Debate on the Address

HC Deb 20 November 1980 vol 994 cc7-102

[FIRST DAY]

2.36 pm

Mr. William Van Straubenzee (Wokingham)

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

I must confess that it was a considerable shock when I realised that 21 years had passed since I first heard that motion put to the House. I first heard the Address moved by Mr. Arthur Tiley, who then represented Bradford, West. Many still remember him with affection. The Speech was seconded by my hon. and learned Friend the Member for South Fylde (Mr. Gardner), who then represented Billericay. That was the first of his many speeches that have delighted and impressed the House. In those days, the mover and seconder followed the conventions, just as we shall today. They were not unduly contentious. They willingly made mention of the constituencies from which they came. Most welcome of all, they were brief. [HON. MEMBERS: "Hear, hear."] If only those who cheer would take their own medicine!

Of the 102 hon. Members who came to this House for the first time in 1959, only 26 have seen continuous service in this House. I shall start on a sombre note and add that of the 102 hon. Members, 18 are dead. Obviously, we hope that they have their reward above. In addition, three of those hon. Members are now in another place. Since those days, one—on this side—has completed a sentence of imprisonment and one has become Prime Minister.

On this occasion, perhaps I may presume to speak for the whole House when I give our warmest greetings to the Prime Minister on her 21 years of uninterrupted service to the House. My next remarks might be marginally more contentious, just marginally. Many of us hope to see my right hon. Friend complete 21 years at No. 10.

When seconding the proposition those years ago, my hon. and learned Friend the Member for South Fylde drew on his experience of representing a London overspill new town. I have always thought that the concept of a new town was one in which all parties could take pride. It is of special concern to me as representing one of them, namely, Bracknell — one, I claim, of the most successful. The concept was given expression to by that granite figure, John, first Lord Reith, principally remembered for his work at the BBC. It has been developed and adapted under successive Governments so that innumerable young couples have been enabled to make new lives for themselves and their families in towns that have brought together their homes, their work and their leisure.

My hon. and learned Friend the Member for South Fylde referred, rightly, to the strains imposed on the surrounding countryside by such massive developments. It has been my observation since then that there is much greater concern than there used to be with the quality of life and particularly the quality of life in the surrounding countryside. Hence I welcome the references in the Gracious Speech to the conservation of wildlife and the countryside itself.

Just across the piece of countryside to which I refer specifically lies the ancient and proud town of Wokingham, from which my constituency takes its name. It is one of the ancient boroughs of England, with its arms in the windows of Saint Stephen's Hall in this Palace, yet it, too, bears the strains which are imposed on such ancient towns, at least in the South, by the massive development of the last 30 years. In employment terms, the area which I am proud to represent is typical of modern, mobile, high technology industries. Of course, they have their problems at present—I do not deny it—but, as Southerners, we understand and recognise that they are as nothing compared with the problems in the North.

While conditions are different from the days when, as a schoolboy, I watched within a short distance of this Palace the hunger marchers shuffling down Whitehall before the war, the fact is that we have a social problem, and we are in danger of creating two nations in terms of employment in the North and the South. Therefore, I welcome the understanding in the Gracious Speech of the hardship and worries of those suffering unemployment.

The House will not recall it—there is no reason why it should—but I spent two and a quarter happy but, I fear, undistinguished years as a junior Minister in the Department of Education and Science when my right hon. Friend the Prime Minister was Secretary of State. My first legislative duty as a junior was to remove from the mentally handicapped child the stain of being ineducable. That measure was supported on both sides of the House. How much, therefore, I welcome the legislation foreshadowed in the Gracious Speech to facilitate the education of children with special needs.

Drawing equally upon modest experience, I think that no one who has served ministerially in Northern Ireland—and we are on both sides something of a trade union—can ever lose an abiding interest in that most charming part of the United Kingdom. Therefore, I welcome the words in the Gracious Speech, for they indicate to me that there is a continuing movement in the search for a political settlement there which must surely be the concern of men and women of good will everywhere.

I started with a reference to my own first election here. In those long ago days, as they now seem, I was warned that with a name like mine I had no hope of being selected, let alone elected. Subsequently, although my constituents cannot spell my name, have the greatest difficulty in pronouncing it and often give their own gloss on how it should be put, I have, bless them, found over the years that they can always recognise it as it sticks out ahead of anyone else's on a ballot paper.

The name, of course, reveals that I am descended from an immigrant. My forebear came here in a year glorious in English history, for he came to help the English in 1745 to suppress the Scots. I am bound to say, as I look about me, that I do not know that he made a good fist of it. But for him, in those distant days, to become a British subject required an individual Act of Parliament. In the intervening years, the provisions of our nationality laws have become ever more complex, and I think that it is high time — and I welcome this — that the House had an opportunity of debating and making changes to our nationality laws.

We all understand that that legislation may be technical and tedious. But, taking the proposals in the Gracious Speech as a whole, there are two aspects on which comment can be made from a House of Commons point of view. The first is that compared with the last Session they are not too demanding in legislative terms. For that, Back Benchers return grateful thanks. The second is that they form the programme for a useful Session of this Parliament. So let us get to work.

2.47 pm

Mr. John Lee (Nelson and Colne)

It is a great honour for me to second the motion moved so elegantly and amusingly by my hon. Friend the Member for Wokingham (Mr. van Straubenzee). He talked of his twenty-first anniversary here. I look forward to mine. But, whereas he was talking in years, I am talking initially in months.

I believe that I am the first member of what is termed the class of 1979 either to move or to second the motion on the Gracious Speech. That being so, perhaps I may use the occasion to thank, on behalf of my intake, all senior colleagues on both sides of the House who have gone out of their way to be kind and helpfully constructive in guiding us, none more so than my hon. Friend the Member for Wokingham.

This afternoon I address a rather fuller House than I did one evening in June last year when no fewer than five hon. Members crowded into the Chamber to hear my maiden speech.

During my election campaign in Nelson and Colne, a number of those on what is now our Front Bence came to give me support, including my right hon. Friend the Patronage Secretary, known more affectionately as the Chief Whip. He arrived sporting a yellow rosette, causing considerable consternation amongst my blue-rosetted supporters. Some thought that he was the dark horse independent candidate, but the majority took the view that he was on his way to the Rugby League cup final and had got off the train at Nelson station by mistake. Of course, I knew that, with yellow being his constituency political colour, he had merely forgotten to change his rosette.

Mr. Patrick Cormack (Staffordshire, South-West)

Or his suit.

Mr. Lee

I am conscious of the honour shown to my constituency by my being asked to second the motion. Not only does it appear to be the first time that an hon. Member for Nelson and Colne has been so called upon, but I suspect that it may also be the last. On redistribution, we emerge as the main constituent of a new parliamentary seat to be named Pendle.

Our best remembered past Member is unquestionably the late Sydney Silverman. In December 1973, when the right hon. Member for Ebbw Vale (Mr. Foot), the present Leader of the Opposition, visited Nelson, he paid Mr. Silverman a warm and generous tribute, saying: He was my close friend and comrade. We used to sit next to each other on the same bench in the House and most of what I have learnt about parliamentary procedures was taught to me by him.

The past fortnight has been an expensive period for me. To cover my options, I have had to buy copies of both those fascinating books "Healey's Eye" and "Debts of Honour". I also placed a small, unsuccessful wager with the hon. Member for Bethnal Green and Bow (Mr. Mikardo), who, I am led to believe, has always regarded the Palace of Westminster as Britain's first enterprise zone.

As I come from the hills and valleys of Lancashire and have spent nearly all my working life in Manchester, it is hardly surprising that at times I may be considered a trifle "wet". Indeed, to suggets otherwise would be to fly in the face of nearly 2,000 years of climatic experience.

The people of north-east Lancashire, and Pendle in particular, are a proud, resilient and resourceful race and I have no doubt that in time we shall recover from the present recession with its miseries of unemployment and short-time working. Fortunately, past diversification into aerospace, through Rolls-Royce and its subcontractors, furniture with Silent Night and G-Plan, packaging through McMillan Blodel and Mandon Wrappings and wall coverings, where the Nelson-based Coldroll among others, has been a great success—though I admit that at present times all are under varying degrees of pressure—has given us a certain strength.

But our textile industry in Nelson and north-east Lancashire is experiencing a brutal contraction. It is a sad and deeply distressing experience to talk to one's redundant textile operatives who, despite being moderate, co-operative and in receipt of low wages for years, find themselves on the dole through a combination of inaction by successive Governments and the historical failures of managements. When they see redundant workers in certain nationalised industries whom they have supported by their taxes receiving substantial golden handshakes, one can share their bitterness at life's inequities.

When one also sees other Governments, particularly the French, announcing new packages of measures to support their ailing textile industries, it is no wonder that our industry feels so isolated and unwanted. I accept that our trade Ministers are doing what they can in terms of tightening up on dumping and labelling legislation, but to the old saying "England's bread from Lancashire's thread" I must add "Now from the rest of the world instead."

Those of us who represent the regions are increasingly aware of the North-South divide, as twenty-first century industry is increasingly sucked towards the South-East — the Channel tilt. Unless that trend is positively corrected, we shall in future years need a United Kingdom version of the Brandt report.

I believe that we need a three-pronged approach to correct the imbalance. First, we need prime regional communications. Secondly, we need to give substantial incentives to companies to move to the regions with a greater emphasis on the initial, front-end inducement. Once firms are established in the regions, let them stand on their own commercial abilities. Thirdly, to provide accommodation for our new fledgling firms, which the Gracious Speech encourages, we need to push ahead with the construction of new small factory units. I welcome the Government's incentives and the conversion of older properties.

The Lancashire county council has suggested in a submission to the EEC the creation of a mill development agency. Let us pursue that urgently. Money spent in that way would be extremely cost-effective by providing multiunit accommodation within older structures.

I am sure that the whole House will welcome the commitment in the Gracious Speech to proceed urgently with an expanded programme of employment and training measures for the unemployed, particularly the young. There can be few more urgent priorities for the Government. Let us hope that the programme is substantial and immediate.

By July 1980, nearly 42 per cent. of the unemployed in Europe were under 25. In this country, comparing the summer leaving dates of 1979 and 1980, the number of unemployed school leavers under 18 increased by 114 per cent. and the Manpower Services Commission projects unemployment in the 16 to 19 age group to reach 450,000 by January 1982. Those are pretty appalling figures and greatly worry all bodies in the youth field, not least the National Youth Bureau, with which I am involved. We know that disadvantaged young people, particularly from the ethnic minorities, have proportionately greater difficulties in finding employment.

It is vital that, as a national responsbility, we provide avenues for training and involvement for our young people, geared to the industries and careers of the future rather than of the past, as an alternative to the paths that lead to drink, drugs and depression and perhaps to extremism and violence.

We in the House are mere stewards of the nation's traditions, freedoms and resources for future generations. Let us hope that in years to come we can all look back on the 1980s and say with a clear conscience that for their tomorrow we shared our today.

2.58 pm

Mr. Michael Foot (Ebbw Vale)

It is one of the conventions of the House that, after the motion has been moved and seconded by two hon. Members from the Government side, the first speaker from the Opposition side should congratulate the mover and the seconder. I am happy to abide by that convention, and certainly there is no sense of duty in the matter. It is a pleasure which follows from what has been said. The House has listened with the greatest interest to both speeches.

I thank the hon. Member for Nelson and Colne (Mr. Lee) especially for his most gracious reference to my old colleague in the House, Sydney Silverman. I am sure that the way that the hon. Gentleman said it will be greatly appreciated here and in his constituency. I also thank him for many of his other remarks, but I do not want to get him into trouble at such an early stage in his political life.

I have to remind the hon. Gentleman that there have been other Conservative Members who have briefly represented Nelson and Colne. Considering my good nature towards the hon. Gentleman at the moment, I can only wish that his stay here is not too brief. I tried at the last election to ensure that the hon. Gentleman did not arrive here. I cannot give him an absolute promise that I shall do the same on the next occasion. Perhaps a little later he may decide whether he wishes me to come. At any rate, I thank the hon. Gentleman very much for what he said and I am sure that the House will join me in that.

I suppose that the hon. Member for Wokingham (Mr. van Straubenzee) could be described as an old Member of the House, but I do not use that term in any pejorative sense. The hon. Member has been here for quite a number of years and has made a great contribution to the House. We should also like to thank him for what he said and the way in which he said it.

One of the most interesting aspects of the moving and seconding of the Address for those of us who have been here for a number of years, apart from the intrinsic merit of the speeches—and today we have no difficulty there—is that the two speakers were selected by the Prime Minister to start our proceedings. We had reference to the Patronage Secretary a few moments ago. It used to be the custom — and I say nothing of the custom on these Benches — way back before the war in the days of Captain Margesson, who had a reputation different from that of the easier-going right hon. Member for Westmorland (Mr. Jopling), for the mover and seconder of the Address to be selected for their loyalty to the Government, past and prospective. However, the two hon. Gentlemen today clearly have not been selected on that basis. Perhaps the Government have run out of supporters already—but I prefer to attribute the choice to the right hon. Lady's natural generosity.

As I listened to the hon. Member for Wokingham moving the Address, I could not help feeling that he had been selected by the Government to perform that function not to offer congratulations to the Government but to offer his prayers. I am sure that he did it in a manner that no other Member of the House could possibly emulate.

I come to the Gracious Speech itself. I shall go through some sections speedily, not because they are not important but because there are other aspects to which I wish to refer. Indeed, I wish to refer to certain matters that have been omitted. I should like in my customary manner of seeking to assist to try to remedy those deficiencies.

On page 1 there is a phrase in the third paragraph that did not exactly encourage me. It states that the Government will continue to work for effective measures of arms control. If they are continuing the work that they have done over the past 18 months, I believe that it is quite unsatisfactory and does not at all meet the scale of events. I am sure that that view will be expressed in this debate. It will be put by my right hon. Friend the Member for Stepney and Poplar (Mr. Shore), who will speak on that matter and kindred subjects in Monday's debate.

On page 2 the Speech says: My Lords and Members of the House of Commons". I presume that the paragraph following that was drafted by the Chancellor of the Exchequer or at any rate accepted by him. There are no figures. I always have a little difficulty in dealing with figures, but whenever I hear the Chancellor of the Exchequer my self-confidence in that field is refreshed.

The Gracious Speech says that the Government: will take all steps necessary to maintain firm monetary and fiscal policies. Apparently a few more steps have become necessary since those words were written. The Cabinet was presumably discussing yesterday what those steps might be. I hope that the Chancellor will make a full statement to the House on those matters during the debate. I hope that he will not confine such remarks to his speech. They may get lost if they are left in his speech. I hope that he will make a full statement to the House on Monday. I believe that that would be the best way for the House to have a full grasp of what has been happening in the Cabinet. I am sure that the right hon. Lady would not like us to rely on leaks, or even leaks about leaks, or even leaks about leaks about leaks. There has never been such an avalanche—or a Niagara—of leaks. We have some difficulty in sorting them out. I hope that the right hon. Lady will consent to the official version being given by the Chancellor on Monday, presuming that the Government do not have another Cabinet meeting in the meantime.

Attention has already been drawn in the press to the third paragraph on page 2, and I fully accept that it is a very important one. I understand that the right hon. Lady may refer to these matters. We certainly hope that she will. The paragraph deals with special training and employment measures. We asked for a statement about the measures before Parliament rose for the Summer Recess. We pressed very strongly for the Government to make the statement then. We also asked for Parliament to be recalled so that the right hon. Lady and the Secretary of State for Employment could make a statement. When we came back a week or two ago, we also urged that a statement should be made. We therefore naturally welcome the fact that the Government will at last come forward with their proposals. We especially welcome the statement because we assume that it must include an abandonment of one of the first measures taken by the Government — the cut in the Manpower Services Commission budget of about £170 million. All that presumably will be restored. Indeed, the matter must be carried very much further. So gracious are we in welcoming that statement that we shall scarcely waste time in remarking that it is a U-turn, although that is what it will be if it is on anything like the scale that is required to meet the situation.

The right hon. Lady had the advantage of meeting representatives of the general council of the TUC, which put forward a series of proposals governing all the training measures—special measures to assist with employment and all the measures that had been fashioned in the previous Labour Government, in the Department of Employment, partly by my right hon. Friends the Members for Barrow-in-Furness (Mr. Booth) and for Doncaster (Mr. Walker), with some assistance from myself a little earlier. We hope that the Government will build on all those measures. We have urged that they should bring forward statements on the subject all through the period of this Parliament, and we are very glad that the right hon. Lady herself apparently will refer to these matters in a few minutes. We welcome the prospect, and we shall ask for more.

The next paragraph is bitterly hostile to the needs of the nation, although I shall not spend much time on it now. It refers to a further attack on the transport system of this country. We had an attack in the Bill that was pushed through in the previous Session. A further attack is now envisaged. We shall fight it all the way. I hope that that is well understood by the Conservative Party.

The following paragraph suggests that there will be legislation to provide for a capital reconstruction of the British Steel Corporation. We welcome any such proposal. If only the Government had accepted our advice on that, we might have avoided the strike and saved £4 million or £5 million. We knocked most urgently on the Government's door just before Christmas of last year, almost 12 months ago, and urged on them a fresh approach to the steel industry. We knew that it would cost money, but, had that money been spent or pledged and promised by the Government at the time, we may well have avoided the steel strike and its serious consequences not only for the steel industry but for the nation as a whole. We shall look carefully at that proposal.

Some of the proposed measures are unexceptionable, but the proposal for changing the nationality law has many complications. We shall examine it with great care to see that we sustain the proper liberal traditions of this country.

I come to a paragraph that we cannot look upon with anything like the generous favour that I have been showing so far, at any rate in parts: Pensions, war pensions and other social security benefits will be increased on 24th november and reviewed again next year. The date of 24 November is already a swindle. The increase should have been made earlier. If it had been, it would have guaranteed the pensioners what they had a right to expect under the promises that were previously made.

Mr. Cormack rose—

Mr. Foot

I shall give way to the hon. Gentleman in a moment, but first I wish also to say that the second half of the proposition is one that we do not find satisfactory. The words reviewed again next year", particularly in the mouth of this Government, are not a promise but a threat. We hope that the Government will take full note of what we are saying. Nobody is better placed than the right hon. Lady to reveal what has been happening in the Cabinet on these questions. There have been reports that the right hon. Lady herself, perhaps with the assistance of some of her colleagues, was seeking to alter the provisions about pensions. I do not know whether those reports are true, but I do know what the right hon. Lady said in a "Weekend World" interview at the beginning of this year: I pledged at the election to our old people that their State national insurance pensions would keep pace with rising prices, and we honoured that this time, so that when that went up they did get the increase. I'm pledged on that, and a pledge must last. I hope that the right hon. Lady will tell us that there was not even any discussion on the subject in the Cabinet.

Mr. Cormack

I am grateful to the right hon. Gentleman for giving way. How can he wear the badge that he wears today, asking for justice for pensioners, in the light of his own recent achievement and his major part in a Labour Government who withdrew the Christmas bonus for pensioners?

Mr. Foot

The hon. Gentleman is mistaken. I went to the demonstration of pensioners just before I came to the House today, and the pensioners there were well aware of what we had achieved in this area, and they gave me full acknowledgment of it.

I come to the second part of what the right hon. Lady says in that paragraph of the Gracious Speech: Legislation will be brought forward to place a duty on employers to provide sick pay for their employees during the early weeks of sickness. That is a squalid little proposal. We trust that the Government will not go ahead with it. I do not know whether they imagine that it is part of their plans for helping small employers. If the right hon. Lady and her friends think that that is so, I shall be happy to accompany her not merely to a demonstration of old-age pensioners across the way but to a demonstration of the self-employed. I shall be happy to protect her, because she will then find what is the objection to the proposal. If the Government will not throw it out right away, which is the best thing for them to do, let the House throw it out and restore some sanity in the matter. There must be some right hon. and hon. Members on the Conservative Benches who would be only too eager to assist us.

There are matters that the right hon. Lady should have included in the Gracious Speech, especially because of the controversies that we have had about them recently. We have had some debates and exchanges about the firemen in recent weeks. I should like to quote the exchange that took place earlier between the hon. Member for Bristol, North-West (Mr. Colvin), when he was still the prospective parliamentary candidate, and the present Home Secretary, before the right hon. Gentleman assumed that office. I shall quote from the letters only briefly, but I believe that they are of great importance for the Government's good name. In a letter dated 19 July 1978, the right hon. Gentleman told his future hon. Friend: Many thanks for your letter of 17th July about firemen's pay. Yes, we have made it clear that we will guarantee the agreement made by this Government"— the Labour Government— with the firemen. I have made this clear before, and I am pleased to do so again. The prospective candidate sent the letter on from the Bristol North-West Conservative Association to one of those who was working for him, just to underline the matter. I am helping to underline it, and I am simply serving the Conservative Party in doing so. He wrote: I have now received a reply to my letter to Mr. William Whitelaw M.P., the Conservative Shadow Home Secretary, and I attach a copy for your information. I am glad to see that we are now pledged to guarantee the agreement made by this Government with the firemen. But I am surprised that we have not made this pledge more publicly known. That is a matter that we shall now rectify. And now I also help with the rectification. I say to the right hon. Lady, with whom we had some discussions about this matter the other day—

Mr. Michael Colvin (Bristol, North-West)

Is the right hon. Gentleman really saying that there is no room today, in 1980, for any increased productivity in the fire service? Does he remember the words of his right hon. Friend the Member for Huyton (Sir H. Wilson) that one man's pay rise might not only be another man's price rise but could well cost him his job? Is there not room for a review of the manning levels of the fire service? Would the right hon. Gentleman support an appeal to the fire service that if it were considered a special case it should be prepared to give an undertaking not to strike?

Mr. Foot

My appeal is to the Government, and especially to the right hon. Lady, to keep their word. Good industrial relations in this country depend to no small degree on the word that Governments give and whether it is carried out. There is not a newspaper in the country that has not, in discussing the matter, agreed with the view that I have expressed and the view that is held by the firemen and by everybody who has studied the matter that the undertaking was given and was backed by the Conservative Party. The question is whether it will carry it out.

If the Conservatives refuse to carry out that undertaking, that will not merely have an effect on industrial relations with the firemen but will have widespread effects on industrial relations for many months and even years. If the Government undermine the possibilities of an agreement being made on the kind of terms that were concluded with the firemen, they do great injury to industrial relations altogether.

I come now to another aspect of the Gracious Speech where there seems to be an omission. I have looked through it again carefully. I may have missed it. Perhaps this is it: "Further measures will be taken by any shabby or surreptitious means available such as last-minute answers to written questions to introduce pay policies to be described by some other name." The 6 per cent. pay policy, introduced by the right hon. Lady and the Government by such means, is, above all, a vicious attack on low-paid workers. [HON. MEMBERS: "What about your 5 per cent. pay policy?"] When we had the 5 per cent. figure — this shows the ignorance of Conservative Members—there was some special provision for the low paid. They do not even know that. They have not troubled to find out.

There was not a single second of consultation with the trade unions before the Government introduced this subject. They know nothing of the subject. If they bring down the heavens, or, indeed, hell, upon themselves, they will bear the sole responsibility. They made not the slightest effort to try to ease the situation.

These are not the only omissions from the Gracious Speech. There is no reference to the whole general question of what is happening to this country. If one picks up the newspapers almost any day of the week, one can see on almost every page what is happening to our country under the afflictions of the right hon. Lady and her friends. The Times, on Tuesday, even when reporting a record trade surplus — I hear the groans of Conservative Members—stated: Britain leads the world in the speed and the severity of its recession and this is pushing down its imports and forcing British companies to hold on to their export markets. The fact that Britain is facing the worst recession since the 1930s and that Britain is leading the recession is surely a matter of some significance. On page 2 of the same issue, The Times reports from Wales. We did not have the pleasure of the right hon. Lady coming to Wales to speak on that occasion. I doubt whether we shall see her in the near future. I know that Conservative Members do not like to hear these reports from The Times, but they have to hear them. Another report has the headlines British publishers turn to foreign firms as costs soar. Eyebrows raised as Shorter Oxford Dictionary is printed abroad for the first time.

Hon. Members

"Why?"

Mr. Foot —Because of the rate of sterling. I know that Conservative Members do not like facing the facts. They are going to get them.

The report in The Times contains the quotation: The high level of the pound is absolutely killing the British printing industry. If right hon. and hon. Members do not like to face this situation, it shows with what flippancy they are ruining one of the great industries of the country. The Publishers' Association, which knows something about the matter, states that the main problem on its list is the high level of sterling. Second is high interest rates, and third is local authority spending. The Government want those levels kept up, not brought down. They do not understand. The association says it reckons that in the first quarter of 1980 one million fewer school books were sold than in the same quarter of 1979. Does any hon. Member cheer that proposition?

The main lesson must go home to the Treasury Bench, but I also address my remarks to Conservative Members who try to treat this matter flippantly. Every hon. Member should be ashamed of the fact that at a time when one of the greatest advantages possessed by this country is that all over the world more people are speaking the English language, the great British printing and publishing industry should be subjected to what is happening.

Mr. Edward Gardner(South Fylde)rose—

Mr. Foot

I have given way on two occasions. For such a matter to be treated as lightly as apparently is the case among Conservative Members is a crime against the nation. We shall press these matters continuously.

Mr. Gardner rose—

Mr. Jonathan Aitken(Thanet, East)rose—

Mr. Foot

It is not only these great industries that are affected. A whole range of them could be listed. There are also the remarks of some of the leading figures in the country to be considered. The right hon. and learned Member for Hexham (Mr. Rippon) says that the course on which the Government are embarked is motorway madness. The right hon. Member for Sidcup (Mr. Heath) calls it a catastrophe. A former Prime Minister, Mr. Harold Macmillan, calls it the old kind of deflation applied to our present conditions. Mr. Macmillan places the argument in terms that must be especially embarrassing for the right hon. Lady because he says that the wealth-creating industries are most hit.

Printing is, of course, an important industry. I should like to refer to some of the others—ICI Fibres, Burton, GKN, Chloride Group, Ransome Hoffman, Pollard, Vauxhall, Lansing Bagnall, Spear and Jackson, Blue Circle Cement, Metal Box, Philips Pye TV, Courtaulds, ICL, Girling Brakes, Pirelli Tyres, Dunlop Tyres and Lucas. It is a catalogue of redundancies and crises: the list can be endlessly extended.

The right hon. Lady may prefer to hear the words of someone else, Sir Michael Edwardes. A few weeks ago in the House, I happened to say that I thought that the right hon. Lady's economic policies were so disastrous for the country that she was nearly succeeding in converting the blessing of North Sea oil into a curse. A few days later, Sir Michael Edwardes himself was saying: If they can't find a way of living with North Sea oil, I say leave the bloody stuff in the ground.

That is not some inexperienced person on the Opposition side of the House speaking. It is not even one of the right hon. Lady's expert industrial advisers in the Cabinet. That is Sir Michael Edwardes, her own pin-up boy of yesterday. How does the right hon. Lady answer it? What is the cause of the problem? The right hon. Lady herself is one of the primary causes.

I recommend to the House, although I am not able to quote it because of the arrangements of the House, the report of a debate which took place in the House of Lords on 11 June, initiated by Lord Lever. I recommend every hon. Member to read what was stated. It was prophesied in that debate what is happening in the country. Lord Lever prophesied what would happen and what has happened if the monetarist policy was to be applied as rigidly as the Government have been applying it. The fallacy of the right hon. Lady especially and also of her Government is that they think that there is only one problem and only one remedy. They think that the only problem is inflation and that the only remedy is the right Lady's monetarist remedies. She then adds to those propositions the charge that anyone who does not accept those doctrines is guilty of some moral delinquency.

It is this combination of ideas which is leading the country to ruin. It is this combination of ideas which is causing the catastrophe of which the right hon. Member for Sidcup speaks. I say that the crisis facing the country is the greatest that we have known since the end of the war. The present Conservative Party reminds me of what was written by its greatest leader of all time. He said that it was the great Conservative Party which destroyed everything. That is what the party is engaged upon.

There is a rising discontent in this House and in the country. The duty of the House of Commons is to save the country from the right hon. Lady and her policies before the catastrophe prophesied by the right hon. Gentleman becomes irreparable. I say to the right hon. Lady and her Government that we shall fight her in the House of Commons and in the country until the policy is changed.

3.31 pm

The Prime Minister (Mrs. Margaret Thatcher)

I am happy to join the Leader of the Opposition in paying tribute to the speeches of my hon. Friends the Members for Wokingham (Mr. van Straubenzee) and Nelson and Colne (Mr. Lee), who moved and seconded the humble Address. My hon. Friend the Member for Wokingham and I were elected to the House on the same day. Since that was 21 years ago, that makes us fellow old Members of the House. My hon. Friend arrived in this place at his second attempt. I arrived at my third.

My researches show that my hon. Friend is the first Church Estates Commissioner to move the humble Address. In that capacity his appearances at Question Time, though infrequent, have become highlights of this Parliament. When my hon. Friend was elected, the usual channels had some difficulty in pronouncing his name. He explained that it rhymed with Mackenzie — and was promptly put on the Scottish Grand Committee. In view of his explanation of the reason why his ancestors came here, that must have been a traumatic experience for him. Nevertheless, he survived.

My hon. Friend mentioned the success of the new town of Bracknell, which has been developed under successive Governments. I appreciate his support for the legislation which is foreshadowed in the Gracious Speech about conserving the countryside for the benefit of us all.

