy which, though not yet enunciated, was hinted at pretty definitely by the Secretary of State yesterday afternoon?

Labour's intention, thirdly, would be that public investment must not be allowed to suffer. But, again, how can that be achieved in the new climate envisaged by the Chancellor? It cannot but suffer. For example, we ought to begin to plan to meet our energy needs for the time when oil runs down. We shall therefore need to invest in research and development into alternative sources of energy.

Fourthly, Labour would have given priority to the use of our new prosperity to help those in need and not just the rich, the strong and the powerful. We therefore urge upon the new Government that they must have regard for the compassionate society. Yet does anyone in the House really believe that henceforth the social climate will not become chillier, less forgiving and less generous?

The promotion and generation of prosperity cannot simply be left to Adam Smith's hidden hand. It must be planned for and worked for. North Sea oil alone will not enable us to do all that we want to do. A return to full employment, for example, will depend on an increase of industrial investment and production. We need the concerted action of the Government and of the trade union movement and of the managers uniting together, as well as the workers, in a spirit of confidence and adventure.

Above all, there must be a feeling of a share for everyone. No one or no group should feel excluded. We must be one society. Tory policies may make that impossible. Tory policies threaten to divide Britain into two nations—the rich and the poor; the powerful and the powerless; the privileged and the deprived—whereas Labour was putting Britain into shape to face the challenge of the 1980s.

That is why I commend to the House the amendment in the names of my right hon. Friends, and especially the reference to the way in which Tory policies now threaten to divide our society.

6.40 p.m.

Mr. Tony Speller (Devon, North)

I arrive as one of the anonymous new Members. I come from Devon, North, and outside that constituency everyone knows who lost but no one remembers yet who won.

I should like to start my career in this House by paying a deep and sincere tribute to my predecessor, Mr. Jeremy Thorpe. As a constituency Member, he was without equal, and there is no doubt of the respect and affection in which he was and is still held in our constituency.

It is clear to me that hon. Members listen or half listen as new Members describe the beauties of their constituencies. Happily, I do not have to do it, because in my short time here I have met a charming lady police officer who was educated in Barnstaple and wishes she was there again, and another member of the police establishment who comes from Bideford and wishes that he was there. I have met a lady who cleans for my host—my hon. Friend the Member for Exeter (Mr. Hannam)—and who comes from Ilfracombe and wishes that she was there again on holiday, and even in the establishment known, I believe, as "The Kremlin" down below, the lady who helps there wishes that she was back in Bishops Tawton. Therefore. I have the advantage of knowing that many of those who surround me would happily come back and join me, if not politically, at least in the very pleasant environment of North Devon.

But North Devon is not just Exmoor and lots of lovely rivers and good fishing and beaches. We have a distinct advantage over areas represented by many of the Members who have spoken today, hon. Members who come from areas of declining industry and of old industry, where the dangers are of cutting back, of loss of jobs and loss of work. In North Devon we have quite the other problem. We have young industries and new industries. We have industries that seek new employees and new opportunities. Our problems are those of growth, not those of decline.

As a new Member. I have received a postbag never to be equalled again. But among the major and minor, the long-term and short-term problems that we have, are those, for example, of our one and only large employer—to us, "large" means anything over 500 employees—Appledore shipyards, which must be the most economic and probably the only profitable shipyards in the United Kingdom, if not in the world.

We have the problems of the small firms which are growing, and I have made representations about one to the Department of the Environment this very day. The firm has built itself up to 170 employees over 10 years. It is making specialised pipes which are exported all over the Common Market. However, because of transport licensing problems, while this firm has grown in manufacturing output and while a small local transport firm has grown and specialised to carry its products to boost our export trade, the problems of licensing, of getting lorries into France, have arisen as current short-term difficulties. Also there are the immediate problems of the plant hire firms which cannot get fuel oil. Because they cannot hire out their machines, the building industry—and ours is beginning to boom—cannot do its work. These are typical of our North Devon problems. Some are small and some are larger. But all are important.

No one denies that British agriculture—not just that of North Devon—is highly efficient. Agricultural costs rise, but the income is held down. This may be nice if one is looking only at the price of food in the shops, but it is extremely hard if one believes, as I do, that Britain should grow as much of its own food as it can and should continue as an efficient agricultural entity, and not as something liable to "stop" and "go"—words I have not heard used for some time in relation to our economy.

I am a Devonian born, bred and educated. I live there and work there, so all the problems and the good things and bad things can be ascribed to me as a Devonian. Most of all, in my part of the country we are in every sense an area of small business, of the small firm, of the shopkeeper not big enough to have someone else to do the books and returns. I know that we have been described, allegedly by Napoleon, as a nation of shopkeepers. As a shopkeeper, I find myself quite lonely in this House. None the less, we are the weekend workers who do the paper work when those lucky enough to enjoy a five-day week are away about their leisure. It is the small business and the small shopkeepers that are the backbone of our country. That is indeed so in my own local economy.

Finally, one group of people often spoken of, but almost as an afterthought, are the population in our area who have become elderly. Many folk have retired to live amongst us and are truly welcome. These are the people who, a few years ago, retired and came to the West Country, but not with riches. They had, perhaps, sold a small business, or had cashed in their savings, moved down here, and bought a small house, thinking that, although they were not rich, they had a sufficiency. Now, the rates bill, the electricity bill and every bill that arrives brings the fear of not being able to meet from their limited resources the basic requirements of simple civilised life.

I believe that it is totally wrong that pensions received by virtue of age should be treated as taxable when supplementary benefits are not so treated. I do not seek to tax supplementary benefits, but I find it strange, and quite inexplicable to the aged, when we have to say "I am sorry that your savings, your thrift of earlier years, has brought you in just these few pounds, and now we will gross it up for tax purposes."

In conclusion, let me say that I have received a great welcome in this House. I appreciate all the help and assistance that I have had and particularly thank, among many others, my two good friends, my hon. Friends the Member for Tiverton (Mr. Maxwell-Hyslop) and Devon, West (Mr. Mills), for showing me around and showing me the ropes. It will be my pleasure and pride to serve in this House, to serve North Devon and to serve our country.

6.47 p.m.

Mr. Stuart Holland (Vauxhall)

Accustomed though I may be to public speaking, and anxious as I am to raise several points in this debate on the economy, pay and prices, it is only fitting that I make some comments about my predecessor as Member for Lambeth, Vauxhall, the right hon. George Strauss.

George—or "G.R." as he was known to many of his friends and constituents—was the Father of the House until the last election. As such, his wide knowledge, experience and understanding of the House and its character endeared him to many here and gained him respect not only in this Chamber and the corridors and Committee Rooms of Westminster, but also over the bridge, through Lambeth Walk and beyond.

George Strauss's record as a Member was quite outstanding. The thirtieth of this month is the fiftieth anniversary of his first election to Parliament. In fact, he just missed half a century of membership through temporarily losing his seat in 1931, and, by a handful of votes, failing to win it the first time round in 1924. Such a record of service in this House is without parallel in this century and is only just exceeded, I understand, by an hon. Member in the late eighteenth and early nineteenth centuries, who enjoyed contests—if that is the appropriate word—considerably less severe and on a much more limited franchise, before the first Reform Act.

George Strauss was also, for much of his long period in the House, the backbone of the House, inasmuch as he was mainly a Back Bencher, but he was also Minister of Supply from 1947 to 1951, and as Parliamentary Secretary to several Ministers he played an important role, including that of Parliamentary Secretary to the Minister of Aircraft Production during a crucial time in our country's history. He played an important part in the Labour Party and, for a time in the 1930s, outside it. He was a founder member of the Tribune group although he may later have come to regard it with misgivings. In the 1930s in particular he was a vigorous contributor to the discussion, debate and, where necessary, dissension which laid the foundation for the radical policies pursued by the 1945-51 Labour Government in which he played a prominent part. It is an honour to succeed him as hon. Member for Vauxhall.

The structure of the constituencies of North Lambeth that he variously represented has been transformed by a fundamental and until now effectively unreversed change—from private to public housing, from the degradation of a board of guardians that was only one remove from the poor law commissioners and the workhouse to a Welfare State and social security. These advances of a welfare society are seriously in question for the first time in 50 years through the recent change in Government.

Inner city areas such as North Lambeth and Vauxhall have recently undergone profound changes which threaten their vitality and viability. Progressive policies such as those for the new towns have proved increasingly regressive for inner city areas through the migration of labour and capital. The labour that has left Lambeth includes the younger, more adaptable and more skilled workers and their families. The capital and enterprise that has left Lambeth and other inner London boroughs has found greener pastures in the new towns or abroad. That has aggravated a vicious circle of decline in the older urban centres.

Vauxhall therefore has more than its share of those in need in our society. That includes those for whom there appears to be no place in the stark world of Tory self-interest—those who have no savings as a hedge against inflation, who cannot play the stock market, place Eurobond issues or redispose of their personally held shares; those who cannot simply take up their bed and walk into a new job in a new town and live in a newly purchased council house. It includes single-parent families who have no hope of finding a private mortgage in the manner of the bright young marrieds in Conservative media propaganda and those who cannot insure themselves through private medical companies against the infirmities of old age and chronic disabilities.

There are those who cannot get executive jobs in the glass and steel palaces of office blocks such as that currently proposed by Heron and other companies on the Coin Street site by the National Theatre, rightly opposed by the local authority and action groups in the community. There are those who cannot escape from overcrowding, from lack of recreational facilities and lack of hope, as long as the Conservative GLC fails to fulfil its function as the strategic housing authority for the Greater London area and sells to those who come first rather than those who most need the new council housing. This will be aggravated if the Secretary of State for the Environment wields his axe on local authority spending with greater effect than he once wielded the Mace in this Chamber.

That brings me to the touchstone of the allegedly new Conservative economic policies, the key with which they imagine that they will unlock talent and initiative in this country. That policy is remarkable for its massive leap backwards in time and because Conservative Ministers do not seem to understand the analysis or thought of the man whom they have elevated as the idol of their new economic brutalism. I refer to Adam Smith. He wrote two important books—"The Wealth of Nations" and the "Theory of Moral Sentiments", which he considered far more important.

Smith basically admitted that self-interest through a competitive market mechanism was effective in that if an entrepreneur wished to make a higher profit for himself, he would do so mainly by lowering prices on the market. He was surprised that the mechanism worked, and stressed that the invisible hand of the market that gets but a passing reference in "The Wealth of Nations" was more a moral than an economic phenomenon. In the "Theory of the Moral Sentiments" he developed a pantheistic argument that amounted to the expression of his surprise that the market mechanism worked as effectively as it did in his time.

Unfortunately in current Conservative policies one sees much of "The Wealth of Nations" and little of the "Theory of Moral Sentiments". In addition, no attention is paid to one of the most stark warnings given by Adam Smith, that nothing is more certain when two or three producers are gathered together, even for merriment or diversion, than that they will seek to conspire against the public interest through some contrivance to raise prices. It is staggering to hear the Secretary of State for Industry and the Chancellor talk of the devolution of decision-making to millions of independent entrepreneurs without recognising the massive trend to monopoly against which Smith warned even in his time.

The facts are that 100 companies account for more than half the industrial output and employment in this country. They thereby determine more than half the prices that go into the wholesale and retail trade. Less than 75 firms control half of Britain's visible exports. Two and half dozen companies command some 40 per cent. of Britain's visible export trade. That is a remarkable concentration of economic power. Over the years it has increased in muscle, strength and range, despite the efforts of the Monopolies Commission and the activities of the Price Commission.

The Chancellor today talked of profits, but because he appears myopic in failing to distinguish between the phenomenal concentration of economic power in the heartland of the economy and the plethora of small firms being squeezed by that monopoly power. He gave only the aggregate profit figures. Let me give him some others. Over nearly a decade since 1968 the real profits of manufacturing firms rose by only 7 per cent., but those of the top 25 companies rose by 70 per cent., which is 10 times more. That is exactly the situation that we should expect from Smith's reasoning.

A further important factor is that the crowding of small enterprise that the Secretary of State claims is due to public expenditure is caused not by Government action but by monopoly enterprise. The biggest problem today for small business is not big government but big business. If the Government cannot recognise the need to countervail the concentration of economic power present in the economy by appropriate public and democratic institutions, they will not get far by relying on Smith's pantheism or the "Theory of Moral Sentiments".

Another factor that the Government appear totally to ignore concerns the multinational spread of capital. During the election campaign the then Leader of the Opposition made passing reference to the West German economy and its tax structure, but those references are almost entirely irrelevant to the key argument before us. The Government have ignored the simple fact that the British economy is five times more multinational in structure than that of West Germany. Britain has five times more foreign production by our companies outside this country relative to visible export trade than has Germany or Japan. German companies abroad produce goods whose value is only some two-fifths of total German visible export trade. British business abroad produces goods whose value is more than double our total visible export trade. That accounts for much of the weakness in our exporting structure—and I stress the word "structure". Unless we intervene in these structures, we shall be able to do little to cope with the problem of our declining and poor visible trade.

If a company such as Dunlop, GEC, Vickers, GKN or any other multinational company among the top 100 in our system located in both Germany and Britain, and if it were aggressively to sell following a devaluation of the pound on the German market, it would simply be competing against itself. There is no rationale concerned with profit or logic which argues that that is in the company's interest. But it is very much against this country's interest that we have no mechanism to cope with these matters. When there is a devaluation of sterling or when sterling is at a relatively low level, as it is now, in terms of foreign markets, when our wages happen to be about the lowest in Western Europe, why are we not introducing policies which oblige business to pursue a more competitive export effort in certain foreign markets? This was part of the rationale behind the Labour Party's policy involving planning agreements which, I very much regret, it appears that certain people did not have the nerve to pursue, partly because they believed the mythology perpetrated by the CBI and partly perhaps because they were not aware of the full scale of the problem.

I wish to return to my main point—namely, that big business is the main beneficiary of public spending in this country. This is one of the most fantastic ironies about the present Government's policies on the public sector. One can assume that they do not realise that while public spending has accounted for nearly half the total spending in this country, public enterprise accounts for 15 per cent. of the value of goods and services in our economy as a whole.

Let me point out what that basically means. Rotarians and local business men who so enthusiastically supported the present Prime Minister when she promised, in effect, to cut public spending at a stroke might bear the following point in mind. For every £100 of public spending cuts in the economy from now, £85 will be taken from the private rather than from the public sector. In other words, it will be taken from private enterprise sales rather than from public enterprise sales.

In voting for the right hon. Lady the small business lobby, which looks only to a direct tax cut, has failed to grasp the massive fall in sales which would flow from the fall in public spending. The illustrations are legion. There is not a school built, a council housing estate erected, a new hospital launched where the bulk of the contracts do not at present go to the private sector. Inasmuch as the right hon. Lady's axe falls on those construction programmes, it will fall also on the small and medium-sized firms in local areas which depend so greatly on that type of order.

It is also ironical because business in this country lives off the teat of the State. It is poor sense for infants and less for adults to bite the teat that pleases them. In practice, it should prove a painful operation and should disconcert some of the Conservative Back Benchers when they see not only the edge of the axe but the cuts which occur.

There are other areas by which the Government's policy is rent with contradictions. It appears that they have no concept whatever of the social costs of closing down an individual enterprise. For example, in the North-East of England the Vickers company is trying to close the Scotswood plant in Newcastle, one of the forges of the original ironmasters of the Industrial Revolution in that part of the country. An economic audit of the operations of that enterprise, focusing on the indirect effect of that closure, showed that it would cost the community, and over the long run cost exports from this country, more than double the direct cost of Government intervention to assist that company.

If the Government cannot take these factors into account, if they pursue the myth that the economy can be run as a kind of super firm, so that when one runs into the red one puts oneself back into the black, they do not realise the basic message argued by Keynes. And here Keynes was right and Milton Friedman was wrong. If the economy is run in those circumstances on the same lines as a company, by cutting back the State's budget one will aggravate and accelerate the vicious circle of decline in demand. Therefore—and the Chancellor of the Exchequer spoke of this matter earlier but missed the point—it will affect the supply of goods and services in that sector.

