Commons Sitting of 10 July 1980

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
PRAYERS
  PRIVATE BUSINESS

    ALEXANDRA PARK AND PALACE BILL [Lords] (By Order)
    Order for Second Reading read.
    To be read a Second time upon Thursday 17 July.

    PIER AND HARBOUR PROVISIONAL ORDER (GREAT YARMOUTH WELLINGTON PIER) BILL
    Read the Third time, and passed.
ORAL ANSWERS TO QUESTIONS
  ORAL ANSWERS TO QUESTIONS
  Mr. Speaker: Before we turn to questions, I remind the House that hon. Members who are called to ask a supplementary question should ask only one, in the interests of hon. Members who have questions on the Order Paper. I advise Ministers to answer only one supplementary question.
  ORAL ANSWERS TO QUESTIONS
    NORTHERN IRELAND

      Irish Republican Army (Funds)
      Mr. Aitkenasked the Secretary of State for Northern Ireland what is his estimate of the amount of funds reaching the IRA from sources in the United States of America during the last 12 months; and if he will make a statement.
      The Secretary of State for Northern Ireland (Mr. Humphrey Atkins): It is not possible to give an accurate estimate of how much money has reached the IRA from United States sources in the last year. The United States authorities and leading
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      Irish-Americans have consistently condemned the raising of funds for the IRA, and the activities of organisations such as the Irish Northern Aid Committee. Currently the main source of IRA funds is undoubtedly local profit from crime, particularly bank robberies.
      Mr. Aitken: Does my right hon. Friend agree that, possibly as a result of talks with him, certain senior political figures in the United States such as Governor Carey, Senator Kennedy and Speaker Tip O'Neill have exercised a useful restraining influence? Nevertheless, can my right hon. Friend assure the House that he is taking more steps to restrain fund raising, particularly by that infamous organisation NORAID?
      Mr. Atkins: The gentlemen mentioned by my hon. Friend have undoubtedly been helpful. The authorities in the United States have prosecuted NORAID officials on a number of occasions for the illegal exportation of weapons. Currently they are taking action under an Act to ensure that NORAID is registered as the agent of the Provisional IRA. All that is helpful in bringing to the notice of the American people the activities of that organisation.

      Security Measures
      Mr. Marlowasked the Secretary of State for Northern Ireland if he will undertake a review of current policy, with a view to bringing forward new measures to damage the aspirations, morale and effectiveness of the IRA.
      Mr. Humphrey Atkins: I am confident that the guiding principle of our security policy—the elimination of terrorism by the arrest, charging and conviction in the courts of those who perpetrate terrorist crimes—is sound. The ways in which the policy is implemented are constantly monitored by the Government, by the RUC and by the Army, and new measures are introduced from time to time. The advice of the security co-ordinator and his planning staff has contributed notably to this process.
      Mr. Marlow: Does my right hon. Friend agree that the most effective way of damaging the aspirations, morale and effectiveness of the IRA is to put beyond a shadow of doubt that Northern Ireland will always remain an integral part of the

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      United Kingdom? Will the proposals which the Secretary of State put before the House yesterday help to convince it of that?
      Mr. Atkins: I do not think that there is any doubt about the will of the House and of the majority of the people of Northern Ireland that the Province will remain part of the United Kingdom. That is beyond question. Another way of damaging the morale of the IRA is to arrest its members and convict them in the courts.
      Mr. J. Enoch Powell: Does the Secretary of State understand that the most effective way in which this House can give expression to the will which he has just mentioned is to ensure that Northern Ireland and its people are treated in every respect as they claim and are claimed to be—an integral part of the United Kingdom?
      Mr. Atkins: The future arrangements for the government of Northern Ireland were discussed yesterday. I was looking forward to the right hon. Gentleman's contribution, but I missed it.
      Rev. Ian Paisley: Does not the right hon. Gentleman admit that the morale of the IRA would be seriously damaged if the Government could persuade the American Government to supply arms to the Royal Ulster Constabulary? Will the Secretary of State remember that the men whom he has just praised are the men who are holding up the supply of those arms?
      Mr. Atkins: Yes, Sir. Our request to the American Government for licences is still in and I very much hope that the American Administration will accede to it as soon as may be.

      De Lorean Car Project
      Mr. Michael McNair-Wilsonasked the Secretary of State for Northern Ireland if he will give a progress report on the De Lorean car project.
      The Under-Secretary of State for Northern Ireland (Mr. Giles Shaw): Since I last reported to the House on this matter there has been some slippage in the car's development programme. The company now expects pilot production to commence in its Dunmurry plant this month and to continue until November 1980. Series production is expected to
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      start in December 1980 and the launch of the car in the USA is now due to take place early in 1981.
      Mr. McNair-Wilson: In view of the recession in the American car industry and in view of the fact that imports of foreign cars on to the American market this year will be down by 12 per cent., is my hon. Friend reassessing the commercial prospects for this vehicle? In particular does he believe that it can achieve the sales output which its originator has claimed?
      Mr. Shaw: My hon. Friend will be aware that in relation to the application by the company for additional funding a major review of its prospects and marketing objective is being undertaken Insofar as the prospects for entering the American market are concerned I remind my hon. Friend that two years' orders have already been obtained from that market. That is sufficient to get production and penetration off to a considerable start.
      Mr. Cryer: Does the Minister accept that we all wish to see more jobs in West Belfast and, indeed, more jobs in the whole of the United Kingdom? Does he agree that, because of the system of financing De Lorean, and if more money is to be provided, he could usefully ask, as a condition for that funding, that the car should be owned by the British taxpayer? The British taxpayer has paid out £53 million. Is he aware that at the end of the day the car will be owned by Mr. J. De Lorean or the De Lorean research partnership and the British taxpayer will have nothing?
      Mr. Shaw: The investment of the British taxpayer in this company is an investment in the development of an enterprise providing a substantial number of jobs in an area around West Belfast. In addition, it will provide a spin-off by way of jobs which are already becoming available in certain other companies being established there. It is in the interests both of the British taxpayer and the population of Belfast to see a successful development at Dunmurry.
      Mr. Bruce-Gardyne: Is my hon. Friend aware—I am sure he is—that anxiety about the relationship of investment to equity participation in this project is not confined to Opposition Members? Is he able to tell the House how much longer

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      we must wait before we hear the outcome of Mr. De Lorean's demand for the latest top-up from the taxpayer?
      Mr. Shaw: My hon. Friend will be aware that I have promised a statement in the House as soon as we have concluded our examination. The time we are taking and the consequences, not only of the slippage but of the other factors outside the control of the company—such as the inflation rate and the dollar/ pound relationship—make it important that we take due time to husband every pound of the taxpayers' resources.
      Mr. Pendry: Is the Minister aware that although there has been some slippage it has not been all that much and that the pre-sale activities of the De Lorean car, especially in the United States has been brisk? Is it not now time for the hon. Gentleman to accept the inflationary stress on that company and for his Department to back it financially?
      Mr. Shaw: The hon. Gentleman is quite right. The slippage is three months and to bring a car to market penetration in two and a half years, as is presently projected, will be a considerable achievement. As far as investment is concerned, I accept the point that the Government have made a huge investment in this enterprise and that we must, therefore, look carefully to ensure that it is brought to profitable fruition.

      Constitutional Future
      Mr. Stanbrookasked the Secretary of State for Northern Ireland what discussions he has had recently with hon. Members representing constituencies in Northern Ireland relating to the constitutional future of the Province.
      Mr. Humphrey Atkins: In recent weeks I have had discussions with the leaders of both the main Northern Ireland parties represented in the House. We also had a discussion lasting over eight hours in the House yesterday.
      Mr. Stanbrook: Has my right hon. Friend explained to the hon. Members concerned the Government's apparent unwillingness to implement their manifesto commitment to Northern Ireland?
      Mr. Atkins: The Government have sought to return to the people of Northern Ireland, and are still seeking to do so,
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      more control over their own affairs. In this context the important thing is to find what it is that the people of Northern Ireland want and to see whether that matches the wishes of the House. The discussions we have had have shown that there is a clear wish among the majority in Northern Ireland for a return to devolved government.
      Mr. John: Will the Secretary of State accept, arising out of yesterday's debate, that it is quite clear that the Opposition will not accept a role for the advisory council in security matters? Even less will we accept a return of security matters to a devolved Assembly in Northern Ireland?
      Mr. Atkins: I took particular note of what the hon. Gentleman said and, indeed, have taken note of what everyone said in the debate. It was most valuable.
      Mr. Kilfedder: Will the right hon. Gentleman now give an answer to the request I have made on a number of occasions that the Northern Ireland Committee should meet at Stormont to discuss the possible devolution of government to the Province so that the people of Ulster can sit in and listen to what is being said and discussed in their name?
      Mr. Atkins: I do not know how much support there is for that suggestion though, of course, I shall listen to it. I can tell the hon. Gentleman that it would mean a change in the Standing Orders of the House to enable that to happen.

      Football Ground, Crossmaglen
      Mr. Canavanasked the Secretary of State for Northern Ireland whether he will arrange to meet the Gaelic athletic association to discuss the Army's occupation of the football ground at Crossmaglen.
      Mr. Humphrey Atkins: The hon. Member for Liverpool, Scotland Exchange (Mr. Parry) has already made representations on this matter and my hon. Friend the Minister of State has offered to meet him and other interested parties on my behalf to discuss it.
      Mr. Canavan: Is it not about time that this spoilsport Government gave the Army the red card and told it to get off the park? To compensate the Gaelic athletic association for the occupation of

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      its ground would it not be a good idea for a group of Tory Members of Parliament—including the Prime Minister and the Secretary of State for Northern Ireland—to fly over Crossmaglen and do a sponsored jump—preferably without a parachute?
      Mr. Atkins: I am not sure that I can go along with all those suggestions. Seriously, this has been a problem for some time. I hope that we are on the point of resolving it. We are most ready to discuss it with those closely concerned.
      Mr. McCusker: Will the Secretary of State confirm that the ghastly total of soldiers and police killed in and around Crossmaglen is greater than in any comparable area in Northern Ireland? Does the right hon. Gentleman agree that the lives of soldiers and policemen currently serving there are far more important than the sport of Gaelic footballers, bearing in mind that they receive large subsidies of British taxpayers' money while at the same time viciously discriminating against members of the police and the Armed Forces?
      Mr. Atkins: You asked me to answer only one question, Mr. Speaker. I shall give only one answer. Yes, Sir.
      Mr. Parry: Is the Secretary of State aware that the presence of the Army in Crossmaglen is hampering children going to the local school as well as hampering people going to Sunday Mass? Will he not reconsider his decision and do what his right hon. Friend the Home Secretary did when he was Secretary of State for Northern Ireland. Is he aware that on that occasion his right hon. Friend met members of the GAA and hon. Members to discuss the situation concerning Roger Casement park?
      Mr. Atkins: I do not think that the Army's occupation of part of the ground belonging to the GAA has anything to do with people going to church or to school. The Army required, and still requires, part of the ground owned by the GAA. We are seeking to make arrangements to return it to it while at the same time safeguarding the interests of the Army, which is there to protect the population. As I say, we are most ready to talk to the people most closely concerned.
      Mr. John: Will the Secretary of State make it quite clear that two parts of the ground have been occupied by the Army? That is my information. One part has been occupied in the last six months and that is the part which is being given up. Will he confirm that the Army is trying to give up all of this athletic ground?
      Mr. Atkins: The Army is trying to give up the whole ground. In fact, it does not occupy the ground. It occupies part of the property belonging to the GAA. It is hoping to return to the GAA that part of the ground that was occupied in 1974. I think that we can come to an amicable arrangement—at least I hope that we can. As I said, we intend to discuss the matter with those concerned.

      Gaelic Athletic Association
      Mr. Robinsonasked the Secretary of State for Northern Ireland if, in view of the ban which the Gaelic athletic association places on membership by police, Army and Royal Navy personnel, he will review his policy of granting the association aid from public funds.
      The Under-Secretary of State for Northern Ireland (Mr. Philip Goodhart): While the Government deplore the particular restrictions imposed on membership of the Gaelic athletic association, we do not intend to reverse the policy followed by successive Governments in Northern Ireland during the past 18 years of giving this association some financial assistance. The GAA does not receive the full support that open membership clubs receive. It is entitled only to a restricted grant rate because of its membership restrictions.
      In present financial circumstances all grant aid schemes must be subject to further examination but, whatever changes may prove necessary, restricted membership clubs will not be grant-aided at the same rate as open membership clubs.
      Mr. Robinson: In view of the discrimination exercised by the GAA, will the Under-Secretary explain how it is possible to reconcile the payment of vast sums of public money to this organisation with section 19 of the Constitution Act which states that it is unlawful for

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      a Minister to aid or encourage an organisation to discriminate?
      Mr. Goodhart: That point has already been considered by the courts.
      Mr. Wm. Ross: How does the Minister justify restricting the grants if payment of them falls wholly within the law?
      Mr. Goodhart: All restricted membership clubs receive grant at a lower rate than do those clubs with an entirely open membership.

      Security
      Mr. Goodladasked the Secretary of State for Northern Ireland if he will make a statement on the security situation in Fermanagh.
      Mr. Dunlopasked the Secretary of State for Northern Ireland if he will make a statement on the security situation in Castlederg, County Tyrone.
      Rev. Ian Paisleyasked the Secretary of State for Northern Ireland if he will make a statement on border security in Northern Ireland.
      Mr. McQuadeasked the Secretary of State for Northern Ireland if he will make a statement on the security situation in Northern Ireland.
      Mr. Humphrey Atkins: Since I last answered questions in the House on 12 June, 30 people have been charged with criminal offences of a terrorist nature, including five with attempted murder. One person caught red-handed with 600 lb. of explosive and a revolver has been charged with the possession of explosives; and in the Dungannon area, as a result of security force vigilance, over 1,000 lb. of explosives were seized and four people have been charged. The House will be pleased to note that three men have been charged in the Republic under the extra-territorial legislation for their part in the murder of Henry Livingston, an ex-member of the UDR, in County Armagh last March.
      Two people died during the period while engaged in terrorist activity. One of these was a hooded man who was shot dead by the police after he and another man had fired at a mobile police patrol in Andersonstown. Another man
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      was killed when a device which it is believed he was planting exploded prematurely. Mrs. Miriam Daly was found callously murdered in her Belfast home.
      On the border, especially in County Fermanagh, policing confronts the security forces with exceptional difficulties, because of its extent and nature. It is primarily for the security forces themselves to determine the measures necessary to afford local people protection. The recent closure of several more roads across the border is one such measure. The security forces can take credit for a significant reduction of violence overall in Fermanagh recently, although individual round-the-clock protection is impossible. I am well aware of the concern on this issue, and am watching it closely.
      As far as the town of Castlederg is concerned, terrorist activity has been at a low level. There was an attempt on the life of a part-time member of the UDR in May of this year, but I am glad to say that it failed. This was the first major incident in the Castlederg area for two years.
      Mr. Goodlad: I thank my right hon. Friend for that reply. Does he agree that cross-border co-operation is of crucial importance in the Fermanagh area, and is he satisfied that it is adequate?
      Mr. Atkins: Yes, Sir, Relations between the RUC and the Gardai are good and there is close co-operation between them. It is also gratifying to note that the authorities in the Republic are implementing the undertaking to the Prime Minister and myself by the Taoiseach some time ago that they would use the cross-border legislation whenever it proved possible.
      Several Hon. Members rose—
      Mr. Speaker: Order. I propose to call first those hon. Members whose questions are being answered.
      Rev. Ian Paisley: What action is the right hon. Gentleman now taking to keep closed the roads that have been closed in Fermanagh, since along these roads the murderers have come, carried out their dastardly deeds, and returned safely to the Irish Republic?
      Mr. Atkins: As I said in my original answer, a number of roads have been

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      closed recently. None has been reopened, although in one case a temporary bypass was attempted. Steps have been taken which satisfy the security forces that that bypass is not a security risk.
      Mr. McQuade: Are any special precaution to be taken for the 12 July parades?
      Mr. Atkins: Yes, the security forces have taken all the precautions which they deem necessary to ensure that the parades in Belfast and elsewhere on Saturday pass off peacefully. These are traditionally occasions and I have every confidence that the security forces know exactly what arrangements to make to ensure that there is no trouble.
      Mr. Molyneaux: Is the right hon. Gentleman aware that we fully support the decision to deploy an Ulster regiment in the frontier area? Is he also aware that it is right and proper that Ulstermen in all branches of the security forces should be permitted and encouraged to play a full part in the defence of Northern Ireland against attacks from another nation?
      Mr. Atkins: The deployment of units of the Regular Army is, of course, a matter for my right hon. Friend the Secretary of State for Defence, but I am glad that the hon. Gentleman supports the use of the 5th Inniskilling Dragoon Guards in the Province, and I shall pass the hon. Gentleman's comments on to my right hon. Friend.
      Mr. Fitt: The right hon. Gentleman was asked about the Orange parades on Saturday. In the discussions which the right hon. Gentleman had with the leading members of the Orange Order, did he give them an undertaking that in no circumstances would Prince Charles be allowed to marry a Roman Catholic?
      Mr. Atkins: No, Sir. I ask the hon. Gentleman to study the written answer that I am giving today to one of his colleagues.
      Mr. Kilfedder: Has the right hon. Gentleman referred to the Director of Public Prosecutions a statement by the SDLP councillor, councillor Sweeney, which was virtually an incitement to murder Protestant members of the UDR?
      Mr. Atkins: No, Sir. I do not need to refer any of these matters to the Director of Public Prosecutions. This is a matter for the Chief Constable, and I have no doubt that he will take whatever action is necessary.

      Less Favoured Areas
      Mr. Wm. Rossasked the Secretary of State for Northern Ireland whether he will extend the less favoured areas in Northern Ireland; and if he will make a statement.
      Mr. Giles Shaw: The Northern Ireland part of the United Kingdom marginal land survey is complete, but it would be inappropriate to make an approach to the European Community for an extension of the less favoured areas for Northern Ireland alone.
      Mr. Ross: Since a very large part of the aid that is coming from the EEC—I understand that it amounts to £40 million over 10 years—is to be paid to the less favoured areas in Northern Ireland, how on earth does the hon. Gentleman expect to spend that sum in the present area? Since the survey to which he referred has been completed, I understand, not only in Northern Ireland but in Wales, cannot an approach now be made?
      Mr. Shaw: It is my information that the surveys which are being undertaken in other parts of the United Kingdom will not be completed before 1981. It will, therefore, not be possible to make a unified approach to the Community before that survey is complete.
      On the first part of the question, the marginal land assistance to which the hon. Gentleman referred is one of the measures involved, but the question is related primarily to the size of the area which claims the grant.
      Rev. Ian Paisley: Is it not possible for the Minister to make an application to the EEC for the region of Northern Ireland?
      Mr. Shaw: No, Sir.
      Mr. J. Enoch Powell: Is it the firm intention of Her Majesty's Government, when the survey for the United Kingdom is complete, to make such an application?
      Mr. Shaw: The right hon. Gentleman will be aware that such a decision would be one for my right hon. Friend the Minister of Agriculture, Fisheries and Food. He was in the Province on Tuesday this week. I think that he was clearly impressed by what he saw and by the importance of marginal land and the EEC grants towards those who work thereon.
      Mr. Pendry: Is the Under-Secretary aware that we are not comparing like with like? The situation in England is not the same as that in Northern Ireland. In the Province the beef and allied industries are very depressed. We press from the Opposition Benches that the Minister reconsiders his earlier answer and urges the Minister of Agriculture, Fisheries and Food to act unilaterally for Northern Ireland if necessary.
      Mr. Shaw: I take the hon. Gentleman's point. I hope that he is aware that my right hon. Friend the Minister of Agriculture. Fisheries and Food is negotiating with EEC Council Ministers for a structure proposal for Northern Ireland. That indicates the commitment that he and I attach to ensuring that Northern Ireland agriculture gains benefit from our EEC membership.

      Sports Council (Functions)
      Mr. Flanneryasked the Secretary of State for Northern Ireland how many staff of the Sports Council it is proposed to make redundant as the result of the transfer of the executive powers of the council to civil servants in Departments.
      Mr. Goodhart: The present complement of the Sports Council is 42. The Government's proposals provide for a purely advisory body without its own staff or premises.
      Mr. Flannery: Does the Minister realise that those who will be made redundant are highly specialised, dedicated and trained personnel, whose training has taken many years? Will he give serious thought to doing something more about the matter because, through the Sports Council, those people help to break down barriers, especially between youngsters? It would be sad if they were made redundant. What does he intend to do with them if he does displace them?
      Mr. Goodhart: There will be an expanded role for district councils in that area. I expect that the highly qualified staff of the Sports Council will find employment with the district councils.
      Mr. Bradford: How much money is disbursed by the Department for the provision of facilities; and how much money is disbursed by the Sports Council?
      Mr. Goodhart: About five times more money is disbursed by the Department than by the Sports Council. The amount disbursed by the Sports Council in grants in the last financial year was slightly over £400,000. It took slightly under £300,000 in administrative costs to make that distribution.
      Rev. Ian Paisley: Will the Minister give a breakdown of the 42 personnel? How many are experts, and how many are only office staff?
      Mr. Goodhart: About 14 of the 42 staff could claim substantial expertise in the sporting area. The remainder are office staff.
      Mr. Fitt: Is the Minister aware that the Sports Council in Northern Ireland is one of the few organisations that draws support from the whole community across the political and religious divide? Is he further aware that there is bitter resentment from every significant section of the community in Northern Ireland that is involved with sport about the way that the announcement was made, and that no consultation took place with the Sports Council? Will he be honest with the House and admit that a "con" trick has been perpetrated by making the district councils believe that they will be given added functions? Even if the Government gave them added functions, they would be incapable of carrying them out.
      Mr. Goodhart: There is no "con" trick involved in the matter. About £200,000 of extra funds should be available primarily for district councils as a result of eliminating the administrative costs of the Sports Council. Meanwhile, the members of the Sports Council may continue as an advisory body. Members with great expertise in sporting matters can serve as members of the advisory body.
      Mr. McCusker: If the hon. Gentleman is convinced that this decision is right, why

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      has the Minister with special responsibility for sport given a categoric assurance that he will not do the same in England, Scotland and Wales?
      Mr. Goodhart: The circumstances in England, Scotland and Wales are different from those in Northern Ireland. The administrative costs in relation to expenditure on sport in Northern Ireland are very much higher than they are in England, Scotland and Wales.

      Sports Council
      Mr. Pendryasked the Secretary of State for Northern Ireland how many times the Minister responsible for sport in Northern Ireland met the Sports Council for Northern Ireland before 16 June.
      Mr. Goodhart: My noble Friend Lord Elton met members of the Sports Council formally on two occasions before 16 June.
      Mr. Pendry: Does the Minister accept that one meeting was at the request of the Sports Council? Does he further accept that at the meeting on 16 June the Sports Council was told that, following a review in which it was not invited to participate, its executive functions were to be axed? Does he agree that not only does that cut across the findings of the review body on non-departmental bodies, but, more importantly, the Conservative Party's election manifesto commitment on page 292, paragraph 4?
      Mr. Goodhart: It does not cut across any commitments. Apart from the two formal meetings held with my noble Friend, there were many informal discussions.
      Mr. Straw: Is the Minister aware that it is accepted on both sides of the House that that body has been pursuing a valuable, non-sectarian role under difficult circumstances? If the Government are saying that the administrative costs are too high, why has there been no serious attempt made by the Minister and his empire-building Department of Education to reduce the administrative costs, rather than wipe out that valuable body altogether?
      Mr. Goodhart: More than 41 per cent. of the money made available to the
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      Sports Council was spent on administrative costs. That is excessive by any standards. Beyond that, there were further claims to increase substantially the administrative staff of the Sports Council. That was clearly not acceptable.

      Sports Council Functions
      Mr. Parryasked the Secretary of State for Northern Ireland what additional money he intends giving to the district councils of Northern Ireland to enable them to undertake some of the work at present carried out by the Sports Council for Northern Ireland.
      Mr. Goodhart: The money that would be available to the Sports Council for those specific tasks would normally be available to district councils.
      Mr. Parry: Does the Minister accept that nobody will be fooled by that sop to the district councils? Is it not a fact that the bulk of the work that he wishes to transfer cannot be carried out by district councils without complementary assistance from the Sports Council? Will he reconsider the issue?
      Mr. Goodhart: Over the years the district councils have built up a substantial body of expertise in that area. I have no reason to believe that they will not be able to carry out those tasks.
      Mr. Soley: What assurances can the Minister give the House that the changes will ensure adequate provision for all members of the community in Northern Ireland?
      Mr. Fitt: None.
      Mr. Goodhart: The Department of Education will maintain a strict supervisory role in that area.
      Mr. Wm. Ross: Did not the Minister say earlier that, out of the £700,000 disbursed by the Sports Council, £400,000 was used for grants and £300,000 used to meet administrative costs? Did he not further point out that only half of the staff of the Sports Council were administrative staff? Therefore, the remainder must have been experts. Did he not mislead the House when he claimed that £300,000 went on administrative costs, because half of the staff were sports experts, giving advice to councils?
      Mr. Goodhart: Those with expertise in the sporting world were also carrying out substantial administrative tasks.
      Mr. John: Has the Minister been briefed to the effect that his right hon. Friend the Secretary of State has undertaken to review this decision? How does he come to speak in the terms that he has this afternoon, with such a sturdy defence of the Government's decision? How on earth can he be satisfied that an impartial review will be made?
      Mr. Goodhart: I have seen the record of the hon. Gentleman's discussion with my right hon. Friend the Secretary of State and my noble Friend. In the next few days a letter will be sent from my right hon. Friend to those who took part in the discussion.

      Energy Policy
      Mr. McCuskerasked the Secretary of State for Northern Ireland if he will make a statement on future energy policy in Northern Ireland.
      Mr. Giles Shaw: Future policy on electricity will depend on the outcome of a comprehensive review of the position of the Northern Ireland electricity service now in progress. In the meantime, the Government have accepted a recommendation from the service that work on the second phase of Kilroot power station should cease. I shall shortly announce a package of financial assistance towards the orderly rundown of gas undertakings which have decided to close and to help consumers faced with the conversion or replacement of appliances.
      Mr. McCusker: Because of the recent developments announced for the North Sea, including several substantial additional discoveries of gas—and bearing in mind that the report that the Minister has received indicates that a gas industry in Northern Ireland is economically viable—is it not time that he changed the decision that he announced 12 months ago and gave Northern Ireland the same benefits as are enjoyed by gas consumers in Great Britain?
      Mr. Shaw: I am grateful to the hon. Gentleman for the courteous way in which he gave me advance notice of the publication of the Cooper and Lybrand
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      study to which he has just referred. We shall be undertaking a detailed examination of that study, and will let our findings be known in due course. Meanwhile, the decision which was announced last year must stand, and discussions with those gas undertakings which have decided to close must continue.
      Rev. Ian Paisley: How can the Minister reconcile those two statements—that the gas industry is to close, yet he will study an interesting report which is contrary to the report on which he has based his original decision?
      Mr. Shaw: There is nothing irreconcilable at all in the two statements that have just been made. I must remind the hon. Gentleman that the decision was taken last July primarily on the basis that the project for the gas pipeline would not be financially viable. The report just produced suggests that there may be a case that it would be financially viable, and we must assess that case. But the fact remains that the deficit financing involved in the report just made available costed something in the order of £130 million in relation to that project.
      Mr. James A. Dunn: Will the Minister review the decision which was taken last July? Bearing in mind that further encouraging evidence may be presented to him, does he not agree that to be absolutely dependent on one form of energy would be shortsighted, and, indeed, at the end of the day, might jeopardise the future of the Province? I plead with the hon. Gentleman to look at this matter again.
      Mr. Shaw: I appreciate the hon. Gentleman's concern as well as his experience in this matter. But the fact remains that gas accounts for 3 per cent. of the current energy requirement of the Province, whereas other fuels—oil and electricity—account for substantially more. It is a matter of reviewing the electricity problem. This is currently under way. Certainly gas represents a very small part of the energy requirements of the Province.

      Academic and Academic-related Staff (Salaries)
      Mr. J. Enoch Powellasked the Secretary of State for Northern Ireland what action he proposes to avoid further delay in settling the salaries of academic

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      and academic-related staff in Northern Ireland.
      Mr. Goodhart: The salaries of academic and related staff in Northern Ireland are the same as those agreed for the corresponding staff in Great Britain. Decisions on these matters are not taken separately in Northern Ireland in advance of settlements in Great Britain.
      Mr. Powell: What can the Minister do, if necessary in conjunction with his colleagues in Great Britain, to deal with the conviction of this staff that they are deliberately and invariably left at the end of the queue?
      Mr. Goodhart: He can encourage his colleagues to reach an early agreement on this matter. But my noble Friend has no direct standing in these discussions.

      Interrogation Procedures
      Mr. Bradfordasked the Secretary of State for Northern Ireland what progress has been made on implementing the Bennett report on interrogation procedures.
      The Minister of State, Northern Ireland Office (Mr. Michael Alison): The recommendations of the Bennett report, which the Government accepted last July, have been implemented.
      Mr. Bradford: Has the Minister noted that the DPP in Northern Ireland has decided not to proceed with cases against RUC members who were mentioned in the Bennett report? Will he undertake not to spend too much more time and resources on the Bennett report, but to apply all the Government's might and power in the defeat of the IRA?
      Mr. Alison: I have already told the hon. Gentleman that the Bennett report recommendations have been implemented, so further costs and effort in that sense do not arise. As to the decisions of the DPP, that matter is outside the ambit of my responsibility.
      Mr. Fitt: Is the Minister absolutely certain— I ask him to be absolute certain before he replies—that the recommendation in the Bennett report, to the effect that policemen not connected with the interrogation should be present to ensure that there is no ill-treatment is being carried out? Is he satisfied that uniformed
      750
      and plain clothes police officers are there to ensure that no brutality is used during the investigation?
      Mr. Alison: The hon. Gentleman's question was phrased in such terms as to indicate that he expected to receive the answer "No". In the light of my reply, the advice that I am receiving is that all the Bennett report recommendations have been implemented. I am satisfied that they have been, but I shall now check carefully in the light of what the hon. Gentleman has said.

      De Lorean Car Project
      Mr. Bruce-Gardyneasked the Secretary of State for Northern Ireland what conclusions he has reached regarding Mr. De Lorean's applications for an additional £8 million from public funds; and if he will make a statement.
      Mr. Giles Shaw: I refer my hon. Friend to the reply I gave earlier today to my hon. Friend, the Member for Newbury (Mr. McNair-Wilson).
      Mr. Bruce-Gardyne: Can my hon. Friend give the House an assurance that he will make his statement on Mr. De Lorean's topping-up request before the House rises for the Summer Recess? If by any chance that should be impossible, can he assure the House that in no circumstances will the statement be issued while the House is in recess? Does he agree that we must have a chance to discuss it?
      Mr. Shaw: I fully appreciate my hon. Friend's anxiety that this statement should be made prior to the recess. I give my hon. Friend the undertaking that I shall do everything that I can to ensure that the statement is made to this House before the recess. At the present time I cannot go beyond that.

      PRIME MINISTER (ENGAGEMENTS)
      Mr. Altonasked the Prime Minister if she will list her official engagements for 10 July.
      The Prime Minister (Mrs. Margaret Thatcher): This morning I presided at a meeting of the Cabinet. In addition to

      751
      my duties in this House, I shall be having further meetings with ministerial colleagues and others.
      Mr. Alton: Will the Prime Minister today take time to discuss with her right hon. Friend the Secretary of State for Employment his statement that he believes in the introduction of compulsory work for the unemployed and his subsequent retraction of that scheme? Will the right hon. Lady tell the House whether she or he make Government policy and whether that scheme is Government policy?
      The Prime Minister: My right hon. Friend did not say that he believed in compulsory social work for the unemployed, so there was never any need to retract a statement which he did not make. What he said was that he believes that there are a number of young unemployed people who, as well as getting something out of the system, would very much like to put something in, and would feel it very much better to spend some of their time doing social work until they could get a job. We have had preliminary suggestions to that end and we are pursuing them.
      Mr. James Callaghan: As every young unemployed person would like to be at work, and as it is costing the Government and the State between £5 billion and £10 billion a year to keep them unemployed, why not expand the economy and give them real jobs and real wages?
      The Prime Minister: I can no more guarantee jobs for everyone than the right hon. Gentleman. It was he who substantially increased unemployment. Had he left us with numbers of unemployed equivalent to those that we left him—which were very much lower—the number of unemployed now would be very much lower than it is.
      Mr. Callaghan: Does the right hon. Lady regard the increase in redundancies, which have more than doubled over the past 12 months, and the short-time working, which has more than quadrupled during the past 12 months, as evidence of the success of her policy, or is it nothing to do with her?
      The Prime Minister: I am afraid that it is the inevitable consequence of having to deal with some of the appalling situa-
      752
      tions which the right hon. Gentleman left me with. The right hon. Gentleman is now asking me to print more money in order to spend our way out of inflation. He knows that we cannot do that. If we were to go for increasing inflation we would also go for increasing unemployment. We will not do it.
      Mr. Callaghan: What does the right hon. Lady mean when she says that in such an event we should go for increasing inflation? Does not she realise that it is possible to keep inflation under control, and to have a diminishing and decreasing unemployment level, provided that she adopts the correct economic policies? When will she take responsibility for this scandal, for which she is responsible?
      The Prime Minister: The right hon. Gentleman is asking—[HON. MEMBERS: "Dodging."] I do not dodge the issue. I remember very well the right hon. Gentleman saying that one cannot spend one's way out of inflation. He is asking us to do precisely that by printing more money or borrowing more money and putting up the interest rate. [Interruption.] If we were to do that—
      Mr. Speaker: Order. It is difficult for me to hear what the Prime Minister is saying. [Interruption.] Order. Whatever it is, the Prime Minister is entitled to say it.
      Mr. Peyton: Does not my right hon. Friend think that it is odd that so innocent a remark and suggestion as that made by her right hon. Friend the Secretary of State for Employment should have provoked quite such a hysterical reaction from those hon. Members who are normally so enthusiastic about giving something for nothing?
      The Prime Minister: I am grateful to my right hon. Friend. We are anxious to help some of those young unemployed, and if we can do so by assisting them to do some social work, we shall take that opportunity.
      Mr. James A. Dunn: On a point of order, Mr. Speaker. The right hon. Lady is not addressing the House, and we cannot hear her.
      Mr. Speaker: I am grateful to the hon. Gentleman, and I hope that all hon. Members will co-operate to try to ensure that we can hear everything that is said.
      Mr. Geraint Howellsasked the Prime Minister if she will list her official engagements for 10 July.
      The Prime Minister: I refer the hon. Member to the reply which I have just given.
      Mr. Howells: Will the Prime Minister take time today to discuss Welsh broadcasting and television services in Wales with the Home Secretary and the Secretary of State for Wales? What plans has she to save Mr. Gwynfor Evans, president of Plaid Cymru, from starving to death in October?
      The Prime Minister: I deeply regret Mr. Gwynfor Evans's threat. Neither he nor any responsible person can ever expect a Government to respond to that sort of action. My right hon. Friend the Home Secretary has already made a speech from this Dispatch Box on Welsh broadcasting, and he pointed out that if the arrangements that he has already made do not prove satisfactory he is prepared to look at them again.
      Mr. Aitken: Is my right hon. Friend aware that all the indignation from the Opposition Benches this afternoon is in sharp contrast to the scene at the Select Committee on Employment yesterday afternoon, when my right hon. Friend the Secretary of State made his proposal? Is she aware that Labour members of the Committee did not ask a single question—hostile or otherwise—because it was clear that the Secretary of State was simply putting forward an optional scheme to relieve the tedium of unemployment?
      Mr. Cryer: On a point of order, Mr. Speaker. Is it not contempt of the House for proceedings of a Select Committee to be disclosed—[Interruption.]
      Mr. Speaker: Order. This matter arose yesterday, and I explained that when a Select Committee is held in public no secret is revealed.
      The Prime Minister: With regard to my hon. Friend's question, the work of the Community Service Volunteers is greatly admired. They assist with a number of schemes under the youth opportunities employment programme, and it is apparent from what is happening in the House this afternoon that many young
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      people have far more ideals than Opposition members.
      Mr. Arthur Lewis: During the Prime Minister's heavy day will she please do something that every hon. Member will support? Will she send a letter or telegram to John and Harriet Orton, who are 104 and 102 years of age respectively, congratulating them on having achieved 80 years of happy, married life? May I say, even though I may be out of order when I say it, that I know they are staunch Methodists, and perhaps you, Mr. Speaker, may also like to send them a message.
      The Prime Minister: I am grateful to the hon. Gentleman for making that suggestion. I have already sent a personal telegram, and I would be only too happy to send a telegram on behalf of the House. I am happy with the hon. Gentleman's suggestion that I should join the House's most distinguished bachelor in doing so.
      Mr. Speaker: I merely tell the House that I have sent a telegram. It is my ambition to emulate the couple.
      The Prime Minister: Hope springs eternal, Mr. Speaker.

      DUDLEY
      Mr. Blackburnasked the Prime Minister if she has any plans to visit the metropolitan borough of Dudley.
      The Prime Minister: I have at present no plans to do so.
      Mr. Blackburn: If my right hon. Friend were to visit the fine industrial town of Dudley she would find a Conservative-controlled local authority working within the guidelines of central Government and producing the lowest rate in the West Midlands. Is she aware of the excellent co-operation between unions, management and the local authority which is planning the future economy of the town? Is not this an example to the country?
      The Prime Minister: My hon. Friend appears to represent an admirable constituency, with excellent industrial relations, which I know has in it a wonderful private steelworks which accounts for about a quarter of our steel exports. He represents a marvellous local authority,

      755
      and I congratulate it on having the lowest rates in the West Midlands.

