Her Majesty's Government (Opposition Motion)

HC Deb 27 July 1981 vol 9 cc820-911

Mr. Speaker

I have not selected the amendment in the name of the right hon. Member for Plymouth, Devonport (Dr. Owen).

3.33 pm

Mr. Michael Foot (Ebbw Vale)

I beg to move, That this House has no confidence in Her Majesty's Government whose economic and social policies are spreading mass unemployment, undermining British industry and demoralising the country.

The motion is framed in the same terms as the motion that we put down a year ago. I believe that anyone who judges what we said a year ago and what was said by the right hon. Lady the Prime Minister on that occasion in defence of her Government will see whose record has been vindicated by the motion that we tabled then.

I want to comment, first, on the scale of the disaster which has befallen us and look at some of the events that may lie immediately ahead. I also want to say something about the policy that the Opposition will pursue when we get the chance—[Interruption]—as soon as we get the chance. I say that especially because if there is anything more offensive even than the horrors which the country has been called upon to endure it is the right hon. Lady's claim particularly that there is no other path but the road to ruin which she still pursues.

The immediate reason for this censure motion was provided by the July unemployment figures. It is the return to mass unemployment in our country which has dominated the last two tragic years. In that period, the number of unemployed people has risen by 1,400,000. So numbed have we become, or appear to have become, by the increases in these figures month after month, that we have almost ceased to think of them in human terms. We have almost reached the stage at which a monthly rise of 30,000 in the underlying level is represented in some quarters as a blessed relief, or something like it.

Comparisons with previous cycles or the immediately previous cycle serve only to underline the scale of the present catastrophe. In the worst two years of the previous recession, unemployment rose by 650,000—a dreadful figure, but one dwarfed entirely by recent events.

The Prime Minister sometimes chooses to make the comparison with our period—my own period at the Department of Employment. There are, however, two major differences in the figures, apart from the vast difference in the totals. First, during that period we sustained the number of jobs and people in jobs. Secondly, we fought—with some eventual success—to bring down total unemployment by special measures—or "artificial jobs", as the Prime Minister used to call them when she was going around the country during the election campaign. But she is only too glad to have those schemes at her disposal now. Indeed, they provide the only anti-unemployment policy that she has. The stone which the builders rejected has now become the head of the corner.

I dare say that in a few minutes the right hon. Lady will describe to us how she seeks to expand some of those jobs, but I must underline to her that I hope that, if she has read the report in The Times of 22 July, she will never again dare to quote the comparison with what happened previously—it happened when I was at the Department of Employment. It states: In the 1974–75 recession, increases in British unemployment were exacerbated by the growth of the total labour force (which includes both employed and unemployed). In the last two years the rise in British unemployment has to some extent been assuaged by a slight fall in the total labour force; the number employed has fallen even more than registered unemployment has risen. In other words, if the right hon. Lady had had to contend with the same position as we had to contend with on the total labour force, the unemployment figures today would be even higher than they are now.

The fall in output over the past two years is without precedent. The production of the whole economy has fallen by 7 per cent., while production of manufacturing industries has been reduced to only 80 per cent. of the level of two years ago. House building has fallen calamitously, while the number of homeless is rising.

The slump has been intensified by the ruthless and continuous attack on our public services. Resources are being cut in education, social services and housing. More resources are being devoted only to defence and law and order. The other increases in public expenditure—and such huge increases used to be a matter of great interest to Conservative Members—have arisen involuntarily out of the consequences of the great recession, with Government policies at every turn giving a fiercer twist to the screw. Increased spending on unemployment benefits, extra special employment measures, help to nationalised industries—none of those expenditures would have been needed on such a gigantic scale if the recession had not forced them.

The Prime Minister's policy is unworkable, even on its own terms. Cutting expenditure directly has so little net effect on the public sector borrowing requirement that to pursue the policy afresh in the same manner will lead to even more destructive and futile rounds of cuts and tax increases.

The more that the Government follow the straight and narrow path of the true monetarist faith—the policies of the Prime Minister and the hon. Member for Knutsford (Mr. Bruce-Gardyne) or the policies of more expenditure cuts such as the Prime Minister and the Chancellor of the Exchequer were still forecasting a few months ago—the more the public sector borrowing requirement will he increased by the boa constrictor appetite of mass unemployment costs. That is the fact of the matter, and who, apart from the Prime Minister, believes in that policy of self-stultification without parallel in recent times or in most other countries today? Small wonder that The Times speaks casually, as it did in a leading article on Saturday, of: the need to establish a new programme on the ruins of a monetarist experiment". Almost everywhere the fact of the ruin, which is also the word of the right hon. Member for Sidcup (Mr. Heath), is accepted—everywhere, that is, except on the Treasury Bench or, at any rate, part of it.

I wish to put before the House some of the consequences of the ruins that we can see all around us. Whole communities, including Corby, Consett and Linwood, have been left desolate. My constituency was hard hit before, but we were fighting hard to overcome the difficulties. We have been hit again, and hit mercilessly by the Government's actions. People who expected to work for another 10 years have been pushed into undignified and impoverished reliance on supplementary benefit until they reach pensionable age.

The infrastructure of the country is being battered by neglect. Bus services are ceasing, housing is falling into decay, railway lines are threatened with closure because of lack of maintenance and the sewerage systems in some great cities, including Manchester, are in danger of collapse.

Equally neglected are our industrial infrastructure and our human resources. Perhaps the most shameful tragedy is the tragedy of our young people, although I hasten to add that the long-term unemployment problems of older people—more than 500,000 people have been unemployed for a year or more—call for a special assistance programme of their own, just as we must have one for the young people.

Among the young the Government are helping to rear a new generation that believes that society has no regard for human values and that the Government's concern is only to prevent young people from being a nuisance. The Government cannot provide them with adequate jobs, adequate housing, adequate training or higher education. It is barely credible but true that prior to the riots many of the actions taken by the Government directly and deliberately increased the number of young people who would start their adult life on the dole queues.

By the end of this financial year the number of people completing TOPS training courses will have fallen by 20 per cent. from the 1979–80 level. Even so, the success in placing those trained under TOPS schemes has fallen sharply. The number covered by direct training services fell by between 30 per cent. and 50 per cent. between 1979–80 and 1980–81. The Labour Government had set a target of 100,000 places per annum, but on coming to power the present Government cut the number almost immediately to 60,000. The number of young people taking up apprenticeships fell by 10,000 last year and has virtually halved in the past two years.

Much of that is due to the slump, but it is also due to the cuts in the Manpower Services Commission's budget, which the Chancellor of the Exchequer introduced in his first Budget, the injuries that the Government have inflicted on training board schemes and cuts in the job release scheme. Of all the false economies introduced by the Government those are the most futile.

It is ironic that the riots occurred just at the moment when the University Grants Committee was publishing its proposed attack on the universities at Salford, Aston and elsewhere. That action would have been a sufficient cause for a motion of censure on its own. In a world of industrial uncertainty, one thing is certain. For the next 10 years our country will be crying out for skilled workers—with old skills and new—yet it is in that area that the Government axe falls relentlessly and continuously. I read in The Times on Saturday that the unemployment rate for university and polytechnic graduates this year is expected to jump between 15 per cent. and 30 per cent.—three times higher than the rate of two years ago.

I see that the Secretary of State for Employment is already prompting the Prime Minister. He may claim—and good luck to him—that there has been art expansion, and there is to be a further expansion, in the youth opportunities programme. That is certainly required. There had to be such an expansion, partly because of the large increase in youth unemployment. There is talk of a further large increase of £1.5 billion for the youth employment programme. We shall back that to the hilt, because we introduced the scheme in the first place. But we want to see it redesigned, overhauled and expanded.

I read in the Financial Times this morning—[Interruption.] I know that Conservative Members find it difficult to be serious about these matters. Reporting on the schemes that the Prime Minister is supposed to be announcing to us today—I do not convict the Government of doing what the report suggests, but we wish to hear what the right hon. Lady has to say about it—the Financial Times states: The main purpose of the package appears to be to encourage employers to take on young people at less than the normal wage rates, rather than to create new jobs specifically for the young.

I hope that any scheme that the right hon. Lady brings before us will have been worked out not with her mad professors but with the Manpower Services Commission, which knows something about the matter. I hope that any scheme that she proposes for an expansion of the manpower services budget and for the expansion of the youth opportunities programme will be one that she has worked out with the Manpower Services Commission. We regret all the dithering that has occurred in the Cabinet on this matter. However, we hope that all obstacles have now been removed and that the Prime Minister this afternoon will make the announcement about the full scheme that the right hon. Gentleman the Secretary of State for Employment has allegedly put before the Cabinet.

We must also put any such proposals in perspective. My right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman) reminded the House in a recent debate that on present plans the Government this year are removing £1.5 billion from our cities."—[Official Report, 16 July 1981; Vol. 8, c. 1496.] If the right hon. Lady has made up her mind to throw some money at the problem, it is the money that she took away mostly from the same worst hit cities over the past 12 months. We shall follow carefully what she has to say about the matter. We hope that nothing will hinder her announcing the biggest, fullest programme this afternoon because the sooner it can be brought into operation the better.

Apart from the youth opportunities programme or the aid for special industries policy that the right hon. Lady inherited from us, all that the right hon. Lady and her Government have seemed able to do about the situation is to look for scapegoats—a whole flock of scapegoats. [Interruption.] I cannot look at them all today. I know that Conservative Members—a few of them, at any rate—do not wish to take these matters seriously. The Government say that their No. 1 scapegoat is the world recession. Everyone knows that there is a world recession, although some Conservative Members discovered it late, and during the general election none mentioned it at all.

The present recession, fierce as it is, although, in some respects, not as fierce as that experienced from 1973 to 1975, has meant, for most industrial countries, that output has grown considerably more slowly than usual. For us it has meant—we are the only one of the six or seven major industrial countries of which this can be said—a major collapse of production. For most countries it has meant a rise and, in some cases, a severe rise in unemployment. But no other industrial country has equalled the United Kingdom record in the size of the increase in unemployment.

In the past two years, 5 per cent. of our labour force has been added to the dole queues. In no other major country has the addition been greater; in fact, it has not been greater than 3 per cent. I know that Conservative Members and possibly the right hon. Lady do not wish us to underline this situation. It is essential, however, that it should be underlined. These are the facts that distinguish our position from that of most other countries. The same article in The Times on 22 July stated: At the end of 1979, unemployment in Britain stood at 5.8 per cent. of the labour force, which was towards the upper end of the international range—slightly lower than in the United States, Canada and France but much higher than in Germany, Italy and Japan. Since then, British unemployment has surged to a level far in excess of that of any other country.

Another scapegoat for the Government is to say that the situation is the fault of the local authorities. I must underline how bitterly the Opposition oppose what the Government are doing or proposing. When their policy of cuts ran into immovable obstacles, the Government turned with increasing desperation on local authorities in an attempt to force them into the sort of cuts that the Government were unable to make. Many authorities co-operated with the Government in this wretched process. As they did so, more was demanded of them, so that the pressures from the Department of the Environment advanced from the fierce to the inhuman and finally to the physically impossible.

Lothian is only the first of many authorities that will literally be unable to comply with Government directives. But the Government's passion for cuts and still more cuts was accompanied by their desire to help Tory shires in distress. Not only was the grant cut; it was cut so as to inflict the most savage wound on our inner cities. It was the decaying, impoverished areas of inner London, Manchester, Birmingham and Liverpool that were the chief chosen victims of the monetarist plague. This attack on local authorities has moved from an assault on their spending to what must be described as a constitutional attack on the rights of elected bodies. It has made a mockery of local government elections.

The same has been attempted with the nationalised industries, which have had to suffer an assault by the Government primarily because they, too, face the consequences of the slump. As a motion which will come before the House later tonight shows, the Government are relentless in their attack on the nationalised industries. If any nationalised industry is making a good profit—many of them are—it becomes a further victim of Government attack.

A tremendous task awaits us and the country. In two years the Government have presided over a bigger collapse in our economy than has ever been recorded before. The fall in output is comparable to the fall between 1929 and 1931. It took 15 years and a world war before the economy recovered from that calamity. We must not now underestimate the scale of the task that will face us, let alone the wreckage that we may inherit in another year or two. The reconstruction of the economy will require far-reaching radical measures. It will require a strategy to cover the whole range of economic and social policy.

There may still be a few members of the Government who believe that there is a glimmer of light or that the tunnel has an end. The Chief Secretary to the Treasury, in his role as the newest and most innocent exponent of monetarist economics, persists in saying that at least he can see signs of the elusive upturn. He did so only recently, defying all the evidence, including the Government's own talisman, the Central Statistical Office's cyclical indicators, which say something entirely different. In this practice he has been abandoned by his colleagues, or most of them, on the Government Front Bench. They have been sobered by the latest Treasury forecasts, which show no serious recovery in output, no abatement of the rise in unemployment and no real prospect of a decline in the inflation rate.

In yesterday's issue of The Sunday Times there is a summary. [Interruption.] I can understand that Conservative Members do not like hearing what is in their own Treasury forecasts. The report in The Sunday Times states: Contrary to Treasury predictions that the economy would begin to revive before next year, the latest official view is that the economy has reached a 'stabilised decline' with no early hope of a recovery. Perhaps the right hon. Lady, who has those documents in her possession, can tell us what she thinks of the latest paper on these matters that has been circulating in the Treasury.

If the Chief Secretary would only study the working of the economy instead of his theoretical tea leaves in the monetarist cup, he would discover that the escape from the cycles in the economy that he regards as natural phenomena, the escape from those depressions, has occurred only as the product of Government intervention in the economy. There will be no upturn without a U-turn, and a U-turn of gigantic proportions. Unless such a change of direction occurs we shall have the prospect of the 1980s differing from the 1930s in that there will be even larger numbers of people out of work, greater potential dangers of a resort to violence and a rate of inflation infinitely higher. That is the prospect that the Government present to the nation—

Mr. Tom Ellis (Wrexham)

rose—

Mr. Foot

I would give way to one of the real Tories, but not to one of the novices.

Our alternative response—

Mr. John Browne (Winchester)

I am grateful to the right hon. Gentleman for giving way to me. He has outlined a structural problem which must have taken many years, if not decades, to occur. Is he trying to lead the House and the nation into believing that it has happened in the past two years? If so, how could it possibly have happened in the past two years?

Mr. Foot

I do not say that it has all happened in the past two years, but it has been greatly intensified in the past two years. If the purpose of the hon. Gentleman's interruption is to suggest that there are more deep-seated causes of what has happened recently—if, for example, he is referring to productivity, another of the right hon. Lady's favourite scapegoats; apparently she does not like the plural, but she refers to it often—if a comparison is made of the past four or five years, or seven or eight years, going back to 1973, it will be found that although our productivity has not gone up quite as much as that of the seven other major industrial countries it has gone up almost as much. Certainly the difference in our productivity is nothing like sufficient to account for the huge increase in unemployment, particularly over the past two years, when unemployment has risen by 1 million out of the 2 million of all the countries in Western Europe. For the right hon. Lady or anyone else to suggest that that is an explanation is invalid.

Our alternative response—

Mr. Raymond Whitney (Wycombe)

rose—

Mr. Foot

As an alternative response to the complexity of the situation, our plan is part of a general strategy to deal with the deep-rooted social and economic problems of our society—its injustice, chronic inefficiency, and brutal, uncaring disregard of all human values, especially at moments of crisis, which come now ever more frequently.

Our economic strategy has as its first, central objective a reflation of the economy seeking a return to full employment. The reflation will be achieved as far as possible through expansion of the public services and the infrastructure. The Opposition believe in public services. Any scrutiny of the past, right back to 1945, proves that the periods of full employment have always gone hand in hand with the periods of expansion in those services. Any thought that we can return to near full employment or anything approaching it without such an expansion is absurd.

It is through public expenditure on health, pensions, education and the rest that a society gives concrete expression of its humanity, but it is also through those services, and the many services dealt with by the Manpower Services Commission and the Department of Employment, that we can expand our economy. It is our shame and folly that we have a lower level of non-defence public expenditure per head of the population than almost any major industrial country.

But such a rebuilding of the economy presents problems. No one denies that for a moment. That is why we have faced those problems, stated our approach to them and argued how we may approach them, particularly in the document that we published last Friday in association with the trade unions. However, as I said at the beginning, if those proposals made from the. Opposition Front Bench in the debate a year ago by my right hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) and others had been adopted the country's position would be a good deal better than it is.

People ask "What about inflation?" Of course we must have a policy to deal with inflation. We had a policy when the Labour Government were in power, and we succeeded in reducing the inflation rate from the figure of about 25 per cent. that it was in 1975. The right hon. Member for Sidcup knows the figures well enough. When we came into office the rate was about 15 per cent., and it is true that it went up, partly because of the arrangements written into the agreements that the right hon. Gentleman had made. We do not need any instructions on these matters from Conservative right hon. and hon. Members, and particularly the right hon. Lady. When she has managed to bring the inflation figure down to the point at which it was when she took office she will have some right to talk about them. She has not come within miles of doing it yet.

We say that there must be a long-term programme. We have agreed on our objectives and the way in which we believe that we should proceed. We believe, too, that there must be a short-term programme to be adopted and operated from the moment that we have the chance. We shall restore expenditure on education, social services and housing. We shall encourage major investment programmes—for example, in the railways, housing, water supply, hospitals and schools.

We shall reduce indirect taxes, which are especially burdensome on the economy, and particularly national insurance surcharges and heavy oil duty. We shall restore the fair balance of income tax, which this Government have destroyed.

Several Hon. Members

rose—

Mr. Foot

To mention direct taxation in the right hon. Lady's presence is almost an act of sadism, because it was on the idealistic cry of tax cuts for all that she and St. Francis of Assisi found their way to the doorstep of No. 10 Downing Street. Since then, however, it is only the very rich who have seen their promise fulfilled. All the other sections of the community, all the poorest taxpayers, all the middle-range taxpayers, men and women, especially the women, have seen the promise broken—the No. 1 promise on which the right hon. Lady came to office.

I invite the House to look back at what was said in that debate a year ago. A year ago, the right hon. Lady was still boasting about her tax cuts. She said that she had made a wonderful breakthrough. I wonder whether she can give us the figures for the breakthrough this year. A year ago, the right hon. Lady had just delivered her famous speech in Swansea, which all of us in Wales recall and for which the Western Mail gave the headline Thatcher law-Move where the jobs are". I wonder how many people took her advice, and where they went to. Did they go to Bristol, Brixton, Toxteth, or Liverpool? Where did they go? Certainly they could not go to other parts of Wales, such as Ebbw Vale. Wherever they went they must have heard her voice ringing in their ears, saying that unemployment was not the cause of the problem.

I do not believe that the right hon. Lady or the Conservative Party desires mass unemployment. It does not make that much difference to the unemployed whether their misery is caused on purpose or by accident. I do not believe that the right hon. Lady seeks to spread unemployment on purpose. It is a different failure: it is a failure of imagination. The right hon. Lady can hardly see the facts when they are straight before her. Many of her right hon. and hon. Friends can, and that is why there is so much disturbance in the Cabinet and in the Conservative Party in this regard. If she pursues this policy any further—what will happen in her party is another question—what will happen to this country if we have another year or so of this complete failure of the Government's imagination, and in particular of the right hon. Lady's imagination? It is Thatcher law—Move where the jobs are. I wonder whether there is any part of Britain in which Thatcher's law can still operate. There is no part of the country where people can find jobs in that way. We await to hear how the right hon. Lady says that they will be able to find jobs anyway.

In my judgment, there is a more serious charge against the right hon. Lady and her party. It is even more serious than the failure of their imagination in dealing with the mass unemployment that has returned to our cities. It is an even bigger charge in a sphere where, again, I do not claim that they have been responsible for what has developed. Nevertheless, they are responsible for the reaction. An even more serious event grips the whole world—the nuclear arms race. I do not say that the Government are responsible for it. Of course they are not. Nevertheless, the Government are responsible for failing to respond to the situation.

All that the Government offer the House and the country is to say that the defence of the country must rest upon Trident and the maintenance of the deterrent 10, 20 or 30 years ahead. That is their principal doctrine. That view and those utterances may be acceptable to some sections of the House and to the right hon. Lady's followers, but if that is the only way that they can respond to such matters they will not find much response in the country or, of course, in many other parts of the world. To say that the only defence is to build up nuclear weapons and keep them burnished and bright and ready is a recipe for an endless pursuit of the arms race and an endless proliferation of the weapons themselves. It is because the Government so much fail to recognise that fact that they are quite incapable of dealing with these problems as well as the specific problems that are mentioned in our motion. Just as we must seek a new way to deal with the curse of mass unemployment, which has returned to our country, so we must find a new way to deal with the nuclear arms race, which threatens the whole of mankind.

On all those counts the Labour Party says that the right hon. Lady's Government have been proved unfit to govern, and that is what the country will say as soon at it gets the chance.

4.16 pm

The Prime Minister (Mrs. Margaret Thatcher)

The right hon. Member for Ebbw Vale (Mr. Foot) made what for him is an unusual speech, but he is no more credible when he makes a serious speech than when he makes one that is more lighthearted. Certainly he has mastered a veritable battery of statistics. Indeed, he seemed to make up for the absence of those statistics in every previous speech in history. However, he did not enunciate one policy that would tackle unemployment at its roots, that would have reduced overmanning or enabled the nation to become more competitive, which we must do if we are to get more jobs.

The right hon. Gentleman gave a battery of statistics over the first two years. Has he forgotten his own two years in office, when from March 1974 it took just over two years to be on the way to the IMF because his Government did not have the guts to follow the right policy to put things right? He mentioned places like Linwood. I was a member of the Government who sent the factory to Linwood with the best of intentions and with all of the possible regional aids. The factory which went to Linwood made a loss in 18 out of the 19 years of its existence. In all honesty, that could not go on.

The right hon. Gentleman referred to the tragedies at Consett and Corby. He was a member of the Government who put off steel closures that should have been dealt with years before. His Government refused to face reality in the steel industry. He said that his Government sustained the number of people in jobs. Is he suggesting that steel would have a better future or that British Leyland would have a better future if we put back all those people who have been made redundant? They would have had no future at all. Nor would productivity ever have risen. Indeed, all prospect of future jobs would have disappeared for ever.

The right hon. Gentleman referred to the world recession, saying that we did not seem to know that there was one when we came back to power. In fact, the world recession started with a sharp increase in oil prices. [Interruption.] There were two world recessions. One was in 1974, when perhaps the right hon. Gentleman will remember that there was a sharp increase in oil prices, followed by a considerable reduction in real oil prices for the greater part of the lifetime of his Government. Another extremely sharp increase in oil prices took place when OPEC was sitting, when we were at the first economic summit in Tokyo. That was the beginning of the second world recession, and since then oil prices have risen by over 100 per cent.

There is a world recession, but the fact is that the countries which were most efficient and did not have overmanning and the Governments which faced realistically the problems before 1979 rode the world recessions better. Those countries were Germany, France and Japan and all the countries which followed the very policies which the right hon. Gentleman's Government rejected and which we are trying to follow today.

The right hon. Gentleman referred to the TUC policy document and to his policies. They seem to amount to spend more, tax less, meet the difference by printing and call it reflation. If anything like those proposals were adopted, the pound would plunge and inflation and interest rates would rocket. It is no use pretending that reimposing exchange controls would help. There were exchange controls in 1976, yet the pound plunged. If the pound plunges with consequent increases in interest rates and inflationary expectations, bang will go all our hopes for more jobs. That will be the effect of the right hon. Gentleman's policies.

The right hon. Gentleman argued for a policy of massive reflation. [HON. MEMBERS: "That is right."] I am glad that there is no doubt about what the right hon. Gentleman argued for. He is arguing for a policy of massive reflation. Those who support him do so on the basis that there is a grave shortage of demand. In other words, they claim that there is a shortage of money in the economy. They argue that, as in the 1930s, the right way forward is to increase demand by a policy of reflation.

That analysis contains a simple and fundamental fallacy. There just is not a shortage of demand at the present time. Let us look, for example, at the market for cars. Demand exists this year for 1.4 million cars, but fewer than 700,000 will be supplied by British workers. That is not a failure of the Government to create demand. It is a failure of competitiveness in the factory to supply the goods.

This year my right hon. and learned Friend the Chancellor of the Exchequer has provided for an increase in the money supply of about 8 per cent. This should translate into extra demand of about £15 billion. In the 1930s the situation was totally different. Prices were actually falling. There was indeed then a shortage of demand. As Lord Robbins suggested in another place last Friday, a policy of reflation would have been right then, but it would be quite wrong in the very different circumstances of today.

An increase in the money supply of the amount that I have indicated can go either into real growth or into price and pay increases. If there were no such increases the growth in money supply that we are allowing for would permit 8 per cent. extra output. If pay and price increases are modest there will still be room for some growth and for some new jobs.

Our task, therefore, must be to divert the increase of money supply away from price and wage increases and into growth and more jobs. All the evidence of the past 20 years suggests that to apply a dose of further general reflation now, when the money supply is rising as it is, would be to create accelerating inflation, leading inevitably to still higher unemployment.

Between 1970 and 1980, expenditure in money terms grew by 340 per cent., but only 16 per cent. of it went into output. If we were to have a massive reflation now, more money would go, not into rising growth but into rising prices and ultimately into a falling number of jobs.

Therefore, the right hon. Gentleman's call for reflation bears no relation whatever to the basic problem of the British economy which he has always refused to face—lack of competitiveness. Governments cannot spend their way to prescribed targets for output and employment. At a time of inflation, that cannot work. By pumping more money in, the right hon. Gentleman would stimulate inflation once again. All the efforts that have been made over the past two years to bring about a new sense of realism will have been wasted.

Our policies are addressed to the root causes of the uncompetitive economy that we inherited in 1979. The first step to a stronger economy is to get inflation down. That is not a minority doctrinal obsession, pursued blindly for its own sake. It is a necessary precondition for our economic recovery.

My right hon. Friends and I sometimes remind Opposition Members of the things that they said when they were in power about the importance of controlling inflation. But I wonder how many of them realise the extent to which that belief is so widely shared today, both nationally and internationally, that it is those who think otherwise who are now a tiny minority obsessed with doctrinal delusions. I remind the House, for instance, of the following passage: We must continue to reduce inflation if we are to secure the higher investment and sustainable growth on which the durable recovery of employment depends.

I could not have put it better myself. That passage is the centrepiece of the communiqué issued at the conclusion of the Ottawa summit last week. It was unanimously agreed, not just by broadly Conservative Administrations but by President Mitterrand and Chancellor Schmidt, who head broadly Socialist Administrations.

Inflation is the cause of unemployment, not an alternative to it. In case there are any doubters on the Opposition Benches, I remind hon. Members of another passage: Our most urgent task is to create more jobs while continuing to reduce inflation. Inflation does not reduce unemployment. On the contrary, it is one of its major causes. That is an extract from the communiqué of the Downing Street economic summit in 1977, when unemployment under the Labour Government was at its peak, after the Labour Government had been rescued by the IMF.

The defeat of inflation is a necessary but not a sufficient condition for recovery. Therefore, we have taken further steps to lay the foundation for the growth of profitable enterprise. To remove long-standing obstacles, we have swept away controls and regulations on a large scale—including wage, price, dividend and exchange controls.

To provide incentives and to help industry, we have lowered the basic rate of income tax from 33 per cent. to 30 per cent. and made even bigger reductions in the higher marginal rates, which had reached absurd levels under the Labour Government. We have started to provide the small business sector with a more encouraging capital tax regime. We have vastly improved the arrangements for stock relief. We have also introduced substantial incentives for new businesses, including in particular a business start-up scheme more generous and better than that in any other country.

We have created a number of enterprise zones, the first three of which are already in operation—at Swansea, Corby and Dudley. Five more will be in operation by the end of August.

There are calls for a programme of investment-led growth, but many forget the vast resources which the Government are already providing as direct help to private sector industry, largely under the Industry Act and mostly in assisted areas. This year that will amount to over £1 billion. Twice as much as that is being provided to public sector industries such as British Leyland and the British Steel Corporation. This is not to enable them to carry on as they were but to help them to carry out the necessary radical restructuring, so that they, too, can contribute eventually to the recovery.

All that is being done to lay the foundations for the future of private enterprise and to make public enterprise profitable. In addition, to reduce inflation is our top priority.

I also believe that it is essential that as many young people as possible should be given training and practical experience in the use of new technologies which will form the basis of so many new jobs. Over the last few months we have been discussing with industry ways in which such practical experience can be provided.