My hon. Friend the Member for Nelson and Colne was elected in May last year. His was the first Conservative gain to be announced. I hope that he achieves his preliminary ambition of achieving 21 years of continuous service in the House. The whole of the Front Bench has a vested interest in seeing that he does. He spoke with real feeling and with deep knowledge about youth unemployment. As chairman of the National Youth Bureau he is well qualified to do so. He referred to that passage in the Gracious Speech which confirms the Government's commitment to an extended programme of employment and training measures for the unemployed, particularly for the young. I shall have something more to say about that later.

I was glad that my hon. Friend referred to the success of Coldroll Ltd, the 32-year-old managing director of which said, earlier this month: We will emerge from the recession fitter, stronger and healthier. He went on to say that his firm's results were proving that already.

It is the custom that the Leader of the Opposition has the privilege of being the first to congratulate the mover and seconder of the humble Address. Of course, the right hon. Member for Ebbw Vale (Mr. Foot) added a somewhat miscellaneous collection of things to that duty. It was difficult to follow him through his grasshopper collection. I shall refer to one or two matters. He referred to the capital reconstruction of steel. The great tragedy was that steel was ever renationalised. Its future would have been very much greater if it had not been.

The right hon. Gentleman referred—or, rather, he did not refer—to restrictive practices in the print industry, a subject about which he knows something. He read references from The Times, scarcely conscious that The Times is under threat because of restrictive practices and that jobs might be lost because people have refused to terminate those practices so that The Times can be profitable.

The right hon. Gentleman also referred to my distinguished predecessor, Mr. Harold Macmillan, and school books. He forgot to say that one of the things that Mr. Harold Macmillan pointed out was that public sector pay was taking so much out of the education service that there was just not enough money left for school equipment and school books and therefore urged that we should spend a good deal less on public sector pay, not that we should spend more overall. That would not be Harold Macmillan. He would not have built up a splendid business unless he had learnt the elementary laws of accountancy.

The right hon. Gentleman seemed to avoid a lot in the Queen's Speech, particularly the parts referring to foreign affairs. He mentioned arms control cursorily and in passing. He did not mention his party's policy on that, and he scarcely referred to Europe. Given his views, that is not surprising. Ever since joining Labour's Front Bench, the right hon. Gentleman has shown the consistency of a chameleon. No one can or should deny his steadfast commitment to the Campaign for Nuclear Disarmament — that is, until he became a member of the 1974 Labour Government. That Government rightly retained Britain's independent nuclear deterrent, and the champion of the unilateral disarmers managed to swallow his principles.

No one can or should deny the right hon. Gentleman's antagonism to Britain's membership of the European Community. He was remorseless in his efforts to prevent our joining the Six. [Interruption.] The European Community and this Government's commitment to it are mentioned in the Gracious Speech. The right hon. Gentleman was content to play a prominent role in an Administration who endorsed and continued our membership of the Community. The trouble with the right hon. Gentleman is that he tends to forget not only what he has said but, when it is convenient, what he did in the last Labour Government.

The Gracious Speech makes extensive reference to foreign and defence matters, and I intend to follow that. Today in foreign and defence matters Opposition Members are displaying the irresponsibility that always characterises them when they are deprived of the restraint of office. Once again, they are ignoring the facts. They know that our future is inextricably involved with the fate of our neighbours in Europe, with that of our partners in America and with that of our friends elsewhere. They know, but not many will say so. As a result, their attitude on three fundamental issues—on Europe, on defence and on international trade — is negative and profoundly destructive. [HON. MEMBERS: "What about the Queen's Speech?"] Perhaps right hon. and hon. Members have not read it. It actually refers to Europe, to foreign affairs and international matters.

If we walk out of Europe, our trade, of which more than 40 per cent. is with other members of the Community, will suffer; our economy will be damaged; and our international effectiveness will be diminished. Today our major problems with the Community are on the way to being solved; our trade with the Community is moving into surplus; and the prospective accession of three newly restored democracies—Greece, Spain and Portugal—demonstrates the appeal of the Community for those who wish to remain free.

Mr. Robert Maclennan (Caithness and Sutherland)

Will the Prime Minister accept that her cause in Europe will be greatly strengthened if she ceases to treat it as a partisan matter in this House? Is she further aware that she carries less conviction today, since 38 of her hon. Friends have organised themselves in direct opposition to her, led by the hon. Member for Southend, East (Mr. Taylor), who was formerly a member of her Shadow Cabinet?

The Prime Minister

I understand that the official policy of Opposition is to withdraw from Europe. Ours is to remain in the Community, and the Gracious Speech refers directly to that. I am speaking to the Gracious Speech. Just when most of our problems are being solved, the Opposition would like to throw everything away.

Let me turn to the next subject to which the right hon. Gentleman scarcely referred. The Opposition are pledged to disarm unilaterally. If we did that, or reneged on our defence commitments, the security of the West as a whole would be undermined. We should be powerless to resist pressure in time of peace and virtually defenceless in time of war.

I come to the third major belief of the Opposition. If we become protectionist, others will retaliate. Our foreign trade—which accounts for a larger proportion of our national product than in the case of any other major industrialised country — will be crippled; the poorer countries with which we trade will be the first to suffer. In all these matters, the policies of the Opposition are deeply hostile to the true interests of the United Kingdom.

There was a time when the right hon. Member for Ebbw Vale expressed in this House the hope that we in Britain would be determined to maintain our influence in Europe. He was right then and he would be right now if he chose to repeat the sentiment. Whether he does or not, we intend to see that our influence is maintained. Since coming into office we have combined a firm commitment to the ideal of the Community with a vigorous determination to defend our national interests. Through tough negotiation, we have achieved a fair deal for Britain on a number of issues—on the budget, on sheepmeat, on conservation of fish stocks.

Mr. Nigel Spearing (Newham, South)

On fish?

The Prime Minister

We are on our way to achieving more—notably on the common fisheries policy as a whole, the agreement that the right hon. Member for Deptford (Mr. Silkin) was incapable ever of reaching.

Mr. John Silkin (Deptford)

Perhaps the right hon. Lady will be fair enough to recognise that the reason why I was incapable of reaching such an agreement was that I was unwilling to surrender British waters to the EEC.

The Prime Minister

The reason why the right hon. Gentleman was incapable of reaching an agreement was the right hon. Gentleman.

In the second half of next year we shall hold the presidency of the Community, just when the Community will be deciding how to restructure its budget. We intend to take advantage of the occasion to press for the long-term financing of the Community to be put on a sound and equitable basis.

Let me stress the Government's belief—this will be most important during the coming year — which is shared by the Governments of France and Germany, that the necessary reforms can and will be achieved within the limits imposed by the 1 per cent. ceiling on VAT receipts. The Community's budget, like the budgets of the member States, must be restrained.

The right hon. Gentleman scarcely referred to East-West relations and defence, although they are vital to the future of our people. The security of Europe is indissoluble from that of North America. Governor Reagan has already made it clear that he attaches the highest priority to the maintenance of a confident and powerful alliance. On the Government Benches we welcome that. It creates the right basis for close co-operation and partnership between Europe and America. Proposals from the Labour Party to weaken the alliance — and there are plenty — are irresponsible in the highest degree. The right hon. Gentleman was once an anti-appeaser: I fear that he is now an arch-appeaser.

We, for our part, will maintain Britain's contribution to NATO. Despite the economic difficulties, we shall achieve or come very close to the 3 per cent. target in each of our first two years in office and will continue to increase defence expenditure in the coming years. Let those who say that that is too ambitious look again at the growth in the Warsaw Pact's military expenditure the last decade and ponder the Soviet invasion of Afghanistan.

As for nuclear weapons, the Government have made their decisions and will stick to them. Of course, we recognise the dangers of an unrestricted arms race of course, we are anxious to reach agreement on arms control measures, to which the right hon. Member for Ebbw Vale referred. But we intend to approach any necessary negotiations as an equal partner and not as a supplicant. The right hon. Gentleman—like all the unilateralists—is deluding himself if he thinks that mere eloquence, earnestness or example will win concessions or respect from the Russians. They will not. Such delusions are dangerous.

Protectionism is another delusion, first because retaliation is a reality, not a vague spectre. Recently we imposed quotas on textile goods from Indonesia worth just £3 million per year. We now find that this has lost us major orders for construction projects and for exports of high technology worth well over £100 million. We cannot afford to lose the world markets on which so much trade and so many jobs depend.

Worse still, protectionism would do no more than disguise our problems—and then only briefly. Imports enter this country because industry or the consumer wants to buy them. The advocates of import controls are saying to the purchaser "You cannot have the cheapest, you cannot have the best, you cannot have the most modern—all you can have is what we make here." That is a recipe for discouraging British industry from being competitive, for slowing down change, and for increasing prices. It is also a declaration of total lack of faith in British industry.

Of course, we do not ignore the pursuit by other countries of unfair policies that discriminate against our manufactures or damage our industries. While we shall always seek to resolve such problems first by discussion rather than by retaliation, we shall insist that free trade must be fair trade.

Mr. Jack Straw (Blackburn)

I appreciate the genuine difficulties of retaliation that exist in respect of textile imports. However, is the right hon. Lady willing to ensure that the Government will provide the same level of aid for our textile industry as the Dutch, the Belgian and the French Governments are providing for theirs?

The Prime Minister

First, some of those decisions are not yet through. Secondly, some of the aid provided is much less than the total already provided to the British textile industry.

The Gracious Speech then moves on from foreign and defence matters to the economy. The right hon. Gentleman has attacked the Government's economic policies in the disingenuous manner that characterised his performance as an economic Minister in the first two years of the previous Labour Government. Surely he is not seriously saying that we should leave the oil in the ground with all the catastrophic consequences for jobs in Scotland. Nor is he seriously saying that Michael Edwardes said that—of course he did not.

The right hon. Gentleman was the architect of the so-called social contract, whereby the trade unions got everything they wanted without delivering anything of lasting benefit in return. He was the advocate of the dangerous myth that we could spend our way to prosperity. Aided and abetted by the right hon. Member for Leeds, East (Mr. Healey), that brought the country to the highest inflation rate in modern times, the imminent threat of national bankruptcy, and finally the IMF. By that time, the right hon. Gentleman was no longer in charge of an economics Department.

If the right hon. Gentleman would look at the facts, he would find that the whole industrial world has moved into recession largely because of last year's doubling of oil prices For example, 900,000 jobs have been lost in the United States motor industry this year, and industrial output in Germany has fallen by 5 per cent. The whole world has been affected by the world recession. So although our exports have performed better than anyone predicted, our industries—like everybody else's—have inevitably suffered. The right hon. Gentleman would also find that our loss of competitiveness over the past two years has mainly been not because of the exchange rate but because our labour costs have risen nearly twice as fast as those of our competitors. People have been taking out more than they have earned, and mar y thousands have lost their jobs as a result.

Mr. Austin Mitchell (Grimsby)

Will the Prime Minister accept, in all this prating, that this year the pound has risen more than earnings?

The Prime Minister

With all due respect to the hon. Gentleman, that does not defeat my argument in any way. The main reason why we are having difficulty with exports is the loss of competitiveness because people have failed to match pay and productivity.

The right hon. Member for Ebbw Vale would have us think that the Government could have prevented sterling from appreciating. He knows that North Sea oil is the principal cause of sterling's strength. He ignores the experience of his right hon. Friend the Member for Leeds, East, who, in November 1977, was forced to abandon the pretence that he could hold out against market forces and hold down sterling. He ignores the fact that while many industries have found the strong pound difficult to cope with, some have benefited from it, and that the country as a whole has benefited from lower prices. He seems to have forgotten that the damage caused by the collapse of the pound under his Government in 1975 and 1976 far outweighed its transitory benefits.

Finally, the right hon. Gentleman seems to have forgotten that this country has been bedevilled for the past 25 years by a rising trend of unemployment—a trend that has been caused by the underlying weakness of our industrial economy and the fact that we have just not been sufficiently competitive. The average level of unemployment was only 300,000 in the first post-war Conservative Government; it was almost 500,000 during the Labour Government of 1964–70, almost 750,000 during the last Conservative Government, and 1.2 million under the last Labour Government. [Interruption.] Of course, Opposition Members do not like that. We started the current recession from the base that they left us of 1.3 million unemployed.

Mr. Michael English (Nottingham, West)

I welcome the Prime Minister's—[Interruption.] The right hon. Lady's supporters must be short of something if they have to cheer me. They should be cheering her. I welcome the right hon. Lady's desire to keep down costs and to protect British industry from imports. Why does she not believe in keeping agriculture competitive? Why does she not believe in keeping British food cheap?

The Prime Minister

British food is very much cheaper than the remainder of the items in the retail price index. Food has risen far less than the retail price index as a whole. The worst offenders in the retail price index are those Socialist industries, the nationalised industries.

None of us denies that rising unemployment and falling production present a sombre picture. Where we disagree is about the cause and the cure. There are no magic or quick solutions. What this Government can and will do is to create the conditions in which, when the world economy recovers, the seemingly endless cycle of economic decline can be broken. Meanwhile, because we are all deeply concerned about unemployment, especially among young people, the Government will be introducing new employment measures. The right hon. Member for Ebbw Vale asked me to say a few words about that. I shall do so, although the details will be given by my right hon. Friend the Secretary of State for Employment, who hopes to make a statement tomorrow.

Mr. Alexander W. Lyon (York)rose—

The Prime Minister

I am about to announce the measures, and I wish to continue. As a result of the review that I promised in the summer, we have decided to expand the youth opportunities programme next year. We are asking the Manpower Services Commission to aim to provide 440,000 places on the programme next year—180,000 more than for the current year. On the basis of that expansion, we are asking the commission to improve the present undertakings to employ young people. My right hon. Friend the Secretary of State for Employment will give further details to the House tomorrow.

To mount that programme, the commission will need the fullest support from employers, unions, voluntary agencies and local authorities. There will also be changes in other special employment measures, which will be covered in my right hon. Friend's statement. In total, the Government have allocated some £570 million to these measures in 1981–82 in place of the previously planned expenditure of just over £320 million.

Mr. Guy Barnett (Greenwich)

That is a U-turn.

The Prime Minister

I hope that that announcement will be welcomed in all parts of the House. Of course, they are temporary measures to alleviate the present difficult position. They will not solve the long-term problem. Our first task will remain that of bringing down the rate of inflation. We took over when the inflation rate was accelerating. It is now coming down rapidly.

Mr. John Maxton (Glasgow, Cathcart)rose—

Mr. Speaker

Order. The hon. Gentleman must not remain on his feet.

Mr. Maxton

I am sitting down.

Mr. Speaker

Only because I stood up. Does the Prime Minister intend to give way?

The Prime Minister

As the hon. Member for Glasgow, Cathcart (Mr. Maxton) is new, I shall give way.

Mr. Maxton

I am grateful to the Prime Minister. She says that the Government are keen to fight inflation. Will she explain why the copy of the Gracious Speech costs 70p this year when it cost 25p last year? That is a threefold increase.

The Prime Minister

The reasons are pub tic sector pay and restrictive practices in printing.

Our first task remains to bring down the rate of inflation. We took over when inflation was accelerating. The figures show that. It is now coming down rapidly. The latest annual figure of 15.4 per cent. is below what my right hon. and learned Friend the Chancellor of the Exchequer forecast at the time of the Budget, and during the past six months retail prices have risen by only 4.3 per cent. Our aim now is to bring down our inflation rate to below that of our competitors. Only then will our industries regain some of the competitiveness they have lost. That is just what we would not get if we were to listen to the call from Opposition Members for reflation. They want still more spending, ever more borrowing and lower interest rates—a sure recipe for higher inflation.

If pumping more money into the economy was the answer to our problems, we would have solved them long ago. However, pumping more money into the economy has not solved the problems of the car industry, for example, on which so much else depends. Ten years ago, we built 1.7 million cars and new registrations were only 1 million. Last year, the position was almost exactly reversed. New registrations amounted to 1.7 million and production only 1.1 million. It has not been lack of demand that has caused problems for industry; it has been the failure to build cars that people want and at a price that they are prepared to pay. Lack of demand is not the problem. It is the inability to fill that demand in Britain. Therefore, pumping in extra demand is just not the answer.

We must get both inflation and interest rates down. That is why the Government have been conducting a searching review of public expenditure. I hope that the right hon. Gentleman will be pleased if my right hon. and learned Friend the Chancellor of the Exchequer makes a statement on Monday, which I am sure he will seek permission to do. There has been vastly increased spending on public sector pay, we are massively overspending on the nationalised industries and we are spending more on social security.—[HON. MEMBERS: "What about unemployment?"] I am about to come on to that point. Opposition Members should be patient. Higher spending on social security is the inevitable consequence of the recession. However, the problems of the nationalised industries go much deeper.

Mr. Kevin McNamara(Kingston upon Hull, Central)rose—

The Prime Minister

I am sorry, but must get on. There is a legacy of years of overmanning and inefficiency for which we are all now paying dearly. Indeed, the amount that the taxpayer is now having to find to support these industries is equal to more than three-quarters of our North Sea oil revenues this year, or, alternatively, equal to 4p on the standard rate of income tax. That is why we are determined to open up as much of the nationalised industries as we can to the competition and discipline of the private sector.

We made a good start in the last Session. We are committed to going further, and this Session we shall bring in legislation affecting transport, telecommunications, posts and the British National Oil Corporation. The Transport Bill will enable British railways to introduce private capital into non-railway activities and allow private investment in a reconstituted British Transport Docks Board. The British Telecommunications Rill will create a new corporation to run the existing telecommunications and data processing business of the Post Office. It will provide powers to reduce the postal and telecommunications monopolies—much overdue—and to encourage partnerships with private capital, also overdue. These changes are essential if this country is to take full advantage of the information technology revolution. The petroleum and continental shelf Bill will provide powers to enable the British public to participate in the BNOC through the purchase of equity shares.

The third reason for reviewing spending plans is that the pay bill for the public services has gone up by some 50 per cent. in two years.

Mr. Guy Barnett

The House would be grateful if the Prime Minister could say something in response to my right hon. Friend about the firemen.

The Prime Minister

I have said a great deal about the firemen at almost every Prime Minister's Question Time, and I expect that there will be a great deal more to be said. The facts have not changed. I intend to make my own speech today, just as the right hon. Gentleman did.

I was in the midst of saying that in the last two years alone, public sector pay has gone up by 50 per cent. in total. We have scrupulously implemented the Clegg comparability commitments, and public servants have at least caught up—many would say more than caught up—with pay in the private sector. But industry has had to pay the price in terms of both higher interest rates, because of higher Government borrowing, and, as a result, lost jobs. That is why we are determined to see much lower public service settlements from now on.

Besides getting inflation down and curbing the public sector, our other major task is to make our market economy work more efficiently.

Mr. Bob Cryer (Keighley)rose—

The Prime Minister

I must get on. Years of nationalisation, controls, high personal taxes and entrenched and over-powerful trade unions have left their mark. Enterprise and initiative have been stifled, and we have failed to adapt fast enough to changing technology. Too much protection of yesterday's jobs has been at the expense of tomorrow's. We have already made a start at overcoming, these problems. We shall continue to do everything that we can to make our economy more responsive to the opportunities that lie ahead — by reducing controls through tax incentives, by increasing competition and by encouraging the new technology industries.

I have outlined some of our proposals for legislation in the economic sphere. The Gracious Speech also sets out other measures which we shall bring forward. I should like to mention a few of them now and to say a little about them.

Mr. Clinton Davis (Hackney, Central)

The House will be interested to know how the right hon. Lady squares what she has said about public sector pay with the unqualified commitment given by the Home Secretary in 1978, a matter which she has studiously ignored.

The Prime Minister

Perhaps the hon. Gentleman will read the answers that I have already given again and again on this question. Any further answer that I gave would be the same, and I do not believe that we benefit from repetition.

The right hon. Gentleman referred to the nationality Bill. We promised that we would introduce legislation on nationality to define entitlement to British citizenship and the right of abode in this country. Last July, we published a White Paper containing an outline of the proposed legislation, and we shall introduce a Bill shortly.

My right hon. Friend the Home Secretary will also bring forwrd a criminal attempts Bill which, among other things, will repeal the "suspected person" offence. We have been concerned that its simple repeal might leave an unacceptably wide gap in the criminal law. The repeal of "sus" will, therefore, form part of a Bill which will reform the law of attempt and ensure that the public is properly protected.

In education, we propose to amend the law governing special education in the light of the Warnock report, which I and my hon. Friend the Member for Wokingham set up when we were at the Department of Education and Science. Our proposals will give the parents of handicapped children rights to early consultation about their children's education and will extend the appeals machinery of the Education Act 1980 to include them.

Mr. Jack Ashley (Stoke-on-Trent)

rose—

The Prime Minister

The Education (Scotland) Bill will make parallel provisions for special education in Scotland. It will also provide for the extension of the rights of parents to choose a school for their children. That is much-wanted and much-needed legislation in Scotland.

Another of the measures that we shall introduce will make employers responsible for sick pay in the early weeks of sickness. The right hon. Gentleman made some comments about that. Our proposals have been substantially amended in the light of comments on the Green Paper "Income During Initial Sickness". These amendments will concentrate particularly on the problems of small businesses, and my right hon. Friend will be explaining the proposed scheme in detail later in the debate.

The Transport Bill will include measures to tackle two of our most serious and urgent road safety problems—drinking and driving and motor cycle safety.

We had hoped to bring forward legislation on Northern Ireland. For many months the Government have been seeking agreement in the Province to bring forward proposals for a substantial transfer of responsibilities to elected representatives of the people there. That agreement has not been forthcoming. Therefore, we are now considering other ways of making the administration of the Province more responsive to local needs, and my right hon. Friend will report further to the House in due course.

Let me make one point about the hunger strike in the Maze prison. I want this to be utterly clear. There can be no political justification for murder or any other crime. The Government will never concede political status to the hunger strikers, or to any others convicted of criminal offences in the Province.

Mr. McNamara rose—

The Prime Minister

Finally, I return to the economy, on which all else depends. I shall give way to the hon. Gentleman.

Mr. McNamara

I am grateful to the right hon. Lady for giving way on this point, particularly because of the last issue that she raised. She is obviously right that if a person is properly convicted before a judge, with a jury, and with properly corroborated evidence, that person should not be given any degree of political status—or, indeed, any status—for the infamous crime that he has committed. But in Northern Ireland there is effective bending of the rules of evidence, and those people, whether or not they have committed political crimes, are different. Therefore, will the right hon. Lady say whether she will restore the same degree of trial for all offences in the Six Counties as exists in the rest of the United Kingdom?

The Prime Minister

Both Labour and Conservative Governments have had to make modifications to the legal systems for the protection of the people of Northern Ireland. I supported the Labour Government when they needed to introduce those modifications and, for the greater part, they have supported us. In the light of that, I wanted to make the position clear. There can be no such thing as political status for people convicted of criminal offences in the Province.

Mr. Merlyn Rees (Leeds, South)

Is the right hon. Lady aware, as the person who ended political status, that her words are right and that they should be heard throughout the world? [HON. MEMBERS: "Hear, hear."] But shortly after it was ended we looked at the Northern Ireland emergency provisions legislation. Is it not time that we looked at it again and examined some of the points that have been made by my hon. Friend the Member for Kingston upon Hull, Central (Mr. McNamara)? We agree that in no way should there be political status for anyone, but we should at least look at the legislation again.

The Prime Minister

I understand that that legislation is automatically looked at every six months.

Finally, as I have said, I return to the economy because all else depends on it. The Opposition's prescription for the country's problems is that we should spend more money—money that we do not have. That might relieve unemployment in the short run, but the cost would be another, larger surge in inflation, leading to yet another decade of unemployment.

The British people are fed up with phoney palliatives. They have always known that the Government cannot create wealth and that they can only draw on the wealth created by others. Attitudes are changing. Managers are once more managing; trade unions and their members are acknowledging that pay increases have to be earned. Exports have done well despite the pound's strength. The balance of trade is good. The number of strikes has fallen dramatically. We are the only major industrial nation self-sufficient in energy. Rising revenues from North Sea oil will give us the opportunity to promote real growth in the economy.

We have got inflation right down. [Interruption.] We have got inflation down from its previous heights, and we intend to go on. [Interruption.] In the last six months it has been right down. I agree that on the annual basis it is not yet right down. When we have got inflation, on the annual basis, right down, when we have achieved better productivity, when we have realistic pay settlements, we shall see a real revival in our country's fortunes.

Nations overseas are applauding our new strength and resolve. [Interruption.] They have found again their confidence in Britain. So long as we do not flinch from our responsibilities, neither they nor our people will be disappointed. We shall carry through the task that we have undertaken. There is no other way to success.

4.15 pm

Mr. David Steel (Roxburgh, Selkirk and Peebles)

The Prime Minister concluded her speech by saying "There is no other way". That is a doctrine that I should like to contest and to which I shall return in the main body of my remarks.

Increasingly, when people in politics, journalism and industry try to talk to the Prime Minister about other policies that might be more productively pursued, they find that it is like making an important telephone call, only to find that when they get through there is an answering machine at the other end. [Interruption.] We do not go in for answering machines; we speak to the people. The last four words of the Prime Minister's speech summarise what is wrong with the Government's approach. They start from the assumption that there is no other way, and then all other argument is simply shoved under the carpet.

Before I turn to the main issues of the economy I should like to say that this Queen's Speech is certainly thinner than usual, despite the substantial increase in its sale price. Regarding its quantity, we may say to the Leader of the House "For which relief, much thanks." But it might usefully have been thinner in at least three respects.

First, if it is intended to pursue the nationality law proposals on the lines of the White Paper, the Liberal Party will continue to oppose legislation that is based on the obnoxious philosopy of the Immigration Act 1971 which created different categories of citizenship, which, at the end of the day, boil down to different categories of citizenship on racial lines. We cannot accept that in principle.

Secondly, we are suspicious of the Government's intentions regarding legislation on European election boundaries. We would vigorously oppose any attempt to take away the normal rights of objection to boundary proposals. In any case, it would be wrong for the British Government to try to rush through single-Member constituency boundaries for European elections when we are committed under the Treaty of Rome to a new common voting system for the next European elections. That system may not include single-Member constituencies.

The third respect in which the Gracious Speech could usefully have been thinner is in the reference to the proposals, which both the Leader of the Opposition and the Prime Minister mentioned, for sick pay to be paid by employers. I quote from the Gracious Speech: Special attention will continue to be given to the encouragement of new businesses and to measures to permit small firms to expand and prosper. Of course, one's definition of a small firm may vary according to the political party to which one belongs. It is not right that the scheme that has been outlined so far by the Government should have exceptions built in only for very small firms, and, even then, built in in such a way that they add greatly to the administrative and paper burdens on the small firms. This has been one of the repeated complaints by small business men, under every Government. They are landed with more and more legislation and regulations. Now the Government are proposing a highly complicated repayment scheme, even for the small business sector.

At a time when so many businesses are finding the going hard, this is the last straw—to impose on them the obligation to look after sick pay in the early weeks of sickness. That is something that in principle we shall strongly oppose.

I said that I would deal mainly—and I shall—with the economic outline in the Gracious Speech, which is summed up in the two sentences: The need to bring down the rate of inflation and create conditions for a sustainable growth of output and employment remains the prime concern of My Government. To that end they will take all steps necessary to maintain firm monetary and fiscal policies. That is all they have to say. It is the pushing of all economic policy on to that one sentence about the maintenance of firm monetary and fiscal policies that is the root cause of their failure.

It is now apparent that the Government's determination to maintain unnecessarily high interest rates and to rely exclusively on monetary control is counter-productive and is causing the most appalling economic damage to the country. It is affecting every householder making mortgage repayments, every business borrowing funds and every exporter struggling to overcome the barrier of an artificially inflated pound.

The Prime Minister said that other nations were applauding the Government. They are applauding as they are pouring imports into this country and pinching our orders all over the world. That is the way in which they are applauding.

All these categories of people are now paying what I call this dogma levy imposed by the Government. It is the price of a doctrinaire and blind commitment to excessive interest rates. Even the illusion of income tax relief has long passed as funds are drained away from the householder and as the Government have deliberately fuelled the inflation rate, which they now claim to have brought under control. It is nowhere near the level of inflation that they inherited.

For far too many people in our country, unfortunately, the price is more immediate and more absolute than simply a monetary penalty. It is the loss of their jobs, the bankruptcy of the businesses they have been trying to build up, and their feeling of total despair.

The awful and frightening trend is that all the suffering, the industrial sabotage of our productive base and the human misery that is being created have provided no indication that the sacrifice is to be of any lasting use, for by their own measure the Government are failing. The explosion in the money supply is at least in part the result of extra bank borrowing by firms having to pay higher interest charges. Paradoxically, some of the recent financial studies that I have read have suggested that a 4 per cent. cut in minimum lending rate would be likely quickly to reduce the money supply by about 2 per cent.

But at least I suppose we should be grateful for the fact that the Government have finally jettisoned one part of their ideological package, namely, the belief that wage settlements have no effect on the current rate of inflation. That belief was repeated by the Chief Secretary to the Treasury in the debate that we initiated only a few months ago. Yet I have to tell the Prime Minister that the new 6 per cent. public sector pay policy cannot be expected to attract the support of my party, because we have consistently advocated the need for a sustained prices and incomes policy which is properly worked out, which is argued before the people and which is flexible and fair to all sections of the community. We have always believed that that is a vital and permanent weapon in the armoury of any Government seeking the effective management of a modern economy.

But that is not the belief of the Prime Minister. She told people at the last general election that if they voted for her there would be free collective bargaining all round, in the public sector as well as the private sector. Now, that has been removed at a stroke. We now have something that is a very far cry from a sustained incomes policy of the kind that my party has envisaged. Instead, the Government have cobbled together a temporary and unfair expedient that is applied to only one sector of the work force.