      PRIME MINISTER (ENGAGEMENTS)
      Mr. R. C. Mitchellasked the Prime Minister if she will list her official engagements for 10 July.
      The Prime Minister: I refer the hon. Member to the reply which I gave earlier.
      Mr. Mitchell: Will the Prime Minister find time today to telephone the leader of the Conservative group on the Hampshire county council and ask him to withdraw the proposals to cut £10 million from the education budget, which, among other things, will lead to the sacking of 1,000 teachers by Christmas? Is the Prime Minister aware that the chief education officer of Hampshire has said publicly that if these cuts go through, the education committee will no longer be able to fulfil its statutory duties?
      The Prime Minister: The short answer is "No, Sir". I must leave these matters to the local education authority. Like the Government, I expect that it has members making great demands on a limited purse, and it has somehow to match the two.
      Mr. Geoffrey Johnson Smith: On a point of order, Mr. Speaker. Some hon. Members—it may apply to both sides of the House—are having some difficulty in hearing some of the answers. It may have something to do with the accoustical system. Could not those responsible for the amplification of our proceedings do something about it?
      Mr. Speaker: I hope that whoever is responsible has heard that.
      Mr. Shersby: Will my right hon. Friend take time to consider the judgment of the Court of Appeal today in the case of Hillingdon borough council v. Streeting, the result of which is to compel local authorities to provide accommodation for people from overseas who have no connection with any local authority in the United Kingdom? Will she discuss this matter with her right hon. Friend the Secretary of State for the Environment, with a view to amending
      756
      the Housing (Homeless Persons) Act to ensure that homeless persons from overseas do not have priority in housing over the indigenous population?
      The Prime Minister: I saw that judgment, and it obviously will be of concern to many people who are seeking housing. We must consider it in detail, and decide whether that Act needs amending.
      Mr. Wellbeloved: In view of the breach of faith in respect of the Boyle Commission report, will the Prime Minister confirm that she will honour the recommendations of the Armed Forces Pay Review Body in respect of the pay of the Armed Forces?
      The Prime Minister: Yes, Sir.
      Rev. Ian Paisley: Will the Prime Minister take time today to read some of the 1,000 letters that were delivered to her by the four widows from Fermanagh, whose husbands were murdered by the IRA? Is she aware that the people of Northern Ireland were grateful for the fact that she was able to meet those widows and hear at first hand some of the current fears of the womenfolk of Ulster?
      The Prime Minister: I saw the four widows. It was obviously a very distressing experience for us. I learnt more from them by seeing them than I could ever have learnt from reading any number of papers or letters. They brought a large number of letters from people who live near the border. I have already seen a very considerable number of them.
      My right hon. Friend the Secretary of State for Northern Ireland and I put security at the top of our list of priorities for Northern Ireland.
      Mr. David Watkins: Has the Prime Minister yet considered the petition about Consett that was presented yesterday for her attention, signed by more than 20,000 people? In considering that petition, will she bear in mind that the steelworks at Consett is meeting all the criteria that she has repeatedly laid down in this House for survival, in that it is both profitable and highly productive? Will she recognise that its loss would devastate an entire community?
      The Prime Minister: I received the petition. I can understand the hon. Gentleman's concern about the loss of a

      757
      main steelworks such as Consett and the effect that this has on the community. With regard to the point that is continually made that Consett steelworks is profitable, I must correct any impression that it has been profitable for a long time. From 1975 to 1979 it made annual losses varying from £3·5 million to over £17 million. It was profitable for only one quarter of last year, when it made something like £½ million. It is, I regret to say, again now in a loss-making position.

BUSINESS OF THE HOUSE
Mr. James Callaghan: Will the Leader of the House state the business for next week?
The Chancellor of the Duchy of Lancaster and Leader of the House of Commons (Mr. Norman St. John-Stevas): The business for next week will be as follows:
Monday 14 July—Supply [26th Allotted Day]: Debate on an Opposition motion on the persistent rise in unemployment.
Tuesday 15 July—Completion of remaining stages of the Local Government, Planning and Land (No. 2) Bill.
Wednesday 16 July and Thursday 17 July—Report and Third Reading of the Finance (No. 2) Bill.
At the end on Wednesday, motion on the Summer Time Order.
Friday 18 July—Motion on the Appropriation (No. 2) (Northern Ireland) Order.
Monday 21 July—Supply [27th Allotted Day]: The subject for debate to be announced.
Mr. Callaghan: With regard to the Summer Time Order, many of us will be very anxious to know why we are being cut short on summer time next year. We hope that there will be a full debate on this subject. There is no reason whatever why we should fall into line with the others. They ought to fall into line with us, as we have obviously the most sensible arrangement on summer time.
Secondly, with regard to public expenditure cuts, which I understand are being discussed by the Government at the present time, will the Leader of the House tell us whether we are likely to have a statement on this matter next week? If so, let me intimate to him now that we would expect it to be followed by a debate.
Thirdly, as the Leader of the House has already said that Monday's debate is to be about the persistent rise in unemployment, let me indicate to him that with the remaining business at our disposal every week from now until the end of the Session we shall bring before the House some aspect of the scandal of unemployment
Mr. St. John-Stevas: I have been given early warning by the Leader of the Opposition.
Without getting into a dispute on the question of summer time, I point out that it is clearly for the convenience of everyone, in whatever country within the Community, that summer time should begin and end at the same time.
There is no need for a statement concerning public expenditure. The Cabinet is carrying out its normal review of public expenditure, as it does at this time of year, and no final conclusions have been reached.
Mr. Hill: If my right hon. Friend can spare the time, will he read early-day motion 673, on the reform of the licensing laws?
[That this House welcomes the submission of the National Union of Licensed Victuallers on licensing legislation reform; believes that its conclusions result from a thorough investigation into the current problems in licensing law; and whilst not necessarily accepting all their conclusions nevertheless broadly accepts them as the basis for much-needed reform.]
Is it not time that the House discussed the jungle of legislation on which so many courts are unable to act because of the sheer immensity of the problem?
Mr. St. John-Stevas: I understand that my right hon. Friend the Secretary of State for the Home Department is studying these proposals, but he has at present no plans for legislation.
Mr. Kilroy-Silk: As the Leader of the House has not made the expected announcement that there will be a debate on prisons on Friday 18 July, will he say when that debate will take place? Will he also confirm that it will not be on a subsequent Friday?
Mr. St. John-Stevas: I am hoping that I shall be able to announce shortly a debate before the Summer Recess, but I cannot give a guarantee in the terms for which the hon. Gentleman has asked.
Mr. Bruce-Gardyne: Does my right hon. Friend recall that when, before Easter, I expressed anxieties about the way in which the House was expected to approve the Spring Supplementary
760
Estimates on the nod, he showed at least some sympathy? Now that we are confronted with Summer Supplementary Estimates running to £230 million of additional expenditure, will he offer some encouragement for the hope that we shall be given an opportunity to debate this before any decision upon it is taken?
Mr. St. John-Stevas: As my hon. Friend said, I am sympathetic towards the point that he has raised, both in this House and in correspondence. I do not believe that it is satisfactory that we should follow these procedures, but I think that it is a subject that would be suitable for discussion in the procedure debate that I have promised the House before the Summer Recess.
Mr. Spriggs: With regard to what my right hon. Friend the Leader of the Opposition stated about unemployment debates in the future, may I ask the Leader of the House whether he has seen early-day motion 748, about unemployment in Great Britain, and in the North-West of England in particular?
[That this House is deeply shocked at the reported increased number of unemployed men and women in the United Kingdom, which, with the decision of a major furniture and upholstery firm to lay off workers and to close a factory in the Manchester area, has reached the proportions of a major economic disaster in the North West Region; and calls upon the Government to take special measures to reduce the hardship caused by Conservative Government economic policy.]
Will the Leader of the House arrange time for a debate about the shocking conditions in the North-West in particular and in the country in general?
Mr. St. John-Stevas: I am, of course, aware, as is everyone in the House, of the problems raised at the moment by high unemployment, particularly in the North-West. It is for that reason that parts of the region where the problem is greatest are to retain their special development area status. That will entitle employers who are setting up, and thereby creating new jobs in those areas, to receive the highest level of assistance available under the Industry Act. But in the long term the prospects for the

761
region—as, indeed, the prospects for employment in the country as a whole—depend on our success in the fight against inflation.
Mr. Budgen: Does my right hon. Friend agree that the problem of gaining control of public expenditure is now so urgent that the leisurely procedure that he suggests for considering the way in which we might consider Supplementary Estimates is not good enough, and that we must have an urgent debate about it, so that the House may consider whether it wishes to reassert its ancient rights of considering Supply?
Mr. St. John-Stevas: I hope that there will be nothing leisurely either in the approach to the debate or in the debate itself. As I indicated, it is a most urgent problem, and I hope that we shall proceed to tackle it, as action has been delayed for many years.
Mr. Hardy: Will the Leader of the House accept that there is a great deal that is contentious in the Government's proposals for agricultural capital grants? May we have an assurance that this matter will be debated on the Floor of the House and not sent to a Committee upstairs?
Mr. St. John-Stevas: I have no plans to have a debate on this matter in the coming week. I shall consider what the hon. Gentleman said.
Mr. Eldon Griffiths: Does my right hon. Friend expect the Secretary of State for Defence to make a statement on arrangements to maintain an independent British strategic deterrent? If so, will there be a debate on this matter before the Summer Recess?
Mr. St. John-Stevas: That is a matter for my right hon. Friend the Secretary of State for Defence or for my right hon. Friend the Prime Minister.
I cannot see my way to arranging a debate at the moment because I am anxious not to delay the Summer Recess unduly.
Mr. Ashley: Has the Leader of the House read the recent report by the Equal Opportunities Commission, which shows that there is widespread discrimination against women in Britain
762
today? As this discrimination is increasing, and is offensive and damaging to many women, could we have an opportunity to debate discrimination against women?
Mr. St. John-Stevas: The right hon. Gentleman has referred to an important report. It may be that further action ought to be taken in that sphere, but I cannot promise a debate before the Summer Recess.
Mr. Silvester: In view of the comments of my right hon. Friend the Lord Privy Seal on 14 May, will my right Friend ensure that the view of the House is taken before the Government finally decide to renew the right of individual petition to the European Court in January next year?
Mr. St. John-Stevas: I do not know what statement was made by my right hon. Friend the Lord Privy Seal on 14 May. If it is an important constitutional matter, I shall take an early opportunity to discuss it with him.
Mr. James Callaghan: There are two issues that the Leader of the House has answered on which I should like to press him further. The first is public expenditure. May we take it that no decisions will be announced before the end of the Session? If so, which is what I inferred from his statement, may we also take it that no statements will be made during the recess, when it is not possible to debate them? I should be grateful for a further indication of the Government's thinking on that matter.
Secondly, it will be intolerable if the Government make a statement on the strategic nuclear deterrent without a debate. There has been insufficient debate about the important issues raised by this matter—the balance between our forces, whether we can afford it, what it should be, and so on. I put it to the right hon. Gentleman that if the Government are to make a statement on this matter it is imperative that there shall be a debate so that the House can express its opinion, too.
Mr. St. John-Stevas: The Leader of the Opposition has raised hypothetical points. I have given no indication that there will be a statement on this matter. I have not ruled it out, but I certainly

763
have not ruled it in. The logical point at which to raise the question of a debate is if and when a statement is made. At present I have no plans for a debate on the subject. If a statement is made, the right hon. Gentleman can raise this point again.
With regard to the public expenditure review, I stick to what I said. This is a normal review, which takes place in all Governments at this time of the year.
Mr. Callaghan: With respect, the Leader of the House has not answered the question. A normal review is going on. I have known many years when statements have been made. [Hon. Members: "In July?"] In July, certainly, by Governments of both parties. There is nothing exceptional about it. Therefore, it is not unreasonable to ask that if a statement is not made before the House rises for the Summer Recess it shall not be made until the House has had a chance to debate the issue. The Government cannot just creep away into the recess and then make statements either on Polaris or on public expenditure and expect the House to be satisfied.
Mr. St. John-Stevas: The Government are not creeping away from anything. The right hon. Gentleman has made a point without validity. I have had no requests for statements on these matters. The review that is taking place within the Cabinet at this moment, which has not reached a final conclusion, is the normal review that is carried out at this time of the year.
Several Hon. Members rose—
Mr. Speaker: Order. I propose to call those hon. Members who have been rising in their places.
Mr. Kilfedder: Why cannot the Leader of the House give a clear assurance that the Government will arrange for a debate before a decision is taken to replace Polaris—a decision that would cost thousands of millions of pounds and perhaps have the gravest possible consequences for the people of this country?
Mr. St. John-Stevas: We have had a debate on defence. I have had no application for a statement on nuclear policy.
Mr. Arthur Lewis: Will the Leader of the House, one day next week, look at
764
the daily worsening position of Members' correspondence being neglected by almost every Government Department? It now takes a couple of months to get an interim reply and three months to get a substantive reply to any ordinary question. Is the right hon. Gentleman aware that, having waited for six weeks for an answer to a letter, I tabled a question and got a reply within 24 hours? If he does not do something, every hon. Member will be tabling questions asking for replies to corespondence.
Mr. St. John-Stevas: I think that that point is being exaggerated by the hon. Gentleman.
Mr. Lewis: Ask Members.
Mr. St. John-Stevas: I do not have to ask Members. They would tell me prettty quickly if the general situation were as bad as the hon. Gentleman contends. Practice varies from one Department to another, but I do not believe that it is the normal practice in any Department that there should be no interim reply for, I think the hon. Gentleman said, three months.
Mr. Sheerman: Will the Leader of the House assure us that there will be an early opportunity to debate women's employment as well as equal opportunities and the effect of modern technology on their employment? Many hon. Members have the experience that I have in my constituency, of modern technology sweeping away and eating into women's employment, especially that of young female school leavers. This is an urgent problem. In my constituency the ratio of young female school leavers to male school leavers is two to one. This is a growing problem. Surely it is time that the House concentrated its mind on the problems of women's employment.
Mr. St. John-Stevas: I agree that it is a very important problem. The hon. Gentleman raised another aspect of the problem that was raised a few minutes ago. Important though it may be, I cannot promise a debate on this subject before the Summer Recess.
Mr. Hooley: Will the Leader of the House give an assurance that there will be a full-scale debate before the Government proceed with any plans to build a fast-breeder reactor?
Mr. St. John-Stevas: I cannot promise a debate on that subject before the Summer Recess.
Mr. Winnick: Will there be an opportunity in Monday's debate for the Minister of Agriculture, Fisheries and Food to make a contribution, bearing in mind the remarks that he made to the Tory Reform Group over the weekend? Are not his remarks even more relevant when we recognise that unemployment is increasing not only in areas where there have been problems for some time but in the West Midlands and the Black Country, where unemployment and poverty have increased substantially since the Tories returned to office in May last year?
Mr. St. John-Stevas: The Government, through various Ministers, have expressed their concern about the present state of employment, but we have consistently maintained that until our policies have a chance of coming into operation we have to go through what I hope will be a temporary period of high unemployment.
I am interested in the hon. Gentleman's desire, which I am sure is genuine, to hear from my right hon. Friend the Minister of Agriculture, Fisheries and Food in the debate on Monday. At present there are no plans for him to speak from the Front Bench in that debate. I suggest that if the hon. Gentleman is interested in the exegesis of my right hon. Friend's words, he should write to him about it.
Mr. Soley: Is the Leader of the House aware of the growing anger on both sides of the Chamber about the Government's casual attitude to the crisis in our prisons? His answer to my hon. Friend the Member for Ormskirk (Mr. Kilroy-Silk) is totally unacceptable. There is a major crisis in our prisons. I remind the right hon. Gentleman that prior to the Whitsun Recess he told me that there would be a debate on this matter after that recess. We have been told that repeatedly. Friday has been mentioned. That shows the low priority that the Government are prepared to put upon the matter. When will they give us proper time for a debate on it.
Mr. St. John-Stevas: The fact that we have not had a debate earlier is a reflection of the importance that the Government attach to the report, because it has
766
been necessary to hold widespread discussions on this most important report. As I told the hon. Member for Ormskirk (Mr. Kilroy-Silk), on this and other occasions, it is still my hope that we shall have a debate before the Summer Recess, but I cannot guarantee that it will not be on a Friday.
Mr. Cryer: Will the Leader of the House accept that the fact that the Opposition are devoting a great deal of their time to the subject of unemployment does not abrogate the Government's responsibility to provide time for a debate on the textile industry, which is still losing jobs at the rate of 500 a week? It is a very complicated position for the industry and it needs the individual attention and responsibility of a Minister answering to the House specifically on the textile industry.
Secondly, will the Leader of the House provide time before the Summer Recess to debate the Select Committee's report on the register of Members' interests? As the right hon. Gentleman knows, five hon. Members have not declared their interests, which makes it extremely unfair on the rest of us who have done so. The report has not yet been debated. The right hon. Gentleman has in the past indicated that he would provide time for such a debate. Perhaps if we debated that report and, as a result, some Tory Members divested themselves of their interests, we might have more jobs floating around.
Mr. St. John-Stevas: My hon. Friend the Prime Minister recently had a meeting with representatives from the textile industry, which I understand was a satisfactory meeting. I repeat the Government's pledge that when the multi-fibre arrangement expires in 1981 we shall negotiate a further agreement to protect the textile industry's interests.
With regard to the register of Members' interests and the Select Committee report, I have been instrumental in securing the publication of the register, which the hon. Gentleman may have noted—
Mr. Cryer: Yes, indeed.
Mr. St. John-Stevas: Thank you very much.
Mr. Cryer: I called for publication.
Mr. St. John-Stevas: I am grateful for that solicited tribute. I cannot, however, promise an early debate upon the subject.
Mr. Skinner: On the question of coordination of Government policy, will the Leader of the House tell us whether the Prime Minister will make a statement on the recent remarks of the Secretary of State for Industry in America, on the one hand, when he said that it would be a good thing for American investors to come over here because we paid low wages, and, on the other hand, a fortnight after that, when he said that wages in Britain were too high and that that was one of the reasons for unemployment? May we have that matter clarified?
Secondly, will the Prime Minister ensure that with regard to the statement by the Minister of Agriculture that unemployment benefit is now running at a rate of £7,000 million, out of a public sector borrowing requirement of £9,000 million, and is too high a price to be paid for the efforts to squeeze inflation out of the economy, a statement will be made on the question whether that is Government policy, especially at a time when the Government are giving aid and comfort to the steel bosses to throw people out of work, such as the people at Consett, which is the height of economic lunacy and is thereby adding more to the expenditure needed for the dole queues?
Mr. St. John-Stevas: After that, I am clearer about the hon. Member's views on the matter than about the various speeches—
Mr. Skinner: That is what the Secretary of State said.
Mr. St. John-Stevas: So the hon. Member says, but I would require to see the text of these statements and to check them against the version that the hon. Member is giving. However, as the hon. Member knows, when Ministers speak in their official capacity they are speaking on behalf of the Government. They are setting forth Government policy and they speak for the Prime Minister as well as for other members of the Government.
Mr. Eldon Griffiths: On a point of order, Mr. Speaker. I realise that the House is anxious to move on. However, I think that my right hon. Friend the Leader of the House said that he had not received any request for a statement on the modernisation of the British nuclear deterrent. For the avoidance of doubt and in the interests of good order, perhaps I may tell you, Mr. Speaker, that my question to the Leader of the House a few moments ago was precisely a request for such a statement.
Mr. St. John-Stevas rose—
Mr. Speaker: Order. That was a point of order.

BILL PRESENTED
  SEX DISCRIMINATION ACT 1975 (REPEAL)
  Sir Ronald Bell, supported by Mr. Philip Holland, presented a Bill to repeal the Sex Discrimination Act 1975; and for connected purposes: And the same was read the First time; and ordered to be read a Second time upon Friday 25 July and to be printed. [Bill 249.]
ORDERS OF THE DAY
  SUPPLY
  [25th ALLOTTED DAY]—considered.

INDUSTRY (GOVERNMENT POLICIES)
Mr. Speaker: Before I call the right hon. Member for Leeds, East (Mr. Healey) to move the motion, I must tell the House that an exceptionally large number of right hon. and hon. Members have indicated to me their wish to speak. It is clearly quite impossible for everyone who has indicated that he wishes to speak to be called to speak today, but I gather that there are other occasions on which we shall be discussing much the same subject. However, I hope that those who are called will bear in mind the number of hon. Members who are waiting to speak.
3.55 pm
Mr. Denis Healey: I beg to move,
That this House deplores Her Majesty's Government's economic policies which are inflicting intolerable damage on British industry.
I do not think that there can be any argument on either side of the House but that the damage done to British industry over the last 12 months is intolerable. The evidence is multiplying every day. Up to the beginning of April industry was sliding steadily downhill, but since April firms have been tumbling over the precipice one after the other. Many are disappearing for good, and most of those that remain see their profitability falling lower than ever in British history, and they are able to survive only by slashing their investment plans, abandoning their research expenditure and sacking or underpaying their employees.
Let me run quickly through a long litany of disaster. I begin with bankruptcies. Over 2,000 companies have entered into voluntary liquidation in the last three months and over 800 have been compulsorily wound up. That is three times the rate that obtained in the same three months last year, and the rate is rising all the time. If the trend continues —and it may well worsen—we shall have
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Well over 6,000 firms going bankrupt by the end of this year.
Bankruptcies are worst, as always, in those industries that are regularly more vulnerable in a recession, such as textiles, engineering and construction. Bankruptcies in textile firms doubled in the first half of this year. Courtaulds has recently been shutting one mill every week, and 30,000 jobs have been lost in the textile industry.
In clothing manufacturing, bankruptcies have more than trebled in the last six months. In engineering and the metal-using industries, bankruptcies increased by 83 per cent. in the first quarter of this year and have more than doubled in the second quarter. In construction, 136 building contracting firms collapsed in the last six months.
There is a steady contraction throughout British industry. Manufacturing output has fallen by 8 per cent. in the last 12 months, since the Chancellor presented his first Budget. The contraction and the liquidations are not only in declining industries. For example, in chemicals, which since the war has been one of the most rapidly expanding and certainly most efficient industries in Britain and, indeed, in the world, output was sharply down in March and April, and exports are now said to be stagnating. In electronics, which should be the foundation of our future growth, the number of bankruptcies of firms has nearly tripled in the first half of this year.
The decline in British industry is not confined to the regions of secular decline. Let us take the West Midlands. Since the war that has been one of the fastest-growing regions in the country. It is now littered with industrial casualties. Apart from the car industry, there has been a sharp contraction in all engineering industries, including GKN, IMI, Glynwed, Rubery Owen, Delta Metal and Tube Investments. All of them expect the contraction to worsen dramatically, at least over the next 12 months. The situation is such that the chairman of the CBI recently said that there had been
"a great deal of talk about a Phoenix rising from the ashes—but what if we are left with just the ashes?"
That is the problem to which the House must address itself this afternoon.
The East Midlands has often been spared serious damage in a recession.

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However the textile, footwear and engineering industries throughout the East Midlands are in a state of dangerous decline. Every day we get more bad news from all over the country. On Monday, hon. Members from all parties bombarded the Secretary of State for Industry with horror stories from their constituencies. Only this morning, we heard that the MG plant was closing down and that the furniture industry was at death's door.
Trouble is not confined to manufacturing industry. Bankruptcies in retail and wholesale firms increased by just under 30 per cent. in the first half of this year. The tourist industry is undergoing a season of near disaster. Conservative Members have always boasted of their great affection for small firms. I wonder whether they have had an opportunity to read the statement made by the chairman of the National Federation of the Self-Employed in Small Businesses last week. He said that he expected 12,500 of the employers in his organisation to go out of business within the next 12 months. He estimated that that would involve a job loss, from that source alone, of 125,000 men and women.
Of course, not all firms and businesses face the receiver. But most of those that are managing to survive do so only by cutting investment, research, manpower and pay. The Conservative Party has always rightly insisted on the importance of profitability as the source of all industrial improvement and growth. The squeeze on profitability now facing British industry is the worst since the 1930s. Indeed, it is worse than it was throughout most of the 1930s.
The other day the CBI told us that in 1980–81 British business would have the lowest profitability ever recorded. For every pound of profit earned by British firms in 1979 the MESR estimates that there will be only 17p profit in 1981. The cash threat to firms is easily the most severe since the war. It is a potential threat to the banks and financial institutions that support them. There is a real danger that the banking sector will come under the same type of domestic strain—as a result of the decline in British industry—as the international banking sector is coming under in the world as a whole, as a result of the effect
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of the world recession on the developing countries. Investment is the seed corn for the future of our industry—
Mr. Dennis Skinner: There is some logic in saying that the banks will come under pressure if things continue as they are. However, the minimum lending rate was at 17 per cent. for God knows how long. It is still very high in relative terms. That means that banks and insurance companies can offset the other difficulties to which my right hon. Friend referred. As long as there is a high bank rate, banks will be able to make £1,500 million profit, as they did last year.
Mr. Healey: My hon. Friend is quite right as far as the clearing banks are concerned, but merchant banks have to buy their money at high interest rates. As a result, they may face a serious threat.
According to the Department of Trade's estimates, investment in manufacturing is likely to be cut this year by up to 12 per cent. In the last two years of the previous Labour Government, investment in private manufacturing rose each year by over 12 per cent. in volume. Indeed, the fall in manufacturing investment over the next 12 months will represent the steepest fall since 1972, when the last Conservative Government were conducting the same policies as those to which they returned in 1979.
Expenditure on research and development is being cut throughout industry. Most industries stopped taking on new workers many months ago. Now, compulsory redundancies have arisen on an unprecedented scale and they have doubled within a year. In the past few months redundancies have increased at the rate of 30,000 a month. They are rising to 40,000 a month and are likely to rise further before the year is out. Most of the industrialists to whom I have had a chance to speak in the past few weeks believe that unemployment will probably reach 2 million, not by the middle of next year as I believed, or by the end of next year, as the Government claim to believe, but by this Christmas.
The consequences of such unemployment were well illustrated in today's edition of The Times. I hope that the

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House will pay attention to it. It states:
"Nearly 500 unemployed school leavers formed a despairing queue outside a clothes shop advertising eight jobs in the employment black-spot of Sheffield.…In the queue were several young people with degrees who had waited for up to two hours, hoping to land one of the £32·50 a week jobs selling jeans at the newly opened boutique in the city where 5,400 teenagers are unemployed…Mr. Paul Caplan, a director of the company, said: 'You could call it a queue of despair. We were stunned. They were standing five abreast and some had been there for up to two hours'."
If economic dogma blinds Ministers to the human consequences of such unemployment, I hope that they will at least look at some of its social consequences. A speaker at the meeting of the London education authorities said yesterday that the scale of youth unemployment represented a time bomb that was ticking in the heart of Britain. One must consider the problems relating to the black population. During the past 12 months, unemployment among the black population has increased four times faster than unemployment in the white population. The riots in St. Paul's, Bristol, which took place a few weeks ago, were just a foretaste of what may happen in many of our cities during the coming months and years.
The problem is not confined to the young. One of the most tragic features of Britain today is that in some areas, such as Shotton, unemployment among adult males—most of whom look after families—stands at the horrific level of 36 per cent. That means that more than one adult male in three is out of work. Steel workers came down from Consett yesterday. They were all men of the highest moderation and respectability. They told us that they would face the same scale of unemployment if the Government went through with their plans to close the Consett works.
Mr. David Watkins -: In my constituency 1,400 young people will leave school this year. There are just eight jobs available.
Mr. Skinner: The policy is working.
Mr. Healey: Indeed, my hon. Friend is right; the policy is working. I shall come to that in a moment. I need not describe the level of unemployment in Wales, Scotland, the North-East and the North-
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West, where it threatens to become high enough to damage stability not just in one town but in whole regions of our land.
The Government's only response to unemployment on this scale—unemployment that is still set to rise continually for the whole period that this Government are in office—is to cut unemployment benefit, cut training for the unemployed and think aloud about putting the unemployed to work in hospitals and prisons. I am very surprised at the Secretary of State for Employment. We have always known him as a man who has some skill with words. It is surprising how often recently he has managed to get himself misunderstood. I have no doubt that he will be very, very sorry about what he said two days ago, as he was about something that he said a little earlier.
No one can deny that the facts that I have outlined briefly represent an intolerable decline in British industry. My point this afternoon is that those facts are a direct and intended result of Government policy. On occasions I have been charitable enough to wonder whether Ministers knew what their policies were doing to the country, but I have had the opportunity to read a speech that the Secretary of State for Industry made in Chicago on 27 May. This is what he said:
"I bring you good news: Britain, which pioneered the industrial revolution, is beginning the process of turning away from stagnation. The relative decline associated with the bindweed of state power, which has afflicted Britain for several decades is being stemmed. Britain is in transition. Before very long the thousands of healthy, successful businesses will no longer be overloaded: Britain will be on its way again."
I must confess that I found that pretty astonishing, even by the right hon. Gentleman's own standards.
The key to the right hon. Gentleman's speech was what he said a few days later, when he spoke to the Electronic Association of California. We have become used to the personality of the right hon. Gentleman in recent years. He has two personalities—one is a sort of Siegfried figure, who fights with his sword against dragons—usually artificial—and the other is the gloomy Hamlet figure, who is not fighting dragons but facing real decisions in the real world.
In California, a long way from his responsibilities at the Department of

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Industry, the right hon. Gentleman was in a Wagnerian mood. There was a sort of romantic exaltation about his speech, and I strongly recommend all Members to read it. It sheds a great light on a senior figure in the present Government. His feet were even further off the ground than usual. His whole speech was a long hymn of praise to what he called
"the perennial gale of creative destruction."
What an illuminating phrase. Now we know what he meant by all those pre-election speeches about galvanising the entrepreneurs. What he meant by that was that he was strapping the entrepreneurs down in the electric chair and then throwing the switch.
The Secretary of State for Industry expressed in this rather high-flown way the emotional mood in which he approaches the decline of British industry. He dances around the flames rather like a little boy at a bonfire. But the Chief Secretary, who I am glad to see sitting in the Chamber, takes an altogether more intellectual and systematic approach to these affairs. A fortnight ago, when he was asked about the unemployment figures, he told us that they were a necessary price to pay for getting inflation down. We know that to be his conviction, which he has often expressed in the House.
The root cause of the appalling prospects now facing British industry, much of it already in terminal decline, is the Government's belief that they have only one responsibility in economic management, and that is to counter inflation. They believe that inflation can be countered only by controlling the money supply and that the money supply can be controlled only by savage cuts in public expenditure and draconic increases in interest rates.
The Government have now had a year in which to apply this policy in practice. Their policy has proved mistaken at every point. The measures that they have chosen for controlling the money supply in the hope of getting inflation down have thrown the whole burden of adjustment on to industry, both public and private. First, the Government have engineered a heavy cut in domestic demand at a time when world demand was already falling
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because of the recent doubling of oil prices. Secondly, they have achieved their desired cuts in public expenditure in ways that have hit industry, both coming and going. On the one hand the Government have raised the price that industry must pay for fuel and transport and the rates that it must pay on its property, and on the other they have cut orders for industry by concentrating their cuts on goods and services and on capital spending. This has hit hard not only the construction industry but also the engineering and metal-using industries.
The Government have tried to bring down the money supply growth by holding MLR at 17 per cent. for 10 months, but this has not brought the money supply under control. Indeed, it was interesting to see yesterday that the 1 per cent. cut in MLR last week was, as we suspected, just a sop to the wets, because the money supply is still growing outside the range set for it by the Government. As Ministers know all too well, it will grow very much faster in the next month or two as a result of the corset being unwound. The effect of the rise in interest rates has been not to cut private company borrowing—the reason that the Chancellor has always given the House—but to put up the exchange rate to a level at which it is quite impossible for most of British industry to compete with the foreigner, either at home or abroad.
In the past 12 months the pound has risen by 20 per cent. against a weighted basket of the currencies of the countries with which we trade, compared with the increase in our relative costs. Against Japan, the value of the pound has risen 40 per cent. in the past 12 months, although I am glad to say that with the strengthening of the yen that price advantage may be somewhat diminished in the coming months.
Finally, by doubling the rate of VAT and by increasing public sector charges in rent and rates the Government have sent up the retail price index right across the board. As a result, inflation has more than doubled in the first 12 months of a policy the only objective of which was to get inflation down. We still have big increases to come in gas and electricity prices, and rates, in the remainder of this year.

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Meanwhile, British industry is staggering under a savage squeeze coming from four directions at once—high inflation, high interest rates, high exchange rates and low demand. That is a perfect recipe for industrial collapse, and the recipe is working. The proof is in the facts that I have just deployed to the House.
We face an appalling prospect, and our confidence was not restored by anything that the Leader of the House told us about public expenditure a few minutes ago. The Government have totally failed in one of their economic objectives. They have failed to control the public sector borrowing requirement, which turned out to be 18 per cent. higher last year than the level set by the Chancellor in his Budget in June 1979. Central Government spending in the first three months of this year has been half what the Government wanted it to be over the whole 12 months. The Government are therefore planning again to pile Pelion on Ossa. The Chancellor, we are told, is approaching his colleagues with a demand for another £1,000 million of public expenditure cuts, mainly to be achieved by a moratorium on capital spending in the public sector, which will be another karate chop to the neck of British business.
The Chancellor takes an objective and uncommitted view on most of those issues. He is a typical lawyer in that respect. I ask him to read with some care what his right hon. Friend the Minister for Agriculture, Fisheries and Food said last weekend—that unemployment, at 1½ million, is already adding £7,000 million to the PSBR, which implies that if unemployment rises to 2 million by the end of the year, particularly as the unemployed will include a higher proportion of more highly paid workers than in the past, the effect on the PSBR is likely to be as high as £10 billion. However, the only way in which the Chancellor can think of dealing with that situation is to increase unemployment, and hence the PSBR still further by making further cuts in public expenditure, the final effect of which will fall mainly on private sector industry.
That is bad enough, but all the problems of British industry, created by the macroeconomic policies—if I may use economic jargon—of the Government are
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being compounded by the microeconomic policies of the Secretary of State towards British industry. It is well known that all over the world economic behaviour has changed since the first oil shock in 1973–74. Economies have been more sluggish to respond to changes in the economic environment, and there is good reason to believe that there have been structural changes in the requirements of industry, which will require major industrial structural adjustments in the next 10 years or so.
The Governments of every one of our major competitors have been giving direct physical help to their own industries to assist them to make those structural adjustments as rapidly and smoothly as possible. However, this Government have been moving out of that area. They are dedicated to a bigoted belief that market forces, and market forces alone, can produce the optimum distribution of industrial resources.
The German Government, for example, are giving massive support to the coal, railway and steel industries. The average subsidy per tonne to the German coal industry is £14 compared to £1 in Britain. That money subsidies the costs of all German industries, which, directly or indirectly, are affected by the price of coal or moving goods by rail. The British Government are reducing assistance to our nationalised industries, on which he health of the remainder of industry depends.
The French Government have just embarked on a major programme of support for their telecommunications industry, particularly in viewdata. They are to put three terminals into each of the 20 million houses that they expect to take new telephones over the next 12 years. Japan has already spent £1,000 million in direct support for its electronics industry, £500 million of which has gone to the microprocessor industry. However, the Secretary of State for Industry is refusing to allow the British Post Office to market its Prestel system, which is the most advanced in the world, by insisting that it sticks to cash limits that take no account of productive and profitable investment by the industry. The right hon. Gentleman is also dithering in his Hamlet mood—not his Siegfried mood—over

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giving Inmos the second tranche of £25 million that it was promised years ago.
The Chancellor, we are told, is trying to engineer the collapse of the most powerful computer firm in Europe—ICL —by abandoning a long-standing Government commitment to give it preferential treatment in public purchase and throwing the contract for the £150 million new Inland Revenue computer system open to IBM, in the United States. I ask the Secretary of State, or the Chancellor, if he is prepared to do so, to answer the question tonight. We are told by this leakiest of all Cabinets that there is to be a meeting of a Cabinet committee on Monday to decide the matter. The Secretary of State for Industry can prove that that leak is untrue. He can reassure us by telling us tonight that there is no question of not giving our computer industry the public purchasing support that every other Government in the world give to their computer industry. I hope that he will be kind enough to give us positive reassurance, even if he has to spend 10 minutes talking to the Chancellor of the Exchequer at some time during the evening.
Our competitors are not so daft. It is extraordinary that the Secretary of State for Industry can give £2 million to a banking firm in the United States to help an elderly but able mining banker—if that combination is the appropriate description of Mr. MacGregor—to run BSC but is not prepared to support industries on the ground in the way that the Governments of all our competitors support their industries. I wish that he would travel to Paris at some time and get a little bit of Gallic pepper in his veins, and then make sure that we support our industries in the way that France is supporting hers. All contracts for the supply of this enormous number of new terminals for the French viewdata system, which is costing £3,000 million a year over the next 12 years, are to go exclusively to French suppliers. We should like to see the right hon. Gentleman take a leaf out of the French book.
All the countries that compete with us ensure that their financial institutions make cheap credit available for productive industry. We are the one country in the world that does not do so. The French do it through direct and indirect control of many of their banks. The
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Germans do the same. The Japanese have a system under which every company is overgeared and every bank is overlent, because their Government stand behind every industrial loan. We started doing that when we were last in power. By far the most effective part of the whole industrial strategy was the interest rate subsidy under the accelerated project scheme. We desperately need to expand that on a large scale to take account of the problems of structural adjustment that now face us in Britain, as in other parts of the world.
What puzzles us most in this area is the extraordinary capriciousness of Government policy on industrial support. For example, after telling Harland and Wolff that the £20 million that it received last year was the last penny of Government aid that it would ever get, the Government decided, a few days before publishing a White Paper on Northern Ireland, to dish out an extra £42½ million to Harland and Wolff. They were right to do so, but they did it for political and, to be fair, social reasons and not for economic reasons. Harland and Wolff plays a role of immense importance in the society, as well as the economy, of Northern Ireland.
The RAF has just been told to buy 15 British transport aircraft instead of the American aircraft that it could have bought more cheaply. "Hear, hear" say I. The biggest U-turn so far—it encourages me slightly, because we are always looking for analogies between the second year of the present Government and the second year of the Government of the right hon. Member for Sidcup (Mr. Heath) in 1972—was that on British Steel. The Government have not gone far enough, but their action smells like the U-turn of the right hon. Member for Sidcup on UCS and I hope that it is the prelude to a massive shift in industrial policy along the lines that I have suggested.
We shall never get consistent industrial policy while the Secretary of State for Industry is in a perpetual dither, like Balaam's ass, between two bales of straw, one marked "monetarist theology" and the other "responsibility to British Industry". I wish the right hon. Gentleman would make up his mind or, if he cannot do that, knock it off.
There are alternatives to the approach being taken by the Government, and they

