HC Deb 26 November 1980 vol 994 cc439-522
Mr. Speaker

I have selected the amendment in the name of the Leader of the Opposition and his colleagues.

3.35 pm
Mr. Eric G. Varley (Chesterfield)

I beg to move, at the end of the Question, to add: but humbly regret that the already shameful levels of unemployment will be raised even further as a result of the measures announced by the Chancellor of the Exchequer on 24 November".

Yesterday the unemployment figures for November were published. They revealed that on 13 November the number of men and women and boys and girls in the dole queue totalled a devastating 2,162,874. When Labour left office, the number out of work—far too many by any reckoning—was 1,340,600. Therefore, during the 560 days since the Government came into office each day an average of 1,468 people have been added to the dole queue. That is the real dole queue and not the Saatchi and Saatchi dole queue. That is the unique achievement of the Secretary of State for Employment. That is his only achievement. Putting people out of work has become the record on which the right hon. Gentleman has to stand. It is not an achievement that belongs solely to him; it is the achievement as well of the Chancellor of the Exchequer, whose disastrous flounderings on Monday will inevitably add to the numbers out of work.

I was expecting the right hon. and learned Gentleman to be present in the Chamber this afternoon. It seems that when he made his statement on Monday he spoke in a way that was seriously misleading. He gave the impression that employers' national insurance contribution rates would not be raised. He said: Having regard, however, to the financial pressures on industry and the way in which the employer's share has grown in recent years, employers' contribution rates—including the surcharge—will remain unchanged."—[Official Report, 24 November 1980; Vol. 994, c. 316.]

It now appears that employers will have to face an increase of up to £386 million in the annual cost of their national insurance contributions. We have learnt this not because the Chancellor has decided to be straightforward enough to correct his misleading original statement and to apologise for it on the Floor of the House, where the misleading statement was made. Once again, the Government have resorted to their familiar device of a written answer to a planted question. In this instance it was a written answer from the Secretary of State for Social Services, who has shown the courtesy to the House of being present in the Chamber this afternoon.

The Government's practice of making major announcements by written answer has become intolerable to the House. We have had many examples in the past few weeks, including the 6 per cent. public sector pay limit and the council house rent increases. We now have a huge tax increase on business and industry, which, among other things, cannot help affecting employment levels, made by what has become the Government's characteristic subterfuge.

The Chief Secretary to the Treasury has disappeared from the Front Bench. I listened to him today in a radio interview, when he admitted that the announcement should not have been made in the way that the Chancellor of the Exchequer made it. It is not the Chief Secretary who has misled the House but the Chancellor. He could at least have shown the House the courtesy of being here. Had he done so, I would have asked him to apologise to the House for gravely misleading it. As the right hon. and learned Gentleman is not here, I shall address my remark to the Prime Minister. When will she get a grip on her Government so that the House of Commons is not misused and misled, as it has been over the past few weeks?

The Secretary of State for Employment has the unenviable record of 2,162,864 unemployed. The number of people kept off the unemployment register by the measures that he announced will be far outweighed by those who will be added to it by the Chancellor's frantic meddling with the economy.

Over the whole miserable mess hovers St. Francis. We all remember the words presented to the nation as a benediction by the Prime Minister from the steps of No. 10 Downing Street on 4 May last year. She proclaimed, in the words of St. Francis: Where there is despair may we bring hope. We now know that those fine but misleading words were put into the Prime Minister's head by a third-rate playwright angling for a knighthood. However, even Sir Ronald Millar, let alone St. Francis, could not have imagined that within 18 months that messenger of hope would be cutting the pensions of the old in violation of a solemn pledge and reducing the benefits of the unemployed whom she herself has thrown out of work.

Mr. Andrew Faulds (Warley, East)

Will my right hon. Friend give way?

Mr. Varley

I give way with some trepidation to my hon. Friend.

Mr. Faulds

I have certain sensitivities on such matters. May I assure my right hon. Friend, as one who probably knows Sir Ronald Millar's work rather better than most of my colleagues, that he is not a third-rate dramatist? He is a sixth-rate dramatist.

Mr. Varley

I feared that I was about to receive a thunderbolt from my hon. Friend. However, I thank him for that intervention,

Just before last year's general election, the Secretary of State for Employment confided to a friendly journalist his plans for reducing unemployment. He said: I don't want to raise false expectations but I'm confident that we can do better than what is happening at the moment.

The trusting interviewer was quite impressed and begged the Secretary of State for further details, with this additional question: How would you work towards the reduction? The confident reply was: Well, we believe it has to come basically through a stimulation of the economy and a better climate for business and industry.

What a deception those brave words turned out to be! Hardly a business in the country has not suffered as a result of the Government's policies. Many firms have been thrown out of business and into bankruptcy. Practically every industrial and economic decision taken by the Government has been an attack on jobs and investment

Last month the Tory newspaper The Daily Telegraph published a devastating article written by Mr. Graham Turner. He interviewed the chairmen of three of our major companies—GKN, Courtaulds and John Brown. Mr. Christopher Hogg, of Courtaulds, lamented: We are having an appalling time, it's almost unbelievably rough. Since I took over, not much more than a year ago, Courtaulds have lost 22,000 jobs and I don't know where it's going to end. Mr. John Mayhew-Sanders, of John Brown, felt just as despondent. He said: As I see it, companies like ours are going to find themselves with an appalling loss of business and major contraction if things go on the way they are. Mr. Trevor Holdsworth, of GKN, felt that the situation was bleak. He said: The precipice came early this year and everything went down at once. We are surrounded wih customers making losses. We have never seen anything like it before. Mr. Hogg, of Courtaulds, summed up the position in these words: The Government don't seem to have given any thought to the survival level of British industry.

It is no wonder that it is rumoured that at next year's Confederation of British Industry conference Sir Terence Beckett is planning to organise a mass distribution of badges stating "Don't blame me; I voted Labour."

When we debate the mounting toll of unemployment, the Secretary of State and other Ministers have taken to claiming that it is not a matter that they can put right and that the difficulties in the economy and unemployment are caused by the world recession. However, they cannot conceal the fact that the slump in Britain is more serious than in any comparable country. Throughout the developed world, Governments are facing recession, inflation, or both, but those conditions are no excuse for the disastrous policies of this Government—far from it. They strengthen the indictment against the Government.

If the world economy and the national economy were buoyant, the Government might at some stage have had some justification for pursuing an economic experiment that, even in the most favourable circumstances, was a high-risk gamble. However, to pursue such an experiment when the odds against it were so high, when we had so little to stake and when the Government were staking all that they had was irresponsible to the point of folly. It is not a time for political voodoo, accompanied by incantations from the works of Professor Milton Friedman. It is time for the Government to act to soften at home the hazardous conditions overseas. However, they are pursuing policies that make a bleak situation devastatingly worse.

Unemployment has now reached levels not seen in Britain since the 1930s. Practically every commentator predicts that the total could reach 3 million in 12 months. No doubt the Treasury and the Department of Employment have secret forecasts that they dare not reveal to the House. The figure does not take into account those who are not registered as unemployed but who want and need work. The appalling misery and waste that unemployment imposes is an astronomical burden on society.

The cost of existing unemployment—not that which we shall have in the next few months, through the loss of production and services to the economy—amounts to a massive £10 billion. The cost to the Exchequer for additional expenditure on social security benefits and the loss of national insurance payments and tax revenue adds a further £6,000 million in a full year. On top of that there is £10 billion in lost production and services. That is the enormous bill that the nation has to pay to indulge in the Prime Minister's dogmatic obsessions.

There is also a cost to individuals and families. For a married man who has two children at school and who is thrown out of work, the cost to society can be as high as £6,000 a year. In addition, unemployment is sheer psychological misery for that man and his family. This Government of penny-pinching Gradgrinds cut that man's unemployment benefit last Monday by £2.80. Not content with that, on the same clay the Chancellor of the Exchequer announced that he would cut it again next year by up to 50p.

Very soon we shall be getting to the stage, as was witnessed in the 1930s, when it will be possible to recognise the children of the long-term unemployed by their visible poverty compared with the children whose more fortunate fathers have been able to hang on to their jobs.

Last Friday the Secretary of State for Employment announced with a great flourish his employment measures to be funded by an extra £250 million. On behalf of the Opposition, I welcome the extension of the youth opportunities programme—a scheme that was started under the Labour Government. But the package as a whole fell far short of what is required. Of course, there is no substitute for sound economic measures to create permanent jobs, but the measures announced by the Secretary of State in present circumstances are nowhere near what is required to meet the situation.

The new community enterprise programme is woefully inadequate and will not assist the long-term unemployed, whose numbers will soon reach 500,000. That new scheme plans to provide only 25,000 places by next March. On the face of it, given the growing numbers of those who have been out of work for a year or more, it is a dismal scheme.

Dr. Keith Hampson (Ripon)

Surely, the right hon. Gentleman forgets that under his right hon. Friend the Leader of the Opposition youth unemployment was 50 per cent. higher than it is now. It was 165,000, and under his right hon. Friend the Member for Barrow-in-Furness (Mr. Booth) it increased to well over 200.000.

Mr. Varley

I said that unemployment under the Labour Government was too high. The fact is that for every month in the 12 months prior to the general election unemployment fell. There were more people in work when the Labour Government left office than when they started. Under this Government, 800,000 people have been added to the unemployment register in record time. The measures announced by the Secretary of State fall short of what is required. Much more could have been done. I will give way to the hon. Member for Cambridge (Mr. Rhodes James) on this point, if he wishes to intervene. Apparently he does not wish to do so. Perhaps the Secretary of State for Industry wants to intervene.

The Secretary of State for Industry (Sir Keith Joseph)

I was observing to my neighbour that the right hon. Gentleman had conveniently changed the subject. It is true that more people were in work when the Labour Government left office than when they came in, but there were nearly double as many unemployed when they left office as when they came in.

Mr. Varley

The right hon. Gentleman has been the prime architect in putting another 800,000 people on the unemployment register.

Mr. Frank Haynes (Ashfield)

What does the Secretary of State know about poverty? He has not got a clue.

Mr. Varley

The Secretary of State for Employment could have done much more. We understand his difficulties in getting extra resources out of the Treasury, but it is acknowledged by those who are administering the community industry scheme, for example, that they could cope with more places than the additional places allowed for by the Secretary of State.

The job release scheme, which has already taken more than 100,000 off the register, could have been widened to allow older men and women to opt for early retirement.

I understand that when he addresses the House later, the Secretary of State will expand on the words in the Queen's Speech: Proposals will be put before you for improving industrial training in the longer term and for supplying those skills which will be needed when industry moves out of the current recession. My first reaction is that the climate for embarking on new training could not be worse. A whole generation of young people is being denied apprenticeships. Boys and girls with the aptitude for potential skills will never have the chance of having them developed. They are gone for ever. They will never get apprenticeships. The numbers of apprentices throughout the country have decreased by about 10 per cent. over the past 12 months. Hundreds of apprentices have been declared redundant this year. I have received—I suspect that other hon. Members have also received—pitiful letters from boys and their parents whose joy at having an apprenticeship has been shattered and snatched away from them.

I assure the Secretary of State for Employment that if the proposals envisaged in the Queen's Speech are constructive and require legislation we shall give them a speedy passage through the House. But any proposals that the right hon. Gentleman brings forward will have to be judged by the resources that are made available by the Government for training for industry.

On Friday the Secretary of State avoided telling us what he should have told us, because he certainly knew that, with his ready agreement, the Chancellor of the Exchequer had already taken steps to render that total package completely ineffective. The increases in taxation and the cuts in public expenditure outlined by the Chancellor on Monday have "at a stroke" taken away any credit that the Secretary of State may have claimed for himself.

Putting forward policies on one day to nullify policies put forward on the previous day has become the hallmark of this very confused Government. First, they dismantle major components of regional policy by getting rid of assistance grants and sacrificing hundreds of thousands of jobs all over the country. They tell us that they are doing that to make financial savings that are less than the cost to the community of the unemployment being caused by the savings. The Government set up ramshackle enterprise zones that are expensive in lost tax revenue but will be considered a howling success if, between them, they create 1,000 jobs a year.

The Government provoked a strike in the steel industry and forced it into virtual bankruptcy by the preposterous cash limits imposed to fiddle the public sector borrowing requirement. Then, to salvage the situation that he had created, the Secretary of State for Industry handed the British Steel Corporation a blank cheque, which, when cashed, was added to the public sector borrowing requirement.

Next, the Chancellor of the Exchequer came along and, to compensate the public sector borrowing requirement for the extra money provided for the British Steel Corporation, increased taxes and cut expenditure in a way that will increase unemployment and consequently increase the PSBR again. It is crazy economics, but in the Treasury, I suppose, it is known as prudent bookkeeping.

Let us consider the National Enterprise Board—a body that once had the chance of creating jobs and doing some of the work that the Government now claim they want to do. One of the legislative centre-pieces of the last Session of Parliament was an Industry Act, which reduced the borrowing limits of the NEB, together with further measures for the Scottish and Welsh Development Agencies. This week the Secretary of State responsible for that statute introduced a new Industry Bill, which will raise the borrowing limits of the NEB together with those of the Scottish and Welsh Development Agencies. The NEB was stripped of most of its powers and all its effective board members were unceremoniously got rid of by the Secretary of State. The shell of the NEB is now to be used to promote the expansion of Inmos—a company whose formation under the Labour Government was greeted with howls of derision by the very Secretary of State who now uses it as an economic and political pawn, having campaigned in office on the principle of non-interference with industry.

Was it not ironic that in the censure debate in July the only plums that the Prime Minister could pull out were further public expenditure allowing the Inmos project at last to go ahead and the giving of further assistance to the Dunlop company?

Another Act that was solemnly passed in the last Session was intended to bring about the sale of shares in British Airways. Now, we are told that no shares will be sold for a long time, because the Government's policies have forced British Airways into financial difficulties that render it impractical to "privatise" the organisation.

The Prime Minister exhorts us to buy British. The Secretary of State for Industry promptly contradicts her publicly and acts on his own policy, against that of the Prime Minister, by this week introducing a Bill that infringes the monopoly of the publicly owned telecommunications industry, which is by far the country's largest industrial investor. This wanton piece of legislation—as I am sure the right hon. Gentleman has been told—will open the way to damaging imports, which will jeopardise jobs in Britain.

All these demented contradictions of Government policy—sometimes one Minister contradicting another and sometimes one Minister contradicting himself—are baffling enough, but the biggest contradiction of all is that no one on the Government Front Bench denies that the Government's policies during the past 18 months have devastated industry and massively increased unemployment. We are told that all this was in the sacred cause of reducing the PSBR, so bringing economic salvation to the country. However, this week the Chancellor of the Exchequer admitted to the House that his policies had failed. On Monday he confessed that by his standards the PSBR was out of control. Therefore, all that misery and those additional 800,000 unemployed have been for nothing.

Now, the Chancellor has another magic formula. In order to bring the PSBR back under control, he has increased taxation and cut expenditure in a way that will increase unemployment even further. That will mean that the PSBR will spiral out of control again. Either the Chancellor will have to think of something else or, even more likely, we shall have to think of a new Chancellor of the Exchequer. I am told that all the clever money is on the Secretary of State for Trade, who will reply to the debate tonight, although I do not know that that will do the country much good.

The scenario for the coming Session of Parliament is an uneasy mixture of farce and tragedy. The farce stems from the Government's clumsy and frantic efforts to put right their own unnecessary mistakes; the tragedy comes from the human misery caused by even higher unemployment. There are 2,162.874 reasons why our amendment should be carried tonight, but the Government will use their majority to vote it down. That majority consists of Tory Members sitting for marginal seats that they acquired from Labour at the general election. Not one of those Tory Members would be here if, in his election campaign, he had hinted to the voters whom he deceived that his election to Parliament would bring about double inflation, countless bankruptcies, intolerable interest rates, cuts in pensions and social benefits and the largest dole queues for half a century.

That temporary majority will do its grisly work tonight, but the Opposition will speak for the people. We shall continue to fight for the people until the people themselves are given the chance to cast their votes.

4.4 pm

The Secretary of State for Employment (Mr. James Prior)

The right hon. Member for Chesterfield (Mr. Varley) made a characteristic speech. I doubt whether anyone in the country will be any the wiser about what the Opposition would do, unless it is to do exactly as they did last time, in which case the level of unemployment would continue to rise and, as far as I can see, no attempts would be made to reduce it.

I should like to begin by referring to the national insurance surcharge and the right hon. Gentleman's comments upon it. The situation is perfectly plain. I am grateful to the Opposition for drawing it to our attention. If they have a little patience, they will see that they completely destroy one of the main purposes of their amendment. I should like to state exactly what has happened.

Since the national insurance surcharge was introduced in 1977, it has been tied in with national insurance contributions and with the upper earnings limit for earnings-related contributions. During that time the upper earnings limit has increased from £95 in 1976 to £200 in 1981. The statutes provide that the upper earnings limit shall be set at between six-and-a-half and seven-and-a-half times the single person's pension, and the new limit to operate from next April will be £200, which is slightly less than seven-and-a-half times the single person's pension rate. In effect, this does no more than keep the take from surcharge broadly constant in real terms.

In this matter we have followed the same procedures as those used by the Opposition when they were in office. After announcing the changes in the earnings limit and the employers' contributions, my right hon. and learned Friend the Chancellor of the Exchequer gave estimates for the total impact and mentioned the self-employed. He then said: Having regard, however, to the financial pressures on industry and the way in which the employer's share has grown in recent years, employers' contribution rates—including the surcharge—will remain unchanged."—[Official Report, 24 November 1980; Vol. 994, col. 316.]

That is perfectly correct. Employers' contribution rates and the rate of the surcharge are unchanged. We are continuing the practice of adjusting the range of earnings to which those rates apply in line with inflation.

However, it has been interesting to look at the history of this matter. The surcharge of 2 per cent. was introduced in the Budget in April 1977. At that time, 1.4 million people were unemployed. In fact, the number of unemployed had gone up from 1.28 million the previous April to 1.4 million. Therefore, the Opposition's answer when in Government was to slap on industry a surcharge of 2 per cent., which presumably they thought would have some effect on their borrowing requirement, otherwise why did they do it? Here they are today trying to argue in their amendment that the Chancellor's measures announced on Monday were designed to create more unemployment. What did they do in 1978, when unemployment was still rising?—[HON. MEMBERS: "It was not."] Yes, it was. By 1 April 1978, unemployment had gone up to 1.45 million. I have checked the figures carefully.

In the autumn of that year the Labour Government put up the surcharge from 2 per cent. to 3½ per cent. But now the Opposition are trying to argue that the measures announced by the Chancellor on Monday are likely to cause more unemployment. That is precisely what they did twice in the course of two years.

Mr. Denis Healey (Leeds, East)

The right hon. Gentleman has just made clear that the second increase in the surcharge took place in the autumn of 1978, when, he knows, unemployment was falling. According to the figures published by the Government a fortnight ago, employment rose by 350,000 in the last three years in which the Labour Party was in power, and unemployment fell by 100,000 in the last two years. The burden of our complaint against the Chancellor on Monday was that he misled the House. There is no question but that he did, because many Conservative Members have said that they had no idea of the effect of raising the threshold.

When my hon. Friend the Member for Workington (Mr. Campbell-Savours) asked the Chancellor what was the net effect of the mini-Budget on manufacturing costs, the Chancellor said that that sort of question raised many implications. Indeed it does. But the most important feature is the reduction in MLR. It is a precise, visible and effective reduction of the costs to manufacturing industry. The CBI has made it clear that the increase in the threshold for the national insurance contributions has reduced the effect of the MLR cut by more than 50 per cent., and the rest of the cuts is nullified by the increase for sickness benefits. Will the right hon. Gentleman follow the example of the Chief Secretary to the Treasury and apologise to the House?

Mr. Prior

If I were the right hon. Gentleman, I would keep extremely quiet about the national insurance surcharge. When he was Chancellor of the Exchequer, he imposed a national insurance surcharge of 3½ per cent.—at a time when unemployment doubled. I do not think that he has any case for saying what he has said this afternoon. The procedure followed was precisely the same procedure as has been followed year after year, and the right hon. Gentleman knows it.

Mr.Bob Cryer (Keighley)

Will the right hon. Gentleman give way?

Mr. Prior

No; I want to get on with my speech.

Mr. Cryer

On a point of order, Mr. Speaker. It is clear that the Secretary of State has not answered the serious point of order—

Mr. Speaker

Order. A point of order has not been raised with me. A question was raised from the Opposition Front Bench, but it was not a point of order. I doubt very much whether there is a point of order for me on the content of a Minister's reply.

Mr. Cryer

On a point of order, Mr. Speaker. There must surely be some sort of remedy in your hands if a Minister of the Crown comes to this House and clearly attempts to cheat—[Interruption.]

Mr. Speaker

Order. That is a matter for argument between both sides of the House. I do not like the word "cheat". The English language is very rich, and there are many other words that are parliamentary.

Mr. Healey

On a point of order, Mr. Speaker. You have invited us to try to keep within the rules of order in finding a suitable parliamentary expression. The Chief Secretary to the Treasury made clear in a lunch-time broadcast today that the Chancellor of the Exchequer involuntarily misled the House. Would it not be decent for the Secretary of State for Employment to make a similar apology to the House?

Mr. Prior

In no way have I or the Chancellor of the Exchequer misled the House. There is nothing for this side of the House to apologise for, but I thought that we should deal with that problem first and get it out of the way. I am sorry if I have upset the right hon. Member for Leeds, East (Mr. Healey) by reminding him about the national insurance surcharge. I understand that he does not want to be reminded of its effect on unemployment when he was Chancellor of the Exchequer, but he brought up the question and so he must face up to it.

When I hear the right hon. Member for Chesterfield talking about the number of people unemployed, I must remind him and the House that, serious though the unemployment position is, unemployment did not start in May 1979. The right hon. Gentleman talks about 2,100,000 people who were mistaken in 1979 and who will not make the same mistake again, but may I remind him that there were 1.4 million unemployed under his Government? For any Labour Member to try to make out that unemployment started in May 1979 and that our policies resulted in 2 million unemployed is a total travesty of the facts.

The House knows that ever since the 1950s, when our productivity was higher than that of almost any other country in Western Europe, productivity has declined, and we now have the lowest productivity of any industrialised country of Western Europe.

Those are some of the reasons why unemployment has been higher in each successive economic cycle in the last 20 years. The remedies that were tried in the past have not worked. We can see now perhaps more clearly that the problems are deep-seated, and they cannot be put right by instant change. Long-term problems call for long-term solutions. That is the only thing that will get this country out of its difficulties.

With regard to employment, the most successful countries are those that have the best control of inflation. There is no doubt about that. We must not forget that there was a sharply rising trend of inflation all through the early months of 1979. Part of the reason for that was—

Mr.AlecJones (Rhondda)


Mr. Prior

Part of the reason for that was the inevitable increases in inflation that followed the ending of pay policy, and the problems that price control was creating—pent-up price controls—during the early months of that year, leading to a general election, helped to lead to an increase in the rate of inflation. Labour Members know that that was happening.

Mr. Martin J. O'Neill (Clackmannan and East Stirlingshire) rose—

Mr. Prior

Lower inflation leads to lower interest rates and, therefore, to the welcome cut in MLR that was announced by the Chancellor on Monday. In addition, borrowing by the Government must be kept down if the private sector is to expand and flourish.

However, in a difficult transitional stage, it is right to seek to alleviate hardship and ease that change wherever possible. Therefore, much of the £2.3 billion for the nationalised industries is designed for that purpose. British Shipbuilders has had to shed 17,500 jobs since it came into operation, and in the last 18 months British Steel has shed 46,000 jobs. In the private sector, we have also been trying to help as best we can with the temporary short-time working compensation scheme. In the textile industry alone, 150,000 workers have been helped in that way. All that makes nonsense of the claim that we are deliberately engineering unemployment.

Mr. Cryer

Will the right hon. Gentleman give way?

Mr. Prior

No. I shall not give way to the hon. Gentleman, because he is inclined to cheat.

Mr. Speaker

Order. The right hon. Gentleman is reasonably good at English, and he will find another remark.

Mr. Prior

I should not have said that; I apologise to the hon. Gentleman.

The proof that we care is contained in the statement that I made on behalf of my right hon. Friends and the Government last Friday. At that time the right hon. Member for Chesterfield welcomed the measures in it. He was not so generous this afternoon.

We are seeking to improve the system of work preparation for young people and the vocational education and training for those in work. Our immediate aim is to help young people into schemes from which they can derive real benefit. This means an increase of 70 per cent. over the number of places this year and a total of 450,000 places. We want to improve these young people's chances in a permanent manner. This is why particular emphasis will be placed on good-quality work experience schemes, on a major expansion of work preparation courses and on training workshops, and, of course, taking advantage wherever possible of spare training capacity in industry and commerce.

Almost 200,000 more opportunities will be needed. These cannot just be conjured up. The YOP is a collaborative programme. At its heart are its sponsors. We need many more employers to come forward with offers of help, particularly large organisations. It costs the sponsors nothing but commitment, and the rewards will be there.

I welcome the announcement made yesterday by the CBI that it is setting up a new special programmes unit under the chairmanship of my noble Friend Lord Carr. This will actively encourage companies to increase the number of YOP places which they offer and to develop and improve the content of what is provided. This is a most timely and valuable initiative which I hope the whole House will join in supporting.

Mr. Jim Craigen (Glasgow, Maryhill)

I think I am right in saying that nationally about one in four of the places in the YOP are provided by either the local authorities or public bodies. What confidence does the Secretary of State have that his targets will be met at a time when his colleagues are busy trying to contract the public sector generally?

Mr. Prior

I think that the majority of new places will be provided by industry, but the MSC recognises that it has a mammoth task in providing the number of places, although it is confident that it will do so. Not only are we confident that we shall provide the number of places. Our aim is significantly to improve the quality of the training aspect of the YOP. The amount of off-the-job training has increased. Seventeen per cent. of work experience trainees received off-the-job training in 1978–79. Last year it was 38 per cent. It is currently about 40 per cent. That is some achievement, testifying to the hard work and the fruitful collaboration of the MSC, the sponsors and the education service.

Mr. David Alton (Liverpool, Edge Hill)

I accept that the MSC and the YOP do a very good job. However, does not the Minister realise that many young people believe that these programmes are simply palliatives? Is he aware that, for instance, at the Leece Street employment office in Liverpool, which I visited the week before last, 10,000 people under the age of 19 were registered as unemployed and only 26 vacancies had been notified as available by the Liverpool careers office?

Mr. Prior

That is why we are expanding the YOP to the extent that young people will have an opportunity of staying in a programme longer and of changing from one programme to another. It is why this will cover 16-yearolds and 17-year-olds, and some 18-year-olds, and it is why we have also brought 18-year-olds more within the range of the community enterprise programme than was perhaps possible under the special temporary employment programme. I certainly do not want in any way to minimise the seriousness of the problem, particularly in areas such as Liverpool.

I want to comment on the community enterprise programme and the long-term unemployed. I recognise very well that the problems of the long-term unemployed and the problems of old people who are unemployed are, if anything, more serious, certainly on a personal basis, than perhaps the problems of the young. Whilst I think that we are doing an enormous amount to help the young, we have to recognise that the only practical way of providing jobs for the long-term unemployed and for the many people aged 40 or 50 with family responsibilities is to provide proper jobs.

Having said that, however, and that being the Government's main aim, I want to say that I believe that the community enterprise programme will generate schemes which will be practically useful both to unemployed people and to their communities. The more that we can encourage voluntary organisations to play a part, now that we have given an indication that the schemes can last for three years, the more I hope that the voluntary organisations will play a part, both in recruiting people to work full time in running their schemes and in giving an opportunity for unemployed people who wish to volunteer—many will and many do—in order to do something to help the community.

