HC Deb 29 October 1980 vol 991 cc490-577

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Waddington.]

3.30 pm
Mr. Denis Healey (Leeds, East)

Parliament is approaching the end of its first Session under the Government of the right hon. Lady. In just 18 months she has broken every promise on which she won the last election. Her economic policy is in ruins and the price of her failure is an increase in unemployment of over 600,000 in the last 12 months while British industry, already reeling under the heaviest battering that it has suffered since the 1930s, has just published what it describes as its blackest survey ever, saying that we have not touched bottom yet, that there is a lot more bad news to come, and that it is going to get considerably worse the way things are going.

The fall in employment in Britain over the first six months of this year was over 500,000, after three years in which employment rose by 250,000. Unemployment breached the 2 million mark in August, and is increasing faster every month. The latest increase in unemployment is the highest ever recorded at 106,000. Vacancies are the lowest for 20 years. There are 250,000 men and women on short-time working or waiting for the sack. As the right hon. Gentleman the Secretary of State for Employment knows, the temporary short-time working scheme is now beginning to run out for many of those at present covered by it.

In addition, large numbers of people who have lost their jobs are not registered on the unemployment register. I gather that the Government's own assumption—I hope that the right hon. Gentleman will confirm this—is that unemployment will reach 2,800,000 next year, which is more than can be handled by the Government computers. If that prospect gives delight to some Conservative Members it does not do so to their constituents.

These figures reveal a human tragedy of a dimension that we have not known since the great slump of the 1930s. Nearly half of those out of work are under 24 years of age. A whole generation of youngsters is being condemned to drop out of normal society, and 350,000 men and women have been out of work for over a year. There are still some Conservative Members who talk of unemployment as if it were a comfortable rest cure, but the average couple on benefit are expected to live on under £30 a week. The Government are cutting nearly £3 off the increase in unemployment benefit due next month in order to make sure that it does not match the increase in the cost of living that the Government themselves have produced over the past 12 months.

People with as little as £2,000 of redundancy pay or £2,000 in a building society will lose their right to supplementary benefit, and next year the Government are planning to abolish the earnings-related supplement. This is an appalling tally of humiliation and indignity inflicted on the British people by this Government.

The effect on our economy and, indeed, on Government financing, is equally disastrous. The present level of unemployment represents a loss to the economy of £10,000 million, which is 5 per cent. of our gross domestic product. It is equivalent to an average cut of £400 in the income of every man or woman at work today. If the economy were growing at 3 per cent., as it was in the last full year when the Labour Party was in power, instead of falling by 3 per cent., as it is falling this year, the public sector borrowing requirement to which the Conservative Party attaches so much importance, would be lower by £6,000 million.

At this time entire industries and entire regions are being smashed into ruins. Unemployment is already over 10 per cent. in Northern Ireland, in Scotland, in Northern England and in Wales. In Wales, authorities locally have estimated that it will reach 15 per cent. in two years' time and 30 per cent. in many areas of the Principality.

Firms are now collapsing all over the country. The last quarter's increase in company failures in manufacturing industry was an all-time record. The problem is not confined to the areas of traditional unemployment. The London Chamber of Commerce said last week that unless there is an immediate change in Government policy, London will face a tidal wave of bankruptcies in the coming winter. This is not, as the Government used to claim, a shake-out of the inefficient firms. Some of the most efficient firms in the country are deeply affected.

ICI reported a loss for the first time in its history last week and is sacking 4,200 exceptionally able and dedicated men and women in its fibres division. Other efficient firms with world-wide reputations are going under. Fodens is already in the hands of the receiver, Bowaters is closing down, GKN, Lucas and Courtaulds are reporting heavy losses. The problem is not confined to manufacturing industry. The construction companies are being hit worst of all, mainly by cuts in Government spending. Distribution is equally hard hit. The profits of the big chain stores, Woolworths, Marks and Spencers and British Home Stores, have fallen heavily and 30,000 jobs have already been lost in retailing. I also remind the Prime Minister that small firms and small shopkeepers are being hit worst of all.

I wonder whether the Prime Minister has recently looked at the situation in Finchley High Street. Opposite the job-centre, which is now doing a booming trade because unemployment in Finchley has risen 70 per cent. in the last 12 months, one shop has already closed, a second closes on Saturday, and a third as soon as its closing sale is over. I expect that the owners of all these shops voted for the Prime Minister in the last election. I know that many of the firms that 1 have mentioned and many of the firms now in trouble were large contributors to the Conservative Party's funds.

We were all relieved to hear from the Prime Minister yesterday that she has now withdrawn the letter that attempted to blackmail the companies receiving Government aid into subscribing to the Tory Party. I ask her whether she will now complete the good work by returning the money subscribed to her at the last general election by Bowaters, Lucas, GKN, Fodens, Wimpeys, Taylor Woodrow, and the hundreds of other firms of which I shall be glad to give her a list under sealed cover after the debate.

The plain fact is that British industry is now facing the most daunting prospect since the early 'thirties. Why does it face that prospect? It is not because of the world slump—exports are only just beginning to fall. It is not because of excessive wage increases. The Financial Secretary published in the Treasury's economic report in August the view that unemployment would increase if wage increases were higher than the increase in the money supply. They have not been so in the last 12 months, have they, Mr. Speaker?—or is it unfair to ask you that question? The Financial Secretary will be able to tell you, Mr. Speaker, that in the last 12 months the increase in earnings was about the same as the increase in the growth of money supply. It was much lower in the manufacturing industry, which has been hit by the closures that I have mentioned.

British industry is facing that daunting prospect not because of the increase in oil prices. Among industrial countries Britain is deriving great benefit from the increase in oil prices, because Britain is now self-sufficient in oil. It is adding about 5 per cent. to our gross domestic product. It is giving us the benefit of about £4 billion in public revenue. It means that Britain is the only industrial country in the world, apart from Norway, that can look forward to a surplus on its current account in the present year.

No, Mr. Speaker, the industrial reality and the outlook that I have described are direct consequences of Government policy. First, we are experiencing the most savage deflation of demand since the war. The Government decided at the beginning of this year, contrary to their election promises, to increase the burden of taxation by £3,650 million. They decided to cut public expenditure by £5,000 million. On top of that, the collapse in public confidence in the country's economic future has led to the savings ratio rising to 15 per cent. of income. Every 1 per cent. increase in the savings ratio is equal to a fiscal deflation of £2,000 million. In other words, as a direct consequence of Government actions there has been a reduction of about £15 billion in demand in the current year.

On top of that savage fiscal deflation the situation has been made infinitely worse by a monetary policy that is far too strict. It sets a target that is only half as high as the increase in inflation engendered by the Government. It is a monetary policy that has been pursued with an incompetence unparalled in the world.

The Chancellor of the Exchequer has tried to control the money supply through interest rates alone. However, excessive interest rates have not reduced company borrowing, which was the Government's intention according to the Chancellor when he introduced the rates nearly 12 months ago. On the contrary, company borrowing is still at an all-time high. The only effect of the excessive interest rates is that companies have had to borrow more to finance their existing debt. We have offered foreign speculators a bonanza at the expense of the British taxpayer. About £4,000 million of hot money flowed into Britain in the past 12 months. That has been the main factor in pushing up the value of the pound. It has risen by 30 per cent. compared with the average of other currencies over the past 12 months.

I have been pointing that out to the Government all year. The Bank of England points it out in its latest edition of the Bulletin. The CBI has followed suit. In its survey published today the CBI states: The relative unit cost competitiveness of British industry is 60 per cent. worse now than it was in 1975. As a result, Sir Terry Beckett said yesterday that industry was going right down the nick. Sir Maurice Hodgson, the head of ICI, last week said that he believed in a bracing monetary climate but that British industry was now "freezing to death".

The Government claim that all this is just the painful price that inevitably must be paid for bringing inflation down by controlling the growth of money. The Government have pointed to the recent fall in inflation as evidence that their policy is working, but if the Government's arguments are right and there is an 18-month to 24-month gap between a change in the growth of money and a consequence on prices, the fall in inflation this summer is due to the last Government's monetary policy and not to this Government's monetary policy.

More than that, this Government have made a total shambles of their monetary policy. The Chancellor finally admitted to the Select Committee on Monday that sterling M3 has been growing at 19 per cent. since February—over twice the target of 9 per cent. set by the Financial Secretary when he addressed the House some months ago. If the Government are right in their arguments, we must face an immense increase in inflation some time next year as a consequence of their monetary incompetence this year.

I read in the newspapers that the Prime Minister is "very, very sorry" about all this. In fact, I gather that she has been in quite a bate. Her personal style as Prime Minister, as we all know, has been distinguished by a remarkable disloyalty to her colleagues, as the right hon. Member for Lowestoft (Mr. Prior) will be the first to testify. I am glad to see that many of her Cabinet colleagues are now flattering her by imitating her disloyalty. There was a lovely example of that by the hon. Member for Cambridge (Mr. Rhodes James) in a speech yesterday. I can see why the Leader of the House is looking so nervous he thought that I was about to refer to him.

The Prime Minister has been putting it about that the collapse of her monetary policy is all the fault of the Governor of the Bank of England. Apparently, everybody is to blame but she. However, it was she who authorised the 8 per cent. increase in the retail price index—for which the Government are directly responsible—over the last 12 months, which has been reflected in the biggest increase in earnings for six years. It was she who abolished the exchange control, although the Bank of England must have warned her that that would mean saying "goodbye" to control of the money supply, because British banks have been lending furiously to British firms through their subsidiaries abroad.

It was the Prime Minister who abolished the corset and therefore freed for the banks a new way of avoiding monetary control by round-tripping, thus pushing up the money supply and attracting even more foreign inflows, which are pushing up sterling still further. I suspect that the Bank of England warned her against all these steps but with her usual self-confident pigheadedness she preferred to rely on the stumble-bums in the Treasury. She ignored all the advice that she received from the Bank. If the Bank of England is at fault in this lament- able story, it is in relying on the last Conservative Government's introduction of the ill-famed competition and credit control policy instead of taking direct control of bank lending, as happens in all the countries that successfully control the supply of money.

The Prime Minister herself was responsible for the public expenditure cuts, which relied largely on cutting the orders to private industry for capital equipment or increases in nationalised industry prices. Mr. Harvey Jones, of ICI, told us last week: Every single one of our costs"— he was referring to his firm— that can be affected by Government is higher than in continental Europe. To take just one example, British industry is having to pay more for its industrial gas than industry anywhere else in the world-18 per cent. more than Germany, 47 per cent. more than France and 108 per cent. more than the United States. That is the main reason why Bowaters is bust.

Surprisingly, the Conservative Party has been standing market economics on its head. It has been using cash limits in the nationalised industries to ensure that they raise the prices of their products when the demand for them is falling. That is why we shall suffer a 14p first-class letter post in a month or so and why British Rail fares will go up by 19 per cent. by the end of the year.

Everything that I have so far described, which is responsible for what has happened so far, is nothing compared to what is to come next year, as Sir Terry Beckett pointed out in his introduction of the last CBI survey. Next year we face the collapse in exports that has been so slow to come. Next year we shall face a 10 per cent. collapse in investment, after three years in which investment, particularly in private manufacturing industry, has been rising at unprecedented levels. Next year, also, we shall face a collapse in retail sales that will be all the more severe if the Government are successful in the compulsory pay policy that they are introducing in the public sector.

Two questions have been asked in the past week or two, and they have not been answered. I hope that we shall get answers from the Government this evening. First, Sir Terry Beckett, the head of the CBI—the employers' organisation—asked yesterday whether we have to go through the next three or four years destroying great tracts of British industry. We want a reply to that question, too. The other question was asked by the head of the trade union movement, Mr. Len Murray, of the Prime Minister personally in Downing Street the other day: is there any level of unemployment that the Government would consider too high? We want an answer to that question, particularly from the Secretary of State for Employment.

The biggest problem that the country risks facing unless there is an immediate reversal of policy is that when recovery comes—and we may have to wait for the next Labour Government before it does—those parts of our manufacturing industry that have survived the Prime Minister's holocaust will have carried out no investment and no industrial training for five years. We shall therefore face the possibility of recovery with an industry that has clamed-out machinery and lacks the skills that will be essential then to respond to demand. That is why it is essential that the Government should reverse their policy now. Every week's delay is pushing British industry further towards terminal decline.

Mr. John Bruce-Gardyne (Knutsford)


Mr. Healey

I will not give way.

Mr. Bruce-Gardyne


Mr. Speaker

Order. It is quite clear that the right hon. Gentleman is not giving way.

Mr. Healey

There is no answer to our economic problems today that does not involve a U-turn by the Government. The Prime Minister is so far off course that she will have to do a U-turn even to get herself back on the course that she set herself earlier in the year. I shall tell the right hon. Lady what is needed, and I think that there will be wide agreement between both sides of the House on what I have to say.

First, at least £400 million is needed to alleviate the immediate impact of unemployment. The TUC and the Labour Party have both put forward specific proposals for short-term alleviating measures in this area. I isolate two of them as being by far the most important. I hope that the Secretary of State for Employment will be able to tell us tonight that he has persuaded his colleagues to give him enough money to do two things. The first is to fulfil the promise that was carried out by the last Labour Government to offer every school leaver a job or job training by the Easter after leaving school. Secondly—this has now become equally important—there must be a similar offer of a job or job training to every man or woman who has been out of work for more than 12 months.

Further—there is wide agreement on this—there must be an immediate cut in interest rates of at least 4 per cent. Most City advisers whom the Prime Minister may have drawn to her attention are now agreeing that that is likely to have no effect on increasing the money supply, but it may have a healthy effect in producing a fall in the value of sterling.

Next, we must have reflation. The savage deflation from which Britain is now suffering is only made worse by every aspect of the Government's present policy. We must make good the shortfall in demand, especially when the saving ratio is now as high as 15 per cent. The Government must borrow from that money and feed it back in industrial aid, in cuts in indirect taxes, and in assistance to the under-privileged.

This will not upset the money supply. The London Business School pointed that out earlier this year, and it provided the Chancellor, I think, with his first economic adviser. I must, with respect, tell the Prime Minister that such a move will not prevent the institutions from lending to industry. The appalling thing about the abolition of exchange control, as revealed in the figures this week, is that the financial institutions have been buying more equities abroad than they have been buying in Britain in the past 12 months.

The next thing that the Government must do is to channel North Sea oil revenues—£4 billion this year—into industrial investment, infrastructure and industrial training instead of allowing them all to pour down the drain in financing unemployment.

Mr. Gordon Wilson (Dundee, East)

Will the right hon. Gentleman give way?

Mr. Healey


Mr. Wilson


Mr. Speaker

Order. There is no advantage to be gained in the hon. Gentleman's remaining standing when it is clear that the right hon. Gentleman is not giving way.

Mr. Healey

I put my final point urgently to the Government, and I know that the Secretary of State may have some sympathy for what I shall say. They must start serious talks—negotiations—with the CBI and the TUC about actions that will help to reduce costs through higher productivity and will produce a more sensible approach to the problems of pay and prices. The right hon. Lady has met the TUC, but only to abuse and insult it.

The sort of approach that I have suggested is one that any previous Conservative Government facing these problems would have adopted, as Mr. Macmillan made clear on television the other day, and as the right hon. Member for Sidcup (Mr. Heath) would no doubt confirm. However, the Government are planning to do exactly the opposite. We understand that there is a great crunch meeting of the Cabinet tomorrow morning. The Prime Minister appears determined to stick to the policies that have collapsed around her. She seems determined to try to make something of the ruins of that ridiculous medium-term financial strategy that the Chancellor of the Exchequer unveiled to the House, to such derision, in his speech on the Budget. She seems determined to try to make good the increase in the public sector borrowing requirement, which is due entirely to the fall in output and the increase in unemployment.

There is no way of cutting public expenditure by the £2 billion that is talked of which will not hurt industry even more and drive up unemployment even higher. The reduction in demand will do that, however it is achieved. If it is done through capital cuts, as has happened so often in the past, it will fall very heavily on private industry, particularly in construction. If the Prime Minister does it through nationalised industry price increases it will directly add again to industrial costs. If she follows the advice of the ineffable right hon. Member for Daventry (Mr. Prentice) and goes for the social services she will be inflicting needless suffering on those who are not able to help themselves.

I read in The Daily Telegraph this week that one of the Prime Minister's Cabinet colleagues described her present policy as the economics of the madhouse. It also represents the social morality of the Victorian poorhouse. I hope that there are enough hon. Members on both sides of the House who take seriously the future of Britain's industry and economy, and who will join the Opposition tonight when we vote against the Adjournment motion.

4 pm

The Chancellor of the Exchequer (Sir Geoffrey Howe)

The House has listened to the speech of the right hon. Member for Leeds, East (Mr. Healey) without overwhelming enthusiasm from either side. We should regard it as the opening step in his campaign for the leadership of the Labour Party. Those of us who naturally take an interest in that position find it difficult to determine the terms and conditions on which the local, acting, temporary leadership of the Labour Party will be available. On present form the occupant of that position seems likely to have about as much authority as the doorkeeper of Congress House, and as much job security as the chairman of Westward Television.

The right hon. Gentleman has some qualifications for the job. Like his immediate predecessor, he is the owner of an ample mansion in Sussex—[Interruption.]

Mr. Speaker

Order. I hope that the debate can now continue.