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are being followed by all our competitors. Every one of our more successful competitors, the major countries in Europe, the Far East and on the other side of the Atlantic is following the same mix of policies that the previous Labour Government followed—management of demand in order to raise output to capacity when it is running far below capacity, as it is at present; a reasonable control of monetary growth, which is prepared to relax or suspend monetary policy if it is throwing people out of work—a course followed by the German and Swiss Governments on several occasions in recent years; and, above all, the achievement of sufficient consensus between the Government and both sides of industry to produce a climate in which there is a chance to keep pay increases in line with increases in productivity.
I wish the Government would add to that active intervention both in industry and finance to make certain that the necessary structural changes in British industry can take place as fast and as smoothly as possible. We have a better chance than our competitors of achieving changes smoothly, because our changes can be lubricated by North Sea oil.
Yet the Government, and particularly the Treasury, persistently play down the importance of North Sea oil. An extraordinary Treasury document on the economic effects of North Sea oil priced it for this year and the next four years at the price that obtained in 1978–79, which was only half the present price. The increase in oil revenue to £10,000 million in a few years' time is presented in the Brown Book as an increase to just under £5,000 million.
North Sea oil gives us a heaven-sent opportunity to ease the transition that is required in Britain, as in other countries, to new technologies and new ways of doing some of the old things in industry. But the Government are throwing that money—about £4,000 million this year—down the drain, financing unemployment and replacing revenue that has been lost due to the depth of the recession that the Government have engineered.
As the Secretary of State for Industry said in his California speech, the Gov-
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ernment have a mystical belief in what the right hon. Gentleman called
"the perennial gale of creative destruction."
But there is no chance of restoring the strength of British industry while a Government of cold-hearted economic bigots are in charge of our affairs. The most creative act of destruction available to the House is the destruction of the Government before they destroy British industry.
4.29 pm
The Chancellor of the Exchequer (Sir Geoffrey Howe): I beg to move, to leave out from "That" to the end of the Question and to add instead thereof:
"this House approves the economic policies of Her Majesty's Government which are the only means of defeating inflation and providing a sound basis for sustainable economic and industrial recovery."
As so often, there was a contrast between the precision and relish with which the right hon. Member for Leeds, East (Mr. Healey) purported to describe the difficulties of the scene and the facility with which he was offering inconsistent descriptions without coming near to offering any real alternatives. It is hard to believe that the right hon. Gentleman bore responsibility for any of these matters until less than 14 months ago.
I begin by acknowledging, indeed asserting, the difficulties facing our economy and, in particular, our manufacturing industry. They are real and they are the very difficulties of which we warned year after year throughout our time in opposition.
The right hon. Member for Leeds, East and the Labour Party have no monopoly of concern in those matters. We share the concern of everyone in this country that the health of our economy should be restored. The question is which policies are more likely to yield the right solution—those tried erratically during five years of the previous Government, which manifestly failed, or those to which we are committed and which we have always made plain will take time to come to their full effect.
Of course company profitability has been declining, as it has for many years. Productivity improvements in this country have come almost to a standstill, as they have for many years. Redundancies are rising and are likely to go on doing so. However, it is not right for the right

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hon. Member for Leeds, East to exaggerate where that is wholly unjustified. For example, we inherited a situation in which there was a balance of payments deficit of £1½ billion in the first half of 1979. By the second half of last year, it had been reduced to £¾ billion and there will be a further improvement in the first half of this year. It is worth looking at the aspects of the economy that are improving.
It is also important to recognise that by no means all of our difficulties are home made. The right hon. Member gave only a passing glance at what is happening in the world economy and did nothing like enough justice to the impact of the shock of oil price rises on the entire world economy in the past year.
The oil price increase is recognised by all who attended, for example, the Venice summit and recognised in all the communiqués issued from various meetings as having inflicted an enormous shock to the capacity for economic growth and prosperity of every industrial country. It is in that storm that we are having to reconstruct our economy in the way that is necessary. The right hon. Gentleman sought to draw the conclusion that there was something remarkably different about our economic policy compared with the policies followed by our international competitors. That is not the conclusion endorsed not only by the summit Heads of Government at Venice but also by the OECD and by the International Monetary Fund—
Mr. Healey: If the right hon. and learned Gentleman wishes to be fair, he should quote the conclusion of the central bankers of the world in the report of the Bank of International Settlements which described with wonder and horrified amusement what it called the laboratory experiment by this Government, the only Government in the world who thought they could cure inflation by monetary means alone.
Sir G. Howe: The right hon. Gentleman anticipates me. I was going to quote, by way of example, the communiqué of the OECD in June that was precisely echoed by the communiqué of the European summit in Venice. They all agreed specifically that it would be a serious error to relax fiscal and monetary
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policy before the current surge of inflation has demonstrably been brought under control. They underpin totally the commitment we give to that policy.
The international scene underlines the two foundations of our policy. The first emphasises the whole range of measures we are introducing, which have been universally welcomed, to improve the supply side of our economy. The second, even more important, emphasises the extent to which the conquest of inflation is crucial, with monetary policy at the heart of that policy. For the world and for the United Kingdom, our experience shows that when the inflation rate accelerates, growth slumps. When inflation begins to turn down, growth begins to pick up. Both for the world and for the United Kingdom, the recent huge rise in inflation is now affecting the growth rate crucially and will go on doing so this year and next.
Mr. Frank Hooley: Will the right hon. and learned Gentleman give way?
Sir G. Howe: In a moment.
When inflation falls, we can expect growth both here and in the rest of the world to recover. That is the emphasis that emerges from the entire international analysis. The case for concentrating on inflation was clearly put in these words.
"We cannot master inflation unless we have control of the money supply…if the rate of inflation were to take off again…no responsible Government could shirk their duty for maintaining firm control over the supply of money and using the necessary fiscal and monetary instruments for that purpose. Unless we did so, inflation would soar to stratospheric heights and within a year or two unemployment would rise into the low millions.—[Official Report, 20 July 1977; Vol. 935, c. 1726–31.]
I quote from a speech made by the right hon. Member for Leeds, East to the House almost three years ago.
Mr. Hooley rose—
Mr. Deputy Speaker (Mr. Bryant Godman Irvine): Order. It is clear that the Chancellor is not giving way.
Mr. Hooley rose—
Mr. Deputy Speaker: Order. The hon. Gentleman knows that, if the Chancellor is not giving way, he must resume his seat.
Sir G. Howe: The right hon. Gentleman, much more recently, in a debate in January last year, told the House:
"The Government are determined to maintain the monetary policy to which they have pledged themselves and the fiscal policy implied by the monetary policies."—[Official Report, 25 January 1979; Vol. 961, c. 755.]
The trouble is that he was not so prepared, but we are. I hope that we can continue to count on his support. Unlike some of his hon. Friends, the right hon. Gentleman—
Mr. Healey: I must point out to the right hon. and learned Gentleman, as I have done in every debate since the election, that a monetary target of 8 per cent. to 12 per cent. with inflation running at under 10 per cent. is perfectly consistent with the growth of British industry, and was so. A monetary policy which sets a target which is well under half the rate of inflation created by the Government is one with which industry and Government cannot live.
Sir G. Howe: We shall examine in a moment the responsibility for the present rate of inflation. The right hon. Gentleman will not find himself easily acquitted.
The link between monetary policy and inflation is crucial. The right hon. Gentleman understands that. At any given time, one may identify one or more temporary factors affecting inflation. Recently, as I have remarked, there was the rise in world commodity prices, not unconnected with the doubling of world oil prices. In the United Kingdom, wholesale input prices, dominated by imports, including oil, increased by nearly a quarter over last year. By contrast, they were falling in the last year of the previous Administration. There are the price increases that follow from the necessary reduction in subsidies and financial support for the nationalised industries. In the period before the election, increases in rates and nationalised industry prices had not matched the impact of cost increases. That unsound price structure had to be corrected. There are the short run consequences in the change of the burden of taxation from direct to indirect taxation.
I remind the House that the effect on the year-on-year inflation rate of the changes made in my first Budget will
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pass out of the retail price index when the index is published in August.
The last but not the least of the short-term influences on the rate of inflation has been the backlash from the previous Government's pay policy. The disintegration of that policy led to immediate and accelerating pay increases far greater than the country could afford and bequeathed an inheritance of large and disruptive catch-up awards in the public sector stretching well over a year ahead. The clutch of staged comparability awards is estimated to have cost almost £3,000 million in a full year. Of that total almost a half falls on the local authorities' pay bill, with inevitable consequences for the rates.
Those are the short-term factors that have been at work, but, as the right hon. Gentleman reminded the House, the real and underlying causes of inflation usually lie in the past. The past year is no exception. The rise in prices over the the last 12 months reflects primarily the acceleration of monetary growth and fiscal expansion during the last two years of the right hon. Gentleman's stewardship at the Treasury. Whereas sterling M3 rose at an annual rate of 7 per cent. between mid-1975 and mid-1977, it increased at more than twice that rate between mid-1977 and mid-1979. That acceleration was associated with a major change in the budgetary stance with increased public spending and tax cuts that he embarked upon in autumn 1977.
Mr. Jack Straw rose—
Sir G. Howe: I shall give way in a second.
In our first year, we have managed to curb the money supply increase that we inherited. Over the last six months, sterling M3 growth, at an annual rate, has been within the 7 to 11 per cent. target range. We have not shrunk from the painful and other fiscal measures that were necessary. I stress that the high rate of inflation with which we are currently grappling was largely caused by the failure of the right hon. Member for Leeds, East to exercise sufficient control of monetary and fiscal policy.
Mr. Straw: If it is correct that the rate of money supply in the previous two years caused the present level of inflation,

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does the Chancellor agree with his Chief Secretary that pay increases over the last 12 months have not been a cause of inflation? If so, why is he blaming the Clegg award for the present rate of inflation?
Sir G. Howe: I have already dealt with that matter, as the hon. Gentleman would have known if he had been listening. I will repeat the answer for his benefit.
I explained at some length that at any one time there were a number of short run temporary factors affecting the inflation rate but that the underlying and most potent cause was the growth of money supply that we inherited from the previous Administration. It is noteworthy that the right hon. Member for Leeds, East never ceased to argue that the first two years of his Administration were dominated by his inheritance. I was interested to find him returning to that tack in a broadcast last week when in reply to a question he said:
"Certainly, but that is because of the inheritance we had from the Conservatives".
Even last week he was seeking to lay blame against us.
The task of re-establishing fiscal and monetary control makes it inevitable, as my right hon. Friends and I have often said, that the period ahead will be far from easy. Under the impact of the world recession and of our worsening competitiveness, demand for our goods has fallen. Profits have been squeezed and unemployment has been bound to rise.
I therefore come to consider—I know the concerns of my hon. Friends—the suggestions that have been made from various quarters for easing the discomfort and the pains of the transition, above all to the industrial sector. It is important to remember that all must be judged on the same basis. I cannot emphasise too strongly that we shall not be able to look forward to resumed sustainable economic growth and to reversing the rise in unemployment until we have substantially reduced the rate of inflation.
Dr. Jeremy Bray: Is the right hon. and learned Gentleman aware that in ICI—to give him a measure of the magnitude of the
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Problems—after the Prime Minister in her visit gave it as an example of a company which was winning through, I checked and found that the output of the basic building block of the chemical industry, ethylene, has fallen 40 per cent. in the past three months? Is he also aware that two of the three big ethylene crackers in ICI have closed down? Is that the kind of problem with which his measures will be able to deal?
Sir G. Howe: It is the type of problem which illustrates the difficulties. I am about to address myself to the various measures suggested to cope with the problems.
The basis upon which one must begin is that if we are to resume sustainable economic growth and reverse the rise in unemployment in a meaningful way, we must substantially reduce the rate of inflation. That is the basis on which we must judge, for example, the case tentatively put forward by the right hon. Member for Leeds, East for monetary relaxation, by revising the target upwards, fiscal expansion or lowering interest rates. The reality about that is that the effect on unemployment, if any, would be shortlived. The upward impact on inflation would be certain and, in due course, on interest rates and unemployment. They would soon be back on an upward path.
If we are to achieve the necessary gradual reduction of monetary growth while bringing interest rates down to acceptable levels, public sector borrowing, as a proportion of national income must be steadily and substantially reduced. I was not clear whether the right hon. Gentleman was saying that we are failing to bring public sector borrowing down far enough and fast enough or that we should be expanding it substantially.
Mr. Healey: Let me try to make it clear. I believe that the PSBR this year should be at least £3,000 million higher than the Government's aim. The London Business School and many monetary economists in the country and the world agree with me. I also believe that the Government are failing in their attempt to keep the PSBR up to the target level that they set themselves. In other words, the Chancellor has set himself a stupid target and he is totally incompetent to reach it.
Sir G. Howe: Having spent some 40 minutes making his own speech, the right hon. Gentleman has had several attempts to remake it in the course of my speech. He must know that if he were to try to expand the PSBR in present circumstances by anything like that amount his chances of holding interest rates at anything like their present level would be totally destroyed. He would lay the foundations for the next round of inflation on a catastrophic scale. He would not make such an assertion if he were responsible for it.
We must reduce the borrowing requirement. We recognise that the burden of taxation is still higher than we should like. The only effective answer is to accept the necessary restraint on overall public spending. None of our critics has proved the contrary. That is why our plans encompass a slow and steady reduction in total spending in the next few years—something which has never been attempted previously. The House and the country should be in no doubt that we shall persevere in that.
There is no question of the Government losing control of their own expenditure and borrowing in the short run. The central Government borrowing requirement for the April-June quarter published yesterday was £4½ billion. That is high in comparison with the Budget forecast for the year of £9·3 billion. The CGBR is often high in the first quarter of the year. In this year it is particularly affected by timing changes, the most important of which is that about £700 million of petroleum revenue tax, otherwise receivable in May, was paid in March. Moreover, as I said in my Budget speech in relation to cash limits and expenditure, the provision for inflation was less than the forecast might have suggested. It would not be surprising if that caused initial difficulties in some areas.
In general, however, central Government expenditure is not running at a level which is out of line with the Budget forecasts and the cash limits. It is being closely monitored. The House should be in no doubt that if problems arise corrective action will be taken. We are equally determined to secure effective control of local government expenditure.
I turn to the question of the exchange rate. I refer to the external value and
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the effect of that on the competitiveness of industry. It is easy to forget that a strong pound brings advantages as well as disadvantages. It is an important part of the so-called transmission mechanism from lower monetary growth to lower inflation. It certainly helps industry with the cost of imported raw materials. I am conscious of the extent to which the present exchange rate is a source of worry to some industries. It is that which leads some people to suggest that we should atempt to secure a reduction in that rate.
I have to remind the House that the rate is not, to a significant extent, within my control. In so far as it is, it can be influenced in a downward direction—as the right hon. Gentleman discovered in 1977—only at the cost of undermining the tight monetary policy that is fundamental to success in the battle against inflation. Once the exchange rate begins to fall in that way, the price of imports rises. Too often in the past that has set off further inflationary demands for higher pay with the result that any gain in competitiveness is wiped out quickly. We must recognise the underlying reality that improved competitiveness can be achieved only by improving quality and marketing skills and, above all, reducing unit costs.
I turn to the alternative policy, to which the right hon. Gentleman referred, of using North Sea oil revenues directly to help the manufacturing sector. That is not a new proposal. I am aware that many Opposition Members favour the large-scale injection of public funds into British industry. However, such intervention in this country has been shown to be doomed to failure. It can hardly be said that we are not providing substantial sums in any event. Huge sums are being made available to the coal and steel industries, for example.
The people who are best able to identify profitable investment opportunities do not dwell in Whitehall and Westminster. They work in British industry. Differences of opinion about the establishment of a fund to handle these matters should not obscure the real argument. The argument is about whether there should be a change in our priorities in that direction. I have examined some other possibilities in that connection.
Mr. Tony Benn: Will the right hon. and learned Gentleman comment on the German Government's subsidy of the German steel industry to the tune of £3 billion a year, permitting German steel to come in below our cost, to undercut our steel and motor car industries and cause pit closures? Is he aware that the cost of coal production in Britain is between one-half and one-third of what it is in the privately owned pits on the Continent?
Sir G. Howe: I cannot accept the right hon. Gentleman's figures. All the comparisons have been studied and are being studied by NEDO and sector working parties. The truth remains inescapable. Out of the limited resources available in Britain, we are already making substantial subventions to the coal and steel industries.
I have considered, since resources are being eaten in that way, representations from other quarters to the effect that I should take direct fiscal action to ease the pressure on the rest of the corporate sector. We have considered that at NEDC. There are suggestions that I might make a reduction in the rate of corporation tax or reduce the national insurance surcharge. It is questionable how such measures can best help the longterm competitiveness of industry when compared with the alternatives.
I conclude that the best service that the Government can perform for businesses in the immediate future is to keep down the burden of financing the public sector and thus pave the way for lower inflation rate and, above all, lower interest rates. It will be some time before industry sees the full benefits of that policy. However, the recent reduction in minimum lending rates provides a firm indication that we are moving in the right direction.
It is not only the Government who should be pressed to respond in the circumstances that are creating difficulties for our industrial base. From now on it will be supremely important to secure the right response from all those concerned in working and managing the industrial base, and, above all, in fixing the levels of pay.
I noticed that the right hon. Member for Leeds, East listed a number of factors which he said were bringing pressure to bear on British industry. He conspicuously failed to mention the level of pay
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demands and pay settlements. He should know, surely, that there is a direct tradeoff between pay on the one hand and output, jobs and profits on the other. If average earnings growth is faster than the growth in the money supply, unemployment will inevitably rise. We can see this clearly from the experience of the last two decades. Changes in unemployment are closely related to the movement of earnings related to the money supply, so that it is crucially important that those who work in industry should acquire a realism about jobs and pay.
Mr. Clinton Davis: This speech is unbelievably tedious.
Sir G. Howe: It may be tedious to the hon. Gentleman, but it is at the heart of the prospect of his constituents in finding secure employment. If he is not prepared to listen to this, he is prepared to neglect the central message of economic policy.
Being realistic about the relationship between jobs and pay is a question not of doing a favour to this or any other Government but of employees and firms helping themselves and all those who may depend upon them. It is a realism which is crucial for individuals as well as for organisations. Are those who seek work prepared to lower their sights in order to keep or to get that work? We have no choice but to be realistic about wages over the years ahead if high levels of unemployment are to be avoided. We must ask ourselves unflinchingly what is the cause of high unemployment.
Mr. Roger Stott: You are.
Sir G. Howe: We have to give ourselves the simple and unequivocal answer that it is caused by paying ourselves more than the value of what we produce.
I can quote from the speech of the Leader of the Opposition to the Labour Party conference in 1976. He knows, even if his hon. Friends are not prepared to agree, that the relationship between pay and jobs is crucial and that until realism is shot through the pay market we do not have the prospect of getting unemployment down.
Mr. James Callaghan: The right hon. and learned Gentleman has told us three times in his

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speech that his policies must have time. He has also told manufacturing industry that there will be a decline in its output during every year of the lifetime of this Parliament. Will he now give us some indication of the time scale within which he expects to see Government policy succeeding? Will it be after the end of this Parliament or before?
Sir G. Howe: Of course it will be within the lifetime of this Parliament, and well within it. If the right hon. Gentleman will study the Red Book published at the time of the last Budget, he will see clearly there the paths of progress for inflation and for the resumption of economic growth.
Mr. Callaghan: What the right hon. and learned Gentleman has said is very helpful. If that success is to be within the lifetime of this Parliament, why does he expect manufacturing output to decline during every year of this Parliament?
Sir G. Howe: The right hon. Gentleman will see that we expect output to begin growing again. I cannot put a precise date on that because it is not within the power of any sensible man to put a precise date on matters of that kind. I can, however, say with total certainty that the most effective service that the right hon. Gentleman and his party could do to the cause of recovering the path of economic growth and of reducing unemployment would be to put their full weight behind the case for responsibility in pay bargaining, given the link between pay bargaining and unemployment. I invite the Labour Party to study the extent to which, in speech after speech throughout the last Parliament, Conservative Members repeatedly emphasised the case for moderation in pay bargaining. Sadly—
Mr. Callaghan: Will the right hon. and learned Gentleman give way again?
Sir G. Howe: This is an important and serious point. Sadly, still too many trade union leaders are shying away from that reality.
Mr. Callaghan: I am grateful to the right hon. and learned Gentleman for giving way. I do not resile from any comments I have ever made about the relationship between the need for res-
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traint on incomes and prices, and productivity. However, the right hon. and learned Gentleman—and I say this specifically to the Secretary of State for Industry—can never hope to get that cooperation as long as the Secretary of State uses such phrases as he did when he called the trade unions one of the six poisons of society.
The Secretary of State for Industry (Sir Keith Joseph)rose—
Sir G. Howe: Neither the right hon. Gentleman—
Mr. Bob Cryer: Give way to the Secretary of State for Industry.
Hon. Members: Give way.
Mr. Deputy Speaker: Order. I call the Chancellor of the Exchequer.
Mr. Skinner: On a point of order, Mr. Deputy Speaker.
Mr. Cryer: On a point of order, Mr. Deputy Speaker. I saw the Secretary of State for Industry request the Chancellor to give way, and the Chancellor is refusing to do so.
Mr. Deputy Speaker: That is not a point of order.
Mr. William Hamilton: Give way to the right hon. Gentleman.
Sir G. Howe: The hon. Member for Keighley (Mr. Cryer), the Leader of the Opposition and my right hon. Friend the Secretary of State for Industry need have no concern about the way in which that question is to be answered. What my right hon. Friend said—and it was an entirely valid observation—
Mr. Dick Douglas: Let the Secretary of State speak for himself.
Sir G. Howe: My right hon. Friend will have the opportunity to speak at the end of the debate. I speak for him now and add my own gloss to what he said. The Leader of the Opposition should stay silent and hearken for a moment. He said that great damage was being done to our society by politicised trade unionism. That is an observation of supreme significance.
Mr. James Callaghan: The right hon. Gentleman said that trade unionism was one of the six poisons of society.
Sir G. Howe: Were it not to take the range of this debate wider than it should go, I should be prepared to develop at some length the case that the politicisation of our trade union movement has done great damage to the cause of the working people of this country.
Mr. Nigel Spearing: Tell them that at Taff Vale.
Sir G. Howe: The fortunate feature is that, notwithstanding that, some union leaders have been showing good sense in the present situation. I refer, for example, to Mr. Sidney Weighell—and I do not agree with him in this respect—who is clinging to the concept of an incomes policy. On the subject of pay, Mr. Weighell is saying very much the same as we in the Government are saying. He said last week—and this is an important observation:
"In the short to medium term, considerable restraint will be required in the wages field."
He went on:
"A positive contribution on the part of the trade unions will be essential."
I regret that that useful attitude is not shared by many other trade union leaders. I regret very much that some trade union leaders are still describing the idea of restricting wages in order to save jobs as stupid and out of touch with reality. Nothing could be more in touch with reality.
Fortunately, at the grass roots where it matters, sense is prevailing on a far greater scale. We are beginning to see examples of people taking reductions in pay in order to save their jobs. We are beginning to see people arriving at sensible bargains in order to save their firms and to secure their future prosperity. The Financial Times yesterday expressed very clearly the reactions within the engineering industry in the Midlands where there is increasingly widespread recognition by those employed in it of what this implies for the sort of pay increase that they can get.
It is here in the firms themselves that reality is prevailing, whatever may be being said by trade union leaders. Phrases about "the going rate" and "keeping up with prices" do not cut much ice with workers whose firms are fighting, as they must, for markets and which are striving, as they must, for increased
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productivity. These people understand the folly of pricing themselves out of a job and the extent to which their restraint will provide the basis of their success and their jobs in the future.
The private sector cannot be expected to take the whole of the strain. Levels of pay increases in the public sector must also be reduced. We cannot have overgenerous public sector pay awards at a time when production in the country as a whole is static or declining. That will govern our approach to the setting of cash limits for the public services and the external financing limits for nationalised industries in the coming months.
Mr. Frank Haynes: It is all right to keep bashing the trade unions. What about the bosses? There are plenty on the Government Benches and in the other place—
Sir G. Howe: As I said, the need for realism will govern our approach to the setting of cash limits both for the public service and for nationalised industries in the coming months. It is already clear that cash limits next year must be significantly lower than last year. That does not mean that we are setting norms in the public sector any more than the Lucas management, in saying that it could afford to offer a pay increase of only 10 per cent., implied a norm for the country as a whole. It is simply a statement of the reality that faces the Government. Our responsibility in that respect is essentially financial. That is why comparability, for example, cannot be allowed to continue to produce results way out of line with what is happening in the remainder of the economy. The Prime Minister's statement earlier this week shows that we do not lack the resolution to take the necessary decisions along that road.
Fortunately, there are now some reasons for seeing signs that the rate of inflation will soon start to fall. Movement in commodity and wholesale prices since the beginning of the year points to a slowing down of price increases over the months ahead. Commodity prices, other than oil, have generally fallen in recent months and in sterling terms are less than 1 per cent. higher than they were 12 months ago. The prices of industrial raw materials, again excluding

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oil, fell by nearly 10 per cent. over that period. The benefits of those favourable trends in raw material prices will be reflected in the shops over the months ahead. They may already have helped to bring about the encouraging recent movement in wholesale output prices, which have been showing progressively smaller increases each month.
That deceleration is also likely to reflect a cut in manufacturers' profit margins, no doubt in response to greater competition in sales. The decision of Marks and Spencer Ltd. to limit price increases for clothing to 5 per cent. this autumn illustrates the strong pressures that manufacturers will be facing to keep down the rate of growth in costs and prices. There is more general evidence of that in the recent CBI survey, which showed a smaller number of firms planning to raise prices than at any time since 1973. That is indicative of a slowdown in the rate of price increases in the shops over the months ahead.
Other leading indicators give some guidance on the likely course of inflation over a longer period. Clearly the most important is the growth in the money supply, which is the fundamental determinant of the rate of inflation. Another useful indicator is the change in house prices. In the past, the movement in house prices has led the inflation rate. Thus the increase in general inflation in 1974–75 followed the house price explosion in 1972. In 1978–79, when general inflation was still modest, house prices were beginning to accelerate and reached an annual growth of 30 per cent. in the middle of last year. Just as monetary growth is now slowing down, so too is the growth in house prices. House price increases have been decelerating for about a year, and that is yet another pointer towards the slowdown of general inflation.
That enables me to say a word about the proposed increases for pensions and benefits due in November this year. When my right hon. Friend the Secretary of State for Social Services lays the uprating order setting out the rates for the approval of both Houses, as he will later this month, he will wish to satisfy himself that the increases announced after the Budget still reflect the likely rise in prices over the period between the November 1979 uprating and this year's
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uprating. I see no reason to depart from the view that the movement in prices over the period in question will be 16½ per cent. The indicators, especially those that are generally regarded as the leading indicators of future movements in the RPI, all point to a slow-down in the rate of retail price inflation, consistent with the first Budget forecast.
Of course, by any standards, even a 16½ per cent. rate of inflation, with unemployment at its present level, is an unattractive prospect. But there are now clear signs that, as a nation, we are beginning to come to terms with the realities of our economic and industrial position, and that the foundations for our economic and industrial recovery are being laid. The policy that we laid before the country is consistent and coherent.
I see no sign that the right hon. Member for Leeds, East has a clear alternative policy. There is a sense of mystery about where his party stands on almost every issue of importance affecting economic policy.
Money supply growth is now under control. There are signs that inflation is about to move downwards. To maintain that progress it is vital that we maintain control over public sector borrowing and Government spending. We shall do that.
Unemployment is still rising because of excessive pay settlements. That will continue until pay bargaining brings down the level in line with the monetary growth rate. A slow-down in pay and inflation within the monetary target will lay the basis for growth and a reduction in unemployment. None of the alternatives on offer is attractive. None of them offers a hope for a sustained improvement in the outlook. The policies embodied in our amendment offer the best prospect of success. I commend the amendment to the House.
5.17 pm
Mr. R. McTaggart: I welcome this early opportunity to address the House on the occasion of my maiden speech. On 26 June I was fortunate enough to be the victor of a by-election in Glasgow, Central, and victory is always sweet. But for me the victory was tinged with a touch of sadness. I am conscious that I am standing in the House this afternoon only because of a tragic accident to Tom

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McMillan, my predecessor. Tom was not only a political colleague of mine; he was a personal friend. He was also a personal friend of my family. He represented Glasgow, Central for 13 years. During that time he built up a tremendous reputation as a fighter for his constituents. He made the point to me that his job was to serve those who elected him. That was not a platitude.
Tom, although he did not keep good health, insisted on holding at least one surgery every week Those hon. Members who have to travel to their constituencies will realise how strength-sapping that must have been. I have no doubt that it was because of Tom McMillan's past work that my success at the polls evolved. If I can serve the people of Glasgow, Central as well as he did, I shall be satisfied.
My constituency is in the very heart of Glasgow, and the great industrial city which Glasgow was built up to be started there. Within my boundaries lie the city chambers, which is where the Lord Provost, the leading citizen of Glasgow, takes his seat to run council meetings. They are the administrative centre of the district council. Glasgow cathedral, which is more than 800 years old, also lies within my boundaries. Across the road is the Provans Lordship, a historic building which is also the oldest house in Glasgow. We have the Merchants House and Trade House, along with the stock exchange, and headquarter organisations in shipping, banking, insurance and retailing.
My constituency is also an important seat of learning. Strathclyde university is located within it which, along with Glasgow university, in one of my neighbouring constituencies, has places for more than 12,000 multinational students. With a further 12,000 places spread over a dozen specialised colleges in the area covering technologies such as food, science, printing and, not least, the arts, that totals 24,000 places for multinational students, which is proportionately the Commonwealth's heaviest concentration.
In the eighteenth century the tobacco barons brought the city to the boil with their American trade, and the Victorian entrepreneurs emblazoned its shipbuilding and engineering fame. My consti-
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tuency was the seedbed of the industrial revolution in Scotland, yet there are now parts of it which have been officially declared areas of extreme multiple deprivation. Although we have some of the most historic buildings in the land and some of the best examples of Victorian architecture, we also have some of the worst unemployment figures anywhere. We suffer from the curse that is unemployment.
Where once stood factories supplying jobs and life to the area, there is now savage unemployment and emptiness. When Glasgow was built up, it was built as a city of contrast. There were grand mansion-type houses for the wealthy, and small, single-end flats with outside toilets for the lower classes. Those single-ends were vermin-ridden, and because of the unsanitary and overcrowded conditions which prevailed, tuberculosis and other diseases were rife.
Over the years the local authorities have striven to rid us of that squalor, but in Glasgow, Central, and in part of the constituency of my hon. Friend the Member for Glasgow, Shettleston (Mr. Marshall), a special initiative was required. The previous Labour Government, in recognition of that fact, set up the Glasgow eastern area renewal project, into which £160 million was to be channelled in an effort to build factories for employment and decent houses of a type in which people wished to live. GEAR, as it is known, obviously had its teething problems, but it brought hope to that part of Glasgow, an area weakened by loss of jobs and people. Yet even it is under attack by the Government's policies. It has suffered under cutbacks in public expenditure.
The jobs that we hoped that project would provide will not be forthcoming, and may never be forthcoming. At the same time, factories are closing down all around the constituency. A few weeks ago there were 4,000 job losses at Singers and 1,400 jobs lost at Talbot, Linwood. The position is so bad that even Robin Duthie, the Conservative-appointed chairman of the SDA—who is not exactly a card-carrying member of the Labour Party—was forced to attack the Government.
The effects of high interest rates and the Government's policy of non-intervention in industry have fanned the

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flames of unemployment in Glasgow and, indeed, throughout the whole of Great Britain. It is a fact worth remembering that since the Government came to power, 300 jobs have been lost every day, seven days a week. We have heard the Government's response today. They suggest that it is the unemployed's fault for being unemployed, and that if working people did not ask for more wages firms would not close down. But in the world outside, reality is different. With inflation touching 22 per cent., it takes almost one-quarter more in the weekly wage packet just to stand still. That has happened after only one year of Tory rule.
I represent what used to be a busy, crowded and thriving community. It, like industry, has declined over the years. In fact, Glasgow, Central is now the smallest constituency in Britain. Nowhere could be more appropriate to see the devastation of unemployment than my area, and if any Government Minister wishes I shall personally give him a conducted tour so that he may see for himself. Small as it is, it still has the heart of a lion, and it roared a warning to the Government on 26 June. It told the Tories "Enough is enough". We need more initiatives, not fewer. We need more money for projects such as GEAR. We need more money for the Manpower Services Commission. The reality is that unless the Government change their course, as my right hon. Friend the Member for Leeds, East (Mr. Healey) said, what happened in Bristol just a few weeks ago will be timid in comparison with the unleashed fury of the unemployed frustrated masses of Britain.
To Conservative Members representing marginal seats, I say that if anyone should be creating a fuss in this House it should be they, because they are the cannon fodder of the Government. The unemployment statistics which have been glossed over today will be a reality for many of them. When the day of the election comes and we hear the usual waxing from the Tory Front Bench, when Conservative Members in marginal seats are wiped out there will be no point in running to the Labour Party, because our ranks will be so swollen that we will have no vacancies.
5.26 pm
Mr. John Patten: I rise with great pleasure after hearing the hon. Member for Glasgow, Central (Mr. McTaggart). The whole House will have listened with great interest and attention to what he said, and will join him in the generous tributes which he paid to his predecessor. I know exactly how the hon. Gentleman must have felt before he rose, because it was just about a year ago that I made my own maiden speech. He has been about 500 per cent. braver than I was, because he has made his in two weeks whereas I took nearly 12 weeks.
The hon. Gentleman should not for a moment think that simply because he represents one of the smallest constituencies in the British Isles he will be listened to with any less attention, any more than it should be thought that I am listened to with more attention because I represent one of the larger constituencies.
The hon. Gentleman spoke with great lucidity and clarity, particularly during the second more political and uncharacteristic part of his speech. It was a good object lesson for the right hon. Member for Leeds, East (Mr. Healey), who unfortunately has just left the Chamber. We had to listen to an analysis of the economy by the right hon. Gentleman which was so confused and confusing in what it said that not only was it confusing about economics but the right hon. Gentleman was unable to get his classical allusions right.
We heard a good deal about Balaam's ass. Apparently that was the ass which could not make up its mind and turn in the right direction. Perhaps some of his hon. Friends will tell the right hon. Gentleman to turn to the Bible and look at the Book of Numbers, chapter 22, where he will find that, far from Balaam's ass not being able to make up its mind, it clearly made up its mind not to go down the wrong path, stood firm and after it had been struck by Balaam on several occasions, much to Balaam's amazement opened its mouth and ticked him off. The right hon. Gentleman must simply have picked the wrong donkey.
I feel that in opening its mouth and causing such amazement to Balaam the donkey simply echoed the amazement of many Conservative Members who had to

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listen to the extraordinarily convoluted and inelegant analysis presented by the right hon. Gentleman. That only leads me to think that he is suffering from an economic amnesia which makes him forget his five years as Chncellor of the Exchequer, the awful damage which he did to the economy and the terrible legacy which he left, with which my right hon. and learned Friend the Chancellor and my right hon. Friend the Secretary of State for Industry must now deal less than 14 months later.
Mr. Skinner: The hon. Gentleman will not get a job that way.
Mr. Patten: I do not wish to range as broadly across the economy as those who have spoken so far. I wish to concentrate my remarks on techniques and ways of helping manufacturing industry during the next two or three years of the world recession, while we pick up the bits left by the previous Government, and also to look at the problems of manufacturing industry, particularly in the regions.
I turn first to manufacturing industry. I have listened with care to what Labour Members have said, and I appreciate their strength of feeling, because many of them represent constituencies with very high unemployment rates. No one on the Conservative side of the House wishes to see that.
If we approach the problem rationally, it is apparent that within the next two or three years certain techniques will have to be brought into use in order to mitigate some of the worst effects of some of the worst-hit industries. We are not facing a problem of deindustrialisation, industrial deserts and so on. With respect to right hon. and hon. Members, on the Labour Benches, they often devalue their argument by such exaggeration. However, in a period of monetary restraint we may have to look for ways and means of helping firms in trouble. I hope that we do not, because most of the intervention by Governments of both parties over the last few years has been less than successful. Of course, where there are specific problems—massive plant closures—that affect individual areas, some selective assistance must continue, and the Government and the Secretary of State for Industry are to be applauded for their attitudes to closures
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in Corby, Consett, and elsewhere. If we have to turn to more generalised relief—I hope we do not—I press my right hon. Friends to look at methods of helping manufacturing industry that do not increase the money supply and are not inflationary.
One shot in the lockers of the Treasury and Department of Industry that might be stored up for use if necessary is a possible abatement, if not a complete abolition of the employers' national insurance surcharge, a burden that was laid by the then Chancellor of the Exchequer on British industry in 1966, and hiked up again in 1978. An abatement halving or abolishing the employers' national insurance surcharge would immediately improve the cash flow of manufacturing companies that may be in trouble, albeit temporarily, in the depths of a depression. An abatement of the surcharge will increase cash flow, and lessen firms' demands for credit from the banks, enabling us to stay on our monetary targets while at the same time enabling some firms in trouble to stay afloat.
If we halved the employers' national insurance surcharge, there would, because of the employment ramifications, be at least another 80,000 people in work in 1982 who otherwise would be thrown out of employment. This is one of the most important weapons that the Treasury and the Department of Industry can use.
In the longer term, and casting our minds back to what we are told about the decline of the regions, the Tories de-industrialising and laying waste to the country, and all the other exaggerations, no Labour Member can get away from one significant fact—
Mr. Skinner: What is it?
Mr. Patten: It is coming. I ask the hon. Member for Bolsover (Mr. Skinner) to be patient. I am trying to spell it out so that some of our weaker brethren can understand.
In the United Kingdom today, at 1980 prices, the value added element per job in manufacturing is about £7,000, while the value added element in all other sectors of the economy is just above £10,000. If those ratios are maintained

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and if there is even a 1 per cent. alteration from those employed in manufacturing industry to those employed in other sectors, there will be a considerable net loss of jobs—about 70,000 jobs for every 1 per cent. switch in the ratio. If that happens, the tragedy is that the job loss will be felt most in Northern regions, the regions of difficulty, while the glittering new jobs—many new jobs are being created—[Hon. Members: "Where?"] —in the South of England. The jobs will be located a long way from workers who need work in the North. That is a basic fact. It is not party politics. It has nothing to do with capitalism, but it has much to do with history.
The hon. Member for Glasgow, Central in his excellent maiden speech said that Glasgow, Central, was one of the seedbeds of the Industrial Revolution and now, 100 years later, it is completely run down. So, too, is much of the Northern region, because it is paying the penalty for being the first in the Industrial Revolution. The industries that were founded and which led the world 100 years ago are now at the bottom of the economic cycle. Many of them—shipbuilding and others—have come to the end of their economic life cycle. That is a fact that hon. Members must appreciate before they can begin to put forward a potential solution.
Mr. Skinner: Will the hon. Gentleman give way?
Mr. Patten: I give way with pleasure —for the first time in my career—to the hon. Member for Bolsover.
Mr. Skinner: So that is what the hon. Gentleman is here for. I do not think he will get a job on the basis of what he has said this afternoon. He is trying to indicate that some of the basic industries such as coal, steel and shipbuilding have now completed their lifespan and cannot return. Why then, at the recent Venice Summit, did statesmen, including the Prime Minister, sign a document stating that the old-fashioned coal industry that is based mainly in the North and in the nether regions of Britain, can double its coal production? Why has a town such as Consett, with a magnificent steel industry, with a productivity rate equal to that of West Germany, now been closed as a result of this Government's policies?
Mr. Patten: I did not mention coal or the coal industry. Indeed, I am informed by my hon. Friend the Member for Bristol, West (Mr. Waldegrave) that the Government are investing about £600 million in the British coal industry. I was talking not about the coal industry but about manufacturing industry. In this debate we are concerned with manufacturing industries, not primary industries. I shall be happy to point out to the hon. Gentleman outside the Chamber, the difference between a primary industry and a manufacturing industry. If Labour Members continue to delude themselves, such money and such techniques as can be used will be misspent.
If by spending double what the previous Labour Government spent in the year ending 1979 on regional aid—about £½billion—we could solve the economic problems of the North, that would be money well spent. But we have been spending money of that order for the last 25 years, and we are still nowhere nearer a solution to the basic problems of manufacturing. That money has been important in keeping some industries going, and in ensuring that social change occurs more painlessly than it would otherwise have occurred. But the idea that we can solve the regional manufacturing problems by throwing money at them is a fallacy. I ask Labour Members to think again about some of their deeply and rightly felt preconceptions about this issue.
Almost a year ago to the day my right hon. Friend the Secretary of State announced our new attitude towards regional development aid, and our concentration on special development areas, the drawing in of aid in some areas and the concentration of aid in others. That is a correct interim position for him to take. But I stress the word "interim". If we are ever to do something about the regional problems we shall have to do more than we have done over the last 25 years, when the development area process has been endlessly extended. It is now being trimmed back again. Perhaps it will be increased. Perhaps it will be more flexible. Perhaps one or two more areas will be added or taken away. None the less, we are going down the same old road and it does not seem to be getting us anywhere.