In a real sense, Keynes has been outdated by factors such as those I have mentioned, especially the monopoly multinational trend in our economy. But Keynes needs to be transcended, not rejected, on both the ownership and control aspects of supply and on the redistribution of demand.

Let me take another example from the favourite economy extolled by the present Prime Minister—namely, West Germany. Are the right hon. Lady, the right hon. Gentleman the Secretary of State for Industry and the Chancellor unaware that there now is a massive structural crisis in the West German economy? Do they not know that gross fixed domestic capital for the nation, which is the overall investment that takes place in the system, has fallen from 9 per cent. a year in Germany in the early 1950s to 6 per cent. a year in the early 1960s and to 0.2 per cent. a year between 1970 and 1974? That was before the OPEC price increases, and before the specific crisis that now faces the world.

Is the Prime Minister unaware—indeed, is the German Chancellor unaware—that, if they are to be monetarists, the thing to do is to listen less to Chicago and to some people on the Government Front Bench who seem to be ideologically suited to some of the cities on the American Great Lakes, and to pay more attention to the fact that, unless the surplus trading countries act like bankers and unless they offer credit to other countries and achieve a joint reflation of demand—which can be based only on the reflation of public spending in its essence—we are bound to have a downwards spiral? That spiral is based not on "beggar-my-neighbour" protection, on which several Governments have congratulated themselves, but on "beggar-my-neighbour" deflation. A cutback in one country's imports is a cutback in another country's exports. Unless the present Government change course, we therefore are in for a very serious crisis in this country. These factors are in addition to those which are more widely known both within and outside the House, in the impending technological crisis of the third technological revolution, including the development of the microchip.

Thet right hon. and learned Gentleman the Chancellor of the Exchequer spoke earlier about regenerating small and medium-sized enterprises by concentrating on innovation. Does the Chancellor not know that for nearly 10 years to date the main pattern of innovation in this country and in Western Europe has been in processes of production, and not in new products—in cheaper ways of doing the same kind of thing and not in the creation of an entirely new range of industry? We are no longer in a situation where investment automatically creates new jobs. Unfortunately, we are now in a situation where investment automatically displaces jobs, and thereby, ironically, if the Government succeeded with even one of their objectives by raising investment, they would thereby increase the problem of unemployment. This is a really major problem.

What is to be done? In real terms, for a class-based party such as that which is behind the present Government, there are two main options, and they are both capitalistic. There is either the option of laissez faire, blue in tooth and claw, taking this country through de-industrialisation to the brink of confrontation, grave social crisis, and the abyss of slump, or—and it appears that this has not occurred to Conservatives—capitalist State intervention of State capitalism. They could learn the lessons of intervention in industry, half-digested, but at least begun, under the previous Tory Government led by the right hon. Member for Sidcup (Mr. Heath).

One of the most remarkable aspects of the speeches made by the right hon. Lady in the election campaign, and indeed earlier during the period of office of the Labour Government, was that she has a simplistic notion that State intervention equals Socialism. In practice State intervention or State capitalism, in its rationale, is as foreign to Socialism as the reality of such State intervention in their sister parties on the Continent of Europe is foreign to this Government.

Essentially State capitalism amounts to intervention by whatever means feasible, including public spending, public enterprise, public works, public institutions and certainly price controls, wherever this manages to preserve a fundamentally unreconstructed class framework in society. In other words, State intervention in itself is not Socialist.

The key questions are: State intervention for what, by whom, in whose interest, where and how? State intervention with-out changing what in practice are the social relations of power in our economy and society is certainly capitalist, at least in the key sense that it maintains the existing power structure.

"Plan" is not a four-letter word in the language of the European Right. It appears to be so only in Tory Anglo-Saxon. The matter therefore involves recognising that the instruments of State intervention are of themselves not of Right, Left or centre, that they are not in themselves bad versus non-intervention, which in some sense is supposed to be good. There is no Manichean dichotomy of the kind that the Government appear to assume in State intervention, in public spending or in public enterprise.

That was grasped by Baldwin, who argued in the 1920s, when electrification of this country was proceeding apace, that he saw no case for giving private companies monopolies in the distribution of electricity, when that was a public utility and should be run as such in the public interest. If we need to go to another non-Socialist, we can point out that it was stressed a century ago by Bismarck, when from the start he nationalised the railways in Germany rather than allow them to proceed feebly or to fail under private enterprise, and introduced social security for the German working class.

Will our Iron Maiden Prime Minister really turn the clock back to before the Iron Chancellor in her contempt for the intervening century? If so, this is a very serious message for the British people.

There are further aspects on which the Government's disdain for the basic mechanics of the modern capitalist State is almost breathtaking. Either they know what they are doing in attempting to dismantle about a half century of consensus politics in this country or, to be more charitable, they know not what they do. In either event, their present determination to impose savage cuts on the weaker and more deprived sections of the community through restraint of public spending, added to their apparent willingness to confront organised sections of the labour movement, is fraught with conflict.

Of course, there may be—indeed, is likely to be—yet another U-turn. But even if this Government do undertake such a change in direction, even if after one year or two years they are converted from a false concept of laissez faire—here I refer back to their false conception even of Adam Smith—to a specific form of State intervention, unless they also change the power relations within our society, unless in effect they are prepared to democratise decision-making and decentralise local and social control, we are likely to see a major crisis.

Of course, the main political beneficiaries of the Government's forthcoming failure are likely to be on the Opposition Benches. But this forecast brings me no joy, because the main losers from this Government's recent electoral victory, on their current policies, are likely to be the British people. That is certainly why I support the Opposition amendment.

7.13 p.m.

Mr. Alex Pollock (Moray and Nairn)

In rising to address the House as the Member for Moray and Nairn, I am very conscious of my distinguished predecessors. For several decades the seat was represented by two men, each of whom in turn rose to the highest office that Scotland can bestow—that of Secretary of State for Scotland. The first was James Stuart, later Viscount Stuart of Findhorn, who was succeeded by Gordon Campbell, now ennobled and still serving this country in another place as Lord Campbell of Croy.

From February 1974 until the last election the seat was represented by Mrs. Winifred Ewing, to whose tireless efforts on behalf of her constituents I pay tribute. She was always anxious to make sure that this House and the country at large were kept fully aware of the special problems and needs of the constituency. She was most diligent in pursuing any injustice that required correction or any unfavourable treatment of an individual constituent.

That burden now falls on my shoulders. It is one that I accept with humility and pride—humility because of the record of those who have gone before me, but pride because of the nature of the seat that it is now my honour to represent.

The constituency is arguably the most beautiful in Scotland, covering as it does two counties on the North-East Coast. It is rich in natural beauty, from the grandeur of the Grampian mountains down to the Moray Firth. It is the quintessential Scottish rural economy, embracing fishing, farming, tourism and small businesses. It is not directly in the front line of oil development, but it is certainly affected by its offshoots.

One reason why I was anxious to catch your eye in this part of the debate, Mr. Deputy Speaker, was that I wanted to remind the House of the importance of small businesses and the necessary conditions under which they must operate if they are to thrive and prosper. In Moray and Nairn we have many such small businesses. They are composed of men who are hard-working and industrious. Indeed, those actively engaged in farming have productivity records on a scale that would put many other parts of the country to shame.

Most people do not ask for special favours. What they do ask for is sufficient recognition of the best considerations that must apply to such an economy if they are to benefit not only their area but the country as a whole. What they complain about most is the amount of unnecessary State interference in three main areas—fiscal, legislative and bureaucratic.

I do not need to labour the fiscal point. Suffice it to say that the current levels of taxation are too high and must be drastically reduced in order to restore realistic incentives for individual effort.

Turning to the legislative aspect, I earnestly urge the Government to take early steps to reform the so-called employment protection legislation. Far from achieving its declared object of employment protection, it has led in my constituency to employment prevention. Too many small business men dare not take on new labour for fear of falling foul of the Employment Protection Act.

During my election campaign I spoke to an ex-Service man who now runs an electrical contractor's business in Lossie-mouth. There are many people like that in Morayshire. He has skills that he was ready and willing to pass on to young men who were out of a job, but he did not feel able to do so with the present legislation hanging over his head. He had one job that he wanted to offer, but he could not. In Forres, along the coast, there was another man willing to offer five jobs and in Elgin yet another employer waiting to offer 20 new jobs. But not one of those jobs will become available until the reform of the legislation.

The other worry of the small business man, which must be tackled, is unnecessary bureaucratic harassment, which takes up time and energy that could be far better employed in running his own business. I should like to give a small example from my own experience.

As a self-employed advocate at the Scottish Bar, I am required to fill in a VAT return once a quarter. Various questions are put to me, I am told purely for statistical purposes. The first time I received such a form I had to tell the VAT man how many cars I had exported on a zero-rated basis in the past quarter. You may or may not be aware, Mr. Deputy Speaker, that members of the Scottish Bar are not in the habit of exporting cars, whether zero-rated or otherwise.

I duly replied that I had exported none, and three months went by. Yet again the same question was asked, with yet again the same answer. So it has gone on during my years at the Scottish Bar, not only for me but for my colleagues.

I suppose that there must now be some civil servant tucked away in a far corner of St. Andrew's House, paid out of the public purse, who could tell the House at the snap of a finger that since the introduction of VAT not one member of the Scottish Bar has exported a single car on a zero-rated basis. That kind of nonsensical bureaucratic interference is costly, not only to business men but to the taxpayer. It diverts us all from our true goals.

I urge the Government to tackle these three areas—the fiscal, the legislative and the bureaucratic. If they do so effectively, I am convinced that rural economies such as that which I now have the honour to represent will be able to make an even greater contribution to the well-being of the country than they have already.

7.20 p.m.

Mr. Richard Wainwright (Colne Valley)

I am happy to offer congratulations to no fewer than three hon. Members who have just made their maiden speeches. I do so with some envy for the talents which they have displayed. It is quite clear that North Devon has acquired a powerful Devonian voice for its interests and a voice in this House for small business, which is always welcome. As for the hon. Member for Vauxhall (Mr. Holland), I suppose that it could be said that he has exchanged a vicarious presence in this House for a personal one. It may well be that hon. Members, all unknowing, have listened to speeches prepared by him in the past but delivered by others. It is good to have him here in person. If I may offer some greetings from a member of one minority party to another, I am glad that it is clear that his attitude to his own party will be almost as robust as his attitude to the Government.

We also had a most interesting speech from the hon. Member for Moray and Nairn (Mr. Pollock), who obviously is accomplished in one of the major duties of Members of this House, which is relating the work of this Chamber to the interests of their constituents. He was able to provide some very telling examples in that respect.

I am sure that hon. Members on both sides of the House will be anxious to hear more from all three of those hon. Members. Their performances today will have reinforced the wish of most of us that our procedures shall be reformed radically so that the House may make the maximum use of the new talent which has come into it.

On their own showing, the Government must already be a little anxious about maintaining their vigour and pace in the new Parliament. The message which comes through in different keys and tones from different members of the Government is that resilience and vigour are maintained by competition—this great key word which they use now. So they must reflect with some alarm, as I have done for many years, that they themselves belong to the tightest governmental cartel in the world in which there are only two parties, often passing under the title of Box and Cox or Ins and Outs—

Mr. William Hamilton (Fife. Central)

Punch and Judy.

Mr. Wainwright

Or Punch and Judy. I am grateful to the hon. Member for Fife, Central (Mr. Hamilton), not for the first time, for assisting me with an apt simile.

The obvious disadvantage of this iniquitous cartel is that standards of performance get lower and lower as the decades go by. As failure creeps up on each successive Government, they reflect with some complacency that at least they are no worse than the previous lot.

I mention briefly another disadvantage of this cartelism in our antiquated political system. It is that when it suits the two Front Benches to exclude a very serious matter from effective argument or debate in this House or during an election, that subject, however important to the mass of the people, is deliberately ignored by the two parties.

As polling day approached, it was commented on from all sides how the subject of pay determination and pay bargaining was being avoided by the leading television performers of both parties because it was clear that both of them found the subject embarrassing. Similarly, there was a scandalous lack of emphasis on unemployment and on the dismal employment prospects for so many of our young people, because again the leaders of both sides found the subject too embarrassing to dwell upon.

I say straight away from this Liberal Bench that we regard the greatest defect of the Gracious Speech to be its total lack of proposals to get moving back towards something approaching full employment. At the moment, we have 1,300,000 people unemployed. There is no ground for complacency in the fact that there has been some very modest reduction in that figure over recent months. It is clear that the Government's programme, not just in one way but in various ways, will add to the total of the long-term unemployed.

To those of us on this Bench, one of the main duties and arts of government is to ensure that the country's resources, especially its human resources, are as fully employed as possible. Simply to keep inflation in check by imposing massive, deliberate, calculated unemployment is no form of government at all. It is an open confession of failure.

The previous Government, which I repeat always found it embarrassing to raise this question because of their own record, tried to salve their conscience by increasing benefits for the unemployed and seeing to it that they remained untaxed. This is not an acceptable alternative to providing full employment. To offer an able-bodied person a benefit but no apparent role in the community is almost an insult.

The necessary economic measures to get back to something like full employment cannot be embarked upon safely until the country has a sustained and carefully planned incomes policy with the full authority of Parliament behind it. No one in Government has so far had the sense of leadership to get the country united behind some fair and sustained incomes policy. As a result, we have to fall back on the mean and contemptible weapon of deliberate unemployment to regulate the economy.

A few weeks ago, I should have felt that to make this point at any length to the party in Government would be speaking to the deaf. But, as polling day approached and the pressure of morning Press conferences in London seemed to have its effect, both The Daily Telegraph and The Guardian reported that at her press conference on 23 April the new Prime Minister was driven into making an explicit and open admission that she might well have to enforce a pay freeze.

When the former Chancellor of the Exchequer mentioned this today, he did not go on to relate what I thought was much the most significant part of the right hon. Lady's admission—that the Conservatives might have to impose a wage freeze. According to The Guardian of 24 April, the right hon. Lady said that she might be forced into a freeze by "irresponsible collective bargaining". A freeze, she said, was a very temporary measure during which you revise political and financial policies in the light of circumstances. In view of that explicit admission at an important press conference, I am entitled to ask how the Government intend to revise political and financial policies when this freeze comes. Hon. Members will agree that the House is entitled to an answer. This is of the greatest importance to our future economic policy, which we are debating. Will the freeze be clamped on those who have been "responsible" and who have settled for modest pay increases just as much as it is clamped on those judged to be irresponsible? Is it to be a comprehesive freeze without regard to merit or deserts? Or will it be some attempt to administer rough justice? What is implied by the right hon. Lady's statement that she would use a freeze to revise political and financial policies"? Does this mean that the Gracious Speech is liable to be overturned by new policies which will be devised in the familiar form of a U-turn?

In view of the Prime Minister's statement on this subject, we must also be told how the country would be got out of this freeze and how the dangerous process of thawing will be administered. This has always proved to be the downfall of improvised and hastily cobbled together incomes freezes or panic incomes policies which do not really deserve that term. In any case, there is also this question for the Government to answer. They are strong in their bold statements against monopoly at the outset of their career in Government. They demolish detailed interference but say that monopolists will tremble because the Monopolies and Mergers Commission is to be revamped—I must say it will have to be revamped out of all recognition if it is to serve any use—in order to be a terror to all who try to corner or monopolise in this country.

To Liberals, that is an admirable aim which we shall fully support if we are satisfied that it is being effectively pursued. But what will the Government do about the monopoly power of certain trade unions? Unwisely, they reject, no doubt for electoral purposes, any kind of sustained and carefully planned incomes policy. Yet they have no apparent plans for dealing with one of the most powerful monopolies of our time. We are entitled to hear what they have in mind. It is no good the Government saying that by allowing conscientious objection against the closed shop they will be reducing this monopoly power. They will have to come out with some alternative during the next few months if they are to be credible in the world.