I hope that those schemes will be concentrated through the community enterprise programme. This programme will also provide funds for partnerships between the private sector and the voluntary and community bodies in the creation of new enterprises. That is one of the ways in which we can help the long-term unemployed.

Mr. Eric S. Heffer (Liverpool, Walton)

On this very practical point, will the right hon. Gentleman indicate whether the Government are prepared to assist voluntary organisations and so on with help towards obtaining premises? One of the serious problems in areas such as Merseyside is that, although plenty of people are willing to help, they cannot necessarily obtain the premises needed to get schemes off the ground. Will the right hon. Gentleman give an assurance that help will be forthcoming in that direction?

Mr. Prior

That is something that we shall certainly be prepared to examine. I cannot believe that, if we have proper voluntary organisations and the resources available to do that, we shall be held back because we cannot find premises. In places such as Liverpool, I should have thought that there must be premises available at reasonable rents, which should be able to help us. However, certainly we shall look at that problem.

Mr. Derek Foster (Bishop Auckland)

As regards the community enterprise programme, does the right hon. Gentleman realise that by the time he gets his 25,000 places there may well be 500,000 long-term unemployed and that, therefore, his scheme is quite derisory? Is there not now an overwhelming argument for having a scheme that is parallel to the YOP for the long-term unemployed, in which he could incorporate education and training?

Mr. Prior

I am coming to what I wish to say on training, but this is a matter of resources, and the resources that we take for schemes of this nature have to come out of the resources available for proper jobs in industries which are expanding. One has to keep a balance. In many ways, one would like to do more, but in the long run we shall solve the problem of the long-term unemployed only by providing an economy which offers proper jobs. The community enterprise programme can help only on a comparatively small scale to get this right.

The measures that I announced on Friday are the first leg of a move to help with employment combined with practical training.

I come now to what I believe is a vital new step, taken at this very difficult time, to help to lay a sound foundation for the future. I have spoken already of our bad productivity record. I have no doubt that part of the cause is our failure to have adequate training—training for management, for industrial relations, for skills, for work experience and the basics of industrial life, and for a simple understanding of straightforward economic problems.

The solution of some of these problems has been helped by legislation—the 1964 and 1973 Acts—but we lag behind other countries, not so much in legislation but in our attitudes towards training. There is greater awareness of the problem now that there has been an opportunity, perhaps the best opportunity, to do something about it. Clearly, there is a need for some fresh thinking. All the efforts of the past years have not prevented shortages of skill holding us back whenever the economy has got moving. This has been particularly marked in skills associated with the newer technologies. Yet, compared with other countries, few of our young people have the opportunity of systematic training leading to recognised vocational qualifications.

The number of apprenticeships on offer continues to decline, despite the fact that we are subsidising 25,000 apprenticeships this year. Opportunities for retraining or upgrading later in life are still very much the exception rather than the rule. As a nation, we clearly need to put more effort into training and to direct it to better effect. We need to do that now. If we wait until the economic upturn is upon us, it will be too late.

Of course, all is not bad. We have a fine tradition of craftsmanship and of technical education in this country. Despite the need to retain a tight control on public expenditure, we continue to spend about £250 million per annum on training services. Putting Government money into training is not necessarily the whole answer. In addition, we are expanding the youth opportunities programme and our support for unified vocational preparation. The Government wish, as resourses permit, to work towards a point at which every 16 and 17-year-old who is not in education or in a job is assured of vocational preparation lasting, as necessary, up to his or her eighteenth birthday.

Both the CBI and the TUC have emphasised the need to maintain, extend and improve industrial training. We now need a new sense of direction and, to some extent, a new framework for industrial training. The review carried out by the MSC was concerned with future policy as well as with the future of training institutions. I should like to deal first with that point.

In the Government's view, we need a more systematic provision of vocational preparation for 16 and 17-year- olds. The links between training and education need to be improved. The apprenticeship system must be modernised and made more flexible in response to changing demands in industry and changing educational patterns among young people. Wider opportunities need to be provided for the training and retraining of, adults. I have long been conscious of a gap in our training arrangements at technician and related levels as well as in relation to supervisors. If we are to make the best use of new technology in modernising our economy, it is essential to close that gap. To do that, we must try to make training at this level more accessible to as many people as possible.

I am convinced that we need more open opportunities for technical training. By "open" I mean that there should be no formal pre-entry educational qualifications and that such opportunities should be available to people irrespective of whether they can join with others for structured classes at set times in working hours. New technology not only makes this training revolution necessary but can also provide part of the means, such as video and cassette recorders.

One of the windfall benefits of the new technology is that it carries with it the seeds to spread its growth. The training techniques and mechanisms that it provides are remarkable. If we can grasp and harness those, we shall be well on the way to exploiting fully all its potential. That is why I am asking the MSC to come forward with a scheme of distance learning—what I call an "open tech"—in conjunction, of course, with existing technical colleges and colleges of further education.

There is a great willingness among young people and adults to learn new skills, if properly presented. We must tap that potential before it is frustrated or dies. On all these training issues, it is vitally important for us to move forward and to get it right. I am considering with the MSC and in collaboration with those concerned in industry and education how we can make progress. I hope that proposals will be published for consultation as soon as possible in the new year.

For some years we have had an extensive system of industrial training boards. Currently, there are 24 industrial training boards and between them they cover 55 per cent. of all employees in the economy. Hon. Members will know the statutory powers that they have. The review recommended that this system should broadly continue. The consultations have shown widespread support for the continued need for industrial training bodies of some kind. There are, however, strong differences of view between employers as well as between employers and others about whether such arrangements should continue on a statutory basis.

In the Government's view, that question can be decided only sector by sector, having regard to the extent to which they might be met by other means. The MSC proposes to carry out such a review. I am asking the MSC to do so urgently so that the Government may have a sound basis on which to take final decisions next summer about particular boards.

I want to make it clear that the Government's aim will be to extend the area of reliance on voluntary arrangements as far as possible and to keep statutory industrial training boards in a few key sectors where they are likely to be essential to securing the wider training objectives to which I have referred. We shall await the outcome of the review, but we intend to seek powers to abolish an industrial training board where we judge it right to do so, and not only on the basis of an MSC recommendation. On the other hand, I also want to make clear that national priorities may require continuation of a statutory industrial board even where some employers are opposed to that.

Where the need can be met by voluntary arrangements, the cost will clearly fall on the employers concerned. In principle, it seems right to the Government that where an industrial training board continues on a statutory basis the costs should be met by employers. On the other hand, while clear on the principle, the Government recognise the difficulties which many firms will find in meeting any significant extra costs at present. The extent of those difficulties will not be clear until the review has been completed next summer and until we know what boards will remain, which firms they cover and what new voluntary arrangements may need to be set up.

It is the Government's present intention that Exchequer funding of industrial training boards' operating costs should be reduced in one way or another in 1981–82 and cease in 1982–83. However, we shall be prepared to consider the timing in the light of the review. It is essential to maintain close parliamentary scrutiny of the levy-raising powers of industrial training boards. Accordingly, we do not propose any change in the present arrangements, whereby levies cannot exceed 1 per cent. of payroll, save by affirmative resolution. The necessary legislation for these changes will be brought before Parliament in the new year.

The MSC is in a unique position to carry out the review. It has representatives from trade unions, employers and, of course, education and local government. We can build on their suggestions. It is the MSC's commitment and that of unions and employers with educationists that can help us to carry forward this new training theme. That is an important point.

Mr. Harry Ewing (Stirling, Falkirk and Grangemouth)

Is the Secretary of State aware that his announcement is a clear recipe for bad companies not to undertake any training? They will live off the backs of good companies that want to train young people. I plead with the Secretary of State to give a great deal of thought to the proposals before introducing any legislation. I urge him to hold the widest possible consultations before wandering into a disaster area for training.

Mr. Prior

I accept that the views expressed by the hon. Gentleman were held 10 or 15 years ago. I do not wish to prejudge the results of the review to be conducted by the MSC and which will be reported to me. I am not convinced that a case can be made out at present for the continuation of training boards on the existing scale. In many cases, a bureaucracy has developed that is not giving us the results that we need. I note the hon. Gentleman's remarks. This subject will be very much in our minds when we review what the MSC has had to say.

We shall achieve more training if we put voluntary and modern methods to greater use rather than continuing with the bureaucratic system that has built up in recent years.

Mr. Harold Walker (Doncaster)

Before the right hon. Gentleman leaves the important question of the changes that he is proposing in the ITB structure, can he say whether the savings that accrue from the phased withdrawal of the Government's commitment to meet the administrative costs of the boards will go to the Government, or will he make the money available to meet the training costs of hoards, wholly or in part?

Mr. Prior

I have made clear that we believe in principle that the operating costs of the boards that continue should be carried by the industries concerned. The Government will make certain savings on operating costs. On the other hand, we are continuing to put £250 million into training for skills and the training opportunities scheme. Although the decision to put operating costs on to industry has been taken, we shall decide when we have the results of the review when it would be right to implement that decision.

I am sorry that the Leader of the Opposition has left the Chamber, because I wish to refer to him. I understand that he is carrying his campaign to Liverpool this weekend. I do not believe that the right hon. Gentleman has any right to preach to the rest of us on the evils of unemployment. He made many intemperate speeches and attacks on his party from below the Gangway in the 1960s. He said that the total of 600,000 unemployed was the worst scar on his colleagues' record. On another occasion he said that the level of unemployment was the worst domestic crime committed by Labour in office. Yet the right hon. Gentleman was a member of a Government during whose period of office the number of unemployed more than doubled. Despite that, Labour Members still tended to talk glibly about reducing the level of unemployment to 700,000 by 1979.

I am glad that the Leader of the Opposition has returned to the Chamber. I have a particular point to address to him. His record means that he ought to exercise some restraint on his flow of oratory.

Mr. Gerald Kaufman (Manchester, Ardwick)

That is no problem for the Secretary of State.

Mr. Prior

It has never been a problem for me. Unlike the Leader of the Opposition, I am interested in getting at the facts.

There is another reason, apart from the Leader of the Opposition's record, why he should show some restraint. He and his colleagues should ponder the words of the hon. Member for Liverpool, Edge Hill(Mr. Alton) in a Sunday newspaper last weekend: The last thing we need in Liverpool is more bitterness.

I hope that when the Leader of the Opposition goes to Liverpool this weekend he will remember his record. If he expects to be taken seriously, he had better start telling the country why and how things would be different under a future Labour Government compared with what happened under the previous Labour Government.

Mr. Michael Foot (Ebbw Vale)

I am sorry that I was out of the Chamber for a moment when the Secetary of State started this part of his speech. There is a great difference between his Government and the Labour Government. Both Governments faced great world recessions, but the Labour Government struggled hard to bring down the unemployment figures and the right hon. Gentleman seems to be struggling to push up the figures.

If the right hon. Gentleman is so scornful about the Labour Government's achievements in bringing down the level of unemployment, will he tell us when he thinks that his Government, with his measures, will be able to get the unemployment total down to the level that existed when he took office?

Mr. Prior

The one thing that I will not do is to try to make false forecasts. Members of the Labour Government, including the right hon. Member for Leeds, East and the hon. Member for Newcastle-under-Lyme (Mr. Golding), prophesied time and again how much unemployment would fall. As the Leader of the Opposition knows, I do not play that game.

I hope that the Leader of the Opposition will start telling the country why and how it will be different under a future Labour Government and what he would do. How would he reflate without going straight back to inflation? Is his answer a further incomes policy? If so, why did it not work last time? How would he deal with the inevitable slump in trade that would be caused if we pulled out of the EEC or resorted to import controls? If the right hon. Gentleman is going to Liverpool, we are entitled to ask him to deal with those problems. Why should the same old policies that doubled unemployment over a five-year economic cycle—not just at the bottom of the cycle—succeed next time round?

Many of the right hon. Gentleman's audience, including the 37,861 people who became unemployed in Liverpool during the five years of the Labour Government, will want answers to those questions. The rhetoric of the soap-box, which is what we have had from the right hon. Gentleman in the past three weeks, will not give us the answers or give the country confidence. The speech of the right hon. Member for Chesterfield added nothing to the debate, and I hope that my right hon. and hon. Friends will vote against the Opposition amendment.

4.47 pm
Mr. Donald Stewart (Western Isles)

Some of the measures announced by the Secretary of State are useful, but he reminded me of a boy going to the seashore with a bucket and spade and building sand castles that will inevitably be washed away by the incoming tide.

One of the factors that will deepen the unemployment catastrophe is the statement in the Queen's Speech: My Government reaffirm their strong commitment to the European Community.

There is a conspiracy on both sides of the House to refuse to recognise that that emperor has no clothes. Our membership of the EEC has been a disaster. One of the great phoney promises made when we were discussing our accession to the EEC was the suggestion that failure to join would result in a serious loss of jobs in the United Kingdom. We have seen how little there was in that threat. More unemployment is on the way from the Common Market if, as indications show, the fisheries policy is to sell out our fishing rights.

Unemployment on an increasing scale will follow the promise in the Queen's Speech that the Government will take all steps necessary to maintain firm monetary and fiscal policies.

That is a chilling prospect. All the evidence should be convincing the Government of the necessity to abandon those policies.

The Leader of the Opposition mentioned recently that the publications of the CBI resembled the front page of Tribune. We have now reached the stage at which the Daily Mail has used its front page for an editorial demanding that the Government make an immediate U-turn. That is something that the Daily Mail editor said he never thought that he would have to do. But the Government carry on regardless.

The Prime Minister is apparently working on Nixon's law that "If two wrongs do not make a right, try three." The Chancellor of the Exchequer came on Monday with a swift attempt to get things right. In arguments across the Floor, a lot of nonsense is talked about the rise in wages causing unemployment. That has been exploded by the number of instances quoted in the House of firms that met all the criteria that the Government claimed were necessary to ensure survival and yet have gone to the wall and landed in the bankruptcy court.

The state of industry and the appalling level of unemployment arise mainly from the policies of the Government. The pensioners have been robbed by the refusal to keep their increases up with inflation and have had their pensions reduced by 1 per cent. This does not show much confidence on the part of Government that inflation will be coming down all that quickly. The payment two weeks late of increases this year was a sign of the mean way in which the Government operate.

I want to be fair about the one aspect of the Queen's Speech relating to Scotland. It states: Measures to improve the law in Scotland relating to education and to local government and to protect wives' home rights will be laid before you.

If the latter refers to doing something at last about battered wives, it is welcomed by my party. It is one of the matters that we have endeavoured to press.

In education, the Government cannot find the money to see that the schools are properly funded. They are closing colleges of education while the proposed legislation is no doubt intended to subsidise fee-paying schools. If people in Scotland who wish to have their children privately educated foot the bill, no one can have any objection. It is a different matter when one is talking of schools that take money from the Government as well as from private contributions. That seems to me to be robbing the public purse. It is indefensible when one considers how Scottish education is being denied funds.

The Queen's Speech contained no mention of devolution. That is a clear indication that devolution has been totally abandoned by the Conservative Party, despite the fact that even in the last Session, under the Labour Government, a few Conservative Members were making noises in favour of devolution. Nothing has been done by Lord Home to redeem his promise to produce a better Bill. We can see that the promise was worthless.

Unemployment in my constituency is now 16 per cent. It will inevitably increase as a result of the Chancellor of the Exchequer's intention to cut the rate support grant. The director of finance in my local authority told the council two weeks ago that the increase in rates will be 47 per cent., or probably higher. There will be no alternative but to increase rates and make some workers redundant.

Mr. Dafydd Wigley (Caernarvon)

Will my right hon. Friend accept that making people redundant in local government lands central Government with an even greater burden to be placed on the taxpayer or the public sector borrowing requirement? On average, a man with a wife and two children to support costs the taxpayer £6,000 a year. That is the difference between the man being in employment and out of employment. The result of people being out of work in local government is to add to the burden on the Exchequer.

Mr. Stewart

That is correct. I was intending to quote the figures. For a single man, the loss of revenue covering income tax, loss of indirect tax and national insurance contributions would amount monthly to an average of £283. The transfer payments that would be lost—unemployment benefit and so on—would total £436. That makes £719 a month. Those were official figures given to a noble Lord in another place. They show the appalling cost to the Government.

The right hon. Member for Huyton (Sir H. Wilson) said that the Prime Minister would be ditched by the Conservative Party in three years. I believe that he is being unduly pessimistic. I have a feeling that she will be walking the plank long before that time. There will be no industrial base in a much shorter time than three years. That message should get through to the Conservative Party.

If there is a tremendous Left-wing surge waiting on the Opposition Benches to dismantle capitalism, it will not find much to dismantle at the end of the day. Usury has already taken over from the industrial society. There used to be a jibe that the Government were operating on O-level economics. If they were up to that level, hon. Members would have more confidence in what they are doing. It may happen, as the right hon. Member for Chesterfield (Mr. Varley) said, that the Conservative majority will vote down the amendments on the Order Paper. It is that kind of mindless, misplaced loyalty that induced Conservative Members in 1940 to give a vote of confidence to Neville Chamberlain at a time when he was obviously losing the war. Some have higher priorities. It is up to Conservative Members who are aware of the situation to use their votes in a constructive way.

4.56 pm
Mr. Peter Hordern (Horsham and Crawley)

No one can doubt the seriousness of the unemployment situation. I thought that the right hon. Member for Chesterfield (Mr. Varley) was right to point out the gravity of the situation, although not in the manner that he chose to do so. It is a serious situation. It has been deteriorating, so far as I can see, in each of the economic cycles since the war.

We have now an altogether new economic factor that has not occurred at any time since the war. It is doubtful whether it has occurred at any time in our industrial history. I refer to the effect of the appreciation of the pound sterling in relation to other currencies. I do not think that at any time in our industrial history we have had to face an appreciation of some 50 per cent. in the value of the pound compared with other currencies. It has meant for large parts of manufacturing industry, especially the traditional manufacturing industries, a challenge to their margins that they are unable to face.

The result is that in Scotland, the North-East, the North-West and the West Midlands traditional firms making basic manufactured goods are unable to compete. This is a totally new position. I suppose that the nearest one can find to it was the return to the gold standard in 1923 at the wrong price. It does the country no good for us to minimise the gravity of the situation or the challenge that is now being unleashed on manufacturing industry.

It is impossible to foresee a state of affairs in which we can get to a post-industrial revolution within three or four years. It is, therefore, all the more important for those who are now unemployed and for the economy to analyse more carefully than has often been done what has gone wrong in the past 10 years to create this situation. I make no apology for going back over this period of 10 years. It is important that we should do so. I make no apology for referring, in particular, to manufacturing industry, because manufacturing still employs about 30 per cent. of the total work force and is responsible for about 30 per cent. of the GDP. It represents an important part of our national product.

The main criticism from the Opposition Benches seems to be that the Government are slavishly attached to monetary policy, as though it were some form of arcane religion. If we are, I should point out that we are more slavishly attached to St. Augustine than to St. Paul. The House will, of course, recall the words of St. Augustine: "Lord, make me chaste, but not yet."

So far, monetary policy is very slow in being observed. The level of M3 has gone up not by 7 to 11 per cent. but by nearer 20 per cent. Although we were told that the public sector borrowing requirement would be restricted to £8½ billion, we find that £8½ billion has been borrowed in the first six months of this year.

Dr. Jeremy Bray (Motherwell and Wishaw)

The hon. Gentleman was not quite right in what he said about St. Augustine. The words he should have used, reflecting the policy of the Government, are "Lord, I was chaste, but not now."

Mr. Hordern

Happily, I believe that the hon. Gentleman is not correct in his textual analysis of St. Augustine, and probably of St. Paul too.

The money supply targets appear to be out of control. My right hon. and learned Friend the Chancellor was setting the correct course in seeking to reduce borrowing as far as he could, and he has done so by cutting Government expenditure to the level at which it was supposed to have been six months ago—not without great sacrifice. We have been told that serious discussions, even disputes, have taken place within the Cabinet about these cuts.

But what is ignored is the way in which the public sector has grown over the past 10 years. I shall deal with this matter in particular, because it is the additional weight of public expenditure and, in particular, the movement of people out of the private sector into the public sector during the past 10 years which have created the pressure on manufacturing industry today. In the past 10 years, 1 million people have moved out of manufacturing industry and 1½ million people have moved into local authorities.

I want to refer in particular to two of the largest employers in the public sector, the National Health Service and the education service. In 1968, which I reckon was the last time that public expenditure was under control, the NHS employed 710,000 people. In 1978 it employed 1.175 million people, an increase of about 60 per cent.

Mr. Haynes

On the matter of the increase of manpower within the NHS, the hon. Gentleman should remember that his own Government created that situation.

Mr. Hordern

That was a rather unfortunate remark, because there is nothing in any reorganisation which requires any increase in personnel. The reorganisation was followed by a massive recruitment campaign, but before that took place the size of the NHS had been increasing year after year. In case it is said, as it sometimes is, that reorganisation meant that some people formerly employed by local authority health and social services departments were transferred to the NHS, let me say that the figure for employment in those departments of local authorities rose by some 10 per cent. compared with the figure before reorganisation.

The result has been that in the National Health Service alone the wage and salary bill increased from £715 million in 1970 to £4 billion in 1980, an increase of about 17 per cent. every year.

I recently asked my hon. Friend the Minister of State for the numbers employed in the NHS. He replied: the latest year for which comparable and complete information is available is 1978, although it is possible to provide an estimate of staff for 1979." [Official Report, 7 November 1980; Vol. 991, c. 686.]

Here we are in November 1980, and it appears that the Department of Health and Social Security does not even know how many people it employs.

I am glad that my right hon. Friend the Secretary of State for the Environment said the other day that he was able after 18 months to say precisely what everyone in his Department did. That was a notable advance, though I should have liked it to be made some months earlier. But it appears that the Department of Health and Social Security has no idea how many people it employs, even now.

I turn to the question of education. In 1968, 1.1 million people were employed. In 1978, 10 years later, the number had increased to 1.5 million—an increase of some 40 per cent. Very worthily, the number of teachers and lecturers had increased, from 407,000 to 541,000, no doubt improving the standards and staff-pupil ratios in those years. But what about those who neither lecture nor teach? Can it really be said that it was necessary to increase the full-time staff who neither lecture nor teach by 10 per cent. to 201,000, or the part-time staff by 30 per cent., in 10 years, so that the authorities now employ 483,000 people?

Mr. O'Neill

Will the hon. Gentleman concede that the employment of many assistants in the education service has been in order to free teachers for the job of teaching, and not having them preoccupied with administration?

Mr. Hordern

I have no doubt that that is true and that the education service has benefited thereby, but can the country afford it? Of course, there has been an advance in standards, but when we compare the number of people who neither lecture nor teach today—483,000—and the 90,000 in 1960, we see no comparable improvement in our educational standards to merit that sort of increase.

The result has been that local authorities' wages and salaries have risen from £2.7 billion to just under £10 billion in 10 years, an increase of 18 per cent. every year.

That is the real problem that manufacturing industry and the rest of the productive sector must deal with—these vast increases in the cost of wages and salaries. For a time, between 1972 and 1976, the problem was obscured by Government measures. At that time successive Governments printed a great deal of money, the money supply being up by 23 per cent. in 1972 and 25 per cent. in 1973.

Mr. William Hamilton (Fife, Central)

The hon. Gentleman supported that.

Mr. Hordern

The hon. Gentleman is absolutely wrong. I was against it all the time, and I remain against it.

Even more important, in 1974 the last Government succeeded in borrowing $14 billion abroad to sustain that kind of expenditure. The pound dropped from $2.50 to its lowest point in October 1976 of $1.57. Within that time manufacturing industry was able to sustain the growing weight of the public sector because of the decline in the value of sterling. But it is no excuse for manufacturing industry that it increased its own wages and salaries in those years by about 140 per cent., for an increase in production of just 5 per cent. What did it suppose would happen?

In 1976 the IMF made its second visit, as it always does with every Labour Government, and produced what appeared to be some very stringent measures, including the corset. From then on, the position began to improve because of the IMF. Then, in 1978 and 1979, North Sea oil also had a dramatic effect on the pound.

Mr. John Smith (Lanarkshire, North)

The hon. Member for Horsham and Crawley (Mr. Hordern) is giving a very interesting analysis of the growth in manpower in various areas. He is very familiar with the City and banking. Perhaps he can give us the figures for those areas as well so that we may have the complete picture.

Mr. Hordern

As a matter of fact, I do not have the figures for the City or for banking. In any event, I cannot understand the comparison which the right hon. Gentleman attempts to make. The City and banking make up the most productive part of the whole country. They have produced the invisible earnings without which the country would not have sustained its present existence.

Since the discovery of North Sea oil and since its effects began to be felt—and, it should be said, because of overseas confidence in the present Government—the pound has risen considerably. It is now standing at about $2.37 to the pound compared with $1.57 four years ago. As I remarked before, the effect on manufacturing industry is very serious. I do not see, the decline which some people think may occur because of the reduction in the MLR. The basic position remains as it was. The effect of North Sea oil and the effect of the Government's determination to get inflation under control are a very attractive combination for overseas investors. Therefore, I believe that manufacturing industry will continue to be under considerable strain.

Manufacturing industry has another problem. Due to these events, its employment has shrunk from 8.3 million in 1970 to 6.7 million in 1980. But its problems have been made worse by the fact that in the last four years it has increased its wages and salaries by about 75 per cent. while its production has fallen by 5 per cent. As the House knows, our real difficulty is that our manufacturing base in any case is very small compared with that of our major competitors such as France and West Germany. We appear to employ more people in the manufacturing process than other countries do to produce the same article.

My concern is that when the recovery comes those who are now unemployed in manufacturing will not necessarily revert to their former jobs. That cannot be considered certain.

The position has been made worse by the fact that the local authorities and the Government last year paid their employees 29 per cent. more in wages and salaries because of the Clegg commission, the Pay Research Unit and the comparability process. That is why the 6 per cent. cash limit which the Government announced recently is a most important factor. It is not one, however, which should be applied to the nationalised industries, because for the most part they have been running down their own manpower. But the same cannot be said of local authorities or of the National Health Service.

The result, therefore, is that although 10 years ago, thanks to the International Monetary Fund, public expenditure was more or less under control, every year since then the size of the public service has increased, and I think that it is now much too large for the private sector to sustain. If it is possible for my right hon. Friend the Secretary of State for the Environment to know accurately what everyone in his Department is doing, why cannot the same exercise be done in the Departments of Health and Social Security and Education and Science? I do not think that either Department knows how many people it employs. What is required is a close examination of the manpower in each of these growing Departments to see whether we need it. That is a top priority.

I have said already that I am most concerned about the effect on manufacturing industry and on future employment. It is not possible to enter a post-industrial phase within two short years when the pound has appreciated so much. I recognise what my right hon. Friend the Secretary of State for Industry is trying to do to help with regional development and in other ways, but the Department of Industry seems more like a field hospital than a Department which is making any serious attempt to regenerate investment in industry.

For a long time, I have been suspicious of the size of the Department of Industry and the work that it has attempted to do under successive Governments. I know that it is very well meant, but it is very time consuming and there are immensely complicated schemes with a great many bureaucrats looking after them. I ask my right hon. Friend to look carefully at the position in other countries, especially in the Republic of Ireland, where there is a flat rate corporation tax of 10 per cent. for manufacturing companies which they have been told will last until the end of the century. As a result, the Republic of Ireland has been far more successful than we have been in attracting manufacturing companies.