Sir G. Howe

Like his immediate predecessor, the right hon. Gentleman spent a great deal of his time in office helping the International Monetary Fund with its inquiries. As we know, he is a man of sufficient intelligence to disagree with almost every decision of his party conference and with every decision of its national executive, but he is very reluctant to admit that in public. His speech today was in line with that character.

The debate proceeds on the common grounds of deep concern on both sides of the House about unemployment and the recognition of the real difficulties that face much of industry, with the knowledge of the problems that are especially intractable for businesses that face foreign competition at home or abroad. There is common ground also in our concern about individuals and communities that suffer from those problems.

If we are together to improve the prospect, it is of the utmost importance not to overlook two matters. First, the problems are in no way unique to Britain. Secondly, responsibility for these conditions cannot be laid exclusively at the door of Governments of either party. [Interruption.] Opposition Members may choose to disregard that, but throughout the industrial world recession is marching ahead. The average rate of inflation in the main industrial countries, excluding Britain, has doubled since 1978. In the seven major countries, again excluding Britain, unemployment has risen by 2.3 million during the past 18 months. For the same industrial countries in the year towards which we are now moving there is the prospect of no more than 1 per cent. growth at best. In the United States—still a major part of the world market—output last year was down by 11 per cent. Even in Germany, the major industrial partner in Europe, output is expected to decline by about 1 per cent. in the first half of next year. All those things are symptomatic and symbolic of the troubles afflicting not only Britain, but the whole of the industrial world.

Whatever the right hon. Gentleman may say, I do not argue that those problems are all the fault of the Opposition. Anyone who takes an objective view knows that much of industry in Britain has been failing to match the improvements in productivity that have been achieved elsewhere. Over the years industry has become less and less competitive. For example, during the three years to 1979, when the overseas markets for motor cars was buoyant, registrations for new cars in Britain rose by one-third, but the output of cars in the United Kingdom dropped by one-fifth. The Labour Party came into office in 1974 with unemployment standing at 575,000. By the time it left office, unemployment stood at 1.3 million—well over double the figure of 1974. The Opposition have very little cause for complacency and no cause whatsoever for conceit. I have illustrated two causes of Britain's present difficulties—each of great importance and far from easy to remedy, except over a significant period.

The right hon. Gentleman argued that the Government could determine one cause of our difficulties, namely, the exchange rate. I know that a number of my hon. Friends are concerned about that. There are three things to be said about that matter. First, although the problems posed for some businesses by the high exchange rate are real, we should not overlook the fact that it is not all bad. The present level of the £ sterling keeps down the price of many raw materials. It is worth remembering that our problems were not made significantly easier when the right hon. Gentleman found himself treating our problems by means of opposite prescription—massive depreciation. Even so, the present level of the £ sterling is not an objective of policy. The right hon. Gentleman may well laugh. As he should know, the reasons underlying the present level of the exchange rate are more complex than might be thought. Of course, the level of interest rates attracts inflows to some extent. But I am not aware——

Mr. Geoffrey Rippon (Hexham)

Will my right hon. and learned Friend at least agree that the record level of the minimum lending rate has a significant effect on the exchange rate? Will he indicate how high the money supply must rise before he will consider reducing the minimum lending rate?

Sir G. Howe

I have already acknowledged that the level of interest rates has the effect of attracting inflows to some extent. But if we look more widely than that, it is difficult to find any commentator who can explain the high sterling as being predominantly due to that influence. As my right hon. and learned Friend must have witnessed, the upward climb of the £ sterling during the past 18 months has pretty consistently exceeded the forecasts and expectations of most commentators.

Experience surely suggests that, however much we may like to think the opposite, it is self-sufficiency in oil, the rising real price of oil and conditions in the Middle East which are undoubtedly the most potent real influences on the present level of the pound sterling. However much one would like to conclude in the opposite sense, there are no grounds for confident belief that the Government can exercise great influence on the exchange rate, still less on all the other factors which make up the word "competitiveness". It is prudent not to assume that lower interest rates, which are certainly the objects of our strategy, will make a dramatic difference in that respect.

Mr. Peter Tapsell (Horncastle)


Sir G. Howe

Perhaps I may be allowed to deal further with this point.

It is also prudent to be very careful about international parallels which may well be drawn in the debate—for example, with Germany and Switzerland when their currencies were under upward pressure. It is by no means clear that measures to control inflows in those countries were more than marginally effective, and then only for a short period. Nor should we ignore the price paid in higher inflation, for example, by the Swiss when controls had not achieved their objects and they abandoned monetary targets for a time. The right hon. Member for Leeds, East should know this from his own experience, because in 1977 interest rates were dramatically reduced and there was massive intervention to hold down the sterling exchange rate. However, in the end, none of that worked and he was forced to let the rate rise. In due course, interest rates rose as well.

Of course I appreciate the concern of my right hon. and learned Friend the Member for Hexham (Mr. Rippon) about the possible effect not only on exchange rate but in other directions, of higher interest rates, which are a real burden. The level is a function of past inflation and of the policies that must be followed to reduce it. In an economy of any complexity, the price of money—the interest rate payable—is inevitably a fundamental instrument of monetary control, and direct controls, as we have seen from experience of the corset introduced by the right hon. Gentleman, distort but do not control. All this should be familiar to the right hon. Gentleman because he has long recognised

Mr. Tapsell

While no one has ever suggested that the level of interest rates is the sole determinant of an exchange rate, does not my right hon. and learned Friend agree that, if MLR in this country was 2 per cent. below the prime rate of the United States rather than 2 per cent. above it, it would have a most helpful effect on the exchange rate? Most people in the City of London do not think that that would have a damaging effect on the money supply. It might positively help him in his problem of reducing bank lending.

Sir G. Howe

I can see the force of my hon. Friend's point as a proposition. However, our experience is that even when the American prime rate was ahead of us the £ sterling continued to appreciate. The other feature that one must remember is that one must compare the prime rate, or the equivalent rate in any country, with the level of inflation in that country, anticipated, actual or that which has just taken place. If one compares the interest rate in this country with the level of inflation, it is still barely positive, and, if one looks at the United States, one finds that their interest rate at a shade under 13 per cent. is comparable with ours in exactly the same sense. If one compares lower interest rates in other countries with the level of inflation in those countries, one finds that the interest rate is comparable with the level of inflation.

The truth is, as the right hon. Member for Leeds, East said, that the need for monetary control is inescapable. As he said in the House three years ago, we cannot master inflation unless we have control of the money supply"— I am quoting not from any doctrinaire author but from the speech of the right hon. Gentleman— … no responsible Government could shirk their duty for maintaining firm control over the supply of money and using the necessary fiscal and monetary instruments for that purpose."—[Official Report, 20 July 1977: Vol. 935, c. 1726–31.] From the right hon. Gentleman's speech, one is not clear whether he thinks that our monetary policy is. or has been, too lax or too tight. In the Budget debate earlier this year, he argued that the monetary policy which we were pursuing was too tight. But as the summer went on he began to argue in precisely the opposite sense. Today he argued in both senses at the same time.

Mr. Healey

Perhaps I can repeat what I said when the right hon. and learned Gentleman raised this matter last time. 1 said that the policy was far too strict and that it had been pursued with unparalleled incompetence. The result is that the Chancellor has come out at double his target rate. That is a simple point to make, and everyone in the City knows it.

Sir G. Howe

The right hon. Gentleman still declines to address himself to the question. Is he or is he not arguing that the rate of monetary growth is too tight or too slack? When he thought, as did all commentators, in the earlier part of the year that the monetary growth rate was running at the predicted level, he argued that our monetary policies were too tight. But when he now finds, as a result of the removal of the corset which he put in place and which created the distortions, that the monetary growth rate is faster than that, he argues that it is too slack. Yet he reserves the right at the same time to continue to argue that it is too tight. It is a characteristic attempt to present the case in both ways.

I have no doubt that we have created the conditions that are necessary for slowing the rate of monetary growth. We shall be deciding on the rolling forward of the monetary targets in due course when more information is to hand. We shall be making announcements in due course on the prospect of monetary base control. As I have told Committees of the House already, we expect public sector borrowing and bank lending to abate in the second half of this financial year, and we are looking at further ways of securing more finance directly from the personal sector. It is for that reason that we shall have a substantial new issue of so-called "granny bonds" available on 17 November.

I reaffirm our commitment to the principles of our financial strategy as a means of conquering inflation and permitting sustainable growth. The object of that policy is the defeat of inflation, and it would be total folly to abandon that policy when it was beginning to produce results.

When we came into office, inflation was on a rising trend. The price index had been showing increases in annual rate month after month from October 1978 onwards, and it was rising sharply at the time of the election in May 1979. Now it is back to a falling trend. If the right hon. Gentleman, again characteristically, seeks to take credit for that, he must take the blame for the rise that intervened. In fact, the September RPI figures showed a fall in the annual rate for the fourth month running—six points lower than in May. Wholesale input prices are scarcely growing. House prices are flat, and the increase in retail prices has been well below 1 per cent. in each of the last five months.

Of course, it is clear that this sustenance of the battle against inflation involves substantial and painful adjustments. It is important to spread the burden of adjustment as fairly as we can. I agree with all those, notably the CBI, which has so often been quoted by the right hon. Gentleman, that it is of crucial importance to restrain central and local government spending in order to ease the burden that that spending represents on industry.

Mr. Dick Douglas (Dunfermline)

Has the right hon. and learned Gentleman noticed that the Scottish Council for the Care of Spastics has had to sell its investments in order to pay for the Government's incompetent policy? Does he consider that to be spreading the burden fairly?

Sir G. Howe

We are all concerned about the Scottish Council for the Care of Spastics, but I cannot comment on a particular disposal of shareholdings by a particular organisation.

The reality is that industry, and the private sector in particular, is finding the burden imposed upon it sharply increased by the costs of central and local government, not least by the costs of industrial rates on industry, which is one aspect of the costs of local government. The achievement of sufficient and effective control of public borrowing will permit lower interest rates while meeting the necessary monetary objectives.

When in power, the Labour Party recognised as part of the policy to achieve these things the importance of restraining public expenditure. But today the right hon. Gentleman has argued simultaneously the case for lower interest rates and a substantially higher public sector borrowing requirement. That combination is quite unattainable. As the right hon. Gentleman said in December 1976, under the surveillance of the International Monetary Fund, failure to take measures to reduce our public sector borrowing requirement to the extent to which we have reduced it would have had effects on inflation and employment far more severe than anything attributable to the measures that I have announced this afternoon."—[Official Report, 15 December 1976; Vol. 922, c. 1555.]

Mr. Clinton Davis (Hackney, Central)

Will the right hon. and learned Gentleman give way?

Sir G. Howe

No, I am sorry. I have already given way more times than the right hon. Member for Leeds, East.

It is that policy—the containment and control of public spending—that industry in this country also wants. The CBI, which the right hon. Gentleman quoted so often, is certainly not urging us towards the abandonment of our policies to defeat inflation. The director-general of the CBI said last month: They cannot bring down interest rates until they control public expenditure. He was right, and it is to that that we are committed.

For those reasons, we have set out the path for the reduction of public spending, in real terms and as a share of the GDP. We shall maintain that overall strategy. As is usual at this time of the year, we are reviewing the pattern of public spending, and inevitably there are some shifts to reflect changing circumstances. But when that has been undertaken the fact remains——

Mr. Andrew Faulds (Warley, East)

On a point of order, Mr. Speaker. When will the right hon. and learned Gentleman, who is boring his colleagues into somnolence, turn to the subject of the debate—unemployment?

Mr. Speaker

The hon. Gentleman knows that that is not a point of order.

Sir G. Howe

The fact is that one of the features that is most relevant to the containment of unemployment is the burden of the pattern of public expenditure. All public expenditure must be paid for by taxation and borrowing, and we must take account of that when we consider the shape of it. For us all, that arithmetic is inescapable. For that reason, we have agreed to and will take action to keep the public sector borrowing requirement under control, next year as well as this year.

Mr. Dennis Skinner (Bolsover)

Regarding the question of arithmetic and the public sector borrowing requirement, which is very much in the Government's mind, as the right hon. and learned Gentleman constantly tells us, how does he reconcile the fact that the Minister of Agriculture said, a few months ago, that it cost £7 billion a year to finance the dole queue when there were F6 million people out of work—it is suggested that the figure, when updated, could be about El 0 billion a year, probably as much as the public sector borrowing requirement—with the Government's inability to tell us how much further they are prepared to allow unemployment to rise and so swallow up more thousands of millions of pounds of the taxpayers' money?

Sir G. Howe

The growth of the public sector borrowing requirement is being curtailed by present policies. The experience of the previous Labour Government shows that clearly. Under that Government, unemployment rose steadily and remorselessly until the moment came when they achieved control of public sector borrowing. It was only when control was taken—from 1977 onwards, when public sector borrowing came under the control prescribed by the International Monetary Fund—that unemployment under the previous Labour Government began to fall. The point made by the hon. Member for Bolsover (Mr. Skinner) is sometimes advanced as a reason for failing to control public spending. It was that very argument that misled his Government for so long.

As I said, following the IMF measures announced in 1976, in 1977–78 public expenditure was 8.6 per cent. below the level that had been planned in February 1976. If we compare spending after the application of the IMF prescription with spending in 1976–77, we find that there was a reduction of more than £4 billion. It was at that time, for the first time in the Labour Government's term of office, that unemployment began to fall. That is the reason for the directness of the link between the control of public expenditure and the problem of unemployment.

There are other things that industry wants. Industry wants, and we have given it, the removal of unnecessary controls and restriction of opportunities. The House will recall that, when the Prime Minister announced the location of the first seven enterprise zones, she said that further sites would be announced in the North and in the Midlands. A decision on the site in the North will be taken shortly. Meanwhile, I am able to announce today that, following a recommendation by my right hon. Friend the Secretary of State for the Environment, we have chosen two possible new sites in Dudley and Corby. Both sites are in areas where their value will be considerable. By reducing the burdens on business. their creation will help to bring much-needed jobs and investment to those towns.

There is one other factor that is of importance in relation to the present unemployment—the level of pay that has been and still is being paid in some places. We are still paying today the price, in the level of unemployment, for pay increases far in excess of the growth in productivity over a number of years. In the last pay round, earnings were up by 22 per cent. while output was down by 2 per cent. At the same time, in most of our major competitor countries earnings were rising in single figures. It is that growth in earnings on an excessive scale that has had an unfavourable impact on profits and profitability and has helped to destroy investment. competitiveness and jobs. In that sense, as we were told by NEDC recently, pay and the growth of pay can have a greater impact on jobs than interest rates. CBI economists said that in the economy as a whole 1 per cent. less in pay increases had three times as large an effect on profits, and so on jobs, as a 1 per cent. cut in interest rates.

The continued growth in pay ahead of productivity is an important aspect of the long-term decline in competitiveness, which we must reverse. The same discussion at NEDC offered a comparison of unit labour cost in manufacturing with most of our main competitors in world markets. The right hon. Member for Leeds, East also quoted those figures in his speech. The suggested average level in the second quarter of this year, compared with the level of 1976, was 70 per cent. higher in this country than in our competitor countries. The CBI document said: Although the appreciation of sterling has exacerbated the problem, the major cause of our loss of competitiveness has been our very poor pay and productivity performance. That is the reality with which people in this country must come to terms, and of which we must remind them constantly. It is up to the pay bargainers on both sides of industry to take account of the employment consequences of the bargains that they strike. There is every reason to welcome the growing mood of realism in that respect and move towards lower pay settlements and a substantial reduction in strikes—fewer in the last three months than in any three-month period during the last 30 years. All those factors can contribute enormously to the prospect of reducing unemployment and restoring prosperity in this country.

We cannot control public spending unless the Government control public sector pay, and that we must do. There is no question of victimising those in public services who give loyal and valuable service to the community. But when much of the private sector is accepting very modest pay rises, that should and must be reflected elsewhere in the labour market. Pay rises in the public services must be sharply lower than in the past year. In August the Lord President of the Council told the trade unions in the public sector that cash limits would be the main determinant of settlements in the year ahead. Hence the decision this week to suspend the Civil Service pay agreement, and with it the operation of pay research. That decision reflects our determination that cash limits should be the ruling factor in settling pay in the public services.

Nationalised industries must also play their part. The steel industry already demonstrates that the public sector is no exception to the rule that high pay awards cost jobs. That is the crucial importance of the link between the policies that I have outlined and the problem of unemployment with which this debate is concerned.

Of course, it is natural that there should be deep concern in the House and throughout the country at a time of rising unemployment and the severe pressures on industry to which I have referred. But the Government will be adhering to their policies, not out of any sense of obstinacy or unawareness of the problems but because we have no doubt that those policies are right. The temptation, when the going becomes more difficult to do something new for the sake of doing something new, however inappropriate, to demonstrate concern is one to which one ought not to succumb. It is precisely because we care about the problem touched on in this debate that we shall stand by the policies and offer the only way for this country to make its way back to economic prosperity.

4.29 pm
Mr. Tony Benn (Bristol, South-East)

I think that the kindest thing that I can say to the Chancellor is that, whatever the merits of his policy, he found it difficult to put them into words. If I were a supporter of the Government, I would be deeply anxious to think that the best justification for what is happening is to be found in a study of today's Hansard; for, frankly, the Chancellor bombarded the House with jargon, like a lawyer who had read a late brief, and did not convince the House, nor, I suspect, his own colleagues, that what he said justified what was happening.