I must now draw attention to what I regard as a totally puzzling gap in the Government's whole scenario. Even if one gives the Government—because this debate has to end before long—their eventual success in releasing all kinds of springs of enterprise and altering fundamentally the climate of business, they do not say how long this will take, although there have been ominous references to three Parliaments or 12 years. They do not explain how they will secure their re-election for that period. Much worse, they do not say what they will do in the meantime. They seem to be guilty of a glaring inconsistency.

In one voice, the Government say that 15 years of Socialism, either of the Huyton kind or the Bexley-Sidcup kind, has utterly debilitated the British economy. We are told to contemplate our economy in the most appalling state of near collapse. At the same time, they seem to say that only a few weeks of the new tonic policy of cold baths and fresh air, the windows open all night and the turning down of the central heating, will miraculously, at a stroke, turn this chronic invalid, drunk and debauched on 15 years of Socialism, into a healthy individual. This is not credible.

Before the debate ends, the Government must tell us how they will bridge this gap while the British economy, in the terms of their own argument, is still convalescent. They seem to be in such excessive haste. They have not got the Monopolies and Mergers Commission within miles of anything like an efficient organ for terrorising monopolists. Last year, this lumbering, ponderous body could produce only six reports. When it took on Guest, Keen and Nettlefolds, it had to abandon the investigation because it simply could not see its way through it. This palsied body has somehow to be turned quickly into a totally different engine capable of rooting out monopoly in our system. This will take a long time. Before they have started, or even produced a Bill on the Monopolies and Mergers Commission, they have abolished the Price Commission. This seems an error of time scale beyond all reason. To throw away the existing panoply, even if they despise it, before their own system has got under way, or even been described to the House, seems either panic or a lapse of mind.

The Government have many questions to answer tonight. I take some hope from the fact that no less than the Chancellor of the Duchy of Lancaster, with his formidable resources, is to be put up to answer. I hope that he will give full answers to the questions I have posed. If we do not get satisfactory answers, we will have no course but to support the official Opposition amendment.

7.36 p.m.

Mr. Eric S. Heffer (Liverpool, Walton)

Before coming to the main point I want to make, I would first like to congratulate you, Mr. Deputy Speaker, as a colleague from Merseyside. I am sure that you will be very distinguished in your new position. I hasten to add that I am not saying that in order to get called every time I stand because I know I will not succeed anyway. It would be a total waste of my time doing so. I would like sincerely to congratulate my hon. Friend on his appointment.

I found the remarks of my hon. Friend the Member for Vauxhall (Mr. Holland) most interesting in a remarkably excellent speech. I want to say a few words first about the contrast of the philosophy of the Prime Minister and the view of a previous Conservative Prime Minister, Harold Macmillan. The arguments now being advanced by the Government Benches are a repudiation even of the type of Conservatism experienced under Harold Macmillan and expressed in his book "The Middle Way".

I would like to quote from a chapter in Harold Macmillan's book entitled The emergence of a new doctrine". He wrote: The average citizen of this country had been bewildered by the mysteries of economic theory and persuaded into an almost fatalistic acceptance of what he had been taught to regard as the operations of economic law. The idea that the laws of economics might be dominated by the will of men, and that 'the system' might be made responsive to life rather than life to 'the system' was one which even intelligent and progressive men were chary of expressing lest they might bring down upon their heads the contempt and the condemnation of the learned economists. But the crisis forcibly revealed the strangely haphazard and insecure character of our economic position. He went on: The tide of depression had risen so high as to menace the position of many sections of the population which had formerly felt relatively secure. The obvious over-capacity and competitive redundancy in many industries generated in the minds of those responsible for their conduct new ideas of co-operative organisation. The interdependence of all forms of economic activity was more clearly revealed". That is "The Middle Way"—the Macmillan concept. That concept was repudiated by the right hon. Member for Sidcup (Mr. Heath) for two years. But it was reverted to after two years because the policies now being pursued by the Government could not be carried through in practice.

My fear is that we have a group of people on the Government Front Bench, supported by their Back Benchers, who are so stupid as to carry through what they say, unlike the right hon. Member for Sidcup, who, after two years, had to go back on his word. The result of such stupidity will be nothing but total economic and political disaster for the British people.

What leads me to that conclusion? It is the views of the Prime Minister. Her views frighten me to death. I should like to give an example of her views. In an interesting article in the Sunday Express on 22 April 1979, during the general election campaign, under the heading: We shall reward the workers and declare war on the wreckers", she said: There is no such thing as collective compassion, collective energy and collective ambition by Act of Parliament. What we get, and become, depends especially on our own efforts. Let us think about there being no such thing as collective compassion".

Mr. J. Enoch Powell (Down, South)

There is not.

Mr. Heffer

I appreciate that the right hon. Gentleman would perhaps agree with me on many things, but not on that. Both the right hon. Gentleman and the right hon. Lady are totally wrong. If there were no such thing as collective compassion, there would never have been a National Health Service or a Welfare State. The fear of ordinary working people going into the workhouse instead of receiving decent retirement pensions would have been with us still. It may be that some Tory Members are not aware of the fear that my mother had of having to go into what was known as the workhouse. It was collective compassion by Acts of Parliament which brought in the National Health Service and the Welfare State and eliminated that fear and changed the lives of millions of ordinary working people. It is a false argument to say that there is no such thing as collective compassion by Act of Parliament.

The other argument is that we cannot have collective ambition by Act of Parliament. I do not know whether the Financial Secretary to the Treasury had a grant to go to university. Possibly he did not. Grants were brought in by Acts of Parliament because we needed legislation to give the sons and daughters of working people the opportunities of higher education which they could not get because the money was not available for them in the past. Therefore, collective legislation has helped collective ambition. Many PhDs, also holding professorial chairs, got there only because they had grants as a result of Acts of Parliament giving them the opportunities.

Mr. Powell

As the hon. Gentleman referred to me both directly, though almost sotto voce, and perhaps by implication in his reference to a professorial chair, might I indicate the difficulty which some of us feel over collective compassion? The good Samaritan had compassion. If two good Samaritans had compassion, that would still be individual compassion, not collective compassion. If the good Samaritan had been obliged by decree of the Roman Emperor to assist the traveller, that would not be compassion at all, because it would be done under obligation.

Mr. Heffer

I remind the right hon. Gentleman that Jesus Christ was nailed to the cross for preaching collective compassion. He preached collective compassion: that we are our brother's keeper; that we are responsible for our brother as well as ourselves. That is why I believe that the basic doctrines of the Bible and Socialism are not very far removed. It is merely a question of historical interlude, but the basic argument is precisely the same.

I seriously challenge the arguments put forward by the Prime Minister. They sum up the philosophy of Tory Members that we have to look after ourselves; that we have to be concerned with selfish interest and greed for ourselves. Is that the kind of society that we are to build in future? Are we not to be concerned about our fellow man? I fear that, with this Government, that is precisely the type of society for which we are heading. It is the repudiation not only of what the Labour Party has done but of the more humane type of conservatism which Mr. Harold Macmillan was advocating through "The Middle Way" and in arguments and books of that kind. I fear what is going to happen in future. I fear the type of society for which we are heading.

I draw the attention of the House to what the Prime Minister said the other day. What right hon. and hon. Members say is very interesting. We should take note of this. The right hon. Lady said: I turn to the second theme—that of restoring choice to the individual. That choice was progressively diminished during the lifetime of the last Government. … During the election campaign many people said that at least the Conservative Party gave people choice and that this was quite different from the other party."—[Official Report, 15 May 1979; Vol. 967. c. 79.] Let us examine the argument about choice. It used to be said that when the unemployed marched from Scotland, Jarrow and South Wales, many of them presented themselves at the various big hotels in London for a meal. It was said that it was their choice to go to one of the big hotels. Of course, they were turned away. They did not have any choice. They did not have any money to pay for their meal so the doors were slammed against them. If they tried to go in, they were ejected by force. One or two were imprisoned because they dared to go in, sit down and demand a meal.

There is no such thing as so-called total choice. The same applies to education. Conservative Members say that there should be freedom to choose schools. A banker with vast sums of money may send his child to Eton, Harrow Hailey-bury or any other public school. However, Fred Bloggs, the son of a joiner, is not able to give his children that type of comprehensive education. That is why over the years Labour has endeavoured to introduce a State system of comprehensive education so that our youngsters will be able to receive a decent education—not as good, admittedly, as that received by those who go to Eton, but at least moving in that direction.

We must understand that there is no such thing as total choice. That applies even to schools in localities. I was a member of an education committee in Liverpool under a Conservative-controlled local authority. There was even argument about whether a child in one part of the city should go to a school just across the road but in another part of the city because of the zoning system. The concept of choice is ridiculous. To reach the stage of choice about which Conservative Members speak, it will be necessary to create the requisite social conditions and monetary basis.

Why is it that ordinary people now have a greater opportunity for choice than hitherto? It is precisely because they have better standards of living due to trade union activity and legislation introduced by Labour Governments. There has been a greater measure of choice through our efforts and never through the efforts of Conservative Members. That should be made clear when we argue about choice and whether there is collective compassion and legislation to help forward collective ambition.

Mr. Lawson

If the hon. Gentleman attributes improvements in the standard of living solely to the trade union movement, how does he account for the improvement in the standard of living that occurred between the dark ages and the nineteenth century when trade unions became an effective force?

Mr. William Hamilton

There was no Tory Party then.

Mr. Heffer

If the Minister was talking about the dark ages of early capitalism, it is clear that because there was only a weak trade union movement beginning to develop the workers suffered a great deal. The coming into existence of the capitalist system also saw the creation of the trade union movement to assist workers to defend themselves and advance their own interests. Working people's conditions are now much better in our type of society, where there is a strong trade union movement, than in other parts of the world where capitalism exists, such as in many Latin American countries, where the trade union movement is not strong and is unable to protect and develop the interests of working people to the extent with which we are familiar. Without the trade union movement, the conditions of our people would be much worse and completely different.

It has been said that the Government will make a U-turn in two years. I do not agree with that. On the basis of the attitudes adopted by the Government Front Bench, I doubt whether that will happen. Therefore, we shall find ourselves with a serious economic problem.

Something that is dear to my heart is the attitude of Government to industrial policy, especially for underdeveloped areas. On many occasions I have bored the House when arguing for extra work and more Government assistance for Merseyside. I asked the Secretary of State for Industry yesterday to set out his policy for the special development and development areas. He said that he was to visit them. He said that he would see the problems for himself and that he would listen.

Mr. Dennis Skinner (Bolsover)

Is he to wear a cloth cap as well?

Mr. Heffer

Perhaps he will do that. It would be fine for the right hon. Gentleman to go to listen to the problems of Merseyside if he had not already clearly indicated that he believed that there are no special problems on Merseyside. On 7 March, in an article in the Liverpool Daily Post, he was reported to have said in an interview that Merseyside has no special problems and that it must be treated in the same way as the rest of the country. That could mean special development area status being withdrawn from Merseyside. Incidentally, the added assistance which that status brings is basic to private companies. As my hon. Friend the Member for Lambeth, Central (Mr. Tilley) said, if that status is withdrawn, the high level of unemployment we now have will be nothing compared with the level that we shall see develop.

With the development of the National Enterprise Board we saw a new instrument that should be used for the creation of new industries, new companies, and, therefore, work in areas such as Merseyside, the North-East Coast and Glasgow. If such instruments are withdrawn, or if their support is reduced, we shall see only further high levels of unemployment.

The nonsense that economic problems can be solved by competition was precisely that which Harold Macmillan argued against. There had been a period of free competition. We had unfettered capitalism and we had the highest levels of unemployment ever known in Britain and other Western European countries. Unfortunately that did not necessarily lead to Socialism and a planned economy. Sometimes it led to Fascism, Nazism and to a Right-wing backlash. That is the other side of the coin, and that could be the outcome of the Government's policies. The Government will not solve our problems with their present policies.

There is the choice of going further to the Right, with disastrous consequences, or putting into effect that for which the Labour Party—or many of its members—has been arguing for a long time, and some even from the commencement of the party—namely, planning our economy on the basis of democratic Socialism. The latter course is the only real answer to our problems.

We are now in the age of the silicon chip. This is the second industrial revolution. Unless we plan our economy and reorganise our society, unemployment levels are bound to increase. That cannot be avoided. That in itself will lead to higher levels of unemployment. Either we have policies that will bring about a democratic planned society with working people genuinely involved in forms of management control in the industries in which they work or we have a total economic disaster with laissez faire policies possibly leading to State intervention, but of a Fascist kind.

That, I fear, is the choice in front of us. The policies advocated by the Government cannot work. The next few years will be difficult and rough, especially as, once again, we move into an economic crisis. At the end of the political five-year term—possibly before—the British people must make a choice of a Labour Government, but this time one carrying through a genuine, Socialist policy that will ultimately solve our economic and political problems, while solving those of the Western world.

8 p.m.

Mr. Michael Welsh (Don Valley)

I am pleased to take part in this debate so early after being elected by the people of Don Valley. My predecessor was Richard Kelley. He was a great guy, loved and held in high esteem by all in the constituency. I was thrilled when I came to the House of Commons. Every member of staff, the police and all Members of Parliament had nothing but praise for the work done by Richard Kelley. It was said that he was one of the best House of Commons men in a number of years. That is a compliment to Don Valley for sending such a gentleman to the House.

However, it is a great challenge to follow in his footsteps. I am prepared to accept that challenge. If I end up being half as good a House of Commons man as Richard Kelley, I shall have succeeded; I shall be a happy man.

When I first came to the House of Commons, I thought that it would be pleasant to be a Back Bencher and that I should enjoy looking after the interests of my constituents. After only two meetings in this beautiful Chamber I decided that the only place to be was on the Front Bench, for two important reasons. First, that is the only place where water is drunk in the Chamber—if it is water. Secondly, it is the only place where there is a flat surface on which to put papers. For those reasons, it is worth trying to get on to the Front Bench—but of course only on the Labour Front Bench.

Don Valley is traditionally a mining area. It is a good area with six big pits. Before I came to the House of Commons I worked at Broadsworth colliery, which employed 3,000 people. Many men work in that mine. The Don Valley miners are known for working and playing hard. The Doncaster panel of miners, of which I was chairman for some years, knows how to fight hard when necessary. I hope that we shall not be dragged into that necessity this winter. I hope that everything will go right. Like all good miners, we never turn down a challenge. I hope that, being good negotiators and tolerant men, the miners will get what they desire without any struggle.

Doncaster is the centre. It is surrounded by the Don Valley. There are good relations between town and village. It is a cosmopolitan area. People have come to it from Wales, Scotland and Derbyshire—even from other parts of the world. They are welcome. They are accepted among our communities. They play good roles in the local trade union committees, as local branch officials and as secretaries of working men's clubs, which are the hub of the villages. They join in the community life of the mining villages in the Don Valley.

There is only one thing that is wrong. There are two kinds of citizens among those who come from Scotland and Wales. I regret that I can do nothing about it. If such people come to our valley with their children, the children can never play cricket for Yorkshire. However, if people come as youngsters and have their children in Yorkshire, the children will have the privilege of playing cricket if they are sufficiently gifted. That is important to the people of Yorkshire. The House of Commons can do nothing about those two sets of citizens. The matter is left to the gin-and-it boys at the Yorkshire cricket club.

There are lovely rural areas in the Don Valley. This should be understood by those living south of Watford. On leaving the mine, we may eat our dinner, put the child in a pram and be in a beautiful rural area within 10 minutes. We may be down in the bowels of the earth sweating, with lamps on our heads to enable us to see what we are doing. However, in the afternoon we may be in glorious sunshine walking around rural England.