What is more, in order to revive our manufacturing sector we need to attract more manufacturing companies from abroad. A year ago, the right hon. Member for Lanarkshire, North (Mr. Smith) and I went to Japan where we agreed how necessary it was to attract Japanese investment to our country. This is necessary not just because of the technology possessed by Japanese companies but because of their industrial relations. We have many lessons to learn from that process.

Currently, we are conducting an experiment with enterprise zones in selected parts of the country. Those are all very fine, and I understand the attraction of doing away with certain of the planning forms, but, again, do they really grasp the nettle in the way that some of the free trade zones do in the United States, which are much more revolutionary in their application? Semi-manufactured goods are allowed to be to be imported from abroad as long as they are manufactured in the United States, and they do not attract Customs duty. In my view, we ought to have an experiment with that sort of free trade zone in various parts of the country, especially in places such as Liverpool, where they would be particularly suitable.

The position is very serious. We ought not to shrink or turn away from special experiments which will secure employment in our most hard-hit regions. The Government must be more imaginative than they have been so far in looking at these alternatives. But we ought not to regard the present situation as though it were one which could be readily mastered by a change in policy. The House will recognise that we have tried alternative policies. We have tried printing money. We have tried reducing the MLR. When it was last tried, it was not manufacturing industry which borrowed; it was the property speculators, and they were followed by the financial institutions. I give this warning: that if the MLR is reduced too far the House cannot be sure that that process will not start up again.

It is very important to keep firm monetary control and to keep a proper check on public expenditure. I am sorry to say that, in my view, my right hon. and hon. Friends have far more to do in controlling public expenditure if we are to get the balance of the economy right. It is high time that they attended to this matter.

5.18 pm
Dr. Jeremy Bray (Motherwell and Wishaw)

The hon. Member for Horsham and Crawley (Mr. Hordern) was forthright and scant in his support of the Government. He represents a growing number of hon. Members on the Government Benches who are increasingly uneasy about the Government's monetarist policy as it is working, not least on the exchange rate. The hon. Gentleman is bothered about the inconsistency of their public spending and monetarist policy plans. However, I propose to concentrate on the subject of today's debate, which is unemployment.

We used to think it a terrible blow when unemployment increased by 30,000 in one month. In September, it increased by 89,000. In October, it increased by 108,000. This month, the figure is 136,000. It is quite appalling that at such a time Ministers should be thinking at all of cutting public expenditure.

But we should not underestimate the victory of the wets, and my purpose is to cheer them on. Tucked away at the back of the documents issued on Monday was a statement about increases and decreases in the volume of public expenditure since the White Paper was published in the spring. The increases in public spending were as great as the cuts and amounted to £1,000 million. Most increases were in the Department of Industry.

The wets have also forced the Government to abandon their monetary targets up to April next year. The Chancellor of the Exchequer said that money supply is likely to exceed the targets. He said that he was not rebasing or revising the targets. He said that he was not rolling on the targets.

I take the Government's monetary strategy seriously. I think that Government Back Benchers also take it seriously. But increasingly we hear strident remarks from the Prime Minister and the Secretary of State for Industry in particular not about money but about the unions. They say that the unions are to blame for everything. We are learning that monetary strategy is not perhaps really the instrument—or that, at best, it is an instrument in pursuit of another objective—to bash the unions. Monetary strategy is a veil which has been torn aside to show the hidden agenda of the hard-liners in the Cabinet. That hidden agenda is to undermine the unions.

The last Tory Government having failed to reform the trade unions statutorily, the present Government have decided that they must try to destroy them economically. The forefront of the attack on the unions is neither the Employment Act nor the important but still relatively minor issue of picketing but the whole thrust of the economic policy. Employment and unemployment are the instruments which the Government are using to beat the unions to try to bring about a structural reform on the collective bargaining process.

First, the strategy will not work. The middle-class, Tory voting, service industry-based, South-East dwelling people in Britain might be able to do without British manufacturing, they might be able to do without British steel, British engineering, British textiles and clothing, but they cannot do without British services. The important issues are not simply the cuts in commuter services, to which a whole page was devoted in The Guardian today, but the vulnerability of the soft underbelly of the South-East to the wave of industrial disputes in the public sector which sooner or later will bring the disorder of which the TUC general secretary has warned.

The strategy will not work, because it is a strange perversion of a strategy. The depression of the 1930s was largely responsible for all the nonsenses of industrial relations today. Is it sensible to say that we need another slump to educate another generation in all the frustrations and horrors of unemployment so that they can turn into another Bolshy set of shop stewards in the next 30 years?

Not St. Augustine but St. Thomas Aquinas said that the weakest argument of all was the argument from authority. However, I shall still use it. My authority is no less than the guru himself, that distinguished academic Professor Hayek, with whom I had a fascinating conversation this morning. He is a delightful man. He is responsive to argument. Unlike Conservative Ministers, he listens and says that he must think about an idea that has not occurred to him.

Professor Hayek was engagingly frank about money. He said that he wondered whether the overdraft system in Britain was not a factor in the uncontrollability and irrelevance of money. He recalled how last year, when he could not afford to pay a bill for hospital treatment, he used his American Express card. He said that the bill had only just come in. Perhaps credit is important.

On Socialism, Professor Hayek made the point which I have made over and over again. He said that Fabian Socialism lacks a theory of production. He is bored with money and is writing about Socialism in intelligent anticipation of the next Labour Government. Professor Hayek said that he had met the Prime Minister only once and that his advice to her was that a slump and the use of the money supply would not bring about a defeat of the trade unions and a structural change in industrial bargaining. He advocated the use of a referendum to provide the authority to remove legal immunities from the trade unions altogether. Hayek says that the monetary strategy of bashing the unions cannot work. I am delighted to see the Under-Secretary of State shrinking in horror at the suggestion of removing the legal immunities.

The second reason why the hidden agenda will not work is that the Government are trying to hit the unions through private manufacturing industry—the heart of their support in the country. That is partly intentional and partly unintentional because of the unpredictable effect on the exchange rate of the Government's monetary policy.

Finally, the hidden agenda will not work because it will embitter another generation of working people. Conservative Members who have been involved in detail in any case of injustice to a working man know that if they and their middle-class Tory friends were in a position similar to that experienced by working men in industrial disputes they would be outraged with the sense of injustice. They would act far more intemperately than the cautious, conservative, reluctant British working man to try to remedy an injustice which eats at his heart.

The wets must now face up to the hidden agenda of their right hon. Friends. I hope that the Treasury and Civil Service Select Committee report, which I hope will be published soon after Christmas, will help all members of the Cabinet to sort out the problem of monetary policy. Clearly, the monetary policy is not intact. Clearly, it is no panacea. No member of the Cabinet would claim that it was.

It is essential for the Secretary of State for Employment to talk to the unions. The Government need their help. We are told that the Prime Minister is "not for turning". Lord McCarthy gave a worthwhile talk today on the inevitability of an incomes policy. I hope that the Secretary of State will obtain a report of it from his officials. We hear that "the lady's not for turning". In the original play, he reminded us, the lady did turn but she did not burn. Government Ministers have burnt better men in the Prime Minister's position for breakfast.

The best solution would be an agreed incomes policy, although I suspect that the Government and the Secretary of State for Employment would regard that as being unavailable. However, the right hon. Gentleman would be wise to explore, informally and without publicity, the conditions upon which some co-operation would be available from the unions. He could then inform the Cabinet when it came to take the crucial decisions before the Budget.

What modifications in policy are needed to permit a move towards an agreed incomes policy? I predict that if those moves are not made, if the Secretary of State does not use such good will as he possesses to explore the possibilities now, the Government will be introducing a statutory incomes policy by next July. It will be appalling for us to watch the inexorable rise in unemployment in the next few months. There is nothing that the Government can do about it now, and the anger of the country will mount. However, I implore Ministers to begin to look ahead for the way out in the spring and summer of next year when the country will become uncontrollable.

5.31 pm
Mr. David Madel (Bedfordshire, South)

The hon. Member for Motherwell and Wishaw (Dr. Bray) referred to collisions between the Government and the unions and to the need for the two sides to co-operate. He could not have heard the speeches by my right hon. Friend the Secretary of State for Employment on the Bill that is now the Employment Act 1980. That Act in no way seeks to undermine the unions or cause a collision with them. The way in which it has been accepted is proof positive of that fact. That does not mean that the Act will not in due course need amending. However, it is wrong for the hon. Gentleman to say that my right hon. Friend and his Ministers in the Department are engaged in a war or are inviting a collision with the unions. That does not square with what my right hon. Friend said today and in the many debates on that Bill.

Dr. Bray

I hope that I did not say that the Secretary of State or his Ministers were engaged in a war with the unions. I said that it was a hidden agenda of a section of the Cabinet to engage in such a war.

Mr. Madel

The hon. Gentleman gave me the impression that he said the words that I attributed to him, but I shall not dwell on that point. I wish to confine myself to the Government's plans for training, as set out in the Gracoius Speech.

I particularly welcome the promise by the right hon. Member for Chesterfield (Mr. Varley) that the Opposition will give the industrial training Bill a good passage through the House. It is vital to get the new training measures right. We must not expose the changes in industrial training procedures to the see-saw approach that has been adopted towards trade union legislation in the past 10 years. I welcome the relevant passage in the Queen's Speech and do not dissent from the view of the hon. Member for Motherwell and Wishaw that the electorate takes most seriously the problem of unemployment. It regards unemployment as the most serious economic problem. That is not unique to 1980. It has always been the case. The difference between people in Britain and the West Germans is that they regard inflation as the most serious problem. For historical reasons we in this country take unemployment the more seriously, and the Government must therefore act accordingly.

There is irrefutable evidence that if any party is to govern the country sensibly and hold it together there must be a strong manufacturing base. In order to make sure that that base is strong and effective, we must get the right training and skills. It is, therefore, vital that the measures in the Queen's Speech, when translated into law, are effective and are fully understood for the way that they will cushion the impact of unemployment and, in due course, help to strengthen our manufacturing base.

The Manpower Services Commission is charged with the responsibility for operating these schemes. Its reaction was contained in a press notice issued last Friday which refers to the importance of young people registering at the careers service or the jobcentre as quickly as possible. It points out that the new rule debarring unemployed school leavers from obtaining supplementary benefit until the end of the holidays after they leave school might mean that young people do not register as swiftly as they have done in the past. That puts an additional onus on the careers teachers who have the responsibility of guiding and informing young people on the state of the labour market to make sure that, even though there has been a change in the rule, young people register quickly at the careers service or the jobcentre in order to be told of job opportunities.

The MSC press notice makes other important points. It rightly says that great stress will be placed on good quality work experience schemes.

It says also that there will have to be improved training for sponsors' staff—that is, on the employers' premises. That prompts the question of who will be responsible for the additional training. Will it be done at the polytechnics or the skillcentres or elsewhere? The commission is right to stress the importance of that factor, because one of the anxieties about the work experience scheme to date is that there has not been as great a training content as is desirable.

In the press release the commission says: At present 40 per cent. of Y.O.P. trainees on work experience schemes get off-the-job training or further education.

The commission's target is to lift that figure to 100 per cent. The Government's determination to help on that score was revealed when my right hon. Friend announced that an "open tech" would be launched and that the MSC would be charged with the task of getting it under way.

That means that the premises of polytechnics and universities will have to be used to get the scheme under way. I hope that those institutions will look carefully at their existing staff levels, because many people working in them who might be considered surplus to requirements will not be so once the "open tech" has been launched. It is, therefore, important that a close watch is kept on that aspect, and the sooner that the commission can start detailed conversations with the institutions of education that are to help, the better.

There will obviously have to be an acceleration of the retraining of teachers, because they, too, will have a role to play in the "open tech". I am glad that my right hon. Friend said last week, in announcing the new schemes: skillcentres will play their part in providing some of that off-the-job training."—[Official Report, 21 November 1980; Vol. 994, c. 211.] In other words, the age limit in respect of skillcentre places has been removed. Those under the age of 19 may now participate. I am glad, therefore, that additional use will be made of the vital resource of skillcentres for retraining and for launching the "open tech".

In commenting on the launching of the new schemes, the commission said that the careers service was to be expanded by a further 200 posts. The commission hopes that local authorities will have made these appointments by the beginning of next April. It is important to have monthly monitoring of progress, because, if the extra resources and opportunities are to be provided, the careers service will have a vital role to play. The commission will be anxious that those 200 posts should be filled by April. I only hope that the local authorities will co-operate fully in making sure that that target is met.

In terms of the work experience and what employers can offer, it is vital for the commission to keep in close touch with the employers who are offering places on their premises. In the past, some employers have felt that there has been insufficient consultation. If this task is to be undertaken effectively, it is important that employers' anxieties and needs are fully recognised by the commission and that the commission acts accordingly.

The size of the task is great. The MSC review of the 1973 training legislation indicates that about 65 per cent. of pupils in England and Wales leave school at 16. Most of that group of school leavers have no, or relatively modest, formal educational qualifications.

It continues: only about 14 per cent. of young people in Great Britain who … do not obtain an … apprenticeship receive any formal part-time education".

An attempt is being made in a massive scheme to give young people the opportunity to learn a new skill. In common with every economic problem, it will take time to reverse the trend. The trend has been for years that young people leave school with virtually no qualifications. The only training that they are given when they get a job is to be told where to sit. I hope that the scheme will be successful.

I am especially pleased to see that the CBI has announced today, as published in The Times Business News, that it will provide 120,000 opportunities for young people to obtain work experience during the next 12 months. That is to be done under the special unit chaired by Lord Carr of Hadley. I hope that the scheme will be ongoing and that it will be increased as the years pass.

We have had a great deal of argument about national insurance contributions and what the employer pays. I maintain that we could get more young people into work earlier if for two years, for example, an employer did not have to pay the stamp for a young person in his or her first job. That is not a new idea. It has been tried with a reasonable degree of success in Belgium and elsewhere. I am certain that if we implemented it we would have young people in work earlier than if such a scheme were not adopted.

The training schemes that are included in the Gracious Speech require a shake-up in the apprenticeship scheme, which my right hon. Friend talked about, and a change in the schools' curriculum. All that will be done in the next few years requires, above all, that young people leave school better trained and qualified. Above all, we must overcome the shortage of qualified mathematics teachers as soon as possible. None of the schemes coming up that involve the MSC and nothing that the "open tech" can do can possibly succeed unless there is a dramatic improvement in the teaching of mathematics and in the understanding of mathematics by children in our schools.

This is the first Gracious Speech for many years that proposes concrete steps for training and retraining. It is a dramatic effort to cushion the effects of the recession. I wish the Government well in what they are trying to do.

5.43 pm
Mr. Derek Foster (Bishop Auckland)

I do not wish to follow the line of thinking of the hon. Member for Bedfordshire, South (Mr.Madel). If I may say so, the hon. Gentleman made a constructive and useful contribution on employment and training.

The Secretary of State for Employment was berated by my right hon. Friend the Member for Ebbw Vale (Mr. Foot) for not offering any constructive alternatives to the present policies. As a result, I expected that the right hon. Gentleman, fresh from his recent victory, together with some of his colleagues in the Cabinet, would produce some alternatives. However, alternatives were not forthcoming from the right hon. Gentleman.

I come from the North-East, where we have felt the full blast of the icy winds that the Government have caused. There are 170,000 unemployed in the Northern region, and the total is increasing daily. The Guardian states this morning that unemployment is increasing by 3,000 a week. That is entirely unacceptable. We are grateful in a sense that in the Gracious Speech and the statement made by the Chancellor of the Exchequer there has been a great shift in the emphasis of the Government's policies. This has not been the Government's intention. I am sure that some members of the Cabinet would have preferred to continue with their excessively tight monetarist policies. However, they have had to come to terms with reality.

The Government's financial strategy is in ruins. The money supply and the public sector borrowing requirement are at double the rates that were planned. We understand that the high interest rates and the overvalued pound are due entirely to the far too tight targets that the Government set themselves for the money supply and the PSBR. In other words, all the suffering that has been imposed on areas such as mine in the North-East has been entirely unnecessary.

The Government persist in pointing to the international recession and saying that unemployment is increasing throughout the Western world. That is true, but is it not also true that unemployment is increasing more rapidly in Britain than elsewhere in the Western world? Britain has seen a much more rapid fall in output, especially in manufacturing output, which has fallen by about 10 per cent. and in some sectors by as much as 14 per cent. That additional burden has been imposed upon us—a greater burden than that carried by the rest of the Western world— and the responsibility lies entirely with the Government. It is about time that they began to acknowledge their responsibility.

The Government are unable successfully to cut public expenditure as they planned. They have made five attempts to cut public expenditure, but because of the deepening recession, because their tax revenues have been less than they hoped and because their payments in benefits have been much higher than they hoped, they have succeeded only in inceasing it. Instead of public expenditure being about 3½ per cent. of GDP, in the current year it will be about 5 per cent.

What effects have these policies had on trade and industry? We have had continual complaints, especially from manufacturing industry, about high energy prices. Part of the reason for the high prices lies in the excessive cash limits that have been imposed upon nationalised industries. I think that manufacturing industry deserves to know why it has to pay £8 a ton in excise tax on fuel. That is double the rate that our European competitors have to pay.

Industrial association after industrial association has complained to the Select Committee on Trade and Industry about the effects of high interest rates and the overvalued pound. Is it not true that there has been a reduction in the competitiveness of many sections of British industry by about 30 to 40 per cent.? Much of that has been due to the overvalued pound. The decline has become so serious that the loss of competitiveness cannot be regained perhaps even in the lifetime of this Parliament, even if the Government were now to alter their policies completely. That sort of recovery would not be possible.

We are in a serious position. We can look forward only to a greater loss of jobs in the following year. We are becoming uncompetitive at an increasing rate. There has been a serious cutback in investment. Even newly industralised countries are now adopting advanced technology more rapidly than we are. There has also been a severe loss of demand, not entirely because of the national recession but also because of rapid destocking, largely as a result of high interest rates. Only recently the CBI forecast a sharp fall in investment next year.

What is the effect on employment? We know too well that 2.16 million people are without jobs. As I said earlier, 170,000 of them are in the North of England. There is a continual reduction in the number of vacancies. The Prime Minister advises people to seek jobs elsewhere, but there are increasingly fewer to be found. Will she next advise people to emigrate in search of work, perhaps to the Far East, where they seem to know little about an international recession?

Sir William Elliott (Newcastle upon Tyne, North)

With regard to advising people where to seek work, has the hon. Gentleman recently been to the Team Valley trading estate, which, as he knows, is close to Blaydon, where in the past there has been a steady opening of new factories? There is a steady demand at present, as the management will tell him, for factories of 1,000 square feet and 500 square feet. Is he aware that in 1980 alone 145 new or reconditioned factories have been opened in the Northern region, providing 3,500 new jobs? That is the sort of thing that we want in the North-East, together with a bit of optimism.

Mr. Foster

I am aware of the situation. Those factories were put there as a result of the activities of the previous Government and by public investment. It is that investment that the Government are trying to cut back.

Mr. Gordon A. T. Bagier (Sunderland, South)

Does my hon. Friend agree that the vast majority of factories on the Team Valley estate are on a three-day week or short-time working due to the policies of the Government?

Mr. Foster

I am grateful to my hon. Friend for pointing that out.

I should like to be optimistic. Of course, new jobs are coming into being in various parts of the economy. That has always been so. However, in the North-East jobs are disappearing much more rapidly than they are being created.

Every commentator predicts that unemployment will increase to 3 million in the foreseeable future. About 40 per cent. of the unemployed are under 25 years of age. It is disgraceful that the coming generation, who deserve the best that we can give them, should be unemployed.

The Government offer the community enterprise programme. I do not denigrate the programme, but there are only 25,000 filled places in the programme compared with 400,000 long-term unemployed, and that number will increase to 600,000 shortly. The programme is completely inadequate. When will the Government give us the massive investment in training and retraining that we were promised at the general election? I warn the Secretary of State for Employment that, if he believes that leaving training entirely to industry and commerce will increase training, he is mistaken. Voluntarism is completely inadequate. What is required is a combination of the carrot and the stick. We need incentives and legislation to ensure that every company does the right sort of training. Only then will we get the response from industry and commerce that our young people deserve.

Mr. Nicholas Baker (Dorset, North)

What are the hon. Gentlemen's views about the record of the industrial training boards?

Mr. Foster

The industrial training boards have done a very respectable job. Their performance can, of course, be improved. It would be wrong to do away with them. I am worried about the Secretary of State's proposals to do away with them in certain respects.

I wish to deal with what the next Labour Government should be considering. Some form of incomes policy is absolutely essential. There could be a growing consensus in the country for concerted action by the Government, the CBI and the TUC to reach agreement about the amount of money that there will be for distribution. It will not be long before the Government are forced in that direction. They have an incomes policy in disguise for the public sector. How long can we expect the public sector to be the only sector in which there is guidance for incomes?

The Secretary of State for Trade, who will be replying to the debate, will be only too aware of the growing force of protectionism throughout the world. We are inevitably being drawn towards further management of trade. I use that phrase instead of "import controls". We should be devoting time to devising ways to ensure that our exports increase more rapidly than our imports. If we erect barriers to imports without an expanding volume of imports, there will be retaliation from all quarters of the world. However, we should not dismiss the arguments for a greater amount of managed trade as completely irrelevant.

The Government should directly invest in State industries and induce much greater investment in the private sector. The idea that if we leave everything to the market investment will be forthcoming has been proved false in the past and will prove false again. When we see the extent of economic planning in Japan and Germany, the way in which their banking sectors completely support the strategy of central Government and the way that investment flows to the sectors where it is needed, we are forced to wish that we had similar systems.

We shall inevitably be drawn back to much greater economic planning, when every large company does its planning in a most professional way. It is nonsense to expect that economies such as ours cannot proceed in that way. The sooner we are done with the nonsense that we can leave it all to market forces, the better. The sooner we can get down to professional economic planning, the sooner prosperity will return. I warn the Government that my people in the North-East are longing for that day. Even those who voted Conservative in the general election had no conception that they were letting themselves in for the present policies. They had no idea that they were voting for 2½ million—perhaps 3 million—unemployed or for the present numbers who are on short-time working. If they were given the choice today, many of those who voted Conservative on 3 May would change their minds.

6 pm

Mr. Nicholas Baker (Dorset, North)

The decline in the competitiveness of our manufacturing industry has gone hand in hand with the increase in industrial planning. The recipes advocated by the hon. Member for Bishop Auckland (Mr. Foster) are no answer to the difficulties in which we now find ourselves.

I want to address myself to the problem of unemployment and how we consider it in the House. The charge made against hon. Members over the years is that we raise people's expectations. We have fed people on the idea that the Government can meet their expectations and lead them away from the recognition of economic reality. That is the opposite to what we should be trying to do—namely, to face people with economic reality.

I was not pleased to hear the suggestion by the Leader of the Opposition this week that we should have unemployment brought back to the House of Commons so that we can deal with it here. I was not clear whether by "deal with it" the right hon. Gentleman meant that we should discuss and bewail it—unemployment is distressingly high and we all share concern about it—or whether we should promote and consider serious remedies for unemployment. The debate so far has not been full of the constructive proposals about remedies for unemployment that we ought to be providing.

The reality is that in the capitalist system, in which we participate whether we like it or not, businesses grow and die. The answer by the extreme Left is that the capitalist system should be replaced. At least, that answer is consistent. But that is not the answer that most Opposition Members seek to provide. The answer that many Opposition Members seek to provide is that, because a business has been in existence for 300 years, that is sufficient reason for it to continue. That was the argument put forward by landlords at the turn of the century to prevent the House from making changes in the law relating to the ownership of land. I believe that everyone will agree that that is not a substantial argument.

The problems of unemployment are not satisfied by debates in which we moan about the figures, however distressing they are Indeed, in doing that we are insulting those who are unemployed in these difficult times.

The Labour Government made grants available to industries under the Industry Act in order artificially to keep them going for short extra periods, at the end of which they went out of business and people lost their jobs. The injection of public funds without regard to future profitability is no answer to the life of any business and it is no service to the employees. In particular, it is no service to those in northern cities which depend entirely on one or two industries.

We are right to be alarmed about the unemployment rate. However, I have yet to hear any analysis why unemployment should be higher in the North-East than in the South of England—for example, in my constituency in Dorset. It cannot be anything to do with the activities of the Government. I hope that no one will seek to suggest that it is. However, it might have something to do with the fact that in the South of England there is a greater variety of businesses, and those businesses have kept more up to date and been more prepared to innovate and be more competitive than some of the large, heavy manufacturing industries which are mainly concentrated in the North. In our present difficult economic circumstances, alternative employment is available to people in the South which is not available to people in the North.

We have a duty to people who work in industries which are no longer viable. Opposition Members were not slow to point out that we have a responsibility to the Third world. People who live and work in less developed countries want to manufacture for themselves. Indeed, in many areas they have proved that they are able to manufacture cheaper and just as efficiently as we can. We do no service to people who work in our industries to deny that painful truth without any time limit.

The more money we put into British Leyland and British Shipbuilders without regard to future profitability—which is the condition that my right hon. Friend the Secretary of State for Industry adopts, and I am pleased that he does—the more we take away resources which might provide the basis for new industries and jobs for those who otherwise face unemployment.

We have a duty to analyse where we have been uncompetitive and where our industries have been subject to overmanning. We also have a duty to help the low-paid. We hear much from Opposition Members about the plight of the low-paid, but I have yet to hear that the low-paid would be rewarded by a future with new industries and jobs in which they could be highly paid.

I hope that my right hon. Friend will look carefully at the development of in-work training. It is unfashionable to mention the word "lawyer", but the training of solicitors in articles is successfully carried out within the profession. Businesses know best what they want by way of qualified practitioners and they provide the necessary training. Anything that the Government can do to encourage the development of in-work training must be right and must help businesses to train young people for jobs.

Mr. Craigen

Will the hon. Gentleman give way?

Mr. Baker

The hon. Gentleman will have the opportunity to make his point later. I am about to conclude my remarks.

Unemployment is not a painless process, but we do less than justice to the unemployed if we pretend that by running industry the Government can get them out of the painful difficulties in which they find themselves.

I hope that contributions to the debate by Conservative, Members will be seen to be constructive because they do more to face the unemployed with reality and show that in the long term we shall be better able to reduce the distressing problem of unemployment.

6.9 pm

Mr. Ray Powell (Ogmore)

With reservations and a degree of anticipation, the nation waited for the message in the Gracious Speech, hoping, wishing and some of us praying that somehow, somewhere, we would find a glimmer of hope. But the messages, the warnings and the appeals by Opposition Members, well-respected past Tory Prime Ministers, the TUC, the CBI, small business men, the self-employed and people in all walks of life were not heeded. Alas, 20 November arrived and we had the same message—no change in the Government's fiscal and monetary policies, no U-turns, only further cuts.

The Gracious Speech holds nothing for the business man, the underprivileged or for bankrupt firms. It says nothing of the crisis facing the country. It barely refers to the plight of industry. It says nothing about the economic disaster into which the nation is plunging. There is not even a glimmer of hope that any of the warnings and appeals have been heeded.

Most tragic of all, the Gracious Speech holds no hope for the 2½ million who are out of work and no hope for the hundreds of thousands of them who are under 24 years of age. Are all those people skivers, shirkers and scroungers? That is what the Tories called them only a few months ago. Let me assure the Government that life is not comfortable for a couple living on £33 per week. Even if the rent is paid, that is no luxury living. But the Tory philosophy is "Give them a stretch on the dole and it will soon erode their self-respect, independence and self-discipline." That philosophy is even contained in the Gracious Speech.