During all this time, when the public sector is being hit, when the industrial private sector is being hit and when those who are least able to cope in social and economic life find themselves hard hit, the one area of the country which is really prospering is the financial sector. It has enjoyed the unearned fruits of the Government's doctrines through huge windfall bank profits. The Prime Minister and the Government have created a country fit for financiers to live in and have turned their backs on its industrial heart. That is the true picture of the British economy as we start a new Session.

What I find most galling of all is that the Prime Minister sometimes justifies her policies by claiming some distant legitimacy from nineteenth century Liberalism. She believes that she can pervert the free market theories of Adam Smith by transplanting them to Britain in 1980, but the conditions are entirely different. World markets are not free. Such purity has long since been muddied by the hard realities of monopoly trade union bargaining power, the scale of public ownership, international corporate dominance and the near monopoly of energy supplies. All the time, in plundering the Liberal philosophical tradition, the Prime Minister has taken only those parts of it which suit her own argument. Those elements which enhance individual liberty, while stressing compassion, humanity and the claims of a wider society, she completely ignores.

I should like to take one element of the free market philosophy which the Government have imposed on British industry—the requirement to pay market prices for fuel. Many of our competitors—America, Canada, Sweden and others—have, as a deliberate policy, cheap energy for industry. The contrast between what we are doing and what others are doing is obvious.

A week or two ago in my own constituency I visited a firm which is at the very frontiers of technology. It is a firm of the kind approved so strongly—and rightly so—by the Government. It is increasing its exports and expanding, but its gas prices—and gas is its main fuel—went up by 34 per cent. last year. It is not the wage inflation that is affecting the firm but the Government's own deliberate policy.

Large efficient firms such as ICI and Bowaters have to live in the real world, not one invented by the Prime Minister and the Secretary of State for Industry. We ought, therefore, to have a change in policy and the recognition that if other countries support their industries through cheaper energy we shall also have to do so. If we do not have such a change, in the case of industries such as carpet making and paper making we shall merely suck in more imports, create more bankruptcies and accelerate unemployment.

I believe very strongly that the role of any Government today, whatever their political complexion, must be to intervene intelligently, selectively and realistically to protect the interests of the citizens and not to use them as guinea pigs to test out a fascinating economic theory.

If we are to have a policy of cheaper energy for industry, the simplest way for the Government to do it is by abolishing the heavy fuel duty, because at the present moment it results in an increase of £8 per tonne for that fuel and puts us well above the costs of that fuel even in the European Community.

Contrary to what the Prime Minister says, I believe that there is an alternative economic course. It is, and should be, to harness the energies and skills of our people rather than to stifle them; to generate consent and co-operation rather than fomenting division and discord; and to work with industry rather than against it.

There should be four new courses of action. The first is an immediate 4 per cent. cut in interest rates—for which so many have called — to aid the industrial borrower and help reduce the value of the over-priced pound.

Second, in response to the inevitable world recession and our self-inflicted national ills, we should be spending on capital projects which will put people back to work and at the same time improve important areas of our economic infrastructure, such as railway investment, for the future. The hostility to the public sector, which is one of the themes of the Gracious Speech, is deeply alarming. That kind of public investment would be a lot more acceptable in the country than the £5 billion earmarked for the Trident project.

Third, we have to have a sustained and fair prices and incomes policy. It will not be easy, but it should be linked to profit sharing and to a background of partnership in industry.

Fourth, as I have just mentioned, we ought to introduce a cheaper energy policy for industry.

The Prime Minister is very fond of repeating that there is no alternative. There are many choices, and I believe that there are more acceptable and improved ones. In the election, the Prime Minister issued a pamphlet headed "Now is the time to choose—a message from Margaret Thatcher", and over her signature she concluded with these sentences: So we shall unite the country by the politics of common sense. And we shall restore the economy by the economics of common sense. That is the way to break out of the depressing cycle of division, strife and economic failure. The right hon. Lady's final sentence was: I am sure that we can do it. If we had had the economics and politics of common sense, perhaps the right hon. Lady could have done it, but people no longer believe that she can. The Gallup poll this morning showed 34 per cent. of people satisfied with the right hon. Lady's leadership of the country and a record 60 per cent. dissatisfied. The Government certainly will not succeed in the aims stated by the Prime Minister if they persist with the measures outlined in the Gracious Speech.

4.31 pm

Dr. Alan Glyn (Windsor and Maidenhead)

I listened with considerable interest to what was said by the leader of the Liberal Party, the right hon. Member for Roxburgh, Selkirk and Peebles (Mr. Steel). I am sure that he will excuse me if I do not follow his every word. I was particularly interested in what the right hon. Gentleman said about alternative policies. Of course there are alternative policies, but I contend that the policy being adopted by the Government is the best of the alternative policies.

I was alarmed by what the right hon. Gentleman said about the Trident missile. I understand that, in accordance with the Liberal Party's policies, he advocates that we should go for unilateral disarmament and at least reduce our expenditure on defence and reject the cruise missiles. I think that is the right hon. Gentleman's principle. I see him nodding approval.

The Loyal Address is brief and shows that the House will not be subjected to a long process of legislation. It is not in the interests of the country that it should be overburdened with legislation. The House should discuss major issues. That is one of the principal matters in this Loyal Address.

I was interested in what was said about Nepal in the Loyal Address. Great tribute is paid to the visit of His Majesty the King of Nepal. We deeply appreciate the contribution that his country has made to our defences over the centuries. I know that the right hon. Gentleman, even though he may not be listening, will agree that Nepal's contribution to our defences over the centuries has been considerable and that it is right that reference to it should be made in the Loyal Address. I am glad that at least on that point we are united.

I am also pleased to see in the Loyal Address that, contrary to many other occasions, we have placed national defence at the head of our priorities. I am convinced that we should maintain that priority. If we do not adopt a proper system of defence, everything else that we want—for example, an improved standard of living—will not be possible.

We have seen the Soviet threat against the background of Afghanistan. I know that the right hon. Member for Roxburgh, Selkirk and Peebles will not disagree with me on this matter. I am addressing my remarks to him because he was the last speaker and, out of courtesy, I wish to refer to what he said. I am sure that the right hon. Gentleman will agree that the whole concept of Afghanistan has illustrated to the world that Communist countries are determined to force their way of life on the Western world. In the past couple of days we have witnessed a complete confession to that effect by the Soviet Union. Therefore, we must get our priorities right.

My right hon. Friend the Prime Minister was right when she said that the most important issues facing this country are defence and the economy, and both are dealt with in the Gracious Speech. We now know that the previous Labour Government, although many of us tried to fathom what was being done about Polaris, acted in the national interest and went ahead with the modernisation of the nuclear deterrent. Whatever may be the views of the Leader of the Opposition now, the previous Labour Government adhered to the general principle that we must preserve our independent nuclear deterrent.

Our partnership with an enlarging Europe is vital. For defence we are still largely dependent on NATO and America. I am relieved that the United States will be headed by a President who appreciates the dangers facing Europe and is not unaware of the problems which could face America if Europe were to be dominated by a Communist force. Governor Reagan realises that it is in the interests of both America and this country that we should work together not only for the defence of our two countries but to ensure that between us we have adequate defences so that we may negotiate from a position of strength.

As regards defence expenditure, my argument has always concerned not what we should cut or spend, but what is necessary. I am not altogether happy with the 3 per cent. that has been mentioned. I should like the figure to be higher, as would many of my right hon. and hon. Friends. I know that the Government face many difficulties with cuts and so on, but I believe that it would be unwise to cut our defence programme. I do not wish to go into the details. I think that we have got the balance about tight. We have our own nuclear deterrent. I suggest that we have had a very good bargain from America, certainly as good as that achieved by the Nassau agreement. We have the American deterrent, our cruise missile and our front-line forces in Europe. However, I do not believe that it is possible with conventional weapons alone, first, to defend ourselves and, secondly, to be strong enough to make the Soviet Union see common sense and make any form of arms limitation realistic.

We all know that inflation is our greatest enemy. However, I differ about the exchange rate. It is not artificial; it is determined by the value which other nations place on our currency. We cannot play about with it.

I understand that, if the minimum lending rate were free, it would probably stay at about the same level. I agree that it hits small businesses. Indeed, I was interested in what the right hon. Member for Roxburgh, Selkirk and Peebles said about small businesses. We are all concerned about them. The small productive businesses produce the wealth of this country. Private industry is supporting a huge bureaucratic machine, and we want to reduce that bureaucratic machine so that private small firms can benefit. I am glad that the right hon. Gentleman appears to be in agreement with me on that point.

Our target should be to break the monopolies, to free this country from a vast, expensive, bureaucratic machine, to cut public expenditure, to help small businesses, to encourage people to set up new businesses and to be competitive. That is what is set out in the Gracious Speech.

I am glad that we are to break up some of the big national monopolies. I was particularly interested in what the right hon. Member for Roxburgh, Selkirk and Peebles said about energy. I am conscious that other nations give subsidies to certain industries by giving them cheaper energy. I do not know whether this is in accordance with the Treaty of Rome, but it is an invisible subsidy from which certain industries benefit. I do not know how we should tackle this matter. We shall have to consider this point when balancing our economic performance against that of our main competitors in Europe. I agree with the right hon. Gentleman that serious consideration must be given to this point.

This is a short Gracious Speech and I welcome it. I welcome particularly the proposal regarding a change in the nationality law. It is high time that we had some form of citizenship and that the whole of our nationality laws and citizenship were reviewed, and that a sensible and fair policy, something not prejudicial to immigrants or the people of this country, was finally worked out.

Lastly, the Queen's Speech sets out the Government's intentions to defend our nation. It emphasises that Britain has the resources, the energy and the capabilities. We shall find extremely difficult to harness those together to be able to compete with nations which are now undercutting us. I am convinced that, whatever the medium-term or short-term policy may be, we are on the right path when we reduce public expenditure, encourage businesses and make sure that the energy, initiative and enterprise of Britain are harnessed.

With that in mind, and if we follow the line along which my right hon. Friend the Prime Minister has led us so far, I am convinced that we shall see a recovery in Britain and an ability to compete with the world. Other countries owe no debt to us. With oil, resources and energy, we shall be able not only to compete with the rest of the world but to make this country the envy of other nations.

4.41 pm

Mr. Tony Benn (Bristol, South-East)

The Queen's Speech sets out for Parliament the priorities of the Government of the day. Its greatest weakness is that these priorities do not accord with the anxieties of our people in this country. That is its greatest difficulty. It would be a waste of time for the House of Commons to devote too much attention to trying to persuade the Prime Minister to change her mind, for she has met the CBI and the TUC and made it clear that she will not budge, and although my right hon. Friend the Leader of the Opposition made the most powerful presentation of an alternative view, that was rejected, too.

As Members of Parliament, we have an additional obligation to convey through our speeches in this House the agenda of our own constituents for the Government of this country. I want now to put forward what I believe to be some of the most urgent agenda items for the British people, which the Government will neglect at their peril.

I begin with an issue that has been discussed—the very widespread anxiety about the Government's defence and foreign policy. There is no dispute in the House about the wrongness of the Soviet invasion in Afghanistan. In my mind, it was identical to the error that the Americans made in going into Vietnam. But to read into Afghanistan and what happened there a presumption that the Soviet Union is planning to occupy the world and that we must prepare for war is grossly to distort what is happening.

I say to the Prime Minister—if she reads her Hansard—that there is a growing body of opinion in Britain that believes that the escalation of the cold war is a deliberate policy of the present Government to divert attention from what is happening at home. A large number of people believe that, by finding a foreign enemy upon whom all responsibility can be placed, those at home who are critics of what is happening can be smeared with some brush of near-treachery. I say that because so much of what the Government say about East-West relations is actually couched in those particular terms.

I might add that the election of President Reagan, far from reinforcing a sense of comfort, as the Prime Minister sees it, is arousing in the minds of many people, who have never voted Labour in their lives and probably never will, the fear that the bases that the American Government have in Britain—which, according to the press and television, amount in total to 103—make this country an agency in American foreign and defence policy over which we have no control whatever. That feeling is very widespread now among people—including religious leaders who are by no means political—that this could be a factor leading towards war. It is very much on the agenda of public discussion and is not in any way met by the language of the Queen's Speech.

The third anxiety is about civil defence. I am old enough to have served in "Dad's Army" in 1941, when I was given a tin hat, a bayonet in a bit of tubing and sent out at night to bayonet any German who landed by parachute. I was told that he might be dressed as a nun. I never met a nun against whom I might have deployed my primitive teenage military skill. But, as a method of defending this country, that makes an awful lot more sense than what we are told today, which is that in the event of an attack upon this country we are to go into the basement with five weeks' supply of baked beans and a teddy bear for the children, and the Prime Minister will tell us when to come up when the nuclear exchange has taken place.

The truth is that the civil defence policy of this country is not a credible policy. What people want now is an exploration of a non-nuclear defence strategy, because they fear—a lot of people fear it, people who are by no means of my political persuasion — that computer malfunctions, someone dropping a spanner down a Titan missile silo or some accidental event might precipitate a nuclear exchange between East and West.

There is another element to it as well. Again, I speak, perhaps, for people of my generation. In 1941 it was the German invasion of Russia and the death of 25 million Russians that bought this country the time to organise the counter-stroke against Hitler. If the Government believe that they can mobilise the younger generation today on the basis that their future lies in an inevitable nuclear war with the Soviet Union, they will awaken memories of the wartime alliance and a resistance to what they are trying to do which will take them very much by surprise. In Leningrad alone, 900,000 people died. There are many people who remember that. They are not prepared to see the Government use the cold war as an instrument of their own domestic policy.

If we really want security in Europe, the development of free trade unionism in Poland has a lot more to do with our future security than Trident missiles trained on Warsaw. It is the development of a new approach to Europe, a nuclear-free zone, real detente and co-operation and the development of free trade unionism and free institutions in what is now the Soviet empire that point the way to security for us and our children, and not the endless escalation of the arms race. When the Archbishop of Canterbury yesterday found it necessary to go to a seminar and denounce the Government for their meanness in Third World aid, that should be a warning for the Government, too, that their defence and foreign policy has no real basis of support.

The second range of anxieties relates to the question of jobs. We had a debate on unemployment at the end of the last Session and we are to have another next week. I do not intend to go into it in any detail, except to say that it is the fact that the Cabinet are prepared to accept, without any apparent concern, the destruction of whole industries and whole areas of Britain in pursuit of what they try to persuade us is an economic theory but is really a political strategy to rule by fear. That is getting across to the British people, because the British people, whatever their political philosophies or preferences may be, are quite capable of seeing what is happening.

A few days ago I went on a deputation to see the Secretary of State for Trade to argue that it was necessary to provide some cover for the motor industry in this country, even if only to protect the Metro while it got launched, because if the Metro did not work and British Leyland went down, which is not impossible, Ford, Talbot and General Motors would all retire from Britain because they would not have a domestic industry with which to compete and we would have another 1 million unemployed. I could not get that assurance from the Secretary of State for Trade. But 1 million unemployed could flow from that. Yet if one presses the Government one finds that they are not prepared to recognise that the engineering industry and the motor industry are essential national interests. We have just had a speech from the hon. Member for Windsor and Maidenhead (Dr. Glyn) about the need to spend more on defence. That was an essential interest. But, if defence is a national interest, our engineering industry is an essential interest. The Government will not accept that there is any industry or any part of Britain that has a right even to survive if it runs counter to their policy.

What is their policy? It is to go back to rule by fear in industry. Anyone who believes that this so-called new note of realism in wage bargaining is because workers suddenly realise that they should take a huge cut in wages—down to 6.8 per cent. when inflation is over 15 per cent.—is deceiving himself. Is that realism? It is fear. The Government are pursuing a policy to frighten the trade union movement out of even allowing its members to keep their living standards at their present level.

Mr. Tony Marlow (Northampton, North)

That is completely irrevelant.

Mr. Benn

It is no good Conservative Members laughing. We saw them going into No. 10 last night for £21 dinners. The Secretary of State for Employment was asked about the cuts and he said "I do not mind about the cuts." He added "I probably should not have said that." The right hon. Gentleman has a larger budget because unemployment is greater. That is why the employment budget is larger.

The Confederation of British Industry, whatever words it uses, believes, too, that the Government are prepared to destroy our industrial base to break the power of trade unionism. It, too, has been to the Government to say "You are going too far."

What is wanted is something that we have done many times before and something that we shall have to do again—namely, to harness the resources of the nation to meet the needs of the nation. We must reconstruct our industries with oil revenues and with moneys saved from excessive defence expenditure.

Mr. Marlow

Does the right hon. Gentleman have any more cliches?

Mr. Benn

We must equip our schools and hospitals so that our children will be able to be educated for the age of high technology and so that our sick and the elderly will be properly cared for. That is what the people want, and it was on that basis that Harold Macmillan wrote "The Middle Way", which 21 years later gave him the largest Conservative victory. It was the "Middle way" in practice that allowed him to say "You have never had it so good." To the extent that the Conservative Government—it is their problem and not ours—are prepared to desert even basic responsibilities for the people whom they were elected to serve in pursuit of a so-called monetarist theory, but really in pursuit of a nineteenth century return to rule by fear, they will forfeit the interests and concerns of our people.

The third area of anxiety that must be raised in the House—again, it is not catered for in the Gracious Speech—is the fear of whole sections of our community that their civil liberties and rights are under attack. First, I cite women. Women are in the front line of the attack from the Government's policy. Married women are being driven back into the home by unemployment. Women have lost the right that we gave them in our employment protection measure to return to work after they have had their children. Women who are at home with their families are having to cope with appalling inflation. They and that their husbands' wage packets are coming to them containing smaller amounts because of the "new note of realism" that is boasted about by Ministers when they appear on television.

Women feel that this Government, under a woman Prime Minister, have done more to set back their rights and interests than any Government since the war.

The second group—women are a majority but this group is not—is the black communities. They are afraid that the Government, led by a Prime Minister who used the term "swamping" to arouse emotional support in the election, intend through a new nationality Bill to discriminate nakedly on the ground of colour. The black communities are those most vulnerable to unemployment, because, of course, it is harder for a black school leaver to get a job. The blacks often live in areas where unemployment is at its highest.

It is not only in those areas that people feel that their rights are being eroded. I turn to another group. The erosion of democratic rights that is now apparent in so much Government policy can be seen in their direct attack upon the elected rights of local government, which was set up to safeguard the interests of its own people. Local government is now being made the agent for Government policy that is destructive not only of local services such as housing and social welfare but of the accountability of local councillors.

I take those who are anxious about civil liberties more generally, for there is a steady erosion of civil liberties under this Government. That is not new under this Government, because there has been an erosion for some time. It has occurred partly because of high technology. However, the attempt to impose law and order without reference to justice is a recipe for the further erosion of civil liberties. There are many who believe that the issues of civil liberties and freedom of information, and all the issues that accompany them, will become of even more importance as Britain sinks deeper into slump. Most people know that it will get worse before it gets much worse. It is not on its way down only to come up. It is a decline that will be accelerated and accentuated by the election of another monetarist to head the United States Government.

In addition, we have lost the control of governing ourselves because of the Common Market. Our loss of control over issues of peace and war deriving from the missile sites deepens the feeling that I have described.

The final anxiety that people feel—I believe that it is the most deeply founded of all—is that we are now governed by a Government who, as a matter of specific and explicit Cabinet and Prime Ministerial decision, are bereft of moral purpose. That is because they are trying to put the future of this country—

Mr. Marlow

Rubbish. Absolute rubbish.

Mr. Benn

—on to the benchmark of profit and loss. That is an explicit rejection of what is the best in the Conservative Party, whether one considers the old paternalism of Sir Alec Douglas-Home, the practicalities of Harold Macmillan or even some of the technocratic sensitivities of the right hon. Member for Sidcup (Mr. Heath).

We have never before had in this country, this century, a Government for whom even the national interest must be subordinated to international market forces, just as jobs in Wales, Clydeside, Merseyside and Geordie-land are to be subordinated to domestic market forces. When the people realise this, they will sweep out the Government by an overwhelming majority. We now have a Tory Party and a Tory Government, hitherto only written about in the Socialist textbooks, who are using their parliamentary majority to strip the British people of the protection that they need in a highly dangerous world and to hand them over to their financial and industrial supporters who brought them to power in the first place.

It is utterly irrelevant to the issues that I have raised whether members of the Government are wets or whether they have marginal differences about monetary targets. The British people want a Government who appear to them to care about them and who treat them not merely as profitble or unprofitable units of production. They want a Government who care about the young, the old and the sick in a way that this Government do not. The Government are exposing themselves in a manner that will reveal a flank to their opponents that will be far wider than arguments about the niceties of Milton Friedman's economic philosophy. They are a Government who have betrayed their historic trust, and they will be removed from office by the people as soon as the people learn that fact for themselves.

4.59 pm

Mr. Michael Latham (Melton)

I intend to drop one of the topics that I had planned to deal with and to substitute references to the speech of the right hon. Member for Bristol, South-East (Mr. Benn), which was of considerable importance. He tried in a series of generalised words to paint a picture that must be refuted forthwith.

I shall start where the right hon. Gentleman started, with defence. The right hon. Gentleman has an advantage over me. He says that he was in "Dad's Army". I can make no such claim. Indeed, I was born on the day that Montgomery's army entered Benghazi, exactly 38 years ago today. However, I have the honour to sit on some of the church committees to which the right hon. Gentleman referred, and the argument is not all on one side. I wish to put to him the contrary argument, which he ignored.

The House would not have thought, listening to the right hon. Gentleman, that he had been for six years in the Cabinet of the right hon. Member for Huyton (Sir H. Wilson) between 1964 and 1970 or, if not in the Cabinet itself, certainly in those Governments. He also sat for five and a half years in the Cabinets of two Prime Ministers, the right hon. Members for Huyton, and for Cardiff, South-East (Mr. Callaghan), between 1974 and 1979. In the whole of that time there was an independent nuclear deterrent in this country. Did the right hon. Gentleman attack the nuclear deterrent? Did he resign? Alternatively, did he point out that this was the deterrent founded by Lord Attlee and sustained by three Labour Prime Ministers? He did not. He remained in office, remained in the Cabinet and continued to support it through the principle of collective Cabinet responsibility. That is the doctrine that he now opposes.

Mr. Benn

The hon. Gentleman has a fair point. However, the Prime Minister sat under the right hon. Member for Sidcup (Mr. Heath) and followed a policy that she has repudiated 100 per cent., and she is quite entitled to do so on the basis that a Cabinet Minister in the Cabinet supports the majority decision to sustain the Government and argues the case inside the Cabinet. The Prime Minister, who made much of this with the Leader of the Opposition today, absolutely reversed every policy that she had publicly advocated from 1970 to 1974, and quite properly. That is her right. I have no doubt that she was engaged in bitter conflict with her own Prime Minister during the years that she was Secretary of State for Education.

Mr. Latham

I am grateful to the right hon. Gentleman. The difference between my right hon. Friend and the right hon. Gentleman is that she put her programme to the people in a manifesto at the last general election. The programme on which he fought as a member of the Cabinet of the previous Government was a programme to support the nuclear deterrent, Britain's defence and NATO. The right hon. Gentleman is misleading the House and the country, and he knows it.

The right hon. Gentleman talked about civil defence. On that, he is quite consistent. We know what the Labour Government did with regard to civil defence. They did nothing. They let it run right down. The right hon. Gentleman took the view then, as he does now, that it does not matter whether people are defended—let them die. The difference between this Government and that in which the right hon. Gentleman served for all those years, without resigning or hedging his position, is that this Government believe in the defence of Britain and that the best way to prevent war is by being strong.

The right hon. Gentleman also talked of civil liberties. How dare he! Which Government rigged the Boundaries Commission? Which Prime Minister, as Home Secretary, brought forth orders to implement the Boundary Commission recommendations and then asked his own side to vote them down? What did the right hon. Gentleman do on that occasion? Was he abstaining? Was he somewhere in Bristol, South-East, telling his electors that he did not agree with the policy? I bet that he was not. I bet that he was in the Lobby supporting it. If I am wrong, I will give way to the right hon. Gentleman. The right hon. Gentleman does not stir, so I assume that I am correct.

Again, how dare the right hon. Gentleman talk about civil liberties, regarding the judiciary. What is more important to this country than that there should be an independent judiciary? Yet it was the right hon. Gentleman who now sits as Leader of the Opposition, in the seat of Clement Attlee and Hugh Gaitskell, who attacked judges and talked of trigger-happy judges. That is how much the Labour Party cares about civil liberties. It does not care about them at all. The right hon. Member for Bristol, South-East does no service to the people of this country who believe in the rule of law when he comes to the House and talks about civil liberties, bearing in mind the deplorable record of many of his right hon. and hon. Friends.

The right hon. Gentleman said that the Government were bereft of moral purpose. He should not assume to himself all the moral arguments. He should not assume that there are not people on the Conservative Benches who do not have moral views equally as strong as his. He should not assume that 13 million people who voted Conservative in the general election have no moral purpose. The moral purpose of which he speaks is best served in this House by advancing together. However, he does not preach togetherness. He preaches division.

Mr. Austin Mitchell

What moral purpose is served by increasing unemployment at the present rate and moving it towards 3 million, which it will remorselessly reach, by closing plants, factories and industries that two years ago were competitive? Those industries are not now competitive under an exchange rate that is grossly undervalued.

Mr. Latham

No moral purpose is served by spending money that we do not have. My right hon. Friend this afternoon made that very clear when she said that the Government's overall aim is to keep our spending within bounds. That is essential. It is no good right hon. or hon. Gentlemen offering in the House to spend more money than we have. There is nothing moral in that. It is the morality of the man who puts his hand into someone else's pocket.

I shall now spend three minutes dealing with the points that I originally intended to deal with, but I felt it right to say a word about the speech of the right hon. Gentleman. The right hon. Gentleman tries to tell us what many people think—women, blacks and the young. However, plenty of people think differently from the right hon. Gentleman—and he had better not forget it.

Mr. Ernie Ross (Dundee, East)

If the hon. Gentleman honestly believes what he is saying, why do we not test it? Let us have a general election right now.

Mr. Latham

I can let the hon. Gentleman into a secret. There will be a general election. It will come at the end of this Parliament. Unlike the right hon. Member for Bristol, South-East, I have absolutely no doubt who will win. Even if the Labour Party was not judged on its record, which it would be, it would be destroyed by the right hon. Gentleman. The right hon. Gentleman is an immense liability to the Government—to the Government that he would seek to join. I assume that he is seeking to join the Shadow Cabinet, although we never know from one day to the other whether he wants to support his own side.

In fairness to the House, I shall now deliver none of my speech. I shall instead perhaps deliver it to a local audience.

The people of this country do not wart to hear strident words from the right hon. Gentleman or listen to a lot of nonsense about defence being thrown away. They want to see a strong Britain of which they can be proud. My right hon. Friend is giving leadership to the nation, and I am glad to support her tonight.

5.8 pm

Mr. Frank Hooley (Sheffield, Heeley)

On 15 May last year, in the debate on the Queen's Speech, I described the Government's programme as a "wrecker's charter". I am astonished to see how accurate that description was. This Government are a five-star Government in their achievements—one, soaring unemployment; two, a disastrous decline in manufacturing industry; three, inflation double what it was three years ago; four, lunatic interest rates maintained month after weary month, despite protests from all quarters; and, five, even on their own chosen criterion of keeping the public sector borrowing requirement under control, they have failed totally and miserably. It is a record of incompetence that is astonishing in 18 months.

The hon. Member for Melton (Mr. Latham) was strong on morality and what people think of this Government. Let me tell him what has been happening in Sheffield in the 18 months during which his party has been in control. In April 1979, just before the Conservatives took office, 12,000 adults were unemployed, a fall compared with the figure for the previous two or three months. By October this year the figure had shot up to 19,000, an increase of nearly 1,000 in one month. In April 1979 we had 872 boys and girls out of work. Today there are nearly 4,000 boys and girls out of work, and there is no prospect of their finding jobs in the city. That is the sort of morality that the hon. Gentleman is boasting about. That is the sort of competence that the Government show.

Mr. Jim Marshall (Leicester, South)

Perhaps I should let my hon. Friend know the contents of the speech that the hon. Member for Melton (Mr. Latham) might have made if he had not spent so much time criticising my right hon. Friend. Unemployment in Melton Mowbray has escalated over the past 18 months and is now above the national average. Footwear factories have closed down and will close down; hosiery manufacturers have closed down and will close down. The citizens of Melton Mowbray are alarmed about the expenditure cuts and are up in arms over the social services cuts.

Mr. Deputy Speaker (Mr. Bernard Weatherill)

Order. We cannot have another speech.

Mr. Hooley

My hon. Friend has made his point very well. I am not surprised that the hon. Member for Melton threw away his speech. He must either have made a speech that dishonestly represented what was happening in his constituency or have admitted the Government's total failures, as so neatly spelt out by my hon. Friend.

I return to the Sheffield figures. In April 1979 total unemployment there was about 13,000, which showed a fall of nearly 1,000 on the previous month. It is now 23,000 and is still rising.