There are efficient farms in my constituency. I know a number of farmers. They work and play hard. More than anything, miners believe in fairness. If slightly wrong statements are made, they correct them. That is not my task today. I am proud and pleased that you, Mr. Deputy Speaker, have called me to make my maiden speech.

It was said that the rate support grant would be cut. Would Ministers make sure that they know who receives it? A few days ago the police were given a £40 million increase. It was said that the rate support grant would help to pay the 61 per cent. In metropolitan districts the police come under the county budget. However the counties do not receive the rate support grant. The increase must be paid pound for pound from the rates. The rate support grant goes only to the districts. In the shires it is different. It will cost South Yorkshire about £500,000 to pay its part of the police bill. I do not say that the police do not deserve the money. However, it is a fact of life that £500,000 must be taken from somewhere else to pay the bill.

Mention was made in the Queen's Speech of the people of the Third world. This matter is dear to the people in the Don Valley, who feel for those who are worse off. It is our nature. We cannot knock it out of our nature—and thank goodness we cannot.

My right hon. Friend the Leader of the Opposition asked the Prime Minister how much of our resources would be available for the Third world. The answer was that we must wait to see what resources were available. That is correct. It is foolish to give anything away or make promises before we know what resources are available. The Prime Minister is correct to say that. However, that, £40 million was given to the police, increases were given to the Armed Forces, and £50 million was promised to enable people to buy their way into schools. Mortgages of 100 per cent. were promised so that there could be asset stripping within local authorities.

As these things were done before it was known what resources were available, there would seem to be one law for the haves and another for the have nots. As a new Member here, Mr. Deputy Speaker, I am only saying that that is how it appears to me. I hope that the Minister responsible for making resources available to the Third world will come very quickly to this Chamber and inform the House that at the very least the Government will carry out the same commitments as the previous Government made, and which would have been undertaken had the Labour Party been returned to office. That is the minimum for which anyone could ask for our brothers and sisters, many of whom are literally dying of starvation because they do not happen to live in the advanced industrial world.

I accept, Mr. Deputy Speaker, that there has to be a limitation on the length of maiden speeches, and I will do my best to be brief. I have always honoured the Chair—unless I am provoked—and always will honour the Chair, Mr. Deputy Speaker. But I want to say a word about industrial relations, as I have been a trade union official for many years. Having worked in the pits since I was 14, industrial relations have been my lifeblood, and I have enjoyed every minute of it. It is good fun. I must emphasise, however, that those who know how to deal with people are those who are on the spot. If they are removed too far away, the result is rather like ploughing through a minefield, and someone is bound to get hurt, so that it is important to be very careful about this aspect of industrial relations.

Perhaps I may be permitted to tell a little story to illustrate my point, Mr. Deputy Speaker. My old secretary Tom Cowan, once went in to see the manager, and he said to him "These face workers are the hardest workers in the pit and you must give them more money." After an argument, they were given a 5 per cent. increase. The next day he went to see the manager on behalf of another group of workers, the front rippers, and he said to the manager "Boss, you have got to give these men an increase because they are the hardest working men in the pit." The manager said "Come off it, Tom, you said that yesterday about the face workers." Tom said "Yesterday I was selling oranges. I am selling apples today." I might add that he managed to get the 5 per cent. for them also.

There are parts of the Queen's Speech, concerning industrial relations, which ought to be looked at very carefully by the Ministers concerned. One important aspect is the matter of picketing. I have done a lot of picketing in my time. I have even been in the Chamber when the hon. Member for Bolsover (Mr. Skinner) was dragging out the Derbyshire miners, in 1968, so I know what it is like to be picketing, Mr. Deputy Speaker, and fetching people out. When it is a good cause, it is done sincerely and from the heart. Miners, like others, may suffer while they are doing this but are prepared to do it if they think it is the correct course to follow.

The Government should consult fully on the law on picketing with everyone concerned. The Government are talking basically about secondary picketing. The kind of tight limitation on secondary picketing now being proposed could cause the closure of factories. It is quite simple for about 100 craftsmen at one factory to picket another factory. If secondary picketing is made an offence, the people concerned will be pushed into gaol, resulting in factory closure. It is as simple as that. I am therefore warning the Government to be very careful indeed in what they seek to do about secondary picketing.

Before I conclude, I should like to say a few words about the closed shop. I, for my sins, have been involved in industrial development in Doncaster, and we have done very well indeed. I have met many managers, and I am basically talking about managers, because I never use the word "entrepreneur". Dr. Royden Harrison once told us that the word went out of usage years ago, but it appears to have come back again. Industrial relations have evolved around the managers and the trade unions in industry. I have not only met very many managers in this country. I have also been to New York to invite managers to come over to this country. They always say to me "If we come to your area we must have trade unionism in straight away." The managers want the trade unions to be involved and they will accept closed shops because they then know the people with whom they are dealing. They know where they stand when there is a dispute.

I urge the Government, therefore, to be very careful in what they do about closed shops. This is not a threat that I am making, Mr. Deputy Speaker, because I am not that sort of gentleman, but I hope that no one will ever take on the National Union of Mineworkers over the closed shop. Let us make that quite plain. When men's lives depend on their fellows who are holding a girder, they will not tolerate working with men who are not trade unionists. They will not tolerate people living on the backs of others. That is not a threat.

Mr. William Hamilton

It is a promise.

Mr. Welsh

But it is said in the very nicest way, Mr. Deputy Speaker, and I hope that note will be taken of it.

As for providing financial aid for postal ballots, I can only say that if the Government of the day are not careful, the lads in the unions will take them to the cleaners. I can well imagine an executive meeting saying "Go for £20" and the secretary coming back and saying "They won't give us owt. Let's have a postal ballot. We'll ring Government up and tell 'em to foot bill." I go further and suggest that the Government should also have consultations with the Post Office, because it is debatable whether the Post Office could carry all the mail that would be involved if postal ballots were to be held.

The other serious aspect is that the Government would be allowing leaders of trade unions to abdicate their responsibility. If at the NUM conference next year we say "We will just go for a reasonable increase of £50 a week and not be avaricious", and we are only given £25, and go straight to the ballot, it is obvious to me that if an executive recommends to the men to go out on strike, they will support the executive, if they have any loyalty at all.

Once that ballot is returned in favour of a strike, union leaders can do nothing. They cannot renegotiate because the members of the union have made a decision. They want 50 quid and nowt else. The union leader will have to telephone the boss and say "We want 50 quid and nowt else. We are not going to negotiate." This will be done through the law of the land, not the unions. The union leaders will say "Our members have told us we must have £50. Give us a ring when you are ready. Tell them that we are out."

When the union leader is interviewed on, say, "Panorama" and the interviewer asks "What have you got to say?" the answer will be "It is nothing to do with me. It is the law of the land and we are law-abiding citizens, so we must accept it." It is a fact of life. Therefore, I ask the Government to take great care and to have a lot of consultation with the trade unions before proposing any measure that may cause industrial strife or trouble. That is of vital importance.

If the Minister should come back to the House and say that after consultations and second thoughts he recommends that these three points should not be implemented, I should not oppose his recommendation.

8.19 p.m.

Mr. James Molyneaux (Antrim, South)

I am happy to follow the hon. Member for Don Valley (Mr. Welsh). We all look forward to his future contributions. I am quite sure that he will forgive me if I do not follow him into the ramifications of the free post system. I am glad that he was not here prior to the election to make that speech, before we got our election communications posted.

I particularly appreciate the efforts which the Secretary of State for Northern Ireland has made to join his colleagues on the Government Front Bench during my brief remarks. I am sure that he will not mind my saying that I also appreciate the presence of the former Leader of the House and the right hon. Member for Mansfield (Mr. Concannon), who, together with his colleagues, looked after the affairs of Northern Ireland for almost five years and earned the gratitude of the people of Northern Ireland. We in Northern Ireland may not always express our appreciation in terms that are clearly understood by people on this side of the water. However, we would want them to know that they have left behind them a great many friends and we are grateful for all they did for our Province.

The House will have gathered that although the hon. Member for Liverpool, Walton (Mr. Heffer), who spoke a short time ago, has joined us on these Benches, we do not necessarily share the same political views. When he asserted that the right hon. Lady the Prime Minister had used the term "collective compassion" he may not have been aware that the phrase was first used, as I understand it, by my right hon. Friend the Member for Down, South (Mr. Powell), who naturally felt that he was under some obligation to offer enlightenment and explanation during the contribution by the hon. Member for Walton.

Ulster shares, in more than full measure, the economic experience of the United Kingdom as a whole, being exceptionally exposed to economic stress by reason of its geographical location and, in particular, taking more than a fair proportion of the economic disadvantages which membership of the EEC, in its present form, entails. Economic policy in general and especially the maintenance of our national interests vis-á-vis the Community are therefore matters of acute concern to the people of Ulster.

We are under no illusion that the only viable economic future for us is as an integral part of the British economy. That adds force to our desire to see Ulster tied in with the supply and distribution of all forms of energy on which the economy of the United Kingdom depends. We are convinced that physical links for that purpose between Ulster and the mainland make complete economic and financial sense. We hope that the impetus in that direction at the end of the last Parliament will not only not be lost but will lead to decision and action in the near future.

These are matters which there will be opportunities for pursuing further at a later stage. The House will not be surprised if I turn to matters more directly political this evening. My colleagues and I extend our welcome and offer our help and counsel to the Secretary of State for Northern Ireland and his five colleagues. He—even more they—will have already begun to suspect the reason why there are so many of them. Six Ministers of the Crown to manage one-fortieth of the United Kingdom—just one and a half million people!

Admittedly no Patronage Secretary likes to see the rewards at his disposal unduly limited, but in this case the Patronage Secretary is not guilty. Nor is it anything to do with the terrorist assault which the people of our Province have had to endure for nearly 10 years. The Secretary of State, with one other Minister, could amply cover, besides other duties, everything that arises for ministerial decision out of the requirements of security.

The reason for the number of Ministers is both simple and astonishing. Six Ministers of the Crown are required, and, as they will soon discover, are barely sufficient, however hard they work, because they are attempting to administer those matters which in the rest of the kingdom are the responsibility of democratically elected representatives of the people. From pavements and potholes at one end of the scale to the location and organisation of schools at the other, almost every detail of administration which concerns the lives of the people is, in Ulster, the sole responsibility of a Minister of the Crown.

As an incidental consequence, hon. Members are the only elected representatives to whom their constituents can appeal. With every day that passes, the Secretary of State and his juniors will learn to appreciate still more the rightness of the objective that was set out in the Gracious Speech of restoring to the people of Northern Ireland more control over their own affairs". That means the same control—none other—as all their fellow citizens throughout the United Kingdom enjoy and, indeed, take for granted.

The Gracious Speech also says that the Government will "seek an acceptable way" of doing this. Let me remove what is perhaps a misapprehension from the mind of the Secretary of State and his Cabinet colleagues. The restoration of normal local government in Northern Ireland is already acceptable, except to a small minority which will oppose anything which does not obviously lead to the break-up of the union. The district councils, their members and staff are more than ready to tackle the additional functions which they could, and should, be discharging. I might describe these functions in shorthand as "second tier" functions. The desire to see democracy brought into the bureaucratic bodies which administer the larger or upper-tier functions is confined to no one class or section of the communuity. As I have said on previous occasions, any party which declines to take its share in working local democracy would receive short shrift from the electorate. Therefore, I have no hesitation in wishing the Secretary of State will in the task outlined in the Gracious Speech, and I assure him that it ought to be easily within his reach, if not in this first Session at any rate by the middle of this Parliament.

I offer three brief and respectful words of advice. First, let him work as for as possible upon the existing structure and along the lines of democratic local government in the rest of the United Kingdom. Secondly, let him bring into consultations those who have actually been elected to represent their fellow citizens, rather than individuals, groups or parties, however admirable otherwise, which do not have that sort of authority and responsibility. I can put my third suggestion to newly appointed Ministers in the words of Harold Macmillan, which were quoted in The Daily Telegraph today: Ensure that you are in charge of your civil servants, not they of you. On the defeat of terrorism, which is the object and ambition of every Secretary of State and Government, let me say that people talk about solutions as if the Provisional IRA and its kidney cared a fig for any solution except its own. There is one solution, and one only, for Northern Ireland, and the Prime Minister has grasped it already. She said in her speech at the opening of this debate: We shall do nothing to jeopardise the unity of the kingdom."—[Official Report, 15 May 1979; Vol. 967, c.85.] That is the key to the defeat of terrorism, to the return of peace. Let it be seen that the Government and the House will deny to Northern Ireland nothing that is implicit in the union, and do nothing in Northern Ireland which jeopardises the union. They will then bring back security and prosperity to Northern Ireland and to all its people.

8.30 p.m.

Mr. Norman Hogg (Dunbartonshire, East)

I am grateful to you, Mr. Deputy Speaker, for the opportunity to make my maiden speech so early in the new Parliament. I am most anxious to participate in the debate because of the importance of economic policy for my constituency. I want to refer particularly to industry, industrial growth and industrial relations.

I am proud to represent Dumbarton-shire, East. The constituency is at the very heart of Scotland and is an accurate reflection of old and new Scotland. It has traditional and new developing industries. It has new and exciting communities as well as well-established communities. The seat, which I gained for Labour at the general election, was previously held by the Scottish nationalists. Before that it was held by the Conservatives, from February to October 1974. My predecessor, Mrs. Margaret Bain, served the constituency for five years, and it is right that I should pay tribute to the hard work she did on behalf of her constituents. She was popular both here and in the constituency, and her defeat was the rejection of separatism. It was her politics, not Mrs. Bain, that the electors rejected.

The population of Dunbartonshire, East is concentrated on three principal towns—Cumbernauld, Kirkintilloch and Bearsden. Cumbernauld is one of Scotland's five new towns. With respect to the hon. Members whose constituencies include East Kilbride, Glenrothes, Irvine and Livingston, I believe Cumbernauld to be the most successful. It is an exciting place where young people have come to live and work. They have the determination to ensure that it succeeds.

The success of Cumbernauld in fulfilling the hopes of its citizens can be attributed to policies pursued by Labour Governments. It was a desire on the part of the people of Cumbernauld to see these policies continue that sent me to this House on 3 May. I know that the people of Cumbernauld are anxious to see their town grow and prosper, and I hope to help serve that objective here at Westminster.

Kirkintilloch, which is a well-established community, is strongly independent of Glasgow. I hasten to add that there is nothing wrong with Glasgow, but the people of Kirkintilloch see themselves as being independent. Many of the communities that exist on the periphery of our great cities and that have their own heritage and traditions want to retain their identities and individuality. So it is with Kirkintilloch.

The town has its own industry providing local employment. Maintaining that base of employment is vitally important for the town. It is with considerable alarm and concern that the town viewed the recent notices of redundancy at the Kelvinside works of Anderson Strathclyde Ltd. I hope that the Government will appreciate the anxiety of the workers employed at the company and the fears of the townspeople. I hope, further, that the Government will act quickly to give the fullest assistance, and to that end my hon. Friend the Member for West Stirlingshire (Mr. Canavan) and I will seek a meeting with the Secretary of State for Scotland.

My constituency includes the villages of Twechar and Croy. For generations they produced colliers for the mines of central Scotland. Some of their men are still employed in the coal industry, but many have found new work in industry that has been developed with Government assistance. These small villages know the importance of Government assistance, and they know the valuable activities of the Scottish Development Agency. They therefore hope that the agency will be able to continue its good work.

The Gracious Speech includes the statement: Proposals will be brought forward to amend the Industry Act 1975 and to restrict the activities of the National Enterprise Board". In Scotland that could mean a massive loss of jobs, and I fail to see how that will aid the economy. It takes us back to the talk during the election campaign of the need for real jobs. I suppose that the Government see it in that context.

During the campaign I visited the mines where some of my constituents work. The miners there were working at real jobs. I visited factories which have been assisted with public funds in the form of grants, tax relief, free rental periods and so on, and in every case the workers were engaged in real work. I visited Woodilee hospital, in my constituency, and there the staff are worried about an economic policy which might reduce or level the financial support for the National Health Service. They are having enough difficulty as it is in maintaining the service, and what they do is real work.