When we returned from the other place to start the debate, I well remember the Prime Minister—I have written to inform her that I shall be referring to her—standing at the Dispatch Box looking like a blushing bride in all her finery. It was not her petticoat that was showing. It was her Dracula-like teeth. Within minutes, she spelt out how she intended to suck the life blood from the weakest in society and how she would drive them further to the wall. That was spelt out by the whiz kid, with all her wealth of experience in the industrial and commercial world. One must give her credit for the fact that she worked behind the counter in her father's grocery shop. Unfortunately, she has failed to understand that business has changed. One does not get rich and fat today by weighing one's thumb with the bacon and the butter.

The Iron Lady, her armour getting a little rusty, her tongue tucked resolutely but firmly in her cheek, and without a sign of a blush, then stated openly, frankly and forcefully that her Government recognised the hardships of the unemployed. Within days, she showed what she meant by that. She decided to take away £80 from the unemployed couple, to introduce new rules to end supplementary benefit payments and to stop earnings-related unemployment pay. I could list many other measures to prove what she really meant, but suffice it to say that the 2½ million who are seeking work and a crust of bread have got the message loud and clear: the Government recognise their hardship, but they want to make it infinitely worse for them and their families and will ensure that as many more people as possible will be compelled to join them as soon as the right hon. Lady can get around to it.

The Government's policy reminds me of the story of the Good Samaritan. That poor person was destitute, down and out and in need of help. People turned their faces away from him, pretending not to see him. There were others, however, who pushed him further into the gutter and robbed him of the little he had. That poor person's experience may be equated with the way in which the Government today treat those in need of help. Instead of showing compassion, they are robbing the old-age pensioners, the sick, the invalids, those on social security and the many hundreds of thousands of our people who are living in poverty. Not only are the Government robbing the poor; day by day they are pushing more and more people into relative poverty through unemployment. The dole queue is getting longer and longer. Not since 1933, in the days of the great depression, have so many people been out of work.

It has been said that the Government are following not an economic but a political strategy, designed to undermine the trade union movement and to bring the workers to heel. It matters not to them that in the process they are also wrecking the industrial base of this country, large and small businesses alike. It is a vindictive and cruel policy. It will not work, because it is totally destructive in its ultimate aim. The nation is plummeting to an all-time low through the Government's lack of concern for others and their indifference to the sick, the elderly, the disabled, the disadvantaged, the unemployed and the poor. Every day, I become more convinced that the Prime Minister and her henchmen are hell bent on this persecution out of sheer, pleasurable spite.

Amid this doom and gloom, however, I see a ray of light. I hear rumbling and grumbling from the ranks on the Government Benches. I detect less spontaneous support for the right hon. Lady's utterings. I have not yet detected the "Thatcher man", or, rather, the "hatchet man", but I am sure that he is lurking there somewhere.

I refer again to the young unemployed. The Government's policies are having a disastrous effect on young people. The principal education careers officer for the county of Mid-Glamorgan, of which my constituency is a part, remarked this week that the Government's recent package on social security benefits would deprive an estimated 5,000 Mid-Glamorgan teenagers per year the right to claim supplementary allowances immediately upon leaving school. Mid-Glamorgan has a crippling teenage unemployment rate. Last month there were 3,765 registered unemployed in the 16 to 18 age range and a further 3,300 teenagers on youth opportunities and community industry programmes. Only about a dozen vacancies are on offer through careers offices in the whole of the county. I therefore say to the Secretary of State that the mammoth task of the Manpower Services Commission will be even more difficult in Ogmore and Mid-Glamorgan.

The number of people out of work in the Principality, excluding school leavers, is now higher in percentage terms than in any other region in the United Kingdom, excluding Northern Ireland. Every day, more redundancies and closures are announced. There is grave concern about the threat of further cutbacks in the coal and steel industries. Further slashing of employment in those industries would be disastrous for Wales. I warn the Government that Wales has already suffered too much. We shall not allow this incompetent Tory Administration to turn Wales into an industrial desert. Someone, somewhere, must stop this rot and put an end to this obscene insult to the working women and men of Britain.

In May 1979, unemployment was 1.3 million. That figure has been almost doubled in the past 18 months. Recently, the dole queue has been growing at the horrifying rate of 4,000 per day. Between 9 and 10 per cent. of our work force is now idle. What a waste of people and resources, and at what cost to the nation—£10 billion per year in lost production and a further £6 billion in lost tax revenue and in benefit payments. Is it any wonder that manufacturing output is falling? If one takes 400,000 jobs out of industry, does one expect it to produce more?

Investment is falling by 8 per cent., and it is predicted that it will fall by 10 per cent or more by the end of the year. That should be coupled with the escalation of company liquidations, which almost doubled in 1980. An average of 150 companies a week are going to the wall, and I have no doubt that some of them gave generously to Tory Party election funds. No wonder the right hon. Member for Sidcup (Mr. Heath) called the Government's policies "catastrophic".

Unskilled manual workers, racial minorities and women are the hardest hit. But the major social disaster is the level of youth unemployment—a problem that cannot be left unresolved. It is a problem that will escalate social unrest and disorder. Already I see the danger signs in Wales, where unemployment is higher than anywhere in the country except Northern Ireland. In Wales, 12.4 per cent. of the working population is out of work.

Mr. Robert Parry (Liverpool, Scotland Exchange)

The point made by my hon. Friend about youth unemployment should be brought to the attention of the House because, of the 110,000 unemployed on Merseyside at present, nearly 30 per cent. are youngsters under 20 years of age. That is an absolute disgrace.

Mr. Powell

I am grateful to my hon. Friend, and I am glad that he emphasised that point. The problem exists not only on Merseyside and in Wales but throughout the country. It is time that the Government took notice of what we are saying and remedied this problem.

The Secretary of State earlier asked what the Opposition had to offer. The TUC has given them the remedy, and so have we. I should like to spell out some of the policies that the Government should adopt and quickly introduce. I now urge the Government to take them on board. First, they should now accept an overall expansion of the economy. Secondly, there should be an expansion of special employment and training measures. Thirdly, there should be a regeneration of industry by the use of funds from North Sea oil and the financial institutions through a new national investment bank.

Fourthly, there should be a positive role for the public sector. Fifthly, there should be managed trade, including temporary and selective import controls. Sixthly, there should be a more positive policy to help the worst affected regions of the country. Seventhly, they should recognise the fact that the trade union movement has an important and constructive role to play in solving the nation's problems. Eighthly, they should adopt a policy which attacks unemployment, not the unemployed. Ninthly, they should abandon the 5 per cent. cut in unemployment benefit and re-establish the earnings-related supplement. Tenthly, there should be a further expansion of resources for the Manpower Services Commission.

Parliament depends on the will of the people to uphold democracy. Therefore, the people have a right to voice their objections. The cry from the people of the valleys and vales of Wales, the mountains of Scotland and throughout, the length and breadth of England and Northern Ireland is echoed by the cry from people of all political colours—from bosses, workers, industrialists, bankers, business men, builders and, in recent months, bankrupts. That cry is for moderation, common sense, flexibility, sanity and the preservation of democracy that we hold so dear to our hearts. Unless that cry is heard by the Prime Minister and the Government before it is too late, I fear that the ground swell of opinion from those without work, in fear of losing their jobs or who have spent half their lives learning skills only to find that they are no longer required will erupt into rebellion never before witnessed, and the calm and tranquillity of democracy as we now know it will never return.

It is our profound duty to spell out the dangerous situation into which we are plunging. Indeed, it is our responsibility to spell out to the Government that war with the workers in the 1980s is absolute and irresponsible madness. It will inevitably lead to destruction and defeat and ultimately, unless we are careful, to the end of the whole fabric of our democratic system. I implore the Government to change course now before it is too late.

My right hon. Friend the Leader of the Oppostition recently stated in the House that we shall fight the Government's policies in Parliament and in the towns and villages throughout the length and breadth of the country until there is a change of Government. He has the full backing of every Labour Member in that fight. He has the united and loyal support of the whole trade union movement, the co-operative movement, the old-age pensioners, the sick, the disabled and the 2½million unemployed. Indeed, he has a fair measure of support from the CBI. All of us will be in Liverpool on Saturday to give him that support.

If the Government are so adamant that their policies are right, why do they not put them to the country and seek a mandate, because they have not had a mandate for the policies which they are now pursuing?

6.25 pm
Mr. Nigel Forman (Carshalton)

I do not seek to emulate or follow the melancholy hyperbole of the hon. Member for Ogmore (Mr. Powell) to cap his 10-point plan for the revival of Britain. However, I share his deep-felt concern for the plight of the unemployed in future months and years, as do so many of my right hon. and hon. Friends. We Conservatives yield to no one in our concern about these matters. Surely, the argument between the two sides of the House is about the most appropriate and effective remedies, and it is to some of those matters that I wish to devote my brief remarks.

All Governments learn from hard experience. Of none is that more true than British Governments since the war. It was the Prime Minister who said in the debate on the Gracious Speech: 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."—[Official Report, 20 November 1980; Vol. 994, c. 33–4]

That is exactly what the objective should be for any sensible Government.

The House will have noticed that on a number of occasions recently the Government have had considerable success in their efforts to reduce inflation, but at a considerable transitional cost to the real economy and to the human casualties of that process of adjustment. While my right hon. Friend concentrated on the ways of alleviating and dealing with these transitional costs, I believe that the Government should also turn their attention—I hope and believe that they are doing so—to laying the basis for the economic recovery if and when it comes. Therefore, I strongly welcome those parts of the Gracious Speech the purposes of which are to lay the long-term basis for recovery.

The aspects which strike me as particularly positive are those which come under the heading of the encouragement of new businesses",

especially the community enterprise programme, to which my right hon. Friend referred last week. I also draw his and the Government's attention to the fruitful experiments with what are called local enterprise trusts, about which I have already written to him. About 15 now exist and about another 15 are to come. These local enterprise trusts act as catalysts for real employment creation in all parts of the country and do so in a cost-effective way. I have supplied my right hon. Friend with details, and I shall not weary the House with them now. Suffice it to say that they are a good example of the cooperation between the public and private sectors.

I also welcome the increase of about £52 million in support for selective industrial development and industrial research and development. That must be a sensible way in which to lay the basis for the future growth and prosperity. That is something at which the French have proved good over the years. I have read the recently published Nora report on "The Computerisation of Society"—which is now available in an English translation for my right hon.

Friends to study—and I thought that it made good sense. It said that the best future is one in which society accepts the advantages of computerisation, its efficiency and its ability to—simplify life, while providing an impenetrably democratic climate to oppose its indiscretion. That is a somewhat rough English translation of a French thought, but the thought is right. We must back the long-term demands of industry, and we must do it early enough, so that when the economic recovery comes we are in a position to take advantage of the revival of world trade.

I also welcome the remarks of my right hon. Friend the Secretary of State for Employment about the industrial training boards and the Government's commitment to a revised programme of training in different aspects of industry. He is right to seek to withdraw Exchequer support from those training boards, but I hope that in placing emphasis on the voluntary approach he will not fall into the trap of missing the strategic sectors of the economy where we need that training in the national interest. Everything that is related to computers and information technology would obviously be a case in point. The real challenge in training and retraining is for us to take these steps, to make progress in time and to do enough to match our competitors in their larger efforts. One thinks of the Federal Republic of Germany, where there are about four of five times the number of apprenticeships that we manage to produce.

I also welcome the prospect of legislation on energy conservation. That, too, could be an example of investing now in order to reap greater rewards later. In contrast to some of the other employment measures that are bound to be more palliative, it will provide jobs that will last.

If there is a danger for the Government in the present situation, it is that we run the risk of pursuing financial and other policies which seem right for many macro-economic reasons but in such a way that people might think that we were to be the last adult generation in this country—with insufficient concern for the long-term future. The point that I am trying to make is that investment in people and technology is two sides of the same coin and two sides of our Conservative responsibility for the future.

It is also vital that such investment that takes place—even though it is not as great as that on the Continent—is used as efficiently and productively as possible. All too often we have found, through our system of industrial relations, that we do not make full use of existing investments, let alone provide adequate new investments. It is importamt that we get every possible degree of understanding in all aspects of British industry and commerce and that some of our attitudes are brought more quickly into line with conditions in the modern world. Some of the surveys about industrial attitudes show what can be done if management and all other employees wear roughly the same clothes, eat in the same canteen, clock on and off in the same way and generally submit themselves to comparable working conditions. That is something that management in this country could look at with advantage.

There is no doubt also that there will be an opportunity for this Government in the way they apply North Sea oil revenues, which will become increasingly available over the years. While I should not like to pre-empt those revenues, as and when they become more freely available—it is estimated that the revenues will amount to £15 billion by the mid-1980s—it is vitally important to plough that capital benefit back into public infrastructure, into replacement sources of energy and to paying off some of the public debt that will still be round our necks at that time. We must get this country into such a position that when those resources are nearing depletion and exhaustion we can put our hands on our hearts and say that we built for the future.

I welcome the cut of 2 per cent, in minimum lending rate and the 6 per cent. public sector cash limit. I hope that the Government will recognise that we now have a sensible policy for incomes. It can only be common sense to take into consideration those employees who are directly or indirectly the responsibility of the Government, and, since that will entail a need to broaden the understanding of all sections of the working people, surely it is time to make further progress with the wider economic forum. The Conservative Party is committed to that in its election manifesto, and it gives us many opportunities to communicate with and understand all people in industry.

My right hon. Friend the Prime Minister and others have said that the Government are involved in trying to modify attitudes. We should try to modify those attitudes on a permanent basis in such a way as to prevent the building up of any lingering hostility or resentment over the years. Distinguished former Conservative Prime Ministers in the 1940s and 1950s worked hard to put the Conservative Party on to a basis where it stretched out its appeal to the entire community. I do not want to see that good work wasted or evaporated by short-term policies now. That is why I stress that we must treat people as if they were intelligent adults. We must communicate openly with them, and we must try to be fair to them in our policies wherever possible. We must have a bias in favour of fairness, but we must not raise false expectations. If we approach matters in that way, and if we underline our concern for the long-term future, as well as for immediate financial and accounting considerations, we shall be worthy of the trust that was placed in us at the last election.

6.38 pm
Mr. David Penhaligon (Truro)

I have attended a number of debates on employment over the years, and although this debate pertains to the Queen's Speech in many ways it follows a familiar theme.

Few hon. Members have referred to the main cause of unemployment, which is the long-term steady decline of our competitive position. In a trading world—Britain is one of the biggest trading nations of the world—our relative competitiveness is connected more with our employment position relative to other countries than any other factor. There are a number of aspects—the skill of management, the co-operation of the unions and the quality of the product. Whether they are good or bad, they have not changed very much in the last 12 or 18 months. Any change in competitiveness that has taken place during that period cannot be attributed to those factors. It may be argued that over the last decade and a half those areas have not been satisfactory, but that is our long-term deterioration. I do not believe that any of those three factors can be blamed for the problem as it exists today relative to 18 months ago.

The other major part of our competitiveness is controlled by wage rates and exchange rates. The real achievement of the present Government and the real reason why we are discussing the present disaster is that the Government have achieved something that no one has managed to achieve previously—considerable increases in wage rates and considerable increases in the exchange rate at one and the same time. Added together, the two things have probably reduced our competitiveness relative to our overseas competitors by over 30 per cent.

The result is that there are about 2.1 million unemployed. Worse than that, a number are not registered as unemployed. Even more despairing than that, clearly unemployment is on a rising trend. Estimating the point to which it will rise is a game for a prophet. Clearly, it is on a rising trend with a long way to go.

During the period of the Lib-Lab pact, under the previous Government, I remember when unemployment fell a little—by about 100,000. I sometimes used to listen to hon. Members who referred to that 100,000 as if that were a total solution to the problem. However, unemployment was reduced during that period.

The real reason why that happened was that it was a period when the value of the pound was very low and a period when we had some semblance of an incomes policy. Until we return to those two criteria, there is little prospect of any major change.

Since the present Government were elected about 18 months ago, they have pursued a policy of high interest rates and tight public expenditure control. They have decided that OPEC decides the price of our oil in our country, and until recently they rejected any pay policy whatever. The predictions made by many 18 months ago have come to pass extremely accurately. The Government's sole hope was that a tight monetary policy would reduce wage demands. The hope was that such a policy would stop this two-part cycle which has greatly reduced our competitiveness.

To be fair to the Government, there is at least a teeny-weeny sign of success. British Leyland, Ford and a number of companies with which we are all familiar are looking forward to pay settlements somewhat lower than those made previously. But in my travels I notice no real change in attitudes in Britain. I believe that the moment the Government start to ease the top of the pressure cooker they will find a whole avalanche of pay claims which has been building up; people will demand pay rises to compensate them for the reduction in the standard of living that has taken place.

As a Liberal spokesman in this debate, I am prepared to tell people that a reduction in living standards will happen and that for at least half a decade that will be irretrievable if we want to get off the ludicrous inflation-unemployment merry-go-round. That is the reality. The Government should be more forthcoming in telling the British people the truth. I only wish that the official Opposition would tell people exactly the same. The realities of our economic position would not change that much whichever party was in power.

Our only hope of getting out of the present ludicrous situation is a broad-based pay, incomes and prices policy. I am a member of a party which has held that belief for a very long time. I believe that such a policy should be backed by mandatory controls, but clearly the best control of all would be one that was freely administered by the general good will of the people in our nation.

Let us suppose that a really draconian incomes policy were implemented today. The Government could immediately halve interest rates. There need be none of the nonsense of 1 per cent, off or 2 per cent. off. They would have more control over the money supply with a good incomes policy and half the present interest rates than they have now with no incomes policy and ludicrously high interest rates.

I advocate a policy for the internal pricing of oil that has something to do with the actual cost of producing it, as opposed to the price lately decided by an OPEC meeting. Our internal energy pricing policy is ridiculous.

The fact that we would have a pay policy and, through that, that money supply would be under some control would allow the Government, in the short term—perhaps even in the medium term—to have a slight increase in public expenditure. I am not one who pretends that all our problems can be solved by endless public expenditure. However, if we had a tight pay policy and brought down interest rates, the Government could offer to make that a palatable package to the mass of the people by offering some increase in public expenditure.

I hope that such public expenditure would go on things which in the long term would help our economy—insulation, massive training schemes and so on. To be fair to the Secretary of State for Employment, I think that he is aware of just how much improvement is required in training. I would advocate massive increases of expenditure on training. It is not difficult to look around some of our State-owned enterprises to see where some money is required. An injection of capital into our national railway system would not go astray if we were looking for somewhere sensibly to improve our long-term facilities. Such a policy would at least enable a reversal of the employment trend that we nave seen for a long time, with only the merest hiccup of a reversal during booms in between the ever-increasing slumps.

There is another thing which the Government should investigate. People say that it is impossible, and perhaps it is. However, in Britain we have for many years pursued exchange control. The idea of the regulations was to keep money in Britain. Clearly, they had some success. They restricted the flow of exchange to a certain extent. Is it not possible, given the peculiar position of Britain being an industrial oil-rich country, to implement some sort of regulations the other way around to stop the open admission into Britain of short-term hot money which serves no useful purpose?

Dr. Hampson

What the hon. Gentleman has just said seems extraordinary. I hope that he will agree, as he has already argued at the start of his speech, that the value of the pound is too high. But, since we have an oil-based currency, if we had not removed exchange controls and allowed money to leave the country, what would be the level of the pound now? It would be way ahead of what it is already.

Mr Penhaligon

I apologise for not making myself clear. I did not criticise the removal of controls. I was wondering whether we could have a similar system the other way round to stop some of the hot money from coming into Britain. We maintained those regulations for years on the theory that we could stop money going out of Britain. Perhaps, because we are now an oil-rich nation, we should look into some similar regulations to stop the admission of hot money. It was maintained by this House for about 20 years that the exchange control regulations did something to stop money from leaving Britain.

Therefore, I do not see why some sort of regulations could not be produced which could stem the admission into our oil-rich country of hot money, which only pushes up the exchange rate to a ludicrous height. Therefore, I am not particularly arguing with the hon. Gentleman.

That is the general economic background. The Liberal Bench would offer, as the key to the way out of the misery in which we find ourselves, some form of draconian pay policy as a better alternative. I use the word "draconian" so as not to mislead people as to what we are talking about.

As for the effects of unemployment on individual sectors of our country, the one which still annoys me most is the effect on youth. The hon. Member for Bishop Auckland (Mr. Foster) said that 40 per cent, of those unemployed were under the age of 25. We shall have to discuss that later, because the last time I loked at the figures the proportion was 50 per cent. However, it is about that percentage. Clearly, the age group below 25 is taking a great proportion of the burden.

Although YOPs, WEPs and WOPs—whichever one cares to mention—must be short-term palliatives, they cannot seriously be suggested by the Government or their predecessors as anything approaching a reasonable solution. At very best, they are a poor short-term option. Among some of my small employers, I discover that these programmes produce an attitude which I do not like. Some employers are looking to the State to provide them with—as they are referred to in Cornwall—"Some of your free boys to come and help me to do some work." There is an attitude that the employer should no longer employ people when they leave school but should wait until they have been unemployed for six months before he employs them free for a while, as he sees it, to help him with his enterprise. The longer such schemes remain an important part of our economy, the more widespread that attitude will become. We are not far from the day when the Government will become responsible for employing every person from the day of leaving school until the age of at least 18. The Government do not want to do that, but the long-term use of youth opportunity programmes and YEPs cannot lead to any other conclusion.

I am disappointed that the Secretary of State for Trade is not sitting in his place, although he has been here for most of the debate. He represents the constituency of St. Ives, and I intend to make a regional point. Hon. Members constantly say that unemployment affects the North. They refer to the "prosperous South". I do not know how they describe the area where I live. They cannot include my area in the North. I fear that they are lumping my county into the South. However, unemployment in the far South-West is just as bad as that in any other area.

The Secretary of State for Trade is not a "wet". Indeed, I am told that he is so dry on these matters that he is surrounded by deliquescent salts in order to ensure that not a drop of water enters his thoughts. I shall tell the right hon. Gentleman something about the area that he represents, in the far South-West. In Penzance male unemployment has reached 16.5 percent. In St. Ives it has reached 24.7 per cent, and in Helston 18.2 per cent. In the right hon. Gentleman's constituency, the largest source of income in the winter months is State benefit. Almost one-fifth of the male work force in the right hon. Gentleman's constituency of St. Ives is unemployed. Nevertheless, we are told that the right hon. Gentleman wishes to pursue such nonsense further

The rest of the county is no better off. In Redruth, Camborne and Hayle male unemployment has reached 16 per cent. In Falmouth male unemployment represents 22.9 per cent. In Truro, which is part of my constituency, male unemployment is 12.5 per cent. In St. Austell, male unemployment represents 9 per cent.; in Newquay, 17 per cent.; Bodmin, 11 per cent.; Wadebridge, 17 per cent., and in Camelford unemployment has reached 16 per cent. The average figure for male unemployment in Cornwall is 15 per cent. Before winter ends, male unemployment will have reached 18 per cent. That is a disaster of mammoth proportions.

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

What about the summer months?

Mr. Penhaligon

The situation is not much better in the summer months. Employment during the summer is not as good as one might imagine. The three-year rule is one cause of our problems. If a man is employed for three years and is regularly unemployed at a particular time of the year, he cannot receive unemployment benefit. A young man living in Cornwall with a wife and family knows that he can live only at the level of supplementary benefit if he works in the tourist industry and suffers the unemployment that that industry inevitably brings for two or three months a year. If that rule were removed, it might help my county.

Mr. John Evans (Newton)

Are the appalling levels of unemployment in the hon. Gentleman's part of the world caused by high and excessive wage claims by the workers whom he represents?

Mr. Penhaligon

Statistics show that the average wage in Cornwall is the lowest average wage in Britain. The high levels of unemployment are not caused by militant trade unionism. Not many trade unionists are militantly active on the shop floor. The unions are weak in Cornwall.

The main cause of Cornwall's unemployment is its popularity. Those who want to opt out to some extent find that it is more pleasant to be unemployed on the sands of Newquay than in the centre of Birmingham. There is some logic to that. Fortunately, a good number of those who opt out vote Liberal when they get to Cornwall. Nevertheless, population drift is a massive problem. My area still attracts substantial numbers of the unemployed.

The problem of unemployment extends far beyond the North of England. The only prosperous area in England lies within a 100-mile radius of London. Any area that is more than 100 miles from London is in economic trouble.

Mr. Michael Colvin (Bristol, North-West)

The unemployed who are on their way to the hon. Gentleman's constituency might care to stop in my constituency. We enjoy a profitable and progressive industry, namely, the areospace industry. It happens to make products that the rest of the world wants to buy. It does so at a competitive price and it delivers its goods on time. There is a desperate shortage of skilled engineers. If any unemployed people with engineering skills come the hon. Gentleman's way, perhaps he will ask them to stop off in my constituency to seek work there. The areospace industry desperately needs them.

Mr. Penhaligon

Many of my constituents regard Bristol as being in the extreme North. They think that Bristol is far away. Indeed, it is about 200 miles from Truro.

Before the last election, there was some indication that we could solve unemployment if every small business employed one extra person. I made a television broadcast with the Secretary of State for Trade. I pointed out that there was a fault in his argument. I also pointed out that the right hon. Gentleman seemed to believe that every male hairdresser should take on an extra employee. I could not understand whose hair that employee would cut. At the time, the right hon. Gentleman merely laughed it off. Since then, 9,000 small businesses have gone into liquidation. They cannot take on one extra employee, and he cannot laugh that off.

Last Monday, the Government increased the cost of the stamp for the self-employed. They intend to introduce a sickness scheme that will serve only to discourage the small employer from taking on anyone with any sign of ill health or with a bad medical record. I shall not go into the bureaucracy that small firms face. In Cornwall, which is a long way from London, 30 per cent, of the population are employed in small businesses or are self-employed. The Government have only made the situation worse.

6.57 pm
Mr. Richard Needham (Chippenham)

The hon. Member for Truro (Mr. Penhaligon) said many things that were not consistent. I should like to question the point of having a statutory draconian incomes policy. He said that if such a policy were put into effect, it would allow any Government to halve interest rates tomorrow. A draconian incomes policy would not make the slightest difference to interest rates, becase they are determined by inflation and by the public sector borrowing requirement.

The hon. Gentleman could have argued that a draconian form of restraint on incomes in the private sector already exists because of the lack of demand. In the same way, there is a restraint on incomes in the public sector, becase the Government have imposed a 6 per cent, cash limit. The hon. Gentleman's statutory incomes policy will not get us very far. I am sure that the hon. Gentleman would like to know that the Secretary of State's schemes are not WOPs and YEPs but YOPs and WEPs.

The right hon. Member for Chesterfield (Mr. Varley) reminded me of one of the loyal crew of the "Bounty" who finds that the captain is no longer in control of the ship and that the crew have taken to the dinghy. They shout to the seagulls at the top of their voices "Reflate, reflate. Spend, spend." They think that that is the only way out. Meanwhile, back on the "Bounty", Long John Silver has taken over and hoisted the Jolly Roger. He has told everyone that he is dismantling the guns and has informed the admiral that he will pull out of the fleet. He has told him that he intends to follow the orders of the shop stewards in the crew to sail in ever-tighter circles without letting anyone else on board.

I do not see how the right hon. Member for Chesterfield can suggest that reflation and spending are an option that any Government could consider now. He certainly did not consider it to be an option when he was Secretary of State for Industry at the time of the Chrysler affair.