Over the period during which the present Government have been in office, unemployment in Sheffield has risen from 4.5 per cent. to 7.9 per cent. It is steadily rising and looks like soon hitting double the figure that it was when they took office. Every time I look at the local newspapers, I see headlines such as the following: 2,700: That's the grim tally of area jobs lost in a black October". That was in the Star of 31 October. GKN to make 500 redundant at two plants". Nearly 200 jobs to go at magnet firm". That was in the Morning Telegraph of 3 November. Under the headline Gloom spreads to 5,200 more jobs we read in the same newspaper: The industrial gloom in Sheffield and its surrounding area is deepening. Each month the number of firms having to shed labour increases, and jobs threatened or lost each month are, in general, rising That is the picture in Sheffield, and it is characteristic of industrial cities throughout the land. Yet the hon. Gentleman has the impudence to prate about morality, including the Government's morality.

Nationally, the position is just as bad. We have over 2 million unemployed, and the figure is still rising. The Prime Minister made no comment today on the trend of unemployment. Either she is afraid or she knows that what the commentators are saying is true and that we are heading for 2½ million or possibly 3 million unemployed. What has the Gracious Speech to say about that? It simply contains the phrase: maintain firm monetary and fiscal policies. In other words, the very policies that have created the present disaster are to be pressed on with ruthlessly for 12 months, 13 months, 15 months or until a few Conserative Members have sufficient sense to ditch a Prime Minister who has proved such a disaster to the country.

Even in economic terms, the Government's policy makes no sense. It is estimated that unemployment at its present rate is losing us £10 billion worth of production. That is real wealth, not money, which is being lost as a result of the Government's economic policies.

Even for the Treasury, the policy makes no sense. It has been said that about £6 billion is the combined cost to the Treasury of the loss of revenue in taxes plus the benefits that even this miserable Government have to pay out to the unemployed and their dependants.

All of the above are figures. The human cost is incalculable: the damaging effect on a man in his mid-forties or mid-fifties when he loses his job and sees no prospect of returning to work; the deadly effect on boys and girls—4,000 of them in Sheffield alone—who see no prospect of obtaining a decent job or entering on a useful career. That is the cost of the Government's policy as it affects employment.

Let us turn aside from the employees of industry and look at the managers, the industrialists. They are faring no better. This year, industrial output has slumped by 13 per cent. Investment is down by 10 per cent., and it is predicted that there will be a further fall of 10 per cent. next year. That is in manufacturing industry, where investment is the highest priority if we are to compete with the other major industrial countries. We see fall, fall, fall. The number of bankruptcies has doubled, and it is reckoned that about 130 companies are going to the wall every week under the pressure of the Government's policies.

It is no wonder that the recent CBI meeting expressed outrage and fury at what the Government were doing. One Sheffield industrialist—a former master cutler, Mr. Michael Mallett, who is no Socialist, no friend of the Labour Party—said: Our businesses are being crippled in worship of a banking statistic inadequately understood, improperly defined and incompetently managed. Sir Michael Edwardes, the golden boy of the Conservative Party in the public sector, said: The talk is of risks. From where I sit looking at overseas markets waving us goodbye, there is only one risk that matters—a massive withdrawal of United Kingdom products and a break-up of distribution networks abroad which cannot be rebuilt quickly when better times return. That is the considered verdict of Sir Michael Edwardes, in charge of one of the most important firms in this country.

Those are just two quotations. I could also refer to what was said by the president and the director-general of the CBI and by a score of other industrialists, to the effect of which the Gracious Speech paid not the slightest attention. There is no indication that the Government are taking any notice even of their industrial friends and financial backers.

There has just been published in Sheffield a survey of the steel industry in the Sheffield and Rotherham area. It is an extremely depressing and alarming document. It makes all the criticisms of the Government's policy to which we have now become so accustomed: the damage done by a high exchange rate; the appalling damage done by high interest rates; the disastrous effect on steel making, particularly of the high energy charges, which are nothing to do with market forces. They are a form of taxation levied by the Chancellor of the Exchequer to increase gas and electricity prices to fiddle his borrowing requirement figures, which have become totally out of control and which he does not know how to manage.

The report shows how the loss of jobs has occurred in steel because of the Government's policies. It also makes complaints about uncontrolled dumping from abroad, on which the Government have taken no effective action.

Certain remedies are suggested. One major suggested remedy is public investment—investment in the electrification of the railways, in telecommunications and in the automotive industry. Those are industries that are the customers of steel, and their expansion would have a directly advantageous effect upon the steel-producing firms in Sheffield and Rotherham.

What does the Gracious Speech say? It speaks of restricting the claims of the public sector on the nation's resources. There is a moronic stupidity in the present Cabinet, which does not understand that the private and public sectors are inextricably interlocked. They are not two separate worlds. There is not a British Rail world and a British Steel world, a GKN world and an ICI world. The industrial complex of any modern State is tightly interlocked. We cannot say "We shall cut back on this and that, and all the others will prosper, anyway." It is stupidity. It is not even common sense. There has been reference to the Government's commitment to common sense. That is the last thing they have shown in their economic policies. One cannot go on saying that one will cut the public sector and expect the rest of the economy to flourish. It makes no sense.

The Sheffield steel report is too lengthy for me to give many details. It talks, however, of selective import controls and selective industrial derating. These are controversial and complex propositions that I do not wish to discuss now. The report is right in saying that there is no future for the steel industry in this country unless powerful stimulation is given to the public sector and consequently to the private sector of industry

Another point with which I wish to deal is the question of the Third world. In the last Queen's Speech, there was a vague reference to the Third world. The reference is just as vague this time. It looks as if the policies will be equally disastrous. The Gracious Speech states My Government recognise the serious economic problems that affect both developed and developing countries and will continue to work with other countries and international organisations in seeking to alleviate them. I hope that the Government do not seek to alleviate them by the techniques that they have adopted so far. It has to be remembered that one-quarter of this country's food and one-quarter of our industrial raw materials come from Third world countries. A fifth of our exports, mostly manufactured exports, goes out to Third world countries. We have a suplus on trade with the Third world compared with an appalling deficit within the EEC. It might have been thought that one of the objects of Government policy was to improve relations with these countries, which are so important in terms of economic partnership with the United Kingdom. Not a bit.

The great event of the past 12 months has been the publication of the Brandt report, to which the right hon. Member for Sidcup (Mr. Heath) made such a distinguished contribution. The Government's response has appalled every thinking and thoughtful group of people in this country on the subject. It can be summed up in one sentence from their reply, which states The Government believe strongly in the merits of the present economic system. That is the sum total of the Government's response to the Brandt report. In practical terms, the Government have imposed a 14 per cent. cut in the aid budget, with more, it is feared, to come. The United Kingdom is the only EEC country which is planning to reduce aid. It is the only country in the whole complex of the OECD which is planning to do worse in aid matters over the next few years than in the past

The whole concept of aid has been reduced by the Government to a narrow concept of commercial interest. They do not even understand that. The appalling increase in overseas students' fees will be directly damaging to the commercial and political interests of this country. Young men and women from countries such as Nigeria, Ghana, Kenya and other overseas developing countries, some with considerable potential wealth, who will be the future technicians, engineers, scientists and governors of those countries, are being told "We do not want you here. We do not want you to come and learn in our superb institutions, in our fine universities and splendid polytechnics and our great array of technical colleges." This country has the incredible advantage of a language that is almost the universal language of science and technology. Most of the boys and girls who come to this country are probably reasonably acquainted with the English language as a working language in which to pursue their studies.

We have two superb advantages—a fine array of higher education institutions and a language that is almost universal in terms of science and technology. Yet we jack up the fees to £5,000 a year. We are saying, in effect, that if students come from a rich family and a rich country, we shall be pleased to accept them but that, if they have any difficulty in paying, we do not want them and we do not care two hoots what damage is done to our industrial and political standing in the world. Those students will go, possibly, to Commonwealth countries such as Australia and Canada but much more likely to our industrial competitors in the United States. In some cases, they will possibly seek the training and the higher education that they need in the Soviet Union or Eastern Europe. Whatever happens, the result can only be damage caused by a foolish and short-sighted policy.

Everyone accepts that the OPEC countries have enormous political and economic clout in international discussions. But the Government are not prepared to come half-way on any of the matters wanted by OPEC countries in the restructuring of international order. We were one of the three negative countries in the United Nations special assembly that refused to go along with the vast majority in the organisation of further discussions in 1981.

Within the IMF, we have taken a negative and reactionary attitude towards demands for the restructuring of that organisation. I am not one of the critics of the IMF. I do not believe that it is a bad organisation that we should undermine and displace. It needs reform. We should be pressing for its reform but not its destruction. The attitude of the Government has been unhelpful and negative.

Our attitude to the Third world is shown by an event only a few days ago. On the initiative of the President of Mexico and the Chancellor of Austria, the Foreign Minister of Austria called together the Foreign Ministers of a number of leading countries to arrange for a special summit meeting in 1981 to discuss the recommendations of the Brandt report. The United Kingdom was not even invited to that meeting. There can be few more blatant snubs to this country than the fact that we were not even considered worthy of being invited to discuss that topic.

The Government constantly produce as their alibi a world recession. The Government, like previous speakers in this debate, say that there are no other options. They are trying to persuade and to hoodwink the British public into believing that high unemployment, depression and recession are somehow inevitable and that people have to put up with them because there is no other way. This is nonsense. There are alternative policies. We can cut interest rates, reduce the exchange rate and use the massive North Sea oil revenues not to destroy but to regenerate and to revitalise British industry. This is the policy that the Labour Party will advocate throughout the country. This is the policy that the people of this country want. They will be anxious for the earliest opportunity to put that policy into effect.

5.27 pm

Mr. James Hill (Southampton, Test)

We have had a series of speeches which I can put into three categories. The first was the good old knockabout that all hon. Members enjoy. The second was the broad brush on the world canvas that all statesmen like to make. The third, which I am about to make, is concerned with personal and constituency matters. This is a great occasion for a Back Bencher to bring forward constituency views on matters that will worry his constituents in the next 12 months.

The Queen's Speech says: Measures will also be laid before you to replace public involvement in transport industries. That covers the new privatisation of the British Transport Docks Board. Southampton is the biggest of the 19 ports involved. People on all sides in the industry in the port are extremely worried. I have spoken to the unions involved. This does not simply mean the Transport and General Workers Union. Others involved are UCATT, the AUEW, the EETPU, the National Union of General and Municipal Workers and the Amalgamated Society of Boilermakers, Shipwrights, Blacksmiths and Structural Workers. The problem involves dockland throughout the country.

I am pleased to be able to tell those involved that only 49 per cent. of the shares will be sold off and that 51 per cent. will be left in Government hands. The Government will also prevent any of the ports being separated. The new private/public company will consist of 19 ports. Consequently, the fear that there will be asset-stripping in the ports should be put at the back of the unions' minds.

The unions see another danger in 49 per cent. of the shares being sold. They fear that the main users of the ports might have a majority holding of the 49 per cent. of shares. I hope that as many people involved in the ports as possible will be encouraged to buy the shares. The British Airways scheme has had to be put back because of lack of profitability. However, under that scheme the shares were to be issued to employees on the basis that if one was bought the buyer had an option to buy another. I hope that the Government will follow that course.

The docks labour force consists not only of the stevedores but of all the ancillary workers and the British Rail workers who operate the cranes. All should be involved in the massive share distribution. If the scheme is handled carefully, I am sure that the labour force will willingly accept privatisation of the British Transport Docks Board.

The second problem in my area is caused by the rumour that the Secretary of State for the Environment is considering hiving off some of the Ordnance Survey. The headquarters of the Ordnance Survey is in Southampton, Test. The worry is based on rumour rather than fact. A worker said in a letter: I am employed at the Ordnance Survey in Southampton and I am at the moment anxious that I may lose my job. As no doubt you are aware Mr. Heseltine has suggested that the Ordnance Survey should be hived off and put out to private agencies. This I believe is probably one way of reducing the number of civil servants. I should imagine it is quite obvious that if an outside agency took over the Ordnance Survey its reputation which has been built up over 200 years would be tarnished. Whether or not that letter is based on fact, the fear exists.

My right hon. Friend the Secretary of State will need to give an extremely good reason if I am to be convinced that the Ordnance Survey should be broken up. I believe that there has been some misunderstanding. I can understand how some of the franchise for the printing of maps might be sold off and how some of the services could be dealt with by private enterprise. However; I cannot imagine that anybody would purchase the Ordnance Survey headquarters in its entirety. That would not be a commercial proposition. The building is of a high standard. I am sure that the Ordnance Survey has not made a profit at any time in the last 200 years.

The Ordnance Survey provides a first-class service which is used throughout the world. No doubt more money could be earned by increasing the number of licences to produce maps, but unless the Secretary of State has a wonderful reason, or a series of reasons, I could not go along with a proposal to break up the organisation.

There is a moratorium on council house building in Southampton. It has a reputation for building for the minorities and for building special sheltered acccommodation for the disabled and the elderly. The responsibilities are shared by the social services and housing departments. The standard of housing for the unfortunates in Southampton is high.

Housing associations have been encouraged to build in Southampton. We have offered plots of land to many housing associations. The British Legion, for example, has done some excellent work. In 1979 the Government made a commitment and confirmed their support for and confidence in housing associations. They promised to maintain the money for a programme of new approvals and work in progress. The Government can take satisfaction from the figures. They have helped a worthy cause. In 1979–80, 24,601 housing association homes were completed. That represents more than a minor involvement in housing for the needy.

Repayable loans are involved. There is no possibility that housing associations will become over-stretched. Their architects go into more detail than local authorities have time to do. They build for particular minorities. They do not build on the basis of a waiting list. Anyone coming into an area who for various reasons cannot get on a waiting list stands a chance of a unit in a housing association complex.

My Labour colleague, the hon. Member for Southampton, Itchen (Mr. Mitchell), shares my anxiety about the three issues which I have described. We hope that today's debate will be considered by the three Ministers concerned. We hope that the privatisation of the British Transport Docks Board, the possible hiving off of the Ordnance Survey and the reduction of capital for housing associations will be examined carefully and that we shall be consulted.

5.38 pm

Mr. David Ennals (Norwich, North)

I shall concentrate on local matters. I agree with the hon. Member for Southampton, Test (Mr. Hill) about housing associations. Last week a heading in my local paper stated: Norfolk housing groups spell out cash cuts peril. Local authorities have been told that they cannot give the same assistance to housing associations. I agree that that is a tragedy. I also agree with what the hon. Gentleman said about the Ordnance Survey. However, my colleagues will want to put questions to the Secretary of State for the Environment which are even hotter than those about the Ordnance Survey.

The Queen's Speech is very thin, and that is of some merit. Not too much legislation is promised. I gather from a statement that was attributed to the Leader of the House that the thinness arises largely because two-thirds of the Conservative manifesto has been carried out. However, most of the problems that worry my constituents were never mentioned in that manifesto.

The Prime Minister was very much on the defensive today. She failed, however, to defend the Home Secretary from the most serious charges by my right hon. Friend the Leader of the Opposition to the effect that the right hon. Gentleman had made an absolute pledge upon which his Government have now decided to renege. The right hon. Lady said not a word in her right hon. Friend's defence, but that is perhaps part of her custom. She spoke of lower prices, the great objective of the Government. However, 18 months after the Government's coming to power the rate of inflation is 50 per cent. higher. Most of that inflation they have created themselves. The right hon. Lady took a great deal of pride in the steps being taken to help some of the unemployed. Those steps, however, did not amount to providing the unemployed with jobs. My constituents want, above all, to go back to work.

The right hon. Lady said nothing about falling production. The Conservative manifesto promised that it would rise. Along with production, investment has been falling and unemployment has been going up. The Prime Minister said nothing about interest rates or about the "bare knuckles" conflict with the CBI.

Judgments of Governments are usually made after 100 days. Excluding Sundays, the Government have been in office for about 500 days, and we can therefore make a judgment of their performance so far. They have been an unmitigated disaster. The Prime Minister's policies are in ruins. Her promises to the electorate have proved to be false. The members of the Cabinet are at each others' throats. The Government's erstwhile friends in the country generally, in the CBI and even among distinguished sections of the Conservative Back Benches, involving former Ministers and even Prime Ministers, are in open revolt against the Government's policies.

Therefore, we must consider what the coining year and the Gracious Speech hold for our constituents. Let me spell out three problems that affect my constituency. One is housing. There was no mention of housing in the Gracious Speech. There is no suggestion of massive increases in council rents, an issue that was touched upon last week. There is nothing about further restraints on house building.

I shall give one or two examples of what is happening to housing in Norwich, as set out by the chairman of our housing committee. In 1978–79, the last year of the Labour Government, Norwich city council started 528 new houses. This year, under the Tories, we shall not have started any new homes. Apart from the war years, that is the first time that has happened. Plans for 225 sheltered or supportive homes for the elderly have had to be abandoned. Inner city renewal has had to be scrapped.

In 1978–79, under Labour we provided nearly 90 mortgages for young couples. This year we shall provide none. In 1978–79 we offered 340 improvement grants. This year we shall be unable to offer as many as one-third of that number. In 1978–79 we started to modernise 500 older county council properties. This year we have been able to start work on only 200. In 1978–79, 400 central heating installations were completed, mostly for the elderly. Most of that programme will be scrapped. I could continue to detail that sort of record throughout the council's range of activity.

The council house waiting list in Norwich has increased enormously. It is a good housing authority. There were 3,337 council dwellings in September 1978. They now total 5,400. However, East Anglia has experienced a faster slump in the building industry than any other part of the country.

Norwich has always enjoyed lower than average unemployment. We have been fortunate because of the breadth of industry and services located there. For the first time that many people in Norwich can remember, the city is now suffering from serious unemployment. It has been rising every month by about 500 a month. Over the past 12 months the level has inceased by about 50 per cent., and there is no sign of a decrease.

Firms have been going bankrupt at an unprecedented rate. Others have reduced their work forces and have introduced short-time working. My hon. Friend the Member for Sheffield, Heeley (Mr. Hooley) spoke of the lack of opportunities for young people in his city. The same applies in Norwich. In the city and in the county there are more violence, more crime and more heavy drinking among young people who cannot get jobs. It is recognised that one of the reasons for the increase is the lack of employment opportunities. There is to be a conference in the city on 12 December to examine ways of dealing with the problems.

There is also far more long-term unemployment, with its devastating effect on the lives of individuals and families. The Government will be aware of the recent findings of Dr. Harvey Brenner which he made available to the Select Committee on unemployment in another place. His researches have shown that a rise in unemployment of 1 million spread over five years would bring with it an increase of more than 50,000 in the expected number of deaths, with 700 of them being caused by extra suicides and 130 by extra murders. In addition, 167,000 extra deaths would be caused by heart disease. The numbers suffering from mental illness would increase by 63,900 and the number of prison sentences would rise by 13,900. He went on to elaborate these direct consequences of Government policy. There is no doubt that the consequences can be seen in terms of crime, violence, broken families and dissatisfaction among people at the way they have to conduct their lives. They will be seen, too, in terms of demands upon the Health Service and the prison service.

Mr. John Major (Huntingdonshire)

The right hon. Gentleman paints a bleak picture of Norwich and the country generally. Does he recall the remarkable speech by the right hon. Member for Leeds, East (Mr. Healey) in 1976 in which he said that there was a gap of between 18 months and two years between economic cause and effect? Does he disagree with his right hon. Friend, or does he believe that what is happening now is a result of the actions of the Labour Government 18 months ago?

Mr. Ennals

No one believes that the reason for the current dismal depression is other than the policies being pursued by the Government. I am not suggesting that we are not facing world problems or that vie are not affected by the price of oil. However, the relentless pursuit by the Government of monetarist policies—there were one or two signs today of a U-turn in respect of training for the unemployed—has been the cause of the trouble. I do not believe that the majority of the Cabinet agrees with those policies. It does agree that there will be terrible consequences for the country. I do not know how a country that lives by its industry can survive the destruction of its industrial base. Without that base, the money will not be generated to be put back into social services and all the other needs of the nation.

The report of the Manpower Services Commission predicts that unemployment will continue to rise steadily. It says: The projection of medium-term employment prospects was made in September and lends official support to the forecast published…by the London Business School that unemployment will stay above two million throughout 1984. It goes on: Even by the mid 1980s unemployment seems likely to be still well above present levels. So, more hardship. But will benefits help to cover the hardship?

The Queen's Speech states that pensions and other social security benefits will be increased on 24 November and reviewed again next year. I hope that during the course of the debate, perhaps tomorrow, the Government will explain what that means. Does it conceal the fact that there will be a reduction in the benefit levels for the sick and unemployed? We know that it will not affect the elderly because of the row that took place in Cabinet. We must watch the position carefully.

My last point concerns health. I thought that I might follow the hon. Member for Canterbury (Mr. Crouch). Quite often either he follows me or I follow him when discussing health matters. I cannot see any mention of health or social services in the Queen's Speech. Public expenditure is to be cut, and that may affect the Health Service. During the weekend there was an indication from the Minister for Health that the Government would put forward plans early next year to introduce the insurance principle into the National Health Service. Why do they propose to do that? It is not to improve the efficiency, to lessen the bureaucracy and the cost of the Health Service. The Government are looking at insurance schemes overseas. I have looked at schemes overseas, and there have been studies of countries with insurance-based schemes. The bureaucratic burdens and the costs are heavy. That is why we have the National Health Service. We hope to make some improvements in the current reorganisation to put right what was done by a previous Conservative Government. Nevertheless, the administrative rate is lower than that of almost any other service in the world providing a broad base of health care. The Government's proposal is nothing other than a method of trying to save money.

An insurance-based system will mean that people will not be able to pay the premiums. There may be an alternative as to the level of premium. But usually those who face the highest risk—the elderly, the sick, the handicapped and children—have the least ability to pay. I am sorry that the Gracious Speech did not touch upon that subject. It may be one of the central issues to be debated in this Session of Parliament. There must be no attempt to destroy and undermine the basis of a Health Service that is free at the point of delivery. The Opposition will be watching carefully to see whether the Government make any further moves that will damage or destroy the Welfare State that we have taken 30 years to construct and develop.

5.53 pm

Mr. Patrick McNair-Wilson (New Forest)

Inevitably, every Gracious Speech contains gaps that one would like to have seen filled by measures to deal with problems that have caused concern for some time. I know that many of my constituents will be sorry that there is no mention of rate reform in the Queen's Speech. As rate burdens become ever heavier, many hope that a system can be devised whereby people pay their local tax on the basis of what they can afford rather than where, by accident, they happen to live.

I welcome the Queen's Speech and the matters contained in it. It comes ill from Opposition Members to make many of the attacks that they have made when the previous Labour Government failed dismally to manage our economy. They produced record inflation, high unemployment and a wage policy which, in the end, led to the collapse of the Government. I am content that we should continue with the policies to fight inflation that have been set out by my right hon. Friend the Prime Minister. My worry is that external forces will play a part that will make the fight all the more difficult.

In the recent past the Government have had to listen to siren voices that wish to see a reduction in the minimum lending rate and in the level of sterling—

Mr. Brynmor John (Pontypridd)

The CBI.

Mr. McNair-Wilson

The CBI and many others to boot, as we all know. If the MLR is suddenly reduced, we shall see a deterioration in the rate of sterling that could be equally sudden and very damaging. Some say that sterling is a petro-currency and, therefore, immune from those fluctuations. I do not share that view. Other petrocurrencies, such as the Canadian dollar, do not show the built-in strengths to which some of the siren voices turn. Germany and Japan have strong currencies, but they also have a strong trading base. If we take precipitate action on the interest rate, sterling will begin to fall dramatically. While, at first blush, that might appear to provide new export opportunities, it will make the battle against inflation virtually impossible. As Opposition Members know better than most, a low sterling rate means that there is no way of containing inflation in the economy. We know that we import about one quarter of the food that we eat, of our raw materials, and so on. If the rate for sterling falls, those bills will rise. The whole of the strategy that the Government are pursuing—and which I support—will be in danger. It would be foolhardy to make any change in the lending rate or to attempt artificially, or in any way, to reduce the rate of sterling at this stage in the battle against inflation.

The other external factor that will affect the inflation rate is the price of oil. In the few moments at my disposal I shall deal with the energy crisis. First, however, I shall deal with the price of oil. One cannot take 4 million barrels of oil production a day out of the energy equation, for any length of time, without the effects being felt throughout the developed world. That is precisely what is happening as a result of the conflict in the Middle East. Many countries are not as fortunate as the United Kingdom. They have to buy their oil from Middle East suppliers and producers. The effect that this is already having can be seen by looking at the differential between the spot market for oil in Rotterdam and the world price. The OPEC price is about $32 a barrel. The spot market is at least $10 or $15 a barrel higher. That leads me to believe that we shall soon face a major rise in world oil prices. That will suit the OPEC producers for a number of reasons. They have always wanted to reduce production because they are exporting the only product that many of them have to sell. Because our oil price follows the OPEC price, our price will rise considerably also. That will have its effect on domestic inflation because the industries that use oil will be affected.

I share the view of my right hon. Friend the Secretary of State for Energy that it would be extremely dangerous to have an artificially low oil price in Britain. We would return to the position that temporarily existed less than five years ago when we appeared to be becoming the bargain basement for oil in the Western world. Therefore, I believe that oil prices will continue to follow the OPEC lead.

There is one other source of energy in which we are enormously rich—far richer than we are in oil—and which can play a substantial part in our economic performance and, it is to be hoped, our economic recovery. I am talking about the coal industry. Most of us in our constituencies have heard justified grumbles and criticisms from businesses, for which electricity charges are becoming a worrying burden. As those of us who have followed the industry over the years know, the coal industry is the CEGB's principal supplier. It is fair to say that the CEGB is now the only really big customer which the British coal industry still has. For reasons with which we are all familiar, the steel industry is now a small customer. Therefore, the fortunes of the coal industry for the foreseeable future are closely linked to the performance of the electricity industry.

This year, perhaps more so than ever before, large stocks of coal are being amassed, which cost a great deal of money to put into stock and to maintain. Further, the coal industry has increased its price and is likely to do so again on 1 January. That in turn will have an effect on its customers, particularly on the CEGB, which is its principal customer.

About 70 per cent. of all electricity is made from coal under the boiler. Sixty per cent. of the CEGB's costs are fuel costs. Indeed, this year it will spend about £2½ billion in payments to the Coal Board. At the moment, coal can be delivered to a Thames power station from abroad 10 per cent. cheaper than it can be produced here. I want to see that situation reversed. At present, the CEGB has a five-year contract to buy 75 million tonnes of coal from the Coal Board on condition that the price of that coal does not rise above the rate of inflation. Therefore, this winter the coal industry will reach an important crossroads.

We know that many industries such as iron and steelmaking, and particularly electric melting in the steel industry, with which I am associated, are dependent on electricity charges. I have supplied figures to my right hon. Friend at the Department of Industry which show the differential between the cost of electricity here and that in plants in Europe that are owned by a company with which I am associated. It is a substantial differential—of the order of more than 30 per cent. between ourselves and the French. I therefore want to see electricity charges kept under control—and, I hope, brought down—because if demand increases the coal industry will be able to sell its products.

I know that many of my hon. Friends rightly talk about reducing the size of the Government's borrowing requirement. With regard to coal and electricity, we have already paid, and are now paying, for the power stations and the coalfields. Therefore, it makes no sense at all if we do not get the best value that we possibly can from that investment, which in many cases is already in the ground. I hope that my right hon. Friends will examine the financial controls which are imposed on those two industries to see whether they are not too rigid. The external financing limits which have been imposed, and which are being imposed, mean that the coal industry is trying to meet financial targets which it has no hope of meeting, for the reasons that I have just given—that its market is extremely depressed. The CEGB is in a like situation.

That does not mean that one needs in any way to alter the major economic strategy to which I have referred. It means that this is an area which is within the grasp of the Government and which could make a substantial difference to our competitive edge. If the cost of electricity can be brought down to a more reasonable figure for many of the industries that are major users, we will produce not only benefits for those companies but also benefits for one of our largest industries in the shape of the coal industry. Without that, we could face another situation in January when coal prices again rise substantially and when the CEGB no longer accepts the commitment to buy 75 million tonnes a year from the Coal Board. As a result, that great industry, which is every bit as important as the oil industry, could find itself facing a terrible future. That is unnecessary.

In respect of this part of the energy equation, there is no need to wear this hair shirt. It unnecessarily creates problems both for the users of the products to which I have referred and for those who are trying to dig them out of the ground or send them down the national grid. I believe that the Government should look urgently at the possibility of relaxing the rigid controls on the external financing limits and perhaps put common sense ahead of arithmetic.

6.6 pm

Mr. Donald Coleman (Neath)

This is a wide-ranging debate. I am sure that the hon. Member for New Forest (Mr. McNair-Wilson) will forgive me if I do not follow him down the road that he took. Whenever he speaks in the House he speaks with authority, and consequently he commands the attention of the House. I hope that he will forgive me if I do not follow him along the interesting route that he has just taken.

The document containing the Gracious Speech has already been referred to as a slimmer and more expensive document than the one that contained the Gracious Speech last year. It seems a pity that such a slim document as this does not contain a line stating "Legislation will be brought forward to facilitate an uprating of the death grant", but perhaps my reference to this fact will penetrate the mind of the Treasury and during the course of the year we may find it appearing under the section: Other measures will be laid before you. I am glad that the Government are to bring forward measures to improve road safety. The carnage and injury on our roads are a scandal and a shame. Any measures that can be brought forward to deal with those problems will certainly be welcomed.

I notice that legislation will also be brought forward to amend the financial arrangements for the National Enterprise Board, the Scottish and Welsh Development Agencies, and the Development Board for Rural Wales". I do not know what that means. I hope—and I am sure that my right hon. and hon. Friends from the Principality also hope—that the Secretary of State will tell the House a little more about what is intended before the debate is concluded.