In Scotland generally there is considerable support for Government action and intervention in the management of the economy. The National Enterprise Board and the Scottish Development Agency enjoy massive public support. The jobs created and saved by these organisations total many thousands. They, too, are real jobs—jobs in the manufacturing sector—and there can be no sound economy in Scotland without their continued presence. I should add that any restriction on the NEB and any decline in Government help for industry will be strongly resisted throughout Scotland.

I turn now to a different area of industrial life, that of industrial relations. Yesterday, the hon. Member for Perth and East Perthshire (Mr. Walker) gave the House a resume of his career as an active trade unionist, and it would be impertinent of me to challenge the validity of his credentials, but I suggest that some of us on these Opposition Benches also have some background and experience in the trade union movement.

I have served for the past 12 years as a full-time officer of Europe's largest white collar trade union, the National and Local Government Officers' Association. Latterly, I was secretary to the trade unions committee for the electricity supply industry in Scotland and was much involved in the negotiations within that industry. Also, I had a major role in the consultative arrangements with management on policy. I hope, therefore, that I have the right background to comment briefly on industrial relations.

I believe that co-operation has been shown by experience to be the only way to make progress—co-operation in the recognition of trade unions, co-operation between management and unions in making effective arrangements for negotiation, and co-operation in creating procedures for conciliation.

I regret that the Government are intent on further legislation. I regret the more that I doubt their good intentions in regard to postal ballots. I have no wish to argue with my hon. Friend the Member for Don Valley (Mr. Welsh), who commented on this matter a few minutes ago, but my conclusion is that the Government's proposal is intended to reinforce the fallacious claim often made by Tory candidates in the recent election campaign that trade unions are undemocratic.

The facts are very different. The trade unions of this country have long used secret ballot procedures, and this in two major respects—first, in the making of senior full-time appointments to the union, and, secondly, in major decision-making, often in respect of pay and pay settlements.

The AUEW makes its senior appointments by secret ballot. The General and Municipal Workers' Union makes its senior appointments by secret ballot, as well as references to the membership on pay. The National Union of Mineworkers appoints by secret ballot, and right hon. and hon. Members will be aware also of the pay settlement ballots of recent time. The electricians' union ballots its members on senior appointments, and there has just been a ballot of the membership in the power industry on a pay claim. The National and Local Government Officers' Association elects its national executive on an annual basis by secret ballot.

There are similar procedures at all levels thoughout the trade union movement in Britain, not only for appointments at national level but at regional and district level, too. Therefore, I can only draw the conclusion that the intention of the purpose expressed in the Gracious Speech is to support the argument which Conservative candidates offered at the time of the election that the trade union movement is undemocratic. All I can say is that I have seen no evidence whatever to support that contention, and my 12 years' experience as a full-time trade union officer tells me that it is completely untrue.

I hope that in the weeks and months that lie ahead I shall have the opportunity again to speak on industrial relations, but I certainly do not believe that there is anything to be added to the economic strategy of the new Government by attacking the trade union movement and making it clear, from the very beginning, that they have no confidence in the movement. I think that that is very mistaken and that it can add nothing whatever to the dialogue which I understand the Government hope to have with the movement.

8.40 p.m.

Mr. William Hamilton (Fife, Central)

It is a very great privilege to me to congratulate my hon. Friends the Members for Dunbartonshire, East (Mr. Hogg) and for Don Valley (Mr. Welsh) on their extremely able speeches on a subject about which they know a lot—industrial relations. I wish that the Government would pay more attention to people such as these before they embark on their legislative proposals to deal with the trade unions. The speech of my hon. Friend the Member for Don Valley was like a breath of fresh air. He spoke on industrial relations with a stimulating honesty and a profound knowledge of the subject. I hope that both of my hon. Friends will speak very often and very loudly on matters about which they know so much.

Intervening at this stage of the debate, it is very difficult to find anything original to say, but I shall have a go.

When the Prime Minister made her first speech in that role on Tuesday last, she said: we are offering people what they want."—[Official Report, 15 May 1979; Vol. 967, c. 75.] My hon. Friend the Member for Don Valley should take that as his text to his next branch meeting, when he is putting in that claim for £50, because the Prime Minister said: we are offering people what they want. Therefore, if miners want £50, she is committed to giving it, so my hon. Friend does not need a secret ballot or anything. The Prime Minister is on record as saying that she will give him what he wants.

Let us examine for a few minutes just who is offering what. Let us look at the composition of the Cabinet, for instance. Antony Sampson, writing about this very matter in The Observer on 13 May, said: It is like a roll call of the employers' side of the Corporate State. The composition of the Cabinet is a mixture of lawyers, very wealthy landowners, very wealthy ex-directors of big multinational and national companies, and public school boys. Peregrine Worsthorne, in an article in the Sunday Telegraph of the same date, 13 May, described it in this way: the new Government is encouragingly full of hereditary Peers, self-made and hereditary millionaires, wealthy landowners … headed by a lady who has married money. That was from an eminent Conservative.

It was put in another way by the television critic of The Observer, Clive James, in the same edition of The Observer. He put it this way. Now that the incoming Tory Government has made greed patriotic, there is no use pretending that we aren't going to have a much easier time of it. Except, of course, for those who are going to have a much harder time of it. But in one thing we are all united. We are all doomed to cope with five years of Mrs. Thatcher's liturgical tones. That phrase will appeal to the Leader of the House. Clive James continued: She started quoting St. Francis within minutes of becoming elected, and scarcely an hour had gone by before she was sounding like the book of Revelation read out over a railway station public address system by a headmistress of a certain age wearing calico knickers. By dawn of the same day she was doing a fair imitation of the Sermon on the Mount. Perhaps she is just nerving herself up for the miracles she will have to perform with the loaves and fishes. That language might be rough, but there is more than a germ of truth in it.

From the Labour Benches the theme of the debate has been that the country is facing great economic, social and other difficulties. In order to solve them we have to get what is sometimes called consensus and carry with us people who may not be of our political persuasion and may come from a social origin different from ours. We have to learn to understand the fears, hopes and aspirations of these people. The Government have started on a completely different tack and sought to hector and bully and assert that they are right. The policies for which they have been given a mandate, by hell or high water they will impose.

It is a threat or promise that whether we like it or not we shall be offered choice, freedom and diversity. Those words are never far from the lips of right hon. and hon. Gentlemen opposite. In the short time since the election, we have had indications of the harsh reality of those high-sounding words and exceptional sentiments. In education, health and housing only cash will give people an effective choice. There is complete freedom of choice in education for those with sufficient cash to send their children to public schools such as Eton and Harrow. There is freedom of choice to enter a hospital with highly paid consultants and nurses if one has sufficient cash. Without it, there is the second-class service, the State hospital service. With cash to pay for a house there is complete freedom of choice, but the building societies have warned the Government that the large sums of money necessary for the purchase of council houses will not be available from them on anything like the scale that the Government anticipate.

Judging by the election results, the offer made by the Conservative Party to reduce taxation was attractive. It suggested increasing incentives and that sort of baloney, and was coupled with ill-defined threats to cut public expenditure. To date, public expenditure has been increased by about £160 million on pay rises for the police and Services. There is a promise to increase expenditure on defence, and an extra £2,000 million over the next five years is probably an underestimate. The Government are presumably committed on pensions and other social security benefits, and I hope that they will eventually say whether they intend to honour the commitment made by the Labour Government, which is still in legislative form, that the old-age pension will be tied either to price increases or earnings increases, whichever is the greater. They have not come clean yet on that. If they are committed to all those increases in public expenditure, there will have to be swingeing decreases in public expenditure in other areas or swingeing increases in indirect taxes. We must have specific and clear answers to these problems.

The Government have given substantial increases in pay to police and Service men. I am not arguing the merits; I am here representing NHS employees, particularly the nurses. If the Government do not recognise that a nurse or an ambulance man, or any other ancillary worker in the Health Service, is not worth as much as a copper or a corporal—and we must appreciate that a corporal in the Armed Forces will receive £5,000 a year, slightly less than the salary of a Member of Parliament—where do the relativities come into the matter? Are the Government committed to the finding of the relativities board? This is an important matter. If the Government value policemen, or corporals or anybody else in the Armed Forces at that kind of pay, what will they do with other public employees in other important sections of our services?

The nurses feel desperately aggrieved, as do the teachers. I was a teacher before I became a Member. I see that today the teachers settled for 10 per cent. or a figure in that region. But if they have their eyes on the Houghton recommendations, they will not be satisfied unless and until they reach that stage. The Government have that problem to face. The incomes policy has to be formulated somehow or other. It is an extremely rough and unscientific exercise. The Government must thrash out the matter with the trade unions and organised workers to achieve something that is socially and economically acceptable. I fear that the Government are going about the process in the wrong way.

Next winter, when we reach the next round of wage demands, the kind of industrial unrest that I envisage will make last winter's look like a Sunday-school tea party. [HON. MEMBERS: "Oh."] Yes, that is my forecast. If the sounds made on the Tory Benches in the last five days are anything to go by, there will be enormous bitterness and divisions in this country and the trade unions and organised workers will not be responsible for them. The responsibility will lie on the shoulders of the Conservative Government.

8.53 p.m.

Mr. Tom McNally (Stockport, South)

I am grateful to my hon. Friend the Member for Fife, Central (Mr. Hamilton) for being so brief. I, too, shall be brief because I know that the House is awaiting the replies from the Front Benches.

My first duty as Member for Stockport, South is a sad one. It is to pay tribute to my predecessor, Maurice Orbach, who died three days before he was due to come to speak for me at my eve-of-poll meeting. Maurice was a proud Member of this House—proud of his service as Member for my constituency, and earlier as the Member for Willesden. He was also very proud of being a Jew and a Welshman. I shall greatly miss his counsels. He taught me the importance of being a Member of Parliament who cares for the individual and the individual constituent. He leaves behind in Stockport very fond memories among many people who have been individually helped by the care and compassion of Maurice Orbach.

In common with all cowards, I decided to rest on a quotation to start my maiden speech. It is a quotation from the general election of 1835, and it is couched in the robust words of that day. It is addressed to the electors of Stockport and reads as follows: You now have the power to emancipate this opulent and intelligent borough from the thraldom of Toryism and make it contribute largely to the collective wisdom of the nation. It is for you to decide whether this populous hive of productive industry shall add two champions to the intrepid phalanx of devoted patriots who in the House of Commons will present a bold frontier to the desperate and bigoted invaders of your dearest rights, or whether, by narrow and contracted views of public duty, you accomplish the virtual disfranchisement of our borough and render it to scoff and scorn. The House no doubt will be pleased to know that Stockport is still an opulent and intelligent borough. It will be doubly pleased to know that it is still a populous hive of productive industry. The House will be thrice pleased to know that it has sent two champions to join this intrepid phalanx of patriots. I refer to myself and my hon. Friend the Member for Stockport, North (Mr. Bennett), whose victory was very much a personal triumph as well as a political one in the recent election.

My constituency is almost a blueprint for what industrial strategy is about. It was once a mighty cotton and hatting town. It has become a town at the very forefront of technology. It has one of the finest shopping centres in the North-West and is a leading centre for commerce. If I give the names of the industries in Stockport—the nuclear industry, oil, marine, aerospace, microelectronics, computers, high-precision engineering—hon. Members will be able to see that it is indeed a town of the future.

One has only to add the constituency's magnificent motorway system, its very efficient rail system and its international airport, which is really misnamed "Manchester airport"—it should be "Stockport airport"—to see what an attractive centre it is for industry and commerce.

I can see that hon. Members are saying "This boy has it made. What is he worried about?" What I am worried about is that all that technology, all that precision, all that transition from declining industry to modern, forward-looking, late twentieth century industry has been carried out by firms with names such as Ferranti, Fairey, ICL and British Aerospace.

It will be realised why, with all the advantages, with all the efforts that the working people of Stockport have made to adapt themselves to change—no Luddite atmosphere there, but a real attempt to face up to new technology, to adapt to the challenges of the modern world—there is a genuine fear hanging over Stockport.

That fear is that the people's effort and success will be sacrificed on the altar of Tory ideology. They fear that what we face and what we have heard in the past two days are proposals which will put at risk everything that has been done in the town over the past 10 or 15 years.

We have been told that the present Government will go one better than their predecessors of 1970–74, that they will go one step further. Between 1970 and 1974 the Conservative Government established an asset strippers' paradise. Now they will cut out the middle man; they will do the asset stripping themselves. It will be done not as part of a great industrial strategy, not as part of making a leaner, fitter Britain, but because they can think of no other way of paying for their tax promises, which we told them in advance, at the election, they could not keep.

We shall see the hiving off, splitting apart, of industries which five or 10 years ago were on their uppers, facing bankruptcy and closure, but which, because of the efforts of the Labour Government and the National Enterprise Board, and because of co-operation between working people, management and Government, are now prosperous again.

One has only to talk to senior management or workers in British Aerospace, or Fairey, to discover the importance of keeping groups together so that ideas can flow from one to another. It is no use advancing the old argument that nationalisation always fails and is always costly. Of course it will be if every time it succeeds Victor Matthews and company can go round for their spoils and their pay-offs.

Many warnings have been given to the Conservative Front Bench in the past two days. Let me add another. The people of Stockport will not lightly allow them to destroy what has been their success in the past few years. I tell the Chancellor and the Secretary of State for Industry that the people of Stockport do not believe that down the leafy lanes of Hazel Grove and Cheadle there are hundreds of entrepreneurs waiting for the clarion call to rush out and create jobs. They have had the chance to do so time and time again, and time and time again they have failed the working people of Stockport. What helped the working people of Stockport was the Labour Government with the initiative and the will to create new jobs and new industries.

Perhaps nothing can stop this Government going on their mad and foolish way. But the working people whom I represent will resist them until they see the folly of their ways and give way to a Government who will work with working people to create new industries, prosperity and the wherewithal to make the fair and just society to which we are committed even if it has been forgotten and abandoned by the Conservative Party.

9.0 p.m.

Mr. Michael Foot (Ebbw Vale)

Nine maiden speeches have been delivered today, in addition to all the others that we have had during the debate on the Gracious Speech. Today we have heard from my hon. Friend the Member for Jarrow (Mr. Dixon), the hon. Member for Lichfield and Tamworth (Mr. Heddle), my hon. Friend the Member for South Ayrshire (Mr. Foulkes), the hon. Member for Devon, North (Mr. Speller), my hon. Friend the Member for Vauxhall (Mr. Holland), the hon. Member for Moray and Nairn (Mr. Pollock), my hon. Friends the Members for Don Valley (Mr. Welsh), and Dunbartonshire, East (Mr. Hogg), and, just a moment or two ago, my hon. Friend the Member for Stockport, South (Mr. McNally).

If I commented in a full and proper manner on all those speeches and gave the full premonition of the further occasions on which we hope to hear those hon. Members speak, I might exhaust the whole of the time available to me. I have no doubt that some hon. Members would ask why not. They might eagerly seize on such a proposition. Therefore, I hope that it will be attributed to my natural sense of malice rather than any lack of generosity towards them if I do not follow that course.

Having listened to all those speeches, however, I believe that the House of Commons is a richer place on their account. I say that especially because there have been three maiden speakers from the Government Benches and six from the Opposition side. That is a very proper proportion that I should like to see fulfilled more widely in future.

It would be invidious if I picked out from the many speeches any individual ones, although I shall comment on some of them as I proceed with my remarks. But I hope that none of the others will think it discourteous if I refer especially to the speeches of those of my hon. Friends who spoke with a peculiar knowledge of industrial relations. I have in mind my hon. Friends the Members for Dunbartonshire, East and for Don Valley. I hope that their speeches will be studied carefully by members of the Government, especially by the Secretary of State for Employment, before they proceed with any of the legislation outlined in the Gracious Speech.