This is an almost unprecedented economic debate in the House. In 30 years in Parliament next month, I do not recall an occasion on which a Government have not only lost, at one and the same time, the support of the TUC—and one would not expect the TUC to support this Government—but have also forfeited the confidence of the Confederation of British Industry. The right hon. and learned Gentleman's supporters must know, even though he does not want to admit it, that a divergence as wide as there now is between the Front Bench and the CBI, coupled with a very deep anxiety among the people of this country, makes this debate unique in the post-war annals of the House of Commons.

The reason for this is that we are discussing an unfolding tragedy of enormous human significance. Maybe London Mem- bers are not aware of what is happening in South Wales, where the whole economy is being threatened, or in Merseyside, in Clydeside, in the North-East, or even in parts of London, where unemployment is now over 10 per cent. It is that tragedy that the House requires the Government to consider. It is quite clear that they do not intend to change their policies.

I must take seriously what the Prime Minister said at the Conservative Party conference. She said that she would not change her policy, and I believe that the whole House must take that seriously. I do not believe that hers is an economic strategy; I believe that it is a political strategy to break the power of organised labour, to permit the reconstruction of a society in which employees are reduced to the sort of serfdom that is now appearing. [Interruption.] Oh, yes, it is. Anyone who thinks that when those ICI workers are laid off, without any consultation, they are not being reduced from people full of the skill and pride that goes with working in a successful firm into a form of serfdom under which they have to accept the sack, anyone who misunderstands that, does not understand what is happening.

It is a political strategy that is being followed. Therefore, we should not devote too much time to the possibility of a U-turn, because the real problem facing the House and the country today is that a U-turn, even if it were made, would not help. If there were a change of Prime Minister from the present Prime Minister to the present Secretary of State for Employment or to the Home Secretary, it would not help. If the right hon. Member for Sidcup (Mr. Heath) were brought back into the Government—as many of his party wish he were—to introduce his experience, it would not help. If the Liberal Party were brought into a Lib-Conservative alliance, it would not help. I go further and say that if—[Interruption]. I might add that the experience of the previous Labour Government, who did their best, would not help. No one can deny that they did their best to protect people from the impact of the world slump, but they fell foul of the International Monetary Fund, which the Chancellor lauded, but which, by its imposed prescription upon the Labour Government, contributed something to the problems that he has inherited.

Mr. Peter Hordern (Horsham and Crawley)

Will the right hon. Gentleman give way?

Mr. Benn

Perhaps I may be allowed to develop the argument a little further.

Therefore, I suggest that we shall waste some time in the House this afternoon if we devote ourselves to the sort of party argument that has often characterised these debates. I believe that what we must do now, and what the country would expect, particularly after reading the Chancellor's speech, is to look beyond the life of the present Government to the broken-backed economy that will await an incoming fresh Labour Government. There is no doubt whatever that that economy will be broken-backed. If pay is held down, that will worsen the situation and not improve it. I turn my mind to an old phrase and reformulate it: "One firm's pay settlement is another firm's order book". If one cuts wages, one is cutting the demand for other firms. When the engineering workers are asked to take 8 per cent. when inflation is at 16 per cent., those engineering workers will not be able to afford to buy the new Mini-Metro, or artificial fibres from ICI. So let us look at the matter in a different and more serious way.

There will be factories that are closed by this Government. Their equipment is now being sold off by liquidators to our foreign competitors—fine new equipment as well as the old stuff which should have been replaced years ago. Workers now have to watch the equipment that they have built by the work which they have done, made out of the profits that they have created for their employers, while that equipment is sold to their foreign competitors to manufacture goods which will come back into this country in the form of imports.

I believe—and I do not think that I am exaggerating—that an incoming Labour Government will find a situation graver than that in 1945. Hitler bombed the factories, and we kept them going with day-to-day repairs. When the Secretary of State for Industry closes the factories, they will be scrap metal. There will not be 3 million Service men waiting as then to be demobilised, but 3 million demoralised unemployed who will not have worked for years and will find that the places of work which they left are no longer available to allow them, or the nation, to earn a living. Regions and localities will be destroyed. Industries will be undermined. We shall have to face a problem of recovery which will be much longer and much harder than most people yet appreciate.

I want to turn my mind to what we should now be doing as a House of Commons. I speak mainly to those who share this analysis of how we should try to resolve this situation. First of all, Parliament should support those who are resisting the closure of their factories. When I see steel workers or engineering workers fighting to prevent their employers closing their factories, in my eyes they are defending our industrial heritage and our future in this country, and the House should give them sustained support.

Secondly, there will have to be an enormous public investment in industry in order to deal with the backlog of investment neglect and the present vacuum of investment created by Government policy. If anyone thinks that we are ever going back to the old bribery by the taxpayer to make it work, I ask him to take one example alone. I looked this up the other day. In 1968, as Minister of Technology, I brought before Parliament, and it was approved, a Bill to provide public money to finish the QE2. Now Lord Matthews, who owns it, threatens to sell that ship which he does not really own—because it was bought with public money—as a way of threatening the National Union of Seamen, whose only offence is to try to keep the British merchant fleet under the British flag.

I do not believe that the British people will ever go back to the attempt to bribe and bully business men to invest in the public interest. That is why I do not believe that the U-turn would be relevant.

Next, we must plan our trade. It does not make sense, for even this Government, to put in money for the Mini-Metro, through British Leyland under the National Enterprise Board, and then allow the British motor car industry to be destroyed by imports, as it will be if action is not taken. Once British Leyland goes, why should Ford and General Motors, or Talbot, stay in this country? They are here because British Leyland is here, and if British Leyland goes they will go. That will create another 1 million unemployed in our country.

We must control capital movements so that profits made in Britain, by British workers, are not exported to countries where trade unions are illegal to produce goods at lower cost to come back to Britain to undercut the living standards of those who created the wealth. We must expand the public services with money from oil revenues and from reductions in defence spending to ensure that Britain has something to defend by way of an industrial base. When I went round the world for over four years as an energy Minister I found that there was not an oil-producing country that did not tell me that it was using oil revenues to build an industrial base so that when the oil ran out it would have something on which to live. We are the only country that is using oil wealth to destroy our industrial base by bringing a flood of imports into Britain.

We want a shorter working week so that new technology shares its benefits among the community instead of having half on overtime and half unemployed. We want earlier retirement and expanded training and retraining. If we are to do that, we must get back to the House of Commons the powers that we ceded to the Common Market, which would make the policy that I have described illegal in the eyes of Community law. The preparatory work must be set in hand at once.

I believe—I hope that my trade union friends—

Mr. J. Enoch Powell (Down, South)

The right hon. Gentleman is very generous in giving way. He has appealed to the House of Commons, rightly, for it is the only legal source of finance in this country, to provide money in large quantities for a series of purposes that he has set out. Is that money to be raised by taxation, is it to be borrowed, or is it to be printed?

Mr. Benn

The right hon. Gentleman is the grandfather of the disaster that now confronts Britain. In the 1930s in similar circumstances massive public expenditure on rearmament brought the capitalist world to full employment. The challenge to this generation is how to do it without rearmament and war. That pre-war full employment, even created by rearmament, was self-financing. The £10 billion that we now lose in lost production and the £7 billion that we pay in public expenditure in the form of benefits would both be recovered. Both those weights upon our economy would be removed by a return to full employment which should be funded, I believe, by investment in industry and the expansion of our public services.

A great deal of industrial planning has now to be undertaken by the trade unions in industry. It is no use saying to the trade union movement that it should continue pleading over tea at No. 10 Downing Street with a victorious Prime Minister that her policy is causing hardship. It is intended to cause hardship. The trade union movement at national level, regional level and plant level would be better advised to work out the plans now for the recovery of their industries. That is true of regional and local planning. Labour local authorities with the trade unions and local business men would be better employed now in planning the development of their own immediate economies to deal with the tragedy of a Consett, a Corby, a Llanwern or a Port Talbot, which cannot be dealt with by an incoming Government with only the help of the Civil Service in Whitehall.

It is the role and purpose of my hon. Friends to develop ways of implementing these policies. We cannot wait until the moment comes when there is a change of Government and responsibility rests upon us. We must develop the machinery of government and the policies for implementation that will breathe life into an alternative future for Britain so that we do not campaign only against the Government—which is right and proper—but for something that makes more sense for our people.

I do not believe that the Government can succeed. Their philosophy and their values do not accord with those that we in Britain have developed over centuries. The Government's only real constituency is sitting in the Press Gallery. If it were not for Fleet Street the unintelligibility of the Chancellor, or the amorality of the Government's policy, would become apparent within days to the British people. It is not possible to govern this country with only the constituency of Fleet Street to act as a support. When the British people realise that they are being invited to destroy their own economy, their society and the values in which they believe, including their responsibilities to their fellow men and women, they will turn to us. When they do that—may it be soon—I plead with my hon. Friends to ensure that we are ready with real, relevant and fundamental reforms to meet the needs of the British people, who will turn to us.

4.47 pm
Mr. Peter Hordern (Horsham and Crawley)

The right hon. Member for Bristol, South-East (Mr. Benn) never fails to astonish the House. When he talks about the amorality of the Government, I find it astonishing that he remained a member of the Cabinet of the previous Labour Government, he being strongly opposed, apparently, to the measures imposed on that Government by the IMF. When he says that our policy should be to increase the wages of the worker, what was he doing supporting the previous Labour Government, as a member of the Cabinet, with their 5 per cent. incomes policy?

The right hon. Gentleman has given us, as in the past, a great deal of evidence of the inconsistency of his policies. He is in no position to accuse my right hon. and learned Friend the Chancellor of the Exchequer of amorality or of anything else.

The right hon. Member for Leeds, East (Mr. Healey) was harsh and critical about the Government's measures, especially those of my right hon. and learned Friend. During the Summer Recess, while in a bookshop I happened to come across a book written by the right hon. Gentleman about his photographs. It contained photographs of almost every conceivable activity. There was one shot in particular that was missing, though, namely, one of the right hon. Gentleman being hauled out of Heathrow airport when there was a run on sterling. He had to be hauled out of the airport to return to London instead of attending a Commonwealth Finance Ministers' conference in Hong Kong. Some of us remember that occasion very well. The right hon. Gentleman is in no position to criticise the Government.

It seems to me that the mood of the House and the problems of unemployment are particularly serious. I, for one, have a good deal of sympathy, although not agreement, with my right hon. and learned Friend the Member for Hexham (Mr. Rippon) in his recent letter to The Times, in which he complains about the level of interest rates. But the high level of interest rates should be regarded for what it is. It is a sympton of something that is a great deal more serious than the level itself. For the fact is that the demands upon the capital market by the public sector have been consistently too heavy for far too long. I am talking not of the technical size of the public sector borrowing requirement but of the weight on the private sector imposed by the public sector for very many years past. This weight must be reduced by some means.

Everyone must be aware, too, of the effect on industry of the level of the exchange rate. Four years ago there were $1.57 to the pound. Since then the sterling exchange rate has appreciated by more than 50 per cent. In that time wages in industry have increased by about 70 per cent. In my judgment there is no way in which an industry producing conventional manufactured goods can withstand an appreciation of about 50 per cent. in the value of the exchange rate having paid out a 70 per cent. increase in wages.

In many parts of the North-East, the North-West, Scotland and Wales, many of our traditional industries are facing great difficulties. We see the Alfred Herbert machine tool company and ICI running into losses, but they are not alone. Complete sectors of the West Midlands, and engineering firms generally, are now falling out of business. I dare say the increase in the exchange rate over the past four years is without precedent in the whole of our industrial history. Perhaps it occurred in the 1920s, when we returned to the gold standard at the wrong price. But industry cannot deal with such a burden, nor can the post-industry revolution be financed by short-term money bought on the money markets at substantial interest rates. If one is averse—as I am—to printing money, what is the alternative? Should we just wait for industry to borrow less, so that interest rates can eventually fall? Industry is borrowing not to invest but to exist. It has no alternative. Our only solution, then, is to look at the public sector once again.

The Government have made some sharp reductions in Government capital expenditure, just as the previous Labour Government did. The proposals to cut public expenditure largely affect the Department of Industry. Fewer people will be covered by the regional aid scheme. The Department of Industry's funds cannot be greatly reduced. I should be very surprised if the demands of British Steel, British Leyland, and so on, were to decline. So 1 should also be surprised if the funds given to the Department of Industry were to be greatly reduced.

What other options exist? Perhaps savings should be made in the nationalised industries. Yet savings would mean higher prices for the nationalised industries, and those prices would have to be borne by industry. There is not much comfort to be had from that. We should look at the movement between the private sector and public sector over a period of 15 to 20 years. We should consider the movement of people between those two sectors. Fifteen years ago 1 million people moved out of the private sector and, at the same time, there was an increase of 1.3 million in the public sector. We must bear in mind that the numbers employed in the National Health Service doubled over a period of 22 years—from under 600,000 to 1.3 million. Such a phenomenon is not known by any of our industrial competitors in the Western world.

Britain employs one in five employed people in the public sector. Other countries, notably West Germany and France, employ one in seven. Perhaps the largest increase of all has occurred in local authority employment. Over the past 12 years alone, employment in local authorities has increased by 1.3 million. I accept that local authorities are the first to blame us for that state of affairs. I do not reject that criticism. The House of Commons did not know what it was doing during the past 12 to 15 years.

Neither the country nor our industry can sustain the enormous weight imposed by the very size of the public sector. The situation must be rectified. How is it to be done? I turn to the Priestley Commission, which was The first commission to recommend comparability between the public and private sectors. It stated: The primary principle of civil service pay should be fair comparison with the current remuneration of outside staffs employed on broadly comparable work, taking account of differences in other conditions of service. Those other conditions of service apply today. There is growing and massive unemployment in the private sector, but very little unemployment in the public sector. There is job security in the public sector, but none in the private sector. There are index-linked pensions in the public sector, but no such assurances in the private sector. Such comparisons must be made.

I make no apology for saying that the Government can no longer sustain the basis of "broad, fair comparability" unless they return to the original conditions applied by the Priestley Commission. If one accepts that basis, and if one accepts the cash limits system—which is the only way in which the Government can properly achieve their aim of controlling the public sector—it is impossible to see how the public sector can be awarded salary increases of more than 5 per cent. or 6 per cent. Although the step is harsh, it is necessary.

What is the alternative? If that step is not accepted, further weight will be imposed on the private sector. There will be a diminution of our manufacturing base and a falling-off of industrial activity. We shall not be able to recover our industrial base, or achieve the prosperity that we all seek. There must be a better balance between the public and private sectors. Britain cannot afford to allow the economy to run down in order to preserve the size of the public sector.

4.55 pm
Mr. Richard Wainwright (Colne Valley)

Unemployment debates are particularly important, because the unemployed—unlike most people in Britain—are not an organised or integrated pressure group. Members of Parliament form the pressure group for the unemployed. Thorough debate is therefore particularly important, although one might not have guessed that from the state of the Opposition Benches.

Mr. Harry Ewing (Stirling, Falkirk and Grangemouth)

Perhaps the hon. Gentleman can tell us where all his Liberal colleagues are. It is worth recording that he is the only Liberal Member in the Chamber.

Mr. Wainwright

I ask the hon. Gentleman to be patient and to wait a little while.

The unemployed can scarcely repose any confidence in the remarks the right hon. Member for Leeds, East (Mr. Healey). The right hon. Gentleman did not share with the House his personal familiarity with rising unemployment. As Chancellor, he must have learnt some valuable lessons about unemployment, but he was singularly silent about them. The unemployed will remember that the previous Chancellor of the Exchequer made brave remarks about a tax policy that he intended to introduce. They will remember that he said he would make the rich howl with pain. They will also recall that that policy was followed by four years in which he managed to extract only £215 from the growing Vestey millions that were pouring untaxed into Britain.

Hon. Members' opinions about the Government's declared economic policy are governed largely by what they hope and believe will be the result at the end of the day. In the Liberal view, the corrosive medicine that the Government are giving the country—and with which they seem determined to persist—cannot produce a lasting economic cure. It will result in a massive economic hangover. We do not believe that the Government's policies will result in any major structural change in our economic system, and we therefore look at the present, appalling results in a particularly jaundiced way.

I have made it my business, as other hon. Members have, to question members of the Government and others in high places who implement Government policy. I have asked them how they can believe that what we are going through can result in some permanent control of inflation, or any proper readjustment of our economic system. I have not received any replies worth two pence. The Governor of the Bank of England says that the Government's policy will result in massive public education as regards the effect of wage claims on inflation. The Chancellor of the Exchequer speaks of altering public psychology. Other Ministers speak of people changing their attitudes once they have seen a reduction in the rate of inflation. There is nothing solid behind those remarks. It suggests that the Government do not know the outcome of their policies. In the meantime, as has already been pointed out, this is particularly germane in the area that I represent. It is not simply the overmanned industries or the areas in which there have been massive and possibly over-greedy pay claims, nor areas which abound in restrictive practices, which have suffered the most rapid rise in unemployment in the last 12 months.