If we took the advice of the right hon. Member for Leeds, East (Mr. Healey) to increase the public sector borrowing requirement to £18 billion and to cut 4 per cent. off interest rates, it would have a catastrophic effect on confidence in this country. That lack of confidence would lead to a plunge in the value of the pound, which would inevitably result in renewed inflation and a dramatic increase in the prices of raw materials and so on to increased pay demands, which not even a statutory incomes policy could keep back. The hon. Member for Truro referred to dams and to pressures behind dams, but they build up faster and more effectively under statutory incomes policies than under any other policy.

The question is whether we want to go back to a policy of a declining pound. Is that the right way for our industry to compete? A low pound has meant low value added and low-quality goods competing, basically, with manufactured products from developing countries that are in a different position from Britain.

Let us consider the example of Germany, which has lived with a strengthening manufacturing base and a strengthening currency as it has produced more high-quality goods more effectively. Until recently, I thought that we could agree that inflation was the bogy which must be defeated. For the first time we have a chance, with an oil-backed currency and a tight monetary policy, to achieve a stability in the pound that has been unknown for years.

When we have a stable currency, internal inflation will be largely dependent on our ability to restrain pay settlements, which must be reflected in real increases in productivity. There is no other way for us to compete. The pound, backed by oil, will inevitably stay strong. The only answer for this country is for us to bargain within the limits of our ability to improve our output.

Mr. Craigen

Will the hon. Gentleman enlighten me on the unemployment figure in Chippenham, because I find some of his remarks strangely at odds with the situation in my area?

Mr. Needham

The unemployment figure in Chippenham is 5.7 per cent. That is not from sheer chance but because it is in a part of the country which has managed to attract new high-technology industry. The labour force is renowned for its solidity, sense and intelligence, and the area will continue to benefit for as long as we have a stable and sensible currency that allows business men to plan ahead.

I support the Government's long-term economic policy of coming out of industries in which we can no longer compete and working towards the establishment of industries that will give us high value added.

The consequences of defeating inflation will inevitably mean high transitional unemployment as we move from an economy based on the old industrial revolution and its output to a post-industrial revolution economy that must be based on high value added and high technology.

Mr. John Evans

I am listening to the hon. Gentleman with the utmost interest and I have taken on board his comments about moving to high technology and retaining a stable currency. However, is he aware that at Winsford, in the North-West, ICL has recently closed one of its most modern factories, with the loss of 5,000 jobs? When asked about the reason for the closure, the firm blamed the high level of the pound and high interest rates. That is a brand new industry. What price the strategy now?

Mr. Needham

High interest rates and high inflation are inevitably dangers to all industry and companies wherever they are located. There are bound to be effects across the whole of industry. That is why the Government must cut inflation and public sector borrowing and maintain control of their monetary policy. Otherwise, interest rates cannot fall.

Regardless of depression or growth, employment in manufacturing will decline in this country for the foreseeable future. Changes in techniques, working and technology are bound to result in fewer people being employed in manufacturing. To demonstrate that fact, one has only to consider the position in agriculture 100 years ago when 30 or 40 per cent, of our people were employed on the land. Today, 1½per cent, of the working population produces 50 per cent, of our food. That decline will be mirrored in future in manufacturing industry, regardless of the level of output, because of the introduction of robotics and other methods of manufacture.

Provided that we have a stable currency, high value added and high technology, the profits made in service industries will be able to build a level of employment in those industries that cannot even be thought of at present.

I accept the overall strategy that the Government are pursuing, but there are two points of policy on which I wish to comment. It is crucial that in this transitional stage, when unemployment will inevitably rise, the Government have a national policy for ensuring that the unemployed suffer as little as possible.

I welcome the announcements on training made by my right hon. Friend the Secretary of State for Employment, though I feel that any national training policy must take the 16-to-18-year-olds out of the collective bargaining arena. We must also set up some form of national training allowance, and I feel that there must be a role for the industrial training boards, as well as for the MSC, in determining standards. The highest priority for the Government must be to ensure that, as we come out of the recession, training and a long-term strategy for training are maintained. The Government are on the road, but they still have a long way to go.

My second point concerns benefits. I realise the difficulties facing the country and I do not advocate an increase in benefits, but the level of benefits must be protected. A married man with two children who is earning the average national wage of £124 a week receives only £45 or £50 a week after six months' unemployment. Out of that he has to meet all his obligations, including his mortgage, HP repayments and increased nationalised industry charges.

It is crucial that those who are unemployed through no fault of their own should be protected, along with then-wives and families—child benefit is involved here—so that they are able to get about to look for alternative jobs. It would be a tragedy if we learnt nothing from the 1930s and followed in the 1980s the same route as was followed in those days.

Another point I wish to bring to the attention of my right hon. Friend has already been mentioned by the hon. Member for Truro. What will happen once the recession ends? It can be argued that the present recession is an effective form of incomes policy and that building up behind it will be a dam of demand for increased wages once things look slightly better. One can hardly say that the workers of British Leyland at Longbridge who have received wage increases in single figures for three years cans inevitably and for ever, be prepared to continue to accept wage increases of that level when the golden bonus of redundancy beckons and when they feel that there will be no end to it.

There will be pressure building up. One of the key factors is to encourage ways of greater financial and employee participation. The two sides of industry have been at each other's necks for far too long. My right hon. Friend the Secretary of State for Trade will say that industry is doing this and getting on with it. I am not sure that that is right, although I have a feeling that my right hon. Friend the Secretary of State for Employment might agree with him.

A recent article in The Times quoted a survey on employee communications by a consultancy agency presented to delegates at an Institute of Personnel Management conference which showed that despite much activity in the last three years only 40 per cent, of the 131 organisations surveyed have a formal written policy. The absence of such a policy makes it difficult for companies to assess the effectiveness of their internal communications.

I ask my right hon. Friend to look at remarks he made on occasion in Opposition about the introduction of a code of practice. I ask him to consider what is happening in Europe under the fifth directive laying down requirements to give working people basic information on redundancies, closures, new investment and so on.

On participation, I ask my right hon. Friend to consider the alternatives. Many hon. Members have seen the recent "Horizon" programme on the Mondragon experience in Spain. We cannot, especially those of us on the Conservative Benches, continue to look at the capitalist system without change—a system of "we" and "they", capital on one side and workpeople on the other. Workpeople want to give more than just work. They want to give their lives and their capital. Most of them would want to do both if they could. We have not shown the flair and imagination that could have been achieved in the area of participation. If we cannot get people to understand the need for a common view and common purpose and unity, we will face a new pay explosion. Unemployment will have proved nothing except that it is a rather vicious form of incomes policy.

The Government face difficult times. They have to remember that they are dealing with people and not with numbers. Money and fear are not the incentives to which most people in Britain respond, nor are kind words. In these two areas, the Government can do more, should do more and will need to do more.

7.14 pm
Mr. William Hamilton (Fife, Central)

The hon. Member for Chippenham (Mr. Needham) would be described by the Prime Minister as soaking wet. The right hon. Lady has extremely sharp teeth and claws. Over the last 18 months, she has been sharpening the differences between "we" and "them", the division between North and South and the division between the poor and the wealthy. That explains why we are rapidly on the decline. It is idle to pretend that the problems that we face began at the last general election. It is futile to pretend that they will be solved by the time of the next election. They are too deep-rooted.

People outside the House, listening to some of the jargon spoken in these debates about the public sector borrowing requirement and public expenditure, simply ask much less sophisticated questions. They look around, especially if they live in Glasgow, Liverpool, Manchester, parts of London or even some of the rural depressed areas mentioned by the hon. Member for Truro (Mr. Penhaligon), and see slum houses, slum schools, and slum hospitals. They find waiting lists for hospitals and for houses. They match the demand for those services with the 2 million-plus unemployed who are desperately anxious to supply those hospitals, schools and houses. They ask themselves why the clever men in Westminster, with thousands of millions of pounds of wealth at their disposal, cannot match the demands for those services, which make so much difference to the quality of life for ordinary people, with the idle hands of the building trade workers, the engineers, the teachers and the nurses.

The hon. Member for Chippenham talks of wages being matched by productivity. I should like to tell him something. I am on my old hobby horse. I shall be going down to the South Coast this weekend to see my daughter, who is convalescing at St. Leonards. She is a simple soul like her dad. She will say "Dad, what were you talking about at the House of Commons?" I will say "Don't you know—the public sector borrowing requirement." I do not know what language she will use to me. It will not be all that polite. If I tell her that the hon. Member for Chippenham made a courageous speech, saying that we must match wage increases with productivity, she will ask how, as a nurse, she can increase her productivity in order to get an increased wage. These are the people who are being clobbered by the Government. The only people who have benefited in the last 18 months under this Government have been the bankers, the brewers, the Vesteys and those earning over £20,000 a year. There are no nurses, no teachers in that list. None of the people who provide the services that matter so much to our people have benefited.

Our people are those who depend so much on what is called the social wage. Public expenditure to them means a council house. It means a place in a decent school for their kid. It means a job in a decent factory at a decent living wage. All these things, ever since the Prime Minister took office, have been clobbered by the Government, and there is more on the way. It is idle for the Government to say that people must make more sacrifices and that it would be unpatriotic not to do so. That is rubbish. We will not accept it.

Mr. Needham

I accept the hon. Gentleman's point that it is difficult to apply productivity to people like nurses. I am sure that he would agree that productivity and output in the areas that create wealth form the basis on which we can afford the important services provided by his daughter. What has been happening with the Vesteys has, I understand, been happening for 30 years. It has not just happened under this Government.

Mr. Hamilton

I accept the latter point. It is a capitalist system that produces the Vesteys. Nye Be van used to say many years ago that one of the great difficulties of a democratic system, subject to regular elections, was that no Government could pursue policies for long enough to prove that they were on the right course—or the wrong course. Those words apply equally to this Government.

In some areas of industrial manufacturing production, the productive record is second to none, yet those industries—ICI, the paper industry, the textile industry and many other industries in which there has been massive investment in modern plants—are going to the wall as a result of this Government's narrow monetarist policies.

There seems to be no overall strategy. There are contradictions. Let me give one example of the underlying contradictions within Government policy. The Government now say that they are stopping altogether the building of council houses throughout the country. Local authorities are not being allowed to build. On the other hand, the Prime Minister says "If you can't get a job in South Wales or Scotland, move house."

Dr. Hampson rose

Mr. Hamilton

I must make my point, because I have others to make on the theme of this debate — unemployment and training.

It is no good telling a man "Change your place of work; if you cannot get a job in Glasgow, there is one in London" if there is no house and there is only inferior education available for his family. So there are many contradictions in the Government's policy.

I am sorry that the hon. Member for Horsham and Crawley (Mr. Hordern) is not here, because he and I are members of the Public Accounts Committee. This country has abundant resources, but what matters is the way in which they are used in various areas, including education, housing and agriculture. The hon. Member spoke interestingly enough about misallocation of resources within the National Health Service. He said that there was overmanning in the Health Service and gave a global figure of £4 billion for salaries and wages. He implied that the figure was colossal and unreasonable and that it had expanded indefensibly over the past few years. Much of that was due to the reorganisation carried out by the previous Tory Government, but I shall let that pass.

The hon. Member went on to talk about the misallocation of resources in local authorities. Local authorities provide all kinds of services and jobs for the purpose of helping the old, the sick, the disabled and the underprivileged sections of the community. He talked about other services, but I want to concentrate on the Health Service, because it will help in the comparisons that I am making.

The Public Accounts Committee has been told that the Ministry of Defence is now producing a torpedo for use by the Navy and the Air Force. The present estimated cost of that one weapons system when in full production and use is £970 million.

Mr. Campbell-Savours

A public scandal.

Mr. Hamilton

That is not yet working, and no one wants it. None of our allies is interested in it, and now we have discovered that our North American allies are producing at least as good a weapon at one- quarter of the cost.

The Secretary of State for Defence does not say to the Cabinet "We must cut our coat according to our cloth." Many Conservative Members do not say about defence what they are saying about education, unemployment or many other subjects, such as housing. What they say is that, whatever the straitened circumstances of the nation, we must continue to provide Sting Ray and another £10,000 million-worth of equipment for defence. Do the 2 million—and soon 3 million—unemployed that they seek to defend appreciate the spending of nearly £1,000 million on a weapons system that no one wants?

Mr. Douglas Hogg (Grantham)


Mr. Hamilton

I shall not give way, as I am on an important theme.

The Government keep prating on about no alternative policies being available, but what they mean is that no alternative policies are available that they are prepared to accept. But there are alternative proposals, and I shall give one or two of them.

The Secretary of State for Employment made his statement on Friday about the community environment proposals and so on. They are chickenfeed. The total cost, I think, was £750 million—an increase of £250 million. Let us compare the cost of the Sting Ray torpedo with the figures for all the training facilities that the Government are proposing. I do not know what the additional cost is today. The right hon. Gentleman did not mention any cost in his proposals today. Perhaps the cost was incorporated in the figures he gave on Friday. We shall have to wait and see.

I agree with the Secretary of State that the most civilised way for us to advance is to look at the scarce resources at our disposal and then evolve the strategy by which they can be harnessed in the national interest. I am sure the right hon. Gentleman will agree that the most important of those resources are our human resources and our energy resources—coal, North Sea oil and gas. Those are the resources that we must harness in the national interest.

The most important investment that we can make is in our youngsters. It includes not only training after school but investment in nursery schools and in primary schools, secondary schools, technical colleges, polytechnics and universities. But those are the very areas which are the subject of ever-increasing and continuous cuts by this Government. It is another contradiction of policy.

It is no good expending additional resources on training youngsters who are unemployed after they leave school if they have received inadequate training at school as a result of freezing or reducing resources available to the education of children below the age of 16. Yet that is precisely what the Government are doing.

If the Government were on better terms with the trade unions, they would tell them, as I hope Labour will increasingly over the next few years, because we shall face this problem, that there must be a revolutionary change of attitude to apprentice training and all training beyond the age of 16—indeed, even before youngsters leave school. The old concept of a boy doing an apprenticeship and then being a craftsman is as outdated as the dodo, and restrictive practices right along the line must be stopped. We must get into the frame of mind where a man goes into work and is so equipped mentally and physically and is sufficiently flexible in his training as to be able to Exercise his mind to move from one job to another four or five times during his working life.

It was Shirley Williams who made a speech along these lines at Cambridge university a few weeks ago. She said that the oil and gas resources now available to us in the North Sea and the enormous revenues from them were such that there might well be a case for the Government to examine the need to channel an agreed proportion entirely into investment and training for the future, with a completely revamped national training scheme for our youngsters, because there lay the long-term salvation of the country.

Meanwhile, the short-term problem remains. Why do this Government hate and have such contempt for the poor, the sick, the lame, the disabled and the unemployed? That is the impression that they give, and that is why the increasing bitterness in the country is a frightening prospect. The divisions in the country are becoming more acute, and the fault for them lies at the feet of this Government. I fear that it may be too late now, but the sooner they change, the better for themselves and for the country.

7.32 pm
Dr. Keith Hampson (Ripon)

In the course of my remarks, I shall be dealing with some of the arguments of the hon. Member for Fife, Central (Mr. Hamilton), because I think that he demonstrated to the House a great deal of good sense when he talked about training.

However, it really is not good enough for Opposition Members to rant on about the crisis of unemployment caused, in their eyes, by this Government and about the bitterness that this Government are creating. There are long-term and deep problems in the British economy which they had to face as well when they were in Government. I referred to them during the speech by the right hon. Member for Chesterfield (Mr. Varley), but let me make the figures clearer. It was under the present Leader of the Opposition in 1975 that unemployment among school leavers went over the 165,000 mark and under the right hon. Member for Barrow-in-Fumess (Mr. Booth) that it went to 253,500.

I am sure that no hon. Member on either side of the House will begrudge my right hon. Friend the Secretary of State for Employment successfully achieving such a large sum of money to put into the youth opportunities programme. It is a massive increase in that programme, and it is a much more interesting and valuable programme than we had before under the last Government. But the scale of the problem which the youth opportunities programme is trying to meet is very similar to that put by the last Government. The scale has not grown suddenly under the present Government.

I invite right hon. and hon. Members to consider the number of school leavers unemployed as a proportion of the 16-year-old age group. Under the right hon. Member for Barrow-in-Furness, in 1977, at the highest peak of unemployment for school leavers in August of that year, it was 28½per cent, of the age group. Under this Government, during the worst month this summer, it was 31 per cent.

Mr. Campbell-Savours

That is why we introduced the scheme.

Dr. Hampson

This Government have put a massive extra injection of funds into the scheme, and, what is more, we never opposed the scheme. But, in addition, the nature of the scheme has been transformed. Thankfully, we are no longer talking about the old job creation programme, which involved such tasks as counting lamp posts in Barnsley and clearing Sunderland's beaches. We are now at least talking about constructive programmes which involve work experience and some training.

That is the positive side to which I turn, because my right hon. Friend the Secretary of State used the critical phrase Long-term problems require long-term solutions.

I hope that we are not simply concerned with easing the hardship of the transitional problems of youth unemployment—or of longer-term employment, because I suspect that both relate directly to the nature of our training provision. Taking the longer-term unemployed, as against the school-leaving problem, I believe that unemployment in that category, too, is concentrated on those with fewer skills. That will become an even worse problem as the new technologies change the nature of our industry with ever-increasing pace. It will be more and more difficult for the unemployed, whether the school leavers or those in the older age group, to find jobs whenever any upturn takes place under any Government, simply because they have not the skills.

Our training arrangements have been at best patchy over all the years of the various Acts, and Labour Governments over the period are just as culpable as some Conservative Governments. We have not managed to direct the national effort and political will into training in the way that many of our industrial competitors around the world have done. As some of my hon. Friends have pointed out, even now, in the middle of this deep recession, it is obvious that the training has been misdirected, because there are many parts of the country and many industries where there are still shortages of skills.

We heard today of a major advance. It was most refreshing when my right hon. Friend announced the creation of the concept which many of us—especially my hon. Friend the Member for Bristol, North-West (Mr. Colvin)—have been pressing for many years, which is the notion of the "open tech". Increasingly, people will have to be adaptable, as the hon. Member for Fife, Central said. It is not a matter of learning at school or during a short apprenticeship for life. People must be adaptable, and the notion of recurrent education and training, with people having the opportunity to upgrade and improve their qualifications and retrain, is long overdue, and I believe that here we see the beginnings of it. I only hope that there is no divorce in the approach to this problem between the various Ministries. The Department of Employment must liaise with the Advisory Council for Adult and Continuing Education, which already has made a major contribution to thinking in this area.

As for the problem of youth unemployment, it is not just that we have a tragedy. I believe that if we can begin to think about it positively there are some opportunities as well. We now have a very large sum of money being put into this age group. The Government's duty now is to pitch an ambitious goal for the end of the decade. They must not just concern themselves with work experience schemes of a few weeks, however much improved, for 450,000 young people. They must seek to provide an entire year involving a combination of work on the job and courses off the job. To adopt the phrase in one of the MSC's programmes, we need some preparation for working life, possibly better called a foundation year, for the entire school leaving age group—not for 450,000, but for all 600,000 school leavers. That in turn will ensure that the country is not saddled with the terrible dole queue figures which increase at certain times of the year, because those school leavers will not be included in them.

It is still an indictment, to which all Governments have contributed, that between 40 and 50 per cent, of those who leave school enter jobs where there is little or no systematic further education or training. Obviously, they learn on the job, but there is nothing systematic. The corresponding figure in Germany is 6 per cent., and even in France it is 20 per cent. That is the measure of the task that we have to face.

The notion of providing a package for a year for school leavers should, in a sense, start before they leave school. The first stage of the process must be the attitudes in the school itself, because that is where a motivation for entering manufacturing industry can be generated. Attitudes there are crucially important. Therefore, in the final year at school there is a major task on the education side of the equation to ensure that pupils are not classroom-bound but have increasing experience in various occupations outside the classroom. They can learn outside the walls of the school.

It is also important that young people acquire the basic skills of numeracy, literacy and communication generally. In that respect, the Government took a major step forward by the announcement, which some of us believe was long overdue, that there should be a new examination of a specifically vocational nature for those who stay on in the "new sixth". Such an examination will mean that young people will not have to hang around and repeat CSE and O-level courses. If there are courses with vocational ends, young people will be able to leave with specific qualifications which employers will value.

The rub lies in the cost of making an offer of a year's opportunity to an entire age group. One must think in terms of a three-way provision. For industry we must have a carrot-and-stick approach. If we are to ensure that training places are available, the business man and the industrialist must be given an incentive. We cannot assume that industry is prepared to bear the entire cost of training. Most training in Britain has always been based on that assumption. Industry simply cannot take it, because it affects profitability.

A certain penalty ought to be involved. In terms of the levy for training boards, another condition could be built in. For instance, for every 40 employees a firm could be required to take one school leaver, with a certain levy exemption as an incentive. An employer might perhaps pay only half the regular national insurance contribution for a person employed under the scheme.

The Government can charge something because industry will have the labour and some productive effort. However, the productive effort will not be full-time. That is another part of the equation. An employer engaged in such a scheme should not have to face union basic wage rates. Increasingly, over the years, unions have negotiated for higher and higher juvenile rates. We should move to the German pattern under which both sides of industry agree that trainees are paid about half the going rate. We need a special rate for a special year for a special opportunity. That is the carrot-and-stick approach, with Government funding of the courses.

We do not need to think in terms of large grants for the young person. It is not necessary to start at £30 or £40 as we did with the job creation programme. We could pitch the rate at slightly over the supplementary benefit rate, for it is not only the money that counts but the attractiveness of the package. Not only will the package be attractive to the young person. It will become attractive to the employer who will increasingly look for recruits among young people who have been involved in such preparatory schemes. Young people who do not take part will be aware that they will suffer in the job market and in terms of the opportunities available. Indirectly, a tremendous incentive will build up.

Obviously, there will be a cost. One cannot close one's eyes to training being expensive. My real doubt about today's announcement is whether the Government are being really logical in calling, as they rightly did, for a radical new approach to training. The Secretary of State used the phrase "training revolution", but the Government say that at the same time we should extend the voluntary arrangements with certain boards. The proposition is worthy of reconsideration. It does not fit logically into some of my right hon. Friend's earlier statements.

No successful economy anywhere leaves training to simple market forces. It is wrong to assume that business can cope on its own. By its nature, industry thinks in the short term. It is vulnerable to short-term pressures. Today, in the midst of the recession, the number of apprenticeships is falling. We have all said that we need more apprentices, because we must not have bottlenecks when the upturn arrives. However, we cannot expect business men to take on more apprentices in such times as these.

We need some mechanism or instrument to ensure that the process is guaranteed, that the industrialists take on the young people and that the foundation scheme works. To leave the mechanism to voluntary methods is to leave the system as it is. We have had many years of voluntary arrangements. In the early 1960s we talked about the need to change the character of apprenticeships and to put the emphasis in qualifications rather than time served. In 1978 an agreement was reached between the CBI and the TUC to start changing apprenticeships along those lines. That was a voluntary arrangement, but where are the results? The Government have a duty to intervene and not to leave the system to voluntary arrangements.

We drift while other countries such as Germany and France, and even Hong Kong and Japan, organise their training programmes coherently through State agencies. The Government should view the wider national interest. They should not assume—and I hope that they do not—that the future training needs of the nation are to be met by the collective efforts of individual companies. Employers tend to recruit and train for their "here and now" requirements, whereas the changing pace of technology makes it necessary to find people to train for future jobs and skills which are unforeseen or even unforeseeable. On the other hand, statutory requirements should not be too prescriptive.

I suspect that room for slimming down the Manpower Services Commission still exists. It would be better to do that and preserve the industrial training boards. I should prefer the MSC's regional offices to be reduced. Perhaps the headquarters operations—the training division—could be reduced. At all costs, we must ensure that we have some instrument such as the industrial training boards, because they are at the cutting edge, at the training front. Limited as the money is, it must be put as close to the point of training as possible. That is the importance of ITBs. The training boards have industrial training advisers. They are out and about in industry. They know the local business men and talk the language of industry. The bureaucracy of the MSC is less important.

Perhaps some restructuring of the training board system is necessary. Some boards could go and others merge, but there must be some such instrument. In one sense we need more of them. Whole sectors of the new growth areas for jobs are not covered by them. Within four or five years there will be more white collar jobs than manual jobs, and yet huge sectors such as banking, insurance and information retrieval services do not have training boards. Training is essential in those areas.

In the training boards we have an instrument which can be the key co-ordinating arm at the level which matters. They can ensure the placement of young people and that standards are of the right kind. They can develop new initiatives. For years we have said that we must have more training. We cannot get away with exhortation. We must have the mechanism for implementation. We must recognise that training for the future growth and success of our nation requires spending money now. Training is not cheap, but one cannot avoid the conclusion that it is an investment in human ability and potential and a way of maximising that ability. My right hon. Friend the Secretary of State today announced major steps to achieve that. He is correct in suggesting that a new training framework is long overdue. I urge my right hon. Friend to consider taking action along the lines that I have sketched today. Many of us await very keenly, the Green Paper that will spell out the Government's ideas.

7.50 pm
Mr. John Evans (Newton)

This has been a curious debate, particularly in respect of the contributions by Conservative Back Benchers. One after another they have begun by swearing allegiance to the Prime Minister and her policies and saying that they are the only solution to the country's problems, and they have spent 10 minutes kicking holes in those policies with considerable skill. The exception to that was the hon. Member for Ripon (Dr. Hampson). He did not seek to defend the Government's policies. He made an excellent speech to which we listened with interest. We know of his great interest in youth education and training, and we share and like his views. How his approach will go down with the Prime Minister is, of course, a matter for his political future.

The trouble with unemployment debates is that they invariably attract on the Government side the more caring, the moderate Tories. I do not like the offensive term "wet", and I leave that for the use of the Conservative Party's Right wing. The moderates are offended by our remarks on the Government's policies because they do not completely accept those policies and they therefore resent our vicious attacks upon them. I suspect that those moderates on the Conservative Benches are as concerned as we are about the fact that 2,162,874 people are registered as unemployed. The background to the rise in unemployment since May 1979 has been the Government's actions and economic policies. They cannot deny that if they seek credibility, particularly among those who suffer so grievously from unemployment.

We are all worried, too, about the degree of hidden unemployment, particularly among women and among students who cannot register for benefits. We are also concerned about the extent of short-time working. No fewer than 412,000 people are being supported by the Government's compensation scheme. We feel concern about how long that scheme will be continued. An additional 275,000 people are kept in employment or kept off the unemployment register by the Government's training and redeployment schemes.

Mr. O'Neill

Will my hon. Friend concede that the figure of 412,000 on short-time working would be more meaningful if we knew how many were working three days a week and how many one day a week? The people who are working one day a week are just one step away from the dole queue.

Mr. Evans

I take my hon. Friend's point. If a company is working a four-day week, it is suffering from 20 per cent, unemployment. If it is working one day a week, the unemployment rate in that company is 80 per cent.

The TUC has estimated that the true figure of unemployment—the number who would work if work were available—is greater than 3 million. The official statistics do not enable us to quantify and confirm that figure.

When unemployment was rising under the Labour Government, many of us then on the Government Benches were highly critical of our Administration on that score. One of the problems with which our Government wrestled was that the numbers in employment rose every year until 1979. However, since May last year the numbers in employment have dropped. In June 1979, the end of the period of the Labour Government, 22,825,000 people were in employment. In June this year, the latest date for which figures are available, those in employment numbered 22,409,000. That represents a drop of 416,000, which indicates the degree of hidden unemployment.