We have pioneered a scheme in Notting Hill for a technology centre providing computer and electronic training for young people. I am glad to be able to announce, following the success of that centre, that we have now approved a programme with, as a first target, 20 information technology centres concentrated in our towns and inner cities where young unemployed people will be trained in computing and electronic assembly skills, because that is where the future genuine jobs lie.

Inflation has been checked. These measures are all now in place laying the foundations for the future prosperity of private and public enterprise. Of course, they will take time fully to work through, but already we are seeing signs of success, and I propose to refer to some of them. The rates of increase of wholesale prices, of retail prices, of unit labour costs and of average earnings have all fallen substantially. In most cases, pay settlements have adjusted quickly to the ability of the employer to pay.

The rate of increase in unemployment has been declining steadily over the past few months. On a seasonally adjusted basis, the July increase in unemployment was the smallest since December 1979, and vacancies notified in July rose for the first time in six months and showed the largest increase for more than two years.

Order books in many industries are filling up again. Orders received in the first quarter of this year by British engineering industries alone were worth nearly 25 per cent. more in real terms than those received in the last quarter of 1980. That is good news, though I notice that Opposition Members do not cheer. There are many encouraging signs of substantially improved productivity in manufacturing industry. The Bank of England quarterly bulletin records a 2½ per cent. improvement in productivity in the first quarter of this year compared with the first quarter of last year. As the Leader of the Opposition is so devoted to the Financial Times, I was glad to see its industrial editor also describing in an article last Friday the considerable gains in British productivity".

These productivity gains are not in just a few small and litle-known firms. They have also been achieved in our major vehicle industries, in steel, in engineering and in chemicals. I shall give a few examples. Plessey, in Liverpool, is almost doubling its sales per employee over three years, and plans to more than double them again by 1990. Thorn EMI, in Manchester, is achieving productivity gains of at least 8 per cent. Talbot, in Coventry, has achieved a 40 per cent. improvement in productivity over the past two years. Neptune Glenfield Ltd., in Kilmarnock, has achieved an improvement of 30 per cent., and a vice-president of Ford Europe, referring to Britain, has said that middle management has switched from despair to enthusiasm to a degree that I cannot fault.

Those are practical achievements in productivity which will bring prosperity to the country, and they would not have taken place but for the policies pursued by this Government. Nor should we get improvements in our industry unless management was beginning, once again, to manage with the help of the policies we have pursued.

We continue to be a very successful trading nation. Our exports are worth 33 per cent. of GDP, a higher proportion than in any other industrial country. A sustained and favourable balance in overseas trade has been maintained in chemicals, mechanical engineering and building materials, and outstanding export performances have been recorded by such diverse industries as mining machinery, industrial engines and wallpaper.

Mr. Eric S. Heffer (Liverpool, Walton)

The right hon. Lady referred to Liverpool. If the present rate of progress is so marvellous, will she explain why we continue to have wholesale redundancies and the closure of factories, about one of which I have been to see the Minister this morning? If her policy is proving to be so successful, can she explain the massive increase in unemployment in the Merseyside area in the last decade?

The Prime Minister

The hon. Gentleman knows full well that those industries which have taken steps to put themselves in a competitive position are the industries which are our hope for more jobs in the future. The ones which I am enumerating have taken such steps, and I should have thought that the hon. Gentleman would hope that more industries would do that. Yes, there will be some continued redundancies. They reflect years and years of overmanning, which Labour Governments refused to tackle. Unless they are tackled, there is no hope for rising prosperity. The last Labour Government ducked it. We are tackling it, and therein lies hope for the future.

More than that, new enterprises are being formed. This week, The Economist confirms that entrepreneurs with marketable ideas are coming forward in large numbers and finding private sector finance to develp them. Only last month the Government introduced their own loan guarantee scheme to help small businesses. Already, within a month, 180 loans have been guaranteed, many of them to new firms.

As for investment, contrary to what is usually thought, the level of investment in plant and machinery, which is most closely connected to productivity, has shown a dramatic rise compared with 1975 and 1978. In fact, the rise compared with 1975 is of the order of 30 per cent. This is investment for the future, investment which will give increased productivity, and investment which will enable Britain to compete.

We are also attracting major new foreign investment. For example, Hewlett Packard, of California, announced a few days ago its plan for a second manufacturing base in the United Kingdom because, it said, we now had the best combination of financial market and infrastructure provisions for its project. Large new investments in South Wales were announced recently by a Canadian telecommunications company and a Japanese television company. These are signs of success; which are working through already. Of course, the Opposition do not like them. They are signs that the policy is; working even in advance of an upturn in the world economy. This is the kind of output and production which will bring about the very expansion and the very increase in genuine jobs which the Government desire.

Governments alone do not make economic recoveries; individuals and companies do. What the Government can do is to ensure that provisions are such that companies can take advantage of the expansion as it comes. We would not have been able to do so unless the Government had tackled our problems at their roots. The examples which I have quoted show that the benefits of that approach are starting to come through.

The Opposition motion refers to the Government's social policies, and the Leader of the Opposition referred briefly to the recent disturbances and to the social policy. I intend to say a word about both in rather more detail than the right hon. Gentleman referred to them. There are two points which I want to make about the disturbances. First, many explanations have been offered about why they happened. Today is not the time to attempt a detailed analysis of the causes. We must await Lord Scarman's report. All that I would say now is that the causes appear manifold and complex. The disturbances do not all seem to have had the same origins.

It is worth pointing out, too, that disorders of this kind are not unique to Britain in Western Europe. They have occurred in recent weeks in Switzerland, Holland and West Berlin—again, as far as one can judge, all for different reasons.

The second point about the disturbances is what our immediate response should be. The Government's has been twofold. First, we have given full support to the police in their task of maintaining law and order. Secondly, faced with disturbances on that scale, it is plainly right for the Government to take a fresh look at the problem of the inner cities, and in particular to see whether the large sums of money already being spent on them are being used in the best way. That is why my right hon. Friend the Secretary of State for the Environment is in Liverpool now.

I believe that the public generally regards the Government's balanced reaction of determination to maintain law and order, and a readiness to look constructively at the underlying problems, as the right response.

The right hon. Gentleman referred to the Government's social policies. Already, everybody is familiar with the priority that we have given to law and order and, as he mentioned, defence. However, few realise that we have also singled out spending on the National Health Service as a major priority. We are now spending more in real terms than in any year under the Labour Government. We are spending £13.3 billion in 1981–82. Since March 1979 the Health Service has taken on 1,000 more doctors and dentists. Waiting lists have been cut by more than 100,000. Retirement pensions for a growing number of pensioners have had their value maintained in relation to prices at a cost of £4.4 billion more this year compared with 1978–79. No wonder the right hon. Gentleman did not spend long on that subject.

On the question of education, the teacher-pupil ratios in our schools are now at a better level than they have ever been—[Interruption.] Opposition Members do not like that because it proves that, in spite of everything—especially the difficulties of a world recession—we are doing better than they did when they were in power. How they hate that.

Those are only a few examples of the policies of the Government of ensuring that priority is given to looking after the elderly, the young and the sick—those least able to look after themselves.

I have outlined the Government's long-term strategy for solving our long-standing problems. During the transition we have to redouble our efforts to ease the burden of hardship caused by unemployment. We are already helping the unemployed by means of the present special employment measures. They currently help more than 800,000 people, at a cost of £1 billion this year. We intend to develop those programmes—not only to help people through a difficult time, but to do so wherever possible in a way that will provide lasting benefit to the economy. We must do that both for young people, and for some of those who are older but are without jobs.

I shall begin by setting out our proposals to help young people. First, there is evidence from many areas of an increase in applications to stay on in school or college. It is good when young people choose to follow educational courses, many of a vocational nature, in many cases to obtain qualifications that will help them to obtain and to keep jobs. An additional £60 million in 1982–83 will be provided for that purpose. As a result, we hope that as many as 50,000 more young people will stay on in school or college.

Secondly, we are providing an additional £10 million this year and £11 million next year for the support of longer-term skill training of young people. That was announced last week. Thirdly, we must continue to provide for those who leave school but fail to find work. I reaffirm the undertakings announced by my right hon. Friend the Secretary of State for Employment last November, namely, that all unemployed school leavers should this year be offered a place on the youth opportunities programme by Christmas, and that we should try this year to offer a place within three months to other youngsters who have been employed for three months. Those objectives will require an additional 110,000 places on the youth opportunities programme this year above the 440,000 originally planned. My right hon. Friend informed the Manpower Services Commission today that the necessary resources will be provided.

I am aware that there have been criticisms of the youth opportunities programme, not least from some of the young people who have taken part in it. Indeed, my right hon. Friend the Secretary of State for the Environment already heard some of them from the young people of Liverpool. They felt that the work they were being asked to undertake was of a cosmetic nature, whereas they wanted positively to work for a business or to feel they were receiving effective training.

Thirdly, although I believe that, in terms of the demands made upon it, the youth opportunities programme has done a very good job indeed, we must now look at it more closely to ensure that the experience provided is satisfying to the youngsters themselves, and that it gives the community, which provides the resources, the best possible value for money.

We are, therefore, not only looking at the programme to see how it can be improved; we are giving further consideration to the provision of a better training scheme for the young that will eventually replace the existing programme. Our aim is to reach the position where all young people, on leaving school, move into further education, find a job or are given the chance of vocational training or community service. We want to help the individual and to strengthen our economy by having a better trained work force. A statement will, of course, be made when, after consultations, we have reached our conclusions. In the meantime, I confirm that the existing guarantees under the youth opportunities programme will be honoured next year as well as this year, and that we shall continue to improve the quality of the programme.

Mr. Alexander W. Lyon (York)

Is not the assurance that the Prime Minister has given the same assurance that the Secretary of State has given on two previous occasions when he said that the position was deteriorating and that the Government were earnestly looking, at that moment, at the very issue that she is now announcing? Consultations have been taking place for the past 18 months. All that we needed was a decision—a decision that the Cabinet has now funked.

The Prime Minister

Consultations have not been taking place for 18 months. A document was issued called "A New Training Initiative". The hon. Gentleman is correct to say that we have given assurances that the guarantees will be honoured. We are now finding the resources to ensure that they are honoured. Those guarantees are very much better than those given by the Labour Government—both for those who leave school obtaining some sort of work experience by Christmas and for those who have been out of a job for three months having the opportunity to gain some work experience.

Fourthly, the Government believe that more needs to be done to help school leavers into jobs. Because the wages of young people are often too high in relation to those of experienced adults, employers cannot afford to take them on—even though it is clear that many employers want to help. That situation has come about because of unrealistic pay bargaining over the years. It contrasts vividly with the situation in Germany, where the wages of young people are much lower relative to those of adults and where, consequently, there is less youth unemployment.

In future, if we are to get more jobs for young people, which is what the Government want, trade unions and employers will have to take this factor into account in their bargaining. The Government have decided to provide some encouragement to employers to take on more young people at realistic wage levels. We propose to introduce a new scheme under which employers will be offered a weekly payment of £15 for all young employees under the age of 18 provided they are in their first year of work and provided their earnings are below £40 per week. Full details of the scheme will be announced shortly with a view to its introduction early in 1982. It is expected to cost about £60 million in a full year.

Fifthly, I turn to the job release scheme. Exceptionally large numbers of people will be reaching normal retirement age in the mid-1980s. By bringing forward that peak of retirement we can release jobs so that they may be taken by people who are at present unemployed. Our fifth proposal, therefore, is to lower the age for the job release scheme until March 1984 from 64 to 63 this November and to 62 from February next year—[Interruption.] This will cost about £150 million in a full year.

Sixthly, as my right hon. Friend the Secretary of State for Social Services announced last week, those aged 60 and over who are unemployed and have been drawing supplementary benefit for a year or more will from November be able to retire on the higher long-term rate of supplementary benefit. This will cost about £20 million in a full year.

Finally, I believe that we should immediately develop further opportunities for voluntary service for unemployed people of all ages. Our seventh proposal, therefore, is that the Government will provide additional funds for this purpose. We will provide a further £4 million for the remainder of this year and £8 million in 1982–83 for voluntary work in connection with the community enterprise programme.

There are also opportunities in social service and health where community support for the handicapped and elderly depends on a wide range of voluntary services as well as statutory provision. An additional £4 million will accordingly be available in 1982–83 to expand these activities and the departments concerned will be considering how best to apply this money.

The additional costs of meeting the existing undertakings under the youth opportunities programme are estimated to amount for the rest of 1981–82 to about £90 million. They may approach £350 million to £400 million in 1982–83, but that will depend, among other things, on the impact of the new scheme to encourage employers to take on more young people and of the increased educational expenditure, both of which could lower the costs of the youth opportunities programme. The costs of the other measures are estimated at about £60 million in 1981–82 and at around £320 million in 1982–83. For 1981–82 the extra expenditure will be met from the contingency reserve within the planned total for public expenditure. For 1982–83, it will be taken into account in the forthcoming review of public expenditure.

The figures that I have mentioned are gross costs which will partly be offset by lower expenditure on social security benefits and higher tax receipts and by support from the European social fund. The total net cost of fulfilling the YOP undertakings and of the other measures may be of the order of £400 million to £500 million in 1982–83. These extra costs will have to be accommodated within the general framework of the Government's medium term financial strategy.

Mr. Foot

The Opposition welcome any U-turns that are involved in the package. Some of us remember the fierce debates that took place when the then Conservative Opposition were attacking the job release scheme and the proposal to raise the age limit to 64 years. We remember several of the other debates that took place at that time. Some of the proposals represent U-turns by the Government and we congratulate the Government upon them.

The right hon. Lady says that these proposals are subject to consultation. Will there be full consultation with the Manpower Services Commission? Many of us will regard the package as a derisory one to deal with such a major problem.

The Prime Minister

It is my recollection that when the right hon. Gentleman was Secretary of State for Employment he brought down the age for the job release scheme to 62 years. That was one month before the general election. He is not in a position to speak about that. The youth opportunities programme is run by the Manpower Services Commission. Any changes that are made within the programme will be the subject of consultation with the commission. I believe that I made that clear.

Mr. Foot

rose—

Mr. Robert Atkins (Preston, North)

This is not Prime Minister's Question Time.

Mr. Foot

We regard the package that the right hon. Lady has presented as being insufficient. Will the consultations with the commission, which really knows something about the problem, involve an increase in the amount that will be supplied instead of sticking rigidly to the figures to which the right hon. Lady has referred, which are insufficient to deal with the problem?

The Prime Minister

I do not think that the right hon. Gentleman knows very much about the youth opportunities programme. The guarantees that have been given are that school leavers who have not found a job will be offered some sort of work experience by Christmas, which is a jolly sight better than that which the right hon. Gentleman offered them. If they have been out of work for three months they will be offered a place on the youth opportunities programme. We are saying that if we are to honour that commitment the number of YOP places will need to be increased. We have made resources available to increase them by 110,000. The guarantees will persist for not only this year but next year, as I made clear. The right hon. Gentleman would have appreciated that had he listened to what I said.

We all feel concern for those who are unemployed, but concern is not enough. Nor is it enough to find means of relieving the effects on individuals of our failure as a nation to compete, although we shall certainly do our part. I have no doubt that the Opposition could also put forward ways similar to the measures I have proposed today. But the difference between us is this, and it is profound: we believe that long-standing problems need long-term solutions. We believe that there is no short cut to full employment. The route lies through becoming competitive again. The Opposition believe there is a short cut and that it is called reflation.

That is a road that takes us away from becoming competitive and away from more jobs. It would take us towards hyper-inflation and towards higher unemployment. It is a road that we shall not follow. We must recognise that we cannot enjoy more wealth until we earn it. The Government are committed to seeing that we do earn it. It will be hard work and it will take time, but with our policies we can do it. I urge the House to reject the soft options, to reject the prospect of continuing economic decline, to reject reflation, to reject the motion and to suport Her Majesty's Government.

5 pm

Mr. David Steel (Roxburgh, Selkirk and Peebles)

It would be churlish not to welcome the temporary palliatives which the Prime Minister has announced to help to combat the scourge of unemployment. I do not agree with the Leader of the Opposition: I do not think that they are deep or long-term enough to merit the description of a U-turn.

It is noticeable that the job release scheme has been put back to the point at which the Prime Minister found it when her party took office. It is noticeable that in extolling the virtues of extending the training and YOP schemes she has abandoned the rhetoric to which we were used in 1979 about how those were merely temporary jobs, to be contrasted with real jobs. When she referred to the scheme which will be introduced to help employers take on more young people it was noticeable that she referred to the lack of wage differentials between young people and the rest of the people in this country as being the result of unrealistic collective bargaining. She is always a great advocate of free collective bargaining, but when she does not like the results she does not query the system but merely says that it is unrealistic. The Prime Minister referred to Germany, where there is a marked diffential between the wage rates for younger people, but she ignored the fact that that is in the context of a carefully-thought-out incomes policy, against which she consistently turns her face.

I shall be brief, mainly because I regard the debate as part of an end-of-term ritual in which both the debate and the vote at the end are more or less predictable. The debate and the votes outside are both more interesting and more significant at present.

The Government have now created a scale of unemployment which is beginning to be a social problem, even in places such as my constituency, which never in the 16 years during which I have represented it has had unemployment as a major social problem. Moreover, we are told that that unemployment must be endured in the interests of combating inflation. The assumption is that the Government have been successful in combating inflation, I question that because, according to the Government's taxes and prices index, about which we hear little these days, the current level of inflation is 15.7 per cent. That is nothing to be proud of after two years in office. Moreover, even taxation is up, although admittedly most of it is accounted for by the increase in oil taxation. That has not been offset by reductions in taxation elsewhere.

The forecasts of output and of manufacturing investment are gloomy. The Department of Industry's studies tell us that investment in manufacturing industry was down 10 per cent. in 1980 and is forecast to be down 16 per cent. during 1981. My files are full of press clippings of Ministers' speeches over the past year which have told us that we are now bottoming out and that the upturn is just round the corner. As month after month passes, a new Minister pops up to make that prophecy, but it does not happen.

None of us disagrees with the Government's objective of combating inflation. What we are saying is that in the absence of any attempt to have a prices and incomes policy unemployment is the only weapon which they can have in that battle. The right hon. Lady argues that she is laying the foundation for a more economically successful society.

I query that on two grounds. The first is that nothing has been done during the lifetime of the Government to change the atmosphere or the mechanics of wage bargaining. Even if the right hon. Lady is right—as I believe she has some claim to be—in saying that wage bargains are more moderate now because of unemployment, the reverse is also true. If the great upturn comes, the economy revives and unemployment starts to fall, gone will be the one weapon which has resulted in moderate wage claims. Therefore, there is no long-term change in the nature of wage bargaining and nothing has been changed for the better during this painful experience.

My second reason for questioning that theory of laying the foundation is that new, long-term phychological damage is being done to the country. I have looked back over speeches made by previous Prime Ministers in the 1950s, 1960s and 1970s about the lack of investment in industry in Britain as compared with our competitors and the reasons for it. The present Prime Minister has repeatedly put a large share of the blame on the malpractices of the trade union movement—restrictive practices, and so on. To some extent, that complaint is justified. Those malpractices occurred in the post-war era because the trade union movement was obsessed with the nightmare of the 1930s and was determined to protect its members' jobs at all costs. The Government have revived fears and memories of the 1930s in a way which will make it more difficult in the 1980s and 1990s to try to get the co-operation which we need in industry so that productivity rises, so that there is more investment and a greater sense of community and harmony in our industrial relations.

The Government have produced a more sour society than the one which they inherited. The divides in our country between North and South, black and white and employer and employee have been widened rather than narrowed. It is a travesty for the Prime Minister to say—this afternoon was the first time I heard her say it—that successful countries such as Germany, Japan and France pursued at an earlier date the policies which she is now pursuing. I have never heard such nonsense. I do not remember the mass unemployment in those countries in earlier years. Those countries have chosen different roads and have pursued more successful policies than the ones being produced by the Government.

I shall refer in passing to the amendment in the names of my right hon. Friend the Member for Plymouth, Devonport (Dr. Owen), myself and others, which has not been selected for debate. It is noteworthy that yet again we had a long speech from the Leader of the Opposition which, although it set out a number of specific projects which the Opposition would like to introduce, failed completely to sketch out the alternative society which the Labour Party stands for. I have always paid full tribute to those in the Labour Party who, for example, argue a consistent package—that we should come out of the European Community and introduce import controls. They say that to avoid the resulting massive unemployment one must have massive State takeover and control of industry. All that is done with no referendum. One argued for a referendum last time, but one does not introduce it next time if one does not like the result of the previous one.

The Leader of the Opposition talked about scapegoats. The worst thing to do is to blame foreigners for all our domestic troubles. The Labour Party is now in grave danger of doing that in its attitudes towards the EEC and towards NATO.

Mr. Heffer

Will the right hon. Gentleman explain when the Labour Party has blamed the foreigners for our troubles?

Mr. Steel

Many of the speeches which I hear and read at weekends by Labour politicians, whether they sit on the Front Benches or Back Benches, blame the EEC for all our ills. As far as I know, the European Community consists largely of foreigners. I may be open to instruction on that point.

The Leader of the Opposition was strangely silent on that key issue. If the Labour Party comes forward at the next election with an alternative programme to the Government's programme of the sort about which we have been hearing from its conferences, that will not be an acceptable alternative. It will then become the present Government's biggest ally and the only hope of escape when the Government face the electorate.

However, the new Labour-TUC document is strangely silent on the whole question of an incomes policy, down which path the right hon. Member for Stepney and Poplar (Mr. Shore) has been gently leading his party. It is even silent on a voluntary agreement between a Labour Government and the TUC, which had limited successes under the Labour Government. That is why we say that there is no faith either in the remedies offered by the official Opposition.

A completely different route is required of a Government—one which creates not a divided but a co-operative atmosphere and which elevates topics such as employee shareholding, an incomes policy and public spending.

Mr. Foot

Does the right hon. Gentleman still give his allegiance to a legal statutory incomes policy, and does he have the approval of his new allies and subordinates for that policy?

Mr. Steel

I most certainly believe that for an incomes policy to succeed the Government of the day may have to provide a statutory framework. Indeed, the Government of which the right hon. Gentleman was such a distinguished member did so, but in an arbitrary manner. He will remember the expedient arbitrary measures that were used to enforce an incomes policy.

Mr. Foot

It is absolutely untrue to suggest that we introduced a statutory incomes policy. Indeed, we inherited one, and we took it off the statute book—not, I feel, with the assistance of the right hon. Gentleman but with the assistance of a few other strays sitting on the Bench in front of him. I want to know whether he will try it again if he has the chance and whether he has the support of those who voted previously against a statutory incomes policy.

Mr. Steel

We shall certainly attempt to set out the framework of a sustained incomes policy in the lifetime of a whole Parliament. That is better than using a wide variety of statutory measures to implement voluntary pay policies, which is what the right hon. Gentleman was forced to do last time round because the Government wanted to avoid facing the issue head-on. We had a whole series of arbitrary sanctions.

I come now to public spending. Here I believe that I may have more common cause with the official Opposition. One does not have to go for general reflation of the kind condemned by the Prime Minister, but selective reflation in particular areas of the economy is surely justified. We have been through the catalogue before—telecommunications, the National Coal Board and British Railways—but may I pursue one example to demonstrate to the Prime Minister how a small element of selective public spending could be to our long-term benefit?

Let us consider house improvement. The construction industry is on its beam ends, and we also still have 1 million homes without inside sanitation or running hot water. My hon. Friend the Member for Liverpool, Edge Hill (Mr. Alton) introduced an unopposed Ten-Minute Bill a few weeks ago that would give the Government more powers over private landlords to insist on those improvements. If that were matched by an acceleration of improvement grants it would achieve several things at once. It would, first, provide short-term jobs of the kind that the Prime Minister has been hearing about in firms engaged in that work. They would not be Government schemes. It would also produce more money in the pockets of the people, which would help to regenerate the economy. Moreover, we know that most, although by no means all, substandard homes are in inner city areas, where unemployment is highest. It would tackle unemployment positively and, at the end of the day, improve the fabric of housing in a form most acceptable to people who do not wish to live in high-rise towers or concrete estates on the outskirts of our cities. On social, economic and employment grounds, that sort of selective public spending should be pursued by the Government.

However, we find that the Government love spending money on such things as Trident, which apparently cannot be criticised. If we criticise it we are accused of being unpatriotic, or undermining our defences, although it is nothing of the kind. Trident is not part of the NATO structure. It is our determination to go it alone that causes it to feature in our public spending. Then we have the massive nuclear power programme, which we read that the Government are sticking to, despite the criticisms of a Select Committee and of the Monopolies and Mergers Commission, both of which cast doubts on the wisdom of such a lavish programme. However, while those commitments to massive public expenditure remain sacrosanct, the Government insist on pursuing niggling cuts in the BBC overseas service and in training.

Whatever the debate in the House may be between the doctrines of monetarism and Socialism, it is not the debate that is going on outside. More and more people want to know that it is possible to run a mixed economy in a compassionate manner. Although the two major parties in the House may write off the Warrington by-election result as a fluke—they hope—I draw their attention to the fact that last Thursday, in six different areas of local government, the SDP and the Liberal Party, in co-operation, had considerable victories. I believe that the people of the country are saying that if the lady is not for turning she is for turning out and replacing with something better.

5,15 pm

Mr. Julian Amery (Brighton, Pavilion)

The right hon. Member for Roxburgh, Selkirk and Peebles (Mr. Steel) will agree with me on one point that should have a good deal of support in all parts of the House. What we are seeking to achieve is full employment and stable prices.

For nearly 100 years before the war we had stable prices, but we repeatedly had massive unemployment. Then, after the reconstruction effected by the Attlee Government, for 13 years under a Conservative Government we had full employment and stable prices, with inflation never reaching more than 3 per cent. This was a reasonable price to pay for full employment. I do not claim that it was entirely due to good Conservative management; it was largely due to the fact that, apart from the United States, our principal industrial competitors had disappeared. They were busy reconstructing themselves after the war. We still had the advantage of the Commonwealth preferential and sterling system.

In the 15 years that followed—roughly from 1965 until today—under successive Labour and Conservative Administrations we have lurched from crisis to crisis, reaching unacceptable levels of inflation and unemployment. The basic cause is the fact that as our competitors—Japan, Germany, France and the others—have recovered, our productivity has not kept up with theirs following their recovery and reconstruction. As a result, we have encouraged imports and failed to push our exports as much as we could have done. If it had not been for the discovery of oil in the North Sea we should be in a parlous condition.

What is to be done? The Labour Party has produced a paper on the economic issues facing the next Labour Government. Broadly speaking, the remedies that it advocates are those that were popular in the 1930s—protectionism, which was adopted by the then Conservative Government, and expenditure on public works and Government expenditure generally, which was advocated by Lloyd George and Oswald Mosley when he was still a member of the Labour Party. In the 1930s that was probably all right. As prices were not only stable but were actually falling, there was no danger of inflation in pursuing either policy. However, today that could not be the situation, and I believe that the document recognises that. Because it does, it puts forward a series of dykes, in the Dutch sense of the word, to resist the inflationary pressures that those policies would inevitably generate—exchange control, price control, import controls and direction of investment. Although it is not stated explicitly, there can be little doubt that none of that would work without an incomes policy—statutory, voluntary, or of some other kind. The document and the press conference that followed it demonstrated that clearly.

Given those dykes and forms of protection against inflation we should—given the Labour Party's resolve to withdraw from Europe—be faced with a siege economy. It would represent a version of Socialism along Eastern European lines. We should be heading towards a deeper crisis than the Eastern European countries go through, because our economy is much less self-sufficient than theirs. The idea that such a policy would lead to growth and higher living standards is far-fetched.

Mr. Alexander W. Lyon

The basic intellectual structure on which that policy was built was originally conceived by the school at Cambridge, which was headed by an economist who was not a Socialist and who left the Treasury because he rejected its methods. There is no justification for saying that the concept of an alternative economic strategy is based upon a siege Socialism that is anything akin to the Socialism found in Eastern Europe.

Mr. Amery

I do not mind what initiative was behind that strategy of what the thinking was of the distinguished people who produced it. I am talking about the effect of such a strategy. If such a strategy led to the controls that I have suggested and if inflationary pressures were generated in the way that I suspect, a siege economy would be reached. If we had a siege economy it would be similar to the economy that prevails in Eastern Europe.