About 12 months ago the Iron and Steel Trades Confederation, of which I am a member, told the Secretary of State for Industry that he should provide for the capital reconstruction of the industry. What a pity that the right hon. Gentleman did not listen to what he was told and advised to do. Had the Secretary of State listened and acted, the disastrous steel strike that took place earlier this year might have been averted.

I listened with interest to the Prime Minister and to the hon. Member for Nelson and Colne (Mr. Lee), who seconded the motion, about the proposals in respect of unemployment. Like my right hon. Friend the Member for Norwich, North (Mr. Ennals), my constituents and I would be more convinced of the sincerity and effectiveness of these measures if we knew that they would provide jobs. The Gracious Speech does not give much hope for those who live in the county of West Glamorgan. I would be failing in my duty if I did not emphasise again the problems of our industrial decline and voice the concern about youth unemployment.

There continues to be rapid industrial decline throughout the whole of the county. The current figures were issued on 21 October 1980. Mark that date—21 October 1980—because I shall refer to it again later. Those figures show that in the West Glamorgan travel-to-work area 20,016 people—or 12.1 per cent. of the population—were unemployed. The figures are even worse when we look at the local travel-to-work areas within the county. My constituency, Neath, has 3,490 people—or 13 per cent. of the population—unemployed. It has been forecast that in June 1981 in West Glamorgan there will be 34,650 people—or 16.1 per cent. of the population—unemployed. Looking at the predictions even further in respect of the local travel-to-work areas, Swansea will have 14,250 people—or 13.3 per cent. of its population—unemployed. Port Talbot will have 15,350 people—or 19.1 per cent.—unemployed, and in Neath 5,050 people—or 18.8 per cent. of the population—will be unemployed in June 1981.

If we make further comparisons, we find that West Glamorgan still comes out badly. Its current level of unemployment is 12.1 per cent. That compares with 11.9 per cent. unemployment in South Wales, 11.9 per cent. in Wales as a whole and 8.4 per cent. in Great Britain. If we make the same comparison with the forecast of June 1981, we find that in West Glamorgan the unemployment rate will be 16.9 per cent., in South Wales it will be 16.3 per cent., in Wales as a whole 15.2 per cent. and in Great Britain 10 per cent.

Meetings have been held and countless letters have been written in which we have stressed time and time again that it is important for the county of West Glamorgan to be accorded special development area status. However, all that has been to no avail. The Minister of State, Department of Industry said in a letter dated 23 October—three days after the figures that I quoted were published: In conclusion, I must repeat that our preliminary view of the situation at Neath is that we are not able to justify redesignating the travel to work area as a special development area. Heavens above, must everyone in Neath become unemployed before the Department changes its view? When the decision to take away special development area status from Neath was announced, the unemployment level was 7 per cent. It is now 13 per cent.

I turn now to youth unemployment in the county. The seriousness of this problem in our county can be illustrated by a comparison between the current unemployment figures and those of October 1979. In October 1979, 703 school leavers were registered as unemployed. In October 1980 that figure had risen to 1,709—an increase of 1,006. In October 1979 the total youth unemployed in the county was 1,069. Today it is 2,178—an increase of 1,109. In October 1979, 1,129 young people were engaged on special programmes, while in October 1980 1,693 were engaged in such programmes—an increase of 564. Despite a significant rise in the number of young people taking part in youth opportunity programmes and work experience schemes, which deal with the problem temporarily, the figures for youth unemployment in West Glamorgan have more than doubled in a year.

Last Friday evening I visited the constituency of my right hon. and learned Friend the Member for Aberavon (Mr. Morris) and was shown a poem composed by a young boy of 13 who attended one of the comprehensive schools there. The words of the poem express, far more eloquently than any words of mine, the frustration and the feelings of young people. The poem, which is called "Misery", reads: Between the mountains, between the sea, Lies Port Talbot town—nicknamed 'Misery', where nothing happens all day long, only traffic lights change—and even they go wrong. When people pass near, along the M4, They visualise a sign 'CARRY ON. IGNORE!' —for to visit Port Talbot must seem like Hell, its atmosphere of gloom, its sights, sounds and smell. The weather in Port Talbot just adds to the gloom, it never stops raining from morning till noon. The present seems bad, the future looks bleak, Port Talbot town is going down the creek. No work, no jobs, no money, no naught, just employment famine and financial drought. We have to face up to reality— We live in Port Talbot—nicknamed 'Misery'. These are terrible words for a young child to be writing. They should not have to be written.

I hope that the measures that the Government bring forward will provide jobs for the people living in West Glamorgan, in Port Talbot and in Neath, because that is what is demanded of them. That is what we require of them. Unless they do so, the verdict of the people will be passed upon the Government and they will be cast out for ever.

6.21 pm

Sir Anthony Meyer (Flint, West)

I hope that the hon. Member for Neath (Mr. Coleman) will not make the mistake of painting too black a picture of what is admittedly a very worrying situation in Wales or give the impression that it is a land where all hope is dead, because nothing could do more than that to discourage the investment we so desperately need in order to create jobs there.

Like the hon. Member, I shall speak very largely about the problems of unemployment, but I do not think that I can fail to put on record—even though the right hon. Member for Bristol, South-East (Mr. Benn) left the Chamber almost immediately after establishing his credentials as being lefter than Left—my astonishment at hearing a right hon. Member of this House put on exact equality the Soviet invasion of Afghanistan and the American action in Vietnam.

That American action was in many ways mistaken, and it involved many hideous mistakes, but when it was undertaken by President Kennedy it was at the time widely approved by the Labour Party, as it was, indeed, by most members of the Conservative Party. But, above all, it was an action that was freely debated and discussed, throughout its entire course, in the United States. To put that on all fours with what the Soviets have done in Afghanistan leaves me almost speechless. The right hon. Gentleman's contribution was about the only one I have ever heard in this House that would have been as well delivered in the Supreme Soviet.

I want to speak mainly about unemployment, which is, of course, the principal worry in my constituency, as it is in so many others. Because of steel closures and because of the crisis in the textile industry, unemployment in one part of my constituency—the eastern end, the Mold area—which used to be way above the national average, is now horribly close to 20 per cent. At the western end of the constituency—the Rhyl area—employment has held up quite well by the abysmally low standards that are, alas, normal there. But it is now beginning to creep up towards the 20 per cent. that was prevalent under the previous Labour Government.

Let me first make it plain that the Labour Party has no contribution to make to the debate on unemployment other than to urge that we should spend more money in creating jobs, without ever stopping to tell us where the money is to come from. No official Labour spokesman has had any valid suggestion to offer. This is not surprising, since the unions, almost by definition, are concerned primarily to protect the living standards of those of their members who are in work, and the Labour Party—particularly under its present leader—takes its cue from the unions.

Mr. Austin Mitchell

Pathetic.

Sir Anthony Meyer

Anyone who thinks that import controls will save more jobs than they destroy—in a country where one-third of the jobs are dependent on exports—is clearly happy to be within the Labour Party.

The Gracious Speech makes it plain that the Government's overriding priority is the control of inflation. The Government are quite right to say that until we have got our inflation down to the level of that of our overseas competitors, British industry will be unable to sell its goods in export markets or to compete with imports in the home market. If it is not competitive, British industry, which provides the bulk of jobs in this country, will be unable to go on providing those jobs, to pay decent wages or to create the wealth to finance social services for the whole population

So it is that the conquest of inflation is the essential precondition for getting back to full employment. But it is not the only precondition, nor is it the major contribution. One has only to look at the levels of unemployment in countries that have managed their economic affairs a great deal better than we have to realise that the present unemployment is not caused by inflation, any more than it is caused by the policies of this Government to control inflation. Nothing is more extraordinary than to listen to one hon. Member after another from the Labour Benches talking as if this were the only country in the world to have the present levels of unemployment.

High interest rates and the strong pound are not the major causes of the present level of unemployment. Unemployment in this country—as in France, as in the United States and as even in Western Germany—is caused almost entirely by the world recession, the most severe for a generation. It takes a party as pigheadedly stupid as the British Labour Party to suppose that a British Government can, by purely national action, eliminate the effects of that recession.

Anyone else can see that only international action can accelerate the end of the recession. It follows that by far the best thing the Government can do to restore full employment is to contribute to international action, and to do so in the only effective way open to us, through our membership of the EEC, which is the most powerful trading group in the world. What the Labour Party proposes at this point is that we should impose import controls and thus set an example that would intensify the recession, and that we should leave the EEC and thus throw away our chief weapon for combating it. I most warmly welcome the very firm statement of the Government's commitment to making our membership of the EEC a success.

International action, because it is far more likely to succeed than even the most intensive national action, must therefore take precedence, and any national policies for dealing with unemployment should be set aside if they are prejudicial to effective international action.

The world recession will come to an end; sooner if there is international action, and later if there is not. When it ends, those countries that have mastered their inflation will get back to full employment quicker than those that have not. But I do not believe that full employment will ever again have the same meaning as it had in the years up to 1973—not that it was the oil crisis that brought about the change. All that the oil crisis did was to accelerate dramatically a fundamental shift that was occurring anyway.

The fact is that the economies of the so-called industrialised countries rely, at any rate for the provision of jobs if not exclusively for the creation of wealth, on semi-skilled work, which can now be better done in countries where the workers will do more work for less money.

Within a short time—certainly before the beginning of the next century and probably before the beginning of the next decade—the industries that now provide hundreds of thousands of jobs—motor car assembly, basic steelmaking, textiles, footwear, hosiery, food processing—will be employing only tens of thousands. We cannot hope to save those jobs by subsidies or import controls or any other form of purely national action. We can put off the evil day a little longer by policies of protection within the EEC and perhaps gain five years, or possibly even 10 years, of breathing space that way.

What I am talking about is not long-term; it is here and now. What I look for in the Gracious Speech and in ministerial contributions to the debate is evidence that the Government are aware of this and are doing something about it now in this Session of Parliament. The Japanese—the world's most successful car assemblers—have already realised that this cannot be the industry of the future for them and are acting accordingly.

I warmly welcome the Government's expanded programme of job creation. I saw some of it in my constituency last weekend. I was very impressed by what was being done. Though socially necessary, it is only a palliative, but it is far more justifiable than the use of resources in propping up jobs in car making, steel or shipbuilding. The long-term answer, which is already five years or more overdue, is to accelerate the trend away from traditional industry and employment and to facilitate the emergence of new industries and, above all, new services. It must be almost entirely from private enterprise that these industries and services will spring.

The Government have a subsidiary role to play in persuading the financial institutions to back new ventures along the lines suggested by Lord Lever in his articles in The Sunday Times. I would not rule out the Government's having a role to play in setting up institutions for this purpose.

The Government have a much larger role to play in improving our educational and training services so as the better to equip people to face the changed world of the 1980s. Very big changes in education and training are needed. One has only to ask any industrialist to realise that.

By far and away the most important thing that the Government have to do is to recast fundamentally and urgently our tax system to give a real stimulus to the setting up of new job-creating industries and services. In particular, my right hon. and learned Friend the Chancellor must not allow himself to be deflected from that upheaval of the capital tax structure that he has been promising us for so long. When he does it, let him do so with only one thing in mind—not social justice, attractive though that may be, for that is the fig-leaf that has covered Britain's economic collapse, nor the protection of living standards that we sustain only by selling the seed corn, but the regeneration of British industry through the emergence of many thousands of new firms blossoming among the ruins of nineteenth century industry and in the sunshine of a tax system aimed at creating jobs rather than winning votes.

6.34 pm.

Mr. Austin Mitchell (Grimsby)

In speaking about Her Majesty's most Gracious Speech, we are in a sense talking about an interim agenda for the Government, because the struggle is apparently still going on in the Cabinet. As the struggle is not yet over, we are not aware of the full agenda.

On the Speech so far, the score would appear to be wets, 2; stumblebums, 1. From the accounts that are appearing concerning the struggle going on in the Cabinet, I wonder whether we have government not by the Prime Minister but by Brian Walden. When the sacred text from "Weekend World" has to be trundled into the Cabinet discussion to quote the Prime Minister's promises on pensions against her present intention to cheat the pensioners, one realises that the centre of power is slipping away from the Cabinet Room to a television studio. That is the indication from leaks. Indeed, everything that we learn about the Government seems to come from leaks or written answers. I was hoping that the Prime Minister would make a commitment today not to declare war against any Power and announce it by written answer to the House of Commons at 11 o'clock at night.

We look forward to more written answers and leaks as the Government's inner turmoil comes out drip by drip. So far as I can see from the praising with faint damns that has constituted the speeches of Tory Members in this tumultuous Assembly, there appears to be a re-enactment of the Caine mutiny as, one by one, the mutineers shuffle off and Mrs. Queeg is left alone on the bridge, clicking balls.

All this entertainment, entertaining as it is, is tragic when contrasted with the hopes invested in the Government and the hopes that the Government hold out in the Queen's Speech: The need to bring down the rate of inflation and create conditions for a sustainable growth of output and employment remains the prime concern of my Government. Those hopes are the prime concern of a Government who have decimated output. Industrial output must now be 10 per cent. below the 1973 level, despite an investment of about £26 billion in machinery and equipment in factories since that time. Those are the hopes of a Government who are leading us remorselessly to 3 million unemployed. I see nothing—the palliatives are nothing—to stop that progress towards 3 million unemployed. Those are the hopes of a Government who have doubled inflation and have no hope, for at least another two years, of getting it down to the level at which it stood when they took office and who can fight inflation only by creating a wilderness and calling it stability.

That reality, contrasted with those hopes in the Queen's Speech, is the economics of cloud-cuckoo-land. The whole situation is getting very much like the South Pacific cargo cult about which we used to read. The witch doctors told the people that faith would bring the cargo. They held out promises based on faith. The idea was that if the people would abandon economic activity—whether catching fish or ploughing fields—and observe the diktats of the witch doctors, whether that be building pretend airstrips or whatever the cargo cult dictated, the cargo would come. Of course, when the people do that and the economic activities are abandoned, the cargo does not come and the whole thing collapses into ridicule. We are coming very near to that point as the cargo cult of monetarism collapses around the Government's ears. There can be few Governments in British history who have so sadly deceived the people and irresponsibly rushed into a disaster on this scale with such headstrong folly.

In contrast to what the hon. Member for Flint, West (Sir A. Meyer) said about this being part of a world depression, why should we, the only industrial country in the world that is self-sufficient in oil and has the prospect of breaking out of the straitjacket of a balance of payments constraint that has stopped every attempt at expansion that has been made since the war, be plunged into the deepest depression that we have had since the war? Why are we, with all those prospects, in the worst situation of all industrial countries? The answer lies with Government policies. [Interruption.] The hon. Member for Brigg and Scunthorpe (Mr. Brown) may reply later if he wishes. I hope that he will. I shall be interested to hear his argument in defence of the Government's policies. Indeed, if I remember rightly, the first thing that the hon. Gentleman did when he entered Parliament was to table a motion criticising attempts to provide jobs by the temporary employment subsidy and the short-time working subsidy as camouflaging unemployment. Well, now the hon. Gentleman is trying to camouflage unemployment and is supporting a Queen's Speech that is doing the same thing. I shall be interested to hear his contribution later in the debate.

We find ourselves now up a well-known creek without a paddle. The Government are desperately pretending that the mire into which they have led the country and plunged its people is a beneficial, even enjoyable experience and that good will come from wallowing in it. It is a kind of nostalgie de la boue, I suppose, which affects all Governments but affects none more severely than the present Government, because the mess into which they have led the nation is deeper.

As the Prime Minister read and at times gabbled through her apologia pro catastrophe sua, I thought at times that her main skill must be accounted as the skill of prating—prating to the TUC about the need to hold wages when, for the last few months certainly, the pound has been rising in value faster than earnings have been rising; prating to the CBI about the need to cut Government spending when we all know that if Government spending is cut further the only effect will be to reinforce and to deepen the depression into which this country has been plunged; and prating to the people of the country with her piggy-bank economics, which have produced such a disaster in economic management in Britain.

The Prime Minister is rapidly becoming the original prating mantis. I would say "praying mantis", but when she prates the rest of us have to pray.

Mr. Peter Bottomley (Woolwich, West)

This is the second time today that I have heard that the pound has risen in value faster than pay. Although there are obviously distortions in the figures, my understanding is that pay now is 24 per cent. higher than it was a year ago, although I accept that there has been some backdating, which affects that. If the value of the pound has risen by the same proportion during the past 12 months, it suggests that 12 months ago the dollar rate was 1.90, and I do not think that that was what was happening.

Mr. Mitchell

I said "In the last few months." I am relying on memory. I shall write to the hon. Member with the figures. My recollection is that over the last six-month period which I have looked at, which is up to about August, the pound rose by about 13 per cent., earnings in manufacturing industry rose by about 6 per cent., and all earnings rose by just about 11 per cent. So the value of the pound is going up faster than earnings. 'We should not forget that earnings have been cut by short-time working and by the cutting down of the overtime that is normally worked in the British economy. So over the last few months the pound has been rising more rapidly than earnings have been rising.

Mr. Bottomley

It is clear that either we are talking about different things or the hon. Member does not know what he is talking about. If he is taking the last few months, will he say whether he supports the Government's success on inflation? If one measures inflation over the past six months, one finds that it works out at an annual rate of 8.6 per cent., which seems to me to be quite an achievement.

Mr. Mitchell

When the hon. Member talks about the Government's success in fighting inflation, he should realise that inflation is low in graveyards. That is about the level of the Government's success in fighting inflation, though there is now a certain amount of putrescence. The fact is that the figures that I gave for the appreciation of the pound do not include the further depreciation that should have been necessary given the fact that our inflation has been so much higher than the average for the industrialised world, particularly since the present Government came into office and doubled the rate of inflation.

If that is taken into account, the devaluation that would have to take place to make us competitive again would have to be massive. Indeed, taking account of the appreciation of the pound and our inflation since 1976, we would need a devaluation of about 40 per cent. or 50 per cent. to make us competitive again. In that situation, it is unrealistic to blame wages as the prime cause of this problem and to focus all the attention on wages. That is the essence of the argument. Perhaps we can leave the matter there and deal with it in correspondence later—unless the hon. Gentleman wishes to raise the point again.

Mr. Bottomley

The simple point is that either pay settlements matter or they do not matter. The hon. Gentleman's arguments relating to the period since 1976 rely on the increase in domestic inflation, which is associated with the earnings that we have paid ourselves. If he is taking the past year, I was only trying to knock down the example that he used, because this is the second time that it has been used today. If he is taking only the last few months, it seems that the level of domestic price increases is substantially under control and moving in the right direction. I am not trying to cause a large argument; I am trying to nail the hon. Gentleman's initial figures.

Mr. Mitchell

There is no point in going over the figures. We have not got them here. Let me assert, therefore, that the essence of the argument is that the rise in the value of the pound has been a bigger blow to our competitiveness than internal wage costs. The essence of our present problem is the over-valuation of the pound. If the workers agree with the Government's policy of holding or cutting wages, they will make this over-valuation situation worse, because they will add to the kind of confidence factor in the mistaken economics of the people who are pouring money into this country and they will increase the valuation of sterling. Therefore, they will be putting more people out of jobs by holding down their own wages.

Indeed, looking at an industry such as the pulp and paper industry, which has wage costs of about 25 per cent. of the cost of the finished product, or at the steel industry, with wage costs of 29 per cent. of the cost of the finished product, one finds that given the fact that the pound is now about 40 per cent. over-valued as compared with its 1976 value, if the workers in those two industries worked for free the products would still be uncompetitive against those in currencies such as the dollar and against those of most of our major industrial competitors.

That is the essence of the argument. This fallacious emphasis just on wage settlements and certainly the misleading hope that by holding down wages people will be able to keep jobs and solve the economic problems of this country are so much economic gobbledegook. The major problem is competitiveness, and the major part of the competitiveness is the situation of the pound. Perhaps we can leave that matter before we pursue it into further realms of figures.

The main spectacle that we see is a Government who came in saying "We can and we will change the situation. We can and will improve things and make them better." They are now locked into a cycle of misery and decline, saying "We cannot and we will not. We cannot get interest rates down. The market dictates interest rates. We cannot get the pound down. We cannot restimulate the economy." They are a Government who are offering the people nothing but despair and continued decline. They have turned from the glad, confident morning in May 1979 to the faltering, fumbling apologies and the prediction of further decline and depression that we have been offered over the past few months.

The Government have failed on those tests that are so important to the lives of our people — indeed, to economic activity in Britain — on unemployment, the decline in output, the collapse of the construction industry and the collapse of house building. On all these the record is appalling, and it will get worse because the economic situation over-the next few months will get far worse as the over-valuation begins to exercise its full toll on the British economy, as our exports begin to decline and as imports, particularly of manufactured goods, hold steady in our depressed market.

The Government have not only failed on those tests of the real economy; they have failed on all those paper tests that they set themselves as being more important than the real economy. Let us take the money supply as an example. The Prime Minister's pursuit of a restricted money supply has a lot in common with Captain Ahab's fetish about catching the white whale. It has been about as successful and has shown many of the consequences of Captain Ahab's remorseless pursuit of the white whale. The money supply is still running at double the rate that the Government say it should be running at. Even on that simple test of their own competence in pursuing what they say is the most important part of their policy, they have failed.

At the beginning of the experiment, the Government were saying "If we control the money supply, at some later period—18 months or two years—we shall control inflation and get control of those factors in the real economy, because control of the money supply will give us that benefit at a later stage." But, having stood the whole argument on its head, they now say "When we get the real economy sufficiently depressed and sufficiently deflated we shall have control of the money supply." The whole argument has come full circle, when it started as a monetarist declaration of faith.

It is worth repeating that there are three measures of money—the interest rate, the exchange rate and the supply rate. The supply rate is the least important. One cannot control the other two measures as well as the supply, because one cannot control all three simultaneously and the other two measures have the most direct and immediate effect on the real economy—and over the past few months that effect has been disastrous.

Taking the second objective, about which we were arguing a few moments ago—the control of inflation—one finds that inflation is coming down, but only after the Government doubled it. It is also true that any fool can control inflation by policies that decimate output and increase unemployment on this kind of level.

What have the Government done to defeat the pressures that lead to inflation in the long term? What have they done to reduce unit costs? As output falls, unit costs will increase. There is no long-term attempt to grapple with the fundamental problems of inflation. The Government are so depressing the economy that inflation is falling temporarily. Implicit in that is the promise that if there are expansion and an attempt to make the economy grow and to increase output, inflation will resume its upward rise. Implicit in the Government's policy for fighting inflation by depressing and damaging the economy is the promise that the pressure will have to be kept on. As soon as it is relaxed and as soon as the economy is expanded, inflation will resume. In other words, it is a question of permafrost for the British economy if we continue fighting inflation with the present policies.

The Government attach great importance to the public sector borrowing requirement. It is bound to increase. Unemployment rises in a depression, and aid for industry has to increase. The public sector borrowing requirement will and must increase, as in the past. By falling in with the argument that it is crucial to cut Government spending, the CBI is creating a rod for its own back. Cuts in Government spending will make the depression and the decline in consumer demand worse. Inevitably, the focus will be on reducing Government borrowing as a means of bringing down interest rates generally. That is an entirely fallacious equation. If the CBI accepts it, it will be accepting that interest rates should continue at a high level. That is because there is no chance of reducing Government borrowing and Government spending in the present situation.

The Government are savaging the private economy and using the damage that they have inflicted in that sector as an excuse for further savaging of the public sector. The cycle will continue and we shall be locked into decline. That is the logic of the disastrous course on which the Government have embarked.

The only correct course—it is rapidly becoming too late—is to expand the economy, to borrow more, to push purchasing power out into the economy, to set people back to work and to let the multiplier make its effects felt as those who go back to work cease to receive unemployment benefit and begin to contribute taxes. By an increase in spending, we can reduce the PSBR as economic activity returns. That is the only way in which we shall genuinely reduce the PSBR.

The Government's aim is industrial regeneration. What regeneration is possible in the present climate of depression? It is amazing that the so-called party of business does not understand the rationale of business investment. Businesses need prospects of profitability if they are to invest. What prospect of profitability is there in the present climate? Many firms have a negative cash flow. They are having to cut profits to nothing and in many instances to accept losses in order to retain markets. They are having to struggle to survive. In those circumstances, what possibility is there of investment? The only means of increasing investment and creating regeneration is to increase prices and profits. By so doing, industry will be given the margin to invest. It does not have that at present, and it is not within sight of getting it.

The present policy is one of long-term industrial decline. It is for closing down industries and cutting off capacity. It is closing down firms that two years ago, and even one year ago, when we were on a different exchange rate and before the comparatively recent increase in valuation, were profitable and competitive and could compete on a world market. They are now unable to do so, largely because of the exchange rate. What rationale and economic sense is there in closing down those firms when they could once more be profitable given a more favourable exchange rate? What hope is there of regeneration if the present process is allowed to continue?

What other country has had a 30 per cent. loss of competitiveness—to quote the Treasury's evidence to the Treasury and Civil Service Committee—over one year and a 19 per cent. increase in the value of the pound since the Conservative Government took office? What other advanced industrialised country has had to fight to compete on the world market with those hurdles to cross or, to change the image, with that ball and chain round its feet? How is it possible for industry to compete either on the home market or on the world market when it faces such a burden? There is no answer, because it is impossible for industry to compete when it faces such odds. The future must be one of continued industrial decline for as long as the present exchange rate continues.

So many Tory chickens have come home to roost. The Conservative Party was loud and long in its attacks on British Steel, on the British motor car industry and on the British worker. It has shown such apparent distaste for industry. It is now presiding over the demise of large sections of British industry through the piggy bank and wrong-headed economics that the Government have pursued. They have made a bad situation far worse.

When I consider the months that lie ahead, I am reminded of Byron's paraphrasing of Shakespeare, namely, that There is a tide in the affairs of women, Which, taken at the flood, leads—God knows where. Do the Government know where they are going? They seem to present a simple test of courage. It is said that it is right to pursue the present course, right to be brave, and right to go on without economic rationale or justification.

Another aspect of the Gracious Speech is the Common Market. It is normal for a Government who are mired and ensnared at home to turn to wider stages. It is only natural, therefore, that the Prime Minister wishes to strut for a brief hour on the European stage. The right hon. Lady has avowed her unwavering commitment. However, it is her commitment and that of her Government; it is not a commitment of the British people. On the contrary, the people show overwhelmingly in the polls that they want to be out of the Common Market.

Sir Anthony Meyer

No.

Mr. Mitchell

It is not a commitment of industry and the economy. We are suffering a massive deficit in our manufactured trade with the Common Market. In 1979 there was a deficit of £4,000 million in manufactured trade. That trend has taken jobs from Britain. We had an equal balance in manufactured trade 10 years before, in 1970. The present deficit must be a tremendous drag on our economic performance and a tremendous cause of the increase in unemployment that has taken place. Neither the British people nor the economy want the Commom Market.

As I have said, the Prime Minister's commitment is her personal commitment and the commitment of her Government. I understand, having read of the formation of a new Conservative group on Europe, that it is not the commitment of the mass of the Conservative Party.

Sir Anthony Meyer

The hon. Gentleman may not be aware that his figures are sadly out of date and that from an admittedly poor position British exports now cover 94 per cent. of our imports from other countries of the EEC.

Mr. Mitchell

It is good to know that we are exporting so much oil to the Commom Market. It is good to know how much it is coming to depend on our oil exports. It is certainly not depending on our manufactured exports. The manufactured trade gap remains horrendous. The deficit has been increasing almost year by year. Manufactured trade is of primary importance. It is not the oil trade that is important in terms of jobs.

Mr. Michael Shersby (Uxbridge)

Is the hon. Gentleman aware that exports of food and drink products to the EEC from the United Kingdom have doubled since 1975? Is he further aware that it is paying for half the food that Britain imports and sustaining many thousands of jobs in Britain that are very profitable for British workers?

Mr. Mitchell

I am aware that there are bound to be some successes. It would be odd if there were no successes in any sector. I am aware of the tremendous burden that the common agricultural policy has been on the economy. It prevents us from buying cheaper food that is still available elsewhere. It imposes on Britain the burden of high prices, by which the system is financed. It imposes on Britain, as a member of the EEC, the burden of bearing the costs of storage and disposal on world markets, at dumped prices, of the massive surpluses that the system creates. In essence, the hon. Gentleman is agreeing with me that the CAP is another burden, apart from partial success in one sector. That does not compensate for the overall failure in manufactured trade and the massive deficit in agricultural trade. These two burdens are more than the economy can bear.

When, in the Queen's Speech, the Government promise a settlement of the common fisheries policy, what we are seeing essentially is the backwash from the Prime Minister's failure to win the argument that she precipitated over the budget. I do not object to her starting it. It was a right battle to fight. The problem is that she gave way too soon and for far too little. She gave way for the half loaf that she said she would not accept, and as a condition for getting the half loaf she had to accept two deals. It is odd now that no one is denying them.

There were concomitant deals on the common agricultural policy and on fishing, in return for the concession made to the Prime Minister on the budget. That is why we now have the spectacle of a Minister of Agriculture, Fisheries and Food, who set out to emulate his predecessor, this week lavishing praise on that obscene instrument of high prices, the common agricultural policy. We bound ourselves not to demand fundamental change in the CAP for two years. I hope that that will be denied. It has not yet been. It seems to be the essence of the agreement, which was tragic. It was at a time when the Germans, who are now the paymasters of the system, were coming to demand a reform of the CAP. We have tied our hands and opted out of the battle. What is more, our hands are tied so that next year we shall agree to a massive increase in food prices to keep the system going.