Another frightening aspect is the number of redundancies in manufacturing industry. Whatever divides us in this House, we are united over the need to build up a prosperous manufacturing sector. The wealth of our society is based upon that. The Manpower Services Commission labour market quarterly report for November 1980 states: The decline in employment in manufacturing industry … continues to accelerate. Following the loss of 95,000 jobs in the first quarter of 1980, the rate increased to 140,000 in the second quarter and the latest figures show a drop of another 156,000 in just two months between June and August (seasonally adjusted figures), bringing the total fall in the 12 months to August to half a million. This is a much faster rate of contraction than in previous recessions.

It is against that background that one wonders at the mentality of the Government, especially when the Chancellor introduces, as he did on Monday, a mini-Budget which can only serve to deepen the recession. I do not seek to quarrel tonight about whether the Chancellor misled the House about the employer's national insurance surcharge. That matter will be settled on another occasion. However, when my right hon. Friend the Member for Leeds, East (Mr. Healey), as Chancellor, imposed in 1977 an additional 1½per cent, surcharge on employers, I was highly critical of him. I do not have the Hansard quotation before me, but I well recall my speech. The Conservatives divided the House on that issue, pointing out that the net effect of the increase would be to increase unemployment.

Now, the present Chancellor is increasing the surcharge; and he, too, will be hitting employment. Whenever employers are subjected to extra charges, they tend to ask their existing work force to work overtime rather than take on extra workers. I do not criticise them for that. Their motive is to reduce their national insurance bill. The Chancellor's statement on Monday will serve only to worsen that problem.

We hear a great deal from the Conservatives about the strength of sterling, and we now know that export orders are falling. The Prime Minister and the Secretary of State used to boast that all was well because export orders were holding up in manufacturing industry. It was self-evident that the deliveries were the result of orders that had been placed in the previous 18 months or two years. The evidence in all the financial journals and in the reports issued by the CBI and financial experts indicates clearly that export orders are falling rapidly.

There have been many references to energy prices. We know that those prices have had a cataclysmic effect on the paper industry. For example, 1,500 jobs have been lost at the Bowater factory on Merseyside. That will add to the general misery on Merseyside. The textile industry has been decimated. In a forecast that was issued recently, the textile unions estimate that 20,000 more jobs will disappear from the British textile industry in the next 12 months, many of them in the North-West.

Mr. Parry

My hon. Friend has rightly drawn attention to the problems facing the textile industry. Is he aware that the Courtaulds factory at Aintree on Merseyside is now under great threat?

Mr. Evans

I recognise what my hon. Friend says. I am sure that when we have the demonstration in Liverpool—it will be one of the largest that Britain has ever seen—many thousands of Merseyside workers and ex-workers will participate.

That leads me to the total disaster of the regional policies that we have suffered under this Government. One wonders whether the Secretary of State for Industry grasps the huge problem that he has created in the regions. I shall refer to the North-West, which, unfortunately, has had to bear the brunt of the cutback in the Government's expenditure on regional policies which was announced in July 1979, when about £230 million was cut from the regional policy programme.

It has been a wonderful exercise for the North-West! This month there have been an additional 10,706 declared redundant. We have reached the new all-time record of 311,952, which represents 10.9 per cent, of the employed population in the North-West. I probably do not need to remind the House that until comparatively recently the North-West was the cradle of employment in Great Britain. It had great engineering and manufacturing enterprises that supplied a tremendous amount of wealth to the country. Those enterprises are fast disappearing. There are now no fewer than 113,000 more unemployed in the North-West than there were 12 months ago.

Surely, no Conservative Member can suggest that the Government's economic policies have not been responsible for the cataclysmic growth of unemployment in the North-West and in other regions. The debate has been dominated—at least, from the Opposition Benches—by members of the Labour Party, the Liberal Party or the Scottish National Party who represent the regions. They have all rightly drawn attention to the appalling problems that the regions are facing.

I sometimes wonder whether it would not have done some members of the Cabinet good in terms of their political education if, like me, they had suffered some periods of unemployment and had known what real unemployment meant. Perhaps they would have benefited from being in receipt only of unemployment benefit with a wife and children to support. It might have done them good to go after job after job in shipyards and ship repair yards on Tyneside only to be told "There is no work today and there will not be any work this week." They should have heard those words and repeated that exercise week after week until finally a ship sailed up the Tyne and they managed to get a job. That might well have done them good. If they had gone through those experiences, they would understand the humiliation that results and the great depression that settles on individuals.

I tell the House that there will be a growth in mental illness. There will be more suicides. There will be increased crime because of increased unemployment. All the trends indicate that, unless the Government change their policies, there will be a considerable increase in unemployment, both registered and non-registered, in the coming year. Those on the Conservative Benches who recognise the fallacy of the Government's policies must recognise that they should do something to change the direction that the Government are taking.

The hon. Member for Dorset, North (Mr. Baker) asked for constructive policies. I did not notice much that was constructive in his speech. We on the Opposition Benches have offered constructive advice to the Government since they were elected. However, the Government have totally rejected our policies and standards. It is no good asking us for constructive criticism. It is clear that the Government will not listen. It is for those on the Tory Benches to get constructive policies across or to shift the present holders of office.

Youth unemployment is an especially serious problem. I served an apprenticeship. I went into a shipyard when I was 14 years of age, which was normal for youngsters on Tyneside. I worked as a boy labourer, an office boy and a tea lad until I was 16 years of age. I then started an apprenticeship and remained an apprentice until I was 21. No one can convince me that there needs to be a revolutionary change in the apprenticeship pattern. It is not necessary to tell the trade unions of that. The problem lies not in creating a revolutionary change but in creating jobs for youngsters to fill.

I listened with interest to what the Secretary of State said about his new programme. He turned to the legislation that would allow training boards to be abolished. I accept that he did not say that they would all be abolished. Why does the right hon. Gentleman constantly attempt to placate the hard-liners on the Right wing of the Conservative Party? We have all read the comments that have appeared in the press recently from some of his hon. Friends who want to abolish not only the industrial training boards but the MSC. I ask all hon. Members to think again and to put pressure on the right hon. Gentleman not to follow that course.

No one suggests that there should not be a continuing review of the work capabilities of the training boards. We all accept that some of the boards are good while others are not. If there are boards that can be identified as poor, surely their standards should be improved so that they compare with the standards of the boards that are classified as the best. I suspect the real motives that lie behind the policy that the Secretary of State has set out. At some stage there will be a Cabinet reshuffle and there will be a new Secretary of State for Employment. That Secretary of State will have legislation in his hands that will allow him to abolish all the training boards.

It is obvious—the hon. Member for Ripon spelt this out much better than I can hope to do—that we cannot rely on voluntary service. It is nonsense to pretend that that is possible. If training is required for our young people, it will have to be excellent training that is on a par with the best training in the world.

I ask the Secretary of State to consider again the many problems that lie in the training workshop programmes. All of those with which I am familiar are doing excellent work. One year is not sufficient. The instructors and the principals to whom I have spoken at the training workshops have said with force that during the last three of four weeks of a boy's or girl's 12-month period of training it is heartbreaking to hear the trainee beg morning after morning to be kept on in the workshop. The instructor cannot keep them on. When 12 months have passed, they go out of the door to rejoin the dole queue.

That is rather like leading the youngster to the promised land only to tell him when he thinks he has reached it that he is to be pitched out of the door on his face. I note that my hon. Friend the Member for Newcastle-under-Lyme (Mr. Golding) is in his place. At one time my hon. Friend was Under-Secretary of State at the Department of Employment. I put it to him on a number of occasions that we would face the situation when the State would have to accept responsibility for the training of all young people. I repeat that I cannot understand a system that is prepared to give academic youngsters substantial grants for further and higher education at colleges and universities but which says to working class youngsters "We are sorry, boys and girls. We think an awful lot about you, but your place is in the dole queue or, with a bit of luck, in a training workshop scheme." That is where the revolution in the training of youngsters has to come.

A ridiculous situation exists in local authorities. Because of Government policies, every local authority is increasing its charges for leisure facilities. In many cases the price is being increased beyond that which even those in work can pay. Facilities are being put completely beyond the reach of the unemployed. The necessity to train for leisure because of the advent of the new technology is frequently discussed. The problem is here now for thousands of young people. Surely, it is not beyond the wit of the Government to recognise that, with hundreds of thousands of youngsters with no work, with time on their hands and nothing to do with it and with local authority leisure facilities available, the two can be married together. Youngsters should be allowed to use the leisure facilities, if necessary at a reduced rate. It is better for them to enjoy football, tennis, squash or whatever it is than to be left to their own devices, to roam the streets, get into trouble and become vandals and thieves. Part of the problem of our growing vandalism and petty crime is due to the growth of youth unemployment.

The Government have been in office for 18 months. Their policy, style, proposals and economic strategy are in a complete shambles. That was proved by the fact that the Chancellor had to come to the House last Monday to attempt to explain away his sharp right turn. It is up to Conservative Members to make it clear to their Government that enough is enough. It is up to them to force their Front Bench to do a U-turn or elect a new leader, unless they wish to see social unrest.

8.12 pm
Mr. Kenneth Carlisle (Lincoln)

I am glad of the opportunity to take part in the debate. The problem of jobs has become a central one for our society. I believe that in the House we all agree that it is one that we have to solve. It is the major cause for concern in my constituency. I doubt whether any hon. Member has not in the past year come face to face with the despair that the grim search for a job can bring.

The hon. Member for Newton (Mr. Evans) does no service to the House when he states that our Government have no concern for unemployment. They are deeply concerned. The compassion and worry on the Conservative Benches are equal to, if not greater than, those on the Labour Benches. The hon. Gentleman and the Opposition should realise that we do no service to the unemployed if we hide behind cosmetic solutions. Such solutions can bring only short-term relief. The British people want a Government who will pursue a real and long-term cure.

None of us can doubt that the main cause of unemployment is our economic failure. That has been mentioned many times. Indeed, the hon. Member for Newton accepted that. We have had a long relative economic decline, but the problem is that it is in danger of becoming absolute. Only if we reverse the threat of absolute decline will any Government begin to halt the growth in unemployment.

Our car industry has been much quoted as an example of the decline. Ten years ago we produced roughly the same number of cars as the French. In the past decade they have increased their production to 3 million but ours has declined to 1 million. We have to face the fact that if we were producing an extra 2 million cars now we should have many thousands of extra jobs. Therefore, productivity and our ability to compete lie at the very centre of our jobs problem. It must be the central task of any economic management to create the conditions in which people in this country can compete.

We have had one or two proposals to that end from the Opposition. Indeed, the Shadow Chancellor's solution is to boost public spending massively. As he said the other day, he is prepared this year to borrow £17 billion, and he would bring interest rates rushing down. That would help in the short term, but it would be at a terrible long-term cost. In two years, with such a policy inflation would be higher than at any time in our history. Business would not be able to cope with it, many businesses would be lost and the despair of unemployment would be even more widespread.

The Government must stick to their prime policy of reducing inflation. Inflation is certain to be in single figures next year. The real economic battle that we face is to ensure that in two years inflation comes down from about 9 per cent. to 5 per cent. or less. The danger that we face if we reflate too quickly now is that inflation will rise to 15 per cent. again, with all the problems that that entails.

Mr. Foster

The hon. Gentleman seems to be arguing that because the Shadow Chancellor said that he was prepared to allow the PSBR to go up to £17 billion, that would inevitably result in increased inflation in two years. Does not the fact that the PSBR will be at £11½ billion imply, by the hon. Member's own argument, that we are in for a heavy dose of inflation again next year?

Mr. Carlisle

I am grateful to the hon. Gentleman for pointing that out. That is the danger that I wanted to stress, and it is the very danger that the Shadow Chancellor was leading us to by suggesting that we should increase public spending massively. That is why it is so important for the Chancellor to get back on course, bring down the rate of inflation and make certain that it stays down. Low inflation and the world that will then be emerging from recession can help to establish the essential conditions for lasting economic growth and the creation of more jobs.

Another encouraging aspect that has arisen from the tough times that our industries are undergoing is a real change in attitudes. Pay settlements are now realistic. Even more important, work methods have become much more flexible than they have been for decades. Therefore, the prospects for increased productivity will never have been better when we come out of the recession. The prospect for economic stability and the new realism that the Government have started to create, if adhered to, hold out better prospects in the long term for the British people than any other proposals.

However, while the Government are right in not sacrificing their long-term goals, we have to recognise that we have a short-term crisis. Technological change will bring further problems of unemployment. That is why I greatly welcome the measures that the Government have announced in the past few days. They are important. I congratulate the Ministers at the Department of Employment on the realism and energy that the measures show. They demonstrate that they are confronting the crisis. After all, nearly an extra £250 million is being put into unemployment measures. The total budget has been nearly doubled at a time when nearly all other areas of government are being cut back.

I do not wish to dwell on the details of individual schemes—we have already heard them many times—but I should like to isolate certain aspects. First, I welcome the fact that the youth unemployment problem has been firmly grasped by the expansion of the youth opportunities programme. It is helped now by being more rapid and comprehensive. It will lead to an extended period of training for the young.

Secondly, the community enterprise programme will extend help to the long-term unemployed of 18 years of age and over. This is a serious problem which we must tackle.

Thirdly, I welcome the extension by a further three months of the temporary short-time working compensation scheme. This has proved invaluable in my constituency. It has helped hard-pressed engineering businesses to hold their work forces together. It is vital to keep work forces together if we are to have productive ability when the recession ends and demand increases. In the long term, it is cheaper to hold together a good work force than to train a new one. I believe that in the new year the Government may have to consider extending this scheme in order to hold together their valuable work forces.

I am disappointed in only one aspect of the package—that the qualifying age for the job release scheme has not been reduced to 62. This scheme genuinely removes people from the unemployment register. I know that cash is tight, but I hope that the Government will bear this point in mind for the future.

Three aspects of the scheme deserve special mention. First, the scheme is imbued with a consistent and, indeed, fierce commitment to training. I am encouraged by this dedication because our hopes for economic regeneration rest on having people with sufficient skills.

Secondly, there is an awareness that the hopes and frustrations of the unemployed can be harnessed to community work to attack, for example, the physical decay in our cities. We should recognise that the unemployed can contribute to so many of the jobs which need to be done.

Thirdly, I welcome the determination to involve even more the voluntary sectors. I understand that these sectors are anxious to help. I ask my right hon. Friend the Secretary of State to ensure that the Manpower Services Commission is flexible when it is approached by firms in the private sector to consider schemes.

I believe that the Government are facing the grim consequences of unemployment. The package produced by my right hon. Friend during the past few days offers real help. At the same time, the Chancellor is right not to throw away the long-term struggle against inflation, because inflation is in the long term the greatest destroyer of jobs. The British people would have no truck with short-term relief if it involved running away from the toughness of a long-term and lasting solution.

8.24 pm
Mr. Frank Haynes (Ashfield)

I am now convinced that the Tory Members do not have a clue as to what they are talking about. They do not understand poverty and unemployment because they have not experienced those problems. I have. I can remember my father being out of work, having a newspaper on the table as a cloth, having holes in my shoes in which I had to put cardboard and having clothes handed down from my older brother. I lived in poverty. Many Tory Members were born with silver spoons in their mouths. Is it any wonder that they do not understand poverty and unemployment?

In debates on unemployment, particularly at employment Question Time, I have heard Tory Members give voice to expressions such as "I believe", "hope", "if" and "a major step forward". As regards a major step forward, the situation gets worse, because on each occasion when figures are announced, as on the most recent occasion, more than 100,000 are added to the unemployed register. The problem will get worse.

I am concerned whether this Conservative Government are doing the job for which they were elected by the people of the nation. I get the message loud and clear in my constituency. It has now returned a Labour Member. It had a Conservative Member for two years, but they soon got rid of him.

Much has been said about youth unemployment, but it has been used as a cover-up for the general situation. I accuse the Secretary of State for Employment of using youth unemployment as a cover-up for the full situation.

I recently visited local courts. I was a magistrate before I became a Member of the House. I still have a contact in the courts—the clerk to the justices—and he furnished me with figures dealing with the appearances of youngsters under 17 in the juvenile court and of youngsters aged between 17 and 21 in the magistrates' courts. The figures for appearances in court have nearly doubled. I blame this problem on the Government's employment policy. Yet the Government talk of law and order. They are encouraging youngsters to get into trouble. Youngsters are being paid out of the national purse for doing nothing—for being bone idle.

Before the election, the Tory Party said that it would do something about malingerers. We have the machinery available to deal with malingerers. For example, the Minister for Social Security introduced 1,000 storm-troopers to deal with malingerers. One Saturday morning, a chap literally dragged himself into my surgery, having left his invalid car outside on doble yellow lines. I asked "What is your problem?" He said "I had a serious accident eight years ago in the mining industry. I have had many medical examinations and exercises and seen all kinds of consultants, and they told me eight years ago that I would never work again." But, because of the policy introduced by the Minister for Social Security, that fellow was told to get a job. We said that genuine cases would be hit, and that is what is happening.

I maintain that we are wasting our most important national resource—the person who goes to work to create the wealth of the nation. Yet we have over 2 million unemployed and are seemingly on the way to 3 million unemployed. I believe that the Government are using unemployment as a weapon to create fear. I recall some of the comments which were made about the trade unions in the pre-election period. I am a member of a trade union. For many years I had a large shovel in my hand and grafted at the coal face. I did not have a silver spoon in my mouth. Therefore, I know what work is about and I know what unemployment and poverty are about. I believe that I served my apprenticeship in that regard.

The Government are using unemployment to create fear among the work force and to get control of the trade unions. I warn them that it will not work. The start will be made in Liverpool on Saturday. The people of this nation will rear up and the Government will not know what has hit them. There will be a bloodless revolution, and the Government will get the message loud and clear that the people are not prepared to accept policies of this kind, because they are totally unfair.

I should also like to refer to the firemen's dispute and the promise that was made to them with regard to their 18.8 per cent. increase. The Home Secretary had the audacity to move troops and green goddesses while the FBU and the employers were sitting around the table negotiating. How fair is that? One should expect trouble with the trade unions when a Government act in that fashion and try to stir up trouble.

I turn to the question of business. The Secretary of State for Trade is sitting on the Front Bench, and I hope that he is listening carefully. A firm in my constituency which makes bedroom furniture currently employs 40 people. The factory is located on a development site provided by the county council in Nottinghamshire. The owner took out a mortgage with the county council. Not many days ago, he was told that there was a clause in the mortgage under which he would be surcharged 2 per cent. unless he paid his mortgage regularly. But, because of the Government's policies, the customers to whom he sells his products cannot pay their bills promptly, and he is lumbered with a 2 per cent. surcharge by the county council.

I wrote to the Secretary of State for the Environment because this matter relates to his Department. The chap wants to expand and at the same time take on four school leavers. That is an incentive to four youngsters leaving school. But the right hon. Gentleman acted in the same way in which he has always acted. The sooner that we get rid of him, the better. He said that he could not do a thing, yet Ministers, even the Prime Minister, stand at the Dispatch Box weeping buckets of tears. I once offered the right hon. Lady a handkerchief, but she refused it.

The point is that industry needs help. Ministers keep saying that it will all come right in the end. If we go on much longer, it will be too damned late and the nation's industrial base will be ruined. We shall all be out of work, including Members of Parliament who have cushy jobs and nice salaries. The Government have pushed people out of work and have forced them to claim benefit.

There may be grins on the faces of Conservative Members, but this is a serious matter. Our elderly people have made their contribution, yet the Government are robbing them blind. They have robbed them of two weeks' money. This is the first opportunity that I have had to mention that fact. I feel extremely hurt about what the Government have done to many people who cannot possibly help themselves, such as invalids who find it difficult to get about.

We talk about giving a certain percentage of disabled people a job. A lot of firms in my constituency, which I salute, fall over themselves to help the disabled find a job. At the Metal Box factory, 4½ per cent. of the work force is disabled. The point is that we are now reaching the stage where the disabled are being told "Sorry, but we cannot even take on the others. In fact, we are having to lay off because of Government policies."

At long last, the CBI is right, but it should have made its statement a long time ago. The Government must change their direction. There is a little manipulation now and again, and the words "a major step forward", "if and "hope" are used, but the situation grows worse. The whole House should support our amendment, and we might then move in the right direction.

8.35 pm
Dr. Brian Mawhinney (Peterborough)

The House will have listened with interest to the hon. Member for Ashfield (Mr. Haynes). Those hon. Members who served with him in Committee on the Health Services Bill learnt to appreciate the sincerity of his views, even though some hon. Members thought that he sometimes overstated his case.

I welcome the proposals of my right hon. Friend the Secretary of State on youth unemployment. No doubt like many other hon. Members, I wrote to the Secretary of State urging him to increase the budget of the Manpower Services Commission and to deal with the problem of youth unemployment. I am glad that he has responded, and I welcome this change. I also welcome the increase because I and other hon. Members who have taken an interest in the matter know that many young people who were unable to find jobs and who took part in the youth schemes got jobs as a result. That in itself makes an expansion of the programme a measure that should be, and has been, supported.

The hon. Member for Newton (Mr. Evans)—I am sorry that he is not present in the Chamber now—pointed out that the high level of unemployment today was simply a consequence of the Government's policies. Hon. Members on both sides of the House know that that is a simplification of the truth and a reflection of at least three things. The first is the failure of policy, perhaps by Governments of both parties in years past, whereby Governments spent money that they did not have. That has now caught up with us. Secondly, the problems that we face today are a consequence of poor management over many years. I doubt whether there is any hon. Member who could stand up and say honestly that in his constituency people have not been laid off from firms that have been overmanned for years and that management has not taken steps at the appropriate time to trim the work force in order to keep competitive. That has been true in my constituency and I am sure that it is true throughout the country. Thirdly, and the consequences of which we know least about, is the intransigence and backward-looking attitude of the trade union movement. I speak as a member for 10 years of a trade union that is affiliated to the TUC. Essentially, the trade union movement wants to be negative rather than positive. It keeps saying "No" when occasionally the interests of its members would be better served if it were to say "Yes".

Mr. O'Neill

Some of the restrictive practices that the trade union movement has been jealous of preserving are a direct result of the experience of the movement in the 1930s. To return to those conditions would merely start again the resentment, bitterness and worry of trade union officials when they are confronted with requests to reduce manning levels in the years ahead.

Dr. Mawhinney

Yes. I certainly accept that in some cases that is true. I do not accept that in all cases it is true, just as I would not accept, as I have indicated, that all management is good and that all workers are bad. Both sides of the House must face that fact. There are restrictive practices which have grown out of bitter experience, but there is a backward-looking aspect to the trade union movement in Britain which one does not find in, for example, the United States, of which I have some small experience, where there is an attempt to be affirmative and positive to the benefit of the members of the unions. Therefore, it is not fair or true to say, as the hon. Member for Newton tried to say, that the consequences of Government policy are solely responsible.

Mr. Joseph Dean (Leeds, West)

As a lifelong trade unionist, twice in my life I have experienced the results of work shedding. How does the hon. Member explain that hundreds of thousands of jobs have been phased out under rationalisation programmes in my industry, engineering, by agreement between trade unions and the employers on the basis that the rationalisation would save the jobs that were left, but under the present Government even those jobs are now going west?

Dr. Mawhinney

The answer is simple. It is that the industry is still not competitive. Therefore, management and unions together must find other ways to combat the uncompetitiveness of British industry. That is the essence of the problem facing this country today.

I was interested in the Chancellor's proposal on Monday to increase the employee's contribution as a means of contributing to satisfying the needs of those who are not fortunate enough to be in work at present. As I understood it, he made it clear that this was a measure that was being produced in difficult circumstances, and it has an element of fairness about it which I think will appeal to the British people. I have refelcted upon the proposal and I hope that at some point the Chancellor will talk a little more about it.

Mr. Campbell-Savours

What about the employers?

Dr. Mawhinney

The public sector borrowing requirement has risen, as it must do at a time of recession, and I welcome the decision to relax the controls on the PSBR. When people stop receiving unemployment benefit at the end of 12 months, they move on to receiving supplementary benefit. As hon. Members know, these benefits are financed in different ways. Unemployment benefit is financed 85 per cent. by employers' and employees' contributions to the national insurance fund and by a 15 per cent. contribution by the Treasury to that fund, whereas supplementary benefit is financed entirely by taxation. Therefore, if people are receiving unemployment pay through the national insurance fund, the pressure on the PSBR is less than it would be if they were receiving supplementary benefit.

If the pressure is on to reduce the PSBR, as we know it is and which at least Conservative Members support, I wonder whether the Chancellor is contemplating an elongation of the period for which people will be eligible to receive unemployment pay—that is, extending the period beyond 12 months. I believe that this would help him in his determination to keep down the PSBR and, therefore, to reduce inflation, which in turn would help to stimulate the recovery of the economy out of the recession in which we find ourselves. I have not heard my right hon. and learned Friend the Chancellor reflect on these matters, and I should be interested to hear that.

I accept that the imposition of an extra £1, on average earnings, on the employee's contribution will have an effect on the "Why work?" syndrome. The hon. Member for Ashfield made a fair point when he said that, at a time when we have 2 million unemployed, our major concern should be the creation of productive jobs and not those who may, or may not, be malingering.

I pay tribute to my local MSC office in Peterborough. Despite the unqualified success of the Peterborough new town development and the millions of pounds that taxpayers have spent, unemployment in Peterborough stands at about the national average. I speak, therefore, with some knowledge of the needs of the young who cannot find a job. I pay tribute to those in my area who have worked so hard to produce such an effective organisation.

I visited the people at the MSC office some days ago. They have a waiting list of those whom they would like to place on schemes. As the Secretary of State has made more finance available, I hope that many young people will find a place on the schemes. If my memory serves me right, 70 per cent. of the young people in my area who went on MSC schemes have found jobs. I look forward to the day when the waiting list in Peterborough is reduced.

There is a need for much closer liaison between the MSC and the Department of Education and Science. Schools seem to produce young people—not a majority—who are not equipped to find jobs in the market place. Their inability to read, write or count to the required standard acts as a barrier. In many cases, school leavers have no idea of how to apply what they have learnt in school. I refer in particular to mathematics and its application on the shop floor. School leavers do not know what a thou or a millimetre is. They do not understand the importance in engineering of something being 3 millimetres and not 4 millimetres. They have no concept of how to apply what they have learnt in school.

Hon. Members have spoken about the importance of training and about the importance of application. The hon.

Member for Fife, Central (Mr. Hamilton) spoke about the need to be adaptable. We should consider whether the teaching of mathematics could be adapted to enable young people to apply it to the shop floor.

My constituency is fortunate, because it has one of the best industrial units for the disabled in the country, namely, the Westcombe industrial unit. The Minister visited the unit and saw it in operation. It employs more than 50 disabled people. It operates profitably and competes in the market place in terms of price and quality. It does an excellent job. However, when the pressure is on, it is those such as the disabled who suffer.

I urge the Minister to consider establishing satellite disablement centres round the main industrial unit. There is a certain administrative cost in setting up and running an industrial unit. Disabled people have to travel some distance in their cars in order to work in such units. It would be much more sensible and acceptable if satellite units could be administered from the centre in a way that would cost less and that would maximise protection for the disabled against the pressures of our economic climate.

I welcome the Government's measures. They are a useful step forward. Like other hon. Members, I regret that so much human talent is not being used, but, despite what Labour Members say, I believe that the thrust of the Government's strategy is right and I shall continue to support it.

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

We have had an interesting debate, particularly in the light of the responses of the Under-Secretary of State for Employment, who has regularly nodded agreement with the comments of his hon. Friends and some of the remarks of my hon. Friends. Those comments have related to the need to increase the resources made available to the Department of Employment as against other Departments.