What is our Conservative remedy? Doggedly and firmly we are sticking to the fight against inflation. I am sure that that is right. It is more important to cure inflation than unemployment, because inflation produces unemployment and hits the unemployed harder than anyone else. It hits the poorest in any society. My right hon. Friend the Prime Minister has explained some new measures, which should help, in particular, the young unemployed. However, we should delude ourselves if we were to believe that a combination of the fight against inflation—which will be an uphill fight, not least because of the decline in the value of sterling—and the measures announced today will cure inflation. Unemployment has deeper roots than that.

In a society as large as ours, where most adult women as well as men seek employment, there will be about 1 million unemployed on the register at any given time. A few will be unemployable, some will be changing jobs and some will have pressing personal reasons for not working at a given time. Some may even be topping up their earnings from a private enterprise by moonlighting. Of the remaining unemployed, who number nearly 2 million, about 50 per cent. are the victims of the world recession. I do not deny that the policies that we thought it right to use to defeat inflation have contributed to that. However, it is basically the world recession that has led to the closure of several firms and has led other firms to cut back in important sectors.

The 50 per cent. balance—that is nearly 1 million people—is the result of, to use an awful word "de-overmanning". A vast number of people were employed in manufacturing industry and in the service industries who should not have been there. They were a burden on industry when they should have been—as they are are now—a burden on the community. We have relieved industry of the burden on its shoulders and placed the burden on ourselves. In economic terms, that is probably healthier. It is not clear when recovery will take place, but when it comes, it will arrest the trend towards more unemployment. However, it will not lead to the re-employment of all those who have been shed.

I do not know whether other hon. Members do the same, but when I meet an industrialist I ask him how many people he has shed because of the recession. If he says that he has shed 1,000 people I ask him how many people he would take on again if his plant were working at full capacity. He may reply "100 or 200 people". He does not want to take all of them back. Meanwhile, modern technology is working against re-employment. It provides increased productivity for less manpower. That is the crux of the problem. Should we reject the technological revolution, or embrace it?

The Leader of the Opposition accused my right hon. Friend the Prime Minister of lack of imagination. The failure of imagination is as much the Labour Party's as ours if not more so. If we continue to reject the technological revolution—through the restrictive practices that the trade unions have imposed and insisted upon under successive Governments—and if we continue to insist on overmanning, new technology will not be introduced. Neither the public sector nor the private sector will be able to afford it.

Mr. Foot

My constituency has not rejected the technological revolution, or anything of the sort. Over the years, great technological changes have been accepted. Many of the new industries, which produce new products, for example, for the motor industry are being hit. That is happening on a vast scale throughout the country. Will not the right hon. Gentleman apply his mind to that? Trade unionists and the Labour Party have accepted great technological changes. However, in the past two years many of those who accepted them have suffered the worst setbacks.

Mr. Amery

I would not deny that we have introduced a good deal of new technology. However, we have not introduced it at the same rate as Japan, Germany and the United States of America. Every day, newspapers carry stories about the Isle of Grain, and so on. There has been one dispute after another about overmanning.

Can we embrace the technological revolution? If we do, it will involve revolutionary changes in our way of life. It is the only machine that can generate the surplus value that will enable us to afford growth and improved living standards. However, it is worth installing a machine only if it can be exploited 24 hours a day. It is true that the machine will lead to redundancies. However, that can be largely offset if the machine is working 24 hours a day. It would be possible to have three eight-hour shifts, four six-hour shifts or even six four-hour shifts, and to balance earnings against leisure according to what the management and work force thought more effective.

If that were to happen the implications would go far beyond manufacturing industry. If the machine works 24 hours a day as a norm there will be an increase in demand for services 24 hours a day. There will be an increased demand for shops, banks, Government Departments, cafés, sports facilities, cinemas and television to be available on a 24-hour basis. That is a revolution. It would mean giving up the farmer's day—from dawn to dusk—which some people still follow. However, many do not follow the farmer's day, even now. The blast furnaces of the steel industry are kept going 24 hours a day. They would be ruined if they were not. Many trains and aeroplanes are in use for 24 hours a day and many parts of the Health Service also work 24 hours a day. Indeed, hon. Members are not unaccustomed to working unsociable hours.

The problem is how to accelerate and assist a process that is taking place slowly in Britain but has taken place much more quickly in the countries that reconstructed their industrial bases.

Mr. Tom Ellis

The right hon. Gentleman's speech has demonstrated to some extent the limited nature of his argument. He said that the Government's measures were bound to influence the world recession. He was right to point out the world recession. However, it is no good saying simply that the Government will doggedly continue with their policy—which is primarily one of restraining the money supply—unless they can explain why, in the 1950s and early-to-middle 1960s, all the American economic indices were favourable when the growth in America's money supply was larger than the growth in its national product.

Mr. Amery

I tried to touch on that, but I shall repeat it for the hon. Gentleman's benefit. In the 1950s and early 1960s, Japan, Germany and France—the countries that had been devastated by the war—had not yet become competitive with us. Although our productivity was still low, only the Americans were competitive with us. Not everybody had dollars. We still had the Commonwealth preference system and the sterling area, so we had quite an easy run. We took full advantage of it, and I am glad that we did. But since 1965 the preferential area has disappeared, the sterling area has disappeared, and our other competitors—apart from the Americans—have become infinitely more productive than we are.

I have sketched what we could do if we were to exploit the machine. We are all seeking to move towards it—as the Leader of the Opposition said, in reference to his own constituency--but we are not moving towards it fast enough. How can we accelerate and assist this change? It offers the only cure for mass unemployment.

There must first be a change in industrial relations. That is the heart of the matter. There will be no upsurge in technological investment as long as restrictive practices are maintained at the present level. Indeed, the last Labour document almost acknowledged this. We must reach a position where the unions abandon restrictive practices and insistence on overmanning. In return management should concede to them a share of the profits and a voice in the control of the industrial process that they serve.

I do not want today to anticipate the debates that we shall be having in the autumn on the ideas that are now being generated by my right hon. Friend the Secretary of State for Employment. But we must get to a balance of rights and duties between trade unions and management, and it must be one which takes place in a framework where agreements can become enforceable.

The Government can also help a great deal. We could have more generous allowances for investment in more advanced technology. There is already some fiscal encouragement for participation schemes. We could have more. If we are to have a 24-hour day, many regulations, governing shops, cinemas, pubs and so on, will have to be lifted. But above all, it is necessary that a lead should be given by the Government—in the House, in the country, and perhaps not least through the NEDC.

It will not take effect overnight. Indeed, while the recession goes on there will not be that much new investment. In any case, the British people are not like the Americans, nor are we starting from scratch like the Germans or the Japanese. But an examination of the structure of our economy shows that there is a need for urgency.

At present, half our people are either learning or resting—those who are young and those who are retired—and today we are proposing to increase the number of retired people. Of the other half, at least half are engaged in what might be called the service industries. Therefore, only about one-quarter of the population are creating the wealth on which the whole of the rest of the structure has to depend. That is a tremendous burden to place upon them.

My right hon. Friend the Prime Minister may not: have achieved all the goals that she set herself in the first two years. [Interruption.] The right hon. Member for Leeds, East (Mr. Healey) has been a member of several Governments who failed to achieve any of their goals. But the Prime Minister has managed to change the climate of opinion in the most radical way. She has over the past two years punctured a series of illusions. She has recalled the private sector and the public sector to the harsh realities of economic life.

I submit to her, with great respect, that the task of the next two years is not only to expose the illusions from which we have suffered but to hold out the hope that our mixed economy and free society can offer a better way of life and give us stable prices and full employment. In my judgment, the foundation—the formula—for this is to accept and exploit the technological revolution.

5.35 pm

Mr. Joel Barnett (Heywood and Royton)

I agree with right hon. Member for Brighton, Pavilion (Mr. Amery) to the extent that when the upturn comes it will not lead to re-employment. Indeed, I go further. It seems extremely unlikely that the level of growth that we shall have in the next few years will be enough even to achieve a reduction in the present levels of unemployment.

My criticism of the appalling level of unemployment is restrained to some extent by the knowledge that I do not have a simple solution to put forward to the House or to anybody else to reduce it rapidly. Nor have I heard any proposals that would do more than make a dent in the hard core of unemployment. I fear that many of the proposals now being made could, if anything, make the problems of unemployment worse rather than better.

My real concern is that the strength of genuine emotions aroused by the high level of unemployment will lead to suggestions that there is a simple solution. The Leader of the Liberal Party seemed to imply that all we had to do was to elect nice people, and that would solve the problem. I fear that it will not, because there is no solution in sight. If we promise or imply that there is a solution in sight, people's sense of outrage and disillusionment will be all the greater.

It is against that background that I welcome any measures that, however inadequately, will help to reduce the level of unemployment. I therefore welcome the measures announced by the Prime Minister this afternoon. I have no doubt that tomorrow the media will comment on whether it is a U-turn or an S-bend. I am not greatly concerned about that. The plain fact is that in economic terms, in dealing with the nation's underlying economic problems, the measures announced today are largely irrelevant. We all know that, and I am sure that the Prime Minister knows it, although she was bound to do it.

I was, however, astonished to hear the Prime Minister say that the measures will lead to a long-term answer. They will not. The right hon. Lady must know that they will not lead to a long-term answer to our economic problems. The central economic question is: what will any measure do to solve the underlying problems that we face as a nation? The answer is that the measures announced this afternoon will do very little.

As has rightly been said, the underlying problem is our comparatively poor industrial performance. Not only over the last two years, or even the five years of the previous Labour Government, but for more than 100 years our industrial performance has been appalling, as any analysis will show. [Interruption.] Perhaps my hon. Friend the Member for York (Mr. Lyon) will be satisfied if I say that relatively speaking we have done less well than other countries.

I welcome the Prime Minister's measures to the extent that they will help to create a better educated, qualified and trained labour force. But the Prime Minister does great harm and damage by constantly giving the impression that she is sticking rigidly to a particular line of policy. We all know that between now and 1984 there will be some reflation, but it will be called by another name.

The Prime Minister appears to be insisting that if we continue on our present path and reduce the rate of inflation—I very much doubt whether we shall be able to do that—we can enjoy the fruits of our sacrifice, even assuming that the sacrifice has been fairly shared—and I do not believe that it has. To pretend that that will be the result will do great harm. Indeed, real damage will be created by anyone who pretends that we can somehow allow living standards to rise and public expenditure to increase and at the same time achieve substantial cuts in unemployment.

The fact is that all Governments, past and present, who imply such a simplistic solution and offer more than they can deliver, deserve censuring. I do not exclude critics of the Governments. All Governments, including the Labour Government for whom I share some responsibility, deserve censure not for the reasons that many of my right hon. and hon. Friends suggest—one cannot deliver manifesto commitments without the resources to go with them, and that is my criticism of the critics—but for implying that a change of this or that policy will provide more growth and higher living standards. Increased public expenditure, including increases in benefits for all and sundry, leads to enormous disappointment. We are all guilty of leading people to believe that. Indeed, such a policy could lead to the sort of explosions that we have seen all over the country. It is the disappointment of expectations for which all of us bear responsibility.

Some of my hon. Friends are still doing that. So is the right hon. Member for Roxburgh, Selkirk and Peebles (Mr. Steel) and some of my former colleagues who are now members of the Social Democratic Party. It is all to be done with a new whiter than white policy or—as some of my hon. Friends believe—a new redder than red policy. The implication is that it is a sort of alternative strategy—that all we have to do is to change the policy and everything will be all right. People are led to believe that, and consequently it creates enormous disillusionment.

Those who imply that delude themselves and, much worse, the millions who desperately want to believe them. It is a dangerous illusion to imagine that there is either a simple or a complex solution to this problem and that a change in policy can transform decades of decline in industrial performance. If some of my right hon. and hon. Friends deserve censure, that applies to the Government in double measure, because they not only implied but promised to deliver. Despite all the evidence, they are still promising. Today the right hon. Lady implied that all she had to do was to bring down inflation and everything would be fine.

The Prime Minister

No, I did not.

Mr. Barnett

That was the implication in what the Prime Minister said. That was the central core of her strategy.

Mr. Nigel Forman (Carshalton)

rose—

Mr. Barnett

I shall be happy to give way to the hon. Gentleman in a moment. He knows that I always give way. However, I am happy to give way immediately to the right hon. Lady.

The Prime Minister

I do not think that the right hon. Gentleman can have been listening. There was a whole section in the statement that said that to get down inflation was not enough. To reduce inflation is a necessary but not a sufficient condition for recovery. We went on to many other things.

Mr. Barnett

The right hon. Lady was not listening to what I said, either. The implication of everything that she said was that the central core of her strategy was to bring down inflation and consequently everything would be fine.

The Prime Minister

No.

Mr. Barnett

Yes, it was. If not, I should be grateful if she would spell it out more clearly. How will she improve real living standards and public services? How will she cut unemployment? Will she get inflation down to single figures before the general election? I regret that she is implying, without clear evidence, that once inflation is brought down, we can achieve higher economic growth. There is ample evidence to show that there are countries with higher inflation and economic growth than anything we have ever achieved. The implication is that the sole answer to our economic problems is to bring down the rate of inflation. Indeed, I go further. The right hon. Lady, in the process of trying to bring inflation down, will alienate the people she needs, and she will never achieve the answer to the problems that face the nation.

I want inflation brought down. I recognise the evil of inflation, the social problems it creates and the difficulties for industry. There are enough problems in trying to manage a company without having inflation, exchange control changes and interest rate changes. God knows, I want inflation brought down, but there is no evidence that bringing it down will, by itself, solve the underlying problems of our poor industrial performance. The Prime Minister has convinced herself, some of her more sycophantic supporters in the Cabinet and a few Members on the Conservative Benches that if she sticks rigidly and toughly to her policies all will be well.

Fortunately, I do not believe that the Prime Minister will stick rigidly to her policies. We have democratic elections and presumably she will have to change her policies, but in the process she will alienate so many people that she will put back the time when we shall achieve the co-operation essential for even minimal success.

I have no objection to the Prime Minister and her right hon. and hon. Friends making themselves unpopular. I welcome it. But I am concerned that, because of the obvious failures of her policy, combined with the violence of the criticism of it, people will once again be led to believe that there is a simple alternative that will provide the answer. I know that there is not a simple answer. Therefore, I am concerned about the rigidity of her policies and the alternative proposals that they force. There will be changes to various shades of alternative strategies, whether they be import controls, increases in public expenditure or substantial changes in the borrowing requirement.

Those who advocated the strategies recommended by the Cambridge group recognise that the new Cambridge group also argues that what is required is a strong incomes policy, no increases in real living standards and an import control strategy. I disagree with that policy, but not with the need to recognise that if we are to achieve improvements in public services and get unemployment down there must be an incomes policy and a recognition that there is no room for improvement in net living standards across the board.

There is room for selective import controls and some increases in public expenditures, especially now, but that does not add up to a solution to the disastrous unemployment problem that we have now and are likely to face in the years ahead.

The trouble with pretending that such policies or a combination of any other policies can offer a lasting solution is that each time they fail—as has happened year after year under successive Governments—the disillusionment grows deeper and deeper. If the next Government even hints, let alone promises or implies, that their policies will bring down unemployment, and produce increases in living standards and public expenditure the disillusionment of their temporary' supporters may lead to an explosion worse than anything that we have yet seen.

The tragedy is that the British, who have always been ready to face the truth, are being fed with a diet of pretence. None of us has policies that offer a long-term solution, yet we have led people to believe that there is a short-term solution far beyond anything that could be delivered. It needs to be spelt out loud and clear that, at best, our average economic growth rate, given the likely world conditions in the economic year immediately ahead and our appalling performance, will not provide resources for real improvement in our living standards for some years. Whatever growth we manage to achieve in the years ahead, it will be needed for essential public expenditure, including capital investment. If we are to achieve that, plus the vital reduction in unemployment, we need and must continue to strive for co-operation from the trade union movement that has not so far been achieved by any Government, Labour or Conservative. As I have said, with their present policies the Government have no chance of achieving it. Indeed, they will get the very reverse—and understandably.

Without that co-operation—on the evidence of recent history, one is bound to be very pessimistic—I fear that we shall drift from disaster to disaster, with ever-increasing bitterness and disillusion against all in authority. The inflexibility of the Government and the alternatives on offer—much as I agree with some of the proposals made by my right hon. Friend the Leader of the Opposition—will do nothing to stop the dreadful consequences of long-term unemployment, for now the difficulty is that all of us face the implications of what we have done and said over many years. For my part, I have no difficulty in voting to censure the Government. They certainly deserve it—but so do all the rest of us.

Several Hon. Members

rose—

Mr. Deputy Speaker (Mr. Bernard Weatherill)

Order. Perhaps I may say to hon. Members who have not yet been to see me to ascertain whether they will be called to speak in the debate that there are 28 right hon. and hon. Members on Mr. Speaker's list. Perhaps hon. Members will bear that in mind if they are called.

Mr. Arthur Lewis (Newham, North-West)

On a point of order, Mr. Deputy Speaker. Does the figure of 28 limit the number of hon. Members who can take part? We used to have a system of catching the eye of the Chair. Will that system operate?

Mr. Deputy Speaker

I am grateful to the hon. Gentleman for raising that point because, of course, it is not essential to write in to Mr. Speaker. Indeed, those who have not written in and who rise in their places stand an equal chance.

5.51 pm

Mr. Patrick Cormack (Staffordshire, South-West)

I shall try to obey your injunction, Mr. Deputy Speaker.

The House has listened to a very thoughtful and honest speech from the right hon. Member for Heywood and Royton (Mr. Barnett). His speech was in marked contrast to the threadbare speech of the Leader of the Opposition. The saddest thing about the speech of the right hon. Member for Heywood and Royton is that he is looking increasingly isolated in his own party. It is a sad thing when a great party begins to fall apart. The Labour Party has fallen apart. We have living and eloquent testimony to that fact sitting on the Opposition Front Bench below the Gangway.

Today the Leader of the Opposition did not begin to measure up to his task. He made no positive proposals. He made a number of flippant criticisms, but they were not even witty this time. The right hon. Gentleman has frequently entertained the House. This afternoon he nearly put most of his supporters to sleep. The strictures of my right hon. Friend the Prime Minister were entirely merited.

Nevertheless, I hope to follow the right hon. Member for Heywood and Royton in seeking to be as honest as he was. One of the things that haunt me is the unfortunate poster that we had during the last general election campaign, by Messrs Saatchi and Saatchi, of the dole queue, because it gave the impression that we would be able to reduce unemployment and it made people think that these problems were easier to solve than they are.

In my part of the world—the West Midlands—there are many people who are very sad, depressed and bewildered. If I have a criticism of the Government, it is that there has been a lack of imagination to a degree. There has not been a lack of real concern. No one who knows my right hon. Friend the Prime Minister could for a moment think that she is not concerned. No one is more concerned about individuals. I have seen that at personal first-hand level. When my agent was, unfortunately, struck down last year with a very grievous illness—he had a heart transplant—in the midst of all her problems my right hon. Friend the Prime Minsister kept constantly in touch and her real concern was greatly appreciated and very apparent. But that has not been translated to the wider public. We all bear a share of responsibility for that. However, the fact is that many people think that we are not as concerned as we truly are.

What grieves me very much is the social waste of it all. Throughout my constituency, it is very sad—we all have these experiences—to go into certain homes. I grant that there may have been "de-overmanning"—my right hon. Friend the Member for Brighton, Pavilion (Mr. Amery) referred to that most inelegant term—but it is de-overmanning of men who themselves bear no blame or responsibility for being unemployed. Suddenly they find themselves out of work. Many businesses in the West Midlands, small and large, have been grievously affected.

One must also look at the other side of this social waste—the enormous sum of money that is spent on unemployment and supplementary benefits of one sort or another. As a nation, we are spending £5 billion or more on this. For every 100,000 who join the dole queue there is another £300 million of public expenditure. It is unproductive expenditure. We must consider this waste very carefully.

I welcome warmly what the Prime Minister said this afternoon. One must be honest on these occasions. I must confess that the word "Speenhamland" went through my mind when reference was made to paying people less than they would otherwise earn. We must recognise that. Nevertheless, what the Prime Minister outlined today was a realistic and sensible package, which everyone has a right and duty to support.

However, there are other things about which people in my constituency and throughout the West Midlands asked, to which I should like answers. We talk of redeploying people. Where will they go? Frequently, they will go into small firms. Rightly, we are doing all that we can to encourage small businesses, and I hope that we shall do more. But the other day it was said to me "Why cannot a small firm, without resources but with an inventive capacity and a determination to succeed, if it takes on two extra workers, or even one, be allowed to have for a year or two years the equivalent of any new worker's dole money? He has a real job. The money is still being spent from the public purse, but to much more productive ends." I should be most interested to hear an answer tonight from my right hon. and learned Friend the Chancellor of the Exchequer.

Mr. Allen McKay (Penistone)

We have already seen Lord Gowrie on that point. Our answer from him was not a definite denial of it but he certainly poured cold water on it to a certain extent. Sheffield city council can take today 1,000 youths, put them to community work that wants doing, and take from its rates that part of the wage that will then be made up by the dole money that would be paid to the youths, as the hon. Member has suggested.

Mr. Cormack

I do not want to be led along that path, because there is a big difference between a city council doing something and a small business, which is being productive, doing it. The hon. Member will forgive me if I do not debate with him an issue which I am not qualified to debate because I do not know the detailed circumstances of Sheffield as he does.

It is the saddest thing of all to see young people demoralised, out of work and unable to get a job. What my right hon. Friend the Prime Minister said today will give enormous hope to families throughout the land. Nevertheless, we are concerned about real jobs for real people. I hope that more attention will be given to fostering an interest in the crafts. Hon. Members know that one of my great interests is in the preservation of the heritage. One of the biggest problems for those interested in that cause is that there are not enough craftsmen to go round, be they stonemasons, thatchers, or whatever. [Interruption.] No pun intended.

There is a very good case for putting more money into the crafts, perhaps expanding some of the great cathedral craft centres and making them far more attractive and able to employ a greater number of young people.

These are just small things that can be done.

I was not unattracted by Mr. Peregrine Worsthorne's article in The Sunday Telegraph of yesterday, in which he was talking about the need for conventional forces and wondering why we did not have more of a recruiting drive for the Armed Forces.

There is also something to be said for a suggestion made to me by a constituent, who said that he was anxious to employ a driver-handyman in his home. There are many unemployed people in their fifties in his village who will never get a job. If only he could offset the cost against tax, he would take one on tomorrow. That sort of proposal should not be dismissed, because there is nothing ignoble about entering service and nothing wrong or demeaning about being employed in a service capacity for an individual. We should be thinking about that sort of thing.

However, when we turn from individuals to industry, there are two questions I should like to ask the Prime Minister and the Chancellor of the Exchequer. In the first place, I am increasingly concerned about the apparent unfair subsidised competition faced by many of our industries. I know that many hon. Members were lobbied this afternoon by the representatives of the horticulture industry who are not only concerned about that industry, but see their very livelihood in jeopardy. It is all very well playing by the rules, but if the other side does not, we may, as a result, have a demoralised and destroyed industry.

My second point concerns Japan. The problem of Japanese imports will not disappear but there is something positive that we could do about it. I am not for a minute supporting the import ban lobby any more than the right hon. Member for Heywood and Royton supported it. However, it seems ludicrous that Japan is treated economically and strategically as part of the Western World yet it spends virtually no money on its own defence. I know the historical reasons for that, but if tomorrow there were an international crisis and Japan's integrity were threatened, we in the West would not allow Japan to fall.

I know that many people have bitter memories of the last war and perhaps the Japanese have bitter memories of Hiroshima, but it is time that Japan was made to make adequate provision for its own defence and collective security in the free world. At the moment, by allowing Japan to have no defence budget the free world is subsidising the Japanese competition that is killing our industries. It is time that we put an end to that nonsense. I hope that my right hon. Friend the Prime Minister and her colleagues will give some thought to that.

There are many other things that we can and should contemplate I will mention only one more because I am mindful of your injunction, Mr. Speaker. The problem of wage increases has been mentioned. I believe that at a time of economic difficulty the people of this country would, if they thought that it would assist, co-operate not in a ridiculous prices and incomes policy but in a freeze. The Prime Minister during the general election campaign was careful, on a number of occasions, not to rule out a freeze. It may be something that we shall have to have in the coming months.

6.4 pm

Mr. James Hamilton (Bothwell)

I welcome this opportunity of speaking as a Scottish Member, and it is with the emphasis on Scotland that I intend to speak. As I go round the country I feel nothing but despondency and frustration, and I see many people denuded of hope for the future. We have to understand that many people are without jobs for the first time in their working lives. Consequently I welcome the crumbs of comfort given today by the Prime Minister.

I believe that young people in particular who are continuing their education should have some sustenance and encouragement. I know that some young people are remaining at school not because they want to further their education, but because they realise that when they leave school there is no work.

According to the earlier figures presented to us, 65,000 people emigrated from Scotland. The figures now show that a further 10,000 could be added to that list. Unfortunately, many are construction workers and engineers. Consequently. when the upturn comes—if it comes under this Government's regime—we shall be without the craftsmen we urgently require to keep the economy on a proper basis.

In Strathclyde, the industrial part of Scotland, 19 per cent. of male workers are unemployed. I welcome the opportunities afforded to young people and I hope that they will be successful. Training schemes must be adapted to fit to young people for a world where job prospects are rapidly changing. Untrained young people with no work experience represent a lost generation of countless thousands that we cannot afford. About 40 per cent. of school leavers in Scotland are without O-grades or any other qualifications. That is the worst record of any country in Europe.

Reference has been made to restrictive practices by the trade union movement. We should bear in mind that trade unions have been amalgamating rapidly over the years and I defy anyone to tell me where there has been a strike because of restrictive practices in my industry—the engineering industry—in the past three years. That proves that unions have got the message and are putting their best foot forward. That should be recognised by the Government. The Government will get nowhere by bashing the unions. There must be give and take, but unless the Government change their policy and attitude towards unions they are doomed to failure.

There has also been reference to smaller companies. The number of bankruptcies in Scotland is increasing daily and such closures involve jobs being lost for ever. Such firms cannot be brought back, because they are denuded of capital. Some people talk of natural wastage, but my hon. Friends and I regard that as jobs being lost for ever. Such jobs can never be replaced.

My right hon. Friend the Leader of the Opposition put forward a public spending programme. We urgently require such a programme and the Government do not have to take only our word for that. The Federation of Civil Engineering Contractors asked the Government, via hon. Members, to embark on a public spending programme because that would enable us to use to the best advantage the money that we receive from North Sea oil. It is ludicrous that the money from the North Sea has to be used to pay unemployment and social security benefits. That is a cockeyed way of doing things.

Fewer council houses are being built in Scotland than at any time since the 1920s. Existing council properties are deteriorating for want of modernisation and repairs, to the point that many will eventually have to be demolished. More than 150,000 council houses in Scotland are affected by damp and the remedial cost involved is over £500 million.

Every hon. Member with council houses in his constituency, and particularly Scottish Members, is coming up against the ever-increasing problem of dampness. Something must be done to retain the housing stock that we urgently require and to build more for future tenants.

As the leader of the Liberal Party said, there are more than 110,000 sub-tolerable standard houses in Scotland which, without improvement and repair, will be lost to the community. My plea to the Government is that they should listen attentively to my right hon. Friend the Leader of the Opposition. The Prime Minister mentioned inflation We all realise that it must be brought down as quickly as possible.

There is no desire by the Government to bring down inflation and, at the same time, get people back to work. It is a serious charge against any Government if inflation has to be brought down on the backs of over 3 million unemployed. The Prime Minister knows that many of the things about which he spoke today will not come to fruition before the Government have to go to the county. I hope that the Government will get the message from the people of the country that they should bring about rapid reflation and get people back to work as quickly as possible.

6.10 pm

Mr. Maurice Macmillan (Farnham)

I shall be brief but, I hope, constructive. I have a number of suggestions to make. Like the right hon. Member for Heywood and Royton (Mr. Barnett), I do not pretend that anyone can expect to put forward with any degree of realism policies that will have a significant effect on employment over the next few years. The process will, I fear, take longer. This must be admitted if the measures suggested are to prove of any help.

In the last few years, various businesses facing difficult problems have been concerned to conserve their cash. In that process they have had to accept a lower level of profit, a restriction of activity and confinement to the most profitable markets. They have had to accept a period when they were borrowing merely to keep alive. The time comes when no single firm or company can continue that policy indefinitely. When improvements have been made and savings in overheads achieved, a company has to turn back and worry less about its cash and more about its profitability in order to stay in business at all and in order to establish a basis for borrowing from the banks. Borrowing to expand for a private company is a very different matter from borrowing to pay the bills to survive.