I represent an area of West Yorkshire and Greater Manchester which traditionally has had unemployment levels far below the national average. Business men elsewhere cannot imagine that there is any spare skill or labour in Huddersfield or Oldham. But in fact we are now well above the national rate of unemployment, so hon. Members can picture a diagram of unemployment in my area is quite appalling. This cannot be attributed to bad industrial habits in recent years.

The same is true of small businesses. Not only are people discouraged from using their redundancy money to establish new small businesses, as one hoped they might, because conditions and lack of demand, of which the right hon. Member for Bristol, South-East (Mr. Benn) spoke, make it impossible to launch any new product from a small business at present, but even those businesses which were bravely established in the glowing aftermath of the Prime Minister's election victory are finding life difficult and many are going to the wall. As everyone knows. we now have a record toll of bankruptcies and compulsory liquidations.

It is becoming fashionable—and it is all too often accepted by Fleet Street—to say that much of this misery is due to a world recession which cannot be controlled any more than the weather. Indeed, the Chancellor of the Exchequer himself was guilty this afternoon of misleading the House by suggesting that we were simply sharing—no more and no less—in a common affliction among the developed countries of the world. This is not so. Our plight, especially when one considers that we alone among the developed countries have the priceless possession of a domestic oil source, is far worse than that of our competitors. In so far as there is some world recession and probably much worse to come, this has produced in the Government a kind of paralysis when it should have produced resilience.

The proper response to a world recession is to use the opportunity and the temporarily spare labour to re-equip and be ready for the upturn in world trade so that we shall lead the industrial would at that time instead of lagging far in the rear. This has not been done.

The Government are rather fond of homely similes and images. I offer them the very homely image of the small business man, storekeeper or craftsman, who finds that his trade is slack. When no one comes to his counter or to his repair shop, he does not sit idly by and say that twiddling one's thumbs is very good for one's character. On the contrary, he takes the opportunity to refurbish his place of work, to repair his plant and generally to prepare himself for the upturn in his trade. The Government are doing nothing of the kind, and that is why there is increasing demoralisation in the country.

I still hope that tonight—I have not given up hope for the Secretary of State for Employment—we shall hear of some massive and imaginative scheme for training the young and for retraining. I hope that the Government will bring in a scheme to give young people much more pertinent and relevant training than they are getting at present, and for offering retraining to older workers. Above all, the Government should help our great modern industries to continue those very expensive apprenticeships which, not unnaturally, they are tending to shut down. If we do not hear something about massive Government expenditure on training and retraining tonight. the demoralisation will be complete.

I should like to be a great deal more precise about the main economic remedy than the Shadow Chancellor was this afternoon. He spoke of devoting some £400 million of public money to a new training venture, but he was virtually silent about the problem of a much greater injection of public money into the economy as a whole.

It is my view and that of my colleagues that, rather than sticking to this appalling totem, this out-of-date idea of bringing the public sector borrowing requirement down to 3 per cent. of gross domestic product, which is part of the Government's financial strategy at present, the PSBR should be increased deliberately, as a response to the world recession and to our national problems, to about 5 per cent. of gross domestic product. The additional amount should be used first to help the unemployed to get cracking on some of the worse defects in our national infrastructure.

Take as an example the way in which our telecommunications are rapidly falling behind those of the rest of the developed world. Here we should take a leaf out of France's book for once and get on quickly with the application of microprocessors to telecommunications. There is the appalling slavery of commuting which is the lot of so many millions of people in this country. That could be relieved by the development of telecommunications to the home. When one considers these aspects, one gets some idea of the contribution that the unemployed could make to the quality of life if the Government had the imagination to set them on this task.

Then there is the conservation of energy, which needs no arguing for in the House but which is neglected by the Government. We are told that there are 2,5000,000 council houses completely uninsulated by modern techniques. In the private sector there were said to be 3.3 million houses with accessible lofts which were uninsulated when the right hon. Member for Bristol, South-East was responsible for these matters. I am told that fewer than million householders have taken advantage of the grants that were made available. That is an unfinished task which could absorb temporarily a great number of unemployed people. I am told that there are 4 million private houses for which insulation would be more difficult but which urgently need tackling. That field is being almost entirely neglected today.

I mention the railways, where the admirable development of some of the main inter-city lines. all leading to London, needs copying on the lines across the country—the lines which connect the North-East, for example, with Liverpool, Manchester and the North-West, where we are still treated as cattle, not be- cause of any ill will by British Rail, but because the railways are starved of capital by the Government.

The inevitable concomitant of any injection of that size into our economy in the interests of stopping this appalling national waste of chronic and massive unemployment is the danger that such sums could go very largely directly into pay packets rather than into the objectives that I have illustrated. That underlines the compelling need for an outspoken, explicit and, if necessary, enforced pay policy by the Government towards which the Chancellor of the Exchequer is edging very timorously every time he makes a public speech.

The Chancellor must recognise now, even though he did not recognise it before, the need for such a firm and sustained pay policy. His alternative, to which in the past months he attached so much importance, has broken apart in his hands. In the past, when pay policy has been argued from this Bench, the Chancellor has replied that the publicly announced targets for the growth of money supply were his policy. When the pay bargainers, being reasonable and well-informed men and women, met around the table to settle the year's pay round, they would be aware that the Government were absolutely insistent on there not being more than 10 per cent., next year 6 per cent. and the year after 4 per cent. growth in the money supply.

That argument, if it was worth anything, collapsed with the explosion of the money supply growth. The Chancellor did not deny that in any way when he appeared before the Treasury and Civil Service Committee on Monday of this week. If the Chancellor agrees, as he does, that his main weapon has broken on him, at least for a time to come—and it will take a long time to restore credibility in any Government targets for money supply growth—surely, as a practical man, he must turn to some other weapon of policy. As he is about to move to some kind of norm for pay in the public sector, he must extend that to the rest of the economy. Otherwise, I readily agree that to reflate on the scale that I have mentioned would obviously have its dangers.

It is commonly agreed that, as part of a closely integrated industrial world, we are suffering more than others. If it were not for North Sea oil being used as a sticking plaster to cover some of the deficiencies in policy, we would be in an even more appalling situation. Surely the Government are not prepared to go on relying on a bandage provided by North Sea oil when policies are clearly available which would set this country on the right course.

5.11 pm
Mr. Nicholas Winterton (Macclesfield)

I am pleased to follow the hon. Member for Colne Valley (Mr. Wainwright) as I find myself in agreement with some, if not all, of his remarks. However, I should make it clear that his expected level of reflation would be very damaging to our economic recovery. Likewise, I believe that his advocacy of an incomes policy would create in the long term more problems than it solved in the short term.

I think that Conservative Members are as one that the Government's priorities to reduce inflation and to cut borrowing are right, but a growing number of Government supporters feel that the policies being followed are too insensitive, that the manufacturing sector of our economy is taking the brunt of the effect of the Government's policies and that the public sector is remaining relatively unscathed. We all know that we are in a world recession, and in that situation unemployment will undoubtedly increase. But tens of thousands of people in this country are being put out of work unnecessarily because of the insensitive and inflexible monetarist policies of the Government.

I have often wondered how many Government Front Bench Members, as bosses of manufacturing concerns, have had to meet the wages bill at the end of the week. I went through the list and could count them on only one hand. That did not give me much confidence in the judgment of the Government in implementing economic policies.

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

Will the hon. Gentleman give way?

Mr. Winterton

I shall not give way, because I promised to be brief.

It is all right to take advice from people such as Mr. Milton Friedman and others, as academics can be very helpful., but seldom, if ever, have they run businesses. I have been involved in and am deeply concerned about the plight of small businesses. As I said to my right hon. Friend the Prime Minister yesterday at Question Time, while her objectives are correct, there will be too few manufacturing concerns left in this country at the end of the day to take advantage of the success of her policies. That will mean higher unemployment and we shall suck more imports in further to undermine the manufacturing base that remains.

I commend to the House the speech made by my hon. Friend the Member for Horsham and Crawley (Mr. Hordern). What he said about the value of the pound and the level of the exchange rate was absolutely right. Those factors place our manufacturing industry in an impossible position to compete in the world.

Our textile industry has done everything asked of it by successive Governments. It has modernised and rationalised and shed hundreds of thousands of workers to meet the greater competition that has developed in the world. But what has happened? Because of the value of the pound, among other things, the Government are forcing the textile industry to face what can only be described as damaging unfair competition.

Mr. Nick Budgen (Wolverhampton, South-West)


Mr. Winterton

I shall not give way.

What other country has such high interest rates as this country? This is another decision by the Government which is placing our manufacturing industry in an unfair competitive position.

Mr. Budgen

Will my hon. Friend give way?

Mr. Winterton

I shall not give way. My hon. Friend can make his own speech in his own time and in his own words if he catches Mr. Speaker's eye. My hon. Friend and I disagree fundamentally on this matter. He is a lawyer and I am a business man. Perhaps that explains it.

The Government—my Government—are responsible for placing burdens upon industry which it cannot carry if it is to remain in business and if unemployment is not to reach 3 million.

Much has been said about the textile industry. I come from an area where the textile industry is perhaps the largest employer. As I said, it has done everything that successive Governments have asked of it. Yet the plight of that industry today is absolutely disastrous. Mills are closing not by the week but by the day. Tens of thousands of good, solid citizens who have never been on strike in their lives and have never put in for inflationary wage awards are being put out of work. As a Conservative, I care for people. The Disraeli Government cared for people. I believe that that was why Disraeli was such a successful Prime Minister. I hope that our present Prime Minister will take some lessons out of the Disraeli book and practise pragmatic Tory policies and stand up for our national interest.

I have had letters from my right hon. Friend the Prime Minister indicating that she is deeply concerned about the plight of the textile industry. She indicated that a booklet published last month by the Minister of State, Department of Trade, clearly showed what had been done and the issues underlying our commitment to renegotiate a tough successor to the multi-fibre arrangement. I say to my right hon. Friend and to my right hon. Friend the Secretary of State for Trade that there will be no confounded textile industry left by the time we come to renegotiate a new multi-fibre arrangement unless the Government make their policies more flexible.

I should like to deal with two areas of dire concern. First, why should interest rates remain at their current level?

Mr. Budgen

To control the money supply.

Mr. Winterton

No. That is only part of the answer. Other European countries, including the Federal Republic of Germany, which is a member of the EEC, assist industry with subsidies when interest rates rise over a certain level. Is my hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen) aware of the cost to public funds of every 100,000 people put out of work in this country? It is far in excess of what it would cost to aid industry to maintain people in work and to guarantee a good manufacturing base.

The right hon. Member for Bristol, South-East (Mr. Benn) and the hon. Member for Colne Valley dealt with energy. Why do we not use our vital North Sea raw material for the advantage of British industry? Why have the Government forced the electricity industry to put up prices by 27.3 per cent. in the last year and why have they forced the gas industry to put up prices by 32.6 per cent.? Why have rates to industry gone up by about 30 per cent.? Water rates have also gone through the roof.

The Government are hectoring and encouraging private industry to do this, that and the other, but what of the additional costs that the Government are imposing upon private business? I am not surprised that the CBI is concerned about the plight of private business.

I appreciated the speech of my right hon. and learned Friend the Chancellor of the Exchequer. However, unfortunately, tens of thousands of people in the North-West, which is the part of the country I come from, will scarcely understand a word of the monetary jingoism that he used from the Dispatch Box today. I say to my right hon. Friends on the Front Bench that there is grave concern north of London about unemployment. It may not have hit the South and South-East very much as yet, but it has hit the North. I cannot be proud that under this Government unemployment in my constituency has doubled. I am concerned for the constituency of my hon. Friend the Member for Bebington and Ellesmere Port (Mr. Porter) over the closure of the Bowater mill. It is a highly efficient mill. The Government offered money to tide it over where energy costs were concerned but energy costs will continue to rise year after year.

Mr. John Grant (Islington, Central)

The hon. Gentleman is falling into the same trap as my right hon. Friend the Member for Bristol, South-East (Mr. Bern) in suggesting that London is not suffering from unemployment. Our inner city areas are suffering greatly.

Mr. Winterton

I accept that, but I do not believe that even inner London is suffering as much as the North-East, North-West, Scotland and South Wales.

The Conservative Government came to power saying that they would help the small business man, but we have driven him out of business. We encouraged smaller business men to invest their profits. They now have no liquidity to pay the high interest rates that they owe to the banks. They are having to borrow to pay them. My right hon. Friend the Secretary of State for Employment is sympathetic to the case that I advance. Only one group is doing well—the big business man. I could name certain people who have capitalised their assets and who have pound notes pouring out of their pockets and out of the banks. They can get a far greater return from investing in banks than in manufacturing industry.

The situation is difficult for the textile and paper board industry, as it is for the new high technology industries, especially small businesses which have invested all their profits. They are in trouble. With the co-operation of the Government, I have managed to save one or two companies in my constituency. I hope that another will be helped before it goes out of business through the problems created by the Government. The Government must wake up before it is too late. People matter to the Conservative Party. We are placing out of work tens of thousands of good people who have served their country, employers who have excellent industrial relations with their work force. Once such businesses go, they will never be re-established. A few Whitehall mandarins see our future in the service and tourist industries. That will never be. We must have a flourishing manufacturing base.

I came up through small business, and I am sick to death of the bureaucratic replies that I have had to my representations over the past six to nine months. I may get no higher than the Back Benches, but at least I speak for part of the British economy that produces the wealth that enables the public sector to exist. How right Mr. Harold Macmillan was when, years ago on that excellent programme he told Mr. McKenzie that the system was a pyramid and all the workers helped to pay for the king or tribal chief. It is now an inverted pyramid. The manufacturing base is the tiny bit at the bottom, and it has to sustain the huge administrative bureaucracy and public sector on top.

The Prime Minister carries a great deal of authority and has my deep respect. I say to her that, if we expect private industry to continue to carry the burden of the remainder of the State so that we can make provision for those in the country who need help and provide the services that we should provide, we must preserve our manufacturing base and make it grow. For heaven's sake, do not kill it, as we are doing at present.

5.24 pm
Mr. David Lambie (Central Ayrshire)

In the old days the only hon. Members who participated in unemployment debates came from certain areas in Scotland, the North-East, North-West and Wales. In the South-East and London unemployment was well below the national average and certainly below that which we were experiencing. Even today, when we are returning to the situation of the hungry 1930s, unemployment in the South-East is only 6 per cent. In Scotland it is double that.

In my constituency, in the Saltcoats, Kilwinning and Irvine area, unemployment stands at 17.5 per cent. In the Garnock, which suffered the closure of the open hearth and melting shop of Glengarnock steelworks, unemployment stands at 26.2 per cent. Every fourth person is unemployed in the Garnock valley. In the district of Cunninghame, unemployment is between 18 and 19 per cent. As more redundancies are announced, those figures are increasing. There is a catalogue of closures and disasters, through Massey Harris, SKF, Monsanto, Essex International and Ryeside Mill. We believed that, no matter what the economic climate, those international and national firms would remain.

In the past fortnight there have been other disasters. Just over a year ago I opened the Newage transmission factory, which makes axles for the dumper industry and is associated with the construction industry. It has just announced that it is closing. We had great expectations for the factory, with a move from Coventry to this special development area.

Another major crisis in the past fortnight has been the decision by ICI to close the plant at Ardeer, producing nylon socks. It is the most modern plant in Europe, with a labour force and productivity second to none. About 750 people will be made redundant immediately, with an eventual loss of over 1,100 job opportunities.

In that area unemployment already stands at 18 per cent. If the trend continues, we shall have an unemployment rate of between 30 and 35 per cent. Hon. Members representing London constituencies have seen nothing yet. I should consider that we had full employment if our unemployment rate were the same as that of the South. Even during good conditions we have never been so lucky.

The Government must take action to prevent this slow death of our manufacturing industry. The decision to close the plant at Ardeer was taken by ICI without prior consultation. I have always had a good relationship with the directors and managers of ICI. We have always had consultations and they have prided themselves on the fact that they took their workers with them in what they did. This time, we had a bolt from the blue. There have been redundancies and part closures in the past, but the firm has never closed a modern plant in which it has invested hundreds of millions of pounds. The Government must take action.

ICI has been in my constituency for more than 100 years. After the war, it asked local authorities and Ministers to prevent other companies from coming into the area, because it could use all the available labour. When American firms started to move into Scotland, they were prevented from coming to my area because of pressure from ICI. Local people and authorities co-operated with the company, because it was employing 14,500 people in the area and was prepared to invest more money in keeping the plant up to date. After we have given the firm a lifetime of service and co-operation and have prevented other firms from moving into the area to compete, the company has taken a unilateral decision, without consultation, to close its works.

When we were debating Britain's entry to the Common Market, ICI told me to vote for entry because it would be good for ICE and for my electorate. I did not take that advice, but, unfortunately, the people of England and Scotland did. We now find that ICI is considering withdrawing from the United Kingdom, but last year it invested £600 million in Europe. The firm told me that I, as a politician, was to blame and that it was the politicians' fault that the German chemical industry could get its raw materials more cheaply than firms in Britain could buy their materials. German firms get natural gas for 50 per cent. of what we pay in Britain. I accept part of the blame, but Ministers of successive Governments must accept the major responsibility.