Perhaps we ought to feel lucky that we have the present Under-Secretary and the Secretary of State for Employment at the Department. They have had enough political clout in the Cabinet, against the power of other spending Ministers, to establish firmly in the minds of their colleages the need to increase the resources available to the Department of Employment.

My hon. Friend the Member for Newton (Mr. Evans) wisely said that the Government had shown inflexibility, but it should be noted that the only Department that has willingly accepted any element of flexibility over the past 15 months is the Department of Employment. No sooner were the Government elected than they set about the systematic destruction of the special measures programme constructed by the previous Labour Government. There have been reports, even up to today, of what took place at that time, when the efforts of the MSC were being undermined by instructions from the Department of Employment. People were being sacked as they were placed in the new schemes under the special projects programme. In the past four or five days we have seen a clear U-turn in the attitude of the Government towards the special measures programme.

Like most other hon. Members, during the recess I approached industrialists and trade unionists in order to establish the response of British industry to the monetarist programmes and strategies of the Government. From my conversations, three aspects come to mind.

The first is the complaint of British industry that the Government's monetarist strategy and its effect on exchange rates is destroying the opportunity for British manufacturing industry to export. Figures coming through show a dramatic turndown in the availability of business for British exporters. The economic effects of that reduction in order loads and capacity will not be felt for perhaps another 18 months or two years, and it may be that a Government of a different political complexion will have to deal with the damage inflicted by the present Government.

The second matter drawn to my attention was the fear of industry that its work force would be decimated as a result of the monetarist strategy. Industry complained of the prospect of having to make redundancies or introduce short-time working compensation scheme arrangements for workers. It was interesting that the Secretary of State for Employment said in his recent statement that the short-time working compensation scheme payments were to be reduced from 75 per cent. to 50 per cent. Already, in my constituency there are cries from industrialists who say that firm agreements with trade unions on short-time working compensation scheme arrangements are now being undermined and that industrial relations in those factories are also being undermined by the policies of the Government.

Thirdly, they refer to the collapse of markets. The downturn in consumption at home and the permanent "sales" that are taking place in stores like the Army and Navy Stores in Victoria Street and throughout the retail trade in the United Kingdom are only a reflection of the deep problem that exists for British retailers and for the British manufacturers which supply those markets. Those were the areas of concern.

In reply, I pointed out that the Government, in the Queen's Speech, might be willing to introduce measures to ameliorate the position of those industrialists. That was not the case. Try as we might, when we looked at the statements of the Chancellor of the Exchequer and the Secretary of State for Employment we found nothing. I asked the Chancellor of the Exchequer: Taking into account the reduction in MLR and the inevitable increase in industrial rates, what is the net effect of this mini-Budget on manufacturing costs? Will they rise or fall? The right hon. and learned Gentleman, in an interesting reply, said: That sort of question raises a large number of implications. The most important feature—the one for which industry has expressed its pleasure through its spokesmen in the House—is the reduction in MLR."—[Official Report, 24 November 1980; Vol. 994, cc. 335–36.] That shows a clear decision, obviously taken prior to coming to the Dispatch Box that day, not to tell the country what would be the real effect of the mini-Budget on manufacturing industry in this country and on the prospects of employment by manufacturing industry in the future. It was only the Chancellor himself who knew what the impact would be. He also had in his pocket the bombshell that was to explode only last night or this morning that there had not been a clear public reference to the more than £300 million additional charges to be imposed on manufacturing industry in the form of the employer's national insurance contribution. That has been the response of the Government in this mini-Budget.

There is much that I should like to say. Having spoken for seven minutes, I take the opportunity to make way for an hon. Member on the Conservative Benches. I hope that the next hon. Gentleman who speaks will show the same courtesy, speak shortly and allow time for some of my hon. Friends to speak in this highly important debate.

8.57 pm
Mr. Michael Colvin (Bristol, North-West)

I agree with the final remarks of the hon. Member for Workington (Mr. Campbell-Savours). I have been impressed with the sincerity of many of the remarks of Members on both sides, particularly Opposition Members. It is a pity sometimes that Opposition Members tend to wear their social conscience on their sleeve and do not follow the argument through to the remedy for the ills that they see in society. We cannot spend our way out of trouble. If we try to do so, we succeed only in spending our way deeper into trouble.

Nor can I blame the Opposition for the tenor of the speeches criticising the Government for the level of unemployment. All that I can say is that if, perchance, the Labour Party had won the general election in 1979 and the Conservative Party now formed the Opposition, the noise that we would be making would have been very much greater. That is not because Conservatives are by nature more noisy but simply because the policies that Labour Members advocated during the general election, if implemented, would have produced a level of inflation and, therefore, a level of unemployment very much worse than today.

We have heard comparisons with the 1930s. There is the major difference that the Welfare State now exists and provides some measure of help to cushion the catastrophic effect of unemployment on the individual and the family. That is an improvement, but there is still an important similarity with the 1930s which is often overlooked.

At that time the world was undergoing a major recession and struggling out of it, just as it is now. At that time British industry faced intense competition from overseas as old-fashioned industries were being forced to close in the face of new industrial methods, such as mass production. Today we see the same pressures on industry to modernise or face closure.

Mr O'Neill rose

Mr. Colvin

I have a time limit, so I cannot give way.

The shake-out of old-fashioned industries in the 1930s involved a frightening rise in the numbers of unemployed during the transition period until new industries were established. Today, alas, history is being repeated.

Had we dodged the issue in the 1930s and failed to make the changes required, painful though they were, we should not have had the creation of important new industries. Our motor industry, the synthetic chemicals industry, the electronics industry and the aircraft industry might not have come into being. Without the shake-out into those new industries, there might never have been the development of such products as radar and the Spitfire and Hurricane fighters. In short, if industry had not undergone the trauma of the structural change of the 1930s we should probably have lost the war against Germany before the United States or the Soviet Union entered it as our ally.

Today, our war is economic but no less dangerous. Painful and accelerating structural change is being experienced in industry and commerce and is already resulting in new industries, in a fitter economy, with more long-term secure jobs. We shall be more competitive as a nation and guarded against the economic catastrophe that will otherwise hit us when North Sea oil runs out at the end of the century.

I am delighted by what my right hon. Friend the Secretary of State has said about the major reforms proposed for our training system. In particular, I applaud his announcement about the "open tech". The structural changes being experienced today in industry will result in a great demand for new skills. Workers seeking new jobs will have to acquire new skills, and do it fast. Training courses will have to be available when and where required. For many workers who face redundancy, or who are just looking for a new and better job, suitable courses can be difficult to find.

There is a terrible tendency in this country to try to stay put, to cling to what one has. Figures recently published by the Carnegie Institute in the United States show that in that country workers have on average eight jobs and three careers during their lifetime. In this country the average number of jobs is two, with only one career.

There must be more dynamism in the economy. I think that we shall now achieve it and that the "open tech" concept will help to promote it. The "open tech" can help to overcome our problems by using the module system of course construction, together with the distance teaching method most successfully developed by the Open University. It will enable workers to study what they want, wherever and whenever it suits them best.

What is more, the "open tech" idea could be developed without any vast new investment in training facilities or bureaucratic organisation. In terms of facilities and people, the resources exist somewhere, often underutilised, in colleges, schools, universities, industry and commerce. They are there, and these resources, often paid for by the taxpayer, could yield a valuable extra dividend by being used more fully. The "open tech" could open doors to these facilities. It could provide training which was more flexible and job related, and it could do it with the minimum of Government involvement.

Despite the great potential of the "open tech", I should warn the House that it will be no panacea for all our ills. Trainees will have to be extremely highly motivated and dedicated, as has been seen with the experience of the Open University. Nor will it be of much help to the 19 and 20-year-olds. Again, it has been found with the Open University that there is a high degree of drop-out among students of that age group. If it is to come into its own, the "open tech" must be for adults seeking training and retraining. But it is measures such as the "open tech" which we need to help to deal with the skill shortage arising from the structural change taking place today. It is that which will ensure that Government supporters vote against the Opposition's amendment.

But there is a second reason. Although we have heard a lot of sound sense from Opposition Members, they broke a major promise following the 1974 election. In then-election manifesto, they undertook not to make promises that they could not keep. Then they promised that they would reject the policy of fighting inflation by throwing millions of people out of work. So much for the promises. In practice, we saw doubled dole queues, doubled inflation and doubled taxes, and, if that was not enough, we saw the national debt, which had taken 300 years to reach £40 billion, doubled to £80 billion.

The Conservative Party never promised that it would, overnight, repair the damage which it inherited and get the economy back on course. We always said that the road to recovery was long and tough. The measures announced by my right hon. Friend are a major step in the right direction. They deserve the support of right hon. and hon. Members on both sides of the House.

9.8 pm

Mr. Jim Craigen (Glasgow, Maryhill)

I suppose that we should all welcome the special measures announced by the Secretary of State for Employment last Friday. However, I have the feeling that they are just more of the same. What worries me is the extent to which we are placing too much reliance on the youth opportunities programme to ease the unemployment problem among our young people.

On Monday, the Chancellor of the Exchequer and his colleagues continued their mutilation of the United Kingdom's economy. No matter how much the Secretary of State for Employment may get to spend on special measures, it will be no more than a cosmetic applied to the wounds already inflicted by the Treasury.

There is a clear indication that the youth opportunities programme will run into difficulties after about a year. The Secretary of State for Employment gave way to me during his speech when I took the opportunity to emphasise that local authorities and other public bodies were very important as sponsoring employers. We all want the youth opportunities programme to succeed. But what is to happen to many of the youngsters involved in it after their time on schemes has been completed?

I was concerned during the debate about the extent to which we were having a Punch and Judy show between the public and private sectors. A job is a job whether the person concerned is employed in the public sector or the private sector. It is a great mistake on the part of many Government Back Benchers to assume that, because the public sector is weakened and debilitated, that necessarily benefits and strengthens the private sector. The two are interrelated, and the success of the one is conditional on the success of the other.

The changes proposed in the Queen's Speech for transferring to employers the resposibility for initial sick pay benefits will be highly detrimental to employment and to persons who are long-term unemployed. It will be difficult for the long-term unemployed to get a job if their health record is not good. The whole social security system is now under threat. In the post-war years we have operated on the basis that most people will contribute to the national insurance fund because they are in employment. Many people will perhaps never contribute to the fund, and we now expect a narrowing insured base to carry more unemployed people. That will pose enormous problems.

I wish that the Secretary of State for Employment had spelt out in more detail his proposals for training reforms. Legislation is promised. I hope that we do not return to the pre-1964 situation. It is ironic that for the third time in less than two decades a Conservative Government have the opportunity to make major reforms in the industrial training system. They slipped up in 1973. I sincerely hope that they will not abandon the aspirations of Conservatives in the early 1960s.

Putting on to employers' shoulders the cost of early sick pay and, on top of that, responsibility for training will increase employment overheads. The hon. Member for Dorset, North (Mr. Baker) waxed eloquently about British capitalism. History will show that the Prime Minister and her Secretary of State for Industry have done more to undermine British capitalism than Karl Marx and Friedrich Engels ever did.

9.12 pm
Mr. John Smith (Lanarkshire, North)

I regret that I cannot say that this has been a balanced debate. My hon. Friends the Members for Bishop Auckland (Mr. Foster), Ogmore (Mr. Powell), Fife, Central (Mr. Hamilton), Newton (Mr. Evans), Ashfield (Mr. Haynes), Workington (Mr. Campbell-Savours), Motherwell and Wishaw (Dr. Bray) and Glasgow, Maryhill (Mr. Craigen) spoke of their anxiety about unemployment in their constituencies. On the Government side, with the exception of the hon. Member for Peterborough (Dr. Mawhinney), hon. Members spoke only of the training measures which the Secretary of State for Employment announced the other day. Not one Government Member defended the thrust of the Government's economic policy. Obviously, there was a hand-out particularly among the "wets" on the training measures, but there was no hand-out to defend the main thrust of the economic policy.

The situation was described correctly by my hon. Friend the Member for Chesterfield (Mr. Varley). He reminded the House of the appalling unemployment statistics. A total of 2,162,900 people are registered as unemployed. We have reached that devastating figure in enormous leaps in recent months. There was an increase of 89,000 in September this year, an increase of 108,000 in October and a staggering increase of 136,000 in the last month.

It is impossible to underestimate the misery and tragedy, collectively and individually, which the figures represent for ordinary people and ordinary families throughout the country. It is equally impossible to underestimate the lost wealth which the economy will suffer as a result of the excessively high levels of unemployment.

The Secretary of State for Industry spoke the other day about the last year of the Conservative Government having been a lost year. I think that he meant that in terms of lost objectives as stated at the election. Few of us would quarrel with that. However, it has also been a lost year for many other people—for 2 million of our citizens who are on the dole, a great many of them forced on to it during that period. There will be many lost years for many of them if the Government's policies continue as presently proposed.

We are told that unemployment was a problem under the Labour Government. I see the the hon. Member for Gillingham (Sir F. Burden) nodding obligingly at that point. Under the last Labour Government, 1.3 million were unemployed. We thought that the figure was far too high, admittedly so, and bent all our efforts to seeking to reduce it. Of course, it was falling for a considerable period and it continued to fall for a few months after the present Government took office. However, it took them only three or four months to get it moving up again, and we have seen it climb since to the present appalling level.

One would have thought that 2 million-plus was bad enough. However, the report of the Government Actuary, made on the Social Security (Contributions) Bill, predicts a much higher level. In that interesting document he talks of levels of employment and inflation I have been instructed to use for the purpose of the … estimates", and then follow the figures. He says that the number of unemployed, excluding school leavers, during 1981–82 is estimated at 2,300,000. He is told to estimate by the Government that the number of school leavers out of work will be 200,000. So the Government have told the Government Actuary that an average of 2,500,000 will be unemployed in 1981–82. We know, however, that that is likely to be an underestimate. Last year he was told to estimate that the number of unemployed would by now have reached 1.7 million. The figure is 2.1 million. In addition, the Treasury recently leaked the likely level of unemployment as 2.8 million. Many respected commentators think that it is likely to reach 3 million.

Let us consider what that increase means. Even on the Government's admitted figure of 2.5 million, an extra 1.2 million will have been thrown out of work during the period of this Government. The Government will have been responsible for creating in addition as much unemployment as already existed when they took office in 1979. I hope, in the light of those facts, that we shall hear a little less from the Conservative Party about the levels of unemployment that obtained under Labour.

Let us also have an answer to the question put repeatedly by my right hon. Friend the Leader of the Opposition: when will the unemployment levels come down to the level that existed under the last Labour Government, a level that the Conservatives criticised in the House week after week?

Unfortunately, the unemployment figures do not provide the only cause for concern. The temporary short-time working compensation scheme is disguising the true level of unemployment. A press note issued by the Department of Employment shows that in September this year 154,000 people were on short-time working compensation schemes. A month later, the number had leapt to 276,000. In November it leapt to 412,000. Almost 500,000 people are now on the scheme. We note that the Secretary of State for Employment announced that the scheme would be continued in a particular form but with Government funding reduced from 75 per cent. to 50 per cent. That means that a lot of the schemes will collapse because the employers will not be able to find 50 per cent. of the cost instead of the 25 per cent. they paid originally. We shall have some rapid increases in unemployment as there is a movement out of that scheme on to the register.

Why have we had such a staggering increase in unemployment over such a short period? Is there some inevitability of fate? Is it some inescapable part of a gloomy destiny that no Government can do anything to avoid? Is it because of the world recession? To some extent, I suppose, the world recession has had an impact on Britain as it has on other countries. However, there is no other country in Western Europe that has had such a savage and deep recession moving into depression as the United Kingdom. That is perhaps because no other country in Western Europe has chosen to adopt the foolish economic policies that the present Government have followed.

We have seen a savage decline in our manufacturing industry. As we all know—surely this is not a matter of dispute—that has been caused by high interest rates, the high external exchange rate of sterling and sweeping cuts in public expenditure. Every hon. Member who represents a constituency that is involved in manufacturing industry will have seen good companies as well as bad ones forced out of existence by that trinity of hostile factors.

We know that total industrial production since May 1979 has decreased by 11 per cent. On the Government's own estimates, it is likely to fall again next year. We know that since the Government came to power manufacturing output has fallen by 15 per cent. A few days ago, the Government estimated another 4 per cent. drop below the present level. That means that about a year from now we shall have had a 20 per cent. reduction since the Government took office. On the Government's own statistics, one-fifth of British manufacturing output will have been reduced by their economic policies. That has happened since they took power. What a splendid start for the regeneration of British industry that we were promised at the last election! We now know that one-fifth of British industry will have disappeared. That is the principal reason why we have over 2 million unemployed.

This has all been achieved in the name of the Government's monetary policy. They set themselves the target of an increase in the money supply of between 7 per cent. and 11 per cent. Where is it now? It is about 20 per cent. It is so bad that the Government have abandoned the idea of having a target. They say "Let us leave the target until April 1981. It is hopelessly out of control now." The public sector borrowing requirement figures are also hopelessly out of control.

The Government have lost their way in respect of their economic policy. The Chancellor of the Exchequer increasingly gives the impression of a barrister who has lost the instructions that he last received from his client. The right hon. and learned Gentleman possibly takes instructions from himself. That will put him in even greater difficulties as he staggers through the maze of his economic policy.

The Chancellor says that it is not all his fault. I understand that at a meeting last night of the Conservative economic committee he said that the problem was that the Government were boxed in by the pledges that the Conservative Party made during the last election. What a terrible dilemma! It should have thought rather more carefully before it made some of the pledges that are now boxing in the Chancellor.

What started out as a supposedly new economic departure in the policies of the United Kingdom—we were to become the laboratory for the monetarists' theories—is no more than the old deflation and depression of demand writ large. On Monday, the Chancellor took £1 billion out of public expenditure. He imposed an extra £1 billion in costs on employees by way of national insurance contributions. He devised a new tax on oil to raise another £1 billion.

The first two elements—the cut in public expenditure and the increase in national insurance contributions—are bound to depress demand. Phillips and Drew, the stockbrokers, reckon that there will be a drop in demand of between 1½ per cent. and 2 per cent. in the coming year.

It calculates that that will mean another 100,000 unemployed. That is the result of the measures announced by the Chancellor on Monday.

It is all very well for the Secretary of State for Employment to say that he has special training measures. We welcome the constructive steps that the right hon. Gentleman has proposed. However, we bear in mind that a few days earlier the same Government announced an increase in unemployment of 100,000.

The minimum lending rate comes down by two points and we are told that that will help. The very same Chancellor forgot to tell us about the extra £300 million or so that will come from employers by way of increased national insurance contributions. The Secretary of State for Employment tried to bluster his way past that earlier today. He did not know that that intellectual sprite, the Chief Secretary to the Treasury, had been telling us on the radio at lunchtime that perhaps the Chancellor should have been more prudent. Indeed, he should be more prudent. Many members of the Government should be more prudent about a number of things. Perhaps the Secretary of State for Employment would find it more prudent to listen to the radio occasionally when he knows that the Chief Secretary to the Treasury is being interviewed.

We know that that £300 million robbed us of 1 per cent. of the value of the reduction in the MLR. We also know that manufacturing industry will have to pay another £400 million a year because it has to be responsible for the first eight days' of employees' sickness. Those two measures have robbed manufacturing industry of any advantage that it might have gained from the reduction in MLR.

The other reason why we have to go through the travail, toil and misery is that the Government say that their overriding concern is to bring down the rate of inflation. It is a great pity that the Chancellor did not consider that in his first Budget, when he doubled VAT and set us off on a new, soaring, vicious spiral of inflationary increases. All those thrown into unemployment because of the mistakes of the Government's policy must remember the lunacy of the increases. This is the most manifestly incompetent Government in economic management that we have seen in this country since the war. That is why we are returning to the echoes of pre-war Britain—to the deflationary policies that led to the disaster of the slump and the depression.

The other thing we were told was that, because of the new method of controlling inflation by mechanically controlling the amount of growth in the money supply, we should not have any need for that Socialist nonsense of an incomes policy; that would be taken care of by the operation of the new policies and the control of the money supply. We know the truth now. There is a crude, savage and undiscriminating wages policy being enforced on the public sector—the 6 per cent. policy announced recently by the right hon. Lady. One must say this about the right hon. Lady. She does not mind who gets caught in the course of her policies. With one swift slice of her savage axe she felled the credibility and integrity of the Home Secretary, who promised at the last election that the firemen's deal would be honoured by an incoming Conservative Government. She does not feel boxed in by the odd election pledge. Perhaps the Chancellor should not feel as boxed in as he obviously does. He, too, should just break a few pledges.

The Leader of the House appears to ask why I am looking at him. It is for an obvious reason. I can think of no one in greater need of more prudence than the right hon. Gentleman. I hope that he is not preening himself to succeed the Chancellor of the Exchequer. The hot money is on the Secretary of State for Trade. I do not know whether there will be a new Chancellor of the Exchequer. Whoever is Chancellor, I hope that he is a prudent man, because that is the policy that will have to be developed.

We are back to deflation. We are back to the old policies that were carried out in this country before the last war. As my hon. Friend the Member for Motherwell and Wishaw pointed out, many of us believe that behind the economic theory of monetarism there has lurked all along a political theory advanced by a certain section of the Cabinet, which is now emerging much more into the open. It is the crude and wicked policy of seeking to discipline working people by a heavy dose of unemployment. The Secretary of State for Employment may not agree, and I am sure that the Leader of the House does not agree either, but the "dries" in the Cabinet do agree. It is likely that the right hon. Lady has had that policy in her mind all along. Such a wicked and immoral concept, which will deeply divide the nation, socially and politically, is rightly doomed to ignominious failure. To use unemployment as a method of incomes policy is wrong in principle and we believe that it will fail.

Perhaps the most staggering irony is that we have gone through all the misery without even being able to control the money supply. It is hopelessly out of control, despite all the sacrifices. What kind of Alice in Wonderland policy is it to cut the PSBR in such a way as to increase unemployment benefits, which in turn increases the PSBR? What kind of monetary policy is it to cause an increase in borrowing to stave off the bankruptcies which the monetary policy induces in the first instance?

In their obsession with monetarism, the Government have turned a blind eye and a deaf ear to all the policies which have been urged by the CBI, the TUC and the Opposition and increasingly by Tory Members. They have been so obsessed that they have not seen the alternative policies of the use of North Sea oil revenues in the investment and re-equipment of British industry, in the management of our trade and the recovery of our industry and in the reflation rather than the repression of demand. The Government say that they believe in the introduction of technological change and the rebirth of regional policy, but such things have died under this Government. The Government have rejected all these ideas out of hand.

We all know that what this country needs above all else, and what every citizen passionately wishes for, is the recovery of the strength and effectiveness of our manufacturing industry. We have a number of historical handicaps. We have a history of industrial decline which it will be difficult to arrest. But we have—[Interruption.] I wish that Conservative Members would listen to some serious matters on this serious subject. However, we have one great advantage. The God-given advantage of North Sea oil and gas makes this country, apart from Norway, the only country in Western Europe to be self-sufficient in energy resources.

What are we using the North Sea oil revenues for? Since the Government came to power we have had, or will have had by next year, an extra one million unemployed. The total revenues from North Sea oil and gas are £4 billion. I am told on good authority that the cost to the Government of one unemployed person is £4,600 a year. I get that from the Minister of Agriculture, Fisheries and Food, who recently made a speech on these lines to a gathering of wets. The extra one million unemployed which the Government have caused since they came to office means that we spend £4.6 billion on unemployment benefit. What sense does it make in this day and age for all the resources of North Sea oil to be spent on unemployment benefit for the people who have become unemployed since the Government came to office?

We used to debate what we would do with North Sea oil revenues. Would we spend the revenues on industry, social services, education, training and the re-equipment of industry? We had a parade of priorities. All that has been pre-empted. The Government have no such dilemma. They have already committed the whole lot to the extra one million unemployed that they have created.

When historians look at what this Government have been responsible for, above all things it will stand out clearly that they wasted one of Britain's most important opportunities. North Sea oil gives us an economic weather window. It gives us the opportunity to re-equip our industry. It gives us an advantage over our competitors. We have not only North Sea oil and gas but enormous reserves of coal which will enable us to be self-sufficient in energy through to the beginning and, I hope, a substantial part of the next century. There must be an urgent change in the Government's policy. That wealth must be put to useful and sensible purposes. It should be used to reduce the numbers of unemployed and to put Britain back to work.

The Prime Minister says that those who are unemployed must move, but she does not know where they are to move—whether from Wales to the North-East, from the North-East to Scotland or from the North-East back to Wales again. The right hon. Lady has no idea where they should move. We say that it is time that she moved.

9.33 pm
The Secretary of State for Trade (Mr. John Nott)

My right hon. Friend the Secretary of State for Employment, the right hon. Member for Chesterfield (Mr. Varley) and many hon. Members devoted the major portion of their remarks to the most distressing symptom of this country's underlying problems—the unacceptably high level of unemployment.

The right hon. Member for Lanarkshire, North (Mr. Smith) did much the same. But, listening carefully to his speech, I confess that I did not hear anything which failed to represent measures which have been tried before and have failed to solve our underlying problems. Indeed, so far as I could understand, the methods that he would propose are those which have partially disguised, but have certainly extended, the underlying problem of this country's poor competitiveness over the past 10 years. At least, the right hon. Gentleman admitted that 1.3 million people were unemployed when the Labour Government left office.

Mr. Dennis Canavan (West Stirlingshire)

The present Government have made it worse.

Mr. Nott

The number of unemployed doubled during the tenure of the Leader of the Opposition at the Department of Employment, and prices and the national debt doubled during the Labour Government's term of office. It is clear that each recession in the 1960s and 1970s has led to higher unemployment than the one before. The next recession will be worse than this one, unless we can bring about a more effective cure.

My hon. Friend the Member for Horsham and Crawley (Mr. Hordern) sought to analyse the present situation in an interesting speech. I see my task in winding up the debate as that of examining some of the factors which cause our unemployment problems and of looking beyond the recession to see how the cycle of economic decline can be broken. That was the phrase used by my hon. Friend the Member for Carshalton (Mr. Forman), who said that we must look beyond the present recession to see how we can arrest the cycle of economic decline from which our country has suffered for many years. In particular, I should like to examine the reality of our position in what is a dangerous and uncertain world.

I should like to refer to some of the speeches. My hon. Friend the Member for Bedfordshire, South (Mr. Madel) gave a warm welcome to our new employment measures and rightly talked about the urgent need for an improvement in our industrial training. My hon. Friend the Member for Ripon (Dr. Hampson) stressed the need for youth training and welcomed the new youth opportunities programme. My hon. Friend the Member for Peterborough (Dr. Mawhinney), among other things, stressed the need for better mathematical training. Indeed, speech after speech emphasised the importance of training.

The hon. Member for Motherwell and Wishaw (Dr. Bray) impressed an empty House, and certainly impressed me, by saying that he spoke to Professor Hayek on the telephone before breakfast this morning. From the hon. Gentleman's speech, it seemed to me that either the hon. Gentleman or the professor—because evidently they talked about the problem of the trade unions—had misunderstood the book "The Road to Serfdom". Later, the hon. Gentleman spoke of his talk with his noble Friend Lord McCarthy. That kind of familiarity in one day with the literati and the peerage would, I am sure, impress the hon. Gentleman on the Leader of the Opposition.

The hon. Member for Ashfield (Mr. Haynes) had what I would describe as an attack of the silver spoons.

Dr. Bray

My talk with Professor Hayek was in the all-too-solid flesh. Has he updated his advice to the Prime Minister that the only way to tackle trade unions in this country is to remove all their legal immunities in a referendum, and will the Prime Minister follow that policy?