The time comes when companies have to go ahead again. They cannot do so unless, during the period of later expansion as well as initial saving, they watch their overheads and unnecessary costs with immense care, because a situation has been reached where they cannot cut back further on their activities and continue to exist. I suggest to my right hon. and hon. Friends on the Treasury Bench that our economy is getting near that point now. We are ready for what one might call the next phase—I hope it is the next phase—in the development of the Government's programme. I hope that the Government will be able to continue and to intensify the savings they are making on what might be called overheads on revenue account but to relax public spending a little on capital account. If they continue to push all the savings in public spending that can be achieved on to the side of capital account, they simply help the public sector unions to push unemployment out of the public sector and into the private sector. This has already happened far too much. It is especially true of manufacturing industry.

I hope that the Government will turn their attention to the help that can be given to the private sector by looking again at public investment. I beg them to try to distinguish, in their thoughts if not in their accounting, between the spending that goes on current account and that devoted to capital account. There really is a difference. The difference may only affect the private sector but those are the people that I believe the Government must start to do more to help.

I am not denying the effectiveness of the admirable package that my right hon. Friend the Prime Minister has announced. I am trying, however, to make suggestions for measures that could be considered to the benefit of our economy, in the longer term. However much the package may improve matters, it does not contain policies that will be continued indefinitely.

Some small, significant and selective increases in capital expenditure could help the construction industry a great deal, above all through improvements to the housing stock. I hope that the Government will take account of the forms of public investment that have the biggest effect on private sector industry, especially on construction and engineering. I think I am right in saying that civil shipbuilding employs two to three people outside the yard for every person within the yard while warship building employs four to five times the numbers outside as inside the yard. This might be a consideration when the Government next examine defence policies where many hon. Members feel that provision has been dangerously reduced. It should not be forgotten that the drop in public investment has been greater over the last two years than in any comparable period since the war.

In this process of freer investment by the Government, other savings must continue. Considerable savings must continue in public sector pay. The public sector unions must not be allowed to use their strength to push unemployment back into the private sector. I should like the case for national wage agreements in the public sector to be studied. They are a significant factor in rewarding people inadequately by trying to reward too many people by exactly the same amount.

I hope that the Government will continue privatisation, and that priority will be given to schemes which will be the most cost-effective. The private sector should be handed back those parts of industries which the Government control which involve the heaviest drain, through investment, on the public sector borrowing requirement, and so enable them to go back to the market. Projects that can be done more cheaply by private industry than by public bodies, including local government, should be put out to tender. A business is not necessarily profitable for the State to own simply because it happens to make a profit in the market. That ownership may well represent a misuse of the State's capital, thereby adding to the public sector borrowing requirement, if kept locked up in a particular business that could go to the market. The Government should follow the example of the many private firms that have found that they do better if they allow a competitor to manufacture something under licence rather than waste scarce capital or space in manufacturing something that is no longer essential to their main line.

In helping the private sector, particularly manufacturing, I beg the Government not to put up interest rates. I do not believe that that will be necessary. My belief, although I will not argue the case now, is that this could be inflationary. I hope that the Government will co-operate with our European partners and other developed economies to try to bring a greater degree of coherence to the system of exchange rates.

One thing that the Government can do directly is to help manufacturing industry over the prices of public utilities, particularly those supplying energy. It seems to me odd to raise a levy on fuel to reduce the public sector borrowing requirement so that when it has been reduced we can reduce taxation on industry. It would be easier not to have the levy in the first place.

I agree with my hon. Friend the Member for Staffordshire, South-West (Mr. Cormack), who hoped that we could do something about the unfair and distorted competition provided by Japan, notably in its Govenment-backed attacks in depth on one particular industry, with the object of knocking it out. That problem, as well as dumping problems, should be dealt with by the Government.

I hope that whatever happens the Government will not try to discourage overseas investment. If there is any failure by industry to invest in this country it is not because of shortage of funds; it is perhaps partly because individuals find it safer and easier to lend their money to the Government at high interest rates rather than put it into industry, with a lower rate of return, considerable risk and not much real capital gain. There are plenty of funds for investment. I hope that we can get some of them invested overseas now, while we still have the oil, to make up for future deficiencies which improvements in our manufacturing techniques may not be able wholly to overcome.

The right hon. Member for Heywood and Royton said that our manufacturing failure had gone on for a long time. So it has, but in the past it was greatly cushioned by enormous earnings through interest, profits and dividends from overseas. Perhaps we should consider providing a future cushion while we still have the oil revenue to sustain the balance of payments while we are doing it.

My right hon. Friend the Member for Brighton, Pavilion (Mr. Amery) referred to new methods of organising industry, and mentioned various ideas for wider share ownership, which this movement has been advocating for many years. I want to end with a perhaps slightly controversial thought on that subject. As wealth is created more and more by machines and by new technology, we have a problem of spreading that wealth more equitably among Her Majesty's subjects. The wage structure can do a great deal towards that end but it cannot do everything. That is another reason why I hope that we can at least give hope of a significant move towards the wider spread of equity in one form or another, directly or through trusts, in business by the people who work in it.

I do not believe that it is possible for firms to grow if the reward of those who work in them comes for ever entirely from their wages. Over the past few years, wage and salary earners have taken proportionately more out of the earnings of a firm than the shareholders have. Conversely, the whole of the capital gain, the whole of the profit from increased success and growth, goes to the shareholders—apart from what can be secured by bargaining for the wage and salary earners. The difficulty is that the extra wage and salary which go to those who work for an expanding firm can make such demands on its profitability and cash flow as to inhibit its capacity to find the finance for continuing expansion. In other words, wage and salary earners tend to be paid the profit that would come to them as a result of expansion before it happens, instead of white it is going on and after it has happened.

To persuade people who work in industry to supply as much as they wish to consume may in future depend on their having a clear sight of the profit to them of expanding their firm and making the same savings for future investment as the shareholders and proprietors already make. If they are to be persuaded to do this they must have the same profit as the shareholders and proprietors already have.

I ask my right hon. Friends, in dealing with all these most intractable problems, as they now are, to look a little further into the future, to shine the bright light of their intellect a few years ahead and give us a clearer idea of what they see to be the developing pattern of Conservative economics.

6.25 pm

Dr. David Owen (Plymouth, Devonport)

An experienced Cabinet Minister said at the weekend that the situation that the country now faced was as serious at home as 1931 and as potentially dangerous abroad as in 1939. Regarding the economic situation of this country, I do not think that he exaggerated. If we look at the trend of the relative economic decline of Britain over the past 20 years we see that the situation is as serious as that in 1931, but the international situation is not as serious as in 1939. It is more analagous to the fragile state in 1947.

No one looking at this country, from inside or outside, as we debate this censure motion on the Government, can be in any doubt of the gravity of the situation. But, listening to the speeches of the Prime Minister—with the rare exception of the small portion in which she dealt with constructive although small changes to alleviate unemployment—and almost the entire speech of the Leader of the Opposition, no one could have felt that they matched up to the gravity of the situation. I agree with every word of the speech of the right hon. Member for Heywood and Royton (Mr. Barnett), although it may embarrass him for me to say so. He could not resist a jab at the Social Democratic Party, but anyone who thinks that the SDP will be offering an easy solution to the people of this country—

Mr. Joel Barnett

It is not offering anything.

Dr. Owen

—that it will be promising panaceas or indulging in the quackery of quick and smart political solutions, either now, at the next election, or in Government, is gravely mistaken. The seriousness of the situation is such that I do not believe that we shall right our economic problems or get unemployment down to acceptable levels again in any period in less than the lifetime of even one Parliament. Until our people face up to that length of time and realise the gravity of the situation that we now face they will not be able to choose seriously between what is on offer by the various political parties.

Of course, as the right hon. Gentleman was right to remind us, we must all share the responsibility. Unemployment reached 1½ million under a Labour Government. The Government led by the right hon. Member for Cardiff, South-East (Mr. Callaghan) strove at all times to alleviate unemployment. They may not have been successful on every occasion, and unemployment rose. But the main charge against the Government tonight, and in particular against the Prime Minister—the Chancellor of the Exchequer shares a measure of responsibility, too—is that throughout the past two years there has been a sense that rising unemployment is not a matter of prime concern to them. It is felt on the Conservative Back Benches as well as on the Opposition Benches that there has been an insensitivity on the issue of unemployment.

I do not say that the Government are deliberately creating unemployment. I agree with the Leader of the Opposition that that would be a grave charge. It is not that they want unemployment, but that they are immensely insensitive to it. In judging the balance of priorities between keeping down inflation—one of the most serious threats that now face us—and doing something about unemployment, they have chosen the wrong balance.

What, if anything, can be done concerning a measure of reflation? It appears that the Government have set themselves an upper limit. As I understand the proposition that was put by the Prime Minister today, it is an extra cost, in net terms in a full year, of £500 million. This is insufficient. I believe that it is prudent for any Government facing the present problems of deep recession to increase the overall public sector borrowing requirement by approximately £3 billion. It is unrealistic, at a time of recession, to stick rigidly to the existing limits on public sector borrowing. A small reflationary package, particularly if it were geared to providing employment and doing its utmost not to stimulate inflation, is containable. It is not totally without risk, as must be patently clear. In introducing such a package, it would help greatly if there were a measure of wage restraint at all levels.

However, I cannot believe that any Government could seriously put forward the sort of reflationary stimulus that is advocated by the Leader of the Opposition. That is a public sector borrowing requirement, variously costed, at anything between £18 billion and £22 billion. It is an inflationary stimulus that some people have costed as high as 50 per cent., although of course everyone realises that they could not carry through such a programme for more than a few months without disastrous consequences

Mr. Peter Shore (Stepney and Poplar)

It has not been costed.

Dr. Owen

If no serious costing has been done, as the right hon. Gentleman says, all I can say is that a serious costing should have been done before advocating such a proposal. It can at least be said for the Social Democratic Party that it is the only party to put forward a proposition for a £3 billion reflation stimulus that has been costed, and the Chancellor of the Exchequer has not yet challenged those costings. If he wishes to do so, I hope that he will do so tonight.

The package is not a panacea. It would probably take two years before its full effects could be felt. It is estimated that it might bring down unemployment by 1 million. That would still leave unemployment at the excessively high figure of 2 million, and no one could be content or in any way satisfied with that.

Of course, the Government inherited a difficult situation. Unemployment was already high. Nevertheless, it is a staggering indictment to have doubled unemployment during their tenure of office, to have allowed apprenticeships to fall by nearly one-half, to have allowed industrial output to fall by 18 per cent. to 20 per cent., to the extent that forward projections show that the country's total production will remain broadly stagnant between now and the end of 1982, and to have a GNP that is 6½ per cent. or 7 per cent. lower.

Moreover, the Chancellor of the Exchequer has achieved an extraordinary exchange rate. The exchange rate, looked at against the dollar, appears to have dramatically fallen, but viewed against the basket of currencies and against the currencies of some of our main European competitors and the countries to which our industry must export, there has been little change. In my opinion, the exchange rate is still overvalued. The Chancellor of the Exchequer will have to deal with the problem of the exchange rate, because it is one of the causes that has contributed to the decimation of some of our key industries and to the ever-growing number of bankruptcies.

There is also the matter of interest rates. I hope that the Chancellor of the Exchequer will explain his attitude to interest rates. It would be damaging if they were to start creeping up again. I see merit in holding them, or preferably bringing them down, to start to ease the exchange rate down.

It is time that we had a tougher depletion policy for North Sea oil. That, again, would help to ease the exchange rate.

It is also necessary to have a strategy for incomes, prices and investment. That is an extremely difficult issue. I shall seek to deal with it as honestly and openly as I can. There must be co-operation with the trade union movement, and also with management and employers. That does not mean just a dialogue between the Government, the CBI and the TUC. More important is a way of involving individual trade unionists and managers at particular factories.

Mr. Arthur Lewis

rose—

Dr. Owen

In that sense, the Government have some achievement to their credit. Greater market orientation has been achieved in some of the wage bargaining over the past two years. The question is how much of that has come from a fear of unemployment? How much of it has come from a genuine change in the climate within individual firms? How much is it the result of a genuine relationship between what we pay ourselves and what we can afford? We want a much greater and more genuine democracy within the trade union movement and in particular industries.

It is far more preferable if an incomes policy can be agreed voluntarily. It is far more preferable to maintain a decentralised incomes policy with market bargaining in the commercial sector. Every Government must realise that they must decide when it comes to their employees in the non-commercial sector. Over the past few months this Government have done grave damage to the confidence of their own employees. It is not credible for them to continue with the same arbitrary approach over the next year or more. If they do so, they will find themselves in severe difficulties. It is therefore necessary to have a system of fairness for those people in the non-commercial public sector that is seen to be fair, not only by them but by those people who are wage bargaining competitively in the commercial sector. No Government have yet been able to achieve that balance. In the past, comparability has held the key, except for the fact that it has often been inflationary. We need a comparability mechanism that does not have the inflationary element that it has had previously.

Mr. Lewis

rose—

Dr. Owen

No, I shall not give way. It will be difficult to square all those parameters. I do not deny that. Any Government in extremis, facing a difficult short-term economic crisis, may have to use the mechanism of a statutory incomes policy.

Mr. Lewis

rose—

Dr. Owen

It is not the policy of the Social Democratic Party to advocate a statutory incomes policy [Interruption]—unless it can be one with a considerable measure of agreement. [Interruption.] Hon. Gentlemen may laugh, but that is the balance of policy that has been striven for over the past 15 years by successive Governments. Clearly, it will have to come again. It is not an easy policy to achieve. There is no immediate legislative lever to pull. [Interruption.] Nor is it possible to develop a policy that is totally fair at all times. There must be a greater measure of understanding. The right hon. Member for Heywood and Royton warned—

Mr. Lewis

On a point of order, Mr. Deputy Speaker. Why is it that Privy Councillors can always be called? They come in and make their speeches and go out and only a few Back Benchers are called. The right hon. Gentleman can get in whenever he likes. He never gives way—

Mr. Deputy Speaker

Order.

Mr. Lewis

The only way is to make a protest here.

Mr. Deputy Speaker

Order.

Mr. Lewis

I might as well go.

Mr. Deputy Speaker

Order.

Mr. Lewis

There is no fair treatment here.

Mr. Deputy Speaker

Order. Perhaps the hon. Gentleman would like to stay while I answer his point of order.

Mr. Lewis

No.

Dr. Owen

That outburst demonstrates the intolerance which increasingly is coming into our debates in the House. It does not lie—

Mr. Alexander W. Lyon

The right hon. Gentleman has just made an important sighting policy. It is not a policy yet, but a sighting policy. He says that the Social Democrats are in favour of a statutory incomes policy, in so far as it can be agreed. What on earth does that mean? Are we to have a voluntary incomes policy in agreement with the trade unions, or a statutory incomes policy imposed despite some measure of disagreement with the trade unions?

Dr. Owen

The hon. Gentleman has not listened carefully to what I said. I did not exclude a statutory incomes policy in extreme circumstances, any more than the present Prime Minister has, either now or in Opposition. Nor has the right hon. Member for Stepney and Poplar (Mr. Shore) excluded it. I said that a range of statutory controls are the legitimate subject for discussion with trade unions, management and any Government. Industrial democracy is one aspect. There are many other aspects of employment policy.

The framework of an incomes policy is better if it is voluntarily agreed and not statutory. That does not exclude the possibility that such a measure of agreement might be reached, with only a few people still upholding their rights. In such circumstances Governments have invoked some statutory involvement. The last Labour Government did that in relation to Ford and were defeated in the House. The right hon. Member for Sidcup (Mr. Heath) also used statutory powers.

No Government can totally exclude that necessity. However, I think that it is possible, in a proper spirit of co-operation, consultation and listening, to establish a voluntary agreed policy in the best interests of all the people. It would be a framework against which, to get unemployment down faster than otherwise might be possible, a measure of incomes restraint would greatly help and benefit. Anybody who believes other than that flies in the face of all past facts and evidence.

The Leader of the Opposition talked about scapegoats. He is the last person to make such a charge. He now leads a party that is committed to coming out of the European Community. The people of the country will wish to examine with some care the implications of that policy for employment. I ask the right hon. Gentleman to remember the Ford factory that came to Bridgend. I remember the discussions and the amount of persuasion necessary for Ford to invest in that part of South Wales to help to alleviate unemployment in the Valleys. If the Ford management had thought for one moment that Britain was coming out of the European Community that factory would not have been placed in Britain.

I ask right hon. and hon. Gentlemen speaking on the issue for the Labour Party to examine which companies in their constituencies would be able to maintain current levels of employment if we left the European Community. What would be the implications for inward investment? What would be the implications for factories that export a sizeable proportion of their goods to the European Community?

The other issue is the implication for jobs of cutting the defence budget by between £3 billion and £4 billion. The Government have produced their most recent package, merely to restrain defence spending to 3 per cent. in real terms, which has probably cost 40,000 jobs. That is a sign of what will happen if we slash defence expenditure as advocated. It is humbug to ignore this, and everybody knows it.

No serious policies have been put against the Government's policies by the Opposition. That is one of the reasons why the Government are getting away with their ravaging of industry arid their ever-increasing rise in unemployment. Until there is again a strong, coherent Opposition in the House we shall have the type of Government that we have had in the past two years.

It is the resolve of the Social Democratic Party to provide that Opposition over the next year or so until die next election and then, in association with the Liberals, to provide a new Government for this country.

6.45 pm

Mr. Nicholas Scott (Chelsea)

I do not wish to follow the right hon. Member for Plymouth, Devonport (Dr. Owen) in the more vague and tortuous parts of his speech. However, I support strongly his closing remarks in relation to the Labour Party's threat to withdraw from the European Community.

I take the right hon. Gentleman to task for one remark that he made earlier. He seemed to imply a lack of concern and care by my right hon. Friends on the Treasury Bench in respect of unemployment. Only last week my right hon. Friend the Prime Minister came back from Ottawa and read to the House parts of the communiqué signed there. Included were the words that the fight to bring down inflation and reduce unemployment must be our highest priority and that these linked problems must be tackled at the same time. Today we have seen a welcome step—small but important—in the direction of tackling unemployment. I certainly welcome the package announced today. I do not believe that it goes far enough but for what it is it should be welcomed.

I have two questions to put to my right hon. Friend about what is known in the popular prints as the Walters' plan. Young people earning less than £40 will be subsidised to the extent of £15 a week. What happens if they go above that £40 a week by £1 or £2? Is the whole of the £15 subsidy lost? Or is it in reality a Speenhamland-type system under which the subsidy is reduced pound for pound?

Mr. Michael Shersby (Uxbridge)

Is my hon. Friend aware that the wages councils recommend a minimum wage for a 40-hour week of £42.55 for a 17-year-old? I assume that such people will not qualify for the scheme.

Mr. Scott

That reinforces the argument that we need more details about how the scheme will work and what will happen to young unemployed people in the meantime. Will employers start taking on youngsters for their first job before the details of the scheme have been announced? Is it to be announced that everyone taken on from tonight will qualify for the subsidy? The scheme seems to be rather vague.

As one might expect, my right hon. Friend the Prime Minister made a redoubtable speech this afternoon. It was a parliamentary triumph. She must know, as must my right hon. and learned Friend the Chancellor of the Exchequer, that, as we approach the recess, all is not well with our economic and social health. Unemployment is set to rise to 3 million. The figures for investment and industrial production are immensely depressing. We hear of new pressures on interest rates and even of the thought that inflation might turn up again in the autumn. On top of that we have had the worst civil disturbances in our cities within living memory.

Few Members in the House, or people anywhere else, are popular for saying "I told you so". I was not alone in forecasting that if we allowed unemployment steadily to rise and allowed a substantial proportion of a generation to appear to have no hope of employment they would be influenced by political extremists and evil men who would exploit their frustration. That has happened, and our cities have been disfigured by riots.

I resented the attack by my hon. Friend the Member for Aldridge-Brownhills (Mr. Shepherd) on my right hon. Friend the Home Secretary. It was a fatuous attack. My right hon. Friend the Home Secretary is well able to look after himself. I would not have dreamt of mentioning it had not my hon. Friend talked about the King's Road being boarded up. Far from being a failure on the part of the London police authority, what happened in the King's Road a fortnight ago was a triumph for policing. The police had advance intelligence that there would be skinhead trouble. They warned shopkeepers and residents and put a massive police presence on the streets, and my constituents were able to go about their business in comparative peace on that day. That is a matter on which to congratulate the police of Chelsea, the Metropolitan Police and my right hon. Friend the Home Secretary, who has handled a terrible state of affairs with great skill and a considerable awareness of the problems.

All is not well, and some responsibility rests on the Government. But I agree with the right hon. Member for Heywood and Royton (Mr. Barnett), who said that all of us shared some of the responsibility. The Opposition have to bear a substantial part of the responsibility for reducing political debate in the country to the level that they have, and the gratuitous flaunting of the anti-nuclear policies at the end of the speech by the Leader of the Opposition was quite monstrous. The right hon. Gentleman was a member of a Cabinet that pursued the Chevaline programme throughout his membership, improving and developing the Polaris. Suddenly, when he gets into Opposition, he loses all sense of responsibility and flaunts his anti-nuclear policy.

The trade unions also have some responsibility for the state that we are in. Everyone who has had anything to do with industry knows the extent to which, over the past 35 years, restrictive practices have been nurtured and protected by trade unions, how apprenticeship schemes and training for young people have been kept on an outdated and outmoded basis, and how much of our economic advance has been held back by the opposition of the trade unions.

Our education system, too, must bear some of the blame. Some steps are being taken in the right direction but none of us can be happy when more than one-third of our children leave school with no qualifications and when too many of them leave illiterate and innumerate and have to be retrained after they have left school.

Industry itself has put up with restrictive practices and overmanning for far too many years and left us in an uncompetitive position.

I am aware that one of the worst aspects of a politician is when he appears to preach, and I do not intend to do that. The fact remains that we must all bear our share of the responsibility, and in that connection I remind the House that my right hon. Friend the Secretary of State for the Environment during the debate on the civil disturbances said that the challenge is now to fight our way out."—[Official Report, [16 July 1981: Vol. 8, c. 1504.] It is a challenge not simply to my right hon. and hon. Friends but to everyone in the country.

When this Government were elected they were careful to put the fight against inflation at the head of their list of priorities, and they set their hand to tackling many of the other long-term problems which beset us—overmanning in industry, an oversized bureaucracy, a decline in real jobs, abuse by the trade unions of their privileges, and an overheavy burden of direct personal taxation. They also set their hand to improving our defences, which they sorely needed. But central to their approach was their economic policy.

Perhaps the Government were unlucky to embark on their experiment at a time of world recession. Perhaps, too, they were unlucky—just as my right hon. Friend the Member for Sidcup (Mr. Heath) was unlucky to lose the services, tragically, of lain Macleod early in his Government—to lose the acute political sense of Airey Neave during the election campaign. His sense of the country's social cohesion would have been an important addition to the Cabinet at this very difficult time.

If I have a criticism of the Government's performance over the past two and a half years it is that they seem to have given their monetary and fiscal targets the appearance of being ends in themselves rather than tools with which to perform a wider job. As a Tory, I have always believed that social and political arguments frequently have to override purely economic ones. My right hon. Friend the Prime Minister made it clear in her announcement today that social and political judgments would to an extent override purely economic ones in bringing her proposed package into operation.

We have two years to go to the general election. In two years, the country could take a gigantic and disastrous lurch to the Left. We who live in London see what that can mean for our people, because of what has occurred at County Hall.

As we move to what my right hon. Friend the Member for Farnham (Mr. Macmillan) described as the next phase of this Conservative Government, what should we do? I do not intend to set out an agenda. I mention three major topics which are of special concern to me.

I do not want my right hon. Friends to abandon the fight against inflation, of course, but the first problem to which I draw attention is that of our young people. I welcome the package that has been announced today, but it should be seen only as a step. My right hon. Friend the Prime Minister appears to see it only as a step down the road to the full pattern of post-school training, such as that which obtains in West Germany. It is urgent that we develop that as soon as possible and that we do not see the present package as one which postpones further steps in that direction.

We must have the skills available for the upturn when it comes. On this main argument I mention two matters in parentheses. The first concerns the standards of training necessary for young people. I am sure that we should not have the present decline in the number of apprenticeships and the threats to the level of apprenticeships if employers were able to take on young people and train them in a shorter period to acceptable standards. This morning, I was talking to the representative of a company who said that the firm would double the number of apprentices if it could take them on and train them for two years, and that it was confident of its ability to train them in that time.

Secondly, although we criticise our schools, as I did just now, it is not enough simply to say that all the training that needs to be done after school reflects the shortcomings in the education system. After all, the West Germans have a perfectly good education system, but they still need to train young people for three years after they leave school.

Although I welcome the package that was announced today, I hope that we shall not lose sight of the need for a much more comprehensive package for our young people. Indeed, I should have preferred to have that scheme announced today, with the Walters scheme being used separately to help the long-term unemployed, because they, too, need help in present circumstances.

My right hon. Friend the Secretary of State for the Environment is turning his attention to the problems of urban deprivation. I have no wish today to advance a package of measures designed to save the inner city, but I make one point which I believe to be of great importance. My right hon. Friend may have seen the Marc cartoon in The Times earlier this week, which showed an affluent hostess addressing an academic and saying to him, in her half-million pound Mayfair house, "What's exactly wrong, Professor, with living in the inner city?" As one would expect from a master of his art, the joke is a very good one, and those hon. Members who have not yet seen it will do so very shortly. It is a very good joke but, more importantly, it brings home a significant part of what is happening to many of our cities. They are being left to polarise between the rather rich and the rather poor, and the middle band of people are being driven out. In my London constituency a combination of rates, rents, the manipulation of the privately rented sector, and so on, is driving out many of the middle income people who add so much ballast to a community. We have to look at ways of solving the problems of deprivation, but we must also pursue policies to give us a balanced community in our inner cities.

I wish to reinforce but not to expand unduly the arguments put forward by my right hon. Friend the Member for Farnham. Surely it is possible for the Government to look with sympathy not at a huge reflationary package but at some modest measures, especially in the construction industry, which could begin to take us towards an investment-led recovery.

I shall not set out a shopping list, but I cannot believe that, with the spare capacity that we have in the economy, there is a real danger of either financial or physical crowding out if we set about a few projects, probably in partnership with private money and mainly in the construction industry, which could begin to give the people hope for the future.

I shall vote against the motion tonight. I hope that between the recess and the Gracious Address the Government will begin to move in the direction that I have outlined. Our people need help because of our economic problems. They need some hope for the future. Experience elsewhere has taught us that the fate of democracy is linked with the problems of economic progress. If we fail in our task, evil men will exploit that failure. We dare not fail.

7 pm

Mr. Alexander W. Lyon (York)

About three months ago the Prime Minister went to the City to preach a sermon about unemployment. She categorised inflation as a sin that should command the attention of Christians in the same way as pride or any other sin. I thought that sermon to be theologically bad—almost as bad as her economic policy.

Not long after that sermon Mr. Speaker was kind enough to call me for the first time in Prime Minister's Question Time. I asked her what she had suffered during the past two years that entitled her to make that sort of claim. The question was greeted with some abuse from the Conservative Benches, as though it was wrong to consider the great issues of State in that context. I do not think it is wrong. If the House were filled with people from the unemployment register a great deal more emotion would be shown.

The degree of deprivation and the sense of frustration, bitterness and loss of identity now being felt by thousands of people approaching long-term unemployment—nearly 800,000, and the figure may shortly rise to 1 million—is not manifest in any of the platitudes that we have heard from the Government Benches during the debate. That breakdown of personality is felt only on the streets of our inner cities. It has led to the violence that we have seen during the past few weeks. That has not been reflected in the criticisms voiced during the debate. If I venture to enter that caveat in anything I say it is only because unemployment must be recognised as the greatest scourge that we face. It is more important than any of the accompanying problems of the economy that have been outlined in the debate.

I listened with great interest, as I always do, to my right hon. Friend the Member for Heywood and Royton (Mr. Barnett), a former Chief Secretary to the Treasury. There are times when I think that the Treasury is similar to a sausage machine. People go in with high expectations and ideals and come out with cynicism and scepticism about everything. My right hon. Friend made a Cassandra-type speech in which he castigated us for not recognising the danger of raising expectations and then frustrating them. It is the easiest thing in the world to be a statesman in this place. We need only to bare our breasts and say that we are covered in sin. Everybody then says that we have made a statesmanlike speech.