Why must our manufacturing industry compete with the American and European chemical industries on unfair terms? Other countries subsidise their industries, but, because of our empire tradition and our belief that we can beat everyone in international trade, our companies have to compete on unfair terms. The Government must take action. North Sea oil and gas are transported to America and after refining in the man-made fibre industry come back as nylon products and fabrics that are cheaper than we can make them. The hon. Member for Macclesfield (Mr. Winterton) and I are interested in the textile industry. At one time it was a major employer in my constituency. There are now few firms and they are all holding on by the skin of their teeth. We have short-time working and threatened closures.

Why do we not use North Sea oil and gas to protect our industries? At present, we use those resources to solve our financial problems. That is all right for bankers, financiers and dealers in the international money exchanges, but Britain will not succeed on a financial base alone. We are a manufacturing country and we must support our manufacturing industry. Instead of using the wealth from the North Sea to build up our financial base, the Government should be using it to build up a manufacturing base. That would give our manufacturing industry an opportunity to compete on equal terms with the chemical and other manufacturing industries of North America and Europe.

Mr. David Crouch (Canterbury)

Does the hon. Gentleman agree that the artifici- ally low price of oil for the petrochemical industry in the United States—$24 a barrel compared with $38 for North Sea oil—is causing the distortion? Does he suggest that North Sea oil should be available to British industry at an artificially low price of $24 a barrel?

Mr. Lambie

I agree with the first part of the hon. Gentleman's intervention. We have oil and gas and we can use them to build up a financial base or supply it to our manufacturing and chemical industries at a subsidised price and get the return in taxation from those industries when they begin to sell their products. The ordinary man in the street understands that, but it is difficult to get the message across to Ministers. I am not blaming only present Ministers. We had the same problem with Ministers in the Labour Government. They all seem to be tied to the view that we must have a strong financial base.

We are in a world-wide recession, but we should be able to ride it better than most other countries because we have North Sea oil and gas on which to base our success. If the Government continue with their policy of strengthening our financial base before looking at our manufacturing base, we shall be heading back to the hungry 1930s and disaster.

I have come to the debate from a meeting with Mr. Ian MacGregor, the chairman of the British Steel Corporation. I led a deputation of Scottish Members with steel interests. I was encouraged, as I always am after meetings with Mr. MacGregor, because he said that he would adopt an aggressive marketing policy in relation to North Sea oil and would try to get the BSC a share of the orders that must come from pipeline projects.

The BSC is to compete for the first time with the Japanese in making high quality steel pipes. We must encourage that. The Scottish Members with steel interests appreciate that Mr. MacGregor is drawing up a corporate plan, which lie will submit to the Government at the end of the year and which will decide the future role of the BSC. We told him that Scotland has had 12 years of rundowns, redundancies and closures. We now have a slimmed-down steel industry. In the past five years we have had massive investment at Ravenscraig and Hunterston and the BSC must continue that investment in order to get a return.

Dr. Jeremy Bray (Motherwell and Wishaw)

I was at the meeting to which my hon. Friend has referred. Mr. MacGregor's attitude on the gas-gathering pipeline is to get the orders first and look after the costs later. If the Government took that view throughout manfacturing industry, as my hon. Friend has recommended, we should not be in the difficulties that we are in today.

Mr. Lambie

My hon. Friend has reinforced my point, that it is up to the Government to decide to help BSC. Scottish hon. Members with steel interests made the case that in its corporate plan BSC must keep the Scottish steel industry as it is, that we should suffer no further redundancies and closures, that we now had some of the most modern plant in Europe and that it had to be kept working in order to keep the Scottish steel industry going and give us a base for future steel-using industries.

I ask that whenever BSC's corporate plan is presented to the Government they should take the political decision to keep the corporation going. It must be given orders and encouragement to obtain orders, so that Mr. MacGregor and BSC may be given the opportunity to make it among the most viable and active steel industries in the world. At present people are saying "We can do nothing about it." The Government are in difficulty, because there is an economic recession, not only in the capitalist world but in the Communist world, but they can do what we ask.

Some of our colleagues from the Midlands and the South-East of England are demanding more and more Government aid. Such aid certainly has a place, but it is not the solution. My constituency has all the aids that any constituency in Britain can obtain. We are a special development area, receiving the maximum grants. I have within my area Irvine new town, a so-called growth area with an unemployment rate of 17.5 per cent. In addition, because the area suffered redundancies from the closure of the open hearth and smelting shop at Glengarnock steel works, the area has aid from BSC Industries. Therefore, any firm coming to my area can have a financial package second to none within the United Kingdom. At least, it is necessary to go to Northern Ireland to obtain a better package, but the people in Northern Ireland are in a worse position, with the same ICI closures as I have.

Simply to paper over the cracks, to plaster up the hole, is no solution. One can put all the aids into one financial package, but that will not solve the problem. We need a fundamental change in Government policy. First—even some Tories are now demanding this—we must bring the rate of interest down. A rate of 16 per cent. cannot last, or, if it does, we shall see the end of manufacturing industry. The manufacturers, those who run industry, the small business men, all vote Tory. They are the solid base of Tory support. Unfortunately, they are the people who have been hardest hit by this Government. I am surprised that they are not in revolt. They are always looking for a revolution of the unemployed. We want a revolt and a revolution by the industrialists and the manufacturers. They are the people who are suffering most and are the people who should be putting pressure on the faceless men on the Government Front Bench.

I am glad to see that the Under-Secretary of State for Scotland with responsibility for industry is present. I tried to contact him yesterday, but was told that he was sick. I told his private secretary "There are a hell of a lot of people in Scotland who are sick, not because of illness, but because their two representatives—the Secretary of State for Scotland and the Minister responsible for industry—who are supposed to be standing up for the rights of Scotland, are not doing so." With friends like those, God help the people!

The Government must get the rate of interest down, to get away from the idea of salvation through solving our financial problem, thinking that then all the other problems will be solved. Secondly, the Government must give some help to manufacturing industry by using North Sea oil and gas to subsidise its raw materials.

The Government must also consider leaving the European Economic Community. If ever the people of Britain were conned, it was when they were conned into the EEC. It has certainly been good for the directors of ICI. Eleven hundred people in my constituency are being sacked by ICI. I wanted to know what was happening to the chairman. I discovered that Sir Maurice Hodgson receives £124,380 a year—nearly £125,000 for closing part of the most successful industry that this country has built up. The gang who have hold of it at present have taken their whack. They are taking their pound of flesh. The blood is coming out, and all my constituents are going to the wall.

Moreover, all the chairmen of ICI retire early. I take, for example, Sir Rowland Wright, last year's chairman, a gentleman whom I have often met. When he retired he became the chairman of Blue Circle Industries Ltd. From what we have read lately, he is not making a good job of that industry either, because there are redundancies there as well. He receives £24,813, in addition to his pension from ICI.

I tried to find out what pensions and other benefits these gentlemen receive after their retirement from ICI. It is difficult, and I could not obtain information for individuals, but I have a collective figure. Last year, nearly £2 million was paid in pensions and gratuities in respect of the executive service of former directors. There is only a handful of directors of ICI to share that £2 million—£2 million in pension plus all the other jobs, the running of banks and industries once those people have retired from ICI. I want them sacked before they sack my people. It is they who have caused the trouble.

Therefore, I ask that the Government do something. We need a change of policy. If we cannot have a change of policy with the present Prime Minister, let us get rid of her. If we do not, we shall get rid of Britain's industries.

5.46 pm
Mr. Mark Wolfson (Sevenoaks)

I am grateful for the opportunity to take part in this important debate. It is important to the Opposition, to the Government and to the nation, but most of all it should be important to all the unemployed. However, it will be important to those without jobs only if it seems to them to be relevant to a solution of their individual and deeply disturbing personal problems. Or is the debate only an opportunity for sterile "yaboo" politics, or an opportunity for a warm-up over the course in the Opposition leadership stakes?

I shall not rehearse the reasons for the low level of productivity, low profit levels, lack of international competitiveness and thus a contraction of our manufacturing base, or go over again the economic arguments behind the Government's strategy. I want to deal with the future rather than the present. An upturn in economic activity will come—[Horn. MEMBERS: "When?"]—and when it does two problems will recur. If the Opposition do not wish to consider these practical problems that our industry will continue to face, they do a disservice to the very cause that they advocate. The two problems are, in spite of the present situation, a shortage of skilled manpower and a shortage of capacity. These have been suffered in every upturn in the past 25 years. They result in excessive imports and lost export orders.

I should like the House to consider the following. Britain's training system for producing the skilled manpower required for a modern and competitive manufacturing base is still the worst in the West. The Industrial Training Act 1964 and the revisions of 1973 have in no way solved the problem. We now have a sizeable training bureaucracy, and we have considerable effort devoted to training by employers, trade unions and Government officials. But there continue to be serious complaints about skill shortages and the failure of the training system to respond adequately to industry's changing needs. Much of the argument in terms of industry's problems is the fact that we have not been responsive to the changing needs of consumers both in this country and abroad.

Mr. Robert Hughes (Aberdeen, North)

Who are "we"?

Mr. Wolfson

The consumer, Britain, industry as a whole, and Governments of both parties.

Fundamental reforms of training have not been achieved. The reform of the apprenticeship system is one necessity. Better vocational preparation is another. The setting of standards to ensure that training programmes are appropriate in content and length is a third. Our competitors in all parts of the world often achieve better results. I should like to deal specifically with Germany and the United States. Those two countries provide clear and frightening examples of how far Britain still has to go in overcoming these self-made problems.

It is crucial that we move away from time-served qualifications which all too often are limited only to young people. Instead, we need to establish a sensible pattern of step-by-step qualifications available to candidates of any age which will provide a qualification acceptable to employers, recognised by trade unions and relevant to making British manufacturing industry effective in the world league. In Germany, there is a system of testing to produce, for example, toolmakers at any age and to the highest standards. Apart from Ireland, Britain has the highest proportion among Western countries of school leavers receiving neither an apprenticeship nor any full-time vocational education. As many as 44 per cent. of young people go into the labour market in this country straight from school with no training at all. Fourteen per cent. win a time-served apprenticeship, 10 per cent. go into full-time vocational education and 32 per cent. into full-time higher education. Training in Britain is mainly left for individual employers to decide.

In West Germany, by contrast, training is based on collective employer needs viewed in national rather than individual company or industrial terms. As many as 50 per cent. of young school leavers in West Germany go into apprenticeship and only 6 per cent., compared with Britain's 44 per cent., go straight into a job without any training.

If this country is to become effective and competitive as a manufacturing base—I agree with the strong pleas of Opposition Members that we have to remain so—we have to tackle this fundamental problem and difficulty. With three times as many apprentices as in Britain, the West Germany economy benefits from having two out of every three men and one out of every two women in the labour market with vocational qualifications. A similar pattern applies in France.

I can quote an interesting example in the United States of a company in the state of New York where the Teamsters Union is as positive as management in ensuring that the upgrading of unskilled workers continues to turn them into skilled workers to meet the needs of modern and changing industry. A subsidy is provided by the local authority organisation in the form of unemployment pay which provides an incentive for the company to carry out upgrading training at limited cost to itself. This costs the state overall no more than keeping the individual on unemployment pay alone.

This is an area that we need to consider with care and with a view to possible implementation. Those individuals who go on courses of upgrading in their skill are required to complete it and to reach specific standards, for which there are tests, and to do so, not on the basis of time-serving, but on the far more relevant criteria of standards reached. The fast worker can achieve his qualification more quickly, and increase his earnings as a result.

In Britain our system remains far too inflexible. In a company I know operating in Barnsley the machine shop making high precision tools for the aircraft industry still has a permanent shortage of highly skilled men. Yet, even in the climate of unemployment that exists in Britain, the chances of achieving the kind of flexibility in turning less skilled men into highly skilled men is described as hopeless by individuals in key positions in industry and in training.

There are two reasons. Employers in this country fear the expense of paying full-time rates to qualify individuals at an earlier age and the unions continuously oppose the switch to standard testing rather than time-serving. I put with genuine feeling to Opposition Members, who have influence with their trade union colleagues, the question, "Why are they not making a stronger plea for a change in this attitude?" It needs to be made to management. I hope that the Government Front Bench will campaign, but Opposition Members also have an important role to play in being realistic in achieving the changes that we need.

My second specific point concerns a shortage of capacity. It is strange perhaps to talk of such a shortage now, but it will come when the change occurs. Lack of investment is often blamed for Britain's inability to be industrially competitive. I suggest that this is not the only problem. It is not even perhaps the fundamental problem. The real problem is using our existing. investment better. That means an acceptance throughout British manufacturing industry of double shift working—shifts from 6 am to 2 pm and 2 pm to 10 pm.

I am not advocating increased night shift working. Experience generally suggests that it is not particularly effective. There is the difficulty of lack of management involvement. Often there is poor supervision, relatively low quality of workmanship and even, indeed, the appalling examples that come to light from time to time of sleeping on the job. The double day shift system is another matter. We should consider the effect of such a system not only on the greater utilisation of capital investment but on the balance that it can produce in changing the numbers of direct producers of wealth against the indirect back-up staff. There could be 100 workers on a normal eight-hour day, backed by another 100 indirect workers. By going on to a two-shift system, the likelihood is that it will be necessary to increase the indirect backup staff by perhaps only 25 instead of 100. There are profit possibilities in such a system. It produces more directly productive jobs and doubles the use of existing investment.

Often multinationals come under intense criticism from the Opposition, although the management value of having worked in the broader spectrum and having compared work practices in various countries can be invaluable. By utilising its management knowledge gained internationally a multinational company was able to reduce its export prices by 40 per cent. as a result of moving to the double shift system.

I accept that that system is not popular in Britain, partly because of tradition and partly because of our social practice. Let us consider Rochester in the United States, which is similar in size to Bristol. There it is possible for workers who come off the late day shift at 10 pm to buy a drink and go for a meal or to a cinema. The leisure services are geared to cope with a double shift system. One could follow the other. Services will develop to provide for the leisure require- ments of workers as we move over to the new system.

However, it is difficult and tough to change. Management is not always enthusiastic at the prospect of the hassle involved in achieving a change and, unfortunately, union representatives are not always prepared to negotiate realistic wage levels for a double shift system. The system cannot work if a company has to pay time and a half or time and a third. There should be a premium for a double shift system but it must be realistic.

What action are the Government taking to achieve rapid improvement in our training systems and a change of attitude to the double shift system? These are practical changes. They are two examples of activities which are essential for the future of Britain. Governments have a role as catalysts. They should campaign to stimulate and help to achieve such a change.

6.2 pm

Mr. Gordon Wilson (Dundee, East)

The hon. Member for Sevenoaks (Mr. Wolfson) points to one of the difficulties. He was talking of the need for double shifts. The trouble is that many of our industries can barely manage a single shift, because they are going to the wall.

The hon. Member for Macclesfield (Mr. Winterton) delivered a forceful, direct and effective speech criticising the Government's policies. Obviously, he feels strongly and sincerely about what is happening in his area and to the textile trade in particular.

Scotland faces an economic blizzard, the like of which I have never experienced. Almost every day factories are closing and jobs are lost. At one time we used to talk about redundancies. Now factories are being closed and no one knows whether they will be reopened. Will it be possible, in the changing technological world, to reopen the factories? If not, many areas face perpetual unemployment. We cannot see the gleam of light through the darkness.

The Government must reappraise their policies. Earlier in this Session I said that the Government had been elected by the South for the South. The Financial Times of 30 June 1980 stated: consequently many people working outside manufacturing and living in the southern half of Britain may hardly feel the pinch of recession. That might be true of those who live in the South of the United Kingdom but hon. Members who have wristled with a declining manufacturing base in Scotland for the last 20 years are not easily convinced that the upturn will take place in the manner suggested by Government. The gloomier the prospects, the less likely it is that an area will burst into expansion. Areas that are bright, aggressive and attractive find it easier to create additional jobs. Firms looking for locations often prefer the new towns, where there is effervescence. Success breeds success.

As we move into winter the Fraser of Allander Institute has updated the estimate that it made in July 1979 of 199,000 unemployed in Scotland. Now we are heading for 250,000 unemployed and the expectation is 300,000—the equivalent of 3 million in the United Kingdom as a whole.

The Government must examine their overall economic policies. Hon. Members have referred to the sticking-plaster approach. Some argue that oil is the solution to the problem. The hon. Member for Central Ayrshire (Mr. Lambie) referred to the failure of regional policies. He said that even areas with the maximum advantage of special development area status still found it difficult to attract new industry. The key must surely be the way in which the economy is managed.

Dr. Kay Carmichael, in a message to the Scottish Pre-School Play Group Association, recently stated: The next time you hear about 200 men being laid off—just think of their families and children. Already one in four Scottish people lives in poverty, and this number will grow, particularly when the changes in social security and supplementary benefits make their impact in November. Severe social strains will be placed on the community. There may be social unrest as the new generation leaving school discovers that there is no employment. In September 1,343 young people in Dundee were seeking employment. Only three vacancies were available. That is the horrific picture of the suffering in an area such as Dundee.

As the older industrial bases slip and the heavier textile, engineering and shipbuilding industries decline, it is more difficult to attract new industries. Hitherto more prosperous areas such as the Midlands and the South-East of England are beginning to experience the tensions, strains and cultural shock of unemployment. Such areas will put greater pressure on the Government for a share of the resources. The level of aid to the other industrial areas, which have suffered longer and deeper, will be cut. The spread of assistance will be thinner.