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The Government need to undertake a thoroughgoing review of whether regional development grants and all the wonderful tax concessions—which so many firms in the North cannot use because of tax exhaustion—are doing any good at all, or whether they might be swept away.
I do not want to wave the red rag of enterprise zones and enterprise regions in front of some Labour Members, but at least let us look at the Irish example. The Southern Irish have managed, through their declaration of a 10-year tax holiday for most manufacturing industry—
Mr. Martin J. O'Neill: Will the hon. Gentleman concede that there is one major obstacle to our following the Irish example—our membership of the Common Market, which precludes us from adopting the kind of regional policies that have been so successful there?
Mr. Patten: I was unaware that the Irish were not in the EEC. I could be wrong. I look forward to confirmation of this later.
Mr. O'Neill: It is the designation within the EEC that the Irish enjoy that enables them to carry out such policies. We are prevented from doing the same thing.
Mr. Patten: The Prime Minister has shown that we can make the EEC a much more flexible animal than it was before.
A five-year or 10-year tax holiday for firms setting up in this country, including multinationals, which we need very badly in this country, would be likely to produce better results than the cat's cradle—to use one of the Secretary of State for Industry's terms—of grants and of tax concessions that we have at the moment.
I hope that my right hon. Friend, in his reply, will be able to give us some indication of his thinking on this important issue.
5.42 pm
Mr. Tony Benn: I join the hon. Member for Oxford (Mr. Patten) in congratulating my hon. Friend
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the Member for Glasgow, Central (Mr. McTaggart) on his maiden speech. I have sat in the House with three Members for Glasgow, Central. If he continues to speak with the same commitment to those whom he represents as he did in his maiden speech and shows the same knowledge of their problems and feeling for their needs as he showed in his speech he will always be listened to with great attention.
I shall not follow the hon. Member for Oxford, except to say that his speech will help me to make my own point. His solution is that there should be tax cuts for business and more unemployment in industry, and that is the mainspring of the Government's policy.
I do not share the view that the Government's problems will be solved either by a reshuffle or by a U-turn. Their problems will not be solved by a reshuffle, because I do not for a moment believe that the Secretary of State for Industry is committed to some mad economic dogma, as I hope to show, nor do I believe that, if the Government returned to the policy of the right hon. Member for Sidcup (Mr Heath), which was expansion plus a pay policy, they would be likely to escape the consequences of that change of policy.
There are two root causes of our present unemployment. One is a massive world slump in the capitalist world, with 8 million people out of work in America and 7½ million out of work in Western Europe. One of the main reasons why the Western capitalist world is in a slump is that the world's bankers forced cuts in production as a result of the deficits caused by the oil price increases of OPEC.
Looking back on the problems facing this country, there is no doubt that the International Monetary Fund bears a heavy responsibility for the levels of unemployment in Britain today, because it forced upon the Cabinet of which I was a member cuts in public expenditure which have contributed substantially to the levels of unemployment that we inherited.
Sir Nicholas Bonsor rose—
Mr. Benn: I shall give way in a minute, but I want first to have a chance to establish my argument.
At a time when the oil money from countries that were in a sense developing was available in very large quantities, for the world manufacturing industries—those of Western Europe, Japan and America—to be closing down their own productive capacity was an act of lunacy, and the IMF has a heavy responsibility for the position that faces us.
Sir N. Bonsor: Is the right hon. Gentleman suggesting that the present recession is limited to the Western world? Is he suggesting that the Soviet Union, for example, is in a healthier economic position than the Western world?
Mr. Benn: The recession has a number of causes, one of which is the oil price increase. It has created inflationary pressures that have to be dealt with. Secondly, there is the response of the bankers, whose main concern was to reduce the level of economic activity in order to bring those deficits under control. Undoubtedly, the rest of the world—the Third world and those parts of the Communist world that trade with the West—has been similarly affected.
The second root cause of the problem is the determination of the Government —the Prime Minister, the Cabinet, the Chancellor of the Exchequer and the Secretary of State for Industry—to use the slump to make working people pay for that crisis and to restore profit margins in order to get back to the sort of society that existed in the nineteenth century.
There are two main obstacles to the Government's objective. One is the level of public expenditure, which many Governments—not just Labour Governments but Conservative Governments—have brought into being in order to create a fairer and more decent society. Anyone who thinks that this is the prerogative of the Fabian Society or the Left of the Labour Party should read what Harold Macmillan said in 1939. His book "The Middle Way" was well to the Left of the election manifesto put before the country by the Labour Party in May 1979. He
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called for a planned economy to eliminate unemployment for ever.
Public expenditure not only contributed, under all Governments, to the enjoyment of higher living standards by a wide range of people who before the war were faced with slump; it also financed the Welfare State and gave Macmillan the enormous election victory he achieved in 1959. Public expenditure is now to be slashed, to be cut back, because it is an obstacle to the restoration of profit margins and the restoration of the kind of society to which the Cabinet adheres.
The second obstacle is the trade union movement, because the trade union movement in this country, freely organising under legislation granted by successive Parliaments, protects people from the sort of injustice that they would suffer if there were no trade union movement to protect them. The lowest wages in Britain today are still in those trades where there are no trade unions. We have only to look at the catering trade and the sweated trades. In the West Country, where the trade unions are non-existent, there are levels of wages that are an absolute disgrace to a civilised society.
The trade union movement must have its power broken by the Government if they are to succeed. The Government have three methods of doing this. The first is to raise unemployment. The second is to legislate to make trade union organisation as difficult as possible, if not impossible. The third is by the mass of propaganda, poured out with the help of Fleet Street—and, alas, the BBC, which fails daily in its charter obligations by not giving a balanced view of the interests of labour as against those of capital—[Interruption.] I am not talking about party balance between one politician and another. There is nothing on the BBC or on the ITN that reflects the interests of labour in the way that "The Money Programme" and "The Financial World Tonight" pump out the propaganda that comes from the City and from the sort of speech that we heard earlier.
I thought that the Secretary of State for Industry was intending to get up and explain his real objection to trade unionism. No doubt he will have the opportunity of telling us when he makes his speech. I came across this passage about

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the trade union movement with which I do not think he would disagree:
"By the beginning of this century the Trades Union movement had long ceased to serve its earlier purpose. With each succeeding year it fell more and more under the influence of social democratic politics and ended by being used merely as the battering ram for the class war."
That is from "Mein Kampf". I bought it as a child in 1938 and have kept it since.
Almost every day, if one reads the leading articles in the newspapers in this country, one finds that the language that Hitler used is now becoming the commonplace of Fleet Street, and it lies behind the Government's determination to prevent the trade union movement from performing its double function of protecting those at work and having a perspective of a different kind of society and trying to introduce greater equality.
Sir Nicholas Bonsor: Will the right hon. Gentleman give way?
Mr. Benn: I have given way to the hon. Gentleman once. I am determined to leave time for others who wish to speak.
The Government's policy is not a monetarist policy; it is an unemployment policy. The object of the policy is to increase unemployment. That is why the Secretary of State shows such inadequate responses when unemployment rises. For him that is success.
Then we are told that the problem is wages. Does anyone believe that if every man in this country took a cut of 50 per cent. in wages tomorrow the economy would bounce back into life? We would sink deeper into recession because the demand for goods would fall.
Blaming the unions and wages and attaching the argument to money supply is a fraudulent presentation of the purpose of the Cabinet which now governs this country.
The industrial consequences for Britain will be absolutely tragic. When the oil runs out there will be no industry to allow us to earn our living. Yesterday I met and listened to yet another delegation from another distressed, depressed area. The Consett workers said that there would be nearly 40 per cent. unemployment in the area when the Consett works
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are closed. Anyone who can meet people from Llanwern, Port Talbot, Merseyside, Alfred Herbert and British Leyland and be unaffected wants the unemployment that these people are having imposed upon them.
This is a deliberate policy. The money to pay the benefits which are being cut is to come from the housing, the schools and the invalidity benefits of working class people. This is a class policy nakedly pursued, and Milton Friedman has no more to do with it than any other academic. The Government are using the academic argument to restore the injustice of a society that we have not seen since Victorian days.
Sir Nicholas Bonsor rose—
Mr. Benn: I shall not give way to the hon. Gentleman. I promised to be brief and I want to make my argument. The hon. Gentleman has four years to justify his other view.
I put my next point seriously, having thought about it very carefully. In my judgment, the violence in Northern Ireland owes as much to high and sustained levels of unemployment as it does to the theological arguments between the Pope and the Protestant community. I believe—and the recent events in Bristol proved that it can happen almost by accident—that we are heading for a society in which those who are denied the justice to which they believe they are entitled may in some circumstances turn to violence. It is the duty of hon. Members, if they believe a matter seriously, to warn the House of what may happen. When I read in the papers and see pictures in The Times and the Daily Express of what the police may look like in 1990, dressed up like the SAS, I realise that the Government also believe that that will be possible and are preparing against the possibility that it will happen.
There is an alternative policy. One of the tragedies is that the media never allow the British people to hear the alternative without being told that it comes from an extremist, dangerous, Left-wing view. There is an alternative, and it is the alternative of putting full employment as the main objective and expanding the public services to meet the need by employing the unemployed with the use of the money that is not used.

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That is the money that is available through North Sea oil—money that is now improperly spent on expanding defence beyond the levels of our partners in Europe. We need that money to expand public services, to increase public investment on the basis of public ownership and to protect our industries from being pounded to destruction at a time when they do not have the equipment yet in place to allow the nation to earn its living.
If I say a "planned economy", that is no more than Harold Macmillian said in 1938. The money is available for that purpose. No one will persuade the British people, when they watch the television and see what money is spent on, that there is no money to meet basic needs in education, housing, health and for the elderly.
This week the Pope has been in Brazil and he has made some remarkable speeches. I am not a Catholic. I was brought up at very much the other end of the spectrum, but I concur with some of the words used by the Pope in Brazil:
"Justice will either be achieved through thoroughgoing and brave reforms on principles which respect man's dignity or it will be achieved—without lasting results or benefits for mankind—by the forces of violence. …The persistence of injustice and its consequent menace to society exists when the distribution of goods is based only on the economic laws of growth and a bigger profit, and when the results of progress reaches the majority only superficially, when the gap between the minority of the rich, on the one hand, and the majority of those who live in misery and want, on the other, persists."
The Brazilian situation is different in all but one respect. The Government of Brazil share the economic philosophy of the Government of this country. If the Government do not listen to those who come to make the case that they have as of right, and believe to be their right, to have work and homes, care for their old and education for their children, the consequences will be very serious not only for this Cabinet but for this country.
I believe that the time has come when the Labour movement should lead a crusade to explain to people that what is happening is not a painful monetarism to which there is no alternative but a fundamentally unjust policy that has to be rejected and resisted to the fullest extent until the men who believe in it are driven out of public office altogether.
5.57 pm
Mr. Bob Dunn: First. I pay tribute to the maiden speech of the hon. Member for Glasgow, Central (Mr. McTaggart), in particular his generous references to his predecessor.
I am pleased to take part in this debate because it gives the House the opportunity to disabuse itself of some of the more outrageous notions about the decline of the manufacturing base of the United Kingdom.
I cannot recollect any significant single Act by the Labour Party in government that made a lasting long-term contribution to the economic welfare of the country or to the creation of jobs in industry.
Mr. D. N. Campbell-Savours: Stock relief.
Mr. Dunn: To be charitable, the Labour Party in office did nothing in particular and did it very well.
Mr. Joseph Dean: If the hon. Gentleman does not know of a single Act which brought lasting benefit to industry in this country, I suggest that he reads the report of the proceedings on the Petroleum and Submarine Pipelines Act, piloted through by my right hon. Friend the Member for Bristol, South-East (Mr. Benn), which gave this country the finest chance that it has ever had of re-equipping its industry.
Mr. Dunn: I am sorry that I gave way.
The Labour Party still seems to be obsessed with who owns industry. The manufacturing base of the United Kingdom has been in decline since the war. In 1951, 53 per cent. of those in employment worked in manufacturing industries and 47 per cent. worked in service industries. By 1966 the trend had moved significantly so that half the British work force was employed in service industries and half in making goods for sale. By 1976 the trend had continued apace so that a majority of workers—57 per cent.—were employed in service industries and 43 per cent. in manufacturing industries.
I acknowledge that OECD figures show that foreign industrialised competitors have undergone a similar transformation,

815
but the difference between our competitors and the United Kingdom is that British output has slowed down and will contract over the next year, whereas other trading nations with the same industrial variables continue to improve productive capacity and consequently give rise to improvements in living standards.
For Britain, the years that have witnessed the transformation have also witnessed the growth of unemployment, in as much as many older established industries have declined and newer industries have not come forward to take their place. Home industry has been unable to meet competition or lacks the ability correctly to forecast and to meet changes in demand caused by increased technology and customer selection, Indeed, The Economist, on 7 April 1979, said:
"Britain remains good at fundamental research, but a laggard in mundane skills: e.g., the ability to tailor products (new or old) to market demands; to improve (and then maintain) quality; to adopt (and adapt) the right production process; to discipline (and nurture) suppliers of components."
The problem for British manufacturers goes much deeper. Low production has in the past led to low profits, and low profits have led to low investment. High-cost machinery poorly utilised, and excessive fixed and variable costs, have resulted in higher unit costs. Such a condition can only invite high retail prices which are radically undercut by foreign competition.
By any of the usual yardsticks, our trading position is poor. In 1975 the return on capital employed in the United Kingdom was only 4 per cent., whereas in the United States it was 19 per cent. By 1978 the United Kingdom position had improved by only 2 per cent., to 6 per cent., while that of the United States had improved by 5 per cent., to 24 per cent. The 1979 figures for OECD industrial production show that since 1975 United Kingdom output has improved by only 14 per cent., whereas the United States had improved output by 30 per cent., Japan by 40 per cent. and Western Germany by 20 per cent. During the same period, unemployment in the United Kingdom has risen by a third, while in the United States it fell by 29 per cent., in Japan there was no change from a minuscule 2 per cent., and in West Germany it fell by 25 per
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cent. To take a yet further yardstick, investment in manufacturing industry in the United Kingdom was lower during the years 1974 to 1977 than industrial investment in Germany, which was much higher, as it was in France, Italy and the Netherlands.
It is not simply the lack of investment, the lack of productivity and restrictive practices that have brought us to this present state of affairs. It is to do with our poor reputation abroad, our inability to produce the right goods, of the right quality, at the right price, at the right time. Many firms lack the flexibility to introduce a new product mix and, like the firm in the Midlands that made the best steam locomotives in the world, they suddenly find themselves overtaken by better-placed alternative sources of supply.
I represent a seat in the South-East, Dartford, which has an unemployment rate of only 3 per cent., and falling. Last month our unemployment figure fell by 300, from 1,500 to only 1,200 when the last figures were issued. We have the mismatch problem referred to by my hon. Friend the Member for Oxford (Mr. Patten). Simply, in the last 10 years many local firms have turned away orders because they simply could not get the skilled labour. Yet it seems a very odd position indeed to have many skilled unemployed workers in the North-West and the North-East when many firms such as those in Dartford are looking and begging for skilled workers.
It seems that people on Merseyside are, understandably, reluctant to leave their community, their friends and their natural habitat. I understand all of that. But none the less, in the 1930s people were able to walk for miles, as my grandfather did. There were thousands of people after one job. There are many jobs in the South-East, yet many people in the North-West are reluctant to come down.
Of course, I am not demanding or asking that there should be direction of labour, but it seems to be a constraint on development that modern labour is not mobile.
Mr. Campbell-Savours: Does the hon. Member believe that it is fair to suggest to workers in constituencies in the Northern region that they should come to London to get work?
Mr. Dunn: I was born in Manchester and I left there to work in London for better job prospects and employment. Many thousands of people have done the same, and I see no reason why others should not do so. If the mountain will not go to Mahomet, Mahomet must go to the mountain, or whatever the saying is.
The second problem to which I should like to refer is the problem of training in established industries for the production of new skills. Many people are today being trained almost for redundancy in the sense that they are being trained in the old ways and are not taking on board the new technological skills which will matter enormously by the turn of the century.
There is the problem of setting up new businesses. I accept that high interest rates are a disincentive to the entrepreneurs and that they will lead to investment in Government stocks and not in venture capital. But I hope, too, that the Government's policies—as I believe they will when interest rates start to fall—will produce an upsurge in entrepreneurial activity which will create the new jobs for the future.
Like my hon. Friend the Member for Oxford, I rather like the Irish idea. A business acquaintance of mine has tax exemption until the year 1995 as a result of his planning and building programme, because the system, as I understand it, is that if one plans an addition to a factory, for a period following the building of that addition one is exempt from certain forms of taxation. So it pays in Ireland continually to increase the manufacturing unit because of the attraction of tax relief.
Mr. Campbell-Savours: How would the hon. Member do that in England?
Mr. Dunn: Secondly, and more importantly, I welcome the creation of the enterprise zones. I hope that the Secretary of State will enlarge upon a national application of some of the elements of those zones. I should rather like the whole of the United Kingdom to be declared an enterprise zone. I shall be grateful to receive my right hon. Friend's comments.
It seems that the present Government have given the sort of thrust to industry that is given by the Governments of West
818
Germany and France. I only hope that the recognition of the Government's activities will take place over the next year. To our friends in industry it is important that we stay calm and collected and proceed further down the path that the Government have set.
Finally, I make one comment about the intrusion into firms' activities. It seems unnecessary today that firms such as those in my constituency in the South-East can receive visits from over 87 different organisations. Representatives of these organisations can demand the right to enter a firm's premises at any time, to look at the books, to look at the activities and to hold up the flow of work. Indeed, whereas 10 years ago one organisation would send one inspector for half a day, today five inspectors will enter a firm and stay for a week. Accordingly, the results of that action upon the flow of work within a firm can be very difficult indeed, especially for small firms which are not able to cope with that sort of demand from those organisations.
Mr. Campbell-Savours: Give us examples. These are generalisations.
Mr. Dunn: The Government have my full support in the measures upon which they are embarking. I hope that the success of our policies will be there for all to see in a very short time.
6.8 pm
Mr. William Whitlock: I hope that the hon. Member for Dartford (Mr. Dunn) will forgive me if I do not take up his remarks. I want to make a speech of reasonable length, partly because many hon. Members wish to speak and partly because I have a sore throat.
No doubt the difficulties of many individual industries will be paraded in this debate to add to the veritable catalogue of disaster which my right hon. Friend the Member for Leeds, East (Mr. Healey) outlined.
I want to talk about the hosiery and knitwear industry, which in 1979 had an output of £1,350 million at factory prices. It is an industry of considerable importance. Last week there occurred something which I do not think has happened previously in the history of this House. This unique event, in itself a measure of the magnitude of the disaster facing an

819
industry, was the joint approach by representatives of the Knitwear Industries Federation and of the National Union of Hosiery and Knitwear Workers to Members of Parliament with constituencies in which there are knitwear factories. They came to the House in order to impress on hon. Members the deadly critical situation that now faces the industry. They wanted to ask hon. Members to bring home the facts of that crisis to the Government. After many attempts to warn Ministers about the depth of the problem, the industry feels that Ministers have not accepted the signs of impending total catastrophe.
Both the employers and the unions in the knitwear industry have stressed that the industry has a productivity record that is second to none. It enjoys an enviable industrial relations record. It has a wealth of creative skill. Despite its difficulties it has kept abreast of the latest technological developments by means of investment. However, despite such merits and achievements, the industry is in grave difficulty. As hon. Members know, there has been a dramatic drop in the sales of clothing since last autumn. That has arisen as a direct result of the Government's monetary policy and the doubling of VAT.
Home consumption is falling and exports are proving more difficult to make, yet import penetration of the domestic market is increasing. That has resulted in the loss of 6,000 jobs in the knitwear industry in the nine months preceding February 1980. It is estimated that there has been a further loss of about 3,000 jobs since February. Therefore, 8 per cent. of the knitwear industry's work force has been cast off within a year. As about 60 per cent. of the industry is concentrated in the East Midlands, where it accounts for one in eight jobs in manufacturing industry, one can see that the East Midlands has been particularly hard hit. Many firms are clinging by their fingernails to a continued existence. That tenuous hold may slip at any time. If that happens, Britain will never again retrieve what it has lost.
Much of the industry is in danger of extinction. How have Ministers responded to the industry's warnings and pleadings? They have merely told its representatives "Compete, or go under." That is
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what their words amount to. It would seem that the Government are completely uncaring about the consequences for Britain if the industry should disappear irrevocably. The situation would be worse if it were not for the temporary short-time working compensation scheme. The industry asked the Government to allow companies which have benefited from the scheme to apply for a further six months of assistance, in order to save jobs. I hope that that request is being earnestly considered and that it will be conceded in order to retain a valuable labour force. If it is not retained, and if the Government do not take action to help the industry, there will be no industry left to take advantage of improved trading conditions when the hoped-for upturn in our economy occurs. If that upturn does not come soon, and if the Government do not take the action that the industry desires, that industry will disappear.
In addition to the extension of the short-time working compensation scheme, the Government could take further action to help the industry and to give it hope. There is a considerable lack of hope in the industry now. Ministers must stiffen their resolve to ensure that Britain gets a fair deal in international trading arrangements. That is all that the industry asks for. Neither the Knitwear Industries Federation nor the Union of Hosiery and Knitwear Workers is protectionist. However, they feel that they have a right to tell the Government to exert every possible effort to claim a fair deal for the industry.
We all know that the British market is the most open market in the world. It is being penetrated by countries which bend international rules and those countries are being aided and abetted, unfortunately, by British wholesalers and retailers, who put their interests before those of Britain. Those international rules are largely dictated by countries which do not allow such penetration of their own markets. The Government, with their large majority, must stand up for Britain in international negotiations, and ensure that the yawning chasms in the import restriction arrangements are closed. If the Government undertake to do that, I am sure that they will have the backing of the whole House.

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People will go to incredible lengths to get into our markets, and that has been demonstrated by a recent BBC television programme. I did not see that programme, but, if Ministers saw it, I hope that they learnt a great deal. I hope that they will act on what they learnt. I hope that they will realise that fiddles, quota dodging and the bending of a variety of rules cause a fund of misery.
I said earlier that neither side of the industry was protectionist. Both sides understand that poverty anywhere is a threat to prosperity everywhere, and that uplifting the lot of those in the underdeveloped countries is a matter not only of Christian social justice but of enlightened self-interest for the developed countries. The progress of the developing countries must not be achieved by sacrificing established and essential industries in the developed world, such as the textile and clothing industries which employ large numbers of people.
The liberalisation of trade must not come about at the expense of massive redundancies in the developed countries, where industry cannot compete with low-cost imports which are often the products of labour grossly exploited in a manner repugnant to the International Labour Office.
The industry welcomes Ministers' assurances that the Government are prepared, in consultation with their EEC partners, to take a tough line on the renewal of the multi-fibre arrangement, which expires at the end of 1981. I warn Ministers that the newly formed all-party knitwear industries group will watch closely to ensure that those assurances are carried out. That is in the future. At present, the industry does not believe that the Government are making full use of the current MFA to protect the industry from disruptive imports. Scope exists for more rapid and effective use of existing provisions and, if Ministers wish to demonstrate that they believe that the industry must be retained in this country, they must look at the proposals put to them by the industry to that end. If they are to do their job properly, Ministers must press for the speeding up of consultations with the Mediterranean and ACP associates when the 1980 permitted import levels are approached. They must see that immediate action is taken to
822
suspend imports if the levels are exceeded. In short, all avenues available to the Government to secure a fair deal for this British industry must be explored, and explored not in a leisurely manner but with the necessary speed to prevent irreparable damage to the industry in this country by those who flout and bend the rules.
The knitwear industry's problems do not stem from low productivity, over-manning or poor industrial relations. Neither do they stem from excessively high wages. None of those things applies in the industry. The problems stem from the Government's monetary policy and their failure to protect the industry fairly and properly. This Government boast about the way in which they help small firms. But the knitwear industry is one in which 75 per cent. of the firms employ fewer than 100 people, and the minimum lending rate, even the reduced rate, is imposing penal and crippling charges on those people to the point where it is seriously undermining the viability of many firms and reducing their opportunities to invest in the latest plant and equipment; for such charges are, of course, borne on a greatly reduced level of activitl.
The knitwear industry is in danger of extinction and it must be saved. It will be saved only if the Government have the will to save it. The industry has been asking hon. Members who have knitwear factories in their constituencies to tell the Government "For God's sake demonstrate that you are willing to save the industry and that you wish to support it and do everything possible to ensure that it continues to remain in existence."
6.24 pm
Mr. John Butcher: I am grateful for the opportunity to follow the right hon. Members for Leeds, East (Mr. Healey) and for Bristol, South-East (Mr. Benn). Like my right hon. and learned Friend the Chancellor of the Exchequer, I was somewhat puzzled by the line of argument of the right hon. Member for Leeds, East, who referred very clearly to "the management of demand". I took this to mean some form of what we used to call "Butskellism". In the course of my remarks I hope to look at some of the options which we used to parade before the

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Chamber under the guise of Butskellism and to check on their availability to the present Government.
Far more fascinating were the remarks of the right hon. Member for Bristol, South-East. He had the gall and the nerve to refer to the slump in the capitalist world. He dodged an intervention from one of my hon. Friends, but I must remind him that at present the Comecon countries owe the Western banks and financial institutions about £26 billion. Simultaneously, the Soviet Union operates an economy in which between 9 per cent. and 11 per cent. of the gross national product is dedicated to the manufacture of armaments and the servicing of its armed forces. Indeed, there has been one estimate by Erikson that as much as 30 per cent. of the GNP of the Soviet Union could be going towards the facilities that would be necessary for "a war economy".
The right hon. Member for Bristol, South East, also referred to the role of the trade union movement in protecting people. Many people would argue that the form of protection that has been given to working people by the trade union movement since the Second World War has accelerated all those trends that have caused employers to shed labour. For example, if I were to look at the balance sheet of the Transport and General Workers Union, I would find that it spends £15 million a year on administration. I have checked those figures. By the same token that same union spends £6 million a year on benefits to its members. That is some form of protection for the members of trade unions.
Labour Members may argue that if there were more strikes and the trade unions were paying out more in strike benefits, those proportions might be altered or even reversed. But I have checked the figures over a number of years and I have found that the ratio of administration to benefits hardly changes at all.
Mr. Ernie Ross: I am not a member of the Transport and General Workers Union, but I am a union member. I suggest that the figures the hon. Member has quoted reflect the growth of that particular union, which is the largest in this country. The fact that is does not pay out so much in benefits
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demonstrates its ability to negotiate without calling its members out on strike.
Mr. Butcher: I can only ask the hon. Member to check the track record of fraternal unions in other parts of Western Europe and in the United States. There are ways of protecting members' interests other than by the time-worn and prehistoric methods that are used by trade unions in this country
If the right hon. Member for Bristol, South-East were in the Chamber now I would ask him to look at a book written by a man who is no friend of the Conservative Party—a man called Kornhauser. He wrote a book called "Mass Society". I enjoyed reading it about 12 years ago when I was studying social sciences. I read it on the basis of "Know your enemy". This gentleman, in defining his terms of mass society, described it as "grains of sand, the antithesis of a pluralistic society". That is the sort of society that would emerge if the right hon. Gentleman's ideas were ever given rein in this country. Happily, that day will not occur. But no doubt the right hon. Member for Bristol, South-East would hide behind certain other aspects of his policy. He would say that there will be participation and democracy—just enough to keep the peasants happy. Again, I hope that that day will never come.
The right hon. Member referred to the media and their alleged traditional bias—the fact that television no longer gives the coverage that the trade union movement should merit. I have a rough idea of the right hon. Gentleman's alternative—the public control of the media and public participation of people who work in the media in the editorial content of the media. I can imagine the day when the local NUJ chapel votes on whether a particular story on South Africa should be released to the poor unsuspecting public at the other end of the television screens.
Mr. William Hamilton: What has this got to do with the debate?
Mr. Butcher: The hon. Member for Fife, Central (Mr. Hamilton) should refer those remarks to his right hon. Friend the Member for Bristol, South-East. When the right hon. Gentleman talked about a "thoroughgoing and brave reform" I

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could have reminded him of Meriden. I could also have reminded him of the Scottish Daily News and of his "big is beautiful" phase when he produced that disastrous amalgamation that we now call British Leyland. In listening to the right hon. Gentleman I thought at one stage that he might be a reincarnated Chartist. At another I thought that he might even be a utilitarian and that somewhere John Stuart Mill was turning in his grave. I finally decided that the right hon. Gentleman was neither. No utilitarian or Chartist would have finished his speech with a quote from the Pope.
It is far too easy in a debate such as this to say what the Government cannot do instead of what they can. I hope that it goes without saying that the Government, particularly at present, cannot print money. As was vividly demonstrated by my right hon. and learned Friend the Chancellor of the Exchequer, the inflation from which we are suffering was grafted on to a 15 per cent. base level, which was the figure for the increase in the money supply during the last three months of the Chancellorship of the right hon. Member for Leeds, East.
Secondly, we cannot simply increase public expenditure. To do that we should have to increase the public sector borrowing requirement and/or increase taxation. The right hon. Gentleman referred to tampering with demand and the danger of reducing it. Would he be prepared to come back to this House and say that his increased expenditure was to be financed from increased taxation? Is he aware what that would do to the level of demand in the domestic economy?
Thirdly, we cannot devalue the pound. We do not have the power. The net contribution to our current account from North Sea oil revenue is running at £8 billion. I am referring to the contribution to the balance of payments and not the Exchequer. When our Prime Minister goes to economic conferences, she is viewed with considerable envy by the other Heads of Western Governments. They may envy her large majority and the fact that she does not have to face an election for at least three years. However, when those seven wise men and one wise woman sit down together, what they envy most is that my right hon. Friend is the
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only Prime Minister who presides over an economy that is self-sufficient in energy and has a stable future. Those who make investment decisions about money going to Kuwait, Germany, Brazil or the United Kingdom will weigh such factors heavily in the balance. Regardless of the amount of Government tinkering in the City or with the Bank of England, and regardless of changes in the money supply, those factors will always weigh heavily with the people who wish to buy or sell pounds.
It is a sobering thought that, when the Government's policy succeeds and when inflation and interest rates come down, we shall still have exceedingly great pressure on a highly valued pound. It will still remain attractive to those who wish to invest in Western economies. The long-term implication is that we shall have to live with a highly valued pound for many years to come. We will be fooling people if we pretend that we can subvert its level, pull the rug out from under it or reduce its value by some temporary measure.
Fourthly, we cannot isolate ourselves from trends in world trade and output. The London Business School has been quoted. It forecasts that world industrial production will fall by 5 per cent. over the next 12 months. However, I guarantee that over the next 12 months we shall have another ritual dance, another Supply day debate, when our part of the 5 per cent. reduction in world trade will be blamed on the Administration.
Fifthly, we cannot increase Government investment, not so much for practical as for philosophical reasons. Our track record on investment push tactics is not good. We could try the Japanese approach of having a Ministry of International Trade and Industry, as it is significantly entitled. We could go for the French system which would demand an almost Napoleonic reform of our governmental institutions. We could opt for the American method of public bodies placing massive contracts. I have referred in a previous debate to £8 billion out of £30 billion in the American electronics industry coming from public contracts. However, for some strange reason, perhaps because we have always defined the wrong mechanism, we have been lousy at making entrepreneurial decisions where public money is involved, for instance, in creating the NEB. If I were

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to make any recommendations to my right hon. Friend, I would suggest that he looks at the American demand-pull option.
Even with our current reduction in public expenditure, I hope that my right hon. Friend will concede that there is room for manoeuvre between the balance of public expenditure that goes to capital purchase and investment and that which is spent on the current account, particularly in the building industry. I am told that about 250,000 of those in the dole queues are ex-building workers. I am saddened that, when local authorities in particular reduce their budgets, they tend to take the easy option of reducing capital expenditure. The Governement have no control over that. I wish that Labour Members who complain of reductions in capital expenditure would endorse the Local Government, Planning and Land (No. 2) Bill, so that such decisions could be stipulated, but I suspect that that day will never come.
Sixthly, we cannot enter into a phase of protectionism, although I have some sympathy with the remarks of the hon. Member for Nottingham, North (Mr. Whitlock). What he witnessed in the textile industry I am now seeing in the car industry, and more particularly the motor components industry. We must be careful not to stipulate simply protectionism, quotas or tariffs, which would be another easy answer. That may be a cruel deception.
I am delighted to see the right hon. Member for Deptford (Mr. Silkin) on the Opposition Front Bench. I recall vividly his contribution to a Supply day debate on unemployment about 10 days ago. Unlike the right hon. Member for Leeds, East, in that debate the right hon. Gentleman put forward an alternative economic philosophy. He had three proposals One was managed trade, which has a slight hint of selectivity, if not quotas or protectionism, about it. I believe that there are better proposals for looking after the interests of British industry, such as the measures announced by my right hon. Friend the Minister for Consumer Affairs in the report that she published on free and fair trade in the motor components industry. A German car manufacturer can introduce a tied franchise, which stipulates that the spare parts in
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the after market come only from German manufacturers. We, too, could pursue such measures.
The right hon. Gentleman can give free rein to his views, as he is anti-Common Market. As a pro-European I believe that we have commitments that we must honour. But the right hon. Gentleman must also honour commitments to the GATT.
Mr. John Silkin: I always do, particularly article 12 of the GATT. Surely the hon. Gentleman supports a protectionist basis for the economy, because is not the EEC protectionist in its imports of both manufactures and foodstuffs?
Mr. Butcher: All EEC member countries are signatories of the GATT. I concede that the mechanism inside the Common Market for eliminating protectionism elsewhere is clumsy. I believe that we should look closely at the dumping in this country of Lada cars from Comecon countries, but it would take a great deal of trouble to get that through the agencies in the EEC whose help we would hope to obtain.
I have three reasons for not wanting to plough the protectionist furrow. We are all familiar with the retaliation argument. I take the example of four industries in Coventry—cars, textiles, aerospace and telecommunications. What we gained for cars and the textile industry we might lose for the aerospace and telecommunications industries.
Coventry is in the front line of the whole debate. If the issues were explained to Coventrians openly and without the almost Nixonian attitudes of protectionism, which may be good politics but are appalling economics, they would share the Government's view in this matter.
My second objection to protectionism or quotas is that if we protect the domestic market one of the first phenomena that will emerge will be a switching of goods from export markets to the much easier domestic market, where it will be possible for firms to make profits with far less trouble and, indeed, without even having to pay an export manager.
Thirdly, tariffs particularly, and import controls generally, would so affect the balance of payments that the pound might