By that test, my right hon. Friend undoubtedly made a statesmanlike speech. However, he failed to give any sign of a solution to the economic problem that leads to unemployment. Surely people are entitled to ask us, as politicians, for a solution. If we cannot produce a policy to deal with the major problem that faces our people, what on earth are we doing here? What are we trying to achieve, if it is not a realistic programme—I accept the need for realism—and one that is costed? That there must be a programme is axiomatic in anything that we seek to do in politics. My right hon. Friend's speech could have been made by Philip Snowden in the 1931 Government.

Mr. Joel Barnett

I must respond to that insult. My hon. Friend has gone too far. He said that my criticism is not only of myself but of him and others like him who, because they feel—as I do—incensed about the level of unemployment are led to say that because past policies have failed they must put something forward, even if it is obvious that it will not be successful. That is what I was criticising.

Mr. Lyon

If anyone puts forward a proposal that he recognises will not work he deserves all the castigation that my right hon. Friend can heap upon him. But to suggest that there is no solution, and that people cannot expect a realistic solution to be put before them, is a denial of what politics is about.

If we are in this position through human frailty in our past judgments we can get ourselves out of the mess by finding the right policies. I agree that the right policy must be worked out and tested by the sceptical criticism of those, such as my right hon. Friend, who have been in the mill and know the difficulties. I understand that perfectly well. However, I want the debate to go out to our people with some measure of hope. I do not wish to tell the 3 million on the unemployment register—and the further 2 million who may join them by the time the Conservative Party leave office—that there is no hope and that all that the Labour Party can do when it returns to office is to continue similar policies.

I want to see a change of attitude that at least embraces the one positive point made by my right hon. Friend, namely, that that change must be in the context of an agreement and an acceptance by the trade unions. He meant not only the trade union leaders but trade union members. They are the community at large. There are 13 million working people in the trade unions—half of our working population. Any Government must work towards gaining their assent. That cannot be achieved if we treat them in the way that they have been treated by the Conservative Government, who constantly put them out of work. My right hon. Friend said that they did not do that deliberately. That may be so, but they deliberately chose policies in which it was implicit, and in some cases explicit, that there would be a measure of unemployment. We warned against that during the last election campaign, and it has occurred.

I feel a degree of anger that we should tell our people that we have been working towards unemployment for the past 100 years. What has moved us in that direction? Why are we in this position? It is because we have not used a greater proportion of the wealth that we have created during the past 100 years. That is especially true of the past 20 years. We have not put into our manufacturing technology the degree of investment that has been put into our major competitors' industries. That more than anything else creates a lack of competitiveness.

Conservative Ministers blame the way in which the trade unions have reacted to work practices. My right hon. Friend the Leader of the Opposition gave the lie to that in his speech. He said that compared with other major competitors the increase in Britain's productivity during the past 20 years is not markedly behind. We are, however, markedly behind in the rate of investment that is available to the individual worker. At the time of the last election the amount of capital available to the individual worker was £8,000 of machinery. In Japan it was £28,000 and in Germany £23,000. With that degree of disparity it is not surprising that our competitors' productivity is better.

I have spoken to manufacturers in my constituency who have tried to make the same point as that made by the Treasury Bench. They compare our work practices with those in other countries and with the level of manning of their competitors elsewhere in Europe. However, where the manning was similar and where the investment was less they were not able to explain why they were unable to produce the same return as those in Europe.

The Labour Party is saying that the pattern of investment has to change. Over the years we have tried to tempt manufacturers to make that change. We have given them incentives. We have reduced the level of corporate taxation. We have done everything in our power to try to persuade boards of directors to make positive decisions in favour of investment.

Over the years the percentage of the GNP going into manufacturing investment remained stable. That was true for about 20 years. It remained true until the first two years in office of the present Government. It was between 4 per cent. and 5 per cent. overall every year. It increased during years of growth and it decreased in years of deflation. It is obvious that manufacturers will not invest unless they can be persuaded that there is a long period of growth ahead during which the return on their investment will be met.

After the next general election the new Labour Government will face a dire economic future during which investment will have to come even though it will be difficult to justify it to boards of directors as a sensible investment of their income, because the return will not be available immediately. However, we shall need investment to stimulate a better competitive record against that of our major overseas competitors. The money will have to be put in even though the investment may not be justifiable in normal business terms. It is for that reason that the party argues that State investment should be taking a greater measure of investment generally. It is for that reason that some of us who are not naturally on the Left of the party argue that the next Labour Government will need to take a much more radical approach to State involvement in industry.

We have not come to that decision alone. It is a decision that has been reached by the French, the Germans and the Italians. It is a decision that is not the result of a new wave of enthusiasm for Bennite policies in the Labour Party. It is because the stark reality of what we shall face after the next election indicates as clearly as anything can that we cannot return to the milk-and-water policies that are now being advocated by the Social Democratic Party. We need a radical new edge to our policies.

Mr. Robert Maclennan (Caithness and Sutherland)

The hon. Gentleman has eloquently described the need for industries to have a long-term prospect of stability during which they can hope to reap profits on their investments. Does he agree that by generalised threats of nationalisation, or the renationalisation of industries that have been privatised, he creates precisely the circumstances which make most unlikely the longer-term investment in industry which is so crucial.

Mr. Lyon

It would be beneficial if we had a consensus so that everyone in industry or anywhere else knew that for a substantial period ahead the political outlook and the political complexion would be similar. I remember the reply of Julius Nyerere when I asked him about the one-party State in his country. He said that the reason why a two-party State worked in Britain was that the consensus between the two parties meant that they would do roughly the same things when they were in Government.

The development that brought about the disintegration of that consensus was not the election of the Prime Minister by the Conservative Party or the movement towards a Bennite wing of the Labour Party. It was brought about by a radical understanding that the past policies of the consensus were no longer working. Butskellism does not work. I listened to the quadrupartite leader of the Social Democratic Party. His speech reminded me of the things that used to be said by the Gaitskellite wing of the Labour Party in 1959. The right hon. Member for Plymouth, Devonport (Dr. Owen) made the same sort of speech and expressed a similar outlook.

We have learnt during two periods in Government since those days that it is not possible to proceed in that way. We need a much more radical appreciation of the nature of the difficulties and the way in which they should be approached.

I support the alternative strategy for those reasons. We need a massive degree of investment, a degree of investment that can come only from the State. If we are to make it pay, and if it is to be given time to work, there must be some measure of import control. The answer does not lie in selective import controls.

There must be a ceiling of the sort indicated by the Cambridge group. My right hon. Friend the Member for Heywood and Royton says that we continue to talk about the Cambridge group without accepting that it wants an incomes policy and that it recognises that living standards will not rise. I do not make either mistake. I accept that there should be an incomes policy. It will have to be a voluntary policy. That means that the trade unions have to be carried along with Government. We shall not carry the trade unions with us—by "the trade unions" I mean people on the shop floor—unless the Government's policy is just and equitable. There has to be a total package. Parts of a policy cannot be produced in isolation.

I accept that there are real problems in the mechanics of such a policy. If we are to go for price control it may be that the answer lies in some adjunct of that very control. For example, the Government could allow wage increases of 6 per cent. or 10 per cent. and beyond that the unions could be allowed to have free collective bargaining. At the same time, the price would be passed on to the consumer. In that way we could achieve a degree of flexibility that allowed for productivity inside a company. I accept that that is only one of several proposals. Certainly something must be worked out.

My right hon. Friend the Member for Heywood and Royton spoke about producing a certain level of income. If we continue with the Government's policies we shall have a constantly decreasing standard of living for our people. The standard of living must be balanced before it begins to increase. The radical approach to which I have referred seems to be a possible alternative to that which has been argued in the past.

What can be done in the immediate future under this Government? The Prime Minister has produced a package that no doubt will be hailed by those who support her as indicative of a new awareness and appreciation of the difficulties facing the young unemployed. There was only one serious possible alternative before the Cabinet. It was one which the Secretary of State for Employment promised us on two previous occasions when the unemployment figures were rising. The alternative was to give our 16-year-olds job experience or training for about two years, although initially it may have been for only 12 months. It was proposed that that should apply to that age group across the board. In other words, they would all pass on to sixth form education or to higher education, or move on to work experience and job training.

The degree of training that we give to our young people is different from that which is given in other countries. About 40 per cent. of our young people leave school with no training and with no skills only because we organise our education system in such a way as to produce that result.

We should give those young people training in work or in FE so that for a year or two they are not in the work force or on the unemployment register but are receiving serious training. That scheme was on offer to the Cabinet and would have cost £1 billion, and instead the Government have gone for a £400 million package which will not help seriously to solve our future problems. That would have been a real investment in the growth which may come in the future. The Government turned it down for a scheme which was tried once before and which failed. The Walters scheme was put into operation by the Labour Government. At that time there was a subsidy for the young. The result of the scheme was that 70 per cent. of the jobs in which young people were receiving the subsidy were found to be jobs which would have gone to young people anyway. Therefore, the job substitution of that scheme is markedly higher than that of the youth opportunities scheme.

For that reason those who have been arguing for nearly two years that the Secretary of State should introduce the other scheme feel today that they are denied the objective which they and he had been working for. That was because in the end it was not the wets who won in the Cabinet but the hard monetarist men who today are putting on a cosmetic face. They are not even getting down to the roots of the possible alternative put forward by the Secretary of State. I regret the package that was announced today by the Prime Minister.

7.22 pm

Mr. Terence Higgins (Worthing)

It is perhaps riot unusual for a Conservative Government to go through a period of mid-term blues. Typically, we were elected to deal with problems that were created by the Labour Government. Policies such as ours tend to be unpopular at first, and to take a considerable time to come into effect and have a beneficial effect on the economy. That is particularly so when, as my right hon. Friend the Prime Minister said so clearly this afternoon, the Government are dealing with long-term problems and are attempting to provide long-term solutions to those problems.

What I have just said sometimes results in unfavourable by-election results, but it is extraordinary that one or two Labour spokesmen have recently said that the Opposition are going through a period of mid-term blues. That is remarkable. The reason why the official Opposition have so little support at present is that they have moved substantially to the Left over the last two years. We now have a Leader of the Opposition who is advocating a policy to cure the problems about which we are deeply concerned, but that policy is not credible. We are told that we will withdraw from the EEC and that, industry by industry, massive restrictions on imports will be made. We shall retreat into a siege economy. On top of that we are to have a massive reflationary package as described to us by the Leader of the Opposition this afternoon.

Many of us heard that with surprise. We heard with more surprise the intervention in the speech of the right hon. Member for Plymouth, Devonport (Dr. Owen) by the right hon. Member for Stepney and Poplar (Mr. Shore) when the right hon. Member for Devonport was saying what he thought the cost of the Opposition's reflationary package would be. The right hon. Member for Stepney and Poplar said that no serious costing had been done. Therefore, the Leader of the Opposition has come to the House with a massive reflationary package and we now hear officially that no official estimate has been made.

Mr. Arthur Lewis

On a point of order, Mr. Deputy Speaker. I apologise to the right hon. Member for Worthing (Mr. Higgins), but I should like to seek your guidance on this matter. It has always been the custom that an hon. Member, particularly a right hon. Member, should wait to hear at least one speech following his own. The right hon. Member for Plymouth, Devonport (Dr. Owen), who seems to be called whenever he wishes, always walks out immediately after making a speech. Is that not playing with and taking advantage of the usual traditions of the House? The right hon. Member for Worthing wants to refer to him and he is not here. He may be appearing on television or on radio, but he should be here.

Mr. Deputy Speaker (Mr. Ernest Armstrong)

That has been a custom of the House, but it is not a matter for the Chair.

Mr. Higgins

I agree wholeheartedly with what the hon. Member for Newham, North-West (Mr. Lewis) said. I have never left the Chamber without hearing hon. Members on both sides of the House who have spoken after me.

Mr. Robert Maclennan

Further to that point of order, Mr. Deputy Speaker.

Mr. Deputy Speaker

Order. That was not a point of order, so there cannot be a further point of order.

Mr. Higgins

It is not appropriate for the Liberal Party and the Social Democratic Party to table an amendment on the Order Paper saying that they have no confidence in the official Opposition when I see no reason why we should have any confidence in the Liberal Party and the Social Democratic Party. Clearly, they will adopt much the same policies as the Labour Party in the last general election.

Mr. Robert Sheldon (Ashton-under-Lyne)

The right hon. Gentleman was quoting from my right hon. Friend the Member for Stepney and Poplar (Mr. Shore). That interruption was made from a sedentary position, so perhaps the right hon. Gentleman did not hear it clearly. He said that the critics of Labour Party policies had not costed them.

Mr. Higgins

With respect to the right hon. Gentleman, I do not believe that that is what Hansard will record.

I wish to analyse what I believe to be of grave concern to the House—namely, the cause of the present high level of unemployment. To a considerable extent that is due to the world recession, which is recognised on both sides of the House. It is also true that to some extent it is due to the recent high exchange rates and to the loss of competitiveness, which has been pointed out by the Select Committee on the Treasury and the Civil Service. It is also due to the fact that the Government, in fighting inflation, have rightly had a tight monetary policy, which came into conflict with the level of inflationary wage claims in their initial period in office. That has contributed considerably to high unemployment.

The trade union movement in general, certainly in the initial period of the Government, has laid overwhelming stress on pressing for inflationary wage settlements for those still employed rather than considering those who will be put out of work as a result of inflationary wage settlements. That important point must be stressed. I hope that there will be a change in the trade unions' attitude on that matter. Such a change is desperately needed, particularly given the serious problems faced in some areas—for example, in inner city areas, such as Toxteth. That brings me to another point in connection with the Toxteth riots.

Long lists of firms which have closed down in the Merseyside area were published in the papers. In a previous incarnation I had some experience of that area. The firms went there in good faith, hoping that they would be competitive. Often in that area, however, costs are higher than elsewhere. The insistence of the unions on national wage agreements has been an important factor in causing firms in areas such as Merseyside and round Toxteth to close down. Therefore, I believe that a change in union attitudes on that matter, too, is important.

We all view with grave concern the present high level of unemployment. That is one of the factors which must have been contributory to the riots that we experienced. A considerable problem with regard to the generation gap has also arisen. Perhaps one of the more heartening aspects is that many of the incidents that have taken place seemed to have no racial element, except that there has been a white skinhead problem in some areas. We must recognise that the problem is likely to become more serious as the redundancy payments which have kept many people going gradually run out. Therefore, we must view the immediate prospect with profound concern.

However, the present increase in unemployment is different from anything that we have previously experienced in the post-war period. The various factors that I mentioned have caused substantial demanning. I do not believe that a reflationary policy of the kind put forward by the official Opposition will have a significant effect on unemployment. Many firms have got rid of over-manning and are in a good position to cut unit costs, spread their overheads and become more competitive when there is an upturn in the economy. However, they will not re-employ the people who have become redundant and to whom they have given redundancy payments. Therefore, for the first time in the post-war period we have a new problem. It is important to recognise and to take steps to deal with a problem which is structural rather than one which can he cured by the massive reflation that the Leader of the Opposition suggests.

Our first priority must still be the battle against inflation. Unless we win that battle we cannot cure unemployment. We no longer have a trade-off between inflation and unemployment. That raises difficult issues.

It was not until after 6.30 pm that anyone mentioned the exchange rate—in a period when the pound has fallen from $2.40 to the mid-$1.80. It is a serious problem. The pound was over-valued, so our exports should now be more competitive and our imports less so. However, the pound has fallen substantially, and, if it falls significantly further we shall have a serious problem with import costs and inflation. The Chancellor has a problem with interest rates. One way to offset the tendency for the pound to decline in value against the dollar is to raise interest rates, and we have seen the markets operating in that way. It will be interesting to see what happens when the MLR is abolished, and whether it is abolished before it goes up or goes up before it is abolished. However, if we are to resolve the dilemma we must press for a greater dialogue between ourselves and the United States authorities in particular. Otherwise, it is likely to exacerbate the problem of controlling inflation and reducing unemployment.

I said earlier that there had been significant improvements in the supply side of the economy. The cut in overmanning means that firms are more efficient, which is welcome. However, if we are to find a long-term solution we need more investment, which requires more profits. As I said on a previous occasion, that is a fundamental Conservative principle.

Finally, I turn to the crucial question of when and why there will be an economic upturn. I am glad to see my right hon. Friend the Financial Secretary in his place, because he has made significant contributions to our debates on the subject.

We can discount the view that the economy works on a cycle—that what goes down must come up—so there is nothing to worry about. Similarly, the traditional argument that the rate of fall in stocks diminishes and there is an accelerator effect can be discounted. It will not be sufficiently large to provide a solution. We therefore come to the suggestion made previously, and to which my right hon. Friend the Prime Minister alluded this afternoon, that as long as the rate of inflation comes down in relation to the target growth in money supply, after a period when the real money supply declines, it suddenly begins to rise, and the economy, in a sense, reflates itself.

That argument must be spelt out more clearly. In an exchange with the right hon. Member for Heywood and Royton (Mr. Barnett) my right hon. Friend the Prime Minister said that the reduction in inflation was a necessary but not sufficient condition for curing our problems, which is correct. However, she spoke of a situation where there was no lack of aggregate demand and of it being important to reach the position where, instead of the increase on the money supply or the total money supply being taken up in wage claims, more of it should be taken up in real output. However, we have not had explained to us how that desirable state of affairs—why there should be more of an increase in output at some stage than in wages and prices—can be brought about. I hope that my right hon. Friend the Financial Secretary will ask the Chancellor of the Exchequer to spell it out in more detail.

The explanation is important for industry, which is not convinced that there will be an upturn. It has not had a coherent explanation why there should be one. In the absence of that conviction, we shall not get the investment necessary to generate the jobs that we should all like to see.

As I said, it is not only a question of reflating to get people working again. Many people became unemployed because of overmanning. We need investment in new jobs and to get new firms going. We need the prospect of profits if we are to see our economy restructured to reduce the serious unemployment situation.

That being so, I repeat that it is important to have a medium-term demand strategy alongside the medium-term financial strategy. I do not mean a massive increased demand. I made it absolutely clear that I am totally opposed to that. However, we need some hope that there will be a gradual and steady increase in the level of demand. We also need a better explanation than we have had so far of the rather more technical point that I raised.

We face a serious problem. These are complex matters, and I do not believe that they can be dealt with in the trivial way in which the Leader of the Opposition tried to deal with them this afternoon. My right hon. Friend the Prime Minister is on the right lines, but we must have a clearer explanation if we are to have more investment and less unemployment.

7.37 pm

Mr. Doug Hoyle (Warrington)

In making my first speech since I re-entered the House, I do not believe that anyone will find it too surprising that I should speak about unemployment.

First, I declare an interest in the trade union movement, as vice-president of ASTMS. Secondly, I must praise my predecessor, Sir Thomas Williams, who was highly respected in Warrington. Not only were his views well known in the town, but he also helped many people while he was there. He also helped industry in Warrington. For most of the time that he represented the constituency, Warrington was prosperous, not only because of its industry but because that industry always knew that he would bring its case to the House.

In following that example, let me refer to the plight of industry in Warrington and bring the debate to the real problems facing people. When Labour left office in 1979, unemployment in Warrington was 5 per cent. and dropping month by month. It is now 14 per cent. and rising month by month. Even more worrying is the fact that it has doubled in the past 12 months.

I talk specifically about Warrington, because it is quite different from other parts of the North-West. Indeed, it is quite different from other areas in the regions. All the industries in Warrington have a future if our economic policies are not conducted by either a knave or a fool. The engineering companies that make forklift trucks and road-making machinery and the brewing soap, chemical and paper industries all have long-term futures. Yet all of them have suffered badly from redundancies. A steel plant that had been modernised and that was profitable has closed its gates with the loss of 800 people.

Companies with names that are well known, not only in Warrington but throughout the country, have declared redundancies. I refer to companies such as Rubery Owen and Coventry Climax. Even companies that have never known redundancies, such as those that have been the barometers of prosperity, have recently made men redundant. I refer to companies such as Crosfields and Thames Board Mills. There have even been redundancies in the brewing industry at Allied Breweries.

Young people, who have never before been unable to find jobs in Warrington, are leaving our schools without hope of finding work. At present, more than 1,100 such people are unemployed. The forecasts are even worse than that. It is estimated that in July there may well be 2,000 unemployed in the area. Cheshire has always been a prosperous region, yet only one in 900 school leavers has a job. That is the reality of life in Britain. It is no use hiding the facts from the House. We must consider what has given rise to this situation and what we can do about it.

I welcome the Prime Minister's speech, in which she spoke about young people and what could be done for them. However, I agree with my hon. Friend the Member for York (Mr. Lyon), who said that such measures would not solve the problems of the young. We must give young people career opportunities in the industries of the future. What can one say when one meets computer programmers in the North-West who cannot find jobs although they have tried all over the area? I met an officer of the Salvation Army, who runs a hostel. Just over two years ago he told me that 95 per cent., of those in the hostel were employed and that only 5 per cent. were unemployed. Today, the figures are reversed. Now, 5 per cent. are employed and 95 per cent. are unemployed. He explained to me that many of them had gone from North to South and from East to West looking for jobs and had ended up in Warrington. He asked me what he was to say to young people who burst into tears because they could not find jobs. It is time for a dramatic change.

One of my criticisms, which I have made many times, is that the Government are obsessed with one facet of economic policy—inflation—to the detriment of everything else. It is not good enough to take one facet of economic life. My hon. Friend the Member for York said that this country lacked investment. The Government lifted exchange controls and money flowed out of the country. The lifting of exchange controls was, therefore, unwise. Some of that money could have been invested in modernising industry. It is no use talking to industrialists about investment while the future is so uncertain and while industrialists are stockpiling goods rather than producing them. That is a tragedy.

We are importing many of the goods that we could produce if we were more competitive. We must get over the problems of investment. We cannot leave it to market forces. When the Labour Party was in office it was on the right track. We created the National Enterprise Board. We gave help to industries that were in difficulties and we also created industries with a long-term future. Indeed, those industries could not raise capital on the market. I refer, for example, to Inmos. There is a need for an industry that can manufacture microchips. That is vital if we are to have any future. However, the necessary capital was not available on the market. Without the National Enterprise Board we probably would not have any industry at all. Under this Government, its future is uncertain. The National Enterprise Board has been held back because there is political prejudice against anything in the publicly owned sector. That is wrong.

We are falling behind our competitors in biotechnology, yet the industry has a great future. It could make a great breakthrough in pharmaceuticals and might even find a cure for cancer. Rightly developed, the industry could create energy from waste. We should be considering the future. All our competitors—including Japan, West Germany, the United States of America and France—are investing in such industries. Nevertheless, we are doing nothing about it. It is no use hoping that we shall reach some mythical level and that the phoenix will rise from the ashes. Unless something is done soon we shall not have any industrial base. Warrington, with its wide spread of industry, is a pointer to that fact. We must do something.

As I said in my maiden speech, when I spoke on the referendum, we shall not be able to plan for the future as long as we remain in the Common Market. It is vital to our future that we should come out of the Common Market. We must make our intentions clear to the public. When we come out of the EEC we shall be in control of our destiny and shall be able to trade not only with Western Europe but with the rest of the world. There are scare stories going about to the effect that if we leave the Common Market we shall not be able to trade with our former Common Market partners. That is nonsense. However, we shall be able to trade on more favourable terms than at present, just as we shall be able to trade with the rest of the world.

We cannot get away from the need for planning, for reflating the economy and for the reintroduction of exchange controls. We must consider the damage done by the imports of manufactured items into key sectors of our industry. I have never believed in blanket controls, but some industries will have to enjoy protection for a period of time for investment to prove successful. There is nothing fundamentally wrong with this country. Indeed, Britain is wealthy. I should like our resources, particularly those from North Sea oil, to be used in the expansion of public works and in reflating the economy. We must also begin to invest in our industry.

I had hoped that the Government would admit that they were wrong and that they would make a U-turn. I had hoped that they would agree to look again at the situation and would accept that curing inflation could not be the be-all-and-end-all of everything. I had hoped that the Government would decide to reflate and to avoid the riots that have occurred in Liverpool and in other cities. There is no easy answer, but the one new factor is the alarming scale of youth unemployment in all our inner city areas. That is the match that has lit the recent explosions. None of us condones what occurred in many of those cities. Indeed, I should be the last to do so. However, I hope that we shall learn the lesson and that we shall decide to plan for the future and to revive industry. We must be able to tell our young people that there is hope.

We are a wealthy country. Let us use that wealth to benefit the whole nation by putting our industry back on its feet and by getting our people back to work.

7.48 pm

Sir William Clark (Croydon, South)

The hon. Member for Warrington (Mr. Hoyle), who has rejoined us after a short absence from the House, has advocated policies that will put him out of Warrington next time. The hon. Gentleman said that we could still trade with the EEC if we left it. He must remember that if we leave the EEC the Community will raise tariff barriers against us and we shall be uncompetitive if we try to jump them.

Mr. Hoyle

rose—

Sir William Clark

I shall not give way, because there are many other hon. Members who wish to speak.

If we were to leave the EEC, what would happen? Forty-two per cent. of our exports go to the EEC. How would that figure be replaced? It is ridiculous to say that we can leave the EEC just like that. Perhaps the hon. Member for Warrington would like to work out how many jobs would be lost in his constituency if we were to leave the EEC.

There often seems to be a sense of unrealism in our debates about unemployment and the unemployment figures. Any thinking person must surely recognise that no Government, whatever their political complexion, can guarantee everybody a job. Had it been possible to do that, the Labour Government would gladly have done so. So would the present Government.

The problem for successive Governments has been our non-competitiveness in world markets. Some Labour Members have placed great emphasis on the need to get together with the Trades Union Congress. They seem to suggest that if we can get together with the TUC everything will be all right. I have nothing whatever against the TUC, but we should look for a moment at the TUC and the trade union movement. We must recognise that each trade union leader is fighting for his own members. In many cases, trade union leaders are not taking national interests into account. In some trade unions the leaders are not representative of their members.

One has only to consider some of the polls in which general secretaries have been appointed in order to realise that the polls are derisory and that there is a good deal of non-representation in the trade union movement. The criticism does not apply to all the trade unions, but a small minority of people in the movement have obtained power by means of infiltration and otherwise. Over the years, we have seen Left-wing infiltration into the trade union movement. We have also seen infiltration into the Labour Party, with the introduction of the re-selection process, and so on.

In Victorian times, some employers were harsh in their treatment of employees and in the way in which they were put out of work, but nowadays there are trade union leaders who, at their own whim, can take away a man's union card so that he is unable to get a job anywhere else. That is more damaging to the worker than the sort of thing that happened in Victorian times.

I am in industry, as hon. Members may know, and I assure the House that all employers want to expand, but there are some measures on the statute book that militate against an employer taking on extra staff. One such measure is the Employment Protection Act. I am not entirely against that Act, but in many cases the pendulum has swung far too much against the employer and far too much in favour of the rights of the employee.

My right hon. Friend the Member for Worthing (Mr. Higgins), in an excellent speech, mentioned the national wage agreements. The hon. Member for Warrington listed the companies in his constitutency which have gone out of business. If he were to do some homework he would find that most, if not all, of them had been subjected to a national wage agreement. Measures such as these can adversely affect employment. If I had my way, I would bring to an end all wages councils, because I do not think that they do the worker any good. As has already been mentioned, a youngster just starting work in an industry can often receive nearly as much money as a man who has been working in it for five, 10 or 15 years. That cannot be right, and it must be changed.

Too many youngsters going into industry are more interested in their rights than in the profitability of the company. If we are to get the economy going it must be by means of a partnership, and it will not work if people are always thinking about their rights, or if they are always ready to strike at the drop of a hat before negotiation has taken place.

Many redundancy payments are extremely generous. People in the private sector are irritated by the fact that redundancy payments in the public sector are always far higher than those for the same amount of service with a company in the private sector. I remind the Financial Secretary that for every redundancy in the public sector there have been 14 in the private sector. This has the effect of creating two nations. The public sector seems to act as a magnet to workers. Within the public sector they have greater job security and index-linked pensions. The index-linked pension is certainly a magnet. Under successive Governments, workers have been drawn from the private wealth-creating sector into the public sector. In many instances the public sector is not at all profitable. I agree with my right hon. Friends the Members for Worthing and for Farnham (Mr. Macmillan) that we should have more privatisation.