It appears that some of the proposals ventilated at the time of the general election for dealing with these matters have now been abandoned, and I believe that if the Government study the speeches of my hon. Friends on these matters they will assist them in abandoning the rest of those measures, resulting in our having much more time throughout this Parliament to deal with all the other issues. So I urge the Secretary of State for Employment to read, for example, the speech of my hon. Friend the Member for Don Valley, who in one speech laughed out of court the propositions which the Government have been making on many of these matters.

I comment first on the speech yesterday by the Secretary of State for Industry. I do so because the Prime Minister on a number of occasions has paid tribute to him as the author of many of the policies which the Government seek to apply in this Parliament. He is their guide and philosopher. On his broad shoulders, he carries, Atlas-like, the full weight of the intellectual case which the Conservative Party has to present to the House and the country.

It is the Secretary of State for Industry who has woven into one dazzling theme the views of Adam Smith, of Schumpeter, of Professor Hayek and of Waldron Smithers, as some of us remember him in this House. All are woven into the same tapestry. It is on that basis that I approach the speech of the right hon. Gentleman. I say this especially because he put the case so strongly and effectively. If he were to apply it immediately across the whole range of our industry, covering all the industries mentioned by my right hon. Friend the Member for Chesterfield (Mr. Varley), who also spoke in that debate, I imagine that the full-scale, catastrophic, industrial crash in this country would come roughly about July or the beginning of August.

The Secretary of State for Industry has the endearing habit of suggesting every now and again that he is not going to carry through the full logic of his own principles. Every now and again, he seems to pull himself up, interrupt himself and say "Maybe I have got it wrong again, after all". That is the impression that he seems to give to us in this House. Perhaps that is the impression, or the very words, that he will use in Cabinet when he reaches that conclusion a little later, if he does.

Some of my hon. Friends believe that this is too optimistic. I am not making any prophecy because I believe that the right hon. Lady—I will come to her in a moment—really has the courage of the right hon. Gentleman's convictions. That is the danger that we have to face. But the right hon. Gentleman—I must give him credit—says every now and again "Maybe I should look at it again". Indeed, he made the offer in his speech yesterday that he would come to some of our constituencies, presumably, before putting into operation the policy that he himself has been advocating. I give him here and now an invitation to come to Ebbw Vale. We will show him round. My hon. Friends will take him to Merseyside and to other areas to see, with his own eyes, the utter destruction and devastation that would be caused in this country if the Government were ever to carry their policies into full operation.

During the election campaign, the Secretary of State for Industry went to some of the areas that I also visited to see some of the industries that have been sustained by Government action. He went to the part of Lancashire where there is a Rolls-Royce factory and made a notable speech. He was obviously asked questions on what he thought about subsidies and assistance for Rolls-Royce. He gave the simple answer "We are not going to do anything rash about Rolls-Royce." That was a very fine undertaking.

When the right hon. Gentleman said that the Government would not do anything rash about Rolls-Royce, it meant presumably that the Government will not apply their own principles to Rolls-Royce. They should give us a full list of the places and the industries they will not be rash about. The right hon. Gentleman might put in the Library or Hansard a full list of the industries that the Government will not be rash about—those industries that have been sustained by Government action. They would have a full list of industries, large and small, sustained by the actions of the last Labour Government. I hope that the Secretary of State for Industry will be prepared to do that. We would certainly be prepared to take him to those parts of the country that are absolutely dependent on Government initiative, Government investment and Government action in order to carry through the transformation from older industries to new industries. If the Government were to intervene and say that they were proposing to cut short that process, the results for this country as a whole would be devastating.

I turn from the Secretary of State for Industry to the right hon. Member for Sidcup (Mr. Heath). I invited him to come along this evening. I hope that the right hon. Lady will not think that I am intervening in her prerogatives in any way. I thought it might come better from me.

The right hon. Member for Sidcup has played a notable part in our debates. Even in his absence there has hardly been a speech from either side of the House which has not referred to him. As I listened to the Prime Minister delivering her speech at the beginning of our debate, I could not help thinking that in a certain sense the right hon. Member for Sidcup was the luckiest man alive. It is like one of those terrible aircraft accidents of which we hear and someone not turning up at the right airport or forgetting to set the alarm bell ringing and therefore being let off altogether. The right hon. Gentleman comes into that class.

To change the metaphor, the right hon. Member for Sidcup has been left out of the present Administration because it was thought or felt—or feared perhaps—that he might be a kind of Jonah on board ship. I can understand that point of view. But now I think that he is swimming safely ashore, without even the assistance of any whale, leaving the rest to face the shipwreck. That is what will happen. I think that the right hon. Gentleman deserves our congratulations both on not having had the offer and on having refused it.

Perhaps I should come to the right hon. Lady directly. I never agreed with the proposition that the right hon. Lady had not put her own imprint on the general election that we have just fought. She led her party, she put her imprint on it, and I think that she is entitled to claim the victory, as some of her hon. Friends have said.

No one before the right hon. Lady—she made it clear up and down the country—fully appreciated the rich spiritual quality which was to be found in a straight proposition for an across-the board cut in the standard rate of income tax. Nobody before the right hon. Lady struck such a fine combination or such a wonderful balance—I think that is the word that she prefers in the Queen's Speech—between moral uplift and mass bribery, because that is what she has been engaged in. There has been nothing like it for generations.

I have racked my brain to think where there had been such a comparable mixture of appeal to sentiment and cupidity. There has been nothing like it since Shylock went through the streets of Venice crying: My daughter!—O my ducats!—O my daughter! Fled with a Christian!—O my Christian ducats!— Justice ! the law! —and other themes from the right hon. Lady— my ducats, and my daughter! What we must do in this Parliament—at the begining at any rate—is to disentangle from the right hon. Lady's pious claims the reality of what she is proposing for our society. The more we examine those realities, the nearer we discover how indeed the consequences would be those that have been outlined by my hon. Friends who have described a very different kind of society being established if we follow the course recommended by the right hon. Lady.

The right hon. Lady sometimes talks about her difficulties. Nobody could have talked more fully, if not eloquently, on the subject than the new Chancellor of the Exchequer today. But the right hon. Lady's main difficulties are of her own creation. The main difficulties that she will have to face in these coming weeks and months will arise from the manner and the form of the undertakings that she gave during the general election. The right hon. Lady made a whole series of commitments. She assured the whole country of the aspirations that she was going to carry into effect right from the beginning. She made it clear that she would make tax cuts on a very considerable scale.

The right hon. Lady gave more direct undertakings about wage increases for specific groups than have ever been given in any election campaign. She gathered many votes by that process. I dare say that she gained some policemen's votes by saying that the police would have an increase straight away. I dare say that she obtained some votes from those in the Armed Forces by saying that they would receive their full increase straight away. I dare say that she received some extra votes, if she did not have them already, from doctors and dentists. I dare say that she received some from them by saying that they would have an increase. Is that to be so? We have not been told that yet.

During the course of the general election the right hon. Lady undertook a wide range of undertakings and commitments—increases in wages, in payments and in the rate of inflation. She was entitled to do that, if only she told us how she would do it. If she had done that, it would have been a somewhat different story.

We shall have to wait for the Budget, and possibly for the next one, to see how it will happen. The Opposition claim—I believe that it will be proved by the facts—that she will not be able to carry out her commitments and to satisfy the aspirations that she has aroused for increased material standards unless she inflicts heavy injuries and injustices on the poorest sections of the British people. That is the meaning of a range of other aspects of the items that appear in the Queen's Speech.

All the right hon. Lady's proposals about health, education and housing involve the imposition of injustices—in some instances glaring injustices—on the poorest. It is shameful to say that we shall be able to have a system of selling council houses—I am in favour of doing that in certain circumstances, but I am not in favour of doing it when nothing is said about what will happen to the rents of those who cannot afford to buy—when no real provision is made. What will happen is that sales will be financed partly by the rents collected from those who cannot afford to buy.

The same applies throughout the range of the right hon. Lady's supposedly social policies. She will have to impose heavy hardships on many, especially if she stands by the policy that has been pronounced already that involves drastic cuts. The Chancellor of the Exchequer said that as clearly as he said anything earlier today. He said that there will be heavy cuts in all the provisions for sustaining industry and for creating new industries throughout the country, especially in the areas that have the hardest task to bear.

We had that before. The Government of 1970 set out on much the same course. They set out saying much the same as members of the Conservative Party said in the election and have said throughout the debate. The Tories eventually decided to change course. We are now told that there will be no change in the course. That may be. What happens when we repeat the performance, but in different circumstances and with a different cast? What happens when Selsdon man joins forces with the Iron Lady? That is hard to imagine. I suppose that it might be something like the hon. Member for Chingford (Mr. Tebbit). That is only by the way.

If we were to proceed along that course, and if there were no turning back, the prospect facing us would be dire. That is why the reality of this debate—if Government supporters apply their minds to it—came from several of my hon. Friends, who described how we should get back to that point. That is where the House and the country will arrive.

The right hon. Lady talks about her being a new beginning. She is not a new beginning at all. She is a historical aberration. Indeed, in its modern form the Conservative Party is a historical aberration. Its members never learnt anything from what happened to their Government from 1970 to 1974. Now we have an Administration who seem to be dedicated to the proposition that they will never learn anything from them again. Those hon. Members from our great industrial areas who spoke indicated clearly the different choices faced by the country.

The idea that we may resolve these matters by a return to the ways and methods of the 1930s or the nineteenth century is absurd. The question we must face is not how we can turn back the clock in that manner. I do not believe that the country will tolerate that. The question we must face is how we are to apply much more boldly and determinedly the method by which we may manage and organise the new science and technology that provides the ways of living in our society. It cannot be done by the methods of the unplanned market. I do not think that many Government supporters believe that. If the Government set out to do that, we are heading for the most serious times that the country has faced for generations. We are heading for the clash described by my hon. Friends. Today, in a most notable speech, my hon. Friend the Member for Vauxhall described where we were heading. Above all, it will be the responsibility of the House of Commons to ensure that we avoid those difficulties as much as we can and prepare for the time when the nation may renew the course on which we should go.

We intend, and have the right, to fight the measures proposed by the Government in the Queen's Speech. We know that the Government have a temporary majority which they are entitled to use and to claim. I do not think the Government will stay in office for anything like five years. If the Tories pursue the policy to which the right hon. Lady dedicated herself at the beginning of the Queen's Speech, this country is in for very rough times. It will require all the intelligence and authority of the House of Commons to ensure that the catastrophe does not come. Even the right hon. Lady must turn back. The Government have already showed signs of turning back. Some members of the Government have already abandoned those policies, it appears, but we are not quite sure about the right hon. Lady. All her colleagues apparently have abandoned the most vicious and reprehensible proposal to be included in their so-called trade union legislation—the proposal for the imposition on strikers' families. That, I gather, has been abandoned altogether. [Interruption.] If hon. Members who are interrupting me now would listen to the rest of the debate, they would hear that many of the other items will have to be abandoned.

There is a proposal, for example, about a secret ballot. Many of us are very much in favour of secret ballots. [HON. MEMBERS: "Oh."] Yes, they have been used in many cases. But, as has been explained by my hon. Friend the Member for Don Valley, what will happen is that the Government will apparently pay for all the ballots of the NUM. I am sure that the NUM will be very happy to send in the bill.

If the right hon. Lady would listen to the rest of the speech, she would discover also that even that provision, which is the most innocent and most unexceptionable section of the proposals, has in it such flaws that it would not be possible to put it into a proper, intelligent Bill to be carried through the House of Commons. As for the other measures that she is proposing, my prophecy is that the more the Government seek to ensure that they are set out in detailed legislative form, the more impossible it will be to carry them through this House of Commons and to get them accepted by people up and down the country.

I know that Conservative Members do not like heeding these warnings. They did not listen to such warnings as we gave them at the beginning of the 1970s. As a result, they suffered great difficulties and the nation also suffered great difficulties. They had better heed these warnings now. Even more, they ought to heed the warnings that we have given them from the beginning of this debate to the end of it on the way in which industry has been sustained through the worldwide slump. We had not heard a word from the Conservative Party for the past five years about the world wide recession, but we heard about it today. We had not heard a word for five years about the balance of payments, but it has been rediscovered today. I dare say that there will be several other rediscoveries of that nature.

Mrs. Elaine Kellett-Bowman (Lancaster)

rose—

Mr. Foot

There are many other rediscoveries of that nature that the Government will have to make. As they discover what is the real nature of the world in which they live, they will either have to abandon the policies on which they were elected or they will have to proceed to the shipwreck and the catastrophe which some of us have prophesied.

Mrs. Kellett-Bowman

rose—

Mr. Foot

I urge upon the right hon. Lady at the earliest possible stage in these proceedings to try to see how she can rectify these matters and come to the House of Commons—

Mrs. Kellett-Bowman

Will the right hon. Gentleman give way?

Mr. Foot

—with a different point of view. I will not give way to the hon. Lady.

The right hon. Lady has won her victory temporarily, but she did not in any sense whatever—

Mrs. Kellett-Bowman

rose—

Mr. Foot

—present to the House of Commons—

Mrs. Kellett-Bowman

rose—

Mr. Speaker

Order. The hon. Member for Lancaster (Mrs. Kellett-Bowman) learnt a long time ago that the right hon. Gentleman will not give way.

Mr. Foot

The right hon. Lady did not, in any sense whatever, present to the House of Commons in the debate the realities of the country and the world today. She did not seek to present them in the general election campaign. That is the albatross that hangs round her neck. She was the one who placed it there and she alone can remove it by generally declaring to the House the problems we have to face. For the rest, the country will have to endure again a replay, in more dangerous and difficult circumstances, of the follies and crimes the Tories perpetrated at the beginning of the 1970s. It is this House of Commons, and eventually the country itself, which will have to rescue us from that fate.

9.30 p.m.

The Chancellor of the Duchy of Lancaster and Leader of the House of Commons (Mr. Norman St. John-Stevas)

By tradition, the Leader of the House replies tonight not only to the amendment we have discussed today but to the whole six-day debate. That, I think, is a daunting task at any time: at the beginning of a new Parliament it is particularly so.

This is the first speech I have been able to make in my new office and perhaps it would be appropriate, therefore, if I joined with the right hon. Member for Ebbw Vale (Mr. Foot), in congratulating the other maiden speakers whom we have heard in this debate.

We have had no fewer than 32 maiden speeches—nine of them today—to many of whom I have had the pleasure of listening. I cannot pick them out individually. The roll of honour has been called out by the right hon. Member for Ebbw Vale. I would, however, like to comment on just one of the maiden speeches because it was an impressive and moving one. I hope I shall not be accused of any partiality because it came from the Opposition Benches.

The speech to which I refer is that of the hon. Member for Don Valley (Mr. Welsh). I do not comment on what he said about industrial relations though that was certainly illuminating, but rather on his moving plea for what he called our brothers and sisters in the Third world. The accidents of history and geography have made them less fortunate than ourselves in so many areas.

The great difficulty in this part of the twentieth century is not to bridge the gulf between the rich and the poor at home it is to bridge the gulf between the rich and poor nations in the world. I was delighted that a maiden speech should have been chosen which dealt, in part, with this vital theme. The high quality of the speeches which we have heard makes us hopeful for the future.

There are always Jeremiahs who predict the demise of Parliament. Unlike Jeremiah they will prove false prophets. The shallow denigration of Parliament is one of the unpleasant signs of our times. It is not only depressing and unpleasant, it is also dangerous. Great nations fail only when they cease to understand the institutions which they created. I am not saying that Parliament is perfect. Who is, apart from you, Mr. Speaker—that is, when we catch your eye? We should be ready to revise and revitalise our procedures—a point that has been made by several hon. Members. That is vitally important. We have no constitution in this country. We only have procedure.