Mr. Nott

The hon. Gentleman spoke to Professor Hayek. I did not do so. Therefore, we must await his description of Professor Hayek's views. The hon. Gentleman also gave us a lecture on monetary policy.

There is one thing that I find confusing about the Opposition. What are they criticising us for in relation to monetary policy? Are they saying that the Government's monetary policy is successful and is causing a recession, or are they saying that it is unsuccessful and has no relevance to the recession? What particular criticism are the Opposition levelling against the Government?

The right hon. Member for Lanarkshire, North also talked about the problems of the high value of the pound. I can do no better than refer him to the remarks of his previous leader, the right hon. Member for Cardiff, South- East (Mr. Callaghan), who covered that subject with great skill when his party was in Government. In July 1967 he said: I come now to the question of devaluation…It is no way out…It is a flight from reality…advocacy of devaluation has become very modish among a number of theoretical economists…Unfortunately it has been picked up by a number of people who clamour for devaluation because they believe that it is a way of avoiding other harsh measures. They are deluding themselves. The logical purpose of devaluation is a reduction in the standard of life at home. If it does not mean that, it does not mean anything."—[Official Report, 24 July 1967; Vol. 751, c. 99–100 ] On 9 March 1978, when the right hon. Member for Cardiff, South-East was Prime Minister, the former Member for Southampton, Test, Mr. Bryan Gould, who lost his seat at the last election, asked the then Prime Minister: Has the Prime Minister seen today's reports of a warning by the Chairman of ICI of the damage done to Britih industry by the over-valued pound? The Prime Minister answered, I think in a rather weary way: I always listen, and I read the letters that he sends me. They are all very well informed, as well as being rather lengthy. When he becomes Chancellor of the Exchequer, as no doubt he will, one day"— as no doubt he will not one day, because he lost his seat at Test— he will find that it is easier to talk about moving the pound up or down than it is to achieve it."—[ Official Report, 9 March 1978; Vol. 945, c. 1607.] That was said by the right hon. Member for Cardiff, South-East in 1978 in answer to criticisms from ICI that the high value of the pound was causing its business great difficulty.

Mr. Varley

What is ICI saying now?

Mr. Nott

ICI is saying the same now as it said then, and the Government are giving the same answer now as the then Government gave.

I refer now to a speech made by my hon. Friend the Member for Sowerby (Mr. Thompson) in a debate on employment a few weeks ago. He captured, more graphically than anyone in that debate, and in this debate, too, the impact of factory closures on the loyalties, relationships and people in his traditionally industrial town. He expressed what every hon. Member feels. He said that the argument was not about the waste of unemployment but about the most effective remedies to cure the problem. He also said in his excellent and moving speech that the firms that were dead were gone for ever, and the firms that had traded for generations were lost for ever.

One thing needs to be said in the light of the current unhappy condition of many towns in the North of England. Receivership does not necessarily involve death. Often it is a prelude to rebirth and the resurrection of a business in a different form.

Last weekend I went to Yorkshire, and in the Leeds area I met the local manager of ICFC, the Industrial and Commercial Finance Corporation, which is the principal institution in financing new business formation in this country. I have just received the figures from him about management buy-outs—that is, firms which go into receivership and are then started up again by the managers of the particular firms. In 1979–80 there were 49 such firms financed by ICFC. In the first six months of this year there has been an increase in buy-outs of that kind, the management taking over a firm that had been shut down by its parent company, of 18 per cent.

In 1979–80, 309 new firms were started up. In the first six months of this year, the number had increased by nearly 30 per cent.

Mr. Walter Harrison (Wakefield)

How many shut down?

Mr. Nott

The number of inquiries which ICFC is receiving at present for the formation of new businesses is running at a record level. My hon. Friend the Minister for Newcastle upon Tyne, North (Sir W. Elliott) talked of the new factories opened in the Northern region in the last 12 months. I know myself that in the West Country at present there is an enormous potential demand for new industrial workshops. People are clamouring for them. The will is there. What is needed in this country is a resurgence of self-confidence in the nation's future.

Mr. John Smith

I am glad that that exists in the right hon. Gentleman's constituency, because he will be aware that in St. Ives unemployment has now reached 24 per cent. It is time that something was done in his area, is it not?

Mr. Nott

I know rather more about St. Ives than the right hon. Gentleman knows—[Interruption.] Unemployment in St. Ives was around that figure during most of the period of the Labour Government.

I should like to refer to one thing that was said in the debate the other day. In an interesting passage in an interesting speech, the right hon. Member for Bristol, South-East (Mr. Benn) said: When I see steel workers…fighting to prevent their employers closing their factories, in my eyes they are defending our industrial heritage".—[Official Report,29October 1980; Vol. 991, c. 514.] Certainly some of them feel that they are doing just that. No doubt, when the right hon. Member for Lanarkshire, North, who has just asked me a question about my constituency, spoke in 1971 against the previous Conservative Government's review of steel and spoke in favour of a then target for the BSC of 43 million tonnes by 1981, he did not predict that by 1981 the BSC's capacity would be down to 15 million tonnes, and the BSC is even now unable to sell the output from that capcaity. So, when the right hon. Gentleman talks about deploying the proceeds of North Sea oil, I ask him whether he believes that the sort of judgment which he made then for a capacity of 43 million tonnes for British Steel is the kind of judgment that we should put in charge of our affairs.

Does the Leader of the Opposition, with that unerring instinct of his for the ridiculous, when he chose the printing industry as his example of our industrial heritage, as he quoted from the pages of The Times, suggest that the printing unions in Fleet Street are fighting for our industrial heritage?

I really must say to right hon. Members on the Opposition Benches that some of the examples that they choose are quite astonishing in current conditions.

I come to this country's overriding problems. With 30 per cent. of our gross national product earned abroad, our domestic living standards are crucially dependent on our capacity to hold, and ultimately to increase, our 9 per cent. share of world trade. Very generally, over 7 million British jobs—one-third of our jobs—are dependent on markets all around the world. I regard it as my task to safeguard those jobs against those who would put them in peril in their sincere attempt to protect jobs elsewhere.

It is worth recalling that in the past few years world trade has grown twice as fast as the independent domestic economies that make it up. It is possible that with half our present population we would have the choice of opting out. However, this island has to import a great deal of what we need to feed ourselves, and we cannot conceivably maintain anything approaching our present standards of living without the benefit of trade abroad. We are condemned to suffer the discomforts and hazards of a world environment over which we have very little, if any, control.

It is true that import penetration of our markets has increased substantially, to about 30 per cent. of our gross domestic product. However, the proportion of exports in terms of our total sales has also increased at a fast rate and is approximately 30 per cent. Just as we export more, we import more. The experience of the United Kingdom is similar to that found elsewhere in the world. World trade involves countries in more inter-trading. It involves more exports and more imports, with the consequential adjustment problems that that involves.

I turn to the speech made by the right hon. Member for Lanarkshire, North.

Mr. O'Neill

Why is Britain's share of world trade falling, given that it was rising during the last months of the previous Labour Government?

Mr. Nott

Great Britain's share of trade is not falling. It has been maintained at about 9 per cent. of world trade for several years.

No one doubts that the right hon. Member for Lanarkshire, North has ability. He is eloquent. As a good social democrat, he has the same instincts as a common or garden traffic warden. Like all good social democrats, he is good at issuing parking tickets but incapable of understanding the more fundamental traffic problems that cause the motorist difficulties. He did not say anything that dealt with the underlying problems that this country faces.

As the right hon. Gentleman said, this country now possesses 40 per cent. of the energy resources of Europe. We have a tremendous, important and growing energy sector. Last year gross earnings from shipping, insurance, aviation, tourism, services and invisibles generally amounted to £22 billion. They comfortably exceeded the receipts of £18 billion from our total exports of manufactured goods.

We have a tremendous and growing service sector. Energy and services are the two sectors that the world longs to possess. Last month we had the largest trade surplus in our history. We also had a substantial trade surplus on our manufactured goods. At present, inflation in Britain is falling very rapidly. The Government set that as their overriding and prime objective.

The pound is high. People abroad buy the pound because they have confidence in the future of our country. The right hon. Gentleman and the Opposition Front Bench want the Government to create more money in order to sell our own currency. I repeat that the pound is high because people abroad have confidence in this country and are confident that the Government's policies will succeed.

There is not one hon. Member who does not deplore the current high level of unemployment. It is unacceptable to everyone. If one looks round the world, one finds an increasing challenge from the newly industrialised countries. Most of them already produce goods of a very high quality. More and more, the newly industrialised countries will challenge us, not just on the price of goods but on quality. Whatever the price of the pound may be, our industrial sector has to move up market and sell its products on non-price factors—quality, style and delivery. Unless we can do just that, there is no future for this country.

We have to trade with less developed countries. Last year we had a surplus of £2 billion on our trade in manufactures with those countries. My right hon. Friend the Member for Sidcup (Mr. Heath), as a member of the Brandt commission, has underlined in the commission's report one of the great problems facing this country and the world. When the Opposition asked me about the multifibre arrangement—and we do our best for the textile industry—I must say to them that the less developed countries want trade, and we must recognise that unless trade with them is upheld we shall suffer as well.

Last year, and certainly in the first nine months of this year, we had in our trade with the world one of the largest surpluses in our history. Our trade with the developed world is going well and trade with the EEC is succeeding this year better than in any year since our entry. Looking around British industry today, one sees that there has never been so much co-operation and realism on the shop floor. The high pound, falling inflation and realism on the shop floor are occurring under the policies that the Government are pursuing.

Parliament would do itself a service if, instead of always being the instigator of gloom and doom, it did something to help to restore the self-confidence of the British people, because that is the most important single factor that the country needs. The continual and endless gloom and despondency that pervade the House and the pages of the British press do nothing to solve the underlying problems of competitiveness in this country.

The hon. Member for Ashfield described the Conservative Party as a party of privilege, but, of the candidates in the recent elections for the leadership of the Labour Party, the right hon. Member for Ebbw Vale (Mr. Foot) is the son of a Privy Councillor and has two brothers in the House of Lords and the right hon. Member for Deptford (Mr. Silkin) had a father in the House of Lords. In addition, the right hon. Member for Bristol, South-East was born a middle-class baby and has gone bananas about his upbringing ever since. He, too, was the son of a peer. If Labour Members think that the Conservative Party is the party of privilege, they ought to look at their own party.

The Government are tackling the underlying problens facing this country. When the recession passes, we shall have laid the foundation for a more efficient and a more incentive-based economy. The House should support the Government in the Division.

9.59 pm
Mr. Dennis Canavan (West Stirlingshire)

It is a disgrace that a Minister should be allowed to make such a ridiculous contribution and then sit down at the end of a debate that was supposed to be about the 2 million-plus unemployed. The right hon. Gentleman and this rotten Tory Government are mainly responsible for the creation of the unemployment in this country. Since this Government came to power, more than 10,000 people have been put out of work every week—

Mr. John Wakeham (Maldon)

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

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

Question put accordingly, That the amendment be made:—

The House divided: Ayes 256, Noes 314.

Division No. 1] [10 pm
Abse, Leo Dunwoody, Hon Mrs G.
Adams, Allen Eadie, Alex
Allaun, Frank Eastham, Ken
Alton, David Edwards, R. (W'hampt'n S E)
Anderson, Donald Ellis, R. (NE D'bysh're)
Archer, Rt Hon Peter Ellis, Tom (Wrexham)
Armstrong, Rt Hon Ernest English, Michael
Ashley, Rt Hon Jack Ennals, Rt Hon David
Ashton, Joe Evans, loan (Aberdare)
Atkinson, N.(H'gey,) Evans, John (Newton)
Bagier, Gordon A.T. Ewing, Harry
Barnett, Guy (Greenwich) Faulds, Andrew
Barnett, Rt Hon Joel (H'wd) Field, Frank
Beith, A. J. Fitch, Alan
Benn, Rt Hon A. Wedgwood Fitt, Gerard
Bennett, Andrew(St'kp't N) Flannery, Martin
Bottomley, Rt Hon A.(M'b'ro) Fletcher, Raymond (Ilkeston)
Bradley, Tom Fletcher, Ted (Darlington)
Bray, Dr Jeremy Foot, Rt Hon Michael
Brown, Hugh D. (Proven) Ford, Ben
Brown, Ron (E'burgh, Leith) Forrester, John
Brown, Ronald W. (H'ckn'y S) Foster, Derek
Buchan, Norman Foulkes, George
Callaghan, Rt Hon J. Fraser, J. (Lamb'th, N'w'd)
Callaghan, Jim (Midd't'n & P) Freeson, Rt Hon Reginald
Campbell, Ian Garrett, John (Norwich S)
Campbell-Savours, Dale Garrett, W. E. (Wallsend)
Canavan, Dennis George, Bruce
Cant, R. B. Gilbert, Rt Hon Dr John
Carmichael, Neil Ginsburg, David
Carter-Jones, Lewis Golding, John
Cartwright, John Gourlay, Harry
Clark, Dr David (S Shields) Graham, Ted
Cocks, Rt Hon M. (B'stol S) Grant, George (Morpeth)
Cohen, Stanley Grimond, Rt Hon J.
Conlan, Bernard Hamilton, W. W. (C'tral Fife)
Cook, Robin F. Harrison, Rt Hon Walter
Cowans, Harry Hart, Rt Hon Dame Judith
Craigen, J. M. Hattersley, Rt Hon Roy
Crowther, J. S. Haynes, Frank
Cryer, Bob Healey, Rt Hon Denis
Cunliffe, Lawrence Heffer, Eric S.
Cunningham, G. (Islington S) Hogg, N. (E Dunb't'nshire)
Cunningham, Dr J. (W'h'n) Holland, S. (L'b'th, Vauxh'll)
Dalyell, Tam Home Robertson, John
Davidson, Arthur Homewood, William
Davies, Rt Hon Denzil (L'lli) Hooley, Frank
Davies, Ifor (Gower) Horam, John
Davis, Clinton (Hackney C) Howell, Rt Hon D.
Davis, T. (B'ham, Stechf'd) Howells, Geraint
Deakins, Eric Huckfield, Les
Dean, Joseph (Leeds West) Hudson Davies, Gwilym E.
Dempsey, James Hughes, Mark (Durham)
Dewar, Donald Hughes, Robert (Aberdeen N)
Dixon, Donald Hughes, Roy (Newport)
Dobson, Frank Janner, Hon Greville
Dormand, Jack Jay, Rt Hon Douglas
Douglas, Dick John, Brynmor
Douglas-Mann, Bruce Johnson, James (Hull West)
Dubs, Alfred Johnson, Walter (Derby S)
Duffy, A. E. P. Jones, Rt Hon Alec (Rh'dda)
Dunlop, John Jones, Barry (East Flint)
Dunn, James A. Jones, Dan (Burnley)
Dunnett, Jack Kaufman, Rt Hon Gerald
Kerr, Russell Roberts, Ernest (Hackney N)
Kilroy-Silk, Robert Roberts, Gwilym (Cannock)
Kinnock, Neil Robertson, George
Lambie, David Robinson, G. (Coventry NW)
Lamborn, Harry Rodgers, Rt Hon William
Leadbitter, Ted Rooker, J. W.
Leighton, Ronald Ross, Ernest (Dundee West)
Lestor, Miss Joan Ross, Stephen (Isle of Wight)
Lewis, Ron (Carlisle) Rowlands, Ted
Litherland, Robert Ryman, John
Lofthouse, Geoffrey Sandelson, Neville
Lyon, Alexander (York) Sheerman, Barry
Lyons, Edward (Bradf'd W) Sheldon, Rt Hon R.
Mabon, Rt Hon Dr J. Dickson Shore, Rt Hon Peter
McDonald, Dr Oonagh Short, Mrs Renée
McElhone, Frank Silkin, Rt Hon J. (Deptford)
McKay, Allen (Penistone) Silkin, Rt Hon S. C. (Dulwich)
McKelvey, William Silverman, Julius
MacKenzie, Rt Hon Gregor Smith, Rt Hon J. (N Lanark)
Maclennan, Robert Soley, Clive
McNally, Thomas Spearing, Nigel
McNamara, Kevin Spriggs, Leslie
McTaggart, Robert Stallard, A. W.
McWilliam, John Stewart, Rt Hon D. (W Isles)
Magee, Bryan Stoddart, David
Marks, Kenneth Stott, Roger
Marshall, Dr Edmund (Goole) Strang, Gavin
Martin, M(G'gow S'burn) Straw, Jack
Mason, Rt Hon Roy Summerskill, Hon Dr Shirley
Maxton, John Taylor, Mrs Ann (Bolton W)
Maynard, Miss Joan Thomas, Jeffrey (Abertillery)
Meacher, Michael Thomas, Mike (Newcastle E)
Mellish, Rt Hon Robert Thomas, Dr R.(Carmarthen)
Mikardo, Ian Thome, Stan (Preston South)
Millan, Rt Hon Bruce Tilley, John
Miller, Dr M. S. (E Kilbride) Tinn, James
Mitchell, Austin (Grimsby) Torney, Tom
Mitchell, R. C. (Soton Itchen) Varley, Rt Hon Eric G.
Morris, Rt Hon A. (W'shawe) Wainwright, E.(Dearne V)
Morris, Rt Hon J. (Aberavon) Wainwright, H.(Colne V)
Morton, George Walker, Rt Hon H.(D'caster)
Moyle, Rt Hon Roland Watkins, David
Mulley, Rt Hon Frederick Weetch, Ken
Newens, Stanley Wellbeloved, James
Oakes, Rt Hon Gordon Welsh, Michael
Ogden, Eric White, Frank R.
O'Halloran, Michael White, J. (G'gow Pollok)
O'Neill, Martin Whitehead, Phillip
Orme, Rt Hon Stanley Whitlock, William
Owen, Rt Hon Dr David Wigley, Dafydd
Palmer, Arthur Willey, Rt Hon Frederick
Park, George Williams, Rt Hon A.(S'sea W)
Parker, John Williams, Sir J.(W'ton)
Parry, Robert Wilson, Gordon (Dundee E)
Pavitt, Laurie Wilson, William (C'try SE)
Pendry, Tom Winnick, David
Penhaligon, David Woodall, Alec
Powell, Raymond (Ogmore) Woolmer, Kenneth
Price, C. (Lewisham W) Wrigglesworth, Ian
Race, Reg Wright, Sheila
Radice, Giles Young, David (Bolton E)
Rees, Rt Hon M (Leeds S)
Richardson, Jo Tellers for the Ayes:
Roberts, Albert (Normanton) Mr. Donald Coleman and
Roberts, Allan (Bootle) Mr. James Hamilton.
Adley, Robert Bell, Sir Ronald
Aitken, Jonathan Bendall, Vivian
Alexander, Richard Benyon, Thomas (A'don)
Alison, Michael Benyon, W. (Buckingham)
Amery, Rt Hon Julian Berry, Hon Anthony
Ancram, Michael Best, Keith
Arnold, Tom Biffen, Rt Hon John
Aspinwall, Jack Biggs-Davison, John
Atkinson, David (B'm'th,E) Blackburn, John
Baker, Kenneth(St.M'bone) Body, Richard
Baker, Nicholas (N Dorset) Bonsor, Sir Nicholas
Banks, Robert Boscawen, Hon Robert
Beaumont-Dark, Anthony Bottomley, Peter (W'wich W)
Bowden, Andrew Goodlad, Alastair
Boyson, Dr Rhodes Gorst, John
Bradford, Rev R. Gow, Ian
Braine, Sir Bernard Gower, Sir Raymond
Bright, Graham Grant, Anthony (Harrow C)
Brinton, Tim Gray, Hamish
Brittan, Leon Greenway, Harry
Brocklebank-Fowler, C. Grieve, Percy
Brooke, Hon Peter Griffiths, B.(B'y St. Edm'ds)
Brotherton, Michael Griffiths, Peter Portsm'th N)
Brown, M.(Brigg and Scun) Grist, Ian
Browne, John (Winchester) Grylls, Michael
Bruce-Gardyne, John Gummer, John Selwyn
Bryan, Sir Paul Hamilton, Hon A.
Buchanan-Smith, Hon Alick Hamilton, Michael (Salisbury)
Buck, Antony Hampson, Dr Keith
Budgen, Nick Hannam, John
Bulmer, Esmond Haselhurst, Alan
Burden, Sir Frederick Hastings, Stephen
Butcher, John Havers, Rt Hon Sir Michael
Butler, Hon Adam Hayhoe, Barney
Cadbury, Jocelyn Heath, Rt Hon Edward
Carlisle, John (Luton West) Heddle, John
Carlisle, Kenneth (Lincoln) Henderson, Barry
Carlisle, Rt Hon M. (R'c'n) HeseKine, Rt Hon Michael
Chalker, Mrs. Lynda Hicks, Robert
Channon, Rt. Hon. Paul Higgins, Rt Hon Terence L.
Chapman, Sydney Hill, James
Churchill, W. S. Hogg, Hon Douglas (Gr'th'm)
Clark, Hon A. (Plym'th, S'n) Holland, Philip (Carlton)
Clark, Sir W. (Croydon S) Hooson, Tom
Clegg, Sir Walter Hordern, Peter
Cockeram, Eric Howe, Rt Hon Sir Geoffrey
Colvin, Michael Howell, Rt Hon D. (G'ldf'd)
Cope, John Howell, Ralph (N Norfolk)
Cormack, Patrick Hunt, David (Wirral)
Corrie, John Hunt, John (Ravensbourne)
Costain, Sir Albert Irving, Charles (Cheltenham)
Cranborne, Viscount Jenkin, Rt Hon Patrick
Critchley, Julian Jessel, Toby
Crouch, David Johnson Smith, Geoffrey
Dean, Paul (North Somerset) Jopling, Rt Hon Michael
Dickens, Geoffrey Joseph, Rt Hon Sir Keith
Dorrell, Stephen Kaberry, Sir Donald
Douglas-Hamilton, Lord J. Kellett-Bowman, Mrs Elaine
Dover, Denshore Kimball, Marcus
du Cann, Rt Hon Edward King, Rt Hon Tom
Dunn, Robert (Dartford) Kitson, Sir Timothy
Durant, Tony Knight, Mrs Jill
Dykes, Hugh Knox, David
Eden, Rt Hon Sir John Lamont, Norman
Edwards, Rt Hon N. (P'broke) Lang, Ian
Eggar, Tim Langford-Holt, Sir John
Elliott, Sir William Latham, Michael
Emery, Peter Lawson, Nigel
Eyre, Reginald Lee, John
Fairbairn, Nicholas Le Merchant, Spencer
Fairgrieve, Russell Lennox-Boyd, Hon Mark
Faith, Mrs Sheila Lester Jim (Beeston)
Farr, John Lewis, Kenneth (Rutland)
Fell, Anthony Lloyd, Ian (Havant & W'loo)
Fe'nner, Mrs Peggy Lloyd, Peter (Fareham)
Finsberg, Geoffrey Loveridge, John
Fisher, Sir Nigel Luce, Richard
Fletcher, A. (Ed'nb'gh N) Lyell, Nicholas
Fletcher-Cooke, Charles McCrindle, Robert
Fookes, Miss Janet Macfarlane, Neil
Forman, Nigel MacGregor, John
Fowler, Rt Hon Norman MacKay, John (Argyll)
Fox, Marcus Macmillan, Rt Hon M.
Fraser, Rt Hon Sir Hugh McNair-Wilson, M. (N'bury)
Fraser, Peter (South Angus) McNair-Wilson, P. (New F'st)
Fry, Peter McQuarrie, Albert
Galbraith, Hon T. G. D. Madel, David
Gardiner, George (Reigate) Major, John
Gardner, Edward (S Fylde) Marland, Paul
Garel-Jones, Tristan Marlow, Tony
Gilmour, Rt Hon Sir Ian Marshall Michael (Arundel)
Goodhart, Philip Mates, Michael
Goodhew, Victor Maude, Rt Hon Angus
Mawby, Ray Shaw, Michael (Scarborough)
Mawhinney, Dr Brian Shehton, William (Streatham)
Maxwell-Hyslop, Robin Shepherd, Colin (Hereford)
Mayhew, Patrick Shepherd, Richard
Mellor, David Shersby, Michael
Meyer, Sir Anthony Silvester, Fred
Miller, Hal (B'grove) Skeet, T. H. H.
Mills, lain (Meriden) Smith, Dudley
Mills, Peter (West Devon) Speed, Keith
Miscampbell, Norman Speller, Tony
Mitchell, David (Basingstoke) Spence, John
Moate, Roger Spicer, Jim (West Dorset)
Molyneaux, James Spicer, Michael (S Worcs)
Montgomery, Fergus Sproat, Ian
Morris, M. (N'hampton S) Squire, Robin
Morrison, Hon C. (Devizes) Stanbrook, Ivor
Mudd, David Stanley, John
Murphy, Christopher Steen, Anthony
Myles, David Stevens, Martin
Neale, Gerrard Stewart, Ian (Hitchin)
Needham, Richard Stewart, J.(E Renfrewshire)
Nelson, Anthony Stokes, John
Neubert, Michael Stradling Thomas, J.
Newton, Tony Tapsell, Peter
Nonmanton, Tom Taylor, Robert (Croydon NW)
Nott, Rt Hon John Taylor, Teddy (S'end E)
Onslow, Cranley Tebbit, Norman
Oppenheim, Rt Hon Mrs S. Temple-Morris, Peter
Page, John (Harrow, West) Thatcher, Rt Hon Mrs M.
Page, Rt Hon Sir G. (Crosby) Thomas, Rt Hon Peter
Page, Richard (SW Herts) Thompson, Donald
Parris, Matthew Thome, Neil (Ilford South)
Patten, Christopher (Bath) Townend, John (Bridlington)
Patten, John (Oxford) Townsend, Cyril D, (B'heath)
Pattie, Geoffrey Trippier, David
Pawsey, James Trotter, Neville
Percival, Sir Ian van Straubenzee, W. R.
Peyton, Rt Hon John Vaughan, Dr Gerard
Pink, R. Bonner Viggers, Peter
Pollock, Alexander Waddington, David
Porter, Barry Wakeham, John
Powell, Rt Hon J.E. (S Down) Waldegrave, Hon William
Prentice, Rt Hon Reg Walker, Rt Hon P.(W'cester)
Price, Sir David (Eastleigh) Walker, B. (Perth)
Prior, Rt Hon James Walker-Smith, Rt Hon Sir D.
Proctor, K. Harvey Wall, Patrick
Pym, Rt Hon Francis Waller, Gary
Raison, Timothy Walters, Dennis
Rathbone, Tim Ward, John
Rees, Peter (Dover and Deal) Warren, Kenneth
Rees-Davies, W. R. Watson, John
Renton, Tim Wells, John (Maidstone)
Rhodes James, Robert Wells, Bowen
Rhys Williams, Sir Brandon Wheeler, John
Ridsdale, Julian Whitney, Raymond
Rifkind, Malcolm Wickenden, Keith
Rippon, Rt Hon Geoffrey Wilkinson, John
Roberts, M. (Cardiff NW) Williams, D. (Montgomery)
Roberts, Wyn (Conway) Winterton, Nicholas
Ross, Wm. (Londònderry) Wolfson, Mark
Rossi, Hugh Young, Sir George (Acton)
Rost, Peter Younger, Rt Hon George
Royle, Sir Anthony
Sainsbury, Hon Timothy Tellers for the Noes:
St. John-Stevas, Rt Hon N. Mr. Carol Mather and
Scott, Nicholas Mr. Peter Morrison.

Question accordingly negatived.

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

Debate to be resumed tomorrow