With regard to the figure of 2.8 million unemployed, let nobody have the impression that the Conservative Party does not have compassion or understand what is meant by unemployment. Many of our supporters are unemployed. I agree that unemployment is degrading and frustrating, but we must look at some of the causes of unemployment—apart from world world recession, which everybody accepts to be one of the causes.

We should look at the scale of our social benefits. My hon. Friend the Member for Norfolk, North (Mr. Howell) has done far more work than anyone in the House on the "Why work?" syndrome. The money differential between a person in work and an unemployed person is far too small. Naturally, therefore, we have a black economy. Naturally, there are people who, although not usually workshy, feel that it does not pay them to go to work.

But we should not be too gloomy about the figures. There are more people in work, as a percentage of the population, in this country than there are in most countries in Western Europe. It is wrong to compare the present unemployment figures with those of the 1930s because many people take early retirement or are retired at 58, 59 or 60, and in order to avoid the national insurance contribution they register as unemployed and have no intention of getting a job. There are also married women on the unemployment register, and there are a great many people who are changing their jobs. I am not suggesting that the figure of 2.8 million is not serious or important, but it should be treated with a little more reasonableness.

Many Labour Members have advocated that we should spend our way out of the recession, but, as everbody knows, both Conservative and Labour Governments have already tried it. The Labour Party tried it and failed. The Conservative Party tried it and failed, although we did not have to go to the International Monetary Fund to be bailed out.

People suggest that we should use North Sea oil. We are already using it in order to pay for part of the overspending. Public expenditure is far too high. Every minute of every day we are overspending by more than £20,000. That is a frightening figure. Some hon. Members suggest that we should divert more money to investment. I should like to see that, but I should not like to see the diversion of public expenditure to investment if it meant that the public sector borrowing requirement had to increase.

In the years that I have been in the House I have never heard such a frivolous speech of such an expansionary, reflationary programme as we heard from the Leader of the Opposition. When the right hon. Member for Stepney and Poplar (Mr. Shore) was tackled by the right hon. Member for Plymouth, Devonport, (Dr. Owen) he said that the Labour Party had not costed the reflation programme that it advocated.

Mr. Tam Dalyell (West Lothian)

I heard that comment. There was a reference to the critics and the costings, but it was made from a sedentary position.

Sir William Clark

It may have been a sedentary interruption, but if the Shadow Chancellor of the Exchequer makes such a remark from a sedentary position I cannot believe that he would not say the same thing in a speech. It is the height of irresponsibility to introduce a programme that is uncosted or on which estimates have not been made.

The right hon. Member for Devonport gave some figures. If we were to go through the Labour Party's proposals I am sure that they would require a public sector borrowing requirement of between £20 billion and £25 billion. What do the Opposition say? How can we, as a country, borrow? We are borrowing over £10,000 million. Let us suppose that we were to double that. It is difficult enough for the Government to borrow at the effective going rate of between 14¾ and 15¼ per cent. If the Government wish to borrow twice that amount, does anyone imagine that they would be able to borrow at 15 per cent? Of course they would not. The interest rate would increase. It would hit small businesses and exchange rates and imports would cost more. We could export but not import. It is the height of folly to advocate that sort of policy in an employment debate.

Mr. Nick Budgen (Wolverhampton, South-West)

rose—

Sir William Clark

I shall not give way, as a large number of hon. Members wish to speak.

The country should be alerted to what it is in for if, God forbid, we had the catastrophe of a Labour Government led by the present occupants of the Opposition Front Bench.

We should not be too pessimistic. The medicine is not nice to take and it is not easy, but there are good signs. There is more realism in wage demands. A year ago they were about 20 per cent., but today they are running at 10 per cent. That is good. The pound has gone down against the dollar but not so much against the Continental currencies. Despite the strength of the pound, when industrialists are saying that we cannot export, our exports in real terms have increased by 2 per cent. between last year and this year.

Inflation is falling. We have a rate today of about 11 per cent. I believe that my figures are right. On a six-months basis that would be a rate of between 8 and 9 per cent. What worries me and some of my hon. Friends is that the increase in prices in the private sector is about 6 per cent., but in the nationalised industries it is about 18 per cent. Something has gone wrong somewhere. That points to the fact that the nationalised industries are costing far too much. I welcome the slimdown in industry generally. When the upturn comes I am sure that we shall be able to take advantage of our reduced unit costs.

It would be wrong for anyone to believe that unemployment will be settled in a week, two weeks, a year or two years. We are in for high unemployment for some time. The world recession is ending. That will take some people out of unemployment, but it will not make a dramatic difference. As has been said by some of my right hon. and hon. Friends, attitudes are changing for the general trade union member. Although some Opposition Members probably do not like it very much, I welcome the setting up of the enterprise zones in Swansea, Corby and other places. That is a positive intervention by the Government, giving incentives without interfering with the running of whatever businesses may be set up. I have great hopes for the start-up scheme that my right hon. and learned Friend the Chancellor of the Exchequer introduced in the Budget. We need to build up new businesses and to create new business in the inner cities, but to have someone in the GLC threatening to increase or double the rates will kill small businesses.

We must have a sense of realism. I am not too happy about the package deal. I agree with giving more public money—taxpayers' money—to training and apprenticeship schemes and for further education provided that it is industrial education. We have spent far too much money on art students and arts in higher education. We should spend as much money as possible on training. I am not too happy about the subsidy of up to £15 a week for employees. Subsidies are all very well while they last, but how does one take them away? If an employer has been receiving £15 a week because he has employed a youngster for a year, when that £15 a week is taken away what does he do?

I am sure that the Government would be well advised to consider conscription. I am convinced that with our youth unemployment problem—it is accepted that we cannot buy jobs—as many of our partners in Europe have conscription, we should consider it, examine how much it would cost and decide whether it would be cheaper in helping to solve the problem.

We are not yet out of the wood. Everyone knows that. The medicine is unpleasant, but I am afraid that we still must swallow more of it. To change course now would lead to more and more inflation and unemployment. I urge my right hon. Friends to resist the palliatives that might solve the problem for two, three or six months, or however long it might be. The cold fact of the matter is that, whatever jargon we use, for many years we have been spending more than we have been earning. Sound money, sound jobs and future prosperity can come only when we start living within our means.

Several Hon. Members

rose—

Mr. Deputy Speaker

Order. I appeal to hon. Members to make shorter speeches to avoid disappointing many other hon. Members.

8.8 pm

Mr. William Hamilton (Fife, Central)

The hon. Member for Croydon, South (Sir William Clark) said at the outset of his speech that we had two nations. I was inclined to agree with him until he elaborated on what he meant. He sought to divide the nation between those who are mollycoddled in public enterprise, such as in the nationalised industries and the Civil Service, and those who are struggling in the private sector.

The hon. Gentleman went on to say that the 2.8 million on the dole is not such a problem as it seems. By implication he was saying that it was not as serious as it is to those who are on the dole and that, in any event, the social security payments are far too generous and discourage people from working. If he looks at the Government's policies he will find that the poverty trap, in which his bon. Friend the Member for Norfolk, North (Mr. Howell) is very interested, has been worsened. We can debate that matter at some length on Friday. It could be debated now, because the terms of the motion show that this debate is not wholly about economic policies. It is about social policies, fiscal policies and the rest. Indeed, it is about the whole tenor of the Government's policies since they took power, and the national climate which those policies have created and which is being exacerbated by their continuation.

There is undoubtedly a national feeling of social injustice on a monumental scale. It is a soundly based feeling that such sacrifices as are deemed to be necessary are being unfairly borne. The wealthy—by "wealthy" I mean those receiving anything over £20,000 a year—have scarcely been touched at all. Although the Prime Minister has repeatedly called for sacrifices and although one of her Ministers has talked about making sure that the misery was fairly shared all round, there is evidence all over Britain that the poor, the sick, the unemployed, the young, and the womenfolk are the people who are being hit increasingly hard by the Government's policies. The people who are getting away with it are the Vesteys and those people who are living on their accumulated profits.

These acute divisions within our society between rich and poor will be symbolised on Wednesday, when we shall have a display of ostentatious wealth where no expense is spared and where there is no talk of the country living within its means and the need for pulling in its belt. That event on Wednesday will take place within a few miles of Brixton, where, about a fortnight ago, we had riots—not by wealthy people but by people who were coloured, people who were young, people who were deprived, and people who did not know when or how they would get a job, a house or a decent education. There is multiple deprivation within a few miles of ostentatious wealth. That is what this debate is essentially about.

The Prime Minister has created a more divisive and divided society than I can recollect in my many years in the House. She must know that, but she denies it. All the time she is saying "Keep on taking the medicine", when every indicator that one cares to take, be it productivity, employment, or even inflation, shows that the right hon. Lady's policies have demonstrably failed. In their failure they have created a massive comprehensive feeling that the nation is divided between those who have too much and those who have too little.

The Prime Minister is always giving the impression—she almost boasts about it—that she is harsh, unimaginative and dogmatic. Evidence of the failures exists. All the newspapers, which are not generally supporters of the Labour Party, are now increasingly aware that the right hon. Lady and her Government are leading this country to ruin.

Mr. Ralph Howell (Norfolk, North)

Rubbish.

Mr. John Major (Huntingdonshire)

Drivel.

Mr. Hamilton

Last Thursday the right hon. Lady sought to give a boost to the morale of her party in the House, because Conservative Members know very well that those of them who have a majority of less than 5,000 will be out at the next general election. [Interruption.] Conservative Members are laughing very nervously. Unless there is a great change in the policies hitherto pursued by the present Government, they know what is coming to them.

Let me give one example of the injustice that has been created by the Government in only the last few weeks. They have talked about an incomes policy. The right hon. Lady has said that all workers in the next wage round in the forthcoming year will have to accept less than I he current 6 per cent. The current 6 per cent., for great numbers of workers, means a very dramatic reduction in their standard of living. With inflation at 12 per cent., if one gets a wage increase of 6 per cent., ipso facto one must accept, like it or not, a substantial reduction in one's standard of living.

The police and the Armed Forces have not been asked to accept such a reduction in their standard of living. For whatever reason, the Government are taking good care to ensure the continued support of the police and the Armed Forces. Good luck to the men and women in those forces. But I say to the Financial Secretary to the Treasury that I speak continually in this House on behalf of nurses and other ancillary workers in the National Health Service, and no one will persuade me that a policeman or a soldier is any more worthwhile a citizen than a nurse in any of our hospitals.

Yet the nurses are not getting the 13½ per cent. that the police are getting or the 10½ per cent. that the soldiers are getting. They are being told "You will get 6 per cent., not a penny more or less." Moreover, if they are living in at hospitals they will have deducted from that wage increase more for lodging charges than the sum of the increase, so a large number of our nurses will be substantially worse off as a result of the 6 per cent. increase that is being imposed on them by the Government.

That is the kind of injustice that the whole country is conscious of and objects to very violently. The Government act in this way because they know that the nurses will not strike. The nurses have no industrial muscle. They will just take it on the chin. The Government like to deal with people such as the nurses. [Interruption.] The Financial Secretary is muttering. If he wants to interrupt me he should rise in his place. He is either agreeing or disagreeing. If he is disagreeing and saying, in effect, that the nurses deserve no more than 6 per cent. and a bigger increase in their lodging charges than that 6 per cent. he had better rise and say so instead of muttering in a hostile way from a sedentary position. The Financial Secretary to the Treasury is grimacing, either in approval of disapproval. I should like to know whether he approves of what the Governmnt are doing to nurses, compared with policemen and soldiers.

The hon. Member for Croydon, South chastised my right hon. Friend the Leader of the Opposition for putting forward proposals to deal with the current problems. The hon. Gentleman said that they had not been costed. That is a fair point, but before the general election the Conservatives never attempted to spell out where they would cut public expenditure. They mentioned it in only general terms.

Indeed, the hon. Member for Croydon, South said today that there ought to be more substantial cuts in public expenditure, but he did not spell out where the cuts should fall. Would he cut spending on housing, education or social services? Where precisely does he believe we should have further cuts?

Presumably we shall know in the autumn where the cuts are to fall. My guess is that there will be yet futher cuts in social services expenditure and an even greater erosion of the industrial base on which those services depend.

The package announced by the Prime Minister is little more than a tinkering with the enormous challenges facing us. She got an enormous build-up in the press, but when we examine the details of the package we see that she is merely tinkering with the problems. There will no enthusiasm for the package among the 3 million on the dole.

I have sent the Secretary of State for Employment details of the case of a young lad from Glenrothes new town, in my constituency, who left school at Christmas and started a YOP job in February at Balbirnie nurseries, in Makinch. A few weeks later, on 13 May, he was promised a permanent job if he would go to R. Munro, a firm of landscape gardeners based on New Glenrothes House. The young lad went to that firm on the promise of a permanent job. He was employed there for weeks and in the expectation that the promise would be kept he worked overtime at nights and once did a full weekend of overtime—all for 59p an hour.

When the lad's time was up and he expected to be offered a permanent job he was sacked. That employer got cheap labour and exploited the boy for all he was worth before getting rid of him. I wonder how widespread such abuses are?

The youth opportunities programme is no more than a palliative. The Prime Minister and the Government talk about permanent jobs and real jobs, but there was not a single word in her speech that heralded any intention or policy to create permanent jobs.

In Fife we have two enormous capital investment projects—the gas-gathering pipeline for the North Sea, which will cost nearly £2 billion, and the Moss Morran petrochemical project, which will cost several hundreds of millions of pounds.

Both projects have a big question mark over them. The economies of Fife, Scotland and the United Kingdom depend enormously on the success of those two projects. I am pleased to see that the Under-Secretary of State for Scotland— the hon. Member for Edinburgh, North (Mr. Fletcher)—is here. I hope that before we rise on Friday there will be a statement in the House about the future of those projects. It is important for the United Kingdom, for Scotland and for Fife that we should have an indication whether the projects are on course and on schedule.

Nothing emanating from the Government gives us confidence that they are willing or able to tackle the problems from which our nation is suffering. There does not seem to be the will to solve them and the Government do not seem to have the policies that are required.

If we consider training programmes for young people we see that no country in Europe or anywhere in the industrialised world has a record as bad as our own. It is the complete absence of an imaginative approach to training for the time when we get out of the recession that lies at the root of most of our problems.

8.25 pm

Mr. Ralph Howell (Norfolk, North)

Once again, the Opposition have demonstrated their appalling insincerity on the subject of unemployment. The Leader of the Opposition has totally misjudged the mood of the House and has offered no solution to the problem. It is quite false to attack the Government on the unemployment figures. A confidential Labour Party report in November 1976 came to the conclusion that 2.5 million people would be unemployed by 1980. The report was prepared by a subcommittee chaired by the right hon. Member for Lanark (Dame Judith Hart) that included among its members the then Chancellor of the Exchequer, the right hon. Member for Leeds, East (Mr. Healey) and Mrs. Shirley Williams. For the Opposition to make accusations against the Government when they knew in 1976 that unemployment would reach 2.5 million by 1980 is plumbing the depths of insincerity.

Mr. Robert Hughes (Aberdeen, North)

What about Saatchi and Saatchi?

Mr. Howell

I admire the strong, firm speech of my right hon. Friend the Prime Minister. None of the criticism that I make of the proposals contained in her speech detracts from my support of her firm policies generally. It is most fortunate that the policies of my right hon. Friend and those of President Reagan are so similar. I believe that between them they will be able to do something effective to save the Western world from the difficulties into which it is falling.

The problem of unemployment is obviously not confined to this country. It is a problem all over the Western world. The patterns are similar, although we have rather higher levels. We deceive ourselves if we think that by this policy or that policy, in the present system that we operate, we shall effectively bring unemployment down.

Hon. Members need to examine what has happened to unemployment figures over the last 30 years. Unemployment averaged 350,000 throughout the 1950s, 450,000 throughout the 1960s and rose to 1,050,000 throughout the 1970s. It was known to the Labour Party years ago that the level of between 2.5 million and 3 million would be achieved in the early 1980s and that it would go still higher unless positive and radical steps were taken. The same pattern is seen in Germany and, to an even worse extent, in France, where the steepness of the rise is greater. The reasons for unemployment are not simply inflation and the recession. Over the last 30 years there have been recessions and booms under successive Governments. The reasons are partly the impact of supermarkets, self-service and do-it-yourself, together with microchips and robot engineering. The situation will become worse.

In this country the problem is aggravated—I am sorry to say that it is aggravated by my own Government—through the appallingly high income tax that is levied at low levels. The low thresholds of income tax cause some of the trouble. Many people are locked into unemployment because of the tax and welfare system. They are not simply the low-paid. Some better-paid people, with high mortgages, are also locked increasingly into it.

I go so far as to say that no party—not the Conservative Party, the Labour Party, the Liberal Party or the Social Democratic Party—has any real answer to the problem of unemployment, and it is about time that we looked seriously for one. The answer has been with us for the last 40 years. William Beveridge, the highly respected statesman on whose report the Welfare State was based, had the answer to the problem and yet no one seems to take the slightest notice of it.

In his report of 1942 Beveridge said that if the general benefit system were adopted there would have to be other measures in order to make sure that people did not get accustomed to relying on State support. Beveridge had a system whereby, after three months' unemployment, benefit would stop and work would be offered by the State, either nationally or locally.

If the terms of the Beveridge report were in operation today, 900,000 people would be unemployed—that is the number of people who have been unemployed for less than three months. The figures would never have reached today's levels because they are inflated by many people who are not seriously looking for work. Many different sorts of people are included in the figures. I make it clear that I am as sympathetic as any hon. Member to those people who are genuinely unemployed and cannot find work, but it does not help them or anyone else when the figures are inflated by professionals—people who merely sign on in order not to have to pay national insurance, people retiring at 60 who otherwise would have to pay national insurance contributions, and so on.

I urge the Government to look seriously at the original Beveridge report and to institute a feasibility study. The Select Committee on Social Services reported only last week that it would cost little more to find employment for everyone than to pay nearly 3 million people to do nothing. There is so much work to be done in this country. It is getting scruffier and scruffier day by day and it is about time we found a solution.

In 1981, with our magnificent engineering, our ability to go into space, and so on, we still cannot find a way to solve this basic problem. If we do not solve it our society will crumble. It is time we thought about trying to put the Beveridge proposals into operation and virtually established the right to work.

As a start, we should have a form of compulsory youth work—a national youth work organization—because we have tried all the measures about which we have heard today. All that was announced today was that we are to throw more money at the problem, but it will not solve it, any more than did the other odd measures that have been introduced over the last 20 or 30 years. We must introduce a form of compulsory work service for young people and get them out of areas such as Brixton and Toxteth, mix them with other people arid give them an opportunity in life. If we have voluntary measures only, many young people will not get the benefit of them. Therefore, I urge the Government to examine my suggestion of a compulsory national youth work service.

The time has come for a much bolder and more positive approach. It is high time an answer was found.

8.34 pm

Mr. David Winnick (Walsall, North)

The hon. Member for Norfolk, North (Mr. Howell) told us that there should be a compulsory work scheme. Clearly, there will be no exceptions; everyone will do his job. The hon. Member for Croydon, South (Sir W. Clark) said that conscription was the remedy for youth unemployment. No matter how much he was concerned about public expenditure, he was happy to see money poured into paying for conscription. We know that the people will reject any such so-called remedy.

The hon. Member for Croydon, South, gave the game away. His characteristically callous attitude to the plight of the unemployed was not only his attitude, but, I imagine, that of those on the Government Front Bench, but they must be more discreet. The hon. Gentleman can say outright what many members of the Government really believe.

The debate is taking place, at what I suppose is meant to be the end of the first half of the present Parliament, against a background of the return of mass unemployment, continued industrial decline, and the worst disturbances on our streets for 60 or 70 years. Even the Prime Minister had to admit, on a previous occasion, though with great reluctance, that large-scale unemployment was a factor in the disturbances. The right hon. Lady would have much preferred not even to concede that. There is no doubt that unemployment causes the gravest concern to the country. Every opinion poll shows that it is the issue that, above all others, people consider to be the most important facing us today.

The West Midlands region has been devastated in the past 18 months or two years by redundancies, closures, bankruptcies and short-time working. In May 1979, when the Conservative Government came to office, unemployment nationally was 5.4 per cent. In the West Midlands it was 5 per cent. Today it is 14.2 per cent. in the region, compared with a national level of 11.8 per cent. Is that simply a coincidence? Is it simply because of the world recession? The truth is that the region has been devastated largely as a result of the monetarist policies pursued by the present Government.

Rubery Owen, one of the largest factories in my borough—not in my constituency, but next door—is 10 close later this year. A deputation is to see one of the Ministers in the Department of Industry tomorrow, but I doubt whether we shall be able to persuade the Government to keep the factory open. What is happening there is an illustration of the redundancies and closures taking place day after day and week after week.

In one of his speeches early in this Parliament the Secretary of State for Industry said that the Government's aim was to galvanise industry. I well remember the amused expressions at the use of the word "galvanise". What are the results of the "galvanising" that has occurred during the just over two years that the Government have been in office? The fall in manufacturing output in that period has been 19 per cent. Total investment in manufacturing has fallen by nearly 23 per cent. Some galvanising; some assistance for industry!

The figures that I have just given explain all too well what has been happening in the West Midlands. There is not likely to be a revival of industry unless we first see it in the West Midlands region, which for many years has been the heartland of the engineering industry. Although people recognised that there were problems in the region, I do not think that anyone would have expected that two years of Tory Government would produce the devastation that exists in the region today.

Mr. Neville Sandelson (Hayes and Harlington)

Will the hon. Gentleman give way?

Mr. Winnick

No, I shall not give way.

On top of that, arising from the removal of exchange controls, capital is draining away from this country—capital that should be invested in Britain. Instead, it is going abroad. Tory Members may say "What a disaster it would be if Britain came out of the Common Market", but let us suppose that we had not gone into the Common Market and we had the present economic decline and unemployment at nearly 3 million. There would be enough pro-Marketeers to tell us "That is the result of keeping out of the EEC". Membership of the Common Market has been not a solution but a tragedy for our country. When the next election comes, I believe that the majority of people will realise the need to get out of the Common Market.

The accusation against the Government is not only that their policies have forced so many people on the dole queues. The Prime Minister and others say how concerned they are, but that is no consolation to my constituents and others who are deprived of work and who have to suffer the humiliation of not being able to find a job. They are not just young people, though that is bad enough, but men in their forties and fifties who may have worked in one job for 25 or 30 years and who may never be able to work again. That is the position in which many people in Britain find themselves today.

Moreover, having made people unemployed the Government have taken action against the people who are on the dole queues. For example, the earnings-related unemployment supplement has been phased out. It is due to be abolished next year. What justification is there for that? Unemployment benefit has been increased by 5 per cent. less than the rate of inflation. Having made many people unemployed, the Government seem determined to hit at them while they are on the dole queues.

It may be argued that the sums of money do not add up to much, but they are significant sums for, for example, the wife of an unemployed man with young children who is desperately trying to make ends meet. Anything that undermines the living standards of such families and adds to their difficulties is, in my view, deplorable.

I suppose that today's package is something. We shall not oppose measures which in some way, however limited, may help. Nevertheless, we know that they are no remedy for the people who need proper jobs. I can well imagine what the Prime Minister would have said if she had been sitting on the Opposition Front Bench. She would have dismissed such a package as purely cosmetic. It represents no real jobs. To a large extent, she would have been right.

The crisis that we face today is somewhat similar to that of 50 years ago. When the hon. Member for Croydon, South was speaking I was reminded of the attitude of two business people who were members of the Government-appointed Economic Advisory Council in 1930. Unemployment was rising at the time. The Prime Minister appointed a rather ineffective Economic Advisory Council. In reply to economists, who were perhaps arguing for a different policy, the two business people said that the explanation for the country's troubles were to be found in a combination of high taxation, excessive wages, the cost of the social services, and trade union restrictive practices. Word for word, that could be said today by any of the Government Ministers and by many Conservative Members.

The Prime Minister has told us on numerous occasions that she does not want to do any U-turns, that the lady's not for turning, and so on. However, there is one thing that should be said. I and my right hon. and hon. Friends believe that the Government have done a tremendous disservice to the country by the policies that they have pursued.

The right hon. Lady would do a further disservice to the country if the feeling grew that ordinary parliamentary pressure, peaceful marches and demonstrations, will not change the Government's policies, but that street disturbances will. I wonder whether today's package would have been introduced without the recent disturbances in our streets, which I deplore. I should be the last person to condone what has happened in our streets. However, I must say that we have reached a bad state when the Government are not willing to listen to ordinary protests but panic at such disturbances.

I mentioned in the House the People's March for Jobs eight to 10 weeks ago. The Government said that it was useless. They sneered at it. There was no proper response to the men and women demonstrating the tragedy of unemployment. The Government's attitude is different as a result of what has occurred recently.

I do not believe that the Government can restore employment to anywhere near what it was when they came to office. Clearly, the Conservative Party will be punished at the next general election. To a large extent the remedy lies with Conservative Members. The right hon. Lady took her position as party leader because, with the support of a majority in her party, she ousted her predecessor, the right hon. Member for Sidcup (Mr. Heath).

The only hope for the Conservative Party, and the only hope that it will not suffer at the general election the humiliation that it suffered at Warrington, where its candidate received only 7 per cent. of the vote, is to bring in a leader who, however much attached to Conservative principles, recognises the tragedy arising from the disastrous policies which we shall vote against later today.

8.47 pm

Mr. John Major (Huntingdonshire)

I have sat thoughout the debate and experienced an enlightening afternoon. The Leader of the Opposition committed himself firmly and irrevocably to future inflation as a deliberate act of policy. The Leader of the Liberal Party announced that his party was committed to a statutory framework—whatever that is—for an incomes policy. A statutory framework sounds like a curious beast. It is said that the camel was designed by a committee. I suspect that a statutory framework was designed by a collective leadership. Both are more at home in the desert than here.

Two aspects of the debate are important. First, I welcome without reservation the initiatives announced this afternoon. I have no doubt that they will be well received by those who will benefit from them. I regret that the Leader of the Opposition chose to dismiss the initiatives almost before they had seen the light of day and been subjected to proper examination. I doubt whether it does credit to the right hon. Gentleman. I doubt whether it will do other than reinforce those critics who say that he might re-examine the possibility of early job release from his own difficulties.

I welcome the fact that that it is possible to conclude from the Opposition's motion that they have at last acknowledged the link between economic success and social provision. Had that been carried through to the debate it would have been a startling advance. However, having listened to the debate, I suspect that the Opposition stumbled on that connection almost by accident. Indeed, they did not follow the connection through to their speeches. There have been no significant policy suggestions of intellectual weight.

I am sorry that the Leader of the Opposition is chatting, because he might learn something to his advantage if he listened. The Opposition's policy clearly is to spend, spend and spend. The Leader of the Opposition is more akin to a Vivienne Nicholson of politics than a serious Leader of the Opposition.

We have heard again that whatever has gone wrong with the country in the past and what is wrong at present is all in some magical way the fault of the Government. I suspect that if the Leader of the Opposition caught measles he would claim that he had caught it from the Treasury Bench.

This is poor stuff for a country facing the problems that we have at present. It does no good for those who are unemployed, for whom the Opposition claim so frequently to speak, when the Labour Party raises a debate which touches the trivia of party politics, deals in no way with the serious causes of our problems, and advocates no serious solutions to those problems.

I have no doubt that the roots of our problems are deep-seated and not newly sown. We have had echoes of that in some excellent speeches today, notably that by the right hon. Member for Heywood and Royton (Mr. Barnett). In recent years we have seen a serious decline in economic activity and consequent job losses as a result of the interaction of recessionary conditions together with those many long-standing economic problems which could and should have been dealt with by Governments of both parties over the past 15 or 20 years.

In one respect it is an astonishing act of check for the Labour Party, which once supported a selective employment tax to shake people out of employment, now to complain, when significant job shedding has occurred, that it is a deliberate act of Government policy.

We have had no acknowledgement by the Opposition of their former responsibility for the present crisis. We have had no acknowledgement of their part in the difficulties that have been created. They have made no mention in any serious fashion of the importance of productivity, the damage done by restrictive practices, the problems created by poor trade union legislation, bad management and worse legislation over the past 15 years. Nor do they simply neglect these partial causes of our problems. They also advance the intellectual absurdity that public expenditure reductions are the primary cause of our problems and that renewed public expenditure programmes are the primary solution that we need.

As even a cursory examination will show, the extent of public expenditure cuts implemented by the Government, even if they had been aggregated and carried out, which they have not been, and even if there were no compensating expenditure, which there has been, would be far less damaging in total than, to take one simple example, the increase in the price of oil that we have experienced since 1979.