The other concession that the Prime Minister made was over fishing. Britain's fishing industry is being negotiated away. I make no imputation on the good faith of the two Ministers. The Minister of State has the interests of the fishing industry very much at heart but he has been forced, as has the Minister of Agriculture, Fisheries and Food, into the negotiating chamber with his hands tried by the Prime Minister. Indeed, that is what he tells every deputation that goes to see him from the fishing industry. He asks what room for negotiation he has. There is no answer. We know that the Prime Minister has given him no room for negotiation. The Prime Minister has sent her own Minister bound and gagged into the conference chamber. That is why, over the past few months, we have seen a series of deals, partial compromises, concessions and nods and winks, building up a structure that, when it comes to the House, we shall be unable to alter.

Only three matters remain to be settled—the quotas, exclusive waters and dominant preference. The tragedy is that we are tied to a situation in which we cannot get all three. We shall be lucky to get even one. That is the consequence of the deal that the Prime Minister made as part of the budget public relations victory, which was so loudly trumpeted by the British press only a few months back. We shall see at the end of November our Minister of Agriculture, Fisheries and Food coming back from Brussels, just as Chamberlain came back in 1938 from Munich, and it will mean as much. He will be saying "Fish with honour", and we shall have neither. We shall have negotiated them away, and our rights will have gone. We shall not have the ability to protect and control our own conservation.

The tragedy is that when the settlement mentioned in the Queen's Speech occurs it will come on a take-it-or-leave-it basis. The Government will vote to take it and we shall vote to leave it, as we should and as any honourable man with the interests of the fishing industry at heart should. The settlement will be harmful to the British fishing industry.

Those comments tie in with the general theme that I have been arguing. The Government will ruin the fishing industry, just as surely, sadly and tragically as they have been ruining and will continue to ruin the industrial base of this country over the past few months.

7.3 pm

Mr. David Crouch (Canterbury)

I wish that I could say that the hon. Member for Grimsby (Mr. Mitchell) had touched on a theme on which he was an authority and had spoken with authority. I expected that, being the hon. Member for Grimsby, when he touched on the grave plight of the fishing industry—and I, too, have a fishing industry in my constituency—he would have spoken more sense and not been carried way by an emotive party attack. However, it is perhaps in line with his whole approach. He mentioned Mr. Brian Walden and said that the Government seemed to emanate from "Weekend World". Perhaps one day Yorkshire Television will call the hon. Gentleman back to become the government from Leeds instead of from the other side of the Thames. The hon. Gentleman's contribution to the debate has been very small indeed.

The hon. Gentleman's ideas on the problems of the economy are convoluted, selective and stupid. Talking about the problems of this country as if prices and profits are not high enough and, therefore, businesses are going broke and saying that that could be corrected if those aspects were, put right is to treat the House as if it were stupid and did not understand the problems. There is something in manufacturing about producing at a price that people can afford—at an economic and competitive price. Not once did the hon. Gentleman talk about being competitive, obtaining and commanding a market and being able to sell into it. One or two of my colleagues reminded him in the course of his attack on our membership of Europe that our exports have been mounting very considerably in the past few years, particularly the past two years, and that we have been climbing back into a respectable position. As my right hon. Friend the Prime Minister said this afternoon, very shortly we shall be an exporter into the Common Market.

I do not want to delay the House. One of the strange things about the first day of the debate on the Gracious Speech is that we can range over the many subjects touched on in the Speech. I want to speak solely of Europe. I am prompted not entirely by the hon. Member for Grimsby but by the references in the Speech that mark a turning point; at least, they do for me. I was impressed by the emphasis of the importance of our place in Europe. It was as though there is now a new importance about our place in Europe, underlying which is the need for unity in Europe. I must say, even to my own Government, that this is an emphasis that has perhaps been lacking even in the past 18 months. It is still lacking on the Labour Benches. I am dismayed, and I believe that the people in the country are dismayed, that the new Labour Party, under a new leader, still seems to stand for Britain coming, out of Europe.

Mr. Dennis Canavan (West Stirlingshire)

My right hon. Friend is doing quite well in the opinion polls.

Mr. Crouch

I am not guided entirely by opinion polls. I, as a Member of Parliament, seek to form opinions, not only in my mind but in the minds of my constituents and others, including other hon. Members. It is up to hon. Members to speak for what they believe is the place of this country in the world and not merely deal with matters within the confines of the small nation that we are. We have a place in Europe, and we say so in the Gracious Speech.

It is not a small Speech. It is a very big Speech. It is a Speech containing the determination of a Government to show their face in the world again and to take our place in Europe again and not be afraid economically, politically or in defence. We are not afraid to play our part as a manufacturing and exporting nation.

Europe presents us with a great opportunity. It is a challenge. The opportunity can go both ways. We have the opportunity of selling into a big market of 250 million. It is an industrialised world market with great opportunities. I remember that, when we were considering the problem in the early 1970s, I believed that it was an opportunity that we would seize, but we did not seize it as we should have done. It is only recently that we have begun to shake ourselves out of our lethargy and realise that our new destiny in the world is to manufacture and to go out into the export market and sell. No longer do we have a tame market called the British Empire, or even the Commonwealth, where we did not sell but distributed. We had Ottawa agreements that helped us do a swap deal. We had cheap raw materials from the Commonwealth, and the Commonwealth took our manufactured goods. We tended to rest on the deeds of our fathers and grandfathers, but we can no longer so so. Britain must be out in the world fighting for a market.

We have taken a little while to realise the opportunities to sell into Europe. Perhaps it disturbed us, as it clearly disturbed the fainthearts on the Opposition Benches, to see European manufacturers taking advantage of British membership. Britain is still a rich country, able to buy many manufactured consumer and other goods. Other members of the Common Market have not been slow to seize that opportunity.

Our first priority in foreign policy and defence today is to sustain and strengthen unity in Europe. I am glad that the Government have recently reaffirmed our adherence to the European ideal and to the EEC and NATO. Speaking in Bonn only a few days ago, my right hon. Friend the Prime Minister made a clear statement of where we stood. She said that we were staying in Europe.

It is not referendums that decide whether we stay in Europe. It is up to the leaders and Governments of nations to say what we do and to lead the people. That is exactly what my right hon. Friend has done. It is exactly what my right hon. and noble Friend the Foreign and Commonwealth Secretary said in Hamburg, in a notable speech restating the point that Europe is strong because Britain is staying in Europe. I am particularly glad that there was no mincing of words in the Gracious Speech. It says: the best hope of lasting peace lies in the effective maintenance of Western security.

Of course the public are confused about Europe. My constituents are no different from anyone else's. I hear calls that we should leave Europe and cries of dismay. Everyone is fainthearted sometimes.

Mr. Austin Mitchell

People have been for five years.

Mr. Crouch

The hon. Gentleman may have been fainthearted for five years, as his recent performances have shown.

Mr. Mitchell

I meant the public.

Mr. Crouch

The public are not always fainthearted. They are fainthearted at times, but they can be encouraged.

One of the great points about public opinion, whether in the Armed Services or on the factory floor, is that the public sometimes need leadership to encourage them, to give them heart and a goal to aim at. The goal that the British people have been seeking is wider than this tiny island, locked in by the sea. Once we used to feel that we had an Empire, and then a Commonwealth—many countries round the world. I remember as a boy standing on London bridge and thinking that perhaps I did not need to stay in the confines of this city, which I did not then like. I was working here and wanted to get away. One could stand on London bridge and see the ships in the Pool of London, connecting Britain with one-third of the world.

There was great opportunity then. One could walk to offices in Whitehall belonging to members of the Empire, members of the Commonwealth as they later became, all of which offered the opportunity to work in Government service, in the police or whatever. Those opportunities have disappeared. The British people have had to find out what their destiny is. It takes leadership to show them where to go.

That is why I am so glad that there is no confusion about Europe in the Gracious Speech. People are confused about Europe and the details of the Common Market. They are not only confused about the common agricultural policy; they are rightly dismayed by it. I am dismayed. I have an agricultural constituency, and we are all dismayed by the CAP.

What I am not dismayed about is the Government's attitude. They are not standing still. They are doing something about the matter. The difference between my right hon. Friend the Minister of Agriculture, Fisheries and Food and his predecessor, the right hon. Member for Deptford (Mr. Silkin), is this. Both have spoken in a strong way in Europe, but the way to achieve a good result in international councils is not only by being strong but by being respected. I do not think that the right hon. Gentleman was sufficiently respected in his display of strength, whereas I believe that my right hon. Friend is respected.

Above all, let us remember that the CAP, written in 1956, will not stay as it is for much longer. Next year we shall welcome the addition of Greece to the Common Market, and in the next three years Spain and Portugal will join. All of them are agrarian nations. A Treaty drawn up for six nations cannot remain the same on agricultural policy when the Community is expanded.

The whole of Europe in the Community today knows that the CAP needs reform. Let us give leadership to reform it. We are an agricultural nation, producing on our farms 70 per cent. of our food. Let us show that we can serve not only our farmers but consumers, and let us see that we do not produce ridiculous anomalies such as the CAP produces.

I do not defend the CAP as it is. It has done certain things, including giving continuity of price and security to the producer, but it has its deficiencies, as we all know.

It is difficult to explain the Commission and its bureaucracy, its bureaucratic approach to harmonisation, which is harmonisation almost for its own sake. But these are not the real matters of the Common Market.

I have one criticism of the Common Market's institutions. As I said that, I thought that the hon. Member for Grimsby wanted me to hurry up, but I note that he was applauding me. I hope that the House has picked up the idea that I am a believer in Europe and the Common Market, but it does no harm also to criticise.

Staunch democrat and parliamentarian that I am, I am not so concerned about the Commission and its bureaucracy. It is not vast but is an open, accessible bureaucracy. One can talk to civil servants in the Commission. I go there quite often. The institution that I would criticise a little is the European Parliament. I never know where to find it. Is it in Strasbourg, Luxembourg or perhaps Brussels? It is rather expensive to run. I heard on the radio this morning that someone had calculated that it cost about £320,000 per Member. Can that be right? It seemed an exceptional amount—not that the Members are paid that much each.

I am worried about the Parliament for other reasons. Because I believe in Europe so strongly, I believe that the buck stops in this House. I do not agree with those of my colleagues who formed a group, announced only this week, to modify the EEC and its institutions. I think that that step is wrong-headed and that what they are seeking to do is not helpful. Whether they believe in Europe as much as I do is to be doubted, to say the least.

The European Parliament can do certain valuable things in examining proposals from the Commission as they are recommended to the Council of Ministers. It is the decision taken by the Council of Ministers that I am concerned about. The Council consists of the ministerial representatives of the nine member State Governments. We in this House have a duty to advise and give consent to those Ministers who go from here to sit on the Council. This is where the responsibility really lies. What I say is not to undermine the European Parliament. I emphasise that I do not want to see this House undermined, because it has a great responsibility to Europe. It cannot pass the buck to the European Parliament and say "Get on with it." To do so would not only mean losing responsibility and giving it away at Westminster; it would weaken our interest in Europe altogether.

If there were a referendum in this country now on whether we should stay in Europe, it is doubtful whether the majority of the electorate would vote to stay in Europe. That is understandable. It would nevertheless be wrong. I am a democrat who must be swayed by what people think. I have a responsibility to explain and to persuade people to think and follow what I believe in. The Gracious Speech stresses the fact of Europe and that it is the best hope for peace. We have more than a place in Europe. We have a duty in Europe to defend freedom.

We live in a critical stage in international affairs. If unity should be seen to break in Europe and if one nation of the existing Community broke away, especially a great nation like ours, one wonders what would be the action of the Soviet bloc. NATO is not alone in defending us in Europe. This other community—this Common Market Community—is admittedly an economic community but nevertheless represents a meeting of nations determined upon peace and growth and in coming together to create a new super-Power out of Europe. If there were a break in this alliance, I see real danger. The prospect of such danger requires action. For that reason, I am pleased to see what is contained in the Gracious Speech.

I have taken an interest for many years in the problems of the Middle East and the Israeli-Arab problem. I have felt for a long time that we cannot leave the United Nations to be our mouthpiece. Nor can we leave matters to the two super-Powers, which must, of course, be consulted. We cannot even look for Camp David solutions. Europe—not just Britain—acting together, has a part to play in bringing about an effective solution to one of the tinderbox areas of the world. I am pleased that Europe played its part, earlier this year, backed by the Government—perhaps, at first, a little slowly. This entry of Europe into the task of finding a solution to the Arab-Israeli dispute has already had an effect on American and world thought. That is why I welcome the reference that appears in the Gracious Speech.

The Gracious Speech does not contain a great deal of legislation but it emphasises that this nation is not a little nation but has a part to play in the world and, above all, in Europe.

7.23 pm

Mr. Dennis Canavan (West Stirlingshire)

In the Queen's Speech last year, the Government said that they would lay a secure basis for investment, productivity and increased employment in all parts of the United Kingdom. That was 18 months ago in May 1979. At that time, unemployment in the United Kingdom stood at 1.3 million. Unemployment now stands at over 2 million and is increasing. Unemployment has already increased under this Tory Government by over 700,000. For every week that this rotten Government have been in office, 10,000 people have lost their jobs. We have the worst unemployment rate since the 1930s and the worst in living memory of many hon. Members, including myself. In some areas, the unemployment rate is even more intolerable than the United Kingdom average rate. In Scotland, there are about 250,000 people unemployed, more than one in 10 of the working population.

Against this background, the Government and the Prime Minister have the brass neck to ask the Queen this morning to read a speech claiming that the Government recognise the hardships and worries of those suffering unemployment. That is a lot of crocodile tears.

We should welcome any measure to alleviate unemployment. To that extent, I welcome the mention in the Queen's Speech about the special employment measures. I suspect, however, that they will be far too little and far too late. Paying mere lip service to alleviate the problems of unemployment and the people suffering from unemployment is not nearly enough.

In the past 18 months, the Government have virtually abandoned even the pretence of attacking unemployment. Instead, they have deliberately created unemployment in order to use unemployment as an economic weapon, turning round to attack the victims of unemployment and blaming the unemployed for the predicament in which they find themselves. That is the kind of heartless attitude that the Tory Government adopt towards the unemployed.

A phrase appeared in the 1974 Labour manifesto, and again in last year's manifesto, and I hope it will be repeated in future manifestos. We described one of our goals as being to bring about a fundamental shift in the balance of wealth and power in favour of working people and their families.

What is taking place now is the very opposite. A fundamental shift is taking place all right. Instead of the balance shifting towards working people and their families, this Government are taking wealth and power away from working people and their families.

Even if I were engaged in a conspiracy—I believe that the Government are engaged in a conspiracy—to reduce the power of working people, I could not think of a surer way of reducing that power than by reducing the number of working people. That is what the Government are doing by deliberately creating unemployment. They are dividing what used to be called the working class into those who have work and those who have not. Yet the Prime Minister tells the victims of unemployment, the victims of her failed economic policies, that they have priced themselves out of a job.

The truth is that we have one of the lowest wage economies in the whole of Western Europe. I should like to give an example. During the Summer Recess, I challenged the Prime Minister to come to my constituency and meet some of the victims of her policies, about 180 workers, mostly women, who were employed at the Smith and Nephew Ltd. clothing factory in Kilsyth which the company closed. I asked the Prime Minister to come and explain to those women her policies and her attitude to wages. She refused.

The company about which I am talking is not small. It is a large multinational outfit with interests in Asia, South America and South Africa. Last year alone, its pre-tax profits were over £22 million. Yet the women in that factory, before it closed, were taking home a wage of less than £40 for a 39-hour week. The Prime Minister has the cheek to say to such people that they are pricing themselves out of a job. The Government are using unemployment and the threat and fear of further unemployment to try to produce a docile work force which will accept wage rates far below the rate of inflation—a work force which will be forced to accept cuts in their living standards and those of their families. That has been followed up recently by the Secretary of State for the Environment, the Mace bearer of the Tory Party, who told us that we shall have to stomach a 6 per cent. wage limit in the public sector. That is from a Government who said before they came to office that they would restore free collective bargaining.

The Government are now dishonouring agreements with some public sector workers, notably the firemen. We heard earlier the Prime Minister's total failure to substantiate the volte face by her and the Home Secretary in their shabby treatment of the firemen in their fair wages claim.

The Prime Minister is not only attacking the living standards of people who are fortunate enough to have a job. She is attacking the living standards of people who have been thrown out of work. We have to go back to the 1930s to find a Government who cut benefits to the unemployed. That is what the Government are doing. They are using the abnormally high rate of inflation, which they created, to reduce the real value of unemployment benefit. This month the unemployed will receive an increase in unemployment benefit of only 11 per cent. when the current rate of inflation is still well over 15 per cent.

The Prime Minister is not only reducing the living standards of the unemployed. She is reducing services to the unemployed. She has already closed training centres and she is proposing to close unemployment benefit offices. That will reduce even further the already inadequate facilities for the unemployed.

Yesterday morning I went to Bonnybridge in my constituency and spoke to many unemployed people in the dole queue waiting to sign on. In that area of my constituency the number of unemployed has increased by 70 per cent. since the Tory Government took over. That increase took place partly because of the recession in the paper and foundry industries.

Instead of encouraging the Scottish Development Agency to set up new industries, the Government propose to close the employment office in Bonnybridge. That is the shabby treatment which they are meting out to the unemployed. It seems as if they are hell bent not only on increasing the number of unemployed but on punishing the unemployed. They are kicking the unemployed when they are down instead of trying to alleviate their plight. The public saving involved in the Government's mean proposal is a trivial 75p a week. The building belongs not to the Government but to the Central regional council, which lets part of it out as an employment office for a peppercorn rent of 75p a week. The Government are forcing the unemployed to walk it or bus it to Denny or Falkirk in order to sign on. In many cases the bus fare costs more for the unemployed person than the saving achieved by the Government. It is no wonder that many of the people to whom I spoke yesterday referred in bitter anger to the Prime Minister and her policies and to the right hon. Member for Lowestoft (Mr. Prior), who has rightly been renamed "the Secretary of State for Unemployment".

Not only in the treatment of the unemployed can we see the meanness and malice of this Government's policies. Let us consider education. The Queen's Speech refers to a new Bill for Scottish education: Measures to improve the law in Scotland relating to education… will be laid before you.

That is a value judgment if ever there was one. I have never known a Tory Government do much to improve Scottish education. The Government are trying to destroy Scottish education. By means of a Bill, brief mention of which is made in the Queen's Speech, they intend to introduce an assisted places scheme similar to that in England and Wales. In Scotland more than 95 per cent. of children go to local education authority schools.

Scottish children have already been deprived by this Tory Government of their legal rights to school meals and milk. They are deprived of adequate textbooks, jotters and other stationery in the classrooms. Yet the Secretary of State for Scotland—the Prime Minister's poodle and a former pupil of Winchester—proposes to dish out millions of pounds of taxpayers' money to private fee-paying schools to bolster up the privileged system of which he is a product. That is indefensible, especially at a time of so-called economic difficulty and when public expenditure is being cut in local authority schools.

Private fee-paying schools in Scotland alone already receive £3½ million a year in grant aid. That is enough to employ an extra 700 teachers in local authority schools in Scotland. Yet the Secretary of State claims that he cannot afford to employ more teachers in the schools for which he has statutory responsibility. At the same time, he proposes to close Callendar Park and Hamilton colleges of education and to merge—or submerge—Craiglockhart college of education.

I tell the Government, and the Secretary of State for Scotland in particular, that we shall fight them all the way on the proposals. We believe that the Government's policies are vandalising Scottish education just as much as their economic policies are vandalising Scottish industry. We cannot afford to hang around until a 1984 general election in the certain knowledge that there will then be a Labour Government better equipped to restore the damage that the Tories have done. It might be too late in 1984.

Vast areas of our country are being turned into de-industrialised deserts. It might take only months, or even weeks or days, to destroy some things, but it can take many years to reconstruct them. It is no use the Government refusing to accept responsibility and putting all the blame on the recession as if the recession is like the weather—uncontrollable. Recessions are not acts of God. Recessions are man-made. We have to find manmade solutions. The Government have a duty to give a lead. Part of the reason for the deep recession is the Government's economic policies.

I fail to see a remedy in the Queen's Speech. The remedy in last year's Queen's Speech has failed demonstrably. There appears to be no alternative in this year's Queen's Speech. It contains the same old dose of extreme monetarism and massive cuts in public expenditure. There is not even an admission of failure by the Government. No remorse is shown for what they have done, let alone an alternative strategy.

The Government used to accuse us Socialists of being doctrinaire. It is they who are being doctrinaire now because their minds are stubbornly shackled to the theory of doctrinaire monetarism. They do not even have the humility to admit that they have made a mistake and that their policies have been disastrous. They combine that with a doctrinaire hatred of public ownership and public expenditure. The necessary alternative is the opposite of what they are doing. We need not just lower interest rates but more public investment in industry and services and more public ownership and public enterprise through bodies such as the Scottish Development Agency, which should be given the power to trigger off the economic: and industral recovery that the nation needs.

The Government seem to be abusing even the newest and potentially most valuable public asset—North Sea oil. Their estimate puts the oil revenues for the current financial year at about £4 billion. However, they should be setting up a special oil development fund in order to provide more public investment for the purpose of broadening our industrial and manufacturing base. Instead, they have frittered away too much already in tax concessions to their rich friends. The oil has led in part to the over-valuation of the pound, which in turn has made British industry even less competitive.

Strangely, instead of the oil being used to broaden the manufacturing base, it has been abused by the Government and has helped to weaken and shrink that base. North Sea oil should have been one of the greatest blessings of the century. Instead, the Government have turned it into a curse. Is it any wonder that Sir Michael Edwardes said that if they cannot handle it properly it would be as well to leave the bloody stuff in the ground"? Is it any wonder that the CBI conference referred to the possibility of a bare-knuckle fist fight against the Government's insane industrial policies?

Even worse than the industrial havoc that the Government's policies have caused are the social repercussions. I doubt sometimes whether they have thought out those repercussions. My right hon. Friend the Member for Norwich, North (Mr. Enna1s), a former Cabinet Minister, referred to the increase in juvenile violence. One of the most staggering and frightening statistics from the Department of Employment is that about half of the 2 million unemployed are under the age of 25. Many are not long out of school. Many have never had a job, and many feel an understandable resentment against a society and a Government that have deprived them of the right to work.

Is it surprising that some of them, unfortunately but inevitably, feel tempted to take out their resentment in an anti-social manner? I would not like to see social conflict or civil disorder, but I can think of no surer recipe for the breakdown of law and order than a Government who tolerate a growing army of more than 1 million young people unemployed and roaming the streets with nothing to do.

The Government are simply storing up trouble for themselves until such time as they come to their senses and change their policies. I warn them now that they must change course before it is too late, If they do not, they will head for the kind of confrontation which will make the attempt to prevent Black Rod from entering this House last week look like a Sunday school picnic.

7.45 pm

Mr. Peter Bottomley (Woolwich, West)

After the passion of the hon. Member for West Stirlingshire (Mr. Canavan), I shall pass briefly over the foreign affairs subjects that I want to mention and then come to some of the points that are relevant to his speech and those of a number of other hon. Members.

There is not the time to develop in full my views on the policies that the Government should adopt towards Southern Africa and other parts of the world. In their search for the internationally recognised settlement and elections in Namibia, I hope that the Government and other Western countries will recognise the relative success of the Namibian National Front in the second-tier elections and will try to secure an understanding among the neighbouring States in Africa and in the international community that Namibia will not be sorted out if either SWAPO or, which is even less likely, the DTA gains overall control of the constituent assembly that would follow elections.

It is important that a constitutional understanding should be developed between the three basic groups. These are the DTA, led by Mr. Mudge, SWAPO, led not particularly effectively by Mr. Sam Nujoma, and the parties in the middle, who reject South African dominance and some of the violent methods and apparently Marxist thoughts of parts of SWAPO. I admire the bravery of the people in the middle. Their relative election success deserves recognition in Western countries.

The hon. Member for West Stirlingshire and I spent some time in El Salvador two years ago. Matters there are going from bad to worse. It is important for Western developed countries to recognise that democracy is not a luxury that only they can afford. The only solution to the growing violence, the tragedies and the indiscriminate killings will be for the people of El Salvador to choose their Government. They could then switch away from the junta of the Centre and Right to secure a Government of the Centre that would include both the Right and the Left and get away from the old oligarchy and the revolutionaries who constitute some of the freedom fighters in that country.

I turn next to our economy. Our arguments are not leading us very far forward. We hear on the one hand that the Government's monetary policy has been far too tight. On the other hand, we are told that it has been unsuccessful. It seems as well to get away from that discussion completely. Instead, we should ask what we need to do to let the country move forward. Governments are not normally correct in everything they try to do. That is one of the reasons why I prefer the Government to try to achieve less and to leave more of us to develop our responsibilities to create the jobs to employ the people to pay the taxes that make it possible to finance public services at a higher level year by year, which means that there must be growth in the economy. It is unrealistic to expect those who still have jobs to achieve real pay increases of 5 per cent., as appears to have happened over the past year, while the economy as a whole has contracted.

I fear that the consequence of the TUC and the Government being committed against formal incomes policies has been to put upon trade unions and employers—whether the employers are in the public or private sectors—a responsibility which they have not lived up to. It clearly was wrong, after the experience of the winter of discontent and the failure of the previous Government's 5 per cent. policy, well-intentioned though that was, to continue voluntary pay settlements and Clegg awards that have meant an underlying increase in earnings of 20 per cent. for those who have kept their jobs. It did not make sense, it would not make sense, and we have not yet learnt the lessons.

I fear that when hon. Members argue for a justifiable 18 per cent. for firemen they will return in a month and argue for a justifiable 14 per cent. for one group or 20 per cent. for another. We shall not achieve the necessary general level of increase in pay rates of 0 to 5 per cent. because trade unions and employers fail to get together to discuss the consequences of a succession of their actions.

We must bring down the level of pay settlements, and we must do it by consensus. Trade unions must recognise that they have a mutual interest in bringing down the average rate. I am not arguing for the same settlement for everyone, but there must be a common interest among the members of the TUC to bring down the rate. There is an interest among employers and businesses and also in the public sector. Clearly there is a great interest among those not at work—the elderly, the sick, the unemployed and those too young to work.

We shall all gain if the general level of pay settlements averages about 6 per cent. during the next 12 months. That level would be only 2 per cent. below the rate of inflation measured on the past six months. If we achieve that, I hope that we shall return a year later—again without a formal incomes policy if people are against that—and in the wage round of 1981–82 have an average general settlement of about 2 per cent. or 3 per cent. The consequence of that will be that interest rates will come down to a 3 per cent. level.

That will make a marvellous improvement in Government financing. It will make it possible for people to invest in technology, factories, service industries and British industry generally and to start enterprises that are crying out to be created. We shall then begin to regenerate investment, employment, the taxes and the savings on unemployment pay. That would return the Government to a position in which they could increase spending on matters that even this Government would wish to see improved if the money were available.

I cannot emphasise too strongly that it is not only the laws that we shall pass during the next year that matter but, more important, ordinary Government administration. Even more important than how well the Government administer their part of the economy, how well they administer the Civil Service and how well they look after nationalised industries is the willingness of all of us and of all outside the Chamber to argue for common sense on pay settlements.

It is not all the fault of one side. It is not only pay settlements that affect how well off we are. We know about the influence of overseas prices. We know also that material things alone are not the only important matters. We have discussed levels of juvenile crime and how to make ourselves healthier rather than sicker. We have discussed the importance of family life, because most of our relationships are not at work but at home.

I end my abbreviated and truncated speech with a plea for a general debate on the significance of child benefit. It is not good enough for people to say at Budget time, when the future level of child benefit is announced, that it is too high or too low. It is important that we consider the significance of child benefit to the largest group of people who cannot work, namely, children and the families who look after them. If we are looking for equality of opportunity and a greater evening out of the chances for children born to poor, deprived or unemployed families, child benefit is the only realistic way to achieve that.

If we are to bring down to 6 per cent. the level of pay settlements in the public sector—the private sector will either lead or follow—we need to recognise that those who will suffer most in the transitional period—we shall all benefit in the long term—are the lower-paid, many of whom are concentrated in public sector employment.

The trade unions, who say that 6 per cent. is not enough and who, if they are successful, will bring the general level of pay settlement to 10 per cent. or even higher, with its disastrous consequences on unemployment, would be better advised to enter into discussions with the Government. They should say "You can force a 6 per cent. cash limit on us because you have the power, but can we persuade you that it is in the interests of our members to raise child benefit in November 1981, not simply by the amount of increase in prices but by an additional £1 on top of that." The additional pound would go to the families of each child, which would have the greatest impact on the lower-paid. Employers should recognise that if they treat those whom they employ without any regard to their family responsibilities it is important that they contribute to the national debate on the importance of raising child benefit.

Since 1955 the real level of the old-age pension has doubled. The real value of earnings has almost doubled. The real value of child support—now child benefit, but previously a combination of family allowance and child tax allowance—has not doubled. It has not even remained at the same effective level. It has been reduced by 30 per cent. We shall not solve our problems or achieve acceptance for commonsense pay settlements unless we recognise that we must deal properly, rightly and sensibly with families, especially the lower-paid, who are bringing up children.

7.56 pm.

Mr. Michael McGuire (Ince)

I hope that the hon. Member for Woolwich, West (Mr. Bottomley) will forgive me if I do not follow his argument. I realise that on Monday we shall debate the subject of foreign affairs, but I wish to touch on one or two points in the Queen's Speech. My first point was touched upon by the hon. Member for Canterbury (Mr. Crouch), namely, the Middle East. The Gracious Speech used the words a just, lasting and comprehensive settlement of the Arab/Israel dispute.

