INDUSTRY (GOVERNMENT POLICIES)

HC Deb 10 July 1980 vol 988 cc769-903

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 (Leeds, East)

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 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. 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 of the world recession on the developing countries. Investment is the seed corn for the future of our industry—

Mr. Dennis Skinner (Bolsover)

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 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 - (Consett)

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- 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 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 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.

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 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 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 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 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- 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 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 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 (Sheffield, Heeley)

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 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 (Blackburn)

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, 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 (Motherwell and Wishaw)

Is the right hon. and learned Gentleman aware that in ICI—to give him a measure of the magnitude of the 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 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 (Bristol, South-East)

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 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 (Hackney, Central)

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 (Westhoughton)

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 (Cardiff, South-East)

The right hon. and learned Gentleman has told us three times in his 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- 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 (Keighley)

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 (Fife, Central)

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 (Dunfermline)

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 (Newham, South)

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 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 (Ashfield)

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 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 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 (Glasgow, Central)

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 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- 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 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 (Oxford)

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 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 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 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.

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 (Clackmannan and East Stirlingshire)

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 (Bristol, South-East)

I join the hon. Member for Oxford (Mr. Patten) in congratulating my hon. Friend 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 (Nantwich)

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 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 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 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. 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 (Dartford)

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 (Workington)

Stock relief.

Mr. Dunn

To be charitable, the Labour Party in office did nothing in particular and did it very well.

Mr. Joseph Dean (Leeds, West)

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, 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 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 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 (Nottingham, North)

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 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 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.

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 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 (Coventry, South-West)

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 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 (Dundee, West)

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 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 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 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 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 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 (Deptford)

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 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 (Battersea, North)

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. 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 (Leeds, West)

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 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 (Ormskirk)

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.

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 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 (Loughborough)

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 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. 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- 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 currency than about the performance of the real economy.

Mr. Robert Maclennan (Caithness and Sutherland)

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.

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 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 (Plymouth, Sutton)

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 our current account as we are doing at the moment.

7.25 pm

Mr. David Penhaligon (Truro)

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 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 (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. 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. 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 (Southampton, Test)

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 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 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 (Derby, North)

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 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 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 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 (Preston, South)

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 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. 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.

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 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 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 (Nelson and Colne)

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 (Thurrock)

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 (Dundee, West)

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 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 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 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. 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 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. 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 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 (Holland with Boston)

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 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 (Bury and Radcliffe)

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 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 (Burnley)

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 (Hackney, North and Stoke Newington)

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.

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 (Ormskirk)

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 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", 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 (Stockport, South)

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 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.

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 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 (Deptford)

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.

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 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.

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 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.

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 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 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 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- 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 (West Stirling-shire)

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- -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 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.

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.

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 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 (Liverpool, Walton)

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 (Greenwich)

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 (Bothwell)

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.

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

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

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.