I do not seek to blame our economic problems on the oil producers or on the increase in energy prices. I understand the position in which the oil producers find themselves. The have one asset, and it is a depleting asset. From their point of view, no doubt they are right to maximise the income from that asset so long as they have it.

But a legitimate act of policy that I hope the Government have in mind is to try to seek by international agreement, if it can be obtained, some form of future stability in oil prices and in oil and energy price increases—such stability would be an imporatnt bonus—rather than the ricocheting of oil and other energy price increases that we have experienced in recent years.

There is a secondary and related matter that the Government must maintain firmly in their sights. It is the astonishing problem created by the now huge oil producing and exporting countries' cash surplus. In the current year, it is likely to be about $170 billion. The potential of that amount of money lying primarily on deposit to destabilise any currency if used at the wrong time and in the wrong manner is an eventuality for which we ought to prepare.

I do not seek scapegoats abroad or at home for the unemployment levels. Excuses provide no jobs; neither do speeches full of criticism and without practical comment. But if the House is to make a serious contribution to the solution of our problems the first prerequisite must be to acknowledge publicly and without party rancour all the detailed causes of the problems which have been created in recent years so that we may determine how best to eliminate them and to prevent their recurrence. I suspect that it may be easier to provide the momentum to deal with serious problems if they are raised when they occur rather than at a future date when they may have receded.

We must recognise and proclaim, so that it is clearly understood, that the decades of cheap energy on which our industry and economic activity have been based have gone and are unlikely to return. The growth of the manufacturing potential in the Third world is a permanent feature. That is bound to have a ripple effect on employment in our less efficient industries. In economic, social and industrial policies, we must recognise that we cannot sit back and hope that at some stage in the future the world will return to the so-called normal position prior to 1974. It will not do so. Hon. Members who have some concern and care for the Third world do not wish it to return to many of the circumstances that prevailed prior to 1974. It is part of our policy to help the Third world to develop its industries abroad. However, when we are successful in that endeavour there is a significant ripple effect on our less efficient industries.

There is no point in denying change or in blaming economic management for the effects of that change. It is our responsibility—but clearly a matter of levity for the Leader of the Opposition—to look to the future and to plan and invest for it. If we do none of those things we shall continue in relative decline, and deserve to do so. We cannot escape that fact in any way. That is why I believe, without equivocation, that the Government were right to restructure British Steel and to fund it in the way they did and to sustain British Leyland. I say to the hon. Member for Walsall, North (Mr. Winnick) and others that a Government of rigid monetarist theory simply would not have taken the actions that this Government have taken during the past year or two. That is why my right hon. Friend the Secretary of State for Transport is right to consider profitable investment in British Rail. That is why my hon. Friend the Minister for Industry and Information Technology is right to promote the future of information technology.

I wish to enter a brief plea for any additional expenditure moneys that may be available. An appropriate area for such money would be the renovation and repair of the housing stock presently lying empty and unrepaired. Not only would that have a social virtue, it would mop up a great deal of unemployment. The transfer payments that it would engender would make it far less expensive than might be imagined.

General reflation would be wrong. It would not achieve the intention of those who advocate it. The short-term benefits would almost invariably be outweighed by the medium-term disadvantages. The crude effect of a general reflation can be stated in two sentences. It might benefit today's 17-year-olds, but it would be at the expense of today's 15-year-olds. They would inherit the inflationary position that would result from such action.

We ignore a secondary factor at our peril. A general reflation rather than a specific stimulus would provide as many jobs outside Britain as it would inside Britain. The inflationary effect would, in the medium term, destroy many of the jobs presently being created as inflation reduces and remains at a more stable level.

I have little doubt that the broad strategy of the Government must be to retain a degree of pragmatic Tory philosophy and remain generally on the base from which they have been operating in recent months. The right approach must be to regard inflation control as a priority—not an end in itself, but a base without the control of which we cannot build our industrial and commercial policies. The right climate that will allow the private sector to invest profitably, with good labour relations, is a second priority. Selective intervention in the public sector, when funds are available, is also an adequate and just policy. As I judge it, that is the policy of the Government. I shall have no reservation in supporting them in the Lobby tonight.

9 pm

Mr. Denis Healey (Leeds, East)

The debate was distinguished by a bizarre contribution from the hon. Member for Staffordshire, South-West (Mr. Cormack), who said, when talking about the decline of craftsmanship in Britain, that we should give high priority to increasing the number of thatchers. After listening to the Prime Minister, I think that one is far more than we need.

The right hon. Lady gave us one more example of the armour-plated complacency that has led Britain into disaster over the past two years. She now sits at almost the exact half-way point in the life of her Government, if she sweats it through to the very end. One would have expected to find in her this afternoon at least some faint awareness of the disasters surrounding her, which were described by my right hon. Friend the Member for Ebbw Vale (Mr. Foot), the Leader of the Opposition.

Unemployment is now at an all-time level. It has more than doubled since the right hon. Lady came into power. According to the Treasury forecast, it will continue rising as far as predictions can foresee. Manufacturing output has fallen more steeply in the past two years than in the worst years of the great slump, from 1929 to 1931. The profitability of industry, to which the right hon. Lady used to attach great importance, has reached a record low. The most recent figure revealed a return on capital of under 3 per cent. in 1980 compared with 6¼ per cent. in the last full year of the Labour Government.

The country is littered with bankruptcies. We see the collapse of investment and the collapse of industrial training. The appalling problem that any Government will face when the upturn comes is that the majority of firms that survive in the industrial desert created by the right hon. Lady will have to face the future with clapped-out machinery and with work forces desperately short of the necessary skills.

Britain is the only industrial country which has the inestimable benefit of being self-sufficient in oil. However, we have done twice as badly as the international average. Unemployment has risen twice as fast in Britain as in any other major industrial country.

One of the results of the background that I have described is the riots in our cities. I think the right hon. Lady now admits that unemployment has been a major contributor to the situation which produced the riots. We read last week that last year serious crimes topped 2 million for the first time in our history. Over half of those who committed those crimes were under 21 years of age. They were committed under a Government who came to power having promised law and order. If the right hon. Lady wants a monument, let her look around her.

There is no light at the end of the tunnel. The darkness thickens as we follow the course that the right hon. Lady has decided to take. A few months ago the Prime Minister was telling business men in Saudi Arabia that Britain was through the worst of the recession. The Chief Secretary had inverted the law of gravity and had propounded the superb economic truism that what comes down must go up. That was the basis of his belief that the economy was about to recover.

The Financial Secretary said only recently that the second quarter of the year, which has now ended, would be the first quarter of upturn. That was untrue. The same can be said for every one of those statements. The truth is now out. The latest Treasury forecast states that there will be no improvement in output by the end of next year. That is as far as it can take its forecast. It is confirmed by the Central Statistical Office's publication of leading indicators.

We now know that the situation will get a great deal worse over the next 18 months. No one denies that unemployment is certain to continue rising throughout the next 18 months. The Chancellor of the Exchequer told us in the Budget Statement that his objective was to reduce interest rates. We know that market rates are rising substantially. Whatever proxy the Government choose for minimum lending rate, it is more likely to rise than to fall in the coming months. After August, even the rate of inflation, the single objective which the Government set themselves, is likely to start rising again.

All those sacrifices that I have listed, which have inflicted intolerable suffering on millions of our fellow citizens, are for nothing. The right hon. Lady's policy is a total disaster. She has not even achieved those limited immediate policy targets that she set herself when she embarked on the experiment.

For the only year for which so far we have the figures under this Government, the money supply rose at over twice the rate that the Government had set for it. The Government came into power to cut public expenditure. It has risen from 41½ per cent. of our gross domestic product to 44¼ per cent. In fact, public expenditure as a whole has risen more under the Conservative Government in the last two years than it was planned to rise under a Labour Government. That increase is entirely due to the fact that the State is compelled to finance an unnecessary level of unemployment caused by the Government's policies.

Some £3,000 million has been paid out in extra benefits. There was another £750 million through higher interest rates on Government debt and borrowing, and a substantial amount through the comparability payments, which are mainly responsible for the increased spending on the Health Service, for which the right hon. Lady took credit at the beginning of the afternoon.

The Government promised that they would cut taxes. They introduced a new index of inflation called the tax price index when they took office two years ago to show how much better off people would be if they looked at the pound in their pocket. However, we find that the tax price index introduced by the famous inventor—the Financial Secretary to the Treasury, who also invented the medium-term financial strategy—was 15.7 per cent. last month, 3.7 per cent. above the retail price index. In other words, the Government have increased taxes, not cut them, by 3.7 per cent. over the last 12 months. That has been at a time when earnings have risen over 14 per cent.

We received these figures only last week. There was a substantial fall in the living standards of those in work during the last quarter. If the Government had their way and got pay settlements of 4 per cent. or 5 per cent., in the coming year they would inflict a cut in living standards of 10 per cent. on the average worker. Does anyone really believe that the Government will achieve pay settlements at that level? Of course they will not. The Treasury Bench is planning to make the situation a great deal worse next year if it sticks to the wonderful medium-term financial strategy that will require a further tightening of the money supply, further cuts in public expenditure and a further reduction in the PSBR in the next 10 months.

No one in the world believes that the Government's economic strategy makes sense. The Bank of International Settlements—the central bankers' central bank as it is called—said the other day that the experiment which it described with wonder a year ago had failed. The International Monetary Fund said the same in its last report. In its latest report, the OECD said the same with knobs on.

The right hon. Lady has been boasting in the last few days that in Ottawa she and Chancellor Schmidt found themselves both following middle-of-the-road monetarist policies. I shall read not what he might have said to her, tired and late one evening in the log cabin when they were chatting together, but what he said when he gave an interview a fortnight ago to one of his newspapers. He stated that West Germany will not: under any circumstances adopt a monetarist policy … We have achieved our success with our stability policy since the beginning of the oil crises by a healthy mixture of various instruments which were used simultaneously. The fact is that Chancellor Schmidt does not agree with the right hon. Lady.

Nor, in fact, does the United States Treasury Secretary, Mr. Regan. Indeed, he chose the morning when the right hon. Lady arrived in Washington for her first meeting with the President to distance himself as far as he possibly could from the collapsing experiment of the British Government under the right hon. Lady.

Of course, President Reagan—who is a different person from Secretary Regan—takes a different view. He paid a warm tribute to the right hon. Lady for her performance at the Ottawa summit. The Daily Telegraph reported that he had singled out Mrs. Thatcher as one for whom he felt 'great admiration and great respect' partly because of long acquaintance and similarity of outlook.

There had been many times in the meetings when 'it was Margaret Thatcher who spoke up and put her finger on the point we were trying to resolve.' I have been puzzling about what those points on which she spoke up may have been. I believe that I found the answer in the Financial Times report of the Ottawa conference, which stated that the Prime Minister was not heard very much at Ottawa, but every now and then she chipped in to say "I agree with President Reagan." As I said in our debate on Friday—which I fear was less well-attended—she is content to be President Reagan's parrot or, perhaps, budgerigar.

The lack of confidence in the Government's strategy is equally widespread on the Conservative Benches. We have an open revolt by the wets—not just the Back Benchers but also those in the Cabinet—the Secretary of State for Employment, whom we are delighted to see here this evening sitting rather equivocally a little closer to the erstwhile Prime Minister than the present one, the Minister of Agriculture, Fisheries and Food, the Secretary of State for Foreign and Commonwealth Affairs, the Lord Privy Seal—"You name 'em; they've got 'em". Even the Chairman of the Tory Party, Lord Thorneycroft, recently described himself as: a reluctant example of rising damp. Incidentally, we should congratulate the noble Lord on resisting all the Prime Minister's attempts to detach him from his post as chairman of the Tory Party. I should like, too, to congratulate Lord Soames, although in his case he is still in the Cabinet simply because Mr. Joseph Luns is reluctant to leave Brussels for the time being. However, the trouble is that the people cannot hope for much from the Tory wets. As the Prime Minister said in one of her more elegant phrases, they lack guts and gumption.

I wondered for one moment this afternoon whether we could regard the package of employment measures as a tribute to the Secretary of State for Employment. It is a very much less dramatic package than we were led by the newspapers to expect—as far as I can make out from the right hon. Lady, under £100 million net this year and under £500 million net next year. I thought at first that perhaps at last the right hon. Gentleman had won one battle in this long, 30 years' war in which he is now engaged. Certainly the Government's decision to restore the job release scheme to the position at which they inherited it from the Labour Government points in that direction. On the other hand, no one except the Dr. Who of No. 10—Professor Walters—could have thought up the idea of throwing older men or women earning £40 a week or less out of work to make room for youngsters being hired, as far as I can make out, at a cost of £25 a week to their employer.

The collapse of confidence in the Government's policies is equally notable on the Right of the party. The other day the Selsdon group said that the Government had failed to a serious and disappointing extent in virtually all its economic objectives. I must confess that I was not terribly surprised to read on Friday in The Daily Telegraph that the right hon. Lady had enjoyed only a "mini triumph" last Thursday night in the 1922 Committee. The Daily Telegraph used the following words: She did not send people wild with delight.

The Prime Minister can ignore her party. The power of patronage will see to that. She can continue to treat her Cabinet as a collection of naughty schoolboys but, she cannot ignore the behaviour of those on whose performance her economic policies depend. If she wishes—and she clearly does—she can ignore the TUC, but she cannot ignore the working men and women who are members of the trade unions. She can ignore the CBI—especially now that bareknuckle Beckett turns out to have only false hair on his chest—but she cannot ignore the men and women who run British business, banking and our financial institutions.

The Prime Minister, in her speech, quoted an article in the Financial Times. She did not tell us that it started with the following words: A fresh mood of despondency is beginning to sweep across manufacturing industry starting in the North-West and echoed in the Midlands and the North-East. The article quoted Mr. John Tavare, chairman of Whitecroft in Manchester, as saying: We are now for the first time most concerned about the prospects for 1982 unless policies change. Another chairman of a major engineering group said: I don't thank the Government for kicking viable companies over the edge. Yet another company chairman said: Things have gone too far. The industrial base is being eroded to the extent that too many customers and too many suppliers are vanishing. The Financial Times—the main source for the right hon. Lady's earlier quotations—carried a leader only two days ago about the financial institutions. It stated that in the City there was a nasty sceptical mood in the air.

The time has long passed when the Government could hope to get away with the old claptrap about there being no alternative. Alternative policies are being successfully tried in Japan, Norway, Austria and the Netherlands. All of those countries still have full employment. In all those countries unemployment is under 2 per cent. France has just elected a new Government who have decided to give priority to reducing unemployment. Even the Ottawa summit meeting decided—although the right hon. Lady is extremely embarrassed when this is cited—that unemployment and inflation should be given equal importance as targets of Government policy.

There is no single simple alternative to the single simple version of monetarism that the right hon. Lady has tried and failed to implement over the past two years. I agree with my right hon. Friend the Member for Heywood and Royton (Mr. Barnett) on this point, just as I agreed with him on his other valid point, that generalised import controls, as proposed by the Cambridge school, would require, according to its argument, draconic pay controls in order to prevent living standards from rising. Every advanced industrial democracy in the world needs a mix of policies that includes demand management, a planned policy for industry and, above all, a social concensus.

This country, like any other, must be prepared to run a larger deficit when its economy is running far below its real potential, especially when the rate of savings is exceptionally high. The savings ratio in this country was 17 per cent., and every 1 per cent. increase in the savings ratio is equivalent to over a £2,000 million fiscal deflation. It has gone down to just under 14 per cent., which is still 5 per cent. higher than the general level of savings in the 1960s. In other words, compared with the 1960s the level of savings alone, at the present level of about 14 per cent., is inflicting a £10,000 million fiscal deflation equivalent on our economy.

Japan—a country which has regularly run these high level of savings—has also run very high levels of public sector deficit and public sector borrowing. It is absolutely right that we should do so, too, and that we should borrow from these private savings and feed them back into demand in our economy. What is happening at present, thanks to the Government's abolition of exchange controls, is that the financial institutions which look after these savings last year bought twice as many foreign equities as they brought equities in Britain. It is the duty of the Government to ensure that that money is spent in Britain to regenerate British industry rather than being spent abroad to finance our competitors.

Mr. Forman

Will the right hon. Gentleman give his best estimate of how much of the £10 billion to which he has just referred he could manage to place with the public sector and gilt markets without putting up the rate of interest?

Mr. Healey

All I can tell the hon. Member is that when I was Chancellor of the Exchequer, in my first year, from 1974 to 1975, we had a public sector borrowing requirement that was 10 per cent. of gross domestic product—well over twice the present PSBR. The economy was not running anything like so far below capacity as now, but we managed to finance it with MLR running between 9 and 13 per cent. through the year—most of the time lower than it is today—and the money supply grew by only 10 per cent. The idea that there is a direct relationship between the amount of Government borrowing and the level of interest rates is bunk, and everybody knows it.

We must get that money which is being saved today channelled into Britain, and the Government can borrow it and should spend it on investment. Private manufacturing investment fell by 16 per cent. last year and is expected to fall by between 12 and 16 per cent. again this year. Incidentally, a lot of the productivity gains to which the right hon. Lady referred today are the direct result of the fact that private manufacturing investment rose in the last two years of the Labour Government by 13 per cent. a year in volume, and that investment is now on stream and substantially increasing the productivity of British industry.

The Government have an absolute duty to spend money on more industrial training. I visited a firm in my constituency in Leeds this weekend. It is one of the most successful of all food processing machinery manufacturers in the world.

Mr. Robert Atkins

Has the right hon. Gentleman been re-selected yet?

Mr. Healey

Yes, without opposition, I am glad to say.

That firm, whose apprentice training scheme was a model for the whole of Yorkshire, is training no apprentices whatever. Conservative Members who know something about manufacturing industry will know that this is one of the most worrying elements in the recession caused by the right hon. Lady—the collapse of apprentice training at a time when in the countries which compete with us, such as Germany, Japan and France, six times as many people are being trained in industry as are being trained in Britain.

Some of that money must be steered also into research and development. We read only the other day about the massive new programme by the Japanese Government in research and development into the industries which are at the leading edge of advanced technology, such as biotechnology. In our country the position is disastrous. Finally, this money should be channelled also into improving the infrastructure, especially in nationalised industries.

These are not revolutionary ideas. They are common between the TUC and the CBI, as the Chancellor will discover when he goes to meet the NEDC next week. Nobody concerned with action in the economy, as distinct from talking or lecturing about it, believes that it is not possible to carry out the things that I have mentioned. On the contrary, it is essential that we should do it and do it now.

Most important of all, the Government should act to restore the consensus which they broke deliberately when they took office two years ago. The lesson that our competitors all over the world have learnt is that consensus is far more important than financial techniques or economic policies. That will require the Government to seek support from working men and women through their trade unions—support and co-operation on productivity and in beating inflation. The Government will get that support only if they are seen to care for ordinary people, and if, for the first time in two years, they show an element of compassion in their approach to the people. Yet that is the one U-turn that we shall never see made by the right hon. Lady. Because she lacks compassion, because she glories in confrontation, because she rejects consensus, neither the House nor the country can show any confidence whatever in her.

9.26 pm

The Chancellor of the Exchequer (Sir Geoffrey Howe)

The debate throughout the day has understandably concentrated on one issue beyond all others, and that is unemployment. It is right that it should have done so. The House recognises it as a deeply serious issue. I assure the right hon. Member for Plymouth, Devonport (Dr. Owen) that the Government do not underestimate the gravity of that issue, or of our present economic position.

Equally, I assure the right hon. Member for Devonport that the Government reject his charge of insensitivity. It will not help to solve the problem if we fail to try to understand the causes or if we seek from one party position or another to indulge in wishful thinking about how to remedy it. What has happened is that the failure of our nation under successive Governments—that is acknowledged by those who have listened to the debate on both sides of the House—to come to grips with our fundamental problems over 20 years or more is finally taking its toll. That is why this party, the Prime Minister and I and my right hon. Friends warned the country long before the election that it would take more than one Parliament to put the faults right. Beyond that a high and rising number out of work was an inevitable result of the 1979 oil price increase, just as it had been of the first oil price shock a few years previously. That has been the experience of every industrial economy.

The Leader of the Opposition suggested that unemployment in Britain was higher than elsewhere. That is not so. In Ireland it is running at 13 per cent, In once-prosperous Belgium unemployment is 14½ per cent. It is that factor that applies throughout the world, together with the remorseless decline of our competitiveness over many years, that is responsible for high unemploymnt and not the Govenment's policies.

There has been one refreshing feature about the debate. There has been little suggestion that there is any longer a choice to be made between policies to deal with inflation on the one hand and unemployment on the other. There is no such choice. The fact that there is a plain link between inflation and unemployment has been the clearest message to emerge from every one of the international meetings that I have attended in recent months.

My hon. Friend the Member for Chelsea (Mr. Scott) reminded the House that at the Ottawa summit it 'was concluded that The fight to bring down inflation and reduce unemployment must be our highest priority and these linked problems must be tackled at the same time. The communiqué went on to say—and this is important— We must continue to reduce inflation if we are to secure the higher investment and sustainable growth on which the durable recovery of employment depends. We have made real progress in the fight against inflation. When we came into office, inflation was running at an underlying rate of about 14 per cent., and rising. It reached a year-on-year peak of almost 22 per cent. It has now been reduced to half that figure.

Mr. Healey

Fifteen per cent.

Sir Geoffrey Howe

But the level is still no better than the international average. Moreover, many of our most important competitors are doing much better. Germany and Japan have an average inflation rate of 51/2 per cent. Even more important, the new United States Administration are plainly determined to give priority to the fight against inflation. So it is vital that we do not relax our own fight.

During the debate we heard arguments from several sides suggesting that we were suffering, even today, from a shortage of demand, and that we could and should—in the words of several hon. Members—engage now in a measure of reflation. The Leader of the Liberal party and the right hon. Member for Devonport asked for that. Some, including my right hon. Friend the Member for Farnham (Mr. Macmillan), argued in particular for expansion through large programmes of capital spending. No one doubts the desirability of capital spending, and I shall have something to say about that later on. But the only safe way of doing more in that direction is not by adding to the total of demand; far better to re-order our priorities, because during the 1970s the lesson was clear enough. Money expenditure in our economy grew by 340 per cent., but only 16 per cent. of that appeared as an increase in output. The problem lay in our failure to increase supply. Higher demand would do nothing to remedy that.

Yet the official Opposition are now proposing a massive repeat of the same dose—higher spending, lower taxes, lower interest rates, lower exchange rates. The right hon. Member for Stepney and Poplar (Mr. Shore) told the House this afternoon that that programme had not yet been seriously costed, but he did not challenge the figure offered by the right hon. Member for Devonpor—that it would involve a borrowing requirement of between £18 billion and £20 billion.

I must remind the Leader of the Opposition that even the political editor of the New Statesman has denounced his programme in that respect as half-baked.

The truth, as my hon. Friend the Member for Huntingdonshire (Mr. Major) was pointing out, is that if we tried to stimulate demand by printing money to give away at home, we would simply suck in more imports. We would increase the gap between what the Government spend and get in revenue to a size that we could not finance without raising interest rates to a level that choked off our industial revival. The only result would be to get deeper into the red, to send the pound plummeting and prices and unemployment rocketing.

Those are not my words. They are the words that the right hon. Gentleman seems to have forgotten. They were used by him only four years ago. If they were true then, they are twice as true today.

But what about the more gentle approach, the measure of reflation, something short of the irresponsible policies of the Official Opposition? Here, too, there is a need for caution, as can be seen from the fact that several hon. Members who were calling for modest reflation were calling also for either no increase in interest rates or, in some cases, for a reduction in interest rates. I must tell them that the world does not work in that way.

Interest rates are determined not by Governments, but by markets throughout the world. Of course, they can be influenced by the action of Governments. There is no clearer example of that than the way in which the election of a Socialist Government in France sent interest rates in that country rocketing to 20 per cent. They still stand at 17½ per cent. I must tell the House that all the fears at Ottawa were of higher interest rates. In Canada and the United States they stand at 20 per cent. and in Italy at 21 per cent.

That is the background against which Governments throughout the industrial world, far from indulging in a measure of reflation, recognise even today the need to rein back the growth and size of public expenditure. I have already mentioned that in Ireland the level of unemployment is 13 per cent., yet action was taken in that country last week not to expand the budget deficit but to cut it by 17 per cent. The Deputy Leader of the Opposition referred to the policies of the Socialist Government under Chancellor Schmidt in West Germany, but there, too, they are moving not on the right hon. Gentleman's advice to raise public spending and public borrowing, but to cut public spending by £4 billion.

Mr. Jack Straw (Blackburn)

Does not the Chancellor understand that the demand for reflation comes not only from the Opposition but from the Cabinet? How do his remarks square with the Minister of Agriculture's call for a modest reflation?

Sir Geoffrey Howe

I shall be dealing in a few moments with the measures taken by the Cabinet. Every one of the Governments that I have mentioned is acting in the way that I have described. It is possible that every one is wrong, but I suggest that it is much more likely that their policies represent the only realistic response to today's difficulties. So it is for Britain.

The House has naturally been interested in the measures in relation to unemployment announced by my right hon. Friend the Prime Minister. Those policies are entirely compatible with the maintenance of our other policies to control inflation and the policies to take steps directed againt the other evil of unemployment. That is the purpose of the measures announced by my right hon. Friend. They are designed to speed the process of adjustment to a competitive economy. They are also designed—

Mr. Straw

Will the right hon. and learned Gentleman give way?

Sir Geoffrey Howe

I have already given way once to the hon. Gentleman.

Mr. Straw

On a point of order, Mr. Speaker. Is it in order for a Minister wholly to refuse to answer a question put to him in an intervention?

Mr. Speaker

Throughout the day everybody has been given a fair hearing. I hope that that will continue.

Sir Geoffrey Howe

The policies announced by my right hon. Friend are designed to ease the position of those who are hardest hit by unemployment. The extra expenditure this year will be met from the Contingency Reserve and costs for later years will be taken into account in the autumn when we complete this year's review of future public spending plans. Total spending will be kept to levels that are consistent with the medium-term financial strategy for reducing monetary growth and controlling public borrowing.

My hon. Friend the Member for Chelsea asked whether the changes in the youth opportunities programme were the first step towards a pattern more on German lines. They certainly do not represent the last word. There is much to be said for going further in that direction. We certainly need to improve the content of the programme and for the longer term we need to give more consideration to the possibility of replacing it with a more effective training scheme for the young. There can be no doubt that special employment measures of this kind have a real part to play at the present time. That is why we have judged it right to devote new resources to these programmes. We must not fall into the trap of regarding them as a permanent solution to the problem of unemployment.

Real employment opportunities depend absolutely on better competitiveness and on better performance in industry and commerce. It is only if we can supply goods and services that compete effectively on world markets as well as at home that we can have real and sustainable jobs. To get that better performance, it is essential to improve the workings of markets for goods, services and labour. In the labour market particularly, distortions and inefficiencies act as major obstacles to the growth of employment and to the best use of our human and other resources.

My right hon. Friends the Members for Farnham and for Worthing (Mr. Higgins) drew attention to the way in which national pay agreements are certainly one such obstacle to the growth of employment. Unrealistically high starting wages are another, probably more important, obstacle to fuller employment. That is why we are working on a new scheme to offer payments to employers taking on young people under 18 at realistic rates of pay. If more realistic real wages spread to other groups, the scheme will have helpful wider effects spreading throughout the labour market. The result would be more real jobs.

Mr. Kevin McNamara (Kingston upon Hull, Central)

rose—

Mr. Shersby

rose—

Mr. Speaker

Order. I think that the Chancellor is giving way to his hon. Friend.

Mr. Shersby

Will my right hon. and learned Friend say what is the policy of the Government towards the activities of the wages councils in fixing minimum levels for various groups of employees? Is he aware that most of the groups covered by wages councils have fixed minimum rates above £40 a week? What will the Government do about that in relation to the scheme announced today?

Sir Geoffrey Howe

I am coming to that as my next point. Whereas our collective bargaining machinery has often operated to price people out of jobs, it is equally the case—

Mr. McNamara

rose—

Mr. Speaker

Order. We cannot have two hon. Members on their feet at the same time. The Chancellor of the Exchequer is clearly not giving way.