Having heard the Chancellor of the Exchequer and the former Chancellor of the Exchequer, the right hon. Member for Leeds, East (Mr. Healey) exchanging words earlier, I find it difficult to choose between the respective policies of the IMF man of the last Government and the Mogadon man of the present Government. The debate between them has lasted three or four years and has become a joust, in which the real essentials and the human economic problems have been lost. All four contenders for the Labour leadership are tarred with the IMF brush. They accepted the IMF policies imposed upon the Labour Government, since they did riot dissent sufficiently to resign. If that was the case in the previous Government, would it not he so with a future Government who failed to look for changes in overall strategy?

Mr. Austin Mitchell (Grimsby)

Who put this Government in?

Mr. Wilson

Certainly not the people of Scotland. They were elected by the Midlands and the South of England. The Scottish people certainly did not vote for a Conservative Government.

Mr. Mitchell

You voted for this lot.

Mr. Wilson

I certainly voted against the last Government, which in its five years in power doubled unemployment in Scotland and doubled prices as well. We put the Labour Government out because they were a lousy Government—I hope that that is not an unparliamentary expression. The very fact that this Government have proved to be less satisfactory than their predecessors is no advertisement for the Wilson-Callaghan Administration. Labour Members must surely admit to the deficiencies of their Government. If that were not so, the debate that they are having now over the Labour leadership must surely be one of the most phoney of all time. There are certainly tensions in the Labour Party, because many people in it recognise that when it was in office it singularly failed to tackle many of the United Kingdom's economic and social problems.

My standpoint, as a member of the Scottish National Party, is that the Labour Government grievously failed Scotland. They were put out of power because they refused to deliver the Scottish Assembly in accordance with the pledge upon which they had been elected in October 1974. Between 70 and 100 Labour Members refused to promise to support their Government if it came to driving the proposal through after the "Yes" vote in the referendum.

I therefore have no hesitation in condemning the previous Government for their record. We had hopes that the party that is now in opposition and seeking election would come forward with the policies that would deal with the economic blizzard.

Mr. Lambie

That is why we are changing our leader.

Mr. Wilson

That may be, but far be it from me to become involved in that debate. It certainly is affirmation of the point it I made, that there are certain honest members of the Labour Party who are willing to recognise the deficiencies of the previous Administration.

I was heartened by the statement that Mr. MacGregor, of the British Steel Corporation, intends to seek a greater share of the contracts being given in the development of Scotland's offshore oil resources. It is a scandal of the past that British Steel has failed to take up these opportunities. I should mention to the hon. Member for Central Ayrshire and to Mr. MacGregor—when he reads the glowing tributes paid to him today—that in the 11 October edition of The Oilman, and repeated in the Scottish press earlier this week, is the statement that the United Kingdom—and that means Scott Lithgow—is likely to lose the BP order for one of the new oil rigs.

That is happening at a time when the oil industry is falling over itself to acquire more oil rigs to cope with the world-wide boom in exploration. It must suggest that unless the opportunities are taken up British Steel will, in turn, have an enhanced share of a zero order of steel, because our foreign competitors will be manufacturing the rigs and ordering steel from their own steelworks.

Mr. Lambie

Surely this is a case where Ministers should direct BP—a British company—to buy its vessels in an English or Scottish yard. Government action is needed.

Mr. Wilson

I made a statement about that this morning, and I have tabled a parliamentary question suggesting that the Government should take powers to ensure that something of that sort happens. For once, therefore, I am four square in line with the hon. Member. It would be a crying shame, and a handicap to our industry, if a big oil company that is dependent upon licences for exploration and production from the British Government were allowed to get away with this kind of racketeering. I do not think that there is any other word that I should care to apply.

In our quest for solutions we can only appeal to the Government at this stage to change their policies, to bring down interest rates and, by doing so, to bring down the value of sterling. The very fact that a country possesses oil should not necessarily cause the currency to rocket in value. Norway, whose economy is probably more affected by oil production than ours is, has enjoyed a reasonably stable value for the krone. Norway's exports and industrial production are both up. Unemployment is at about 41,000, a mere fraction of that in the United Kingdom, or even Scotland. The very fact that we produce our own oil is no excuse for the Government's not taking action to try to bring the value of the pound down to a more reasonable level.

We must use our oil resources for industrial investment. During the period of office of the last Government I endeavoured to press for that to happen, and I was therefore intrigued by the statement by the right hon. Member for Leeds, East today that he would now support an industrial development fund. It was my understanding that the Treasury, under his leadership, placed barriers in the way of the hypothecation of the oil revenues into an industrial sector. That was probably the fatal mistake of two or three years ago. Once money goes into the Treasury, it is extremely difficult to get it out again for industrial purposes.

It is also clear in the statement of the Fraser of Allander Institute that although unemployment in Scotland is increasing, Scotland now has higher productivity per head than the rest of the United Kingdom. It attributes that productivity directly to investment in Scotland. If that is so, there is a greater need than ever for higher industrial investment in Scotland if we are to cure our fundamental economic difficulties.

Even if the Government change their policies and bring down interest rates and the value of the pound, both of which will be beneficial to manufacturing industry, there is a real and urgent case for them to bring forward an immediate reflationary Budget in order to try to restore a satisfactory level of employment. For instance, housing grants are to be slashed. That is a cut in public expenditure, but it has been explained to me by the private building industry in Dundee that that will effectively create a lack of business for that sector and cause additional unemployment.

There are so many ways in which, without causing hyper-inflation or overheating our very cold economy, a Government, if they were sensitive to the problems that they have caused, could take action to alleviate them. If they do not do that I hope that the hon. Member for Macclesfield will at least have the courage of his convictions and join the rest of us in the Lobby to vote against his Government tonight.

6.18 pm
Rev. Ian Paisley (Antrim, North)

The last time that I addressed the House on the unemployment disaster in Northern Ireland was on 29 July. Then, 84,684 people were unemployed. At that time the Minister of State told the people of Northern Ireland: This is a grim figure, but there is a silver lining. I should like to examine the three months that have followed the announcement of that figure. Today the number of unem- ployed is 89,900. The overall unemployment percentage in Northern Ireland compares with some of the worst percentages on this side of the water, but there might be one or two black spots in Great Britain that are higher than our average.

In July Strabane had an unemployment of 27.5 per cent. It is now 30.4 per cent. Yet we were told by the Minister of State: This is a grim figure, but there is a silver lining.

Mr. Lambie

Have faith!

Rev. Ian Paisley

Faith is the substance of things hoped for and the evidence of things not seen. There is neither evidence nor substance if the Government continue their policy in Northern treiana. I do not want to develop my homiletics on that text.

The right hon. Member for Down, South (Mr. Powell) has supported the Government's disastrous policies, yet he represents Newry, which, in July, had an unemployment level of 25.6 per cent., which has now risen to 26.2 per cent. In the old days, Ballymena, the heart of my constituency, had the best employment record in Northern Ireland with about 4 per cent. unemployed. In July the figure was 15.1 per cent; it is now 15.9 per cent. The other four worst areas are Londonderry, Dungannon, Cookstown and Omagh. The figures for those areas are appalling. In August, the figure for Londonderry was 21.1 per cent. It is now 26.2 per cent. In Dungannon it was 27 per cent, and it is now 28 per cent. In Cookstown it was 26.2 per cent, and now it is 27.2 per cent. In Omagh it was 19.4 per cent, and now it is 20.1 per cent.

The upward trend of those figures is staggering. In July, 84,684 were unemployed. We were told that that figure was grim, but that a silver lining would come. In August no silver lining had come, and 88,100 were unemployed. In September the figure had risen to 89,300, and in October to 89,900. The figures are alarming, because usually the October figures show a large fall from those for September because school leavers find jobs. In September 1978 the unemployment figure was 70,955. In October it had fallen to 64,595. In September 1979 the figure was 69,557. In October it had fallen to 64,812.

Now the figures do not even remain static. They rose when they should have fallen by at least 3,000 or 4,000. It is a staggering fact that there are now 8,600 unemployed school leavers in Northern Ireland. That is the highest-ever figure in the Province. That is a grave situation. It is easy to trot out statistics, but behind them are wrapped up hopes and despairs, ambitions and disappointments, joys and sorrows and heartbreaks and homebreaks.

I sympathise with the hon Member for Central Ayrshire (Mr. Lambie). This morning I visited the ICI plant at Kilroot and met representatives of the trade unions. We discussed the drastic closure and the loss of 1,100 jobs in the Carrickfergus area. When I came to the House, Courtaulds employed 2,000 people at Carrickfergus. It now employs 250. There is now to be a closure at the ICI factory. The grim reality facing us today is that every man over the age of 50 going out through the gates at Kilroot faces the prospect that he will never work again. He will be on the dole until the end of his life. That is a terrible tragedy. We should consider the hopes and despairs of the real persons behind the figures.

It is a serious matter for any Minister to come to Northern Ireland and say that, although the figures are grim, there is a silver lining, when there is no such thing. Everybody, including the employers and the unions, knows that shortly Northern Ireland will have 100,000 unemployed. So grave is the position that both employers and unions agree that by the end of next year that figure could rise to between 110,000 and 125,000. That is the reality in Northern Ireland today.

I welcome the forthright and courageous speech of the hon. Member for Macclesfield (Mr. Winterton). He made the speech from his heart. As I listened I felt that we were hearing the genuine voices of many thousands of people who voted for the Government. They were being reflected by the hon. Gentleman today. I congratulate him on his courage and on the way in which he put forward his argument.

Northern Ireland used to have 30 per cent. of the British textile industry. Today that industry is near closure. The Labour Administration did not help that industry, and this Administration has not done so either. Both must bear the blame. We were told that Europe was the answer. I always knew that it was not the answer. I was not convinced to vote for it. It will be a great day when we leave the Common Market and become sovereign in our affairs, so that we can do what we should for the people of Britain. Why is it that, of all the members of the Common Market, our Government policies Common Market regulations with a strictness that flabbergasts me, while other Governments have Nelsons with blind eyes? They do not see when the Common Market laws are violated. In Northern Ireland we are policing EEC laws and putting our people out of work. I cannot understand that.

There is a cry throughout the Province, from every section of the community. I met representatives of the farming unions recently. They said that agriculture was bleeding to death and that 5,000 jobs would be lost in intensive farming. That is the basic industry of Northern Ireland. We shall be in an economic wilderness and an economic slum. I met a deputation from the bakeries when it visited the House this week to meet a Minister, whom I thank for his helpfulness. They said that the bakery industry was being destroyed. We have lost the Co-operative bakery at Belfast, the Model bakery in Omagh, the Co-operative bakery at Enniskillen, Hughes and Kennedy at Belfast and Hunters and Eatons of Londonderry. The position in the bakery industry is serious.

The Government must quit their inflexible attitude. They must look realistically at the problem. Would it not be far better to use the money that is paid in unemployment benefits and redundancies to give those firms the cash that they need to continue operating?

If we are ever to see a way out of the tragedy, the Government must make a firm resolve on terrorism. I do not want to see a repetition of the sort of action that they took this week, which has only encouraged terrorism. They must deal with the terrorists and get on with the job of finding employment for the people of Northern Ireland.

6.29 pm
Mr. Stan Thorne (Preston, South)

I listened to the remarks of the hon. Member for Antrim, North (Rev. Ian Paisley) and recognised from the outset that, while we have a major unemployment problem in Preston, it cannot be as bad as the position that he revealed. We cannot accept what the Government Front Bench said about the position in London and the South-East, where, clearly, the position is still not as acute as it is in the North-West, the North-East and other parts of the country.

In my travel-to-work area 12,981 people are at present officially registered as unemployed, although, clearly, married women who are made redundant do not register. Therefore, the figure is probably quite a bit higher. It represents about 9 per cent. of the work force. However, the most significant figures are those from December 1979 to the present day. During that time, 7,000 jobs have been lost. In November 1979, 1,047 jobs were lost in the textile industry and in February 1980, 2,564 disappeared at Courtaulds. I shall not bore the House with the other figures for July, August and September. In October, the Lancashire road construction unit was threatened with the loss of 120 jobs. Already, Carrington Viyella is closing another textile factory in the Lostock Hall part of my constituency.

Many workers in British Aerospace are also under threat, and there are about 14,000 workers in that industry in the Preston travel-to-work area. The British Leyland bus and truck division is already receiving messages from various management centres within its industry that suggest that it, too, will face major, significant cutbacks. The research and development section of British Aerospace employs 3,000 highly skilled design engineers, but a block has been placed on further development in that sector.

Apparently, the new concept of the British aerospace industry, following the selling off to private enterprise, is that we do not need to think about the sort of aircraft that we may need in the late 1980s or early 1990s, because we shall not be producing them in this country but shall be relying on American manufacturers to take care of our needs in that sector. The workers in the aerospace industry clearly reject that completely, even though it is already apparent, and has been for some time, that America, through agencies, is directly recruiting design teams from Warton near Preston, exporting them to America and giving them highly attractive inducements in terms of salary and other incentives.

Therefore, we are concerned not only about the jobs that we have already lost but about prospects. The Government have entered into an agreement that enables Hino, the Japanese truck manufacturers, to open an assembly plant at Warrington new town, and that will inevitably affect the share of the market that can be obtained by Leyland trucks manufactured within my treval-to-work area. Within the constituency, Seddon-Atkinson, which also manufactures trucks, and which is a subsidiary of International Harvester, has been on a three-day working week for some time.

The social effects of unemployment were dealt with in the usual short sentence by the Chancellor. Expressing concern seems to be the way of dealing with the social effects of unemployment. No concern can express the real feelings of unemployed men, who rapidly find themselves without roots. Generally speaking, man prefers to work. I would argue that he is basically a creative animal and that, therefore, he needs to work. He wants to be useful to his family, his community and his fellow men. He does not want to fill in forms in order to apply for free school meals, social security benefit, supplementary benefits and other things, and wonder whether he should get out the bike, have a ride around the town and go to the local library in order to fill in his time. He is frustrated. Work is vital to him.

In last year's Queen's Speech, the Government did not promise the British worker that attempts would be made to protect him from unemployment. They said that it was the Government's job to promote employment—a positive presentation of their intentions. It is easy to see what a useless presentation that was in terms of the policies that the Government intended to pursue. It is the Government's job to extend work opportunities. The Central Lancashire new town has successfully attempted to build certain new small factories. It has leased contracts for new house building, but cuts in public expenditure will inevitably prevent those things reaching their full fruition. Cuts have already created contraction in essential social services.

I notice the hon. Member for Preston, North (Mr. Atkins) in the Chamber. He must experience precisely the same difficulties as I do when attempting to refer cases of dire need to the Lancashire county council social services department. Time and again I have referred back to me the decisions taken by that body on the basis of public expenditure cuts. A family service unit has just been closed in my constituency because the county council cannot afford to pay the social workers the necessary money to keep the service going. It is ironic that precisely at a time when there is a greater demand for social services, to some degree arising from unemployment, the Government are cutting back on the resources available to local authorities to provide those services.

We often hear talk from Conservative Members and, indeed, from some Labour Members, about human rights. I feel that in their minds the subject of human rights is often associated with the right to go along to Hyde Park and to stand up and criticise the Government, the police, the monarchy, or what have you. The concept of human rights is embodied in that activity as if that were the only human right that was worth considering. In my view the right to work is something that we have never fully accepted. Indeed, it could be argued—and I would so argue—that the concept of a human right in terms of the right to work is incompatible with a capitalist society.

It has been rightly said, time and again, that labour power is just a commodity, like any other commodity. In fact, during his remarks, the Chancellor referred to the "labour market". As a commodity it is subject to the law of supply and demand. If producers cut back because they are having difficulty in selling their products, they feel no sense of responsibility for their labour force—even though we are talking about human beings—because to them labour is merely an appendage to the machines that produce the goods.

When I was a young man an employer told me that there could not be any sentiment in business. He meant that employers of labour could not take account of the fact that the people whom they employed were human beings. That employer contributed to my recruitment to the Labour movement, to my activity in it thereafter, and to my recognition of the fact that we shall never change that state of affairs until we have radically changed society.

No doubt the present period of unemployment will teach people about the causes, and possibly about some of the remedies. It was significant that the recent march to the Conservative Party conference at Brighton included many young people who were learning how to participate in politics for the first time. I had the pleasure of meeting some of those young people and discussing the problem with them. Those young people will grow in number. We should be under no illusions about that. But what must be avoided, particularly with the young, is the tendency, fostered by irresponsible media messages, to escape from reality through petty crime, anti-social behaviour, dropping out of society, and so on. I am confident that we shall avoid that, and that the young people of today will not be found wanting in terms of a responsible attitude to their fellow men. That was demonstrated again last Sunday, in the massive demonstration against nuclear armaments. Young people will fight to the end the inequalities of our society and to establish the necessary means by which useful jobs can be created. But how is that to be done?

My right hon. Friend the Member for Bristol, South-East (Mr. Benn) performed a useful service in indicating that one of the primary considerations for Labour Members—because the Conservatives' day is running out—is to ask themselves again and again what policies they should pursue to enable the radical changes that we seek to take place when we take over—as we certainly shall in 1983–84. I do not think that we dare to think about our taking over earlier. Should we proceed in the way in which the previous Government proceeded? Should we go along the road of monetarism—a road that I freely admit was introduced by the previous Labour Chancellor—or should we institute economic policies that will lead to a complete reallocation of resources and a complete rethink? Should we produce for use or for private profit? How should we regenerate British industry?