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rise in value. I am sure that many Labour Members who favour import controls want the pound to be devalued. But if they want to re-enforce the trend towards a higher value of the pound, protectionism is one of the ways of doing it.
Mr. Douglas Jay: Does the hon. Gentleman apply those three objections to agriculture?
Mr. Butcher: The right hon. Gentleman has, as always, made a brief intervention; and I can only hide behind the subterfuge of saying that I should like notice of his question.
My right hon. and learned Friend the Chancellor of the Exchequer took up the politicisation of the trade union movement. That is an economic factor which affects our performance and the ability of Governments to govern. I assume that the remarks of Mr. Moss Evans, as reported in Financial Times yesterday, have some relevance to current thinking within the Labour Party, which is presumably developing its alternative economic strategy. Mr. Evans said that he wanted no part in a rigid, inflexible control over wages and added:
"But if we go back to the principles the trade unions used in the last major attempt at a comprehensive plan for the economy—the social contract—those principles were essentially also for an extension of democracy."
I wonder whether Mr. Evans had his tongue in his cheek when he said that. I suspect that the extension of democracy to which he referred is an extension for trade union leaders who wish to have the mat rolled out at No. 10. I suspect that Mr. Evans has missed the fundamental point, that the social contract took us perilously close to the creation of a corporate State. The trade union movement not only fed information into government, but became almost an arm of government.
I suspect that Mr. Evans would be surprised if he were told that what he is stipulating is not too far from something that Mussolini would have found rather attractive. The article said that Mr. Evans stated that
"the experience of State corporations had been a 'very disillusioning one' for the unions. Public sector workers felt that there was little difference between working in them and working in the private sector."
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I cannot see why there should be a difference. Mr. Evans continued:
"We need a new drive in our approach to the public sector, a new initiative for nationalisation, not on the old model, but with the goal of introducing democracy at every level."
I wonder what the difference would be. I suspect that participation and democracy at every level would eventually mean two lines of management and two areas of discussion. I can foresee conveners and shop stewards sitting down with managements discussing whether products should be exported to Chile and whether it was socially desirable that South African-based multinational companies should be accepted as suppliers. In other words, I foresee chaos, unreality and perhaps the subverting of the trade union movement's original objectives.
In looking for an alternative strategy, we inevitably have to look behind the Labour Party to the trade union movement, but I look forward to hearing the alternative approach of the right hon. Member for Deptford.
6.46 pm
Mr. Joseph Dean: The object of the debate is to highlight the erosion of manufacturing-based industry in this country. I shall follow some previous speakers and talk in a domestic vein about the area that I represent.
Leeds is not a one-industry city. It has a conglomeration of industries and is not doing as badly as many other areas. However, I view with concern, and in some respects alarm, the trends that are showing in the city.
I do not accept the ridiculous suggestion of the Secretary of State for Industry that low wage rates will provide more jobs. I do not believe that that course will help to solve our problems. Leeds is not a high-wage area compared with other big cities. I was an engineer in a factory before I was elected to the House and I know that the average engineer's wage in Leeds is lower than that of his counterpart in Sheffield, Manchester, Birmingham or London. Average wages in most industries in Leeds are slightly lower than those in areas of a similar size with similar industries.
Sir Keith Joseph: I was not referring exclusively to lower earnings but to lower unit labour costs, which can come from

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a combination of earnings plus higher productivity.
Mr. Dean: The right hon. Gentleman made it clear that workers, by offering their services for lower wages—
Sir K. Joseph: Or higher productivity.
Mr. Dean: It is an odd argument, because the Labour Government were constantly berated at the time of the social contract for compressing differentials and making it unattractive for people to work. If we adopted the right hon. Gentleman's suggestion, we could be out on a limb.
Mr. Robert Kilroy-Silk: Will my hon. Friend take the matter further? Can he imagine the situation on Merseyside where two vacancies are being chased by 4,000 school leavers? How are those 4,000, by reducing the wage for which they are prepared to work, supposed to find a job under the proposals put forward by the right hon. Gentleman?
Mr. Dean: The only answer perhaps is to adopt the other ridiculous suggestion, made last night by the Secretary of State for Employment, that it should almost be a condition that youngsters who are drawing unemployment benefit would have to consider various types of community schemes.
Leeds is a stable area for wages and industrial relations. It is almost faultless. Even in that situation, a rapid erosion of the base industries is beginning to show. The main industries are engineering, clothing manufacturing and textiles. Figures show that since the Government took office there have been 1,400 redundancies in engineering, and short-time working affects between 5,500 and 6,000 employees. Redundancies in the textile industries, together with the clothing manufacturing industries, amount to 5,000, with 11,500 on short time. The situation throughout the whole of West Yorkshire is tragically worse. As one who, twice in his lifetime, has faced redundancy or had to move because a factory is closing, I can say that a production unit which is hit by short time working rarely recovers fully. More often, the companies start to go out of existence and most of those on short time move a little further along the redundancy queue.
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So alarmed are people in Leeds that the local chamber of commerce and industry, which is certainly not oriented towards the Labour Party, sought support, through its president, for the concept that a letter be sent to the Prime Minister calling for an immediate cut in the minimum lending rate with progressive cuts to follow.
It is true that the minimum lending rate has been cut by 1 per cent. The cut is so small that it will be almost inconsequential and will have little impact on the saving of jobs. It may do a little for profits. According to the Yorkshire Evening Post, the basic traditional industries in the area are working at only 60 per cent. capacity. I put it to the House that nobody operating in a free market, as most of these industries have to, can possibly keep going indefinitely working at 60 per cent. capacity. They are not financed that way. Most companies are built to produce a maximum of production in order to justify their finance.
What is the role of the Secretary of State for Industry in the present strategy? I am a great believer in the ballot box and in democracy. It is a great pity that the Government show all the signs of not uniting the nation, which was the intention the Prime Minister proclaimed on the doorstep of No. 10 Downing Street, but of dividing it. It is sad that the Secretary of State for Industry, who is a Leeds-based Member, appears to be one of the co-architects of a policy that is eroding the base that sent him to the House. I put it to him—he may care to answer some of these points when he replies—that he did not fight the election in Leeds on the platform that there would be dramatic reductions in job provision. He did not fight it on the basis that there would probably be 2 million unemployed this year and, according to predictions, not all by prophets of gloom, 3 million next year. A lot of those unemployed will be Leeds people.
Sir Keith Joseph rose—
Mr. Dean: I shall give way in a moment. It is significant that, among all the Tory successes in the general election, the majority of the Secretary of State for Industry dropped. His percentage of the vote dropped. I question whether, if he tested the electorate now, he would be coming back here. There is a case to answer.
Sir K. Joseph: The hon. Gentleman contradicts himself. He says that he does not think that I told the daunting truth of what I believe and yet asserts that because I told the truth my majority dropped. I shall send the hon. Gentleman my election address. He will see how clearly I explained my point of view.
Mr. Dean: I happen to have seen a copy of the right hon. Gentleman's election address. Nowhere can I find mention of 2 million unemployed, the doubling of VAT and a 100 per cent. increase in inflation in 12 months. That is not in his election address, or anyone else's
I want the charge to be answered. I put some questions to the Secretary of State for Employment a few weeks ago regarding the Government's strategy. Although unemployment was rising, I wanted to know the job loss and the job gain, which is a different criterion. The figures showed that unemployment was increasing in every area. They also showed a much more adverse balance sheet in Labour areas than in Tory areas. The South-West, represented, apart from Swindon, four seats in Bristol and the constituency of the hon. Member for Truro (Mr. Penhaligon), by Tories, had a net gain of 15,000 jobs. The almost totally Conservative area of East Anglia, where there are only three Labour MPs, two in Norwich and one in Ipswich, had a gain of 10,000 jobs. The South-East, which includes the inner London area, had a loss of 15,000 jobs. The North-West, predominantly a Labour-voting area, had a loss of 33,000 jobs. The area that the Secretary of State for Industry and I represent had a loss of 10,000 jobs.
I have tried to draw conclusion from those figures. I hope that they do not constitute a deliberate policy, showing that the Government are hell-bent on creating two nations. One of the saddest sights that I have seen in my six years in Leeds, which had an international reputation for producing among the best, if not the best, clothing in the world, mainly men's suits—I am wearing one, as I hope is the Secretary of State for Industry—and ladies' suits, is that names that were a household tradition are going to the wall—Saxon Hawk, Hepworth's and, also Burton's, which has almost disappeared other than as a seller
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of tailoring goods rather than as a manufacturer. The empire has been completely eroded.
Mergers and takeover bids have been involved. I raised the problem of import penetration with the previous Government, so I am not crying about it only now. I do not accept that controls will have much of an adverse effect on us. I want to retain a global outlook, but my priority is the well-being of my constituents. I am not prepared to stand by while industries which have employed thousands of people disappear in months with the social consequences associated with that.
If we want to tackle the problem and stop the bleeding quickly, another substantial decrease in the minimum lending rate must be introduced. It is nonsense to argue that it can be held back any longer. We must re-examine import controls. Leeds does not have a history of militant strikes. It is a docile area where people want to work if the wages are reasonable. All they ask is to be allowed to get on with the job.
The biggest tragedy is the problem facing youngsters leaving school. The number of school leavers in Leeds who do not find jobs and go straight to the dole queue is slightly below the national average. However, it is catching up fast. The people in my area do not want the moon. They want a reasonable living, a chance of reasonable schooling for their kids, decent hospitals; and, most of all, they want to give jobs to youngsters who have struggled to obtain qualifications. It is becoming more difficult for qualified children to obtain jobs.
Most of the kids in my area leave school at 16 to go into a factory and take money into a household that needs it, and to play their part in society. The Government's policies are denying youngsters in areas such as mine that facility. The damage that is being done to our seed corn will be seen for generations to come. The Government are creating a terrible legacy. I hope that they will listen to our pleas. Sometimes the Secretary of State for Industry comes across as a man of compassion. His industrial strategy involves industrial thuggery. I hope that he will stop it as quickly as possible.
7.3 pm
Mr. Stephen Dorrell: I shall develop the remarks made by the hon. Members for Leeds, West (Mr. Dean) and for Nottingham, North (Mr. Whitlock) about the various aspects of the textile industry. I have two interests in the subject. My constituency is close to Nottingham, North where there is a substantial knitting industry. I have an interest in the problems of that industry from a constituency point of view. Before I came to the House I was a manager in the textile industry. I declare an interest, in that the business belongs to my family. I have, therefore, a constituency interest in defending textile workers. I have worked in the industry and tried to cope with its problems.
When people talk about declining job opportunities in the textile industry, they often confuse the problems that are associated with low-cost imports with the other problems associated with the structure of the industry and the development of productivity. Statistically, more jobs were lost in the textile industry in the last 10 years as a result of improved productivity than as a result of low-cost imports. It is an over-simplification to ascribe all the problems of employment in textile areas to low-cost imports. The industry has no interest in preserving outdated working habits to maintain levels of employment. The unemployment problem to a substantial extent is the result of improving productivity, which all hon. Members should support.
People from both the employers' and trade union sides of the industry frequently go out of their way to say that they are not protectionist. Many euphemisms have been invented to describe what I regard as protection. The most frequent is that we are not in favour of restricting trade or import controls but that we are in favour of fair trade. Another was invented recently by the right hon. Member for Deptford (Mr. Silkin) who said that he was interested not in free trade but in managed trade. They amount to the same—to restricting imports.
If one argues the case for restricting imports of textiles, one must be clear what that means. It means that, because of the low value-added involved in its products the industry can afford to pay only relatively low wages by British standards. One
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is saying that industry should be protected, and that one is prepared to leave the free forces of the market to operate on the motor industry, the electronics industry or the computer industry but that an industry which pays low wages and produces less wealth for the community should be protected. I do not see the logic of that.
It is more sensible to accept an obligation to provide employment for people in the industry and to discharge that obligation by encouraging the movement of workers away from a traditional and low wage industry to other industries that can afford to pay higher wages and produce more wealth for the community.
Holland has pursued that policy with a reasonable degree of success. The Dutch Government have encouraged adjustment in the textile industry by retraining and Government assistance. As a result, output in the textile and clothing industries has fallen in the last 10 years whereas in Britain output has risen. However, Holland is able to employ a larger proportion of its work force in that industry than we are and are able to pay higher wages.
People who argue the protectionist case often cite the views of the Cambridge Economic Policy Group. Mr. Wynne Godley resents being quoted as an authority for the textile protectionist lobby. His argument is the same as mine—that, if one sector of the economy is protected rather than the whole of the economy, a distortion takes place in favour of low-wage, low-value-added industries. He believes that it is better to protect everything. I believe that we should move as quickly as we can, humanely, to a position where we protect as little as possible and, preferably, not at all.
It is strange that the textile lobby always claims that the textile industry is a special case. The problems that the industry faces in terms of the competitiveness of its imports and exports are nothing special. Large sectors of manufacturing industry involved in international trade face the same problems. I shall return to the problems of competitiveness in a minute.
Before I do that may I say that in any discussion of economic and industrial policy the most important characteristic that we should seek is that of balance.

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Anyone who says that he has the economic panacea which will ensure expansion and the growth of the economy and that, if we pursue that one policy, it will provide for our future, is guilty of gross over-simplification. I believe that the Opposition who argue the case for protection are guilty of advancing such a panacea. Their arguments cannot be substantiated.
So it is with those who do not observe a proper balance in the rest of economic policy. They are also guilty of oversimplification. The Government rightly proclaim the importance of controlling inflation. It is not to the credit of any hon. Member to argue that inflation is, somehow, unimportant. Inflation can be very unfair in its effects upon society across the board. It is particularly unfair to those who have spent their lives working and saving to provide for their old age. Those savings have quite often been in fixed-interest bonds and stocks. Such people see the value of their savings decline year after year and rightly and reasonably they feel angry with the politicians who allowed that to take place. It is the worst form of exploitation that those people should have been encouraged to save and for those who are in charge of the economy to have used those savings in a way that cannot possibly be represented as being in the true interests of the people who, 15 or 20 years ago, responded to the clarion call to save. That is one way in which inflation can be unfair.
The second way is that an inflation rate of 15 per cent. to 20 per cent. imposes upon every person operating in the economy the need to take part in a reckless scramble to climb over other people and to get ahead on the helter-skelter. It imposes obligations to keep ahead all the time of others who should be partners rather than competitors in the economic process. It undermines the social cohesion necessary to the advancement and expansion of any society or economy. Therefore, any policy which does not place proper emphasis on the dangers that inflation can place upon the social fabric and which does not place proper emphasis on the stress created by inflation and the danger of society tearing itself apart is totally irresponsible.
Exactly the same charge can be made against those who, recognising the im-
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portance of inflation, do not also recognise the importance of the other aspects of economic policy. It is not enough to say that our economic policy should be devoted solely to the control of inflation. Economic policy is about more than simply preserving the value of the currency. It is about providing jobs and improving the standard of living. It is about providing for growth of output. It is about better social services and the rest of the indications of a wealthy and expanding society.
I mean no disrespect to anyone when I say that perhaps the Government are made up of a large number of people drawn from the money side of the economy rather than from the industrial side. They, perhaps inevitably—because they are uncertain of the validity of their utterances—stress the importance of monetary disciplines and under-stress the importance of what I term the wider, real economic priorities with which they should be concerned.
I should like to examine one of those priorities. My concern in this context is about the effect of our policies on the competitiveness of producers who operate in our economy. People ask what is the problem and it is one of the peculiar ironies and geniuses of the British to be able to see a black cloud in the middle of any silver lining. If I am asked what the problem is I say in a word that it is oil—that is, the way in which oil is being treated by the economy as a whole.
I have statistics to support my case. Between 1976 and 1979 the net contribution of North Sea oil and gas to the British economy rose by £7¼ billion. If we had not imported the oil that we produced last year, our import bill would have been 20 per cent. higher than it was. Against that background it is not surprising that the pound has risen as strongly, as far and as fast as it has done. The savings on imports because of oil revenues has, naturally, exerted—as was inevitable—a strong upward pressure on the exchange rate. That has obviously been compounded by the high interest rates which, for domestic reasons, the Government have seen fit to impose and by the popularity of the Government's policies as they affect the value of money. Those policies are popular in the financial communities of the world which are also more concerned about the value of our

839
currency than about the performance of the real economy.
Mr. Robert Maclennan: The hon. Gentleman earlier drew favourable attention to the experience of the Netherlands. Does he agree that the Dutch also faced a similar problem some time ago with their currency because of North Sea gas? The great difference between the Dutch experience and ours is that they did not make the senseless error of seeking to depress domestic demand to the extent that this Government are doing as a deliberate act of policy. Nor did the Dutch seek to counter the inflation they experienced solely by monetary methods.
Mr. Dorrell: The results of the Dutch policies are not the same as those we now experience. One of the interesting characteristics of the absorption of North Sea gas into the Dutch economy is that it was done with a small variation in the real exchange rate of the guilder. That is the point upon which I should like to concentrate.
The effect of all these factors on the exchange rate last year was that by the end of 1979 the pound was 25 per cent. above the level of 1976. Taking account of inflation its real effective exchange rate was 25 per cent. above for the average in 1976 and it has risen a further 9 per cent. since the end of last year. In other words, there has been a 35 per cent. increase in the real exchange rate between the middle of 1976 and today.
The result of that strengthening of the pound becomes clear if we look at the effect of the contribution of oil on the balance of payments. Last year the oil contribution was £7¼ billion higher than in 1976. Yet despite that massive inflow into the current account the whole current account deteriorated last year compared with 1976 by £1¼ billion. Far from showing a large growth in the current account surplus we saw that account getting worse against the background of a massive inflow.
It is possible to argue that that in itself is not a bad thing. It is possible to argue that what should have happened is that the growth within the domestic economy should have been put on to a higher plane because demand that was formerly provided by the external sector was now provided in the internal sector.
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It is possible to argue that what should have happened is that the economy should have grown at a faster rate because there was more internal demand than would have been the case without North Sea oil.
Whatever the theoretical attraction of that argument, one can say only that it has not happened. The arrival of oil into the domestic economy has not contributed to an expansion of our rate of growth. On the contrary, it has simply replaced economic activity that existed in the economy before oil came in. Since oil, for all practical purposes, employs almost no one, but the manufacturing sector that it has replaced was particularly labour-intensive, that has inevitably led to the unemployment we now face.
If all this were simply a matter of history and I were merely recording what has happened in the economy my speech would be an interesting academic analysis which would not take us forward. However, I want to concentrate the Government's mind on what I see as the threat of the future, which is an even further deterioration in the position we now face.
Even if the exchange rate in real terms remained as it is now, the British economy would still be 30 per cent. less competitive than it has been on average during the 1970s. For as long as the domestic economy is being held down as hard as it is, it is reasonable to assume that British manufacturers will continue to maintain their export volume for the contribution that that gives them. They will accept pressure on margins in order to maintain volume, and the balance of payments will not suffer unduly. I am concerned that, when the economy eventually begins to recover, those manufacturers who are now maintaining export volume, albeit at greatly depressed margins, might divert that capacity to satisfy the home market. Companies will cease to export, which will lead to a decline of export volume. The expansion of our domestic market will suck in more imports. Obviously, I am describing a straightforward, old-fashioned balance of payments crisis resulting from an uncompetitive economy and leading to devaluation.
In other words, I fear that at this moment we do not face the choice between devaluing and not devaluing. The choice is between devaluing a little now

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in order to pre-empt that loss of competitiveness and that loss of manufacturing capacity and having a much larger devaluation forced upon us in 18 months or two years time.
Mr. Alan Clark: My hon. Friend is presumably arguing, therefore, for a reintroduction of exchange controls, because without them it is not possible for central government to determine exchange rates.
Mr. Dorrell: I say with great respect to my hon. Friend that that is not true. The Germans, the Japanese and the Swiss have over the past 10 years consistently held down their exchange rates by intervening in the open market. None of them has had external outgoing exchange controls. On occasions they have played around with incoming exchange controls. [Interruption.] Does my hon. Friend wish to pursue the point?
Mr. Clark: We are not an interventionist party, and we are not at the moment operating our economy on interventionist lines. If my hon. Friend is to come clean about this we shall listen to him with great attention. The point of lifting exchange controls is to allow market forces to operate. My hon. Friend is simply discarding that purpose and is attempting to combine that with strong intervention in adjusting the rate.
Mr. Dorrell: I am arguing my hon. Friend's case for him. I am arguing the case for lifting exchange controls and suggesting that to reimpose exchange controls would obtain the opposite result to the one that I would prefer.
I want, either from the private or the public sector—and in terms of the current balance it does not matter which—a capital outflow of the kind that was created by the German, Japanese and Swiss Governments in order to maintain the competitiveness of their internal economies. The case that I am making is that we do not face a choice between doing that now and not doing it. The choice is between doing it now and doing it later, and if we do not do it now we run the risk that our economy, when it revives, will be so uncompetitive that devaluation will be forced upon us. We shall be unable to maintain a balance on
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our current account as we are doing at the moment.
7.25 pm
Mr. David Penhaligon: We have heard some remarkable speeches today. Amongst them was the speech of the hon. Member for Leeds, West (Mr. Dean). That is probably the first time for a long time that a Leeds Member has thought fit to intervene in a debate that is largely about unemployment. As I understand the statistics, Leeds has a long way to go to join the super league of unemployment. The fact that areas like Leeds are worried is probably the best indication we could have of the seriousness with which many people view the problem.
I am one of those rare birds in this House who can claim to have worked in manufacturing industry—at least until I was elected for Parliament. The company for which I worked is interesting in the context of this debate because its problems are the problems of large sections of industry. It manufactures rock drills and compressors. There is virtually no United Kingdom market for rock drills. A few people in Cornwall do hard rock mining, and they will buy a few drills. But there is no United Kingdom market adequate to sustain a rock drill manufacturing presence.
That company has therefore depended for 150 years for its survival on the ability to export. The simple fact is that the company's engineering products are not much better or much worse than anyone else's. After 150 years' effort at improving rock drills it is not surprising to hear that manufacturers in Britain, America, Sweden and Germany have all come to the same conclusions about design. Therefore, this company is a victim of or a victor over the problem of selling at a reasonable price, delivering on time and providing service when it is required.
That company, when it is competing with Germany, Japan and the other manufacturing nations, is, as a result of deliberate Government policy, suddenly worse off in international trade by some 20 or 25 per cent. purely because of the change in the international value of the pound.
It is not often admitted in this House that unemployment stood at 1·3 million

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14 or 15 months ago with exchange rates as they were then. Given a 20 per cent. change on those figures, we face the prospect of horrifying and unacceptable levels of unemployment before the next year is out. For as long as the Government continue to run the economy by controlling the money supply with no pay policy, they will be forced to hold interest rates at a high level and the international value of the pound will rise.
It is possible that interest rates could drift down to 15, 14 or 13 per cent., although I find those possibilities a long way off. However, if we are to rely only upon a money supply policy we can guarantee that interest rates will always be on the high side because that is the method of economic control needed to control the volume of money in circulation.
Such a policy applied to this country, with its current oil reserves, can lead only to a serious decline in our manufacturing industries. The living standards of all depend in the long run only on the success or otherwise of our manufacturing and industrial base. There is in my part of the country a substantial tourist industry which helps the economy of the country in many ways. The tourist industry is secondary to that basic industry. Other than the little import trade that it might gather from overseas visitors, whether the tourist industry in Cornwall is buoyant or bad is a direct reflection of Britain's industrial performance, and very little else. The same can be said for those who work in the National Health Service or in education. If we cannot improve our basic industry, all the secondary occupations that make life so enjoyable for many will falter or fall away.
If Britain is in economic difficulty the Government should use the money produced from North Sea oil to support the basic work-producing elements of our economy, and not turn upon them as though they were doing some basic harm. Logic suggests that in difficult times the Government should support them and not cast them aside. I have come back to a favourite theme in my speeches about the economy, namely, how can we get the wealth that is being produced in the North Sea into that basic industry? In Committee on the Finance Bill my hon. Friend the Member for Colne Valley
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(Mr. Wainwright) proposed that the Government should change the tax system greatly to ease the way in which the private individual could invest relatively small sums on the stock market. There is a great deal to commend that to the House.
One way or another we must get the money produced by oil into industry. It is not logical for the House to continue to pretend that, because we have oil, the exchange rates must rise. That makes our industry uncompetitive. Logic suggests that the money produced by the oil industry should be put back into industry to help compensate for the exchange shift that has taken place because of the presence of oil. If we do not evolve policies along those lines I dread to think about where we shall be in another two years.
I do not believe that pay is the sole answer to inflation. I am a Member of Parliament for a county in England—I do not always accept that it is in England—which has the lowest average wage of any county in Britain, except for the county of Roxburgh. It has an 11 per cent. level of unemployment, and that is in the middle of summer. I mention Cornwall because everyone keeps talking about the North, the North-West, Wales and Scotland. I recognise that those areas have their problems, but if one studies the statistics one will discover that at the other end of England the problem is as bad as it is in some of the northern areas. I am not claiming that it is worse than the North, but it is as bad.
This week I received a telephone call from a public-spirited shopkeeper in my constituency. He told me that for the first time in 20 years he would not be able to follow his tradition of taking on two school leavers this year. He has always pursued that policy, whether or not he had work for them to do, because he thought that it was part of his social responsibility. Because the squeeze on his business is so tight, he is having to make decisions on the basis of survival.
In the West country recently, a Conservative candidate deserted his party—for which he stood at the last election—and joined us because he could see that the Government's current policy towards small business operators, among whom he numbers himself, was absolutely suicidal. I remember the right hon.

845
Member for Huyton (Sir H. Wilson) saying long, long ago, when I was barely interested in politics, that investment and productivity are the two parts of British industry that must be improved. Investment is largely a reflection of the Government's tax policies. The Government must devote a great deal of their time during the next 12 months to thinking of satisfactory ways in which North Sea oil money can be put into industry.
On the question of productivity, we need a fundamental change of attitudes in industry. I remember working for a company in the year that it made £3 million profit, which was a great deal of money 10 years ago. Many Opposition Members take the attitude that profit is something nasty, cheated and stolen, and should never happen. That was never my attitude to profit. I did not think that there was anything wrong with my company making a profit that giving some of it to David Penhaligon would not put right. We must install massive systems of profit sharing, whereby the bulk of people in the industry feel that they are directly, financially and intimately concerned, and that they have a considerable interest in their company being successful, aggressive and "go-go" in its outlook. Unless we can get that back into our industry there is little hope for Britain. I advocate broad profit sharing schemes.
The way that power is exercised in industry needs a fundamental shift. It is time to recognise that those who provide the labour in industry are equal to those who provide the capital—not necessarily superior or inferior, but an essential and equal part of the partnership that is required if industry is to be competitive and aggressive. The day has arrived when we should seriously consider basic reforms of industry and seriously consider the possibility of giving those who work in a company an equal right, when it comes to electing those who control the destiny of their enterprise, as those who provide the money. I have enough faith in the British work force, among which I worked for a large number of years, to believe that, if we give a financial incentive and responsibility directly to the individual, there will be a response.
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If we cannot galvanise that response in the next 18 months or two years, British industry will be on the verge of collapse.
The position will not appear to be that dramatic until we begin to run out of oil. If this House does not ensure that Britain has a strong industrial base when the oil begins to run out in 20 years, people outside will not thank them for it. We shall become one of the very poor nations of the Western economy.
7.37 pm
Mr. James Hill: The subject of this debate should be renamed "The lost opportunities of the past two decades". Industrial decline has not taken place only in the last 15 months. There have been lost opportunities not only in European trade but in world trade when dealing with the developing and emerging nations, and in the co-operation of trades throughout the world. Time and again Britain, possibly its manufacturers, and certainly its politicians of all denominations, have lost opportunities that now no longer exist.
When I heard the right hon. Member for Leeds, East (Mr. Healey) talking about a bankruptcy figure that might reach 6,000 this year my reaction was that he obviously had not checked the statistics. His speech was similar to one that I made during the three years 1975, 1976 and 1977. Without wishing to make a party point, may I say that during those years the bankruptcy figures for 1975 were 5,398, for 1976 5,939 and for 1977 5,831. Now we are told that bankruptcies are so severe that they will reach almost 6,000. It is the constant attempt to score points off each other that loses us the respect of the public who listen to the debates.
We have a duty this evening to talk not only about the past 15 months and about lost opportunities but about how we shall face up to the next 20 years. No one has mentioned the real change in attitude by the British work force. There is a move away from the dog-in-the-manger approach, both by management and the work force. We are already hearing that people working with good management are taking lower increases in salary because they know that their companies are in difficulty and, in one case, even taking a decrease in salary

847
because they realise that their company, which is facing enormous outside pressures, is likely to collapse and become only a statistic in 1981.
Therefore, the British work force is already beginning to change its attitude. In the past it may have put pressure on the management in order to get as much of the cake as possible. I believe that the reality is now beginning to filter through to all levels of industry that people must work together to protect their jobs. I am very pleased to see it.
I did not shed one crocodile tear when Mr. Robinson, the head of the British Leyland shop stewards, lost his job. I said to myself "Surely this is retribution. This man has now created a vast pool of unemployed". Slowly but surely the realism has dawned that one cannot compete in any market, be it the EEC or world markets, while having constant strife on the shop floor for whatever reason.
All hon. Members know that there have been some ridiculous strikes in the past. For example, there was a strike in one factory because of the smell of cats. That is nonsense. There has even been a strike over the price of tea in the canteen. The power of the shop stewards was beginning to run out of control. In Vosper Thornycroft, in my constituency, one shop steward had an argument with the person in the snack bar opposite the dock gates. The woman had increased the price of her rolls by 1p or 2p, and the shop steward pinned a notice on the works board stating "The snack bar opposite is out of bounds". When there is that lack of feeling on the shop floor, bad decisions will inevitably be made.
Mr. Ernie Ross: The hon. Member has referred to bad strikes. Perhaps he will comment on whether the strike which was carried out by financial interests—when overnight they refused to buy the previous Government's gilt-edged shares and made a profit of £200 million—was good or bad.
Mr. Hill: I am sure that the hon. Gentleman has prepared a full speech and that he will raise that point. I am trying to stress that there is already a change of attitude. Up to now, I think that we have been a little gloomy. Like Labour Members, I place a lot of the
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blame for our present difficulties on the Big Five banks. For far too long they have accepted the fact that when MLR goes up it does not mean 17 per cent. but as much as they can get according to the reliability or status of their clients.
The point was made earlier that merchant banks which borrow from the Big Five charge an incredibly high interest rate. We want the merchant banks to invest in industry, not necessarily small industry. I am not sufficiently single-minded to think that only small industry is beautiful. Industry as a whole needs the support of the merchant banks. I include in that the farming industry, which has been short of liquidity for many years.
Therefore, the Big Five now have a duty not always to regard MLR as a bonanza but to be the entrepreneurs which banks were 100 years ago. The banks should take more risk with their capital. Not enough risk is taken by the Big Five in order to make small companies viable.
That brings me to the question of enterprise zones and the Budget which were discussed in the Finance Bill Committee. I believe that many of the clauses in that Bill will help people to invest more. I am particularly thinking of clause 36, under which the losses of a company can be written off against the profits of others. That is the sort of thing which will allow individuals and trustees to become more entrepreneurial, thereby aiding small businesses. Certainly people who take a risk by investing money in the microchip industry should be able to offset at least some proportion of the losses against profits.
Mr. Phillip Whitehead: If the banks will not enter into that spirit of risk to which the hon. Gentleman has referred, surely there is a case for imposing a windfall profit tax on them which would allow public investment to be used where private investment lagged behind.
Mr. Hill: I must admit that at one time I felt that the Chancellor might well be attracted by a windfall profits tax on banks. He has resisted it this time. From the debate this evening, a warning should at least percolate from the House to the Big Five—[HON. MEMBERS: "Is the hon. Gentleman in favour or not?"] I am trying to explain and I am being helped

849
enormously by Labour Members. The message must percolate from the House this evening that unless the banks become more socially responsible and supportive of entrepreneurial activities the Chancellor may well consider windfall profits tax for a future Budget.
Mr. Whitehead: The hon. Gentleman is anxious to use 10 words where one will do. Will he answer a straightforward question? In the parlous state of investment in British industry, is he in favour of a windfall profits tax on the banks or not?
Mr. Hill: At present, no, because only a few weeks ago, the Chancellor gauged this matter, obviously with far more information at his disposal than I have. I shall certainly support him if at any time he comes forward with a proposal to tax windfall profits.
An hon. Member was absolutely right in saying that we cannot allow our industry to be so depressed that when the upturn comes virtually no one will be available to benefit from the increase in trade which will result. That was probably in the mind of my right hon. Friend the Secretary of State for Industry when he put forward the proposals on enterprise zones, especially the need for small workshop areas at a time when we are desperately trying through the Budget to redirect investment money. All of us must ensure that at the critical stage when there is an upturn the industry exists to support it.
I should like to refer to the so-called British car industry. We all know that Spain produces the small Ford—[HON. MEMBERS: "Escort"] No, the Fiesta. We know that Germany produces the Ford Granada and that a certain number of Cortinas are made on the Continent. I think that Belgium is one of the countries. It is rather tragic that the British car industry's percentage of world production has fallen so drastically, not only in the last few years but all the way back to 1950.
In 1970, the United Kingdom produced just over 2,098,000 cars, which was 7·2 per rent. of world production. I do not include those cars which were made in Spain, Germany or Belgium. In eight years, the number has declined to just over 1½ million. Therefore, there was a loss
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of about 600,000 vehicles. However, that represented a fall of nearly half in our percentage of world production, because it amounted to 3·9 per cent.
The same story applies throughout British industry. For example, in 1970, British shipbuilding accounted for 6·3 per cent. of the world total, whereas Japan accounted for 48·1 per cent. In the world output of crude steel in 1970 we had 4·7 per cent. of the market, and Japan had 15·6 per cent. By 1979, we do not have to be told what happened because there was a lobby from Consett only yesterday.
Mr. Campbell-Savours: Where were the Tories?
Mr. Hill: In the House of Commons as usual, probably working assiduously in their rooms.
In 1979, we produced 2·9 per cent. of the world output of steel, and Japan was still producing 15 per cent. Those statistics are there for everyone to see, and I am surprised that we have to be told time and again that we are doing badly. We know that we are doing badly. It is time that we told people in what areas we are doing well.
From time to time there is a feeling that all is not good. I have a list of items that will gladden the hearts of some hon. Members. GEC Industrial Controls supplied equipment to a value in excess of £7 million for the offshore and land-based installations associated with North Sea oil. GEC Turbine Generators Ltd. sold generators to South Africa to the value of £200 million. British Aerospace has just sold six Hawker Siddeley 146 aircraft to the Argentine national airline for £85 million. Plessey Radar exports 60 per cent. of its output—obviously a great source of other currencies. Much as we decry the Japanese, Sony has a factory in Wales employing 600 people, and it has just announced a £10 million expansion programme.
One way in which the Government could help in their public purchasing programme would be to look more and more towards British companies. ICL and other companies are competitive on the world market and they could be assisted. In Europe—certainly in France—a public contract almost invariably goes to a national company. I agree that

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it is always best to leave public companies to make their own decisions on purchasing, but once in a while we should give some assistance. Sir Michael Edwardes made a plea from the heart that people should buy British Leyland, but perhaps the products were not right at the time. But there are manufacturers in this country who are worthy of a contract from some of our nationalised industries and public authorities.
But all is not gloom. I know of a change of attitude. In probably one of the most difficult areas of industrial relations—Southampton docks—there has been a change of attitude and a feeling of wanting to draw in more trade rather than having demarcation disputes, and so on. There is now a feeling that good labour relations, working together with management, and sharing problems will be the future. I am sure that the hon. Member for Southampton, Itchen (Mr. Mitchell) will agree that over the last 12 months labour relations in Southampton docks have been excellent. That is my glimmer at the end of the tunnel.
7.54 pm
Mr. Stan Thorne: We have already seen in Preston and in other parts of the North-West the real meaning of the decline in British industry. We have seen closures and rundowns at Courtaulds, Carrington Viyella, Ribble Paper Mills, and in various other factories. In April this year there were 8,505 unemployed, and in June there were 11,304 unemployed—a marked increase in a very short period. In contrast, at British Aerospace where military aircraft are produced, there is a high level of productivity. Reference has been made recently to Britain being the best defended bankrupt nation in the world. It is not my intention to go along that road. I am more interested in suggesting one or two aspects of the decline that need urgent remedy.
At Seddon Atkinson in my constituency—a part of International Harvesters—where commercial vehicles are manufactured, a productivity agreement was reached between the management and workforce, through their trade unions, which resulted in the doubling of productivity. A highly efficient work force there produces an excellent product. That is
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the sort of thing that would have been applauded by the Prime Minister, according to some of her speeches.
But what is the position today? That agreement was reached a few months ago and the productivity figures have been revealed only recently. The answer for those workers in Seddon-Atkinson is now a three-day week, and many workers who produced more efficiently, with greater productivity have succeeded in putting themselves out of work.
In Carrington Viyella, in a textile producing area where several mills are involved in Eccleston, Rochdale, Walkden and Tarleton, all of which are close to Preston and the North-West, another 700 jobs were recently lost. At British Leyland—many of the workers there in the truck and bus division live in my constituency—the five-day working week is being reviewed on a weekly basis. Engine production is buoyant. However, the T45 assembly line is experiencing problems of various sorts, not least on the industrial relations aspect of a management that seeks to maximise productivity without examining some of the major areas of dissatisfaction among the workforce.
Alongside that, there is the tremendous competition from Europe—from Volvo and Scania. Those vehicles appear to have an easy access to Britain, and European Governments give subsidies to protect their exports and to ensure their price competitiveness in order to corner a greater share of the world market in a recession. Britain is an easy area for their products. It has been suggested that a recession today means that imports and exports in the world market are falling. But the most significant factor in the United Kingdom is revealed by the 1979 figures of imports of finished and semi-finished manufactured goods. The figure was £31 billion, and the total import bill was £48 billion. If we deduct oil from that at £6 billion, we have a figure of £31 billion out of a total import bill of £42 billion. In other words, 70 per cent. of the total import bill in 1979 was in manufactured and semi-manufactured goods. In 1974, it was only 50 per cent; in 1966, it was only 30 per cent. Already in the first quarter of 1980, the imports of manufactures and semi-manufactures total £9,095 million.