Sir Geoffrey Howe

I am answering the point raised by my hon. Friend the Member for Uxbridge (Mr. Shersby). The point was also touched upon by my hon. Friends the Members for Croydon, South (Sir W. Clark) and for Norfolk, North (Mr. Howell). It is the case that the machinery of wages councils has operated in some cases to price people out of jobs. In particular, those councils have done damage to the job opportunities of young people. [Interruption.] I do not know why Opposition Members are not interested in this. My right hon. Friend the Secretary of State for Employment has drawn attention—

Mr. McNamara

rose—

Mr. Speaker

Order. We ought to have an orderly debate right to the end. Whoever is called has a right to decide whether to give way. [Interruption.] This is not cut and thrust. Whoever is addressing the House has the right to decide whether he gives way.

Mr. McNamara

On a point of order, Mr. Speaker.

I am most grateful to the right hon. and learned Gentleman. He said that Opposition Members were not interested, particularly in the question of youth unemployment. He makes the point to us and then refuses to give way.

Mr. Speaker

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

Sir Geoffrey Howe

I realise that the hon. Gentleman is more than a little excited, having survived his reselection process, notwithstanding his courage in deciding to send his children to an independent school.

I am now talking about the effect of wages councils on the employment opportunities of young people. My right hon. Friend the Secretary of State for Employment has drawn attention to the fact that young people in Germany are paid very little—perhaps about half what their counterparts in this country receive. That is one of the reasons why there is more youth employment in Germany than there is here.

My right hon. Friend has asked the wages councils to take account of that, and so they should, for there can be no sense in system that provides for the prosecution of an employer in some cases if he pays an 18-year-old less than £56 a week, including the cost of national insurance. The gap between that figure and the £23 that a young person receives from the youth opportunities programme. let alone the £16 that he can draw in supplementary benefit, is far too wide. That artificial differential is helping to keep thousands of young people out of work. It must be substantially reduced.

Mr. John Grant (Islington, Central)

As the Chancellor has mentioned prosecutions, can he tell us how many prosecutions of employers there have been under the present Government in the circumstances that he has described?

Sir Geoffrey Howe

The fact that a Wages Inspectorate exists to prosecute people for paying less than the minimum wage is a real factor in the minds of many employers who would wish, were it not for those restrictions, to give young people job opportunities that are not now available.

Mr. Foot

If the Government were going to make an attack on the behaviour of the wages councils they should have made it directly themselves, not with a sidewind in reply to a question.

With regard to a major matter that the Government have introduced today, can the right hon. and learned Gentleman tell us the exact cost to the Treasury of the package of proposals? What will be the cost this year and next year?

Sir Geoffrey Howe

The right hon. Gentleman cannot have been listening to the speech of my right hon. Friend the Prime Minister. He will be able to see the figures set out in Hansard tomorrow.

Mr. Foot

The right hon. and learned Gentleman is Chancellor of the Exchequer. If he knows the figures well, let him tell us. What is the cost? Some of us think that the package of proposals is derisory. If the Chancellor wants to dispose of that matter, let him tell us from the Dispatch Box today how much it will cost the Treasury this year and next year—and without any prompting from the Prime Minister.

Sir Geoffrey Howe

My right hon. Friend gave the House all the figures, both for this year and for next year, in the course of her speech. The right hon. Gentleman will see them set out in Hansard tomorrow morning.

Mr. Foot

rose—

Mr. Speaker

Order. The same applies to those on the Front Bench as to those on the Back Benches.

Mr. Foot

rose—

Mr. Speaker

Order. The Chancellor of the Exchequer.

Sir Geoffrey Howe

It is not only young people who are being priced out of work by pay levels that are much too high. In the past 10 years unit labour costs in Britain have risen about four times as fast as in Germany or Japan. Is it any wonder that we have been even less able to compete? Is it any wonder that in the face of those figures more and more British factories have been priced out of the market place. Is it any wonder that more and more jobs have been destroyed?

For people of all ages the chances of a return to fuller employment will be put seriously at risk unless there is sustained and, indeed, increased responsibility in the approach to pay bargaining in the coming year. There was a substantial reduction in pay settlements last year, from an averge of more than 20 per cent. at the peak to less than 10 per cent. since last autumn. That is a massive improvement, but if we are to secure real opportunities for increased employment we need a substantial further reduction.

I looked at the latest policy document produced jointly by the Labour Party and the TUC to see what it had to say about this important issue. In the end, I found one sentence, which I now quote: We will seek to establish a new basis of economic management in which the trade unions as well as employers will be actively involved. That pathetic little sentence is a sad but understandable epitaph on 75 years of partnership within the Labour movement, which ended in the winter of discontent. It was too much for the Deputy Leader at the end of his term in office, ending as it did in industrial strife between the Government and the trade union movement, to begin lecturing my right hon. Friend on the case for consensus.

My right hon. Friend referred this afternoon to the other measures that we are taking to promote improved performance in British industry. I remind the House, first, of what we are doing for the industries that remain in public ownership. The investment programmes for the nationalised industries are planned this year to amount to £5¼ billion—an increase on last year of 15 per cent. in real terms. It is the highest figure for investment in the nationalised industries since 1975.

Of course, it is not enough just to spend the money in that way without counting the consequences. Investment on that scale can be justified only if it produces real improvements and real prospects of success. Under the last Government, British Steel and British Leyland alone accounted for £4.3 billion of public expenditure, but there was precious little to show for it. The tragedies of Consett and Corby, to which the Leader of the Opposition referred, are the prices that are having to be paid for Labour's delay in dealing with real problems.

Today the picture is very different. Under this Government, public spending on those two public industries—in all, £2¼ in the first two financial years—is not only helping to sustain orders for thousands of firms in the private sector; it is doing much more than that. At last, it is producing measurable and impressive results, in British Steel and British Leyland. In the first four months of this year, British Leyland produced as many cars as in the same period last year, but with 20,000 fewer men. Productivity has risen by no less than 30 per cent. Over the past year or so, British Steel at Scunthorpe has improved its productivity by up to 25 per cent. It has cut the time taken to produce a ton of steel from nine man hours to seven. At Llanwern, the figure is down to 4½ per ton. Performance in those British Steel works now compares with the best in Europe.

Elsewhere we have pressed ahead with our programme to transfer ownership, in whole or in part, back to the private sector. As a result, the whole of British Aerospace's external finance of more than £100 million this year, is being funded no longer by the taxpayer but by the private investor. We intend to make much more progress in that direction. Parliament has already approved powers to sell shares in British Airways and the National Freight Corporation, and for the latter company we are already considering an offer from the managers to buy back their own business—a business which they know better than anyone else. Only today, Royal Assent was given to the British Telecommunications Act. This will permit the privatisation of Cable and Wireless and some of British Telecom's subsidary activities. Bills to privatise the British Transport Docks Board and major British Rail subsidiaries have now completed all their stages in Parliament.

We shall enable the public to share in the equity of the British National Oil Corporation. That measure will have high priority in the programme for the next Session.

We are bringing about equally enouraging changes in road transport. It is less than a year since inter-city coach licensing was brought to an end by my right hon. Friend the Secretary of State for Transport. Already the volume of traffic has more than doubled. Already the value of fares, literally, has been cut by half. The message is clear—fewer controls, better service and more jobs.

So, too, with enterprise zones. By the end of next month we expect eight or nine of the 11 zones to be in operation. In the two zones formally established last month—Swansea and Corby—there is already much positive action. At Swansea, within the first month, 38 firms agreed to set up in the zone and over 300 inquiries were received from prospective investors. On the day that the Corby zone was designated formally, 50 acres out of 280 acres were allocated for development, and 32 factories were under construction. Six firms were already operating in the zone.

The business start-up scheme brings similar help to small firms. It has been described by the CBI as one of the most important contributions that any Government have made since the war towards encouraging the starting of new firms. The loan guarantee scheme has received a similar welcome.

What a contrast such measures make to the way in which Labour Councils throughout the country are exercising their powers to obstruct business and industry. They are literally destroying jobs with high rate demands. Labour council after Labour council is bringing in huge rate increases. They can be paid for only out of business income that otherwise would sustain growth and create jobs.

Greater London provides the plainest example. The Greater London Council has moved to prohibit all new office development. What good does that do for the future of London as a world financial centre? What good does that do for the construction industry?

As if that were not enough, the Greater London Council last week announced its intention to increase rates next year by 120 per cent. When Mr. Ken Livingstone was asked whether he thought that he could put up the rates without limit, he said: We can now Our rates come to £500 million a year and one-third of it comes from offices in Central London so that does not hurt our people. How foolish can a Labour leader get? The tragedy is that such thinking is characteristic of today's Labour Party. The Leader of the Opposition, in his speech this afternoon, called for massive increases in local government spending. That will have exactly the same result. A Labour GLC is destroying jobs in London today. A Labour Government would destroy jobs in Britain tomorrow.

In every respect, the policies offered by today's Labour Party would do nothing but harm to the nation's chances of reducing unemployment. Six years ago the Labour Party invited the people to take part in a national referendum on whether this country should remain a member of the European Community. By a massive majority, the people said "Yes". Since then the proportion of trade done with Europe has risen by about 20 per cent. Over 43 per cent. of our export earnings comes from within the Community. Much foreign investment is coming to Britain only because it is a member of the Community.

Directly or indirectly, two out of five jobs in Britain now depend upon our place in the Community. As long as six years ago the Deputy Leader of the Opposition told the House that a decision to leave the Community would add a new dimension of uncertainty to those that already existed and that it would certainly damage the readiness of business to invest. He also said that it was liable to increase both unemployment and inflation. Yet the Opposition now propose, without even a hint of a referendum, to break that link. It is greatly to their discredit that they are now prepared to see the nation's interest gravely damaged by accepting that proposal.

The Opposition are also now committed to destroying the defences of the nation as well as the economy. They have decided to abandon, without any kind of exchange, the nuclear weapons that have been at the heart of our defence. The Leader of the Opposition, at last week's meeting of the NEC, declined to cast his vote on this vital subject. He proposed to wait—if the House can believe it—until he had visited Moscow. His policies can best be judged in the words of the Shadow Defence Secretary—the hon. Member for Pontypridd (Mr. John)—who described his party's policies as "simplistic, misguided and very damaging". The same is true of the Opposition's economic policies.

Our policies are those of common sense—common sense to reject inflation, common sense to live within our means, common sense to give industry the right to grow. The way ahead will not be easy, but we shall hold to our course. It is the course of common sense.

Mr. Michael Cocks (Bristol South)

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

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

Question put accordingly:—

The House divided: Ayes 262, Noes 334.

Division No. 289]	[10.00 pm
AYES
Adams, Allen	Ennals, Rt Hon David
Allaun, Frank	Evans, Ioan (Aberdare)
Anderson, Donald	Evans, John (Newton)
Archer, Rt Hon Peter	Ewing, Harry
Ashley, Rt Hon Jack	Faulds, Andrew
Ashton, Joe	Field, Frank
Atkinson, N.(H'gey,)	Fitch, Alan
Bagier, Gordon A.T.	Fitt, Gerard
Barnett, Guy (Greenwich)	Flannery, Martin
Barnett, Rt Hon Joel (H'wd)	Fletcher, Raymond (Ilkeston)
Beith, A. J.	Fletcher, Ted (Darlington)
Benn, Rt Hon A. Wedgwood	Foot, Rt Hon Michael
Bennett, Andrew(St'kp't N)	Ford, Ben
Bidwell, Sydney	Forrester, John
Booth, Rt Hon Albert	Foster, Derek
Boothroyd, Miss Betty	Foulkes, George
Bottomley, Rt Hon A.(M'b'ro)	Fraser, J. (Lamb'th, N'w'd)
Bradley, Tom	Freeson, Rt Hon Reginald
Bray, Dr Jeremy	Garrett, John (Norwich S)
Brocklebank-Fowler, C.	Garrett, W. E. (Wallsend)
Brown, Hugh D. (Provan)	George, Bruce
Brown, R. C. (N'castle W)	Ginsburg, David
Brown, Ronald W. (H'ckn'y S)	Golding, John
Buchan, Norman	Gourlay, Harry
Callaghan, Rt Hon J.	Graham, Ted
Callaghan, Jim (Midd't'n & P)	Grant, George (Morpeth)
Campbell, Ian	Grant, John (Islington C)
Campbell-Savours, Dale	Hamilton, W. W. (C'tral Fife)
Cant, R. B.	Hardy, Peter
Carter-Jones, Lewis	Harrison, Rt Hon Walter
Cartwright, John	Hart, Rt Hon Dame Judith
Clark, Dr David (S Shields)	Hattersley, Rt Hon Roy
Cocks, Rt Hon M. (B'stol S)	Haynes, Frank
Cohen, Stanley	Healey, Rt Hon Denis
Concannon, Rt Hon J. D.	Heffer, Eric S.
Conlan, Bernard	Hogg, N. (E Dunb't'nshire)
Cook, Robin F.	Holland, S. (L'b'th, Vauxh'll)
Cowans, Harry	Home Robertson, John
Cox, T. (W'dsw'th, Toot'g)	Homewood, William
Craigen, J. M.	Hooley, Frank
Crawshaw, Richard	Horam, John
Crowther, J. S.	Howell, Rt Hon D.
Cryer, Bob	Howells, Geraint
Cunliffe, Lawrence	Hoyle, Douglas
Cunningham, G. (Islington S)	Huckfield, Les
Cunningham, Dr J. (W'h'n)	Hughes, Mark (Durham)
Dalyell, Tam	Hughes, Robert (Aberdeen N)
Davidson, Arthur	Hughes, Roy (Newport)
Davies, Rt Hon Denzil (L'lli)	Janner, Hon Greville
Davies, Ifor (Gower)	Jay, Rt Hon Douglas
Davis, Clinton (Hackney C)	John, Brynmor
Davis, T. (B'ham, Stechf'd)	Johnson, James (Hull West)
Deakins, Eric	Johnson, Walter (Derby S)
Dean, Joseph (Leeds West)	Johnston, Russell (Inverness)
Dempsey, James	Jones, Rt Hon Alec (Rh'dda)
Dewar, Donald	Jones, Barry (East Flint)
Dixon, Donald	Jones, Dan (Burnley)
Dobson, Frank	Kaufman, Rt Hon Gerald
Dormand, Jack	Kerr, Russell
Douglas-Mann, Bruce	Kilroy-Silk, Robert
Dubs, Alfred	Kinnock, Neil
Duffy, A. E. P.	Lambie, David
Dunn, James A.	Lamborn, Harry
Dunwoody, Hon Mrs G.	Lamond, James
Eadie, Alex	Leadbitter, Ted
Eastham, Ken	Leighton, Ronald
Edwards, R. (W'hampt'n S E)	Lestor, Miss Joan
Ellis, R. (NE D'bysh're)	Lewis, Arthur (N'ham NW)
Ellis, Tom (Wrexham)	Litherland, Robert
English, Michael	Lofthouse, Geoffrey

Lyon, Alexander (York)	Rooker, J. W.
Lyons, Edward (Bradf'd W)	Ross, Ernest (Dundee West)
Mabon, Rt Hon Dr J. Dickson	Ross, Stephen (Isle of Wight)
McCartney, Hugh	Rowlands, Ted
McDonald, Dr Oonagh	Ryman, John
McElhone, Frank	Sandelson, Neville
McGuire, Michael (Ince)	Sever, John
McKay, Allen (Penistone)	Sheerman, Barry
McKelvey, William	Sheldon, Rt Hon R.
MacKenzie, Rt Hon Gregor	Shore, Rt Hon Peter
Maclennan, Robert	Short, Mrs Renée
McNally, Thomas	Silkin, Rt Hon J. (Deptford)
McNamara, Kevin	Silkin, Rt Hon S. C. (Dulwich)
McTaggart, Robert	Silverman, Julius
McWilliam, John	Skinner, Dennis
Magee, Bryan	Snape, Peter
Marks, Kenneth	Soley, Clive
Marshall, D(G'gow S'ton)	Spearing, Nigel
Marshall, Dr Edmund (Goole)	Spriggs, Leslie
Marshall, Jim (Leicester S)	Stallard, A. W.
Martin, M(G'gow S'burn)	Steel, Rt Hon David
Mason, Rt Hon Roy	Stewart, Rt Hon D. (W Isles)
Maxton, John	Stoddart, David
Maynard, Miss Joan	Stott, Roger
Meacher, Michael	Strang, Gavin
Mellish, Rt Hon Robert	Straw, Jack
Mikardo, Ian	Summerskill, Hon Dr Shirley
Millan, Rt Hon Bruce	Taylor, Mrs Ann (Bolton W)
Miller, Dr M. S. (E Kilbride)	Thomas, Dafydd (Merioneth)
Mitchell, Austin (Grimsby)	Thomas, Jeffrey (Abertillery)
Mitchell, R. C. (Soton Itchen)	Thomas, Mike (Newcastle E)
Morris, Rt Hon A. (W'shawe)	Thomas, Dr R. (Carmarthen)
Morris, Rt Hon C. (O'shaw)	Thorne, Stan (Preston South)
Morris, Rt Hon J. (Aberavon)	Tilley, John
Morton, George	Tinn, James
Moyle, Rt Hon Roland	Torney, Tom
Mulley, Rt Hon Frederick	Urwin, Rt Hon Tom
Newens, Stanley	Varley, Rt Hon Eric G.
Oakes, Rt Hon Gordon	Wainwright, E.(Dearne V)
Ogden, Eric	Wainwright, R.(Colne V)
O'Halloran, Michael	Walker, Rt Hon H.(D'caster)
O'Neill, Martin	Watkins, David
Orme, Rt Hon Stanley	Weetch, Ken
Owen, Rt Hon Dr David	Wellbeloved, James
Paisley, Rev Ian	Welsh, Michael
Palmer, Arthur	White, J. (G'gow Pollok)
Park, George	Whitehead, Phillip
Parker, John	Whitlock, William
Pendry, Tom	Wigley, Dafydd
Penhaligon, David	Willey, Rt Hon Frederick
Powell, Raymond (Ogmore)	Williams, Rt Hon A.(S'sea W)
Prescott, John	Wilson, Rt Hon Sir H.(H'ton)
Price, C. (Lewisham W)	Wilson, William (C'try SE)
Race, Reg	Winnick, David
Radice, Giles	Woodall, Alec
Rees, Rt Hon M (Leeds S)	Woolmer, Kenneth
Richardson, Jo	Wrigglesworth, Ian
Roberts, Albert (Normanton)	Wright, Sheila
Roberts, Allan (Bootle)	Young, David (Bolton E)
Roberts, Ernest (Hackney N)
Roberts, Gwilym (Cannock)	Tellers for the Ayes:
Robinson, G. (Coventry NW)	Mr. James Hamilton and
Rodgers, Rt Hon William	Mr. Donald Coleman.

NOES
Adley, Robert	Bendall, Vivian
Aitken, Jonathan	Bennett, Sir Frederic (T'bay)
Alexander, Richard	Benyon, Thomas (A'don)
Alison, Michael	Benyon, W. (Buckingham)
Amery, Rt Hon Julian	Berry, Hon Anthony
Ancram, Michael	Best, Keith
Arnold, Tom	Bevan, David Gilroy
Aspinwall, Jack	Biffen, Rt Hon John
Atkins, Rt Hon H.(S'thorne)	Biggs-Davison, John
Atkins, Robert(Preston N)	Blackburn, John
Atkinson, David (B'm'th,E)	Blaker, Peter
Baker, Kenneth(St.M'bone)	Body, Richard
Baker, Nicholas (N Dorset)	Bonsor, Sir Nicholas
Beaumont-Dark, Anthony	Boscawen, Hon Robert
Bell, Sir Ronald	Bottomley, Peter (W'wich W)

Bowden, Andrew	Goodhew, Victor
Boyson, Dr Rhodes	Goodlad, Alastair
Bradford, Rev R.	Gorst, John
Braine, Sir Bernard	Gow, Ian
Bright, Graham	Gower, Sir Raymond
Brinton, Tim	Grant, Anthony (Harrow C)
Brittan, Leon	Gray, Hamish
Brooke, Hon Peter	Greenway, Harry
Brotherton, Michael	Grieve, Percy
Brown, Michael(Brigg & Sc'n)	Griffiths, E.(B'y St. Edm'ds)
Browne, John (Winchester)	Griffiths, Peter Portsm'th N)
Bruce-Gardyne, John	Grist, Ian
Bryan, Sir Paul	Grylls, Michael
Buchanan-Smith, Alick	Gummer, John Selwyn
Buck, Antony	Hamilton, Hon A.
Budgen, Nick	Hamilton, Michael (Salisbury)
Bulmer, Esmond	Hampson, Dr Keith
Butcher, John	Hannam, John
Butler, Hon Adam	Haselhurst, Alan
Cadbury, Jocelyn	Hastings, Stephen
Carlisle, John (Luton West)	Havers, Rt Hon Sir Michael
Carlisle, Kenneth (Lincoln)	Hawkins, Paul
Carlisle, Rt Hon M. (R'c'n )	Hawksley, Warren
Chalker, Mrs. Lynda	Hayhoe, Barney
Channon, Rt. Hon. Paul	Heath, Rt Hon Edward
Chapman, Sydney	Heddle, John
Churchill, W. S.	Henderson, Barry
Clark, Hon A. (Plym'th, S'n)	Hicks, Robert
Clark, Sir W. (Croydon S)	Higgins, Rt Hon Terence L.
Clarke, Kenneth (Rushcliffe)	Hill, James
Clegg, Sir Walter	Hogg, Hon Douglas (Gr'th'm)
Cockeram, Eric	Holland, Philip (Carlton)
Colvin, Michael	Hooson, Tom
Cope, John	Hordern, Peter
Cormack, Patrick	Howe, Rt Hon Sir Geoffrey
Corrie, John	Howell, Rt Hon D. (G'ldfd)
Costain, Sir Albert	Howell, Ralph (N Norfolk)
Cranborne, Viscount	Hunt, David (Wirral)
Critchley, Julian	Hunt, John (Ravensbourne)
Crouch, David	Hurd, Hon Douglas
Dean, Paul (North Somerset)	Irving, Charles (Cheltenham)
Dickens, Geoffrey	Jenkin, Rt Hon Patrick
Dorrell, Stephen	Jessel, Toby
Douglas-Hamilton, Lord J.	Johnson Smith, Geoffrey
Dover, Denshore	Jopling, Rt Hon Michael
du Cann, Rt Hon Edward	Joseph, Rt Hon Sir Keith
Dunlop, John	Kaberry, Sir Donald
Dunn, Robert (Dartford)	Kellett-Bowman, Mrs Elaine
Durant, Tony	Kershaw, Anthony
Dykes, Hugh	Kimball, Marcus
Eden, Rt Hon Sir John	King, Rt Hon Tom
Edwards, Rt Hon N. (P'broke)	Kitson, Sir Timothy
Eggar, Tim	Knight, Mrs Jill
Elliott, Sir William	Knox, David
Emery, Peter	Lamont, Norman
Eyre, Reginald	Lang, Ian
Fairbairn, Nicholas	Langford-Holt, Sir John
Fairgrieve, Russell	Latham, Michael
Faith, Mrs Sheila	Lawrence, Ivan
Farr, John	Lawson, Rt Hon Nigel
Fell, Anthony	Lee, John
Fenner, Mrs Peggy	Lennox-Boyd, Hon Mark
Finsberg, Geoffrey	Lester, Jim (Beeston)
Fisher, Sir Nigel	Lewis, Kenneth (Rutland)
Fletcher, A. (Ed'nb'gh N)	Lloyd, Ian (Havant & W'loo)
Fletcher-Cooke, Sir Charles	Lloyd, Peter (Fareham)
Fookes, Miss Janet	Loveridge, John
Forman, Nigel	Luce, Richard
Fowler, Rt Hon Norman	Lyell, Nicholas
Fox, Marcus	McCrindle, Robert
Fraser, Rt Hon Sir Hugh	Macfarlane, Neil
Fraser, Peter (South Angus)	MacGregor, John
Fry, Peter	Mac Kay, John (Argyll)
Galbraith, Hon T. G. D.	Macmillan, Rt Hon M.
Gardiner, George (Reigate)	McNair-Wilson, M. (N'bury)
Gardner, Edward (S Fylde)	McNair-Wilson, P. (New F'st)
Garel-Jones, Tristan	McQuarrie, Albert
Gilmour, Rt Hon Sir Ian	Madel, David
Glyn, Dr Alan	Major, John
Goodhart, Philip	Marland, Paul

Marlow, Tony	Page, Rt Hon Sir G. (Crosby)
Marshall, Michael (Arundel)	Page, Richard (SW Herts)
Marten, Neil (Banbury)	Parkinson, Cecil
Mates, Michael	Parris, Matthew
Maude, Rt Hon Sir Angus	Patten, Christopher (Bath)
Mawby, Ray	Patten, John (Oxford)
Mawhinney, Dr Brian	Pattie, Geoffrey
Maxwell-Hyslop, Robin	Pawsey, James
Mayhew, Patrick	Percival, Sir Ian
Mellor, David	Peyton, Rt Hon John
Meyer, Sir Anthony	Pink, R. Bonner
Miller, Hal (B'grove)	Pollock, Alexander
Mills, lain (Meriden)	Porter, Barry
Mills, Peter (West Devon)	Powell, Rt Hon J.E. (S Down)
Miscampbell, Norman	Prentice, Rt Hon Reg
Mitchell, David (Basingstoke)	Price, Sir David (Eastleigh)
Moate, Roger	Prior, Rt Hon James
Molyneaux, James	Proctor, K. Harvey
Monro, Hector	Pym, Rt Hon Francis
Montgomery, Fergus	Raison, Timothy
Moore, John	Rathbone, Tim
Morgan, Geraint	Rees, Peter (Dover and Deal)
Morris, M. (N'hampton S)	Rees-Davies, W. R.
Morrison, Hon C. (Devizes)	Renton, Tim
Morrison, Hon P. (Chester)	Rhodes James, Robert
Mudd, David	Rhys Williams, Sir Brandon
Murphy, Christopher	Ridley, Hon Nicholas
Myles, David	Ridsdale, Sir Julian
Neale, Gerrard	Rifkind, Malcolm
Needham, Richard	Rippon, Rt Hon Geoffrey
Nelson, Anthony	Roberts, M. (Cardiff NW)
Neubert, Michael	Roberts, Wyn (Conway)
Newton, Tony	Rossi, Hugh
Normanton, Tom	Rost, Peter
Nott, Rt Hon John	Royle, Sir Anthony
Onslow, Cranley	Sainsbury, Hon Timothy
Oppenheim, Rt Hon Mrs S.	St. John-Stevas, Rt Hon N.
Osborn, John	Scott, Nicholas
Page, John (Harrow, West)	Shaw, Giles (Pudsey)

Shaw, Michael (Scarborough)	Townsend, Cyril D, (B'heath)
Shelton, William (Streatham)	Trippier, David
Shepherd, Colin (Hereford)	Trotter, Neville
Shepherd, Richard	van Straubenzee, W. R.
Shersby, Michael	Vaughan, Dr Gerard
Silvester, Fred	Viggers, Peter
Sims, Roger	Waddington, David
Skeet, T. H. H,	Wakeham, John
Smith, Dudley	Waldegrave, Hon William
Speed, Keith	Walker, Rt Hon P.(W'cester)
Speller, Tony	Walker, B. (Perth)
Spence, John	Walker-Smith, Rt Hon Sir D.
Spicer, Jim (West Dorset)	Wall, Patrick
Spicer, Michael (S Worcs)	Waller, Gary
Sproat, Iain	Walters, Dennis
Squire, Robin	Ward, John
Stainton, Keith	Warren, Kenneth
Stanbrook, Ivor	Watson, John
Stanley, John	Wells, John (Maidstone)
Steen, Anthony	Wells, Bowen
Stevens, Martin	Wheeler, John
Stewart, Ian (Hitchin)	Whitelaw, Rt Hon William
Stewart, A.(E Renfrewshire)	Whitney, Raymond
Stokes, John	Wickenden, Keith
Stradling Thomas, J.	Wiggin, Jerry
Tapsell, Peter	Wilkinson, John
Taylor, Teddy (S'end E)	Williams, D.(Montgomery)
Tebbit, Norman	Winterton, Nicholas
Temple-Morris, Peter	Wolfson, Mark
Thatcher, Rt Hon Mrs M.	Young, Sir George (Acton)
Thomas, Rt Hon Peter	Younger, Rt Hon George
Thompson, Donald
Thorne, Neil (Ilford South)	Tellers for the Noes:
Thornton, Malcolm	Mr. Spencer le Marchant and
Townend, John (Bridlington)	Mr. Carol Mather.

Question accordingly negatived.

c911
1. BUSINESS OF THE HOUSE 27 words