There is no doubt that over the past 50 years the balance of power in our constitution has shifted away from the House to the Executive and to Whitehall. That is not to say that the function of the House has ever been to govern. It has not. The function of the House has been to subject the Executive to limitations, control and supervision, particularly in regard to the matter of supply and taxation. It has been to protect the liberties of the individual citizen against the arbitrary use of power. It is the desire to do that work more effectively that lies behind the proposals of the Procedure Committee of this House.

The Government, in the manifesto on which they won the election—and so many of the pledges in that manifesto have already been redeemed—have a pledge on the matter to which I have just referred. My hope and my expectation—they are not always the same—is that that pledge, too, will be redeemed before we rise for the Summer Recess.

Before I leave the constitution, let me say one word about the Leadership of this House. The Speakership of this House apart, to be Leader of this House is the highest office to which any hon. Member can aspire. It is, of course, a political office, and politically I hope to give as good as I get, and sometimes better—

Mrs. Kellett-Bowman

Hear, hear.

Mr. St. John-Stevas

—and I will not give way to anyone, except the hon. Lady. But constitutionally I shall always remember that my title is Leader of the House, and in the last resort every hon. Member has equal rights which must be respected. If I may quote a great radical, Thomas Rainborowe, The poorest he that is in England hath a life to live as the greatest he". Mutatis mutandis—that applies to Front Benchers and Back Benchers alike.

I also want to say a word about Northern Ireland. I found the words of the leader of the Ulster Unionists very moving. I am sure that I stress the concern of the whole House that peace should be brought, if it can be, to that troubled Province. I wish the new Secretary of State for Northern Ireland well. I can pay him no higher tribute than to say that we believe he will be a worthy successor to our friend and colleague, Airey Neave.

I now turn to the terms of the amendment that has been tabled by the Opposition, and studiously avoided by the right hon. Member for Ebbw Vale this evening. When one looks at what it says, perhaps the right hon. Gentleman was being prudent. It humbly regrets that the Government policies will divide the nation, inflict grave damage on Britain's economic performance, raise prices, and increase unemployment.

Hon. Members

Hear, hear.

Mr. St. John-Stevas

Labour Members are right to cheer, because their warnings must be taken seriously. It is advice from experts. After all, the warnings come from the party which last winter divided the nation in a manner that has not been seen since the Industrial Revolution. Then at least, it was capitalist against worker. But it was the achievement of the Labour Government that they set worker against worker, citizen against citizen and trade unionist against trade unionist.

What about the damage to Britain's economic performance? Under the Labour Government, it was the worst performance of any industrial country in Europe and many of the industrial countries in the world. For five years, from 1973 to 1978, most of which was occupied by the late Government, output went up by only 2.7 per cent.—one-quarter of that of the United States, one-half of that of France and one-third of that of Italy.

The amendment talks about raising prices. The highest rise in prices since records began 300 years ago was achieved under the Government led by the Leader of the Opposition. Prices doubled in five years. We had the worst inflation of any industrial country, Italy alone excepted. As for unemployment, nearly one million people have joined the dole queue since the Labour Government took office. Under the last two Labour Governments, over one million people have been permanently unemployed for three and a half years. Today, 500,000 of those people are under 25 years of age. It was my hon. Friend the Member for Liverpool, Garston (Mr. Thornton) who in a maiden speech pointed out the appalling situation on Merseyside—in the Speke area in particular—where 35 per cent. of the population is unemployed. That is a truly staggering figure.

For any Government to deprive that number of people of their most important right, the right to work, is bad enough. It is essential to the dignity of human beings that, however mechanical their task, they should have the right to support their families by their own labour. For a Labour Government who claimed to speak for the industrial workers of the country, that is a disgraceful record.

Mr. Heffer

The Leader of the House referred to Liverpool and to Speke. Is the right hon. Gentleman aware of the value of the last Government's support for industry on Merseyside? Does he know what the level of unemployment there will be if his Government withdraw that support?

Mr. St. John-Stevas

Of course I agree that the temporary measures introduced by the Labour Government helped to alleviate the situation. Without those measures the situation would be even worse, if one can imagine that. But those measures are not a permanent answer, as the hon. Member knows.

The right hon. Members for Ebbw Vale and Bristol, South-East (Mr. Benn) have been wheeled out again to support this preposterous amendment. We welcome them back to political life. Where were they during the election campaign? Why is it that only now these two shrinking violets of Labour's herbaceous border have been allowed to come into full bloom? The right hon. Member for Ebbw Vale was allowed to appear only once at the Labour Party press conference. After hearing his speech today I believe that that was a wise decision. He made no official television appearances until late at night after the vast majority of the electorate, following the sage advice of the then Prime Minister, had gone to bed.

The right hon. Member for Bristol, South-East was even more elusive, and the election without him was not like Hamlet without the prince but rather like Hamlet without the ghost.

Let us consider the arguments advanced by the right hon. Member for Ebbw Vale. There was some amusing badinage about alleged divisions within the Conservative Party. I would take that seriously from a party that was itself united, but not from one which before our eyes is beginning to tear itself apart in a series of agonised recriminations about who was responsible for losing the election. This must be the first occasion at a wake when the corpses have got out of the coffins and started belting each other before the burial has actually taken place.

This is hard lines on the Leader of the Opposition, who only last Friday at Llandudno was exhorting the members of his party to look forward to the long years in Opposition and hoping that they would not slay and slang each other. That, I must say, is the most optimistic statement I have heard since that of the former Attorney-General, the right hon. and learned Member for Dulwich (Mr. Silkin), speaking on the occasion when we discussed picketing. On that occasion, when he invented the famous new term "lawful intimidation.", he concluded his remarks by saying: I trust that I have clarified the situation. At least, the right hon. Member for Bristol, South-East produced a coherent argument, and, if I may, I compliment him on his speech, for it was one of the great set pieces of this debate. With passion, logic and conviction, the right hon. Gentleman put forward his point of view. He said that he had waited 22 years to make it. But whom was it aimed against? Ostensibly, it was aimed against the Government, but everything he said was a repudiation not only of the Leader of the Opposition's Government, of which he was a member, but of the Government led by his predecessor, the right hon. Member for Huyton (Sir H. Wilson), of which the right hon. Gentleman was also a distinguished ornament.

Of course, the right hon. Gentleman delivered a great broadside against the Prime Minister and against her analysis of our situation. The passage which apparently caused particular offence came when my right hon. Friend said: How is society to be improved?—by millions of people resolving that they will give their own children a better life than they had themselves."—[Official Report, 15 May 1979; Vol. 967. c. 77.] The right hon. Gentleman said: I have never heard a Prime Minister use language like that before. I can only say that it is high time he did, because the Prime Minister was not talking about ideology; she was not even talking about philosophy; she was talking about a fact of life and about an old value on which scorn was poured by the right hon. Member for Ebbw Vale. She spoke of an old value which needs to be restated in the conditions of modern times.

Warming to his theme, becoming denunciatory and even apocalyptic, the right hon. Member for Bristol, South-East said: No doubt, it was the language that ultimately drove Christ out of the Temple in Jerusalem when he tried to get rid of the money changers."—[Official Report, 21 May 1979; Vol. 967, c. 715.] I do not wish to seem contentious, but may I point out to the right hon. Gentleman that St. Matthew gave a rather different account, and he had the marginal advantage of actually being there. According to St. Matthew, it was in fact the Lord who drove the moneylenders out and not the other way round.

But I leave that aside in the interests of peace and concord—we have some evidence on it—just to ask how the right hon. Gentleman knows what was said on that occasion, since it is not recorded in the Gospels. We all know that the right hon. Gentleman is well connected, but we did not suspect that he was as well connected as that.

Mr. Tony Benn (Bristol, South-East)

In view of the right hon. Gentleman's known direct connections with the world of theology, may I ask him to be candid? Is he saying that the Carpenter of Nazareth went into Temple to galvanise the entrepreneurs?

Mr. St. John-Stevas

I think that the right hon. Gentleman is confusing the Old and the New Testaments. I thought that he understood what animates people. Does the right hon. Member really think that people are animated by reverence and love for the State? Is that what he is saying? Does he really think that people are merely painful prerequisites for Socialism? Why do people struggle and toil and make sacrifices? It is not for personal selfish reasons but precisely, as my right hon. Friend the Prime Minister has said, to give their children a better start in life. A principal reason why the Labour Party lost the election, why people voted so massively against Labour, is that for the first time since the war people looked forward and saw their children starting not with a better future but with a worse one than they had had themselves.

The family is the great unit of society. Families are not isolated one from another. They are linked by care, concern and friendship. They constitute community. The idea of that is entirely alien from the right hon. Member's thoughts, because in his universe he sees only a world in which there is a sterile confrontation between the individual and the State. It is promoting the family and the community which lies at the heart of our philosophy and of our ideas.

Mr. Andrew Faulds (Warley, East)

Will the right hon. Gentleman be so good as to let us know when his nuptials are to be announced?

Mr. St. John-Stevas

In that remark, the hon. Gentleman has lived up to his reputation.

I do not recognise the heartless caricature of Conservatism that was put forward by the right hon. Member for Bristol, South-East and the right hon. Member for Ebbw Vale. We are entitled to our own form of idealism, just as right hon. and hon. Members of the Opposition are entitled to theirs. I do not recognise in that caricature the party of which I have been proud to be a member for 30 years. If that party were as the Opposition say it is, it would never have survived into the age of universal suffrage, let alone could it be returned at what, by common consent, has been one of the crucial elections of this century.

What we believe in is a society of removable inequalities, a mobile society in which men and women of talent and industry can rise as far as their merit deserves. We recognise that the gifted owe a duty to those less gifted to use their gifts for others and for the community as a whole. That is a very different idea from that of those whose idea it is to mount the ladder of opportunity and then kick it away lest anyone else should climb to where they have reached.

There is one other passage in the right hon. Gentleman's speech to which I should like to refer. It is really the heart of the matter, when he boasted in relation to the National Health Service—incidentally, that was the creation of a Conservative-dominated coalition—[HON. MEMBERS: "Oh."] Yes. Admittedly, it was introduced by a Labour Government. However, what the right hon. Gentleman said was: we have transformed the right to treatment from cash to need".—[Official Report, 21 May 1979; Vol. 967, c. 724.] I ask the right hon. Gentleman: how will he meet the need without the cash? The National Health Service is breaking down because the resources are not there. The only contribution by the Leader of the Opposition has been to make the situation worse by driving the pay beds out of the National Health Service. That will mean a loss of £30 million to £40 million a year.

My last word to the right hon. Member for Bristol, South-East is that if the Socialist solutions that he and his followers so eloquently advocate are right, why is every society in which they have been put into practice distinguished by a lower standard of living for the ordinary citizen and a catastrophic loss of personal liberty? The right hon. Gentleman has quoted from the scriptures. I do not mind his infringing my monopoly, but I shall assert my rights and quote the scriptures back at him: By their fruits ye shall know them. The Opposition are being difficult tonight because they have to face the tact that the majority of people in this country reject their policies. A sizeable proportion of traditional Labour voters prefer ours. That is true of the trade unions, it is true on education, defence, the maintenance of law and order and on the central issue of reducing taxation.

Mr. Walter Harrison (Wakefield)

What about the North?

Mr. St. John-Stevas

Yes, it is true in the North as well. The right hon. Member for Wakefield (Mr. Harrison) can only comfort himself by looking to the North, where there was a swing to the Government of 5.4 per cent. In the South there was a swing of over 8 per cent. It is a curious form of comfort to apply to one's wounds.

Mr. Harrison

The right hon. Gentleman is staggering.

Mr. St. John-Stevas

No, I am not. I have plenty more here but I have to keep an eye on the clock.

Tonight's debate and the Gracious Speech are the result of an electoral decision of the nation. I have never known a Queen's Speech that contained more positive proposals or that is more comprehensive in its scope. On the Tory side of the House, we know the magnitude of the task before us. Members of the Government know it better than anyone. We are aware of the gravity of our predicament and of the dangers that beset our cause, but we know that it is probably the last chance of setting Britain on the road to recovery once again. In that enterprise we have two assets of incomparable worth. The first is the confidence of the British people as shown at the election. The second is our indomitable determination to keep faith with them and carry our programme through to a triumphant conclusion.

Mr. Ioan Evans (Aberdare)

It is typical of the Tories that they have nothing to say—

The Parliamentary Secretary to the Treasury (Mr. Michael Jopling)

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

Question put accordingly, That the amendment be made:—

The House divided: Ayes 272, Noes 337.