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One can only speculate on what the figure will be at the end of 1980.
Years ago in Britain the exports of manufactures produced a surplus which paid for our imports of food. This is no longer true. Indeed, imports of finished and semi-finished manufactures may this year exceed the exports of manufactured goods. By this process we are importing increased unemployment.
Labour Members will recall that in 1979 we had a deficit with the Common Market of £3,000 million. Yet when we were taken into the Common Market by the right hon. Member for Sidcup (Mr. Heath)—aided and abetted by some Labour Members—we had a trade balance with Europe. The position, therefore, has markedly deteriorated over the years of our membership.
On the question of import penetration in relation to home demand, it is signficant that 100 per cent. of all office equipment in the United Kingdom at present is imported; 61 per cent. of textile machinery is imported; 56 per cent. of all vehicles are imported. The trade deficit in 1979 in finished and semifinished manufactured goods in the United Kingdom is sometimes compared, when one talks of selective import controls, with the problems of the developing world. But it is much more realistic—and there is a much better political lesson in it—if we look at the deficit with, for example, the United States in 1979 of £541 million, with Japan of £761 million, and with West Germany of £2,516 million. In other words, to talk in terms of selective import controls is not, as is often implied, a threat to the developing countries but a matter in the main, for the major Western capitalist, producing nations.
The trade surplus figures for 1979 make very interesting reading—£2,907 million for the United Kingdom and £3,994 million for the United States of America. Then we come to some really astronomical figures—West Germany £27,736 million and Japan £33,707 million. As I have already indicated, what we should be seriously considering is controlling imports from West Germany, Japan, the United States, the Netherlands and France.
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The overall import deficit would be much worse without North Sea oil revenues, which are being used deliberately to prevent the deficit from being several thousand millions higher than it is. But what happens when the oil revenues run out—given the existing economic policies? The answer is that we shall have a deindustrialised nation, and an economic recovery could then take generations to achieve in the United Kingdom.
The financial statistics at April 1980 show, on page 117, an interesting position concerning the export of private investment. The figure for 1979 was £5,000 million, and over the last five years there has been an outflow of roughly £15,000 million of private investment. So the multinationals export in order to erect and maintain factories abroad which produce goods to send back to the United Kingdom for sale. There is no patriotism among the multinationals; there is no concern there for the future of the United Kingdom. Indeed, the absence of concern by the multinationals for the problem of the unemployed in Preston is equalled only by that of the Tory Front Bench.
Mr. Campbell-Savours: My hon. Friend has referred to statistics, which are of very great importance. Will he also turn his attention to the problems of trade unions and others when negotiating? Who is importing these products? When we are considering the problem of workers in Preston and other parts of the country losing jobs in sectors which are subject to very heavy import penetration, would it not be beneficial to British industry and to the trade unions to know who is responsible? It may be recalled that when the Courtaulds closures took place in Lancashire, evidence was coming forward to suggest that Courtaulds was importing the very products that workers were producing in the United Kingdom and thereby throwing them out of work.
Mr. Thorne: That is a very important point, and I am sure that my hon. Friend will be glad to learn that one trade union is shortly to publish a pamphlet on the decline of British industry in which it tackles precisely the problems that he has indicated. There is in the Preston area a growing awareness among workers at

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shop floor level of precisely who are the guilty parties.
I hope that the Labour Party—perhaps the Opposition Front Bench will pay close attention to this—will ensure that the records of members of the present Cabinet are very closely examined in terms of their business and economic interests, so that we can refute any suggestion that they are in some way making a sacrifice when they accept a 5 per cent. reduction in their pay as Members of Parliament. For many of them, that 5 per cent. reduction is quite irrelevant. It would be very interesting if the Labour Party were to produce the sort of figures that it produced some years ago to show the kind of people we have in the Government at the present time, and what is their background in terms of the needs of British industry.
I am drawing to a conclusion, Mr. Deputy Speaker, although it is pertinent to mention that several Conservative Back Benchers treated us to speeches of 18 to 25 minutes and said very little about the subject that we are debating.
It is suggested that 200 companies are likely to control 75 per cent. of total
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world production by 1985. That alarms many Opposition Members. The realisation that the decisions of these companies will be taken on the basis of what is in their best financial interests, irrespective of people's needs, means that any expectation one may have about action on the Brandt report will be reduced to nought.
In short, I believe that action on selective imports is vital. We need in the short run, as quickly as possible, a major public investment in housing, railways, health care, education and training, social services, and so on, in order that such investment will act as a multiplier to British manufacturing, if accompanied by selective import controls. In the absence of that sort of remedy, we can safely predict that there will be 3 million unemployed by 1984, and that there will be a big iron-fisted brother waiting to deal with the social problems that such poverty will create. One can only speculate on how many more prisons will be needed then. That is why in my view, and the view of an increasing number of workers, we cannot afford to allow the Government to stay in power to produce such havoc in the United Kingdom. Get them out.
8.10 pm
Mr. John Lee: In many ways, this has been a depressing debate. One would have thought that until May 1979 we had a booming economy, minuscule unemployment, substantially rising productivity, virtually strike-free labour relations and no closures. But, as everyone knows, manufacturing industry has been declining for several decades under Governments of both persuasions.
We have lost sector after sector of our manufacturing capability. It is depressing to go round factories in our constituencies and see so much imported machinery. The hon. Member for Preston, South (Mr. Thorne) and others have commented on that fact. It is depressing to see what has happened to our machinery manufacturing capability. In terms of machinery manufacture, if one misses out on one generation of machines, it is almost impossible to get back into that industry. That is what has happened. We also know about the import penetration that has taken place in the consumer sector.
I do not want to go over the reasons for our decline or to apportion blame. These are sterile and pointless efforts. Much of industry is going through the equivalent of open heart surgery. In my constituency there have been short-time working and substantial textile mill closures and there has been short-time working in the furniture industry. All this, of course, works its way through to the wholesale and retail trades.
Yet our clearing banks are some of the most profitable in both absolute and relative terms in the world. One is entitled to question—my hon. Friend the Member for Southampton, Test (Mr. Hill) referred to this point—whether the banks have been overdoing it. Was it necessary for them to charge the premiums over minimum lending rate that they have been charging in the last few months? In the circumstances, given their level of profits, could they not have said "In view of the 17 per cent. MLR, let us make a reduction in our normal premium and come down 1 or 2 per cent."?
Again, as my hon. Friend the Member for Test said, all is not gloom. There are some bright signs.
Dr. Oonagh McDonald: Where?
Mr. Lee: Given the level of the exchange rate, our exports have held up remarkably well. It is a most creditable performance. A number of our industries even now are doing exceptionally well in home and world markets—for example, aerospace, telecommunications manufacture and mining machinery manufacture.
Mr. Kilroy-Silk: Telecommunications is a nationalised industry.
Mr. Lee: The telecommunications manufacturing sector is not a nationalised industry. Not enough, but some, of those industries are doing well at present.
We are getting greater realism in wage settlements. Increased productivity is, and will be seen to be, coming through during the next 12 to 18 months.
One encouraging sign is the substantial take-up of the new small factory units which have been built during the last few months. We need them in areas such as North-East Lancashire—my political area—where in the past, as the hon. Member for Burnley (Mr. Jones) will know, firms have expanded and taken advantage of the old former mill premises. Most of the mill premises have now been absorbed and used. But North-East Lancashire and other parts of the country desperately need the new small factory units.
8.15 p.m.
Mr. Ernie Ross: In the last few months the speed of Britain's economic and industrial decline has accelerated to a frightening pace. A stream of major companies—from motor components to confectionery and from textiles to toys—has announced redundancies and closures. The existence of whole industries is in question. Previously prosperous regions in Britain have seen their economic and industrial base crumble. With unchanged policies, the 1½ million unemployed have only one prospect—that they will soon be joined by hundreds of thousands more jostling them in the dole queues.
The catastrophic economic policies of the Tory Government have massively increased the difficulties. High interest

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rates and the high value of the pound—the result of monetarist dogmas of the Prime Minister and her supporters—threaten permanently to weaken British manufacturing industry. At the same time, the immediate economic outlook for the whole of the capitalist world is bleak.
In 1979 the United Kingdom imported more manufactured goods than it exported. British manufacturing industry employed 1,170,000 fewer people than in 1970. Manufacturing output was a mere 6·4 per cent. higher than at the start of the decade. These three statistics show clearly the extent of the decline of British manufacturing industry during the 1970s.
In the past Britain has relied on a surplus of trade in manufactured goods, together with a surplus on invisible trade, to pay for imports of raw materials and food. The surplus on invisible trade has declined in recent years. Although it still remains important, it is unlikely to expand very much. The decline in the surplus in manufactures is at present being offset by North Sea oil production.
The decline in manufacturing industry is severe, but in the engineering industry it is even more severe. Britain's past industrial and economic success has depended to a large extent on engineering. But the figures for the last decade show clearly that, if the performance of the whole of the United Kingdom's manufacturing has been bad, that of engineering has been worse.
The range of statistics available for the engineering industry is narrower than for manufacturing industry as a whole. Looking at output, employment, import penetration and trade performance, it is clear that only in employment has engineering fared better than United Kingdom manufacturing industry or engineering in France and West Germany. The figures for output are perhaps the most striking. Between 1970 and 1971 manufacturing output grew by 6·4 per cent. The output of engineering and allied industries grew by 2·5 per cent. While the rest of the economy was slowly recovering from recession, engineering output declined still further.
The extent of the decline of the United Kingdom's engineering industry becomes
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immediately apparent when United Kingdom engineering output is compared with that of West Germany and France. This shows a 1 per cent. decline in the United Kingdom's engineering output between 1975 and 1979, compared with a 20 per cent. increase in France and an 18 per cent. increase in West Germany.
When these figures are combined with output figures, the picture of productivity growth which emerges is as follows. In West Germany engineering productivity increased by 19 per cent. between 1975 and 1979. In French engineering the increase was 25 per cent. In overall British manufacturing, productivity grew by 8 per cent., but in British engineering the productivity increase between 1975 and 1979 was only 2 per cent. Unfortunately, comparable investment figures, which might go some way to explain the difference in productivity growth, are not available.
Between 1970 and 1979 imports sharply increased their share of the United Kingdom market for engineering products. Details are not published for the engineering and allied industries sector as a whole, but there are figures for the six main areas making up this sector. These show that, with the single exception of shipbuilding, all areas of United Kingdom engineering have lost a share of the United Kingdom market to imports. In each case, imports rose more rapidly than imports of manufacturing as a whole. The largest rise was in vehicles where the imports share of the United Kingdom market more than trebled between 1970 and 1979. In mechanical engineering, the largest single area, imports increased their market share by 60 per cent. over the period.
The whole of the engineering sector has been hit. One example is the electronic consumer goods sector. The decline of the electronic consumer goods industry—television, radio, tape recorders, and so on—is now so advanced that the British Radio Equipment Manufacturers Association considers that the industry needs important controls in order to survive. That was the point made in the NEDO progress report, published in January 1980. Overall import penetration in the industry rose from 16 per cent. in 1970 to 46 per cent. in 1978. Statistics from the same organisation show

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that in the colour television market, the industry's most important area, import penetration has risen from 7 per cent. in 1970 to 27 per cent. in 1979.
It is particularly worrying that no United Kingdom manufacturer makes the product with perhaps the greatest growth potential, namely, the video cassette recorder. In 1979, the United Kingdom imported 150,000 video cassette recorders. A study of the United Kingdom electronic consumer goods industry, by the Boston Consulting Group identified three main reasons for Japan's better performance in the manufacture of colour televisions: better design, better quality components and larger scale production.
In its recent report on the microelectronics industry, the NEDO sector working party criticised the Government for reducing support for the development of microelectronics. In July 1978, the previous Labour Government allocated £70 million to encourage production in Britain. The Government have cut that by at least £15 million. In an earlier report, the working party pointed out that the Japanese Government spent £140 million on the development of very large-scale integrated circuits.
Figures for expenditure on research and development in absolute terms and per head of the population show that the United Kingdom has almost slipped to the bottom of the league. There are two other disturbing elements in the United Kingdom's research and development programme. First, in real terms, the amount spent by the United Kingdom on industrial research and development fell by 12 per cent. between 1967 and 1975. In the same period, West German research and development expenditure rose by 44 per cent. French expenditure rose by 17 per cent., and Japanese expenditure rose by 90 per cent.
Secondly, the United Kingdom overall research and development effort has been distorted by defence. In the United Kingdom, 46 Per cent. of expenditure goes on defence. In West Germany the figure is 11 per cent. That represents an obvious misdirection of necessary manpower and funds.
Conservative Members have argued in favour of dropping exchange controls in order to allow firms to invest overseas.
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Overseas investment by United Kingdom firms is clearly damaging to the British economy. If hon. Members need an example, they should consider the survey that was carried out by Houston and Dunning in 1976. It showed that United Kingdom companies were planning to service their European markets mainly from Continental bases. They pointed out that when coupled with the evidence that Continental firms are servicing United Kingdom markets, more through exports than from production facilities in the United Kingdom, it was somewhat discouraging for the future growth of the United Kingdom's economy.
Multinationals, both British and foreign, take investment and other decisions on the basis of their own interests. Their concern is for the highest profit for the corporation, not the economic welfare of the countries in which they operate. All available evidence indicates that the decisions that have been taken have acted against the United Kingdom's interests and have helped the speedy decline of British manufacturing industry.
Labour Members have argued, and will continue to argue, in favour of import controls. The increase in the number of imports is more a symptom than a cause of the decline in manufacturing industry. There are two ways in which the high level of imports makes a reversal of that decline more difficult. First, import penetration is now so extensive that the domestic market share of British industry in many sectors is too low to sustain recovery.
Let us consider the motor industry. Leaving aside the foreign-owned companies, whose investment and production plans are determined on a world-wide basis, the United Kingdom's industry is represented by British Leyland. In 1979, British Leyland sold only 386,000 vehicles in the United Kingdom. It sold 693,000 world-wide. Volkswagen sold 777,000 in its home market of West Germany, and Renault sold 692,000 in France. That contrast illustrates how difficult it is for British Leyland to generate funds to match the investment of the Western European economies.
We must also consider the effect of imports on the balance of payments. At present, a combination of the revenue from North Sea oil and a low level of economic activity has held Britain's

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balance of payments deficit to £2,400 million on the current account. Any expansion of the economy without controls would bring such a flood of imports that it would offset the benefits of North Sea oil and cause a balance of payments crisis.
We shall continue to argue for an extension of public sector expenditure. Experience since the war has shown that, in an economy with spare capacity and unemployed resources, the Government have the power to raise the level of national income and employment by increasing public expenditure. That has the effect of injecting spending power into the economy and of stimulating its expansion. Moreover, a substantial part of any increase in public spending is self-financing because the national Exchequer benefits from a rise in revenue from taxation, both direct and indirect. It also benefits from a reduction in the cost of unemployment benefit. The extent to which any increase in public expenditure is self-financing varies according to the type of expenditure.
Historical evidence for the United Kingdom suggests that between a half and two-thirds of an across-the-board increase in public expenditure would be self-financing after a year or so. In recent years, a line of argument has been developed to the effect that an increase in public expenditure, far from benefiting an economy with unemployed resources, would cause it harm. It is claimed that a rise in public expenditure will "crowd out" the same amount of spending in the private sector, or perhaps more. Jobs may be created in the particular public sector which are expanded, but the effect of that expenditure would be to destroy an equal number of jobs, or more, in the private sector.
That explanation of deindustrialisation was popularised by the Oxford economists Bacon and Eltis in an article in The Sunday Times of 10 November 1974, and in their book published in 1976. It has been adopted enthusiastically by Tory Ministers, who argue that public expenditure must be cut in order to make room for the private sector to expand. In November 1979, a White Paper on public expenditure declared:
"Higher public expenditure cannot any longer be allowed to precede, and thus prevent, growth in the private sector."
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However, that argument is disproved by the severe cuts in public expenditure which were made in the years 1975 to 1979. If public expenditure on goods and services had been preserved at its 1975–76 level as a share of national output in 1978–79, public expenditure would have been £8 billion higher. It has been estimated that about half the rise in unemployment of 900,000 during that period was caused by cuts in public expenditure.
Between 1975–1976, and 1978–1979 private investment rose by £1,400 million. However, there was a fall of £4,700 million in public investment. Thus the private sector took up only one-third of the room made for it by the cuts in public spending on investment. Excluding investment in the North Sea, which cannot plausibly be said to be linked to the size of the public sector, this proportion falls to one-fifth.
The evidence shows that the doctrine of "crowding out" is contradicted by experience in Britain in recent years. Manufacturing industry has not been deprived of financial or labour resources by the volume of public expenditure. There is only one area in which scarce resources and skilled manpower may be preempted by the public sector to the detriment of private industry. That is in defence. I shall not touch on defence tonight; my hon. Friend the Member for Preston, South (Mr. Thorne) did that quite adequately. What I shall say is that the present Tory Government's policies offer no solution to the problems of deindustrialisation. Their concentration on the illusions of excessive public spending and the abuse of trade union power is driving the economy deeper into recession and so accelerating the progress of deindustrialisation.
Other Opposition Members have put forward the alternatives that they would like to see the present Government adopting if decline in British industry is not to continue. I would certainly argue that the relative decline of Britain's manufacturing industry began in the previous century. Faced with the challenge of other, more dynamic countries, Britain tended to rely on privileged access to the resources of the Empire and on supplying capital and financial services to the world rather than modernising its industry. The

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deep-rooted belief in free trade and market forces has meant that State intervention, although it has greatly expanded, has not been used effectively to bring about the necessary reconstruction of our manufacturing industry. The long-standing overseas orientation of the City of London, which has been joined by the internationalisation of the major British manufacturing companies, has worked against the maximisation of investment in our domestic industry.
Opposition Members have heard nothing tonight to change the demand that the Government change their course now if we are to have a manufacturing industry in the late 1980s.
8.30 pm
Mr. Richard Body: When I entered the Chamber a short time ago, I had no intention, Mr. Deputy Speaker, of seeking to catch your eye. However, the speech we have just heard from the hon. Member for Dundee, West (Mr. Ross) has propelled me to my feet, because I do not think that the hon. Member and other hon. Members who have spoken in the same vein appreciate the full consequences of their argument when they call, as they have called, for import controls.
Of course we may regret that many consumers in Britain will prefer to buy a Japanese car rather than one manufactured in Birmingham. We may regret that so many people prefer to buy a shirt manufactured in Korea rather than one manufactured in Lancashire. It is one thing to regret those purchases, but it is another thing altogether to say to British consumers "You shall not have the freedom to buy what you would wish to buy". When Opposition Members make speeches of that kind, they must be more frank with the British people. They should say "If given the chance, we shall take away people's freedom to buy what they would wish to have ".
Mr. Campbell-Savours: Wish?
Mr. Body: Yes—wish to have. There is no compulsion on me to buy a foreign car. It so happens that, being a good European, as several hon. Members may know I am, I prefer to buy a French car. I regret to say that it is a better car than many manufactured in this country. I
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regret my decision, but I have made it. [Interruption.] I sometimes flaunt my French car to prove that I am a good European, and I believe in European free trade. However, while it is a matter of regret that so many people may make such purchases, it is a very different thing—I do not think that this is appreciated on the Opposition Benches—to call for import controls, which are a direct onslaught on the freedom of the British people to buy what they wish to have.
An import into Britain—not an enemy missile here to attack us—is something which is willed to come here by the consumers of this country. [HON. MEMBERS: "No."] No import can come into Britain unless it is to be purchased and someone wants it. I dare say that the hon. Member for Bury and Radcliffe (Mr. White) buys something that is produced abroad. I dare say he would like some of the food that can be produced so much more cheaply.
Mr. Frank R. White: The hon. Gentleman has asked us to be frank with the consumer. Will he be equally frank with the consumer? Will he explain to the consumers of this country, when his Government's attitude to the textile industry has resulted in no textile industry in Britain, what choice and what freedom the consumer will have then, when textile prices are fixed by textile barons outside this country, whose present manipulations of textile prices do little for the Third World population but a lot for the textile barons who are financed by foreign capital in other countries?
Mr. Body: I thought that that argument had been rebutted time and again—
Mr. White: Let us hear the answer now.
Mr. Body: —by organisations which are concerned with the welfare of the Third world.
That has been argued very cogently. If we say that people in Hong Kong and elsewhere should not send their shirts and other textiles over here, we will undoubtedly damage their meagre prosperity. It will be a very bad day, both for them and for our own consumers, if we have a Government who stand between a willing buyer and a willing seller. That is the essence of

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import controls. The State—the merchants of compulsion—would tell the consumer that he no longer had the freedom to choose what he wanted. That is implied in the Opposition's arguments. If they advance that argument again, they should do so with rather more frankness than we have heard today. Imports can come into this country only so long as people wish to buy them. I do not think that the freedom to buy from abroad should be limited in any way at all.
I believe that food should also come freely into this country. It would be to the advantage of many people in Lancashire and other parts of the country, who are anxious about import penetration, if we had a great deal more import penetration by those who produce food far more cheaply than we or any other member of the EEC can produce it. I hope that hon. Members noted the facts which were given in a written answer yesterday and which indicated that, if we had the freedom to buy food from the low-cost producers of the world, the average family would be £5 a week better off.
Mr. Dan Jones: I wonder what the hon. Member would say if he were a manufacturer in this country and saw that similar manufacturers abroad were being heavily subsidised by their Governments. Would he take the same view?
Mr. Body: If they are being subsidised, that is dumping. I regret that our anti-dumping legislation has gone by the board, and that we cannot invoke any anti-dumping provisions except by a long rigmarole via Brussels—a tortuous process which does not work satisfactorily. It is time that we put that right. I do not think that there is any dispute between me and the hon. Member for Burnley (Mr. Jones) on that score.
Opposition Members have suggested that we do not believe in import controls at all. That is nonsense. We believe in one control—the most natural, effective and efficient control that exists. It is self-regulating and works constantly. It is a floating exchange rate. When exports fall and imports rise unduly, the exchange rates adjust automatically.
Mr. Martin J. O'Neill: The free market philosophy of monetarism works only when one has a currency that is dependent on imports and exports. It does not work when one has a currency such as ours, which is grossly over-valued because of North Sea oil. The whole equation is destroyed, and to talk in those terms is irrelevant. If we could forget the North Sea, the hon. Member's argument would be relevant, but North Sea oil is creating a currency which is bankrupting many areas of export manufacturing industry.
Mr. Body: That is a non-argument. We export oil and I regret that we export so much. I wish that we could have Norway's energy policy, but that is not our freedom. If we seek that freedom, limitations will be imposed on us. I hope that the hon. Gentleman understands that and will explain it to the public.
I regret that we are exporting oil in the way that we are. Our currency is thereby strengthened, which makes it more difficult for our other exports to be sold and easier for imports to come into the country. I do not believe that the hon. Gentleman is arguing that we must not have a new industry such as the oil industry and that we should have a museum society that holds on to its existing industries.
Mr. Ernie Roberts: I am interested in the hon. Gentleman's argument about a free market, and his advocacy of being a good European and free marketeer. How does he reconcile free enterprise with the EEC practice of keeping food off the market and interfering with supply and demand in building food mountains?
Mr. Body: The common agricultural policy is a load of nonsense. I believe that the hon. Gentleman shares my view of the Common Market. We may travel by different methods, but our conclusion is the same. I do not defend the Common Market. I am as opposed to it as anyone in the House. My tongue may not have been sufficiently visible in my cheek when I said that I was a good European. I am a free trader. I believe in trading freely with EEC countries. If the Common Market was a free trade area, my opposition would be lessened.

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I have been goaded into speaking at greater length than I intended. I wished briefly to deal with the argument for establishing import controls. Those who advocate import controls should be frank with the British people. Such controls are an attack on the freedom of consumers to buy what they wish to have I repeat that no imports can enter the country without the people being willing to buy them.
7.42 pm
Mr. Robert Kilroy-Silk: The hon. Members for Southampton, Test (Mr. Hill) and for Nelson and Colne (Mr. Lee) complained bitterly about the gloom and doom that had pervaded the debate, and asked for the good news. There is little good news. It is interesting that the only successes in the past few weeks have been in publicly owned industries. On Tuesday, the Prime Minister mentioned the mining industry, British Aerospace was referred to by the hon. Member for Test, and the hon. Member for Nelson and Colne referred to the shipbuilding industry.
The hon. Member for Test was correct in saying that the decline in the manufacturing base of British industry is not new, although it has been greatly exacerbated by the Government. British industry has been in decline for decades, if not for generations. It is alarming to look at the figures. Since 1966, 1·6 million jobs have been lost in manufacturing industry. In that same period, 700,000 jobs have been lost in the construction and mining industries. The new industries, such as petrochemicals, and new technologies, have created only three new jobs for every 100 jobs lost in that period in the more basic and traditional industries. It is disturbing that the decline in our industrial base has occurred not only, or even mainly, in the traditional, older industries and that the import penetration of the domestic market has eroded new, high technology industries.
It is extraordinary that a manufacturing country with the record and tradition of Great Britain no longer manufactures typewriters. It is extraordinary that, but for the grace of my right hon. Friend the Member for Bristol, South-East (Mr. Benn) and my hon. Friend the Member for Liverpool, Walton (Mr. Heffer), we
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would not have even a foothold in the manufacture of motor cycles, even though 20 years ago we had 70 per cent. of the world market. The Meriden motor cycle factory exists by courtesy of the previous Labour Government and because of the tenacity of my hon. Friend the Member for Coventry, North-West (Mr. Robinson). Many Conservative Members have said that the import figures do not tell the full story and that we often import in order to re-export, but there has been large import penetration of some of our newer industries, particularly those manufacturing consumed durables. For example, we import 96 per cent. of dish washers, 70 per cent. of hair dryers, 60 per cent. of cars—only 10 years ago the figure was 7 per cent.—45 per cent. of automatic washing machines, 45 per cent. of agricultural machinery and 45 per cent. of machine tools. I could go on at length. Those are not old industries such as cotton, textiles and mining. If we cannot make our way in our own country in those new industries, the future will be bleak and disturbing.
We are not merely suffering competition from abroad and losing the occasional market. We are losing jobs, particularly in the typewriter and motor cycle industries. With the loss of those jobs we lose the skills attached to them. With the loss of those jobs and skills we lose the prospects for our children and their children. With the loss of those jobs, skills and prospects we lose the ancillary skills and services provided by ancillary suppliers.
All of that is having a devastating effect on our industrial base, our future prosperity and the opportunities that will be available for future generations to find appropriate work and to receive education and training for the necessary skills. That situation will dramatically change the whole structure of our economy, our life style and the society to which we have become accustomed.
As I said at the start of my speech, the process has been going on for a long time under successive Governments of both parties, but it is clear that the present Government's economic policies have exacerbated the position.
Mr. Bob Dunn: No.
Mr. Kilroy-Silk: The hon. Member for Dartford (Mr. Dunn) may shout "No",

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but we cannot talk about vulnerable British industry and the years of neglect and decline and claim that the current 22 per cent. rate of inflation, compared with the 9 per cent. rate left by the Labour Government, has no effect on the situation. Conservative Members cannot suggest that the record 17 per cent. MLR that we had until a few days ago had no effect or that the high value of the pound has no effect. All those factors affect the situation.
Otherwise productive and viable British firms and industries are being made uncompetitive by the Government's economic policies and by high inflation, high interest rates and a high-value pound. Part of all that are the disadvantageous consequences of North Sea oil revenues which are ensuring that a greater number of imports are being sucked into the economy, because the oil revenues are being dispersed into general consumption, partly through tax reliefs.
The more appropriate and more efficient way to deal with the problem would be to support British industry when it is vulnerable and when it needs help in re-equipping and in withstanding foreign competition. That can be done only by using public revenue, through publicly owned and supported schemes such as the National Enterprise Board, to give finance to a Ferranti, to a Fairey, to an Alfred Herbert and to a British Leyland. The first two have proved to be eminently successful companies. Both had to be bailed out by a public body with public money and now the Government are selling them off.
Mr. Tom McNally: My hon. Friend is developing a useful argument. Is he not aware that many companies, such as Fairey, Ferranti and ICL, with workers in my constituency and faced with problems, would go to the wall under the ideology of this Government. The philosophy would be to lock the gates and to close the company when, with a little Government intervention, a viable company could be saved to prosper for Britain.
Mr. Kilroy-Silk: I accept what my hon. Friend says. I was making that point. The record is clear in relation to Fairey, Ferranti and many others. Those companies would not exist today in their efficient and profitable form had it not
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been for the public support and public money given by the Labour Government. My right hon. Friend the Member for Bristol, South-East and my hon. Friend the Member for Walton deserve a great deal of credit for pushing through imaginative policies at a difficult time in the period of the previous Labour Government.
It is not only those companies which have benefited. Many privately owned companies that have never entered into public ownership exist as successful and profitable companies because, at some stage in the past when their future was in jeopardy and their prosperity in doubt, public support was available and given. One of the most impressive companies—always quoted by Conservative Members —which had the sense to refuse a job to the Prime Minister when she was a young graduate student, is ICI. It is a shining example of a highly profitable private enterprise firm with large exports and a big domestic market and production in this country.
ICI exists today as a company only because public money was put into it many decades ago at a time when it would otherwise have gone to the wall. That example can be repeated time and again. It is an example that, for some reason, through blind stupidity or dogma, the Secretary of State for Industry refuses to acknowledge and accept. It is an example that should be followed in the perilous and difficult economic situation in which the country now finds itself.
It is clear that the policies being pursued by the right hon. Gentleman and his friends will not help British industry but will lead to its further demise and decline, with disastrous consequences for people in this country. The consequences will be particularly disastrous for those living and trying to work in regions such as those I represent. The Secretary of State has not merely refused to help; he has maliciously hindered any attempts by industry in that region to help itself by withdrawing intermediate area status from large areas of the North-West that have abnormally high levels of unemployment. His right hon. Friend the Secretary of State for Employment has gone further still and has made massive, vicious and unprecedented cuts in the training and retraining programmes and the opportunities available for young people.
Mr. O'Neill: Does my hon. Friend accept that the vital work of the Scottish Development Agency and the Welsh Development Agency has been made more difficult by the limitations placed upon them by the Government? It is not surprising that only last week the chairman of the Scottish Development Agency, Robin Duthie, was clear and categoric in his condemnation of the Government's industrial policy and their inability to help to resolve the problems of the deprived areas of the country that are fortunate enough, like Wales and Scotland, to have development agencies that would go a long way to help resolve the difficulties.
Mr. Kilroy-Silk: My hon. Friend is citing what might be regarded by Government Members as a tainted source. One could use what they would regard as a respectable source such as the small business men in my constituency who are still waiting for the small business men's friends to act on their behalf. Multinational companies and domestic companies are wondering when the wonderful economic revival that they were promised will happen. What price now Tory support for small business men? They have received a clobbering from the Government. As the Shadow Chancellor of the Exchequer said, 2,000 bankruptcies have occurred in the last three months.
We know that on Merseyside the decline is not new and that decline is always worse in vulnerable regions such as Scotland, Wales, the North-West and the North. The decline has accelerated to an enormous extent in the 14 months in which the Government have been in office. Already in the North-West, 52,000 redundancies have occurred with another 5,000 on the way before September. Since the Government came to office, 14,500 redundancies have occurred on Merseyside and another 6,000 will occur before September. About 1,700 redundancies have taken place in Kirkby with a further 90 to come.
Since the Government came to office 40,000 job losses have occurred in the North-West and nearly 600 firms have closed for ever. On Merseyside 4,000 jobs have been lost and 104 companies have closed for ever. In Kirkby 460 jobs have been lost and eight companies have, closed for ever.
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There are no further job opportunities or prospects for any of the men, women and young people in the North-West, Merseyside or Kirkby. The Government's economic policies are adding to the depression and the intolerable, unacceptable levels of unemployment. On Merseyside alone 91,000 men and women are unemployed. That is 12 per cent—twice the national average—with pockets of unemployment as high as 20 or 25 per cent. in my constituency. In Merseyside 17,000 people have been unemployed for over two years with 1,243 of them in the small town of Kirkby.
No one needs to talk about the waste of talent and human resources involved in such unemployment levels. No one should need to talk about the humiliation, degradation and loss of self-respect that occurs to school leavers and adults as a result of long months and years on the dole. Yet the Secretary of State does not understand. Why does he not understand? His hon. Friend the Member for Loughborough (Mr. Dorrell) said earlier that the Cabinet is composed of men with money who do not understand. He said that the Cabinet was composed of money and that it did not understand. That is the clue. Members of the Cabinet have never been unemployed. Their families have never been unemployed. Their fathers have never been on the dole. They have no conception of the misery and destitution which is experienced by many thousands of my constituents.
Mr. Darrell: On a point of order, Mr. Deputy Speaker. Is it in order for the hon. Gentleman to represent me as saying that my right hon. Friends are moneyed men when I said that they are men who are skilled and interested in monetary matters rather than the real economy?
Mr. Deputy Speaker (Mr. Richard Crawshaw): The hon. Gentleman has made his point.
Mr. Kilroy-Silk: I quoted what the hon. Gentleman said. One does not miss such a remark when it comes from a Government member.
My right hon. Friend the Member for Bristol, South-East said, amid jeers and laughter from Government Benches, that if the level of unemployment is allowed to continue there will be political instability and, perhaps, further riots a la

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Bristol. He was jeered and laughed at. Of course there will be. We cannot allow thousands of our young people to be thrown on to the scrap heap in what they regard as an unjust and indefensible way and with a moral disregard for them and for their future when they can see clearly that there is manifest injustice in the way wealth is distributed in our society.
They clearly see the injustice of the way in which they are treated compared with the way in which other people can run through their own lives—as was said of Members of the Cabinet by the hon. Member for Loughborough—with no worries, concerns or troubles to upset the comfortable, complacement and cosy world in which they live.
Unless the Prime Minister recognises clearly and sensitively the problems that are faced by hundreds of thousands of people in this country and stops sacrificing them on the altar of Tory dogma the social fabric of our society and its political stability will be at risk. The Government bear a great responsibility, as do those hon. Members who form the backbone of Government support, to ensure that that does not occur and that the degradation of society does not take place.
9.2 pm
Mr. John Silkin: It is my happy duty and pleasure to congratulate my hon. Friend the Member for Glasgow, Central (Mr. McTaggart) on an outstanding maiden speech. It is a long time since the convention that a maiden speech should be absolutely devoid of any political content was observed in the House. I am very glad that it was not observed in this case. My hon. Friend gave us a clear indication of what life is like both in his constituency and in Glasgow as a whole.
My hon. Friend was joined in his strictures of current unemployment by my hon. Friends the Members for Nottingham, North (Mr. Whitlock), Leeds, West (Mr. Dean), Preston, South (Mr. Thorne) and Ormskirk (Mr. Kilroy-Silk). Even the hon. Member for Truro (Mr. Penhaligon) reiterated the same strictures. If the rest of my hon. Friends who waited a long time in order to speak had been able to make their speeches, I think that they would have told the same story.
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I wish to make one thing very clear. The subject of the debate did not seem to be a matter of profound interest to Conservative Members. Just over one hour and 20 minutes ago the only right hon. or hon Member sitting on the Government Front Bench was the Secretary of State for Industry and I felt that he had got there by habit more than anything else. There were only three of his hon. Friends sitting behind him on the Back Benches.
It is a matter of vital importance to the Opposition. That is not to say that we do not recognise that there are deep-seated trends in manufacturing production. Hon. Members on both sides of the House made that point and I absolutely agree with them. Certainly during the decade which has just passed there has been only a 6 per cent. rise in manufacturing output in this country and there has been a fall in sectors such as vehicles, steel and parts of the engineering industry. One might say that a 6 per cent. rise is better than nothing. But is it?
During the same period there has been an increase in France of 33 per cent., in the United States of 44 per cent. and of 46 per cent. in Japan. Those are the latest OECD figures. What is happening now, and this is why the position is so desperate and so damaging, is that the Government are taking us right back to the beginning of that decade and perhaps before.
In March of this year our manufacturing output was 2 per cent. below the 1975 level. The Chancellor himself said that he expects manufacturing output during 1980 to drop by 4·5 per cent. to be followed, as my right hon. Friend the Member for Leeds, East (Mr. Healey) pointed out, by a series of drops throughout the remainder of this Parliament. That is what is happening under a Tory Government.
As a result of this decline so far, 1 million jobs in manufacturing industry have ceased to exist. That is why there has been so much concern from Labour Members representing all sorts of constituencies. At the same time, manufacturing investment has begun to lag considerably. This point was touched upon by the hon. Member for Dartford (Mr. Dunn), but he did not give these figures, which are very significant. They are the latest figures of investment per

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worker in manufacturing. They show that, whereas in Britain £660 was invested per employee, in Belgium the figure was £1,340, in France £1,840, in the United States £2,190 and in the Netherlands £2,210.
All this shows a lack of investment in our manufacturing industry. It demonstrates that we lag behind other countries not only in our manufacturing process but in our industrial innovation. There is no denying that British industry has been unwilling and unable to put new ideas into production. This can be judged by research and development, which is as good a test as any. Britain was the only major OECD country in which R and D activities financed by industry declined absolutely between 1967 and 1975. The same has applied to private investment.
As I explained in a debate a couple of weeks ago, when it was a case of saving Ferranti one could not even get that great entrepreneur the National Westminster Bank to step in. The hon. Member for Southampton, Test (Mr. Hill) was telling us what splendid entrepreneurs the clearing banks were.
The same can be seen in manufacturing trade performance. In 1970 this country had a surplus on trade with the rest of the world in manufactures which exactly offset the deficit of trade in food, fuels and raw materials and other visible trade. That was necessary. We are a manufacturing and exporting country. However, by 1980 the manufacturing surplus offsets less than half that deficit. The deterioration has happened in most of manufacturing. The Secretary of State for Trade said recently on television that he thought that it was confined to the motor vehicles section. That is not true. It applies across the board. The reason is lack of investment and failure to modernise or re-equip. That has been the story of private investment in British industry for many years.
Mr. John Patten: Is the right hon. Gentleman saying that the deterioration is caused by lack of investment? Does the productive use of that investment play no part in the analysis?
Mr. Silkin: I am saying that it is a major factor if one cannot get the funds for private investment in British industry. That must have its effect.
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This failure of our manufacturing trade performance has not always been because our prices were too high or because our productivity was too low. I know that the point has been made several times by the Secretary of State. The failure has often been because the quality has been too low and our products out of date. They have been out of date because of that failure to invest, to modernise and to re-equip. The evidence for that is clear. The science policy research unit at Sussex University fairly recently compared United Kingdom and West German exports of about 30 machinery products. It took as examples machine tools, printing machinery and process plant, and it came to an interesting conclusion. It found that Germany outsold the United Kingdom in export markets for 26 of the 30 products. That was despite the fact that German prices were higher than United Kingdom prices. Therefore, it is not always, as the Secretary of State tells us, a question of Britain outpricing itself in the market. It is very much a question of investment, or the lack of it.
During the same decade there has been a conflict, almost an inequality, between two sets of years. There have been years when there has been a period of expansion and growth, and there have been years when there has been either very small growth or a decline. It is interesting to note what happened during that period. When the annual GDP growth exceeded 2 per cent., in every case manufacturing output rose by an annual average of 3·4 per cent. When growth was under 2 per cent., or at 2 per cent., output fell by an average of 1·3 per cent. In a good growth year manufacturing productivity rose by an annual average of 4·5 per cent., and in a bad year by only 0·2 per cent.
That shows an interesting fact. If we are prepared to increase demand and expand, our output rises. That is of vital importance. That would be the policy that a Labour Government would need to impose at this time. It is a policy for now because, when we look ahead to three or four years of Tory government —and I hope that we will not have to look to that—none of us can say what the exact landscape will look like. It will be gloomy, and it will be a more derelict Britain than we have known in