Certain key questions are relevant now in regard to the trade union movement and its reaction to unemployment. Shall we see a change in attitude on the part of the trade unions in respect of the shorter working week, the reduction in overtime, longer holidays, opportunity to pursue different activities, and so on? Much education is needed in the trade union movement before we can get the sort of response we need to tackle the problem of unemployment.

I do not see too well with these spectacles, Mr. Speaker, but I know that you are getting perilously close to the edge of your Chair and are indicating that 10 minutes is sufficient for me at any time. I shall therefore draw my remarks to a conclusion, because I should like to be called to speak in another debate.

We need more Government interference to ensure that the profit takers do not desert human beings without giving their workers the right to run the companies themselves if the employers are incapable of doing so. We need a massive supply of goods to the Third world and an end to the grip of City investors on our financial institutions. If we can take steps in that direction in the near future, there are still prospects that we may avoid the terrible slump that is inevitable as long as the Conservatives rule in favour of their class.

6.47 pm
Mr. David Atkinson (Bournemouth, East)

In any debate on unemployment we serve no useful purpose in apportioning blame for the unemployment figures for example, for the 590.000 that the previous Labour Government inherited when they came into office, the 763,000 jobs that were lost between 1974 and 1979 and the jobs that have been last since. That is no help to the unemployed, and it encourages only greater cynicism in the House.

Our debate is, surely, about the climate and framework that are conducive to encouraging more jobs. In saying that, I hope that all hon. Members will recognise the cruel fact that old industries die and that jobs die with them if they cannot diversify, and that they are more likely to die at a time of world recession. It does no service to those who are employed in those industries to kid them that their jobs can be rendered safe by yet more subsidies. Moreover, by using the taxation derived from the profit of viable industries to support the nonviable industries, we shall never know how many jobs we are destroying in those viable industries. The Government are being unbelievably generous in supporting such industries as British Steel, British Shipbuilders, British Leyland and so on. What they are not doing is recognising sufficiently the job-creating industries of the future and encouraging them to the greatest possible extent.

In his Budget Statement my right hon. and learned Friend the Chancellor established the concept of enterprise zones to encourage profitable enterprises to move into the inner urban areas of high unemployment, with incentives and inducements and with the minimum of red tape. In his speech today he referred to the designation of two further zones. I should like to suggest to him an extension of the principle of enterprise zones. Has he considered the possibility of extending the concept of enterprise zones to particular industries—those that offer long-term employment prospects? If he has not, I hope that he will do so.

One such enterprise industry that would, I believe, benefit from this concept is tourism. It is obvious that international tourism will grow, and Britain, with its immense heritage, amenities and attractions, can benefit from that development. Already it is the third largest industry in this country, worth £5½ billion to our economy, and employing, directly or indirectly, 1½ million people. It can and should be worth a lot more, and it should employ many more people on a nation-wide basis, as it is capable of doing.

I urge my right hon. and learned Friend to recognise that Britain's tourist industry offers one of the best opportunities for reducing unemployment, to offer it incentives and inducements of the sort that are offered to those industries which choose to go into the enterprise zones, to cut the red tape which, for example, encourages the establishment of the so-called pirates in the guest house business, and to end the bias in the distribution of Government grants to tourism which exists in favour of the assisted areas.

Another industry that offers employment prospects is recycling. We are all becoming aware of the folly of waste and of the opportunities that can exist for cutting costs through recycling, but we are still ignoring most of them. Paper, glass, cans, plastics, vehicles, cloth—so much of what we discard can be re-used, and that means new jobs for the future. It is an industry that can pay for itself without grants and subsidies from the Government, but what it needs is support from local government and an end to the obstacles and the restrictions that stand in its way.

When Napoleon referred to this country as a nation of shopkeepers, he was recognising the spirit of enterprise inherent in the character of the British, enterprise that is shown today not only in our shops and in our small businesses but in the so-called black economy. Two years ago Sir William Pile, as chairman of the Board of Inland Revenue, when giving evidence to the General Sub-Committee of the Expenditure Committee, said that it was "not implausible" that the black economy in this country might amount to 7½ per cent. of the gross national product, or £11 billion. That amounts to about 1 million jobs, though admittedly that includes moon-lighters—those who enjoy a formal first job, but with a second one hidden from the tax man.

I note from today's report of the Public Accounts Committee on the Inland Revenue that tax evasion from the black economy amounts to about £3½ billion. That figure includes those who are officially unemployed, but who seek to supplement their social security benefits. In whatever way the black economy is looked at, it suggests that a large number of people would like the opportunity to use their skills and experience to work for themselves, to be able to offer their services to others and to achieve, as a result, considerable job satisfaction.

I hope, therefore, that my right hon. Friend the Secretary of State and my right hon. and learned Friend the Chancellor of the Exchequer will give greater consideration to embarking upon a study of the potential for more people to become self-employed. They are the wealth creators and the job creators of the future. I happen to believe that such a study would show that there are thousands of latent entrepreneurs in this country who have been put off doing their own thing because of the attitudes and policies of successive Governments. Pay policies, VAT registration, high taxation, regulation. licences, permits, and so on, all act as disincentives to those who would otherwise put their effort and enterprise into their own businesses.

It is by reducing such obstacles to jobs that we shall be able to overcome some of the worst effects of the present unemployment situation and of the technological revolution that is about to come. We can tackle the problem by encouraging those with basic skills whose jobs are in the declining industries—steel, motor manufacturing and so on—to apply them to those activities for which there will always be a need.

We shall never achieve a lasting economic recovery unless we get our industrial relations right. It makes me mad to read the kind of headlines that appeared on the front page of The Daily Telegraph yesterday: 15 men cost Ford £1 million production loss The report says: 2,500 men were laid off and the production of million worth of new Ford Escorts was lost yesterday at Halewood. This followed a walkout by 15 men who did not want to walk 50 yards to new lockers provided for their belongings. That is sheer industrial anarchy, and unless we and in particular the unions can eliminate this suicide, there is no way in which we can halt or reverse our decline.

6.55 pm
Mr. Giles Radice (Chester-le-Street)

We have heard this afternoon a speech of quite appalling quality and insensitivity from the Chancellor of the Exchequer. It was the hon. Member for Macclesfield (Mr. Winterton) who spoke for the Tory voters of this country—voters who are now so deeply disappointed about what is happening.

It is he and those Opposition Members who have spoken, and the hon. Member for Antrim, North (Rev. Ian Paisley) who have been telling the Government about the real world, the world that the Chancellor does not seem to think exists.

I should have thought that if the Chancellor looked at any of the facts—I that he does, in his Treasury fastness—he would be extremely worried by what he was seeing—by the fact that interest rates continue at record levels, that the value of the pound is at its highest for seven years, that manufacturing output is nearly 10 per cent. below what it was last year, that investment is dropping, that housing starts are at a new low, that bankruptcies are at their highest level for years, that redundancies occur in all our constituencies almost every day, that vacancies are almost nonexistent except in certain areas and for certain types of jobs.

The most appalling fact of all is that unemployment is now over 2 million and that most forecasters seem to think that it will be up to 3 million by the end of next year. No one knows quite where it will end, or whether there is a natural levelling off, as Conservative Members seem to hope. The reduction of inflation is the prime goal of the Government's economic policy, but even inflation is still over 5 per cent. higher than it was when Labour left office.

All of us know the plight of business men in this country and the triple bind that they face. On the one hand, they have declining internal markets because of the squeeze on the economy. On the other hand, if they then have to borrow because they are in dire straits, interest rates are at record levels and they cannot export because there is no profit in it because of the value of the pound. It is this triple bind that is creating the bankruptcies, unemployment and redundancies in all our constituencies.

It is no wonder that British industry is so desperate, that Sir Terence Beckett, of the CBI, says that the overvalued pound will kill British industry, that the British Chamber of Commerce says that industry is in mortal peril, or that the CBI has produced its most depressing and pessimistic survey since the war. It is no wonder that these things are happening.

If we look to the future, where can we see a way out if present policies continue? Demand is slackening. That means that companies shed labour. That means that the workers have less money to spend. That means that demand slackens yet again, and we are in a downward spiral. I do not see where the end will come.

I should like to tell the House about what is happening in the Northern region, which has the highest level of unemployment in Great Britain, if not in the United Kingdom.

Mr. Jack Dormand (Easington)

It always has had.

Mr. Radice

It always has had, I agree. In October the total unemployment was 11.6 per cent., and the increase since last October is very severe indeed, because it was then 81 per cent. The vacancies this October amounted to 4,000, whereas they were 10,000 last October.

There have been 32,000 redundancies in the Northern region. That is already 12,000 more redundancies than during the whole of last year. Washington new town, in my constituency, the jewel of the Northern crown, was set up in 1964, partly by a Conservative Government. It was the great hope for the North. It is the new and most promising firms which are going bankrupt in Washington, not the old industries. There have been 1,600 redundancies since the beginning of the year. It was the town of the future. It is now being destroyed and laid waste.

It is alarming to think that there are nearly 20,000 on short-time working compensation schemes. That means there will probably be an extra 20,000 unemployed very soon in the Northern region. The chances and opportunities for school leavers are appalling. Over 30,000 are unemployed. In towns such as Gateshead and Sunderland only 40 per cent. of school leavers are likely to get a job. The House will be able to imagine the impact that all this has on families, individuals and communities. We who represent the Northern region will not forget that the Government closed down Consett without offering any alternative employment.

The plain truth is that the Govenment's policies are causing a disaster. It is all very well for foreign Friednanite observers to regard the United Kingdom as an interesting experiment. The trouble for all of us and for all our constituents is that we are the mice in the Prime Minister's laboratory, and it is a pretty terrible experience.

The Government's argument—we heard it today and we have been hearing it for the past 18 months—is that there is no alternative. They say that if the Labour Party was in power it would be doing exactly the same thing. I refute that. There is an alternative to artificially high interest rates, which boost the pound artificially high. The alternative is to reduce interest rates by 4 per cent. That is what the CBI is asking for. That would have an effect on the level of the pound. The reduction of interest rates and the level of the pound would bring immediate relief to industry. That is what industry is asking for, and the Government should be listening.

There is an alternative to the complete deflation of the economy that is now taking place. The Government could expand the economy by reducing taxes and increasing public expenditure. I know that the Government will say that they must reduce the public sector borrowing requirement. That requirement, as a percentage of GNP, is not higher than that of our competitors. In fact, it is lower than most. There is an obvious point that I am amazed the Chancellor has not understood, namely, that it is almost impossible to reduce the public sector borrowing requirement at a time of recession of the sort that we are now experiencing. There is not the output and, therefore, there are not the receipts. It is also necessary to pay out unemployment benefit. So it is almost impossible to reduce the PSBR without cutting savagely into the important services that a civilised society demands.

Mr. Nicholas Lyell (Hemel Hempstead): I listened with great interest to the hon. Gentleman's argument about Consett. He has now moved on to the subject of the public sector borrowing requirement. He said that the Government did nothing when they closed Consett. Have they not directed a good deal of money for substantial new factory building in the Consett area? Is it not true that to do that, when we know that there is not unlimited money available, it is extremely important that the Government keep their other general spending under close control, so that they can shift money, as the hon. Gentleman would wish, in his direction?

Mr. Radice

The money that has gone to Consett is chicken-feed when compared with the number who are unemployed. Secondly, the Government must expand the economy. We are in a deep recession, and there is no demand. That is why firms are going bankrupt throughout the country.

There is an alternative to the mass unemployment that the Government are now creating. They can expand the economy. They can spend more on employment creation programmes. That is happening in Sweden, where, despite the recession, unemployment is still only 1.7 per cent. The Government could give more in aids to industry and devote more resources to education and vocational training. There will be a case for some selective import controls to save jobs in certain areas. Above all, there is an alternative to the divisiveness, the inhumanity and the narrowness of vision that the Government have shown, which are hallmarks of their period in office. I do not argue that all our problems are the Government's fault. Our case is that they have made the situation far worse than it need have been.

It stuck in our gullets to see the begging letter from Tory Central Office to firms in the Northern region, We want them to stop begging for Tory funds from firms in the region, most of which are in considerable difficulties, and do more to help industry in the region. They could do something to help the young people. I know that there are youth opportunities programmes, but they last for only a year. We need to extend the life of those programmes and link them with industrial and vocational training, so that there is a period of opportunity for all those in the 16–19 year age group. No one in that age group should be unemployed. All should have a job, be part of employment creation programmes

Mr. Budgen


Mr. Radice

No, I will not give way. Those in the 16–19 year age group, as I have said, should be in work, part of employment creation programmes or in vocational training.

We need to increase the amount that is spent on regional aid and hurry up the administrative processes so that there is not the delay that is being complained of by the CBI, both nationally and regionally. Lastly, we need to increase public capital investment in the development areas. If we do that, we shall provide more jobs in the construction industry in the way that the Labour Government adopted in the 1960s.

If the Government do not change their policy, the danger is that they will create conditions that will lead to an almost irreversible regional decline. That is the problem facing Scotland, the North, Northern Ireland, and now the North-West. If the Government do not change their policy, they will bring about an industrial decline that will be almost irreversible, or at best extremely hard to turn round.

My fear is that the Government will not change their policy. I am afraid that the doves, moderates or wets, or whatever they are called, will not speak up. They know what is happening. I can see Conservative Members in their places who know very well what is happening in their constituencies. They well know what is going on, but what are they doing? Will they join us in the Opposition Lobby tonight? No, they will not. What are they doing to persuade the Government to change their policy?

Responsibility rests not only on those who are in office but on Conservative Back Benchers, who know perfectly well what is happening and who are sustaining the Prime Minister in office. They will be losing their seats if they do not do something about it. So whatever difficulties we are now in. it will be a Labour Government who will have to clear up the mess. I only hope that the mess that we have to clear up will not be too great.

7.9 pm

Mr. Michael Morris (Northampton, South)

The hon. Member for Chesterle-Street (Mr. Radice) painted a bleak picture of the situation in the North- East, but my hon. Friends and I would have been a little more convinced if he had stood up boldly two or three years ago—

Mr. Radice

I did.

Mr. Morris

We would have been more convinced if he had chided the previous Labour Government to do something about structural unemployment in the North-East. There is not an hon. Member who does not find the present level of unemployment unacceptable. Every hon. Member knows that the current level will rise. Most of us realise that, unless the Government's policies come to fruition, we shall face the tragedy of 3 million unemployed.

I first came to this House in February 1974. At that time the unemployment figure stood at just over 500,000, or 2½ per cent. of the work force. When the Labour Party was in office, unemployment virtually trebled. The figure now stands at about 2 million, and a new experience faces hon. Members. I do not think that any hon. Member here today was in the House before the war. During the post-war period we have experienced relatively low levels of unemployment. None of us has ever had to face anything like the problem that we face today. This period, together with the approaching winter, will form a watershed.

Although hon. Members have complained bitterly about the number of bankruptcies, those of us in business know that many of the companies that went to the wall during the past year were bound to get into trouble.

Mr. Austin Mitchell

What about ICI?

Mr. Morris

ICI is not bankrupt. Those companies that went to the wall were not well run. They were overextended, and they were bound to go into liquidation. However, it is the good companies that feel the pressure now. In that sense, the ICIs of this world are relevant. Such companies are feeling the crunch. They are in trouble.

I know that my right hon. Friend the Secretary of State for Employment has had a particularly tough time. He probably has one of the toughest Government jobs. I congratulate him on some of the work that his Department has done during the past 18 months. Not least, I congratulate him on the way in which he has extended and developed the youth opportunities programme. I congratulate him also on the way in which he has maintained and extended the special temporary employment programme, on the way in which the job release scheme is working and on the temporary short-time working compensation measures. Although I genuinely believe that such work has been well done, it is not the answer to structural unemployment. Nevertheless, my right hon. Friend and his colleagues can claim to have shown understanding over the past year or so.

Unlike Opposition Members, I have no complaint about the Government's basic strategy. It is of paramount importance to control inflation and to alter significantly the ratio of the public sector to the private sector. The Government have made great strides forward on both those fronts. The rate of inflation is falling, and we are selling off public assets. The latter is a great success, not least for the Department of the Environment. At last people have been given an opportunity to come out of council house servitude and own their homes.

I question one or two of the methods used to implement the Government's strategy, although I accept that it is the correct strategy. This country has the greatest coal reserves in the world. We have the assets of North Sea oil and of natural gas. Why do we pay more for our energy than do our European competitors? One can argue about the extent of the deficit, or about the premium that we pay. It is between 20 per cent. and 30 per cent., but, compared with the United States, it is between 40 per cent. and 50 per cent. We should have the competitive edge, and I do not understand why we do not have it.

It is laudable that the nationalised industries should be given a target for a return on capital. If that return on capital is achieved by the exploitation of a monopoly selling position, with the result that prices rocket, we must question whether our objective has been achieved in the right way. On other occasions the hon. Member for Norwich, South (Mr. Garrett) has joined me in complaining to the Department of Trade about dumping of footwear. The Labour Government did little about it, but the Department of Trade has shown a greater understanding of the problem and a willingness to deal with it. I hope that we shall witness the benefits of that new awareness before long.