I am a member of the Council of Europe. In the Assembly at Strasbourg and at meetings of the Western European Union in Paris, I have said quite forcefully that European Governments, preferably collectively, can contribute to a solution of the Middle East problem. The hon. Member for Canterbury called it a tinder box. It is a tinder box that has broken into flame a couple of times. There was a danger that the world Powers could be sucked in.

As a prerequisite to any settlement, a group of people, presently called the Palestine Liberation Organisation, must be acknowledged as the spokesmen for those who suffered a great injustice when the State of Israel was created. We all know the reasons why we welcomed the creation of the State of Israel, but a considerable injustice was done to an innocent people. We expiated the sins of the West on the backs of those who have been displaced and dispossessed. The first prerequisite must be a recognition of the PLO as spokesman for those people.

I know the arguments in favour of the PLO not being recognised. History is littered with the statements of people who said "We shall never recognise terrorists as the spokesmen for this or that Government." Yet in the recent past we had to recognise the so-called terrorists who now form the Government of Zimbabwe. That is the main prerequisite. There are those who argue that, as the PLO has made such chilling statements about its intentions towards the State of Israel, we should not recognise that organisation. As I have said in Paris and al Strasbourg, the way to put that to the test is to confront members of the PLO as spokesmen and to challenge them. I believe that the record will be much more in favour of the PLO than many people are inclined to think. I therefore hope that the Government will lend all their efforts towards achieving a just, lasting and comprehensive settlement of this dispute.

My second point relates to our commitment to NATO. Those hon. Members who were present during the debate heard a powerful speech by my right hon. Friend the Member for Bristol, South-East (Mr. Benn), in which he advanced the argument for unilateral disarmament with great passion and eloquence. I am afraid that I must put myself on the side of those who question the wisdom of unilateralism. Unilateralism has a powerful emotional, philosophical appeal. I find it difficult as an ordinary Labour Back Bencher to argue against it. However, my instinct makes me wonder whether such exercises, wonderful though they sound and philosophically as appealing as they appear, are what the British public deep down want any Government to follow.

I am a supporter of NATO for one simple reason. I choose freedom. The best way of maintaining it is for us to associate ourselves with the peoples who largely share our ideals and ambitions in relation to democratic processes. Yesterday, when I was in Strasbourg, we listened to someone speaking in the cause of youth, which is one of the great fountains at which we now worship. I have an advantage over them. I have had great experience of youth. I have been young. I now have a wider vision about it, and I am afraid that spokesmen in that cause do not have all the answers, even though they may have the enthusiasm. That particular spokesman went on about a meeting that would take place on the subject of unilateralism.

Mr. Harry Greenway (Ealing, North) rose—

Mr. McGuire

Perhaps the hon. Gentleman will allow me to get into my stride before I give way.

That spokesman gave reasons why there should be this great debate on unilateralism. I asked for some details of the form which that great debate would take, because it will involve the young people of the Western and Warsaw Pact nations. I asked whether he expected people representing the Iron Curtain countries to be arguing the toss with our young people whether unilateralism was desirable. I asked whether they would expose all the imperialist arguments—Russian imperialist as well as Yankee imperialist. I said "If I could be assured that that was the kind of debate that would take place, I would be much more encouraged than I am, because I believe that at present this is a one-sided issue."

However, this is a powerful argument and the Government will have to respond to it. I am bound to say that the Parliamentary Labour Party has not yet declared itself to be unilateralist. I hope that it does not do so, but that is not to say that the arguments should not be taken on board. It is a powerful and emotional argument, and philosophically it is appealing. However, my instinct is that the British people will ask some searching questions when the crunch comes. I believe that they will favour a policy, as I do, as a result of which every nation in the world gets rid of nuclear weapons. If the Government lend their efforts to that ambition, I shall certainly support them wholeheartedly.

I am glad that there are two hon. Members from Northern Ireland in the Chamber, because I should like to refer to a report which appeared in The Guardian on Tuesday. I do not normally recommend hon. Members to read things, but this is required reading. It is an article about a book entitled "Ten Years On in Northern Ireland", published by the Cobden Trust. What I am about to say reminds me of a saying which is attributed to Thomas Jefferson. He is alleged to have said that he hated the morbid rage of debate and that he felt that people were more impressed when they read something at some depth rather than being confronted with it in debate. I think that there is a lot of truth in that.

When we discuss Northern Ireland in this House, one of the great difficulties is that, irrespective of the side of the House on which we sit, we are fossilised and we are prisoners of history. If any hon. Member reads that summary in The Guardian, he will be deeply disturbed. The raison d'etre of the policies of both Governments—the previous Labour Government and the present Government—is one of even-handedness in their approach to the problems of crime and terrorist activities in Northern Ireland. Anyone reading that report is driven to the conclusion that there is nothing even-handed about it and that there has been a heavy hand in one direction.

My hon. Friend the Member for Belfast, West (Mr. Fitt) recently made a courageous speech about what the Government's attitude should be towards those in the Maze who are at present on hunger-strike. Hunger-striking in Ireland is something which puzzles many people. It is carried to the ultimate and becomes an article of faith. The grim determination of someone to deny his body food and nourishment in whatever cause is something that has a powerful appeal to me. I wonder why they are doing it. None of us can say that it is an easy thing to do. I have often told people "If you ever hear that I am captured and it is said that I fasted to death as a means of getting my own back, do not believe it, because I am too fond of food and life." I believe that if we look at those in Northern Ireland who are submitting their bodies to this kind of torture, we discover that they are doing so for very deep reasons. Whether or not we agree, we must ask why they have been driven to it. All I can say is that I was pleased to hear my right hon. Friend the Member for Leeds, South (Mr. Rees) ask the Prime Minister whether it was not time to have a look at the judicial process that was set up five years ago.

I believe that the Cobden Trust report reinforces that view. I hope that the Government will not adopt a narrow-minded or restricted view but will take on board the dictum of Thomas Jefferson and examine carefully what has happened in order to satisfy themselves that the evenhanded approach still continues. I do not think that it does.

Mr. John McQuade (Belfast, North)

I should like to inform the hon. Gentleman and other hon. Members that the seven men on hunger strike were found guilty of murder.

Mr. McGuire

I say to the hon. Gentleman in the friendliest possible way that, if he believes that, there is nothing I can do to disabuse him. In general, according to this report, the men in Northern Ireland have not been convicted in the same way as people are convicted in the rest of the United Kingdom. Because we differ, we have a duty to ensure that there is no suspicion of anything other than fair play according to the rules that we lay down. This report says that that is not the case. [Interruption.]

Mr. Deputy Speaker (Mr. Bryant Godman Irvine)

Order. Observations from a sedentary position are not permitted.

Mr. McGuire

I turn now to the EEC. Again, the general view from this side of the House has been that we are totally and unanimously against it. I do not share that view. I believe simply that when the British people are confronted again with the great debate that will take place, and when they are told that when Greece, Spain and Portugal join the Community 91 per cent. of the population of the democratic West will belong to this economic community, they will start to ask searching questions. They will not be persuaded easily that our best fortunes as a nation will lie outside Europe. I believe that a common agricultural policy and an industrial policy such as exists, which were created for a group of six nations—bearing in mind that we spurned the chance to join—a policy that we now term as the bogy man, could be moulded and be made more suitable to our requirements as an industrial food-importing nation. The original policy will have to be altered when we have a Community of 12. I believe that it will alter on the lines that we want. But, above all, the people will want to know why we can do so much better outside when they are reminded of a Prime Minister representing my party who not long ago tried to get the leaders of the Six to support him. He said "We shall not take 'No' for an answer." The people will want to know why we shall do better if we are out of the Common Market. I do not believe that we will do better if we are out of the Common Market, and I hope that when the great debate comes—I note that those who were so fond of using the weapon of referendums are now backing away from it—the people will make their views known. I was against the referendum on the Common Market. Some people thought that it would confirm their opinion and that there would be a unanimous "No". When it backfired, they said that the propaganda was one way, at least from their point of view.

The right hon. Member for Sidcup (Mr. Heath), who took us into the Common Market in 1973, said that he had a mandate. We said that the people should be given a mandate. My answer to the question that we do not now need a referendum now can be illustrated by my election as a branch secretary of the National Union of Mineworkers. When I used to have trouble with the lads in the village who wanted to be branch secretary, and who threatened me with the sack, I told them that I was elected by a secret ballot and that if I was to be dismissed, I would be dismissed in that way.

That is my answer to those who say that we do not need a referendum and that the mandate will be a general election. But this is a special case and remains a special case. Although I am no great believer in referendums—it is a slippery slope—one cannot now say that we do not need one. I believe that at the end of the day people will say that we should stay in the Community and that we should try to reform it; and a referendum, I believe, would confirm this.

I turn now to those parts of the Gracious Speech that affect people of this country in general and my constituents in particular. The Gracious Speech refers to sound monetary policies and the feeling that the pursuance of a sound monetary policy and the grim determination of the Government to hang on will take us to the sunny uplands and that all will be well. But all hon. Members know that fear stalks the land and that the great difference between the present day and pre-war years is that the middle classes are feeling the full lash of unemployment. That used not to happen. Up till now, it was something that affected only manual workers. The Gracious Speech seems to promise more and more of the same old bitter medicine, and the old, sick joke of the operation being a success but the patient dying is coming true. The social fabric of the nation is being destroyed. The building up of health, housing, education, social services and social security enriched this country and transformed the lives of ordinary people. If we contrast that with the level of unemployment that obtained before the war, those who had experience of what it was like to live without these basic services will know what I am talking about. I am old enough to remember—my mother was on public assistance—the cruel humiliation that people had to suffer under that system. But it is what this Government seem to want. It made people frightened, and they had to justify every penny. The argument then was "Treat them mean; keep them keen. Keep them frightened."

I remember that in St. Helens, Lancashire, about 90 boys could have qualified for higher education, if they had won a scholarship. There were only 30 scholarships available for boys in the Catholic schools and 60 available for boys in the county and other schools. But if a boy had won a scholarship in my area he would have been in great difficulty because his parents would not have been able to afford the uniform. One of our greatest achievements in education today is the number of grants given to young people to enable them to go to university.

With regard to council houses, I can relate only my experience. I remember living in a tenement block with only one outside water closet for four families. We transformed the lives of those people. We gave them better housing and better conditions. I believe that this Government's policy on public housing is disastrous and that at some stage we shall reap the whirlwind.

Mr. Greenway

Is the hon. Gentleman aware that fewer children from what might be called a working-class background now go to universities than have ever gone there, and that this is after five years of Labour government, which was supposed to have provided more opportunity for them in the way that the hon. Gentleman has described?

Mr. McGuire

I do not know whether the hon. Gentleman's statistics are true. If someone asserts something strongly, it does not mean that it is true. It may mean only that he believes it more strongly than others. I imagine that later the hon. Gentleman will seek to entertain us with a wonderful speech and develop the point, so that we may all be better informed.

The members of my own family, some of whom went to comprehensive schools, are now enjoying the benefits of a university education. Some of them are coming on stream as well. We can all prove to some extent what we want to prove by statistics, but what I am saying now cannot be refuted. If we compare the pre-war position of children from poor homes and the opportunity that they had to go to university with the position today, we have to recognise that it has been transformed. If there has been some little alteration in the number of places available, the hon. Gentleman will be able to deal with that, but he cannot gainsay my point about the general improvement.

One of the great problems that we faced as a party was that, although we gave people dignity and made them more prosperous, when they became more prosperous they became more selfish. That was the tragedy. So the selfish policies of the Tories appeal to them. Some of us are hoping for an announcement on Tuesday indicating that these policies will soon have to be reversed, especially in regard to taxation.

When the previous Labour Government were in office, we used to have ringing declarations from the Opposition Dispatch Box about how the Tories would set the people free. The idea was that if people were given a few bob extra in their pocket this would galvanise the nation. We shall soon see that the promise that the Tories would bring down the rate of taxation was purely a gimmick. All the forecasts are that taxation will increase.

With the bonanza of North Sea oil, many people are wondering why we are doing as bad as we are industrially. I accept that my own party would also have to face the challenge that we have to restructure British industry and make it more competitive. We ought to use the huge revenues from North Sea oil in order to do this. If anyone had said a few years ago that we would become self-sufficient in energy, with a great oil bonanza off our shores, and at the same time do very badly in industry, he would have been regarded as insane. The Government do not appear to be addressing their minds to the problem.

In the Gracious Speech there is a reference to retraining, and so on, but I do not think that the Government have any substantial plans to transform the training schemes to deal with the redundancies that are coming. My impression is that, something having been written into the Gracious Speech, the Government are hoping that in some way they will be able to muddle through. We need a well-thought-out and drastic programme of retraining, and we need to restructure and re-equip British industry.

We are not as competitive as we should be. In these days of heavy and growing unemployment, it will be very difficult, if not almost impossible, to persuade men that the cost per unit of production must be reduced and competitiveness must be increased, even if it means that some of them will lose their jobs. But with generous redundancy payments and the offer of retraining I believe that it can be accomplished.

The Government are making things difficult for themselves with their anti-social policies. They must realise that they will have to take the trade unions with them. I am not advocating that we should simply make life easier for trade unionists. Some hard questions need to be asked. Some tough decisions need to be taken. But they will only be taken in a spirit of partnership and cooperation, and the Government have not shown any inclination towards that so far.

I want to touch now on the question of the present Government's help—which is very much needed—to industry. I have in mind the short-term or temporary subsidy scheme. The Under-Secretary of State, who is listening to the debate, will know that the scheme is of very great benefit to many companies.

In my constituency I have the new town, Skelmersdale, which has very high male unemployment. We do not get the correct figures because, for travel-to-work purposes, we are linked with Ormskirk. That masks our figures and gives a distorted picture for Ormskirk. The best estimate we can make is that male unemployment in Skelmersdale is 20 per cent.—and probably above—and the prospects are grim. Most hon. Members—even those who entered the House at the last election — will know that Skelmersdale suffered two or three very serious body blows. They were not mortal but they were very serious. We lost textiles at Courtaulds and also the Thorn colour tube factory, among others. I am told that at present 20 per cent. to 30 per cent. of the firms still doing business in Skelmersdale rely very heavily on the short-term subsidy scheme.

One of the problems that has been put to me is that when a firm applies under the scheme it takes far too long for it to receive confirmation that it is to get the money. Recently I had a case that I managed to sort out with the help of the Department. The man concerned had invested a lot of capital and enterprise in a business. There is a phrase about sending coals to Newcastle. He exported pizzas to Italy. Sometimes a cash flow problem can arise overnight. This was a subsidiary of an American company and it needed to be told quickly whether the application would be approved. It was willing to soldier on because it could borrow money on the strength of the decision, but I was told that it took 12 and 18 weeks before there was a positive answer to an application. I hope that the Minister will try to find out whether this period can be shortened. It would be sufficient to have oral intimation, with confirmation to follow fairly quickly thereafter from someone in a senior position in the Department. That would relieve firms of a great deal of anxiety.

It is important that the House looks closely at the development and special development grants designed to help existing industries.

On Friday last, Mr. Deputy Speaker, your predecessor in the Chair, my hon. Friend the Member for Liverpool, Toxteth (Mr. Crawshaw), in his capacity as a constituency Member, accompanied me and two other colleagues on a visit to Merseyside to look at the problems of industrial regeneration in that area. I was surprised to find that, although one thinks in terms of huge numbers of people being employed on the docks, the numbers are now down to about 4,000 to 5,000 and the two big companies in the motor car industry employ only about 15,000.

The chambers of trade appointed a man to find out the numbers of small businesses, some employing between two and 20 workers. The investigation showed that these small businesses were employing a total of between 5,000 and 6,000 people and that some were flourishing even in these difficult times. The message that came through to us was that the interpretations of the qualifications for grants were ludicrous. The fact that small firms are not entitled to the benefits which, on commonsense grounds, they should qualify for is making it difficult for them to expand and to become more prosperous.

The Tory Party in Opposition used to outline its policies and plans for small firms. The Government have not impressed us so far. I hope that the information that I propose to send to the Under-Secretary will help him to be more effective in helping small firms.

I end on the question of the protection of basic industries. The Prime Minister seemed to rule out entirely any question of import controls. That is the term used when one wants to inflame a debate. I prefer to refer to protecting our basic industries.

We must consider protecting the textile industry. About five years ago, one of the last cotton spinning mills in England closed down. That mill was in my constituency. At the turn of the century, Lancashire accounted for 100 per cent. of the world's cotton spinning capacity. Lancashire is now down to less than ½ per cent. of the world's cotton spinning capacity. The factory in Ince did not have bad industrial relations. In fact, the manager cried bitter salt tears when he learned that the factory was to close. Relations between management and workers could not have been better. The workers were not making excessive wage demands. Indeed, I wonder how the management got people to work for the wages that were being paid. It was a family concern and the workers felt that they belonged to the family.

This story has been repeated all over the North-West. Factories which are closing are competitive in the Western industrial sense. Therefore, we must consider giving these companies and industries the protection that we give to agriculture. Our agriculture could not survive the stormy blasts if we allowed so-called cheap food from all over the world to come into this country. Is the policy of protection for our agriculture exclusive? Should we not consider giving protection to some of our other basic industries? How can we say that protection is good for agriculture but not for other industries? I urge the Government to take that point on board.

Basic industries, which are of fundamental importance to the regions, are being swept away. The textile industry is a classic example. One cannot say that its wounds are self-inflicted. We need to think seriously about extending protection to basic industries other than agriculture.

The Gracious Speech promises very thin gruel for many people who were looking for and expecting something better. They will not survive the stormy blasts which the Government have promised them. I hope that the sea change which has been forecast over the past six months will result in saner, wiser policies which will benefit the people of this country.

8.34 pm

Mr. Alan Haselhurst (Saffron Walden)

The point which interests me most in the Gracious Speech is the Government's commitment to a sustained growth of output and its relationship to the commitment to relieve the plight of the unemployed. Following the speech of the hon. Member for Ince (Mr. McGuire), I am inclined to say that it is somewhat inevitable that the country as a whole has to face the prospect of thin gruel, simply as a result of what has happened to Britain over many years. When, in addition to the decline in British industry which has been taking place over several decades, there is the effect of the increase in oil prices which we, as one of many countries, are having to pay, we must be facing a diminution in our standard of wealth. It is, perhaps, our failure to recognise this fact and our wish to go on paying ourselves more than we have been producing, in terms of increased output, that have compounded our difficulties in recent years.

It is important for the Government to keep up the pressure on industry to sort itself out and put itself back in the league of the most competitive and most efficient in the world. We have been failing by every test that can be devised. Our productivity in many sectors is low. Our unit cost of production has been bad. Our unit cost of labour has been bad. We have been sliding down the league tables of the industrial Powers.

Much needs to be done if we are to reverse the situation. It is no good trying to discuss it in terms of partisan politics, trying to ascribe the blame to one party in office. The fact is that this has been going on for a considerable time. The real responsibility for the difficulties lies not entirely with politicians or with one set of politicians but, as much as anything else, with those who work in industry, be they employees or employers, managers or managed. It is the totality of people in industry who bear a responsibility for the state of industry today.

One is still confronted by far too many examples of productivity in British industry simply being out of line with that of our competitors. Whilst that remains so, our propects of increasing our share of the world markets are obviously not very good. If we cannot increase our wealth, we shall not be able to lift the standard of living of our people or afford the range of services which we find desirable. Therefore, it is important that industry should be made to face up to reality.

When I see examples of companies in some cases halving their work force in a particular operation and still ending up with productivity which compares less favourably with productivity rates in other countries, I ask myself, after I have registered due concern for those who have lost their jobs precipitately, how that degree of uncompetitiveness was sustained for so long. Clearly, resources were tied up uneconomically when they should have been released for more wealth-making activities. When such a situation still exists in British industry, it is only right to support the Government's efforts to increase the sense of reality and of awareness of this kind of lack of competitiveness so that remedial measures can be taken.

That having been said, however, we must ask how blunt should be the instrument which the Government use for this purpose. It may be right to go after companies and industries that have permitted a state of uncompetitiveness that has been damaging to the national economy. However, it is of great concern when perfectly efficient units of production are feeling a backlash and are being dragged down through losing customers who may have been inefficent in their own operations and who have gone out of business, thus reducing the turnover of otherwise efficent companies. We must be sensitive to the good companies that can boast of good productivity and good labour relations. We want to see those companies survive so that they can be the base of an expansion of British industry once conditions have been stabilised.

We must pay close attention to interest rates. It saddens me when the difference between a company's performance currently and its performance in a previous year lies in the fact that it has lost profit because it has been paying substantially more in interest rates. If I have a difference with the Government on this issue, it may be that my difference is one of only a few weeks rather than one of great doctrinal and philosophical implications. It is a matter of timing. We must try to make our instrument of economic policy slightly more sensitive to the circumstances that we find at plant level.

If we are to increase our output, we must take measures that will encourage the setting up of new small businesses. I welcome the initiative that has been taken over enterprise zones. It will be interesting to see whether that device creates a climate in individual localities that will enable the faster-than-normal growth of new businesses. I hope that we shall take other measures.

As the economic situation improves, I do not wish to see a tide of money going into land rather than into manufacturing industry. We shall have to take measures to try to steer people's money and savings into manufacturing industry. I hope that the Government will even consider such a measure as the more favourable taxation of dividends for manufacturing industry than the general level of taxation that would otherwise apply on so-called unearned income. We must put great emphasis on the need to get our industry expanding. Every device that tends towards that end should be considered.

I am disappointed that there is no reference in the Gracious Speech to an improvement in communications in industry. Poor communications is one of the besetting sins of British industry. We do not have a comprehensive agreement within industry on the needs for its success. In the United States and in West Germany, there is a commitment shared by management and the work force that the purpose of business is to create wealth. There may be many other disagreements, but on that central purpose they are agreed. That dedication is much less easy to find in British industry. Special efforts must be made to try to get better communications than we have seen in large sectors of our industry.

Managers tell me that they are now finding a new mood within the factory work force. They say that they are able to take steps that they have been unable to take for some years. They claim that there is a sense of reality. I am sure that that is correct. People realise that the country is up against it and that many companies are up against it. There has been a disposition on the part of those who work in certain enterprises to ask "What can we do to ensure that we survive and that we may prosper in the longer run?"

What a pity that it takes a decline in the industrial position of this country to the extent that we have seen over the past 30 years to bring home to people what they have to do to get things right within industry. Would it not speed up the process of bringing about the necessary reforms within industry and the improvements in productivity that we need to try to get our unit cost of production in line with that of our competitors if there was greater pressure on the management of industry to achieve better systems of communication and involvement of the whole work force in the operation of the enterprise? It is not a matter that should be tackled by detailed legislation, by putting directors on boards or companies of anything of that kind. I do not believe that there should be a detailed prescription by the Government. There should be a declaration by the Government of the importance of communication and involvement, if necessary backed up by legislation that says that companies must report on what they are doing in that field so that greater pressure is brought to bear and there is a greater spotlight on that aspect of the management of industry. It would be to the great good of industry if this were so.

The difficulties that we undoubtedly have to go through if we are in the shortest time to get our industry operating on a more effective basis will undoubtedly present us with a serious additional problem of unemployment on top of that caused by structural factors. I do not wish to see the Government's central strategy for industry and the economy wrecked because of an understandable disenchantment in the country over the rise in the numbers of unemployed. I welcome the clear emphasis in the Gracious Speech on more measures in that direction. I shall not elaborate further at this time on the further measures that I wish to see taken, but I believe that a positive approach to unemployment requires our looking at the whole system of training and realising that we do far less than many of our competitors. By a positive approach to training, we might have an ameliorating effect on the employment market. People who would otherwise be registered as unemployed could go through a constructive process of training that would make them better, more satisfied and better paid employees when they come into the labour market proper for the remainder of their lives. I believe that education and training should be looked at in a positive way, instead of simply reacting to mounting unemployment.

We are not merely seeing people thrown out of work because of the effect of Government policies. We are faced with a crisis of unemployment because of the sheer numbers seeking jobs at a time when we need to be drastically improving our productivity with the greater use of machines, robots and so on. It is right that the Gracious Speech should lay emphasis not only on the need to sustain output and growth but on the factor of unemployment, which is undoubtedly tied up with the measures that must be taken if British industry is to be put in the best possible order in the national interest.

Finally, on a slightly different subject, let me say how much I welcome the other great emphasis in the Gracious Speech on the commitment of this country to the European Community. I regard this as being of the first importance. This subject is not unlinked with what I have said about British industry. If we are concerned to see British industry succeed, we might also pay attention to what British industrialists are saying about the country's future. I do not think that very many will be found who believe that this country should quit the Community or who feel that their companies or the British people would be better off if British industry found itself competing over tariff barriers with our present partners in Europe.

I wholly welcome the fact that the Government are absolutely committed to membership and development of the Community, to the reform of its policies in certain areas and to expansion of its membership. I believe that as time goes on we shall bring home to the British people the historic importance of the step that was first taken to join the Community. That had its difficulties in the short term, but it is of the greatest historical importance not only for this country's general well-being in a foreign policy and defence but in terms of the standard of living that we may hope to sustain in future years.

I am delighted that the Government are making their position crystal clear on this matter. I believe that as events unfold the Government will carry the British people with them.

8.51 pm.

Mr. Harry Greenway (Ealing, North)

Having spent well over 20 years in education at the secondary level, all of that time being in comprehensive schools, I naturally followed with great concern the progress to university of children from blue-collar families. I now have the statistics, and I can assure the hon. Member for Ince (Mr. McGuire) that, most unfortunately, the number has been in decline for some years. That trend appears to be continuing. It worries everyone, but it is a fact.

The hon. Gentleman rather extravagantly said that people now went to university free of financial worries. That is not true, I do not think that anyone goes to university free of financial worries. My grandmother used to say that nobody ever had enough money, however much he had and from whatever background he came. There are problems, however big the grant may be.

Mr. Michael McGuire rose—

Mr. Greenway

Before giving way to the hon. Gentleman, I must assert that, most unfortunately, the number of children going to universities from the poor families that he movingly described is falling. That is tragic but true.

Mr. McGuire

My point was that the opportunities for people of my class to go to university were very few and far between but that those opportunities considerably increased later. That is a fact. The hon. Gentleman is arguing that there has been a decline. I do not know how big a decline it is. We should be worried about it, and I shall be worried about it if the hon. Gentleman can produce facts to show that the percentage is decreasing. What cannot be argued against is that the opportunities were created and sustained and that possibly the present Government will weaken them.

Mr. Greenway

It is not the purpose of my speech to pursue that matter, but I could cite front all over the country many individuals from poor backgrounds who have gone on to university from direct grant and other selective schools, as well as non-selective schools. That record dates back over 80 years or more. More went in former days than are going now from blue-collar families. That is a fact. There is a particular dividing line at about 1955, but one could go further back.

I very much welcome the one small reference in the Gracious Speech to education—the determination that Legislation will be brought forward to facilitate the education of children with special needs. I have been interested in and concerned with normal children, who do not have special needs in education. At the same time, outside my working hours I have taken an interest in disabled children of every kind. I welcome especially the intention of the Government to implement Warnock and to bring such children into what might be called normal schools. My last school, with over 2,000 children, contained a unit for children of partial hearing. It was the second largest in London. We had within our ranks in a normal comprehensive school children of the kind envisaged in the Warnock report.

Integration into the normal school routine occurred at many points. I suspect that this will also happen as a result of the Government's legislation. The children were able to take part happily, comfortably and normally in physical education and games. They were able to attend school assemblies. They were able to follow a number of subjects with other children who did not have a hearing disability. They were able to sit in the front of the class, and they also had hearing aids.

The effect on the children with no disabilities was remarkable and impressive. Those who are not disabled form a particular compassion for the disabled children, take a great deal of interest in them and help them. This is quite the opposite of what many might expect would occur, with children perhaps bullying and taking advantage of less fortunate children. This shows the value of the Warnock report to schools.

It will be important for the Secretary of State, in envisaging his legislation, to ensure that schools that are to become centres for accepting children with special educational needs provide withdrawal facilities for them. There will be essential points in the curriculum when they will need to go their own way and receive educational help outside the secondary school. It will also be necessary to see that the staffing of the schools is sufficient to make education as normal as possible.

The partially hearing children in my last school were marvellous contributors to school life. Their parents were interested in all school matters. The children always contributed to school shows, most often in mimed sketches. There were other ways in which they got themselves on to the programme through their own efforts. They rarely failed to stir the remaining children and those in the audience. I have always had a particular interest in children with partial hearing and also an interest in mentally handicapped children. I have been stirred many times to see how well normal children will take to them. I had mentally handicapped and maladjusted children integrating with normal children in physical and sometimes non-physical activities. This is background support for the Government's proposals.

I am sorry that the Gracious Speech contains no reference to comprehensive schools. From daily reports all over the country, it can be seen that the time has come for a top-level Government inquiry into comprehensives to discover why some are so outstandingly good—I have served in three — and some so deplorably bad, with children out of control, staff not working and children not required to do any work.

Comprehensive schools have two great disadvantages which stem mainly from Socialist doctrines. The first is that they were foisted upon the country without proper research as they grew. They began in the mid-1950s. They should have been evaluated during the next 10 years so that we could judge how good or bad they were. The second disadvantage is that the Labour Government forced a comprehensive pattern on us. That compulsion is to the disadvantage of the comprehensive schools.

Mr. J. F. Pawsey (Rugby)

Should we not be looking again at the old grammar school concept? Should we not put back the clock and reintroduce grammar schools?