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our lifetime. If we were to take power at this time, we would have the strategy that Britain requires. It is a policy for expansion. But before we do that we need to protect those industries that are under attack—industries where our home base is being eroded at an accelerated rate.
I was interested to note that that view was taken by a number of my hon. Friends—for example, by my hon. Friends the Members for Nottingham, North, Preston, South, Dundee, West (Mr. Ross), Leeds, West—and by my right hon. Friend the Member for Bristol, South-East (Mr. Benn). They all took that point of view, and regarded it as absolutely vital. But that, by itself, is not enough. It is only a piece of machinery to stop the total demolition of British industry. It is vitally necessary to ensure that British industry responds and moves ahead again. For that we need Government action on a large scale.
I am sorry that the hon. Member for Test is not here. He made a valid point, with which I thoroughly agree. He said that the Government's purchasing policy should be used for the protection and expansion of British industry. As an example of that, he instanced ICL. Opposition Members agree with him that public purchasing is absolutely vital. For that and other reasons, we oppose the denationalisation and the privatisation that has taken place during the past year. We warn the Government that a continuation of that is liable to destroy, to an even greater extent, the basis of British manufacturing. There are rumours that it may now be taking place in shipbuilding. If that were to happen, it would spell the utter destruction of British industries. Therefore, public purchasing is the first requirement.
There must be Government action to ensure that British industry responds to all that the Government can do. There must be pressure on industry to invest, in the same way as in Japan the Ministry of International Trade and Investment—MITI—has given the incentive and drive to Japanese industry and investment. That can be done only by agreeing the goals sector by sector and making planning agreements with individual firms to carry out what needs to be done in the national interest.
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That cannot be done, however, unless there is a strong regional policy. There must be a return to the days of the Labour Government, not the destruction of regional policy that we have seen under the Secretary of State for Industry, to which in panic moments he adds the occasional town or part of a town as another industry is destroyed. In addition, there must immediately be a cut in interest rates. The highest interest rates in our history have contributed more than anything to the present failure of British industry to respond to what is happening.
High interest rates affect industry in two ways—first, because firms cannot borrow at a reasonable rate and, secondly, because interest rates are kept at a level where they force the external value of the pound to an unreal rate. All of us accept that, except, apparently, the Treasury Bench, because the poor Chancellor asked "What can I do about it? That is the real value." The answer is simple. If interest rates were cut, the value of the pound would come down, which would make our goods much more competitive instead of having to fight like they are.
My hon. Friend the Member for Ormskirk mentioned ICI as a company which is doing extremely well. But even chemical firms are finding difficulty at present in selling abroad, because they are competing—[Interruption.] I thought for a moment that my hon. Friend the Member for Newham, North-West (Mr. Lewis) was crossing the Floor.
My right hon. Friend the Member for Leeds, East mentioned one other thing which is of vital importance—what we do with North Sea oil revenues. It is a rather terrifying fact, as the Minister of Agriculture, Fisheries and Food pointed out, that £7,000 million a year is needed to support the present number of unemployed—1½ million. That sum could go up to £10 billion if unemployment reaches 2 million, which it is said it will reach by Christmas.
Effectively, of course, North Sea oil revenues are being used, not to support people working in industry or even to support industry, but rather to support unemployment.
Mr. Joseph Dean: Surely my right hon. Friend heard successive Conservative Members underplay the role and

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value of North Sea oil revenue and how it became available. One hon. Member said that it was the best card which the Prime Minister held when she met the other members of the EEC. Is it not a fact that had it not been for the previous Labour Government she would not have had that card in her pocket?
Mr. Silkin: There is no question about that. But I am concerned with what we do with the growing revenues from North Sea oil. I and all other Labour Members want them to be used in the interests of our people and of British industry. They are being wasted, and that is a tragedy. We must ensure that North Sea oil revenues are channelled into industry, and not into creating and maintaining unemployment.
As an immediate plan, we need a realistic agreement with the unions for greater flexibility. But we can get that only if we create full employment, higher public spending, increased industrial training and increased industrial democracy. Right hon. Members on the Government Front Bench keep murmuring about political power. The political power that they are exerting at present is so destructive that it does not deserve comment.
In a speech last week my right hon. Friend the Leader of the Opposition said that what is happening in Britain today is not an act of God but an act of government. It is wrong for people to say that there is no real Tory strategy today. There is a strategy—more or less. There are more bankruptcies, more closures, more redundancies, and fewer jobs, fewer factories and fewer homes. That is the Tory strategy. I confess that from time to time I have a sneaking admiration for the sheer impudence of the Chancellor, who says that there is no alternative strategy to what the Government have to offer. Is there no alternative strategy to a policy of total anarchy? I have set out our policy so that he can understand the points.
But what is the policy of the Conservative Government? I know what it was when they took power, and what it was at the time of the election. There were to be income tax cuts, an incentive Budget which would set everything
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rolling, and the frontiers of the State were to be pushed back. There was to be slashing of public investment, slashing of regional aid, and a change-round in public ownership—privatisation or denationalisation. Within one and a half to two years—that was all that the time lag would be—that strategy would generate its results. We are very close to that time now. We have had over 14 months of Conservative government, and what is happening is a decline in British industry and employment. If the time lag is one and a half to two years, from what date does it operate?
Only the other day, the Chief Secretary said that we were in for three years of unparalleled austerity. When does that start? When does it finish? In three years? At the end of that period, will there be a light at the end of the tunnel? There is no promise of it. On the contrary, as the Chancellor admitted, the drop in manufacturing output goes on year after year, every single year of this Parliament. That is the basis on which it is operating. So we shall have three years of unparalleled austerity, growing and growing and growing, with no light at the end of the tunnel. In the meantime, there is massive unemployment, which will reach 2 million by Christmas and may well reach 3 million within a year or two after that.
In the face of that, the Secretary of State for Industry says that the Government have to take those measures because workers are pricing themselves out of a job. Are school leavers pricing themselves out of a job? When he made his speech only the other day about school leavers, he said that they were being priced out of a job by other workers. We cannot accept that when we realise exactly what is happening and the number of vacancies and the number of applications that there are. These are not people losing jobs; these are people who are not getting the chance to have jobs.
My right hon. Friend the Member for Leeds, East quoted from The Times report of what had happened in Sheffield, when he said that 500 young people had queued for a couple of hours for a matter of eight jobs. But the same thing was happening in St. Helens, where nearly

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2,000 youngsters have entered an employment market offering only three jobs. The position is described as the worst for years.
I have had reports from the Northern region, where the same thing is happening, and where the number of apprenticeships being offered is a drop in the ocean compared with the number of school leavers applying. So this is happening all over the country, and these are not isolated examples.
But this has nothing to do with trade unionists pricing themselves or others out of a job. This is a deliberate act of policy by the Government. It will be interesting to see what happens when the next school leaving figures come out. I have a feeling that the Government will be delighted that we are in recess in August. They will be happy that they do not have to answer for those figures.
In failing to deal with the economy, the Secretary of State for Industry has gone back to the oldest target the Tories have ever had—the bargaining power of the unions in wage negotiations. It is exactly the same as what happened in the 1920s. At that time the miners were told "Accept lower wages and there will be no unemployment." There was unemployment for years and there were low wages. Everything that we have heard today shows that this is so. The hon. Member for Truro mentioned 11 per cent. unemployment in what he said was a low wage area. We have heard from hon. Members from the textile areas. It is acknowledged that the textile industry is a low-wage industry, yet we are seeing the end of the textile industry in our country and vast unemployment.
We heard yesterday about Consett, where there have been comparatively low wages, great productivity and great profit from the point of view of the Tory philosophy. Yet we have a closure that is to take place in, I believe, September of this year.
Mr. David Watkins: My right hon. Friend may have heard the Prime Minister answering me earlier this afternoon, when she said that the steelworks at Consett was now working at a loss. I utterly refute that statement. I am not for a moment suggesting that the Prime Minister misled the House deliberately, but she has been wrongly briefed. The British Steel Cor-
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poration used to publish monthly figures. If those figures were still available, they would show that the steelworks is still running at a considerable profit.
Mr. Silkin: I am grateful to my hon. Friend. That was the impression we received from those who work in the industry and know something about it. That may be an additional reason for believing that perhaps it is as well to have on the board of BSC people who know something about the industry and not people who, at whatever expense they are brought in, do not.
This is the first Government since the war to take office intent, not on reducing unemployment, but on raising it. That is something which we cannot take, which the country cannot take and which our people will not take. People with memories of the past thought that we had left such things behind us. But the Government are taking us back to the conditions of the 1930s, of which Clement Attlee spoke in "The Will and the Way to Socialism". He wrote of
"idle men, idle money, idle machinery."
It is the waste of human lives, the waste of human families, the waste of a great country, that we deplore. It is this policy of industrial scorched earth that is tearing the guts out of our country.
If that sort of society is what the Government mean by the words in their amendment—
"providing a sound basis for sustainable economic and industrial recovery"—
we reject it utterly. We reject it not only because it is wrong, but because we can see what the future holds.
What will happen when steel, motor cars, shipbuilding, textiles and all the industries have ceased to exist in this country? [An HON. MEMBER: "And fishing."] Fishing is another. What is the country to exist on? Will it exist on tourism, oil—though the oil revenues will support the unemployed—and a rentier investment from money which has gone abroad and is seeking a return to this country? It is an economic system doomed to failure because it creates not a single hope, not a single job and not a single way of living in this country. It is for that reason that I call upon my right hon. and hon. Friends to support the motion in the Division Lobby.
9.30 pm
The Secretary of State for Industry (Sir Keith Joseph): I join the right hon. Member for Deptford (Mr. Silkin)—
Mr. Campbell-Savours: Where are the right hon. Gentleman's supporters?
Sir K. Joseph: — in welcoming the hon. Member for Glasgow, Central (Mr. McTaggart) and congratulating him on a fluent maiden speech delivered with admirable self-possession on what for most of us in our own case was a pretty intimidating occasion.
Mr. Dennis Canavan: Good Socialist content as well.
Sir K. Joseph: The hon. Gentleman allowed himself to reflect strongly what he thought were the interests of his constituents, although in the more controversial part of what he said there was a hint that he might be suggesting some things with which some of us might not wholly agree. However, we congratulate him on his maiden speech.
The House also heard four vigorously delivered speeches which focused mainly on the problems of industry in the hon. Members' constituencies. I refer to the speeches of the hon. Members for Nottingham, North (Mr. Whitlock), Leeds, West (Dr. Dean), Preston, South (Mr. Thorne) and Ormskirk (Mr. Kilroy-Silk), who coupled with his description of industrial problems a vivid catalogue of the wickedness of my right hon. and learned Friend the Chancellor of the Exchequer and myself.
My hon. Friend the Member for Oxford (Mr. Patten) argued for mitigation of the pressures upon industry, urging in particular that the Chancellor should consider at a suitable time some remission of the national insurance surcharge and some thoughts in connection with regional policy.
The hon. Member for Truro (Mr. Penhaligon) spoke up vigorously, I am glad to say, for profit, though he wants it more widely shared. I only wish that there were more of it to be shared.
My hon. Friends the Members for Loughborough (Mr. Dorrell) and Coventry, South-West (Mr. Butcher) made thoughtful and interesting speeches on a range of subjects, but were particularly penetrating on the dangers of protection-
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-ism, a point also made by my hon. Friend the Member for Dartford (Mr. Dunn).
I am sorry to have missed the speech by my hon. Friend the Member for Holland with Boston (Mr. Body). I understand that he spoke robustly against protectionism while arguing at the same time that we must contrive to secure from Brussels a more effective anti-dumping policy. I think that it is consistent to argue against general protectionism while seeking to protect industry by anti-dumping procedures from unfair competition.
My hon. Friend the Member for Loughborough, in an examination of the repercussions of oil, urged the Government to secure, if possible, a lowering of the exchange rate as a step towards making room for manufacturing industry. His speech was very well argued. However, I must point out that any lowering of the exchange rate would wreck any attempt to control the money supply and ruin the prospect for getting down inflation. My hon. Friend, in his careful analysis, listed all the other purposes, as well as abating inflation, which he thought the Government must seek to serve. I can only tell him that those precise purposes which he listed are those which the Government constantly seek to reconcile with the overriding priority of abating inflation. Indeed, we are always seeking the optimum combination of public purposes.
The right hon. Member for Leeds, South-West—[Interruption.] Leeds, West —I apologise as a neighbour of the right hon. Gentleman.
Mr. Kilroy-Silk: And the Secretary of State is trying to run British industry!
Sir K. Joseph: The right hon. Member for Leeds, East (Mr. Healey) gave us a catalogue of woe—a real catalogue of real woe. But there was no hint of policy in what he said. Not one of those awkward choices which he knows from his own experience has to be faced by Governments and Chancellors was presented to the House. Who would have thought, from hearing his speech, that his own monetary squeeze in 1975–76 was arguably worse in the pressures that it brought to bear on industry than the squeeze, the contraction, now in operation upon industry? In fact, I suggest that the Labour squeeze was fiercer in 1975–76.
The dimension totally lacking from the speech of the right hon. Member for

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Leeds, East was that of history. The right hon. Member for Deptford at least had the grace to explain—as if we needed much reminding—that the decline in British manufacturing industry started, not today or even yesterday, but many years ago. The right hon. Member for Leeds, East spoke as if it had started only when the present Government came into office.
Mr. Canavan: The right hon. Gentleman has made it worse.
Sir K. Joseph: Even some of his hon. Friends, especially the hon. Member for Dundee, West (Mr. Ross), indicated by quoting statistics from years back how long the erosion and the decline in British manufacturing industry has been going on.
But if the right hon. Member for Leeds, East gave us no policy, the right hon. Member for Deptford gave us policy in abundance. The trouble is that his policy did not cohere one part with another. What the right hon. Member for Deptford urged upon the Government. and declared would be Labour policy was an increase in public spending, coupled with more consumption, coupled with some sort of agreement with the trade unions. He identified the problems facing our economy as demand problems. The volume of imports coming into Britain shows what an enormous amount of demand there is for our manufacturers to seek, let alone the huge world demand that still remains.
Britain's economic problems are not demand problems. In our view, they are problems of supply. If the right hon. Gentleman's policy were to be put into effect, the result would be not the lower interest rates which he says would result but, from the higher public spending which he urges, enormously increased interest rates and a raging inflationary inferno.
Mr. John Silkin: The right hon. Gentleman is quite wrong on that point, but the point that I really wanted to put to him is this: is it not the fact that it is not increased demand that is taking place but the destruction of our own industries and the importation of foreign goods in place of our own home-produced goods?
Sir K. Joseph: I shall devote the bulk of my speech to this very subject. However, I congratulate the right hon. Member for Deptford on his political tact. He has normally given the House a great diatribe about the importance of protectionism. But because he was winding up in a debate which had been opened by his right hon. Friend the former Chancellor of the Exchequer, who has recently made a very vigorous speech against protectionism, the right hon. Member for Deptford very carefully steered off the subject.
Mr. Silkin: The right hon. Gentleman was busy talking to his right hon. and learned Friend the Chancellor of the Exchequer at the time. If he had not been talking to him, he would have noticed that I supported seven or eight of my hon. Friends who had urged selective import controls.
Sir K. Joseph: That is a far cry from the right hon. Gentleman's general comprehensive argument in favour of protectionism. Manufacturing industry's present problems have not been caused by the Government.
Mr. Joseph Dean rose—
Sir K. Joseph: I shall not give way. I repeat, the problems of British manufacturing industry are not caused by the Government. My evidence for saying that—
Mr. Dean rose—
Mt. Speaker: Order. It is clear that the Secretary of State is not giving way. Therefore, he must be allowed to continue.
Sir K. Joseph: My evidence for that statement comes from last week's editorial in the New Statesman. The New Statesman argues that the present problems of manufacturing industry have been precipitated but not caused by the Government, given the rise in oil prices, inflation and the recession. What has caused the decline in British manufacturing industry? [Hon. Members: "You".] I no longer share the analysis of the New Statesman. The reason for the decline of British manufacturing industry is straightforward and simple. Its cause is declining competitiveness. The decline has been accelerating for many years.

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I question the case for judging the performance of British manufacturing industry by the numbers of those engaged in it. One can postulate that, as in agriculture, a smaller work force could produce a vastly greater quantity of saleable goods. Indeed, that must happen if we are to afford the large number of extra jobs in the non-tradeable services, including public services, that we all desire.
Mr. Straw rose—
Sir K. Joseph: I shall not give way to the hon. Gentleman. The decline in the manufacturing work force has been coupled with a huge increase in manufactured output in most of our competitor countries. In those countries, extra jobs have come from services, including public services. That may not have occurred in every country, but it has occurred in most. The decline in our competitiveness and in our manufacturing industry has been dramatic. I shall give the House only one figure. Between 1955 and 1975 our share of the manufacturing output of the OECD countries fell by over 40 per cent. It fell from 10 per cent. to under 6 per cent. I would argue the competitiveness is both the explanation and the key to recovery.
I accept that there are some highly efficient firms which are well managed and which have co-operative labour forces and which will go to the wall if they persist in staying in exactly the same sector of business. The Opposition must face the facts that they had to face when they were in government. Low-cost competitor countries, without any unfairness, buy the most modern machinery in the world, hire excellent management and put low-cost but fair labour to work, in order to compete with Britain and the rest of the world. There is no way, by sheer competitive efficiency, in which some of our firms can stand up to that competition. I do not say this lightly because I recognise the fearsome difficulties, but those firms must shift into other sectors of that market or go up market or choose some goods that have a premium value. Some of our firms are managing to do that.
Mr. Cryer rose—
Sir K. Joseph: No, I will not give way. I wish to cover all the speeches.
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At this stage I wish to refer to the speech of the right hon. Member for Bristol, South-East (Mr. Benn). So far as I could follow his farrago, I think he shirked the basic choice. He did not make it clear whether the economy for which he was arguing would rest upon the market—that is the sale of goods and services to those who are willing to buy them by those who are willing to produce them—or whether it would rest on a siege economy. Was he arguing for siege or selling? If he is arguing for the market, he cannot escape the need for our businesses to be competitive. If he is arguing for a siege economy, not based upon willing producers and willing buyers, away goes our freedom and in through the door comes poverty.
Mr. Benn: Is the Secretary of State aware that the policies he is pursuing are creating a siege economy for millions of families whose freedom to work and enjoy decent public services has been removed by the policies that the right hon. Gentleman is carrying through? His claims that he speaks for freedom will be regarded as totally hypocritical throughout the country.
Sir K. Joseph: I have always thought that the right hon. Gentleman was very shifty in his use of the word "freedom". I argue that competitiveness is the crux of the matter and that it has been eroded over the years.
It would be wrong to assume that the only way of achieving greater competitiveness is to increase the quantity of investment, as the right hon. Member for Deptford sought to argue. First, there are two interpretations of the figures that he gave. He quoted figures to show that in this country the investment per head is much lower than it is in competitor countries. But that alleged fact could be interpreted quite differently. Suppose that we had just about the same quantity of investment as our competitor countries, but that we were overmanned double compared with them. That also would produce the same low investment per head.
The question to ask is why it is not worthwhile to invest in this country. It is not lack of money. Over the years the pension funds have had enormous sums of money which, in the interests of the pensioners they serve, they wish to

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invest profitably. But because of the squeeze on profits by the uncomprehending wage pressure of the trade unions, unaccompanied by higher productivity, profits have been so squeezed that investment has not been worthwhile.
It is not just investment, nor is it management. Management varies in quality, and some is excellent. It is not even lack of competitiveness or just the trade unions, although overmanning is our economic bane. Competitiveness involves all three—investment, which depends on the prospect of profit, management and co-operation by the work force. Above all, it requires comprehending attitudes and understanding by the work force arm the population that jobs and standards of living depend on satisfying the customer at home and abroad. That is the base for jobs and standards of living.
How do we become more competitive? Let us try to learn lessons from this debate. One of the benefits of the present unavoidable pressures on manufacturing industries is that we are already beginning to become a shade more competitive. The pressures will in time produce greater competitiveness. I beg the House—and I include the right hon. Member for Deptford—not to make the simple mistake of extrapolating from present unemployment trends or even the present rate of increase of unemployment. Self-correcting forces are at work in any economy. The pressures will remain on manufacturing industry, and will get worse before they get better.
However, there are forces leading to recovery that we can already identify. I shall explain what I mean. First, companies in their own interests of survival are having to improve their performance even though that means cutting investment, even for the moment research and development. Even that is worth while for a period if we become more competitive.
Mr. Eric S. Hafer: Will the right hon. Gentleman give way?
Sir K. Joseph: Secondly—
Mr. Heffer: Will the right hon. Gentleman give way?
Mr. Speaker: Order. The Secretary of State has indicated that he is not giving way, and he must be allowed to continue.
Sir K. Joseph: Secondly, co-operation on the shop floor and in the office will increase, as my hon. Friend the Member for Southampton, Test (Mr. Hill) told us. Realism is already increasing, as my hon. Friend the Member for Nelson and Colne (Mr. Lee) said. Some skilled men and managers will be snapped up by an expanding company if they are released from another company.
As inflation and interest rates fall—and they will fall—so, happily, we shall find the pressures reducing. Destocking will come to an end as stocks are adjusted to the lower level of demand. Savings will decrease, and demand will increase. [Interruption.]
Mr. Speaker: Order. The House must be fair and give the Secretary of State the opportunity to be heard.
Sir K. Joseph: World trade will recover. The soiree of wealth and prosperity is not the Government. The source of jobs and standards of living stem from the natural desire of most individuals in any society to improve the condition of themselves and their families. That is the key issue. In all the economies in the West there is government involvement to a greater or lesser degree. Although we have reduced the government involvement that we inherited, and will reduce it further, this Government are still heavily involved in the economy, and we have a huge public sector.
Government involvement in an economy is not a yardstick of effective competitiveness or performance. The yardstick is the degree to which Governments have created frameworks that stifle, dilute, weaken or debilitate the natural resourcefulness, within the law, of individuals.
Mr. Guy Barnett: Will the right hon. Gentleman give way?
Sir K. Joseph: No.
Mr. Barnett: Give way.
Mr. Speaker: Order. I remind the House that the Secretary of State has indicated that he is not giving way. Therefore, he must be allowed to continue.
Sir K. Joseph: This country has been famous in history for the character and adaptability of its people. [Interruption]
Mr. Speaker: Order. The strength of the House has been the right to speak. The Secretary of State must be allowed to continue his speech, as the Opposition spokesman was allowed to do.
Mr. Douglas: On a point of order, Mr. Speaker. Is it not true that the strength of the House has been a willingness to speak for the needs of the nation?
Sir K. Joseph: Successive Governments in this country have with the best of intentions, erected what has become a debilitating framework and we have reduced the resourcefulness of our people.
The Leader of the Opposition recalled correctly that I spoke in a radio broadcast nearly a year ago of what I thought were six poisons in our economy. I used the word "poisons". If it offends, I shall change it to "handicaps".
The poisons or handicaps that have debilitated our economy and go far to explain the decline in competitiveness that we are debating are deficit financing, fiercely progressive direct taxation, which has been changed by the present Government, nationalisation, the cumulative effect of educational, welfare and housing arrangements, laws and regulations that have together created an anti-enterprise culture which emphasises rights and not duties and emphasises the pervasive responsibiliites of government, the wickedness of profit, hostility to wealth creation and the role of the producer and not the consumer.
The fifth of the poisons or handicaps—
Mr. Heffer: Will the right hon. Gentleman give way?
Sir K. Joseph: No. The fifth poison or handicap is a large, Luddite and politicised trade union movement. Trade unions are in the business of restricting output. How can it be that our manufacturing industry will not decline when we have such pervasive trade unions?
The sixth poison or handicap is egalitarianism. Socialism has been the parent of many, though not all, those handicaps. A country can prosper even with nearly all those handicaps. We have competitors who have nearly all of them. But we have every one.
Mr. James Callaghan: Does not the right hon. Gentleman realise that there is a considerable difference between a handicap and a poison? After all, the Minister of Agriculture, Fisheries and Food is a handicap to the Government, but the Secretary of State is a poison not only to the Government, but to the whole country.
Sir K. Joseph: The miracle is that we have done—
Mr. James Hamilton rose in his place and claimed to move, That the Queston be now put.
Question, That the Question be now put, put and agreed to.
Question put accordingly, That the original words stand part of the Question:—
The House divided: Ayes 247, Noes 305.

Division No. 396]

AYES

[10.00 pm

Abse, Leo

Brown, Ron (Edinburgh, Leith)

Dalyell, Tam

Adams, Allen

Buchan, Norman

Davidson, Arthur

Alton, David

Callaghan, Rt Hon J. (Cardiff SE)

Davies, Rt Hon Denzil (Lianeill)

Anderson, Donald

Callaghan, Jim (Middleton & P)

Davies, Ifor (Gower)

Archer, Rt Hon Peter

Campbell, Ian

Davis, Clinton, (Hackney Central)

Armstrong, Rt Hon Ernest

Campbell-Savours, Dale

Davis, Terry (B'rm'ham, Stechford)

Ashley, Rt Hon Jack

Canavan, Dennis

Deakins, Eric

Ashton, Joe

Carmichael, Neil

Dean, Joseph (Leeds West)

Atkinson, Norman (H'gey, Tott'ham)

Carter-Jones, Lewis

Dempsey, James

Bagler, Gordon A. T.

Cartwright, John

Dewar, Donald

Barnett, Guy (Greenwich)

Cocks, Rt Hon Michael (Bristol S)

Dixon, Donald

Barnett, Rt Hon Joel (Heywood)

Cohen, Stanley

Dormand, Jack

Belth, A. J.

Concannon, Rt Hon J. D.

Douglas, Dick

Benn, Rt Hon Anthony Wedgwood

Conian, Bernard

Douglas-Mann, Bruce

Bennett, Andrew (Stockport N)

Cook, Robin F.

Dubs, Alfred

Bidwell, Sydney

Cowans, Harry

Duffy, A. E. P.

Boothroyd, Miss Betty

Cox, Tom (Wandsworth, Tooting)

Dunn, James A. (Liverpool, Kirkdale)

Bottomley, Rt Hon Arthur (M'brough)

Craigen, J. M. (Glasgow, Maryhill)

Dunnett, Jack

Bray, Dr Jeremy

Crowther, J. S.

Dunwoody, Mrs Gwyneth

Brown, Hugh D. (Provan)

Cryer, Bob

Eastham, Ken

Brown, Robert C. (Newcastle W)

Cunliffe, Lawrence

Edwards, Robert (Wolv SE)

Brown, Ronald W. (Hackney S)

Cunningham, George (Islington S)

Ellis, Tom (Wrexham)

English, Michael

Lewis, Ron (Carlisle)

Rooker, J. W.

Ennals, Rt Hon. David

Litherland, Robert

Roper, John

Evans, loan (Aberdare)

Lofthouse, Geoffrey

Ross, Ernest (Dundee West)

Evans, John (Newton)

Lyon, Alexander (York)

Rowlands, Ted

Faulds, Andrew

Lyons, Edward (Bradford West)

Ryman, John

Field, Frank

McCartney, Hugh

Sandelson, Neville

Fitt, Gerard

McDonald, Dr Oonagh

Sever, John

Flannery Martin

McElhone, Frank

Sheerman, Barry

Fletcher, L. R. (Iikeston)

McGuire, Michael (Ince)

Sheidon, Rt Hon Robert (A'ton-u-L)

Fletcher, Ted (Darlington)

McKay, Allen (Penistone)

Shore, Rt Hon Peter (Step and Pop)

Foot, Rt Hon Michael

McKelvey, William

Short, Mrs Renée

Ford, Ben

MacKenzle, Rt Hon Gregor

Silkin, Rt Hon John (Deptford)

Forrester, John

Maclennan, Robert

Silkin, Rt Hon S. C. (Dulwich)

Foster, Derek

McNally, Thomas

Silverman, Julius

Foulkes, George

McNamara, Kevin

Skinner, Dennis

Fraser, John (Lambeth, Norwood)

McTaggart, Robert

Smith, Rt Hon J (North Lanarkshire)

Freeson, Rt Hon Reginald

McWilliam, John

Snape, Peter

Freud, Clement

Magee, Bryan

Soley, Clive

Garrett, John (Norwich S)

Marks, Kenneth

Spearing, Nigel

Garrett, W. E. (Wallsend)

Marshall, David (Gl'sgow.Shettles'n)

Spriggs, Leslie

George, Bruce

Marshall, Dr Edmund (Goole)

Stallard, A. W.

Gilbert, Rt Hon Dr John

Marshall, Jim (Leicester South)

Stoddart, David

Ginsburg, David

Martin, Michael (Gl'gow, Springb'rn)

Slott, Roger

Golding, John

Maxton, John

Strang, Gavin

Gourlay, Harry

Maynard, Miss Joan

Straw, Jack

Graham, Ted

Meacher, Michael

Summerskill, Hon Dr Shirley

Grant, John (Islington C)

Mellish, Rt Hon Robert

Taylor, Mrs Ann (Bolton West)

Grimond, Rt Hon J.

Mikardo, Ian

Thomas, Dafydd (Merioneth)

Hamilton, W. W. (Central Fife)

Millan, Rt Hon Bruce

Thomas, Jeffrey (Abertillery)

Harrison, Rt Hon Walter

Miller, Dr M. S. (East Kilbride)

Thomas, Dr Roger (Carmarthen)

Hattersley, Rt Hon Roy

Mitchell, R. C. (Solon, Itchen)

Thorne, Stan (Preston South)

Haynes, Frank

Morris, Rt Hon Alfred (Wythenshawe)

Tilley, John

Healey, Rt Hon Denis

Morris, Rt Hon Charles (Openshaw)

Tinn, James

Heffer, Eric S.

Morris, Rt Hon John (Aberavon)

Torney, Tom

Hogg, Norman (E Dunbartonshire)

Morton, George

Urwin, Rt Hon Tom

Holland, Stuart (L'beth, Vauxhall)

Moyle, Rt Hon Roland

Varley, Rt Hon Eric G.

Home Robertson, John

Newens, Stanley

Wainwright, Edwin (Dearne Valley)

Homewood, William

Oakes, Rt Hon Gordon

Wainwright, Richard (Coine Valley)

Hooley, Frank

Ogden, Eric

Walker, Rt Hon Harold (Doncaster)

Horam, John

O'Halloran, Michael

Watkins, David

Howell, Rt Hon Denis (B'ham, Sm H)

O'Neill, Martin

Weetch, Ken

Howells, Geraint

Orme, Rt Hon Stanley

Wellbeloved, James

Huckfield, Les

Owen, Rt Hon Dr David

White, Frank R. (Bury & Radcliffe)

Hudson, Davies, Gwilym Ednyfed

Palmer, Arthur

White, James (Glasgow, Pollok)

Hughes, Mark (Durham)

Park, George

Whitehead, Phillip

Hughes, Robert (Aberdeen North)

Parker, John

Whitlock, William

Jay, Rt Hon Douglas

Parry, Robert

Willey, Rt Hon Frederick

John, Brynmor

Pavitt, Laurie

Williams, Rt Hon Alan (Swansea W)

Johnson, James (Hull West)

Pendry, Tom

Williams, Sir Thomas (Warrington)

Johnson, Walter (Derby South)

Penhaligon, David

Wilson, Gordon (Dundee East)

Jones, Rt Hon Alec (Rhondda)

Powell, Raymond (Ogmore)

Wilson, William (Coventry SE)

Jones, Dan (Burnley)

Prescott, John

Winnick, David

Kaufman, Rt Hon Gerald

Price, Christopher (Lewisham West)

Woodall, Alec

Kerr, Russell

Race, Reg

Woolmer, Kenneth

Kilfedder, James A.

Radice, Giles

Wriggiesworth, Ian

Kilroy-Silk, Robert

Rees, Rt Hon Merlyn (Leeds South)

Wright, Sheila

Kinnock, Neil

Richardson, Jo

Young, David (Bolton East)

Lamborn, Harry

Roberts, Allan (Bootle)

Leadbitter, Ted

Roberts, Ernest (Hackney North)

TELLERS FOR THE AYES:

Leighton, Ronald

Robertson, George

Mr. James Hamilton and Mr. Donald Coleman.

Lestor, Miss Joan (Eton & Slough)

Robinson, Geoffrey (Coventry NW)

Lewis, Arthur (Newham North West)

Rodgers, Rt Hon William

NOES

Adley, Robert

Biggs-Davison, John

Budgen, Nick

Aitken, Jonathan

Blackburn, John

Bulmer, Esmond

Alexander, Richard

Blaker, Peter

Burden, F. A.

Amery, Rt Hon Julian

Body, Richard

Butcher, John

Ancram, Michael

Bonsor, Sir Nicholas

Butler, Hon Adam

Arnold, Tom

Boscawen, Hon Robert

Cadbury, Jocelyn

Atkins, Rt Hon H. (Speithorne)

Bottomley, Peter (Woolwich West)

Carlisle, John (Luton West)

Atkins, Robert (Preston North)

Bowden, Andrew

Carlisle, Kenneth (Lincoln)

Atkinson, David (B'mouth, East)

Boyson, Dr Rhodes

Chalker, Mrs. Lynda

Baker, Kenneth (St. Marylebone)

Braine, Sir Bernard

Churchill, W. S.

Baker, Nicholas (North Dorset)

Bright, Graham

Clark, Hon Alan (Plymouth, Sutton)

Banks, Robert

Brinton, Tim

Clark, Sir William (Croydon South)

Beaumont-Dark, Anthony

Brittan, Leon

Clarke, Kenneth (Rushcliffe)

Bell, Sir Ronald

Brocklebank-Fowler, Christopher

Clegg, Sir Walter

Bendall, Vivian

Brooke, Hon Peter

Cockeram, Eric

Bennett, Sir Frederic (Torbay)

Brotherton, Michael

Colvin, Michael

Benyon, Thomas (Abingdon)

Brown, Michael (Brigg & Sc'thorpe)

Cope, John

Benyon, W. (Buckingham)

Browne, John (Winchester)

Cormack, Patrick

Bevan, David Gilroy

Bryan, Sir Paul

Corrie, John

Biffen, Rt Hon John

Buck, Antony

Costain, A. P.

896

897

Cranborne, Viscount

Joseph, Rt Hon Sir Keith

Proctor, K. Harvey

Critchley, Julian

Kaberry, Sir Donald

Raison, Timothy

Dean, Paul (North Somerset)

Kershaw, Anthony

Rathbone, Tim

Dickens, Geoffrey

Kimball, Marcus

Rees, Peter (Dover and Deal)

Dorrell, Stephen

King, Rt Hon Tom

Rees-Davles, W. R.

Douglas-Hamilton, Lord James

Kitson, Sir Timothy

Renton, Tim

Dover, Denshore

Knight, Mrs Jill

Rhodes James, Robert

du Cann, Rt Hon Edward

Knox, David

Rhys Williams, Sir Brandon

Dunn, Robert (Dartford)

Lamont, Norman

Ridley, Hon Nicholas

Durant, Tony

Lang, Ian

Ridsdale, Julian

Dykes, Hugh

Latham, Michael

Rifkind, Malcolm

Eden, Rt Hon Sir John

Lawrence, Ivan

Rippon, Rt Hon Geoffrey

Edwards, Rt Hon N. (Pembroke)

Lawson, Nigel

Roberts, Wyn (Conway)

Eggar, Timothy

Lee, John

Rost, Peter

Elliott, Sir William

Lennox-Boyd, Hon Mark

Sainsbury, Hon Timothy

Emery, Peter

Lester, Jim (Beeston)

Scott, Nicholas

Eyre, Reginald

Lewis, Kenneth (Rutland)

Shaw, Giles (Pudsey)

Fairbairn, Nicholas

Lloyd, Ian (Havant & Waterloo)

Shaw, Michael (Scarborough)

Fairgrieve, Russell

Lloyd, Peter (Fareham)

Shelton, William (Streatham)

Faith, Mrs. Sheila

Loveridge, John

Shepherd, Colin (Hereford)

Farr, John

Luce, Richard

Shepherd, Richard (Aldridge-Br'hills)

Fell, Anthony

Lyell, Nicholas

Shersby, Michael

Fenner Mrs Peggy

McCrindle, Robert

Silvester, Fred

Finsberg, Geoffrey

Macfarlane, Neil

Sims, Roger

Fisher, Sir Nigel

MacGregor, John

Skeet, T. H. H.

Fletcher, Alexander (Edinburgh N)

Mackay, John (Argyll)

Smith, Dudley (War. and Leam'ton)

Fletcher-Cooke, Charles

Macmillan, Rt Hon M. (Farnham)

Speller, Tony

Fookes, Miss Janet

McNair-Wilson, Michael (Newbury)

Spence, John

Forman, Nigel

McNair-Wilson, Patrick (New Forest)

Spicer, Jim (West Dorset)

Fowler, Rt Hon Norman

McQuarrie, Albert

Spicer, Michael (S Worcestershire)

Fox, Marcus

Madel, David

Sproat, lain

Fraser, Rt Hon. K. (Stafford & St)

Major, John

Squire, Robin

Fraser, Peter (South Angus)

Marland, Paul

Stainton, Keith

Galbralth, Hon T. G. D.

Marlow, Tony

Stanbrook, Ivor

Gardiner, George (Reigate)

Marshall, Michael (Arundel)

Stanley, John

Gardner, Edward (South Fylde)

Marten, Nell (Banbury)

Steen, Anthony

Garel-Jones, Tristan

Mates, Michael

Stevens, Martin

Gilmour, Rt Hon Sir Ian

Mather, Carol

Stewart, Ian (Hitchin)

Glyn, Dr. Alan

Mawby, Ray

Stewart, John (East Renfrewshire)

Goodhart, Philip

Mawhinney, Dr Brian

Stokes, John

Goodhew, Victor

Maxwell-Hyslop, Robin

Stradling Thomas, J.