Division No. 2]	AYES	[10.0 p.m.
Abse, Leo	Ashton, Joe	Bidwell, Sydney
Adams, A.	Atkinson, Norman (H'gey, Tott'ham)	Booth, Rt Hon Albert
Allaun, Frank	Bagler, Gordon A. T.	Bottomley, Rt Hon Arthur (M'brough)
Alton, David	Barnett, Guy (Greenwich)	Bradley, Tom
Anderson, Donald	Barnett, Rt Hon Joel (Heywood)	Bray, Dr Jeremy
Archer, Peter	Beith, A. J.	Brown, Hugh D. (Provan)
Armstrong, Ernest	Benn, Rt Hon Anthony wedgwood	Brown, Robert C. (Newcastle W)
Ashley, Jack	Bennett, Andrew (Stockport N)	Brown, Ronald (Hackney S)
Brown, R. (Edinburgh, Leith)	Hattersley, Rt Hon Roy	Parker, John
Buchan, Norman	Haynes, D. F.	Parry, Robert
Callaghan, Rt Hon J. (Cardiff SE)	Healey, Rt Hon Denis	Pendry, Tom
Callaghan, Jim (Middleton & P)	Heffer, Eric S.	Penhaligon, David
Campbell, Ian	Hogg, N. (East Dunbartonshire)	Powell, R. (Ogmore)
Campbell-Savours, D.	Holland, S. (Lambeth, Vauxhall)	Prescott, John
Canavan, Dennis	Home Robertson, John	Race, R.
Cant, R. B.	Homewood, W. D.	Radice, Giles
Carmichael, Neil	Hooley, Frank	Rees, Rt Hon Merlyn (Leeds South)
Carter-Jones, Lewis	Horam, John	Richardson, Miss Jo
Cartwright, John	Howell, Rt Hon Denis (B'ham, Sm H)	Roberts, Albert (Normanton)
Clark, D. (South Shields)	Howells, Geraint	Roberts, A. (Bootle)
Cocks, Rt Hon Michael (B [...]istol S)	Huckfield, Les	Roberts, E. (Hackney North)
Cohen, Stanley	Hughes, Mark (Durham)	Roberts, Gwilym (Cannock)
Coleman, Donald	Hughes, Robert (Aberdeen North)	Robertson, George
Concannon, Rt Hon J. D.	Hughes, Roy (Newport)	Robinson, Geoffrey (Coventry NW)
Conlan, Bernard	Janner, Hon Greville	Rodgers, Rt Hon William
Cook, Robin F.	Jay, Rt Hon Douglas	Rooker, J. W.
Cowans, Harry	John, Brynmor	Roper, John
Craigen, J. M. (Glasgow, Maryhill)	Johnson, James (Hull West)	Ross, E. (Dundee West)
Crowther, J. S.	Johnson, Walter (Derby South)	Ross, Stephen (Isle of Wight)
Cryer, Bob	Jones, Alec (Rhondda)	Rowlands, Ted
Cunliffe, L.	Jones, Barry (East Flint)	Ryman, John
Cunningham, George (Islington S)	Jones, Dan (Burnley)	Sandelson, Neville
Cunningham, Dr John (Whitehaven)	Kaufman, Rt Hon Gerald	Sever, John
Dalyell, Tam	Kerr, Russell	Sheerman, B. J.
Davidson, Arthur	Kilroy-Silk, Robert	Sheldon, Rt Hon Robert (A' ton-u-L)
Davies, Rt Hon Denzil (Llanelli)	Kinnock, Neil	Shore, Rt Hon Peter (Step and Pop)
Davies, E. H. (Caerphilly)	Lambie, David	Short, Mrs Renée
Davies, Ifor (Gower)	Lamborn, Harry	Silkin, Rt Hon John (Deptford)
Davis, Clinton (Hackney Central)	Lamborn, James	Silkin, Rt Hon S. C. (Dulwich)
Davis T. (Birmingham, Stechford	Leadbitter, Ted	Silverman, Dennis
Deakins, Eric	Leighton, R.	Skinner, Dennis
Dean, Joseph (Leeds West)	Lever, Rt Hon Harold	Smith, Rt Hon J. (North Lanarkshire)
Dempsey, James	Lewis, Arthur (Newham North West)	Snape, Peter
Dewar, Donald	Lewis, Ron (Carlisle)	Soley, C. S.
Dixon, D.	Lofthouse, Geoffrey	Spearing, Leslie
Dobson, F. G.	Lyon, Alexander (York)	Spriggs, Leslie
Dormand, J. D.	Lyons, Edward (Bradford West)	Stallard, A. W.
Douglas, R. G.	Mabon, Rt Hon Dr J. Dickson	Steel, Rt Hon David
Douglas-Mann, Bruce	McCartney, Hugh	Stewart, Rt Hon Donald (W Isles)
Dubs, A.	McDonald, Dr Oonagh	Stoddart, David
Duffy, A. E. P.	McElhone, Frank	Stott, Roger
Dunn, James A. (Liverpool, Kirkdale)	McGuire, Michael (Ince)	Strang, Gavin
Dunnett, Jack	McKay, Allen (Penistone)	Straw, J.
Dunwoody, Mrs Gwyneth	McKelvey, W.	Summerskill, Hon Dr Shirley
Eadie, Alex	MacKenzie, Gregor	Taylor, Mrs Ann (Bolton West)
Eastham, K.	Maclennan, Robert	Thomas, Dafydd (Merioneth)
Edwards, Robert (Wolv SE)	McMahon, A.	Thomas, Jeffrey (Abertillery)
Ellis, R. J. (NE Derbyshire)	McMillan, Tom (Glasgow, Central)	Thomas, Mike (Newcastle East)
Ellis, Tom (Wrexham)	McNally, T.	Thomas, Dr R. G. (Carmarthen)
English, Michael	McNamara, Kevin	Thorne, Stan (Preston South)
Ennals, Rt Hon David	McWilliam J. D.	Tilley, John
Evans, Ioan (Aberdare)	Magee, Bryan	Tinn, James
Ewing, Harry	Marks, Kenneth	Torney, Tom
Faulds, Andrew	Marshall, D. (Glassgow, Shettleston	Urwin, Rt Hon Tom
Field, F.	Marshall, Dr Edmund (Goole)	Varley, Rt Hon Eric G.
Fitch, Alan	Marshall, Jim (Leicester South)	Wainwright, Edwin (Dearne Valley)
Fitt, Gerard	Martin, M. J. (Glasgow, Springburn)	Wainwright, Richard (Colne Valley)
Flannery, Martin	Mason, Rt Hon Roy	Walker, Harold (Doncaster)
Fletcher, Ted (Darlington)	Maxton, J.	Watkins, David
Foot, Rt Hon Michael	Maynard, Miss Joan	Weetch, Ken
Ford, Ben	Meacher, Michael	Wellbeloved, James
Forrester, John	Mellish, Rt Hon Robert	Welsh, M.
Foster, D.	Mikardo, Ian	White, Frank R. (Bury & Radcliffe)
Foulkes, G.	Millan, Rt Hon Bruce	White, James (Glasgow, Pollok)
Fraser, John (Lambeth, Norwood)	Miller, Dr M. S. (East Kilbride)	Whitehead, Phillip
Freeson, Rt Hon Reginald	Mitchell, Austin (Grimsby)	Whitlock, william
Freud, Clement	Mitchell, R. C. (Soton, Itchen)	Wigley, Dafydd
Garrett, John (Norwich S)	Morris, Rt Hon Alfred (Wythenshawe)	Willey, Rt Hon Frederick
Garrett, W. E. (Wallsend)	Morris, Rt Hon Charles (Openshaw)	Williams, Alan (Swansea West)
George, Bruce	Morris, Rt Hon John (Aberavon)	Wilson, Rt Hon Sir Harold (Huyton)
Gilbert, Rt Hon Dr John	Morton, George	Wilson, Rt Hon Sir Harold (Huyton)
Ginsburg, David	Moyle, Rt Hon Roland	Wilson William (Coventry SE)
Golding, John	Mulley, Rt Hon Frederick	Winnick, D
Gourlay, Harry	Newens, Stanley	Woodall, Alec
Graham, Ted	Oakes, Gordon	Woolmer, K. J.
Grant, George (Morpeth)	Ogden, Eric	Wrigglesworth, Ian
Grant, John (Islington C)	O'Halloran, Michael	Wright, Mrs S.
Hamilton, James (Bothwell)	O'Neill, M.	Young, David (Bolton East)
Hamilton, W. W. (Central Fife)	Orme, Rt Hon Stanley
Hardy, Peter	Owen, Rt Hon Dr David	TELLERS FOR THE AYES:
Harrison, Rt Hon Walter	Palmer, Arthur	Mr. John Evans and
Hart, Rt Hon Judith	Park, George	Mr. Thomas Cox

NOES
Adley, Robert	Edwards, Rt Hon N. (Pembroke)	Lang, I.
Aitken, Jonathan	Egger, T.	Langford-Holt, Sir John
Alexander, R.	Elliott, Sir William	Latham, Michael
Alison, Michael	Emery, Peter	Lawrence, Ivan
Amery, Rt Hon Julian	Eyre, Reginald	Lawson, Nigel
Ancram, M.	Fairbairn, Nicholas	Lee, J.
Arnold, Tom	Fairgrieve, Russell	Lennox-Boyd, Hon M. A.
Aspinwall, J.	Faith, Mrs S.	Lester, Jim (Beeston)
Atkins, Rt Hon H. (Spelthorne)	Farr, John	Lewis, Kenneth (Rutland)
Atkins, R. J. (Preston North)	Fell, Anthony	Lloyd, Ian (Havant & Waterloo)
Atkinson, David (B'mouth, East)	Fenner, Mrs P.	Lloyd, P. (Fareham)
Baker, Kenneth (St. Marylebone)	Finsberg, Geoffrey	Loveridge, John
Baker, N. (North Dorset)	Fisher, Sir Nigel	Luce, Richard
Banks, Robert	Fletcher, Alexander (Edinburgh N)	Lyell, N.
Beaumont-Dark, A. M.	Fletcher-Cooke, Charles	McAdden, Sir Stephen
Bell, Ronald	Fookes, Miss Janet	McCrindle, Robert
Bendall Vivian	Forman, Nigel	Macfarlane, Neil
Bennett, Sir Frederic (Torbay)	Fowler, Rt Hon Norman	MacGregor, John
Benyon, T. (Abingdon)	Fox, Marcus	Mackey, J. J. (Argyll)
Benyon, W. (Buckingham)	Fraser, Rt Hon H. (Stafford & St)	Macmillan, Rt Hon M. (Farnham)
Best, K.	Fraser, P. (South Angus)	McNair-Wilson, Michael (Newbury)
Bevan, D. G.	Fry, Peter	McNair-Wilson, Patrick (New Forest)
Biffen, Rt Hon John	Galbraith, Hon T. G. D.	McQuarrie, A.
Biggs-Davison, John	Gardner, Edward (South Fylde)	Madel, David
Blackburn, J. G.	Garel-Jones, T.	Major, J.
Blaker, Peter	Gilmour, Rt Hon Sir Ian	Marland, P.
Body, Richard	Glyn, Dr Alan	Marlow, A.
Bonsor, Sir Nicholas	Goodhart, Philip	Marshall, Michael (Arundel)
Boscawen, Hon Robert	Goodhew, Victor	Marten, Neil (Banbury)
Bottomley, Peter (Woolwich West)	Goodlad, Alastair	Mates, Michael
Bowden, Andrew	Gorst, John	Mater, Carol
Boyson, Dr Rhodes	Gow, Ian	Maude, Rt Hon Angus
Bradford, Rev. R.	Gower, Sir Raymond	Mawby, Ray
Braine, Sir Bernard	Grant, Anthony (Harrow C)	Mawhinney, Dr B.
Bright, G.	Gray, Hamish	Maxwell-Hyslop, Robin
Brinton, T. D.	Greenway, H.	Mayhew, Patrick
Brittan, Leon	Grieve, Percy	Mellor, D.
Brocklebank-Fowler, Christopher	Griffiths, Eldon (Bury St Edmunds)	Meyer, Sir Anthony
Brooke, Hon Peter	Griffiths, P. (Portsmouth N)	Miller, Hal (Bromsgrove & Redditch)
Brotherton, Michael	Grist, Ian	Mills, I. (Meriden)
Brown, M. (Brigg & Scunthorpe)	Grylls, Michael	Mills, Peter (West Devon)
Browne, J. (Winchester)	Gummer, J. S.	Miscampbell, Norman
Bruce-Gardyne, John	Hamilton, Hon A. (Epsom & Ewell)	Mitchell, David (Basingstoke)
Bryan, Sir Paul	Hamilton, Michael (Salisbury)	Moate, Roger
Buchanan-Smith, Hon Alick	Hampson, Dr Keith	Molyneaux, James
Buck, Antony	Hannam, John	Monro, Hector
Budgen, Nick	Haselhurst, Alan	Montgomery, Fergus
Bulmer, Esmond	Hastings, Stephen	Moore, John
Burden, F. A.	Havers, Rt Hon Sir Michael	Morgan, Geraint
Butcher, J. P.	Hawkins, Paul	Morris, Michael (Northampton, Sth)
Butler, Hon Adam	Hawksley, W.	Morrison, Hon Charles (Devizes)
Cadbury, J.	Hayhoe, Barney	Morrison, Hon Peter (City of Chester)
Carlisle, J. (Luton West)	Heddle J.	Mudd, David
Carlisle, K. (Lincoln)	Henderson, B.	Murphy, C. P.
Carlisle, Rt Hon Mark (Runcorn)	Heseltine, Rt Hon Michael	Myles, D. F.
Chalker, Mrs Lynda	Hicks, Robert	Neale, G.
Channon, Paul	Higgins, Terence L.	Needham, R.
Chapman, S.	Hill, S. J. A.	Nelson, Anthony
Churchill, W. S.	Hogg, Hon D. (Grantham)	Neubert, Michael
Clark, Hon Alan (Plymouth, Sutton)	Holland, Philip (Carlton)	Newton, Tony
Clark, William (Croydon South)	Hooson, T.	Normanton, Tom
Clarke, Kenneth (Rushcliffe)	Hordern, Peter	Nott, Rt Hon John
Clegg, Walter	Howe, Rt Hon Sir Geoffrey	Onslow, Cranley
Cockeram, E.	Howell, Rt Hon David (Guildford)	Oppenheim, Rt Hon Mrs Sally
Colvin, M.	Howell, Ralph (North Norfolk)	Osborn, John
Cope, John	Hunt, David (Wirral)	Page, John (Harrow, West)
Cormack, Patrick	Hunt, John (Ravensbourne)	Page, Rt Hon R. Graham (Crosby)
Corrie, John	Hurd, Hon Douglas	Parkinson, Cecil
Costain, A. P.	Irving, Charles (Cheltenham)	Parris, M.
Cranborne, Viscount	Jenkin, Rt Hon Patrick	Patten, C. Bath)
Critchley, Julian	Jessel, Toby	Patten, J. (Oxford)
Crouch, David	Johnson Smith, Geoffrey	Pattie, Geoffrey
Dean, Paul (North Somerset)	Jopling, Rt Hon Michael	Pawsey, J.
Dickens, G.	Joseph, Rt Hon Sir Keith	Percival, Sir Ian
Dodsworth, Geoffrey	Kaberry, Sir Donald	Peyton, Rt Hon John
Dorrell, S.	Kellett-Bowman, Mrs Elaine	Pink, R. Bonner
Douglas-Hamilton, Lord James	Kershaw, Anthony	Pollock, A.
Dover, D.	Kimball, Marcus	Porter, G. B.
du Cann, Rt Hon Edward	King, Rt Hon Tom	Powell, Rt Hon J. Enoch (S Down)
Dunn, R. (Dartford)	Kitson, Sir Timothy	Prentice, Rt Hon Reg
Durant, Tony	Knight, Mrs Jill	Price, David (Eastleigh)
Dykes, Hugh	Knox, David	Prior, Rt Hon James
Eden, Rt Hon Sir John	Lamont, Norman	Proctor, K.

Pym, Rt Hon Francis	Speed, Keith	Viggers, Peter
Raison, Timothy	Speller, A.	Waddington, David
Rathbone, Tim	Spence, John	Wakeham, John
Rees, Peter (Dover and Deal)	Spicer, Jim (West Dorset)	Waldegrave, Hon W.
Rees-Davies, W. R.	Spicer, Michael (S Worcestershire)	Walker, Rt Hon Peter (Worcester)
Renton, Tim	Sproat, Ian	Walker, W. (Perth & E Perthshire)
Rhodes James, Robert	Squire, R. C.	Walker-Smith, Rt Hon Sir Derek
Rhys Williams, Sir Brandon	Stainton, Keith	Wall, Patrick
Ridley, Hon Nicholas	Stanbrook, Ivor	Waller, G. P. A.
Ridsdale, Julian	Stanley, John	Walters, Dennis
Rifkind, Malcolm	Steen, Anthony	Ward, J.
Rippon, Rt Hon Geoffrey	Stevens, M.	Warren, Kenneth
Roberts, M. (Cardiff North West)	Stewart, Ian (Hitchin)	Watson, J.
Roberts, Wyn (Conway)	Stewart, J. (East Renfrewshire)	Wells, John (Maidstone)
Ross, Wm. (Londonderry)	Stokes, John	Wells, P. (Hertford & Stevenage)
Rossi, Hugh	Stradling Thomas, J.	Wheeler, J.
Rost, Peter	Tapsell, Peter	Whitelaw, Rt Hon William
Royle, Sir Anthony	Taylor, Robert (Croydon NW)	Whitney, Raymond
Sainsbury, Hon Timothy	Tebbit, Norman	Wickenden, K.
St. John Stevas, Rt Hon Norman	Temple-Morris, Peter	Wiggin, Jerry
Scott, Nicholas	Thatcher, Rt Hon Mrs Margaret	Wilkinson, J.
Shaw, Giles (Pudsey)	Thomas, Rt Hon Peter (Hendon S)	Williams, D. J. D. (Montgomery)
Shaw, Michael (Scarborough)	Thomson, D.	Winterton, Nicholas
Shelton, William (Streatham)	Thorne, N. G. (Ilford South)	Wolfson, M.
Shepherd, Colin (Hereford)	Thornton, G. M.	Young, Sir George (Acton)
Shepherd, R. (Aldridge-Brownhills)	Townsend, J. (Bridlington)	Younger, Rt Hon George
Shersby, Michael	Townsend, Cyril D. (Bexleyheath)
Silvester, Fred	Trippier, D.	TELLERS FOR THE NOES:
Sims, Roger	Trotter, Neville	Mr. Spencer Le Marchant and
Skeet, T. H. H.	van Straubenzee, W. R.	Mr. Anthony Berry,
Smith, Dudley (War. And Leam'ton)	Vaughan, Dr Gerard

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

Question accordingly negatived.

Main Question put and agreed to.

Resolved, That an humble Address be presented to Her Majesty, as follows: Most Gracious Sovereign, We, Your Majesty's most dutiful and loyal subjects, the Commons of the United Kingdom of Great Britain and Northern Ireland in Parliament assembled, beg leave to offer our humble thanks to Your Majesty for the Gracious Speech which Your Majesty has addressed to both Houses of Parliament.

To be presented by Privy Councillors or Members of Her Majesty's Household.