What is happening in the banking sector? Industrial borrowing is not increasing, so that is not the problem. This afternoon the Chancellor of the Exchequer said that the public sector borrowing requirement would be reduced in the months ahead, so that is not the problem either. I remain deeply suspicious of the entrepreneurial ability of the banking world. The banking world will find ways of lending money, and unless we are careful the money supply will continue to expand.

My right hon. Friend the Secretary of State for Employment has, rightly, preached about the realities of life. Our attitude is crucial. We live in a competitive environment, and everyone who works in a company should understand that. When will union leaders and those Opposition Members who are sponsored by trade unions stand up and point out the competitive world in which British industry exists? If they were to do so we should get some reality into wage claims. We need reality, and we need fair claims. Unless the TUC, the union-sponsored Members of Parliament and the leaders of the unions are prepared to recognise the problems facing British industry, unemployment will increase still further.

I know that my hon. Friend the Minister has spoken at great length about the problems of a skilled work force. He has tirelessly toured the country extolling the virtues of retraining. Nevertheless, every hon. Member knows that many unions still refuse to accept those who have been through skill centres. Every hon. Member knows that restrictive practices still exist in some of our industries. We need go no further than Fleet Street to see examples of restrictive practices. Somehow we must bring about a change of attitude among all parties in industry, so that people can learn a skill if they wish to do so, and then use it. Above all, there must be reality on pay.

Finally, I turn to the question of the public sector borrowing requirement. It will not have escaped the notice of many hon. Members that it now looks as though about 10 per cent. of the PSBR will go to British Steel. On top of that there are British Shipbuilders and British Leyland, both of whom are coming forward with further demands. At what level do the demands of these nationalised industries have such an impact on the PSBR that they adversely affect the fortunes of the rest of British industry? I hope that that question is being asked. I do not claim to know the answer, but I believe that it is a question that should be asked.

I hope that the Government will keep worrying at all these aspects of policy. I believe that they will. I ask not for U-turns, but, where there is a change of circumstances, for an adjustment of policy.

7.22 pm
Mr. David Winnick (Walsall, North)

It seems to me that the hon. Member for Northampton, South (Mr. Morris) was criticising the Government in his own sort of coded manner. I much prefer the honest approach of the hon. Member for Macclesfield (Mr. Winterton), because he spoke not only for his constituency, but for many sections of the British people, who are so tired, fed up and dissatisfied with the present economic policies of the Government. I wish that at tomorrow's Cabinet meeting there would be enough critics within the Cabinet who would speak in the same manner as the hon. Member for Macclesfield.

I remember reading about the debates that took place in the House before the war and there were critics on the Tory side, such as Mr. Harold Macmillan, who spoke out. He did not get promotion in the 1930s within his own party, but he spoke out because he believed sincerely that what was being done was wrong. When I listened to Mr. Harold Macmillan being interviewed on television recently, I felt that he had not changed his views one iota. All the criticism that we echo tonight about the appalling record of the Government, their attitude towards unemployment and their monetarist policies, were made by Mr. Macmillan in that interview with Mr. McKenzie. Those Cabinet Ministers who are considered to be critical, such as the Secretary of State for Employment, for example, must have the guts and the courage to speak frankly around the Cabinet table, because that is what is needed.

Mr. James Dempsey (Coatbridge and Airdrie)

Is my hon. Friend aware that one statement was made most forcefully by Mr. Macmillan? He saw the immediate solution to this problem as reflation. I was very surprised to hear him say that. I appreciated it because he indicated quite wisely that unless we increased the wealth we could make no progress with the existing monetary policy. I hope that my hon. Friend will note that important suggestion that Mr. Macmillan made during that very good interview.

Mr. Winnick

I take the point that my hon. Friend has made.

Hardly a single day passes in the West Midlands and in the Black Country districts without news of further redundancies. Hardly a single week goes by without another closure being announced. There is no doubt, as we would expect, that manufacturing industry has been hardest hit by the Government's economic policies. In the West Midlands, we have seen the results. Unemployment in our region is mounting. The West Midlands is not associated with the worst kind of unemployment. Even in the pre-war days, families came from South Wales to Birmingham in order to find jobs. No one would dream of doing that today.

Therefore, we have every justification for saying that the West Midlands has been among the most adversely affected areas as a consequence of the Government's actions. We have nearly a quarter of a million out of work. Some 3,000 jobs in the region are vanishing every month. Between June 1979 and the end of September this year, there have been 133 closures in the West Midlands and 39 in the Black Country districts alone.

I am sure that a number of these firms were small businesses. They were promised every kind of support and encouragement by the Conservative Party when it was in opposition. What support or encouragement have they had in the last 18 or 20 months? Many of them have been driven out of business and their work forces have ended up on the dole, unable to get any kind of job. In my borough of Walsall the unemployment rate is near 11 per cent. It is a rather bleak and depressing picture.

Much is often made by Conservative Members and certainly by the Prime Minister about the ordinary working people who voted Tory at the last election. We were told that many trade unionists voted Tory. That is true; there can be no doubt about it. That is why the Government are in office with such a large majority. But I doubt whether many of those people who were silly enough to vote Tory in May last year would do so again now. They were taken in by the promises of the Prime Minister. They have learnt a very bitter and harsh lesson, and so many unfortunately are learning that lesson in the dole queue or on short-time working.

It cannot be denied that the Tory Party will once again be associated with unemployment. I was born a few years before the Second World War started, and when I came into politics the Tory Party was always associated with what happened in the 1930s—the unemployment, the poverty, the squalor and the means test. There have been many Conservatives, such as Lord Butler, who wanted to change the image of the party and show that Conservative Government policies were somewhat different from what they were before the war. Whether Conservative Members believe me or not, the fact is that the Conservative Party is again becoming associated with unemployment on a large scale and all the resulting misery.

During the recess I visited a display put on by my local authority for unemployed young people. The town hall, where the display was held, was crowded and I am afraid it was a very bleak experience. There were literally hundreds of young people, all of them out of work, seeking advice. I noticed that one stall was advertising a vacancy for a shop assistant. The queue at that stall for an interview was the longest in the town hall. A single job—that of a shop assistant—was available. So many young people have left school this year and would be only too pleased to have the opportunity to be a shop assistant. That reminds one of the situation that existed before the war.

The accusation against the present Government is that so much of the unemployment experienced today is deliberate. It is claimed that it was the aim of the Government to create unemployment on this scale. It is no good the Prime Minister or the Secretary of State for Industry shedding crocodile tears. Their policies have created today's unemployment. There are now more than 2 million out of work and this figure could reach 3 million. That is a deliberate policy. My right hon. Friend the Member for Bristol, South-East (Mr. Benn) was right when he made these points about the Government's policies. Sometimes my right hon. Friend is featured in the press as a man who is out of touch with ordinary people, isolated and remote. But anyone who listened to his speech tonight and compared it with that of the Chancellor of the Exchequer would not be in any doubt about who was talking the most sense.

Sometimes reference is made to the possibility of the Government doing a U-turn on incomes policy. That should not be misunderstood. There is an incomes policy now. That incomes policy is the same as that which existed in the 1930s—large-scale unemployment and all the fears that people had. That is the kind of incomes policy that is being waged, certainly in the private sector. I am worried that the trade union movement could become weakened as a result, just as it was before the war. Those of us who are active in the Labour movement must ensure that some of the mistakes that were made years ago are not repeated.

A sharp reduction in interest rates is essential. First and foremost, that would help manufacturing industry in the West Midlands. A reduction in interest rates, which many Conservative Members also believe to be necessary and about which they have publicised their views, would have an effect on the high exchange rate of the pound.

Many firms in and adjoining my constituency refer, when they speak to me or to the press, to the difficulties of exporting competitively. The difficulties which have arisen from the highest interest rates that we have ever known and the high exchange rate of the pound lead to the redundancies and closures to which I referred earlier.

I believe that it is necessary to have a proper system of protection for British industry. A number of firms in my constituency manufacture padlocks. In 1975—these figures were supplied to me by one firm—over 2 million padlocks were imported. In 1979, the figure was 41 million. When I wrote to the Minister concerned, I received a somewhat complacent reply which, nevertheless, I sent on to the firm. I received a letter only recently from the firm in which it makes the point that imported padlocks are now enjoying about 50 per cent. of the total market and that it finds it difficult to understand why the Minister should have said that the overall import figures did not show a significant increase. If this is not a significant increase, what is?

It is essential that proper protection is given to British industry and for that purpose selective import controls are necessary. I know some of the arguments against such a policy—retaliation and so on—but, unless we have such protection, we shall find ourselves with a manufacturing industry which is even weaker than it is today because imports are making ever greater inroads into British industry. I find it difficult to understand how anyone concerned with the survival of British manufacturing industry can put forward serious arguments against having some form of minimum protection.

Linked to that are changes in our membership of the Common Market. Our membership of the Common Market and the way that we have to subscribe to the Rome Treaty make it all the more difficult for us to have the import protection that I want.

There is a feeling that if one is unemployed nowadays it is not quite like before the war because at least there is some protection. I do not deny that the income of the unemployed is somewhat better than it was in pre-war days, but I emphasise that those who are forced on to the dole queues suffer great financial hardship. The accusation that we make against the Government is not only that they have deliberately created unemployment by their policies, but that they have taken a number of measures against the living standards of those who are forced on to the dole queues. For example, the earnings-related unemployment benefit is to be phased out. I do not suggest that it was a substantial income for those who were without work, but it was a cushion. It was introduced originally to give some assistance to those who were no longer in work. What possible justification is there now for abolishing it?

The unemployment benefit is to be increased in November by 5 per cent less than the current rate of inflation. Again, that will cause extra difficulties for those who have been made redundant. For example, an unemployed married man now gets £1.70 for each child. From November he will get £1.25. Of course child benefit is to be increased, but overall an unemployed married man with a child will be only 30p better off as a result of the Government's measures.

Under the new regulations which come in next month anyone with over £2,000 will not be able to get a penny piece of supplementary benefit. A sensible man with many years' service who is made redundant and receives redundancy pay will try to save some of the money. It will come in handy whilst he is unemployed and looking for a job. But, under the new regulations, he will have to spend whatever he has in excess of £2,000 before he can obtain supplementary benefit. This is a way of hitting directly those who are undoubtedly the poorest in the community. When we compare these regulations with what happened regarding the Vestey family, we begin to understand the two nations which continue to exist in this country.

It is sometimes said that the hardest hit as a result of unemployment are the young. It is a tragedy to see young people go direct from school to the dole queue knowing full well that they have little or no chance of getting a job. Len Murray, after his visit to 10 Downing Street, was criticised because he spoke about social unrest. But does anyone imagine that we can have this level of unemployment—youngsters going direct from school to the dole queue—without having social unrest and a social explosion?

I am also concerned about men in their late forties and early fifties—sometimes skilled men—who are made redundant. They go home with the feeling in their minds that never again will they be able to take employment. This is Britain in the 1980s; this is Britain under the Administration of the right hon. Lady the Prime Minister. Men in their late forties and early fifties suffer the psychological damage that they will not be able to earn their living again. What kind of Britain have we created 35 years after the end of the last war?

The Government have acted in the interests of those whom basically they represent—the rich and the privileged. The Labour Party—perhaps my message is now directed more to the Opposition Front Bench—understands all the difficulties and obstacles that will face the next Labour Government. We have no illusions; we live not in a dream world but in the real world. We understand what will be involved for the next Labour Government. But we want that Labour Government to have the same determination to act on behalf of the people we represent in politics as the Tories have acted in the interests of their own class.

The previous Labour Government did much good. They certainly did a great deal in the West Midlands by rescuing British Leyland. A few years ago, in a by-election campaign, I paid tribute to them, and it was right that I should have done so in those circumstances. I was not ashamed of what the Labour Government had done in the West Midlands. They also made mistakes, and perhaps those mistakes could have been avoided, even with hardly any majority in Parliament.

The next Labour Government need to be bold. They need to take on board seriously many of the policies agreed at the party conference and not to dismiss them out of hand. If we have a Labour Government determined to carry out radical and Socialist policies on behalf of the overwhelming majority of the British people, I believe that that Government will be successful, but, perhaps even more important, our industry and people will be saved.

7.39 pm
Mr. Alan Haselhurst (Saffron Walden)

It would be helpful to rid ourselves of two illusions when we discuss unemployment. The first is that it would be a derogation of Government policy if special measures were taken to deal with the unemployed, particularly the young unemployed. How can it help to fulfil Government Policy if the fact that more people are unfortunately made unemployed adds to the public sector borrowing requirement? Estimates have been made of the cost of unemployment. We do not have an official or reliable estimate. It is suggested that 1 million unemployed can cost about £5 billion. If that is so, it must affect thinking on unemployment.

It also cannot help the Government if unemployment grows to such an extent that the public become disillusioned with their central strategy. People will become worried about the number of unemployed, and that consideration will become more important to them than the need to reorganise British industry or conquer inflation. I hope that when we say that action must be taken over unemployment we shall not be characterised, as in some journals, as being less than firm in our resolve to try to solve the country's problems. It is simply a recognition that unemployment is an unacceptable facet of our social life.

The second illusion is that which tends to come from Labour Members—that all will be well if the Government reverse their policies. If firms simply took on more people, it would satisfy some Labour Members. Unfortunately, we have a serious lack of productivity. Soaking up the unemployed into firms without regard to unit costs would be a recipe for disaster. British industry's troubles exist largely because it has failed to achieve productivity levels comparable with its competitors, who have been growing in number and becoming more effective. That has led to a decline in our performance, and the shedding of jobs. Unless we consider new work practices, using automation to its full extent, we shall not be able to sell our products in competition with the remainder of the world. We shall not earn the money needed for a healthy and expanding economy. I hope that we can look at unemployment without the emotion and party jibes exemplified by the hon. Member for Walsall, North (Mr. Winnick).

Two aspects of the approach to unemployment concern me. The previous Government introduced temporary measures to deal with unemployment. It is astonishing to hear Labour Members say that they will have to cope with the mess that we leave. What did they say when it was being created? Unemployment has been the trend for some time. It is not a transitory phenomenon. The idea of temporary remedies feeds the belief that unemployment will pass away like a dark cloud.

We are facing a serious structural unemployment problem. New ideas must be devised to solve it. The extra product that we need in the future to found the wealth of this country will come from machines. Firms are closing factories that employ 800 people and opening those that employ 200 in order to achieve the same or greater production. That is an inevitable trend. If we deny it, we shall frustrate Britain's recovery.

Unfortunately, our unemployment problems are not temporary. I should like to believe that we could expand the economy by a certain percentage per annum and that that would soak up the surplus labour productivity. However, it is difficult to believe that this can be so, certainly within the measurable future. We must therefore take a completely new look at the structure of the labour market.

The other worrying aspect of our approach to unemployment is that we are merely reacting to it. Instead, we must try to find a positive policy of training young people before they enter their lifetime of employment in the world of work. We do far less training than our competitors, particularly in Europe. We prepare people insufficiently for working life. The Government should look for a new scheme, based on training and education, to take people to a more complete level of skill and knowledge of what is involved in the world of work. Not everyone needs to acquire technical skills, but a great deal of technological skill will be needed in most jobs in the world of tomorrow.

Only 55 per cent. of people in this country have bank accounts. However, in the near future people will be expected to handle pieces of plastic and highly automated equipment to carry out the ordinary functions of everyday life. A great deal more attention must be given to preparing people to enter employment. There must be a new approach to training and education.

Mr. Dormand

Training and retraining are extremely important. In the Northern region we have always had the highest rate of unemployment. It has increased yet again in the most recent figures. However, the hon. Gentleman's Government is closing down a training centre. How can he justify that?

Mr. Haselhurst

We should expand training opportunities, but we need not necessarily base that expansion on existing training schemes under the Manpower Services Commission. Much good has been done by temporary employment schemes, which have become more sophisticated. There is a role for skill-centres. However, we need a fundamental change. We need greater educational content and more involvement by employers. There is great potential for the small employer to play a part in training young people for their working life. That has not yet been achieved, because the smaller employer tends to resent being, as he sees it, bureaucratically controlled and made to co-operate in training schemes and pay a levy.

In contrast, small employers have been readier to co-operate in giving young people work experience when they have been asked to take part in schemes set up by voluntary organisations or bigger employers. I concede that sometimes such schemes have been financed by the MSC. I heard recently that when a radio appeal was made to employers to make places available under the youth opportunities programme many responded and offered tens of thousands of places. There is potential, and it must be exploited much more.

I regret that a training centre has been closed under the present regime of training and I am generally looking for an expansion, but based on a new approach. It is only by looking at the matter from the training point of view, rather than by trying measures that react to unemployment or pretending that it is a temporary phonomenon—when the structural labour market demonstrates that it is not—that we shall get the right answer. We must take a positive approach.

If the Government bring forward more measures to expand the youth opportunities programme, I shall welcome them, but I suspect that they will only temper the effects of unemployment. I do not believe that they will do suffi- cient to increase the stock of skills and knowledge that we need in our work force. I do not believe that they will do enough to increase enterprise from which the wealth-making capacity will ultimately be derived.

I look for a more positive approach and urge the Government to believe that, if they do not soon take such an approach, they may run the risk of having greater dissent in the country from the objectives that they are pursuing and which I agree that they should pursue.

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