Goodlad, Alastair

Mayhew, Patrick

Tapsell, Peter

Gorst, John

Mellor, David

Taylor, Robert (Croydon NW)

Gow, Ian

Meyer, Sir Anthony

Taylor, Teddy (Southend East)

Grant, Anthony (Harrow C)

Miller, Hal (Bromsgrove & Redditch)

Tebbit, Norman

Gray, Hamish

Mills, lain (Meriden)

Temple-Morris, Peter

Greenway, Harry

Mills, Peter (West Devon)

Thatcher, Rt Hon Mrs Margaret

Grieve, Percy

Miscampbell, Norman

Thomas, Rt Hon Peter (Hendon S)

Griffiths, Eldon (Bury St. Edmonds)

Mitchell, David (Basingstoke)

Thompson, Donald

Griffiths, Peter (Portsmouth N)

Moate, Roger

Thornton, Malcolm

Grist, Ian

Molyneaux, James

Townend, John (Bridlington)

Gummer, John Selwyn

Monro, Hector

Townsend, Cyril D. (Bexleyheath)

Hamilton, Hon Archie (Eps'm&Ew'll)

Montgomery, Fergus

Trippier, David

Hamilton, Michael (Salisbury)

Moore, John

Trotter, Neville

Hampson, Dr Keith

Morgan, Geraint

van Straubenzee, W. R.

Hannam, John

Morris, Michael (Northampton, Sth)

Vaughan, Dr. Gerard

Haselhurst, Alan

Morrison, Hon Charles (Devizes)

Viggers, Peter

Hastings, Stephen

Morrison, Hon Peter (City of Chester)

Waddington, David

Havers, Rt Hon Sir Michael

Murphy, Christopher

Wakeham, John

Hawkins, Paul

Myles, David

Waldegrave, Hon William

Hawksley, Warren

Needham, Richard

Walker, Bill (Perth & E Perthshire)

Hayhoe, Barney

Nelson, Anthony

Walker-Smith, Rt Hon Sir Derek

Heath, Rt Hon Edward

Neubert, Michael

Wall, Patrick

Heddle, John

Newton, Tony

Walters, Dennis

Henderson, Barry

Onslow, Cranley

Ward, John

Heseltine, Rt Hon Michael

Oppenheim, Rt Hon Mrs Sally

Watson, John

Hicks, Robert

Osborn, John

Wells, John (Maidstone)

Higgins, Rt Hon Terence L.

Page, John (Harrow, West)

Wells, Bowen (Hert'rd & Stevn'age)

Hill, James

Page, Rt Hon Sir R. Graham

Wheeler, John

Holland, Philip (Carlton)

Page, Richard (SW Hertfordshire)

Whitelaw, Rt Hon William

Hooson, Tom

Parkinson, Cecil

Whitney, Raymond

Hordern, Peter

Parris, Matthew

Wickenden, Keith

Howe, Rt Hon Sir Geoffrey

Patten, Christopher (Bath)

Wiggin, Jerry

Howell, Rt Hon David (Guildford)

Patten, John (Oxford)

Wilkinson, John

Howell, Ralph (North Norfolk)

Pattle, Geoffrey

Williams, Delwyn (Montgomery)

Hunt, David (Wirral)

Pawsey, James

Winterton, Nicholas

Hunt, John (Ravensbourne)

Perclval, Sir Ian

Wolfson, Mark

Hurd, Hon Douglas

Peyton, Rt Hon John

Young, Sir George (Acton)

Irving, Charles (Cheltenham)

Pink, R. Bonner

Younger, Rt Hon George

Jenkin, Rt Hon Patrick

Pollock, Alexander

Jessel, Toby

Porter, George

TELLERS FOR THE NOES:

Johnson Smith, Geoffrey

Powell. Rt Hon J. Enoch (S Down)

Mr. Spencer Le Merchant and Mr. Anthony Berry.

Jopling, Rt Hon Michael

Price, David (Eastlelgh)

Mr. Anthony Berry.

Question accordingly negatived.
Question, That the proposed words be there added, put forthwith pursuant to Standing Order No. 32 (Questions on Amendments):—
The House divided: Ayes 305, Noes 247.

Division No. 397]

AYES

[10.13 pm

Adley, Robert

Eggar, Timothy

Kimball, Marcus

Aitken, Jonathan

Elliott, Sir William

King, Rt Hon Tom

Alexander, Richard

Emery, Peter

Kitson, Sir Timothy

Amery, Rt Hon Julian

Eyre, Reginald

Knight, Mrs Jill

Ancram, Michael

Fairbairn, Nicholas

Knox, David

Arnold, Tom

Fairgrieve, Russell

Lamont, Norman

Atkins, Rt Hon H. (Spelthorne)

Faith, Mrs. Sheila

Lang, Ian

Atkins, Robert (Preston North)

Farr, John

Latham, Michael

Atkinson, David (B'moulh, East)

Fell, Anthony

Lawrence, Ivan

Baker, Kenneth (St. Marylebone)

Fenner, Mrs Peggy

Lawson, Nigel

Baker, Nicholas (North Dorset)

Finsberg, Geoffrey

Lee, John

Banks, Robert

Fisher, Sir Nigel

Lennox-Boyd, Hon Mark

Beaumont-Dark, Anthony

Fletcher, Alexander (Edinburgh N)

Lester, Jim (Beeston)

Bell, Sir Ronald

Fletcher-Cooke, Charles

Lewis, Kenneth (Rutland)

Bendall, Vivian

Fookes, Miss Janet

Lloyd, Ian (Havant & Waterloo)

Bennett, Sir Frederic (Torbay)

Forman, Nigel

Lloyd, Peter (Fareham)

Benyon, Thomas (Abingdon)

Fowler, Rt Hon Norman

Loveridge, John

Benyon, W. (Buckingham)

Fox, Marcus

Luce, Richard

Bevan, David Gilroy

Fraser, Rt Hon. H. (Stafford & St)

Lyell, Nicholas

Biffen, Rt Hon John

Fraser, Peter (South Angus)

McCrindle, Robert

Biggs-Davison, John

Galbraith, Hon T. G. D.

Macfarlane, Neil

Blackburn, John

Gardiner, George (Reigate)

MacGregor, John

Blaker, Peter

Gardner, Edward (South Fylde)

Mackay, John (Argyll)

Body, Richard

Garel-Jones, Tristan

Macmillan, Rt Hon M. (Farnham)

Bonsor, Sir Nicholas

Gilmour, Rt Hon Sir Ian

McNair-Wilson, Michael (Newbury)

Boscawen, Hon Robert

Glyn, Dr. Alan

McNair-Wilson, Patrick (New Forest)

Bottomley, Peter (Woolwich West)

Goodhart, Philip

McQuarrie, Albert

Bowden, Andrew

Goodhew, Victor

Madel, David

Boyson, Dr Rhodes

Goodlad, Alastair

Major, John

Braine, Sir Bernard

Gorst, John

Marland, Paul

Bright, Graham

Gow, Ian

Marlow, Tony

Brinton, Tim

Grant, Anthony (Harrow C)

Marshall, Michael (Arundel)

Brittan, Leon

Gray, Hamish

Marten, Nell (Banbury)

Brocklebank-Fowler, Christopher

Greenway, Harry

Mates, Michael

Brooke, Hon Peter

Grieve, Percy

Mather, Carol

Brotherton, Michael

Griffiths, Eldon (Bury St. Edmonds)

Mawby, Ray

Brown, Michael (Brigg & Sc'thorpe)

Griffiths, Peter (Portsmouth N)

Mawhinney, Dr Brian

Browne, John (Winchester)

Grist, Ian

Maxwell-Hyslop, Robin

Bryan, Sir Paul

Gummer, John Selwyn

Mayhew, Patrick

Buck, Antony

Hamilton, Hon Archie (Epi'm&Ew'll)

Mellor, David

Budgen, Nick

Hamilton, Michael (Salisbury)

Meyer, Sir Anthony

Bulmer, Esmond

Hampson, Dr Keith

Miller, Hal (Bromsgrove & Redditch)

Burden, F. A.

Hannam, John

Mills, lain (Meriden)

Butcher, John

Haselhurst, Alan

Mills, Peter (West Devon)

Butler, Hon Adam

Hastings, Stephen

Miscampbell, Norman

Cadbury, Jocelyn

Havers, Rt Hon Sir Michael

Mitchell, David (Basingstoke)

Carlisle, John (Luton West)

Hawkins, Paul

Moate, Roger

Carlisle, Kenneth (Lincoln)

Hawksley, Warren

Molyneaux, James

Chalker, Mrs. Lynda

Hayhoe, Barney

Monro, Hector

Churchill, W. S.

Heath, Rt Hon Edward

Montgomery, Fergus

Clark, Hon Alan (Plymouth, Sutton)

Heddle, John

Moore, John

Clark, Sir William (Croydon South)

Henderson, Barry

Morgan, Geraint

Clarke, Kenneth (Rushcliffe)

Heseltine, Rt Hon Michael

Morris, Michael (Northampton, Sth)

Clegg, Sir Walter

Hicks, Robert

Morrison, Hon Charles (Devizes)

Cockeram, Eric

Higgins, Rt Hon Terence L.

Morrison, Hon Peter (City of Chester)

Colvin, Michael

Hill, James

Murphy, Christopher

Cope, John

Holland, Philip (Carlton)

Myles, David

Cormack, Patrick

Hooson, Tom

Needham, Richard

Corrie, John

Hordern, Peter

Nelson, Anthony

Costain, A. P.

Howe, Rt Hon Sir Geoffrey

Neubert, Michael

Cranborne, Viscount

Howell, Rt Hon David (Guildford)

Newton, Tony

Critchley, Julian

Howell, Ralph (North Norfolk)

Onslow, Cranley

Dean, Paul (North Somerset)

Hunt, David (Wirral)

Oppenheim, Rt Hon Mrs Sally

Dickens, Geoffrey

Hunt, John (Ravensbourne)

Osborn, John

Dorrell, Stephen

Hurd, Hon Douglas

Page, John (Harrow, West)

Douglas-Hamilton, Lord James

Irving, Charles (Cheltenham)

Page, Rt Hon Sir R. Graham

Dover, Denshore

Jenkin, Rt Hon Patrick

Page, Richard (SW Hertfordshire)

du Cann, Rt Hon Edward

Jessel, Toby

Parkinson, Cecil

Dunn, Robert (Dartford)

Johnson Smith, Geoffrey

Parris, Matthew

Durant, Tony

Jopling, Rt Hon Michael

Patten, Christopher (Bath)

Dykes, Hugh

Joseph, Rt Hon Sir Keith

Patten, John (Oxford)

Eden, Rt Hon Sir John

Kaberry, Sir Donald

Pattle, Geoffrey

Edwards, Rt Hon N. (Pembroke)

Kershaw, Anthony

Pawsey, James

900

901

Percival, Sir Ian

Sims, Roger

Trotter, Neville

Peyton, Rt Hon John

Skeet, T H. H.

van Straubenzee, W. R.

Pink, R. Bonner

Smith, Dudley (War. and Leam'ton)

Vaughan, Dr. Gerard

Pollock, Alexander

Speller, Tony

Viggers, Peter

Porter, George

Spence, John

Waddington, David

Powell. Rt Hon J. Enoch (S Down)

Spicer, Jim (West Dorset)

Wakeham, John

Price, David (Eastleigh)

Spicer, Michael (S Worcestershire)

Waldegrave, Hon William

Proctor, K. Harvey

Sproat, Iain

Walker, Bill (Perth & E Perthshire)

Raison, Timothy

Squire, Robin

Walker-Smith, Rt Hon Sir Derek

Rathbone, Tim

Stainton, Keith

Wall, Patrick

Rees, Peter (Dover and Deal)

Stanbrook, Ivor

Walters, Dennis

Rees-Davles, W. R.

Stanley, John

Ward, John

Renton, Tim

Steen, Anthony

Watson, John

Rhodes James, Robert

Stevens, Martin

Wells, John (Maidstone)

Rhys Williams, Sir Brandon

Stewart, Ian (Hitchin)

Wells, Bowen (Hert'rd & Stevn'age)

Ridley, Hon Nicholas

Stewart, John (East Renfrewshire)

Wheeler, John

Ridsdale, Julian

Stokes, John

Whitelaw, Rt Hon William

Ritkind, Malcolm

Stradling Thomas, J.

Whitney, Raymond

Rippon, Rt Hon Geoffrey

Tapsell, Peter

Wickenden, Keith

Roberts, Wyn (Conway)

Taylor, Robert (Croydon NW)

Wiggin, Jerry

Rost, Peter

Taylor, Teddy (Southend East)

Wilkinson, John

Sainsbury, Hon Timothy

Tebbit, Norman

Williams, Delwyn (Montgomery)

Scott, Nicholas

Temple-Morris, Peter

Winterton, Nicholas

Shaw, Giles (Pudsey)

Thatcher, Rt Hon Mrs Margaret

Wolfson, Mark

Shaw, Michael (Scarborough)

Thomas, Rt Hon Peter (Hendon S)

young, Sir George (Acton)

Shelton, William (Streatham)

Thompson, Donald

Younger, Rt Hon George

Shepherd, Colin (Hereford)

Thornton, Malcolm

Shepherd, Richard (Aldrldge-Br'hills)

Townend, John (Bridlington)

TELLERS FOR THE AYES:

Shersby, Michael

Townsend, Cyril D. (Bexleyheath)

Mr. Spencer Le Marchant and Mr. Anthony Berry.

Silvester, Fred

Trippier, David

NOES

Abse, Leo

Dempsey, James

Home Robertson, John

Adams, Allen

Dewar, Donald

Homewood, William

Alton, David

Dixon, Donald

Hooley, Frank

Anderson, Donald

Dormand, Jack

Horam, John

Archer, Rt Hon Peter

Douglas, Dick

Howell, Rt Hon Denis (B'ham, Sm H)

Armstrong, Rt Hon Ernest

Douglas-Mann, Bruce

Howells, Geraint

Ashley, Rt Hon Jack

Dubs, Alfred

Huckfield, Les

Ashton, Joe

Duffy, A. E. P.

Hudson Davies, Gwilym Ednyfed

Atkinson, Norman (H'gey, Tott'ham)

Dunn, James A. (Liverpool, Kirkdale)

Hughes, Mark (Durham)

Bagier, Gordon A. T.

Dunnett, Jack

Hughes, Robert (Aberdeen North)

Barnett, Guy (Greenwich)

Dunwoody, Mrs Gwyneth

Jay, Rt Hon Douglas

Barnett, Rt Hon Joel (Heywood)

Eastham, Ken

John, Brynmor

Beith, A. J.

Edwards, Robert (Wolv SE)

Johnson, James (Hull West)

Benn, Rt Hon Anthony Wedgwood

Ellis, Tom (Wrexham)

Johnson, Walter (Derby South)

Bennett, Andrew (Stockport N)

English, Michael

Jones, Rt Hon Alec (Rhondda)

Bidwell, Sydney

Ennals, Rt Hon. David

Jones, Dan (Burnley)

Boothroyd, Miss Betty

Evans, loan (Aberdare)

Kaufman, Rt Hon Gerald

Bottomley, Rt Hon Arthur (M'brough)

Evans, John (Newton)

Kerr, Russell

Bray, Dr Jeremy

Faulds, Andrew

Kilfedder, James A.

Brown, Hugh D. (Provan)

Field, Frank

Kilroy-Silk, Robert

Brown, Robert C. (Newcastle W)

Fitt, Gerard

Kinnock, Neil

Brown, Ronald W. (Hackney S)

Flannery, Martin

Lamborn, Harry

Brown, Ron (Edinburgh, Leith)

Fletcher, L. R. (Ilkeston)

Leadbitter, Ted

Buchan, Norman

Fletcher, Ted (Darlington)

Leighton, Ronald

Callaghan, Rt Hon J. (Cardiff SE)

Foot, Rt Hon Michael

Lestor, Miss Joan (Eton & Slough)

Callaghan, Jim (Middleton & P)

Ford, Ben

Lewis, Arthur (Newham North West)

Campbell, Ian

Forrester, John

Lewis, Ron (Carlisle)

Campbell-Savours, Dale

Foster, Derek

Litherland, Robert

Canavan, Dennis

Foulkes, George

Lofthouse, Geoffrey

Carmichael, Neil

Fraser, John (Lambeth, Norwood)

Lyon, Alexander (York)

Carter-Jones, Lewis

Freeson, Rt Hon Reginald

Lyons, Edward (Bradford West)

Cartwright, John

Freud, Clement

McDonald, Dr Oonagh

Cocks, Rt Hon Michael (Bristol S)

Garrett, John (Norwich S)

McElhone, Frank

Cohen, Stanley

Garrett, W. E. (Wallsend)

McGuire, Michael (Ince)

Coleman, Donald

George, Bruce

McKay, Allen (Penistone)

Concannon, Rt Hon J. D.

Gilbert, Rt Hon Dr John

McKelvey, William

Conian, Bernard

Ginsburg, David

MacKenzie, Rt Hon Grecor

Cook, Robin F.

Golding, John

Maclennan, Robert

Cowans, Harry

Gourlay, Harry

McNally, Thomas

Cox, Tom (Wandsworth, Tooting)

Graham, Ted

McNamara, Kevin

Craigen, J. M. (Glasgow, Maryhill)

Gower, Sir Raymond

McTaggart, Robert

Crowther, J. S.

Grant, John (Islington C)

McWilliam, John

Cryer, Bob

Grimond, Rt Hon J.

Magee, Bryan

Cunliffe, Lawrence

Hamilton, James (Bothwell)

Marks, Kenneth

Cunningham, George (Islington S)

Hamilton, W. W. (Central Fife)

Marshall, David (Gl'sgow.Shetiles'n)

Dalyell, Tam

Harrison, Rt Hon Walter

Marshall, Dr Edmund (Goole)

Davidson, Arthur

Hattersley, Rt Hon Roy

Marshall, Jim (Leicester South)

Davies, Rt Hon Denzil (Llanelli)

Haynes, Frank

Martin, Michael (Gl'gow, Sprlngb'rn)

Davies, Ifor (Gower)

Healey, Rt Hon Denis

Maxton, John

Davis, Clinton, (Hackney Central)

Heffer, Eric S.

Maynard, Miss Joan

Davis, Terry (B'rm'ham, Stechford)

Hogg, Norman (E Dunbartonshire)

Meacher, Michael

Deakint, Eric

Holland, Stuart (L'beth, Vauxhall)

Mellish, Rt Hon Robert

902

903

Mikardo, Ian

Robertson, George

Thomas, Dr Roger (Carmarthen)

Millan, Rt Hon Bruce

Robinson, Geoffrey (Coventry NW)

Thorne, Stan (Preston South)

Miller, Dr M. S. (East Kilbride)

Rodgers, Rt Hon William

Tilley, John

Mitchell, R. C. (Solon, Itchen)

Rooker, J. W.

Tinn, James

Morris, Rt Hon Alfred (Wythenshawe)

Roper, John

Torney, Tom

Morris, Rt Hon Charles (Openshaw)

Ross, Ernest (Dundee West)

Urwin, Rt Hon Tom

Morris, Rt Hon John (Aberavon)

Rowlands, Ted

Varley, Rt Hon Eric G.

Morton, George

Ryman, John

Walnwright, Edwin (Dearne Valley)

Moyle, Rt Hon Roland

Sandelson, Neville

Walnwright, Richard (Coine Valley)

Newens, Stanley

Sever, John

Walker, Rt Hon Harold (Doncaster)

Oakes, Rt Hon Gordon

Sheerman, Barry

Watkins, David

Ogden, Eric

Sheldon, Rt Hon Robert (A'ton-u-L)

Weetch, Ken

O'Halloran, Michael

Shore, Rt Hon Peter (Step and Pop)

Wellbeloved, James

O'Neill, Martin

Short, Mrs Renée

White, Frank R. (Bury & Radcliffe)

Orme, Rt Hon Stanley

Silkin, Rt Hon John (Deptford)

White, James (Glasgow, Pollok)

Owen, Rt Hon Dr David

Silkin, Rt Hon S. C. (Dulwich)

Whitehead, Phillip

Palmer, Arthur

Silverman, Julius

Whitlock, William

Park, George

Skinner, Dennis

Willey, Rt Hon Frederick

Parker, John

Smith, Rt Hon J (North Lanarkshire)

Williams, Rt Hon Alan (Swansea W)

Parry, Robert

Snape, Peter

Williams, Sir Thomas (Warrington)

Pavitt, Laurie

Soley, Clive

Wilson, Gordon (Dundee East)

Pendry, Tom

Spearing, Nigel

Wilson, William (Coventry SE)

Penhaligon, David

Spriggs, Leslie

Winnick, David

Powell, Raymond (Ogmore)

Stallard, A. W.

Woodall, Alec

Prescott, John

Stoddart, David

Woolmer, Kenneth

Price, Christopher (Lewisham West)

Stott, Roger

Wrigglesworth, Ian

Race, Reg

Strang, Gavin

Wright, Sheila

Radice, Giles

Straw, Jack

Young, David (Bolton East)

Rees, Rt Hon Merlyn (Leeds South)

Summerskill, Hon Dr Shirley

Richardson, Jo

Taylor, Mrs Ann (Bolton West)

TELLERS FOR THE NOES:

Roberts, Allan (Bootle)

Thomas, Dafydd (Merioneth)

Mr. Joseph Dean and Mr. Hugh McCartney.

Roberts, Ernest (Hackney North)

Thomas, Jeffrey (Abertillery)

Question accordingly agreed to.
Mr. DEPUTY SPEAKER forthwith declared the Main Question, as amended, to be agreed to, pursuant to Standing Order No. 18 (Business of Supply).
Resolved,
That this House approves the economic policies of Her Majesty's Government which are the only means of defeating inflation and providing a sound basis for sustainable economic and industrial recovery.

UNIVERSITY FEES (HONG KONG STUDENTS)
Motion made, and Question proposed. That this House do now adjourn.—[Mr. Brooke.]
10.24 pm
Sir Paul Bryan: The people of Hong Kong will appreciate that in singling out this subject for urgent debate Mr. Speaker has been quick to recognise the deep concern about the Government's apparent discrimination against their students in the matter of university fees.
When the Government announced that overseas students should pay the full cost of the education that they receive at universities in Britain, there was general understanding of that principle although not universal acceptance of its merits. Most overseas students and their Governments resented the change, but the policy was consistent so long as it was aimed at
904
all overseas students. However, when the application of the policy was set down in the DES circular of 10 June, it turned out that the policy was aimed not at all overseas students but only at some. Students from the EEC are to pay the same fees as those from the United Kingdom.
It is difficult to follow the logic of subsidising students from France and Germany and at the same time complaining about Britain's net contribution to the EEC budget. That exercise is designed to cut public spending, yet subsidies are retained for the very people whom we believe we are already subsidising too heavily. It may be that we benefit through subsidies from our EEC partners to British students studying in Europe. If so, what is the balance? Perhaps the Minister will give us some estimate of the consequential costs or benefit to Britain and explain the nature of our obligation to extend this concession to the European Community.
But the subsidy goes further than Europe. The countries of the Community are listed in the circular to which I have referred. Hon. Members probably think that by now they know which countries they are. It may come as a surprise to them to learn that, in addition to the well-known nine EEC countries, no fewer than 13 others are included. Five are recognisable as part of the principal countries, such as the Isle of Man and the Channel Islands, but the remaining

905
eight territories are not recognisable as part of the principal countries. Apart from Greenland and Gibraltar, they include the French overseas departments such as Guadeloupe, Martinique, French Guiana, Reunion, St. Pierre and another that I cannot pronounce. There are, no doubt, good reasons for including in the EEC those remaining French colonies which are departments of France, but it is preposterous to allow the technicalities of the Treaty of Rome to drive us to make absurd distinctions in recognition of obligations to the dependent territories.
Why, for instance, should concessions be made to students from Guadeloupe and Martinique but not to those from the British Virgin Islands, which are next door? Why to those from French Guiana but not Belize, or to those from Gibraltar but not those from the Falkland Islands? Above all, why should Britain give favourable treatment to French and Danish overseas territories while excluding students from its largest remaining territory, Hong Kong?
Britain has not followed the French practice of calling its overseas territories departments of Britain and having them return their own representatives to Parliament—otherwise there would be more Members in this House representing Hong Kong than there would be representing Scotland. Yet Britain is ultimately responsible for the administration of Hong Kong. Its relationship with Hong Kong is much closer than with the sovereign States of the EEC. Similarily, Britain's relationship with countries formerly dependent on Britain and now independent members of the Commonwealth is clearly of a more distant and less responsible nature than with a dependent territory which has no prospects of ever becoming independent.
The relationship between Hong Kong and Britain is advantageous to both, but it needs to be nurtured. From time to time this involves recognising Hong Kong as being different and distinct from foreign countries when devising policies for overseas territories. The distinction is not without beneficial consequences for Britain. If Hong Kong were just another Chinese city, does anyone imagine that British exports to Hong Kong would still be three times those to the whole of China or even that exporters would find
906
it possible to maintain and develop our present exports to China without the Hong Kong base?
No other group of 5 million people in Asia purchases anything like the value of British exports that Hong Kong does. Even Japan's total purchases exceed Hong Kong's by only one-third, despite the fact that Japan's GNP is 50 times that of Hong Kong. The income from insurance, banking, shipping and airline operations is substantial. Two of our nationalised industries, British Airways and Cable and Wireless, earn a large proportion of their profits in Hong Kong. Landing rights at its airport are in the gift of our Department of Trade. We are the only European or American country able to trade off landing rights at an important Asian airport for concessions elsewhere.
All this flows from the fact that Hong Kong is not a foreign country but a dependent country. Although dependent, Hong Kong makes few calls on Britain. Without aid, it has made astonishing progress in providing its own education in the face of quite staggering demands. When liberated from the Japanese occupation in 1945, with a population of only 600,000, there were not even enough primary schools for all its children. The influx from China gave Hong Kong a population of 4 million by 1971, yet by that year primary schooling was available for all. An even greater effort was required to produce secondary school places for all primary school leavers, but this was achieved by 1978.
The provision of places in universities and polytechnics has also progressed, although the supply of post-secondary education is still less than the demand. This is because the Hong Kong Government have—quite rightly, in my view—given priority to getting secondary schooling for everybody. Even though priority has had to be given to expansion of secondary education, the number of full-time students in higher education has increased at an average of 7 per cent. a year over the last five years. Similar progress has been made in housing and medical services.
All these achievements are now threatened by the excessive rate of immigration from China. Last year the population of Hong Kong increased by over 6 per cent., due very largely to

907
emigration from China and the influx of refugees from Vietnam. It is as if the population of the United Kingdom were to increase by 3½ million people in a year. Four hundred to 500 new immigrants are still arriving every day.
The strain on all social services and education is severe, yet it is precisely at this time that Britain chooses to inflict even greater pressure on Hong Kong by increasing the cost of university education in Britain by two, three or five times, depending on the course.
University students from Hong Kong are among the most diligent and talented. On return to Hong Kong they carry British traditions and standards with them. A large proportion of leaders in commerce, industry and the professions in Hong Kong were educated in Britain, and always have been. The connections forged there in their youth are lifelong and show directly in their perforence for trading with this country.
It will be very difficult for the people of Hong Kong to accept protestations of support from Britain when they see that students from overseas territories of the major EEC countries are treated in Britain on a par with British students while students from Hong Kong, a British overseas territory, are treated in Britain as foreigners. [HON. MEMBERS: "Hear, hear."] Colonial exploitation is a term which I had hoped had passed from the terminology of the relationships between Britain and its dependent territories. The retention of discrimination in this matter against British dependent territories is an extraordinary inconsistency which I hope will be removed before the fees become due in this autumn.
10.34 pm
Mr. Edward Rowlands: I intervene briefly in this very important debate in order to associate the official Opposition fully with the remarks of the hon. Member for Howden (Sir P. Bryan).
There are moments in any nonsensical policy when the absurdities and the anomalies of that policy destroy its whole rationale. The hon. Member's speech has amply demonstrated those absurdities and anomalies.
We have arrived at a position in which islands belonging to the French Government are entitled, under the EEC rules,
908
to have the same preferential treatment, whereas dependent territories, whether they be Hong Kong, the Falkland Islands, the British Virgin Islands or a number of other territories of which I can speak personally—having in the previous Labour Government been the Minister responsible for our relations with those territories—are not so entitled. For those students to be discriminated against in this way reveals the absurdity of the policy.
There are times when a general policy statement can be revealed for what it is —when its anomalies and idiosyncrasies can be revealed. We associate ourselves with what was said about the policy by the hon. Member for Howden.
Does anyone believe that we should discriminate against students from Hong Kong, the British Virgin Islands or the remaining dependent territories, of which there are 17 in all, Hong Kong being the largest, when students from French overseas territories are entitled under the EEC rules to study here on the same basis as other EEC students?
Will the Minister explain the so-called logic of that argument? [Interruption.] Irrespective of the figures, it is nonsense. Is the Minister going to say "We do not think that anybody from Martinique or any other territory will come here"? We accept the principle of allowing French overseas students to come here—it may be a dozen, 15 or whatever; I do not care what the figure is—but to discriminate against students from our dependent territories is a disgrace.
The Government preach the idea of promoting Western influence and rejecting influences from Eastern Europe and the Soviet Union. To cut back on British Council grants and other areas of intangible influence that we have been able to promote and achieve is nonsense.
I hope that the Minister will not rest his case on the argument he has been pressing from a sedentary position. Hon. Members on both sides of the House will reject it if he does. We support the statement made by the hon. Member for Howden.
10.37 pm
Dr. Keith Hampson: My hon. Friend the Under-Secretary of State would not expect me to question the policy of having high fees for overseas students

909
since 1974–75 when I had the dubious distinction of being quoted in The Times leader for saying that the then fees were peanuts. This is not the time or place to go into the scale on which fees are raised.
I want to make a brief intervention because I was recently in Hong Kong. I urge my hon. Friend not to be too insular. I think that there are important questions here of the relationship between Hong Kong and this country which transcend the narrow considerations of his Department and of finance which are difficult for him in his dealings with the Treasury.
I went to Hong Kong with my hon. Friend the Member for the Wirral (Mr. Hunt). We were struck vividly by the concern expressed about this matter. This was the touchstone of our relationship with Hong Kong. We were asked "Is it a dependent territory or is it a foreign territory?" That was linked with the Cathay Pacific issue, now happily resolved to Hong Kong's satisfaction, I think, with the nationality problem, with the question of the MFA negotiations and with the financing of British troops there. All these matters coalesce and take on a dimension and importance beyond the specific question of Hong Kong students in this country.
There is a direct and specific gain to this country in having Hong Kong students here. My hon. Friend the Member for the Wirral and I were urging Chinese business men to buy more British goods, more British cloth. Our hon. Friend the Minister for Trade is going out there with a delegation to urge them to buy more of our goods. What do we do? Do we hold out our hand to them to show that they matter to us? When they look at what we have done for French dependent territories, they are disappointed. That is the central question.
We must not take for granted the status of Hong Kong. The bulk of students coming to Britain from Hong Kong for higher education go into engineering. They do not go back to Government service or white collar jobs, as is so often the case in this country. They go into industry and commerce and, therefore, have a direct impact on investment. In our own interests, it is important that the Chinese leaders in that colony have a British bias when they come to decide on investment and purchasing.
910
I urge my hon. Friend, with his interest in and his writings on the history and philosophy of conservatism, to maintain a belief in empiricism and to judge forces on their consequences and not merely in terms of the specific requirements of his Department and its dealings with the Treasury. There are important outside consequences to be considered. We must nurture our relationship with Hong Kong. We should not take it for granted. If we are to use Hong Kong, as we must, as the key bridge towards boosting our new relationship and rapprochement with China, we must build and maintain links with Hong Kong.
10.40 pm
The Under-Secretary of State for Education and Science (Dr. Rhodes Boyson): I appreciate the concern expressed by my hon. Friends the Members for Howden (Sir P. Bryan) and for Ripon (Dr. Hampson), who has recently returned from Hong Kong. I was with our fleet in the Far East at the time of the reoccupation of Hong Kong. I was again in Hong Kong two years ago with Milton Friedman, who was contemplating a television programme about Hong Kong, where he felt there were useful lessons to learn.
I appreciate the genuine concern of my hon. Friends over students from Hong Kong. However, we cannot divorce consideration of those students from the Government's overall policy on overseas students. The hon. Member for Lewisham, West (Mr. Price) was a member of the Select Committee dealing with the matter. The reports are being carefully studied, and the Government's response will be given shortly.
We have no lessons to learn from the Labour Party about foreign students. Labour policy on quotas and increasing fees has failed. Our policy will succeed. I am pleased to see signs of reform on the part of the hon. Member for Merthyr Tydfil (Mr. Rowlands). However, it was Anthony Crosland who first introduced differential fees for overseas students in 1967–68. Labour Governments increased those fees five times. The Conservative Government increased them once. In 1978–79 a Labour Government introduced quotas. We shall kill the fatted calf if the prodigal son has truly reformed, but we shall not know that until we see another Labour Government in power.

911
It is important to consider the figures. In the 10 years from 1967–68 to 1977–78 the number of overseas students, heavily subsidised by British taxpayers, many of whom would have liked to go to university, multiplied. Hon. Gentlemen may shake their heads, but I have more confidence in the man in the street. The trouble with the Labour Party is that it has lost its beliefs.
The Labour Party tried to control the number of overseas students but instead multiplied it. Labour Members now object when we try to control the number. I am sorry to draw so much blood. but it is interesting to see how the Labour Party's guilt complex manifests itself.
Mr. James Johnson: What about Hong Kong?
Dr. Boyson: I realise that the hon. Gentleman is trying to protect his Front Bench colleagues. He is a courteous man. However, they are beyond saving.
Over the past 10 years, the number of foreign students in our universities has increased by 18,500—the size of two universities the size of the university of Birmingham. We cannot let the British taxpayer continue to support that increasing number.
I am not a lawyer. I take advice on legal questions. The dependent territories of France are legally part of France. Hong Kong is not part of Britain.
Mr. Neil Kinnock: The situation is morally wrong.
Dr. Boyson: It may be morally wrong, but one cannot go into court and expect to have a case dismissed because one is morally right. France's dependent territories are part of France. That is the only way that the EEC can work.
Hon. Members have raised the question of numbers.
Mr. Kinnock: Will the hon. Gentleman give way?
Dr. Boyson: No.
Mr. Kinnock: Shameful.
Dr. Boyson: We know how long the hon. Gentleman takes once he gets on his feet. We can never get him down again. I will not allow him to intervene. I am replying to my hon. Friends and some Labour Back Benchers, but not to the
912
Opposition Front Bench. Let me give the figures.
Mr. Kinnock: Do not mislead the House.
Dr. Boyson: I shall not mislead the House. The hon. Member for Bedwellty (Mr. Kinnock) should not talk about anyone misleading the House, bearing in mind what he said recently about school books.
In 1977–78 only seven students came to Britain from France's overseas territories. How many were there from the rest of the world? We have talked about a figure of 86,000. How many were there from the Commonwealth? We all appreciate the Commonwealth. There is at least equal feeling for the Commonwealth on the Government side as there is among the Opposition. After all, who initiated the debate? Was it the Opposition or was it Conservative Back Benchers who are genuinely concerned?
Mr. Christopher Price: It is incumbent upon the Minister to say how much weight the Government attach to the numbers argument, which has a point to it, and, against that, how much weight they attach to the issue that some of us consider much weightier—namely, the influence of Britain in the world and our responsibilities towards dependent territories.
Dr. Boyson: That is a serious question. I shall answer it in the spirit in which the hon. Gentleman asked it. How does one transfer morality into legal practice within the EEC? That is the problem. Legally, French territories are part of France. Hong Kong is not part of Britain. The whole question turns on that. That is how the difficulty has to be looked at.
I mentioned the numbers because no one can say that the British university system was being overcrowded by the seven students to whom I referred. We could absorb them.
I have great respect for the educational knowledge of the hon. Member for Lewisham, West. We have had many great battles over the past 15 years and he has often scored points at my expense. In 1978–79 there were 5,000 students from Hong Kong in all our institutions, includin 1,600 in universities.

913
Reference has been made to the EEC decision. My hon. Friend the Member for Howden did not stress that aspect. He mentioned the dependent territories of France. We made that decision as regards the EEC in the light of the principle of student mobility within the Community. I have never been an enthusiast of the EEC. If there is such a thing as an agnostic on the EEC, I am it. But we are a member of the EEC and we must act as such. The EEC is the only area of the world which sends us fewer students than we send to it. Everywhere else the opposite applies.
Mr. Kinnock: That is a stupid argument.
Dr. Boyson: To the hon. Member all arguments are stupid except those he puts forward. Some people, however, even disagree with the points that he makes on the basis of his great brilliance.
We have brought into practice a new scholarship system for overseas postgraduate students which will apply to Hong Kong as to everywhere else. I believe that people will come here not for first degrees but for postgraduate degrees as more universities become developed in Hong Kong. We are building up to the point where within three years one-seventh of the postgraduate research students in this country will be funded. Many of them will come from Hong Kong.
The Foreign and Commonwealth Office provides about £36 million to be spent in parts of the Commonwealth and the Third world to help students. That should be borne in mind. I shall be greatly interested, when the figures are published in the autumn, to discover how many fewer we are taking from various parts of the world. The figures two months ago showed that applications were only 12 per cent. down, yet the numbers could fall by 17 per cent.
914
before the universities would lose a penny of the money that is paid to them.
My hon. Friends referred to the development of higher education in Hong Kong. It has been progressing very well. There are now two universities and one polytechnic there. One aspect that we are considering is the loan system that has been developed in Hong Kong. Last year $26 million was provided interest free to the universities under the loan system. The figure for the polytechnic was $8·5 million interest-free. Perhaps the Government of Hong Kong could be approached on the possibility of some of that help being transferred to Hong Kong students in this country. I have discussed that with my hon. Friend the Minister of State. Foreign and Commonwealth Office.
When we know the figures in October, we shall monitor what has happened. We have put £5 million into postgraduate courses in universities to prevent their going under this year. If we find that certain territories are particularly affected, while we cannot guarantee that we shall change the policy we will look at the situation as it has developed and against the background of our own economic circumstances.
If we can do anything in any way to help Hong Kong in the development of its higher education system—this applies to my Department and the Foreign and Commonwealth Office—we shall do it. I am grateful to my hon. Friend the Member for Howden for having raised the point. We understand his concern. he also realises, I know, the need for cutbacks, given the economic circumstances of this country. We are prepared to continue a dialogue within our present policy.
Question put and agreed to.
Adjourned accordingly at seven minutes to Eleven o'clock.