Mr. Greenway

I do not go that far. I have a deep belief in the comprehensive principle. When properly applied, it can work. However, I do not say that a public inquiry would not throw up the answer suggested by my hon. Friend the Member for Rugby (Mr. Pawsey). Perhaps a return to selection would be the result of such an inquiry.

It is clear that many comprehensive schools are unsatisfactory. Some teachers expect too little from their pupils. As a result, pupils do nothing. When they do not work, they get into trouble. Even in some good schools work lacks pace, variety and interest. That means that children often under-achieve against their intelligence quotient. Work is often repetitive and dull and involves too much copying from the blackboard.

Some schools reveal a disturbing waste and inefficiency. Their resources are not used effectively to the advantage of all children. That is because some heads are bad managers. They need training in management but they are not receiving it. That also should be covered in an inquiry. Because of mismanagement, there is a shortage of equipment in some areas and lavish provision in others. That leads to schools being out of balance. I do not exaggerate. That is why we need an inquiry into the way in which comprehensives operate.

Mixed ability teaching is thoroughly unsatisfactory. I have seen it operating for more than 20 years. Running a mixed ability class is more difficult the larger the class, but even with five or six pupils it is a difficult task. The teacher will almost always take the pace of the slowest pupil. That is because of the need to keep pupils together, otherwise it is impossible to monitor their progress. Mixed ability teaching is a disaster for bright children, and even for averagely bright children, because the work is unsuitable and geared to children with low intelligence.

Discipline in some comprehensive schools must be examined carefully. I marked some essays this summer for an examination board in which children were required to describe at O-level standard their experiences of school life. Quite a few in one school not so far from this place spoke of the misery of their first two or three years, of the bullying and all the rest. They described how they were forced to hand over their money to older pupils and how, if they said they had no money, they were made to jump up and down, so that if their pockets jingled they were searched and any money found was taken.

That is unsatisfactory, but it certainly happens. There must be an inquiry into behaviour in some schools, because Socialist authorities in the main have stripped from headmasters, headmistresses and teachers all their sanctions for dealing with children who misbehave to the point at which the children can get away with anything. That is one of the reasons why some schools are so bad.

I hope that during this Session the Secretary of State will be able to do something about the unsatisfactory position on school meals. Many children are opting to take packed lunches because their parents genuinely believe that that is the best way to give them the nutrition that they require. However, the dinner ladies, who in my experience are the nicest people but are the least qualified, are often, in schools that I know, proving to be dictatorial by preventing children bringing yoghurt, soup or other food.

I know of children who take one sandwich and an apple because the dinner ladies are so domineering in what they will and will not allow. They adopt that attitude because, they say, their job is to supervise school meals, by which they mean cooked school meals. They resent being asked to supervise the eating of packed meals. That is to the disadvantage of children and their nutritional needs. The whole question of midday supervision at schools must be examined, and I hope that something will be achieved through the contract for teachers that seems to be emerging, gradually but slowly, from the Burnham committee.

I turn now to the wildlife and countryside Bill. I have had close contact with the countryside through my professional interest in children. It is of the greatest importance that all people of all sections of the community should as far as possible have unrestricted access to the countryside. I hope that the Bill will not put into the hands of local authorities or anyone else the right to set up bureaucracies and to open or close footpaths or bridleways without close control and without groups or individuals having the right to a legal appeal.

Many county councils, rural and urban alike, have become so bureaucratic in the way that they are run that they are likely to close footpaths without proper notice and without showing proper reason. They might hand out similar treatment in respect of bridleways and fields for campers and other activities. I plead with the Government to provide people with the strongest system of legal appeal where any such right is conferred upon a local authority.

I understand that some bodies are asking that bridleways, for example, should be open to individual riders but closed to parties from riding schools. What a nerve that is. People from riding schools in the country or in the city are almost always those who cannot own their horses or who are able to ride only at weekends. There is strong pressure on the Government from one or two major organisations that parties from riding schools should have lesser rights than other individuals in their access to bridleways. I hope that the Government will not countenance accepting such a suggestion.

I hope that the Bill on wildlife and the countryside will have as its broad and general approach the principle that the countryside is for the people of Britain, especially those who live in the towns. We need to get the people from the towns into the countryside as a means of recreation and to help them to enjoy it. We must do that if they are to have any understanding of the countryside. Conversely, people from the countryside need to come to the towns to see how town people live. That mutual interchange will lead to a breakdown of the hostility that we are often seeing now between the towns and the countryside, which is dangerous to the well-being of our country and to our future. I hope that the Government will bear that in mind in any legislation that is introduced.

9.11 pm

Mr. Graham Bright (Luton, East)

I welcome the measures announced in the Gracious Speech that are aimed at solving Britain's deep-rooted economic problems. There can be no secure and prosperous future for the people of Britain until we have eliminated inflation from our economic system. Inflation destroys jobs and breeds unemployment. It destroys profits and wrecks productive firms. It destroys the value of money and impoverishes our nation. Inflation is an illness that we must defeat. That is why I, and, I am sure, my right hon. and hon. Friends also, support the Government's decision to put the battle against inflation at the top of their list of priorities. I am equally sure that it is at the top of the list of priorities in every home in Britain.

We have always known that the struggle to conquer inflation would not be easy. My right hon. and learned Friend the Chancellor of the Exchequer, before the last general election, repeatedly stressed that the process of adjusting to economic reality would be painful. The five years of waste and of wasted opportunity before May 1979 imposed a heavy burden and heavy penalties on the British people. I congratulate my right hon. Friends on the Treasury Bench on their great courage in grasping the nettle of excessive public expenditure. That must be cut if private industry — the productive sector of our community—is to lead us out of the recession. We must ensure that we have effective means to control the monetary system and to implement our fiscal policies. If the policies and the machinery fit together, the road to economic prosperity will reopen.

I am especially pleased with the stress laid on the role to be played by small businesses. The more successful are our small businesses, the more successful will be our economy as a whole. It is no accident that our chief industrial competitors—the United States, France, West Germany and Japan — are three or four times more successful than Britain in generating new small businesses. Small businesses generate the bulk of new jobs, new goods and new services in those countries. The lesson for Britain is obvious. I am delighted that that has been recognised and that we are to have a further package of measures to encourage new businesses and to help small firms to expand and prosper.

The biggest problem that newly founded and existing small businesses have to face is that of finding the credit with which to establish or expand their activities. The higher the rate of interest, the less incentive there is to take the risk. I welcome the comments made by my hon. Friend the Member for Saffron Walden (Mr. Haselhurst) because I believe that the lowering of interest rates would give the most tremendous stimulus in this sector of the economy.

I am also sure that my hon. Friend the Under-Secretary of State for Industry is fully aware of the problem that this poses for small businesses. That is why I urged a loan guarantee system last March. Solving the problem is just as important today as it was then. We must create a scheme in which not only new but existing small businesses can find the credit they need, if necessary at a differential rate. It is not acceptable for viable businesses with commercially sound plans for expansion or increased production to be held back because their owners have already committed their savings and mortgaged their homes in order to get their ventures off the ground. There is no reason why the banks and other institutions with money should not accept royalties out of future profits rather than demand an unduly high share of the equity of small businesses. To back that up and to make the scheme viable, the loan should be supported by a guarantee of something like 75 per cent. of its total by the Government.

I do not suppose that that step alone will ensure that the problem of finding credit for small businesses is solved. My right hon. and hon. Friends know that further measures are necessary. Funds specifically saved during past employment for investment in new trading ventures should receive special treatment. I am personally convinced that investments in small companies should be discounted for tax purposes, as they are in France, and that where capital gains tax becomes due on the realisation of a listed investment it should be rolled over if the proceeds go in full to a small or medium-sized trading business.

My right hon. Friends must certainly take action to ensure that the operation of capital transfer tax ceases to pose a threat to the survival of family firms and that provision for advance payment can be made without affecting the assessment of the donor's estate at death. That is most important, and it is a matter that should be considered. It is also intolerable for capital transfer tax and capital gains tax to be levied on the same transactions. The combination of inflation and capital gains tax is a deadly one for small businesses.

My right hon. Friends deserve full praise for the actions that they have already taken. The pressure of planning restrictions and demands for information from Government Departments has been reduced. I have no doubt that the reductions in income tax rates have helped as well. But small business men like myself are still subject to the remorseless increase in rates and to the depredations of the offices of the Inland Revenue and Customs and Excise.

If small businesses are to make a proper contribution to Britain's economic recovery, we must have the full incentives of private enterprise — freedom from excessive taxation, freedom from over-detailed Government supervision and freedom to take the commercial opportunities available. The Government are in a position to create the right conditions for small businesses to flourish as never before. I am certain that they will have the support of the whole country in creating those conditions and that small businesses will grasp the opportunity with both hands. For that reason, I welcome the Gracious Speech.

9.19 pm.

Mr. John Browne (Winchester)

I rise to support the Gracious Speech. From my position as a Back Bencher, I offer my congratulations to the Government on their wisdom, their determination and, above all, their courage in continuing to hold on to their course of facing our country with reality. It is a grim reality, but only by facing it can we hope to arrive at real solutions and achieve real results.

The greatest challenge facing us in our country today is that of the technological revolution. The first great divide between the developed and underdeveloped nations of the world was the first two agricultural revolutions. Then came the Industrial Revolution, which divided the world even more dramatically. Luckily, we were in the van on each occasion. But today we are faced by the technological revolution. It is only by creating new technology and new products that we shall have any hope at all of charging a sufficient margin to make the profits that will allow us as a nation to have a legitimate claim to a higher standard of living than many other countries of the world.

Only four countries are really achieving this technological revolution—the United States, Japan, West Germany and, possibly, Switzerland. We, who have such a technological base of inventiveness, are not yet achieving what is required. In fact, in many respects we shun new technology.

We must embrace new technology as a nation, and to do this we must remove many of the restrictive practices that we now have. More important than that, we must, in terms of management philosophy, worker co-operation, Government and so on, adjust our industries and our thinking. The keys to this adjustment are the disciplines of monetary realism and the boosting of new and small businesses, which are the source of the technological revolution.

Monetarism is a philosophy of monetary reality, but it is a philosophy which depends upon a free market for its success—a free market in all the economic factors such as land, goods, services and labour. Indeed, a free market is an absolute prerequisite for the success of monetarism, so the greatest task facing our Government and our country today is not merely the application of monetarism but the freeing of our economy so that monetarism can be successful.

Despite the clear intention of my right hon. Friend the Prime Minister, it worries me that the policies coming out of the Cabinet are not strong enough to give us the ability to free our economic market. In this respect, there are three points that I should like to make. First, we honoured Clegg, although it was grossly inflationary and grossly discriminatory in that it discriminated against wealth creators and was in favour of wealth consumers. I am glad that we have now agreed to terminate it.

The second point is indexation. We have not only failed to stop or abolish indexation: we have increased it. Indexation itself is highly inflationary. It builds inflation into Government expenditure. It also creates a privileged class of people, the most fortunate of whom have an index-linked salary, index-linked tax thresholds and an index-linked pension and who are completely isolated from the ravages of inflation which affect everybody else. Worst of all, indexation not only reduces the will to kill inflation; it actually eliminates the wish to kill inflation.

Mr. D. N. Campbell-Savours (Workington)

The hon. Gentleman refers to the realism that stems from the application of monetarism. He introduced his comments by referring to the need for technological innovation and its application in industry. If it could be proved to the hon. Gentleman that the application of monetarism leads to the closure of industries that are technologically based, capital intensive and modern in every area of international comparison, would he then accept that there is a central flaw in his old theory on monetarism? Or is he saying that even under monetarism certain industries, although they are technologically advanced and capital intensive, must close as part of this ideology?

Mr. Browne

If that could be proved to me, I would think that monetarism was being wrongly applied. However, I do not agree with the hon. Gentleman, because it is not simply a question of an industry being modern or even technological. That industry must be competitive in not only technology but management and finance.

Mr. Campbell-Savours

I refer the hon Gentleman directly to three industries. The first is Courtaulds, where heavy new machinery was installed and capital-intensive investment was made but where a number of modern mills have been closed over the last six months. Secondly, I refer him to the paper industry in my constituency, where large sections have been brought up to date with machinery that is among the most advanced in the world. That machinery is at a standstill as a result of the application of this policy. Thirdly, I refer him to parts of the British Steel Corporation where investment has been made, as is the case in my constituency, where £l0½ million was invested in a foundry which is now on the border of closure. Does not he accept that if the difficulties of those industries stem from the application of monetarism there is a flaw in his argument?

Mr. Browne

The hon. Gentleman still glosses over the fact that it is not a question of how modern is the industry or how much money has been put into it. The industry must be competitive, even more than having the modern plant and hardware. Why is it that a country such as ours, the birthplace of the Bessemer converter, with billions of pounds poured into the nationalised steel industry, has to buy foreign steel to build its oil rigs? It is because it is not competitive. This is the whole point. It is not simply a question of throwing dollars or sterling after an industry. Competitiveness is human use of cooperation, people and assets. So I do not accept the hon. Gentleman's argument because it glosses over the essential point.

I return to the three points that I mentioned. I am glad that comparability has been stopped. However, I listened in vain to the Gracious Speech in the hope of hearing that there would be an end to indexation. I did not hear that, but we may be at a beginning. I shall strongly support any of my right hon. Friends in the Cabinet who will end it.

Thirdly, and more important, there are the giant employment cartels that exist in this country. On the one hand we have the trade unions which can demand, and on the other hand we have the State, the local authorities and the nationalised industries, which can pay both wages and prices totally out of relation to the market. Today we have a situation where wages are up by an average of 26 per cent., inflation is up by around 16 per cent. and productivity is at minus 4 per cent. That is an absolute recipe for disaster, and yet the giant employment cartels are enshrined in legislation. We still have legislation that bestows privilege before the law on one party in the wage bargaining arena. For example, why are companies made to publish accounts when trade unions are not?

We have legislation which acknowledges and supports restrictive practices. These restrictive practices are the killer of technological advance, of competitiveness and of profitable jobs and, finally, they kill any legitimate claim that we may have to a relatively high standard of living.

We also have legislation — the Employment Protection Act — which actively discourages employment, particularly by new and small business men. We still have legislation which condones the oppression of shop floor democracy and acknowledges and supports the closed shop. Whilst it gives a voluntary secret ballot to the trade union leader, it does not give the same privilege to the shop floor worker. It is like issuing football boots to the team manager but not to the players.

I am sorry to have to say that I feel that my right hon. Friend the Secretary of State for Employment has turned away from the greatest time window of opportunity of this century in terms of worker co-operation. Sadly, the Queen's Speech does not make any mention of rectifying this situation, which is the real nub of the problem of employing monetarism successfully.

On the other side of this employment cartel are the State and nationalised employers, many of whom have abused their monopoly power to the cost of the consumer, the taxpayer and their workers.

I was glad to hear about moves for further privatisation, but, judging by the last Session of Parliament, things have been painfully slow. I urge my hon. Friend the Under-Secretary to urge our right hon. Friends to speed up the process of privatisation. It is easy enough to sell off profitable entities, but it is often difficult to sell off the unprofitable entities.

I should like to make two suggestions. First, why cannot the Government offer sale and lease-back facilities for some of these loss-making assets, which under more enterprising management may run at a profit? Secondly, instead of issuing equity in, say, British Airways, why can we not issue a convertible debenture secured against the assets, for example, against the aircraft of British Airways, the coaches of the National Bus Company and the vehicles of the National Freight Corporation? That would make purchase more attractive. Then, when the business was restored to profitability, the holders could convert their debentures to equity.

I have been critical, but I realise that it is extremely difficult for any Government to abolish indexation and to dissolve the well-entrenched employment cartels. However, I believe that the Government must do that if monetarism is to have a chance of genuine success.

I particularly urge my right hon. Friends, in the Cabinet who have lived through and seen the failure of the alternative solutions, which are regularly proposed, to back the Prime Minister, who, with the Conservative Party, was massively supported and elected to beat inflation. We said that it would be a painful process. I ask them to give her their public backing so that monetarism may have a real chance of succeeding by their helping to free the market.

The Government have certainly made a bold attempt to make cuts, but they are not nearly enough. We are still spending far ahead of our ability to create wealth. Bureaucracy has not been cut enough, but, on the other hand, services certainly have been cut. It is not really effective—certainly it is not cost effective—to make cuts in bureaucracy by percentage cuts across the board — 10 per cent. for all the Ministries. That takes no account of need or of the quality of the people working there or their loyalty. Also, a policy of natural wastage is bad because it discriminates entirely against youth employment, and that is very dangerous. Rather, we should concentrate on cutting assets. It is the sale of assets and the cutting of whole Departments that must be pursued. I shall not be happy or even satisfied about Government cuts until I see some "For sale" boards outside offices in Whitehall and local government buildings and those of nationalised industries with "Office space for sale" written on them, and until I see the announcements of the auctions of the office material and equipment. Then, I shall believe that the cuts are starting to be effective.

How is it that we still have a Department of Industry and a Civil Service Department which between them cost the taxpayers, the wealth creators of this country, between £180 million and £200 million a year? Those two Departments could go tomorrow and the country would benefit. Those are just two examples. I urge my right hon. Friends to stand behind the commitment in the Gracious Speech to cut Government spending.

I also urge my right hon. Friends to think about the effects of monetarism in a non-free market. By applying monetarism in this market, we are creating two nations. There is no question but that monetarism is working in the private wealth-creating sector. However, it is not working in the public wealth-consuming sector. With people living side by side and affected so differently, one man with an index-linked pension, job security and an almost index-linked salary and another man in the next house who has no job security, no index-linked pension and a wage increase of less than 6 per cent. this year, we are creating two nations. We must be very careful. The reason for this is that we have not freed the market. We are operating monetarism, but it is firing only on the private sector.

I now turn to the vital subject which has been mentioned by several of my hon. Friends—new and small businesses. This is the vital balance to the monetarist equation. New and small businesses are the source of new technology, new products, new and higher profits and new taxes to pay for our defence, social services, law and order and education, and, most important of all, they are the source of new jobs—new profitable jobs.

Mr. Campbell-Savours

They are all closing down.

Mr. Browne

In short, new and small businesses are the source of our technological revolution. These types of companies must be made the darlings of the nation if we are to achieve that technological revolution. The Government have already done something for new and small businesses, but they have not done nearly enough. Although I was very pleased, on this specific subject, to see a commitment in the Gracious Speech, it will need a lot more thought and effort to create adequate incentives. I should like to suggest some incentives.

First, on taxation, I believe that there must be major changes and reductions in terms of capital transfer tax to encourage entrepreneurs to take on the risk of starting their own businesses. One has only to consider the risk. When an entrepreneur invests money in a lathe or a machine of any sort with a probable pay-back of seven years to 10 years, he has all the problems of running his business, such as VAT, industrial relations and local council planning permission, plus his competitors, production problems and everything else, and he may have a return of less than 10 per cent. before tax. On the other hand, he could put that same money into the gilt-edged market and get 14 per cent. with 24-hour liquidity. We must give the entrepreneur an incentive to invest his time and life in productive technological business.

We must abolish capital gains tax. It yields between 1 per cent. and 1¼ per cent. of the revenue. But I wonder how much it costs in terms of management and individual time wasted in calculating and trying to avoid it. It is one of the most cost-ineffective taxes that we have. It is a positive disincentive not only to the entrepreneur but to the man, woman or institution going along with him as venture capital investors.

Mr. Pawsey

During the course of my hon. Friend's remarks, will he touch upon the argument that has been advanced by Labour Members to the effect that we should be introducing a wealth tax? Does he feel that the introduction of such a tax would erode even further the necessary incentives that are required by entrepreneurs?

Mr. Browne

That is my feeling. I agree strongly with my hon. Friend. It would have a major and dramatic effect. It would result in British entrepreneurs leaving the United Kingdom to set up businesses abroad. As a result, we would face even more competition, as those who set up abroad would be exporting their products to Britain, products that we would no longer be producing ourselves.

Mr. Walter Harrison (Wakefield)

There is no wealth left to take abroad.

Mr. Browne

That is true. We are certainly paying for that today. I hope later to illustrate how we can overcome that problem.

I believe in more tax incentives. There must be more tax incentives for employees so that they are encouraged to buy shares in the companies in which they work. That would give them a long-term interest in the long-term viability of the company. It would not be mere profit participation, which can be a short-term interest. It should give employees a fiscal advantage over others to invest in shares in the companies in which they work. I include all employees from top to bottom.

Tax incentives should be given to every man, woman and child to invest in British business as is done in France for French businesses. The first £5,000 or £1,000, for example—whatever is considered advisable—of dividend income or capital gains from equity investment in British companies should be tax-free.

There must be major revision of the present employment protection legislation so that it gives legitimate protection but encourages rather than discourages employment.

The concept of the enterprise zones must be increased in scope. Now, we have relatively small pilot enterprise schemes. They are so small that not much enterprise is being attracted to them. They will end up as failed pilot schemes. If we thought big, if we thought Texan or if we had only one large enterprise zone as a pilot scheme, we would be able to attract business men to it. It would then be a real test upon which to base decisions on extension of the scheme.

I should like to see legislation introduced to prevent the wilful suppression of technological advance. For example, if the nickel cadmium battery had not been suppressed by big business, it is probable that we would all be driving electrically powered cars. Think of that in terms of reduced oil costs and reduced pollution. The suppression of technological advance is one of the wrongs that takes place in the capitalist world. We should take a lead in combating it. Maybe we should make it a criminal offence wilfully to suppress real technological advance or even to market foreign imported products that have resulted from it.

Another example is the electric light bulb. Why do we spend so much money renewing electric light bulbs? It is quite easy to produce a long-lasting bulb. Those aspects are an outrage when one considers the Brandt report, OECD problems, our oil deficit and so on. We should take the initiative.

Now, may I turn to the vital need to improve the flow of capital to new and small businesses, particularly to new businesses? There is much capital available but some say that there is not all that much demand for it. I am suspicious of that statement. First, we must consider whether we are offering the right sort of capital in terms of high risk equity as opposed to loan capital or even low risk equity capital. Secondly, are we are in a position to identify accurately the demand for that capital? The average man who starts a small business in his garage with an idea and with his wife and himself working for the company is not that sophisticated when it comes to approaching big institutions, the headquarters of a major bank or a major national organisation. But he does know his local bank manager. Thirdly, we have to find and use the best available conduit through which to channel the capital to the places of real need.

There is much loan capital available, some very favourably, such as the start-up or business development loans now being provided by the major clearing banks. There is also quite a bit of low-risk equity capital available. However, there is not much high-risk equity capital available. There are very few wealthy capitalists left in the country. There is not much wealth here, as has just been said by the right hon. Member for Wakefield (Mr. Harrison). That is the problem. We just do not have much of that sort of capital available. I believe that we must create it again, and in pretty quick time.

It is hopeless using bureaucrats to identify demand. They have the wrong mentality for venture capital work. Finally, it is also necessary for the Government to make high risk equity more attractive both to the giver, or investor, and to the taker, the entrepreneur. We must offer much more liquidity in the equity shareholdings of companies by allowing companies to purchase their own shares in terms of Treasury stock, as they do in the United States.

Having done all the above, I believe that there is then an absolutely vital role for the commercial or clearing banks to play. Here I must declare an interest. I am a banker. It may be fair to criticise the clearing banks and say that they should be less cautious in their lending, but in drawing comparisons between Germany or Japan and this country one must be careful to remember the totally different business environments and types of economies.

I am utterly opposed to a windfall profits tax on the banks. First, it would reduce the banks' international competitiveness. Secondly, that money would be squandered by the Government. We must make use of the thousands of bank branch managers that we have in the commercial banking system throughout the country. They are better placed than most people to identify the demand for venture capital. The Government therefore should approach the commercial or clearing banks and tell them that in lieu of a windfall profits tax they should each make available about £100 million of their shareholders' capital for high risk capital investment on behalf of their own shareholders. Maybe the Government should be prepared to match those investments pound for pound, making approximately £800 million to £1 billion of high risk venture capital available for investment in British entrepreneurs.

I realise that the normal branch manager of a commercial bank is not the ideal assessor of venture capital investments or risk. It is not his normal business. But he does have access to the entrepreneurs, who are so difficult to identify by other means. I believe that on the whole such venture capital investments would be very successful. Small business, and particularly new business, would benefit, as would the shareholders of the banks and our nation—the taxpayers.

My one serious point of disagreement with the Government's present policy concerns interest rates, not because of pressure from people who are worried about them or because I dislike high interest rates as such. I believe that interest rates have an important role and that they should reflect a real value for money. Therefore, today they should be high.

Interest rates of 2 per cent. or 3 per cent. above the rate of inflation create a real value for money and are, therefore, very anti-inflationary, particularly if they are combined with a free economy and cuts in Government spending. On the other hand, rates that are high but not higher than inflation, plus a non-free economy and no cuts in Government expenditure, are highly inflationary. The labour market cartel has meant that wages have skyrocketed, and a large part of the wage increases has been financed by borrowing from the banks.

Interest rates would have risen, but the Government interfered, directly or through the Bank of England, to the tune of about £3 billion—again, highly inflationary—to bring them down to their present levels. So industry is now being badly hurt, but little is being gained.

With high interest rates, companies are not financing in the long-term market and thereby helping to absorb excess money supply. They are borrowing at banks, and that is itself highly inflationary because that borrowing is being partly financed by the Bank of England and also by the massive overseas deposits of foreign placers of domestic sterling. All of this is highly inflationary.

Therefore, I believe that interest rates must come down, though not in one great jump but gradually. If they came down in one great jump, we should destroy the Government's ability to fund in the gilt-edged market. Worse than that, people would speculate against sterling by selling it in the forward market. They would cover in the Euro sterling market, driving up Euro sterling rates, so there would follow a flow of funds from domestic sterling into the Euro sterling market, causing domestic sterling interest rates to rise. Minimum lending rate might then be at 12 per cent., but the domestic sterling maturities might be in the high teens. That is why I strongly believe that interest rates must come down, but gradually. I also believe that we should charge negative interest to the foreign placers of domestic sterling deposits.

I was very glad to hear the Government's firm commitment on defence. Defence is the prime duty of any Government. It would have a disastrous effect on our allies if we started cutting back on defence. However, the Government have a heightened responsibility to see that the increased spending on defence goes on equipment and weapons and that we take a tight view of administrative cost increases, which should be pruned.

I was sorry not to hear that the rating system was to be replaced. Rates are a most undemocratic tax. All people vote, but only some pay the rates. They are a tax on property, with no relation to ability to pay. What is more, they are a tax on property improvement. I believe that education must be taken out of the domestic rate charge and that a new replacement tax should be based on a poll reflecting the numbers on the electoral roll. The rating system as it presently stands should be abolished, and as a matter of urgency.

I was sorry that there was no reference in the Queen's Speech to the water authorities and our intentions to curtail what I believe to be some gross abuses of their present monopoly.

Finally, I urge my right hon. Friend the Prime Minister to hold on to her path. I also urge my right hon. Friends in the Cabinet to give her strong and public support. We are late—much time and many key opportunities have been wasted—but I believe that, with real strong support and leadership by the Cabinet to inspire real effort, monetarism will work and that we shall achieve the technological revolution that alone can give us the standard of living we have now grown to expect.

9.56 pm

Mr. Jack Dormand (Easington)

I hope that the hon. Member for Winchester (Mr. Browne) will forgive me if I do not take up his remarks. I was not able to be present for the whole of his speech. At one point I detected some criticism of the Government. If right hon. and hon. Members on the Government Benches are to be true to themselves within the next five days, they will have some strong criticisms at least of certain parts of the Government's policy. I may be hoping for too much.

In view of the short time at my disposal, I should like to say a few words about the astonishing lack of any reference in the Queen's Speech to regional policy. I come from the Northern region. That region has had the highest rate of unemployment in the whole country for as long as we can remember.

Mr. Campbell-Savours

For 45 years.

Mr. Dormand

My hon. Friend says that this has been the situation for 45 years. Unemployment has increased in the last two years, since the Government came to power. Many people in the Northern region feel that there is active discrimination against the region, which has an unemployment total of 165,000.

A number of my northern colleagues and I have made frequent references to the imperative need for a northern development agency. We do not expect miracles from a northern development agency. We say, however, that the results of such co-ordinated effort backed by increased Government aid would have a beneficial effect on the employment situation in the North. To avoid any misunderstanding, let me say that I am thinking in terms of an agency modelled on the Scottish Development Agency and the Welsh Development Agency.

It is significant that the Government have not abolished those two agencies. One is entitled to feel that the fact that the Government have allowed them to remain—in spite of all the things that they have abolished—means that the agencies have a responsible role in those two countries. If the need exists in those areas, there is an even greater need in the Northern region.

Mr. Michael McGuire

It was promised in our manifesto.

Mr. Dormand

As my hon. Friend says, it was promised in our manifesto. Provided we get the necessary support, I believe that such an agency could have a beneficial effect on the region.

The lack of any reference to regional policy is a fundamental change. The new regional policy introduced with such a fanfare last year by the Secretary of State for Industry, which was supposed to concentrate resources where they were most needed, has not worked. Unemployment has increased in the region. The hon. and learned Member for Cleveland and Whitby (Mr. Brittan), sitting on the Government Front Bench, dissents. He knows from his own constituency that this is what has happened.

The Queen's Speech contains the sentence: Legislation will also be introduced to amend the financial arrangements for the National Enterprise Board".

I remind the House that we have a regional National Enterprise Board. If there is any discrimination against that body and any reduction of resources made available, this would be catastrophic for the Northern region.

Debate adjourned—[Mr. Newton.]

Debate to be resumed tomorrow.