REPEAL OF THE NATIONAL INSURANCE SURCHARGE ACT 1976

HC Deb 28 April 1983 vol 41 cc1018-50 The National Insurance Surcharge Act of 1976 is hereby repealed.—[Mr. Robert Sheldon.]

Brought up, and read the First time.

4.39 pm

Mr. Robert Sheldon (Ashton-under-Lyne)

I beg to move, That the clause be now read a Second time.

The Chairman of Ways and Means (Mr. Bernard Weatherill)

With this it will be convenient to take new clause 4—Abolition of national insurance surcharge: The National Insurance Surcharge Act 1976 shall be repealed with effect from 1st August 1983.

Mr. Sheldon

Under clause 88, the national insurance surcharge is reduced to 1 per cent. We want to go rather further than that and, because of the rules of the House, we have had to put this down in the form of a new clause. The new clause repeals the whole of the Act, straightforwardly and without equivocation. I believe that this is the way to proceed because of the extreme position of British industry at the present time.

I have often expressed my opposition to the national insurance surcharge. It is a tax on exports, but not on imports, and as such is the reverse of VAT. It increases the cost of employment, and at a time when employment prospects have been severely jeopardised that is more important than ever. In a number of other ways it is worse than VAT as it increases the prices charged for goods and services, including even those that are zero-rated for VAT purposes. Although VAT exempts food, books, newspapers and many other articles, the national insurance surcharge works its way into the increased prices for those commodities.

I have always accepted that, but with our economy now in a critical state any help that we can give industry should be given. The first priority must be to remove this tax now that unemployment has risen so rapidly and unfortunately to its present level.

In the past four years, with the advent of the Government, North sea oil has arrived to help our revenues and balance of payments. Among the consequences of the increased revenues from North sea oil we might have expected an increase in investment. Some people rightly looked to the re-equipment of industry and others to the revitalisation of our towns and cities. The national insurance surcharge is of enormous importance because it offers us the only real opportunity in the Finance Bill to give assistance and support to industry in its present difficulties.

The reality has been much more disappointing. One of the saddest features of the last four years is that we have been barren of economic success. In many of our centres of population, there are now more signs of crumbling and decay than anything we would have accepted or tolerated not many years ago. Our minor roads weave their way around the country and produce more alternative routes than almost any other country. They used to be maintained in a state of near perfection, but we are unlikely to see that again. Our motorways, with their perpetual repairs and lane closures, are seen as a national joke, and by some as a national disgrace.

Our railway journeys, in an age of great technical developments, take longer each year. The increase in journey time is chronicled in the annual railway timetable, which records our failure not so much to advance the system as to retain the basic maintenance of an investment introduced by those who felt a greater responsibility than those who have come after them. All these things could have been tackled by giving more resources to industry through the increased public expenditure and help proposed in the new clause.

The picture of decay and disrepair is the same on our council estates. Paint is allowed to peel off, exposing the woodwork to the weather, doors are rotting and window frames decaying. On many occasions I, and I am sure many other hon. Members, have discovered that such window frames are ready to fall out, so bad has been the maintenance. Our roads and pavements show the same dilapidation and our streets are closed due to collapsed sewers. The most basic maintenance tasks are neglected, roads are potholed as never before, and anyone with respect for his motor car plans a route that will do least damage to its springs and suspension.

Our industries show many of the same signs. Factories stand empty, with estate agents' signs on their gates. Parts of our industrial estates have an uneasy silence unfamiliar to those who knew them only a few years ago. The absence of smoke from many chimneys owes nothing to the Clean Air Act.

When we look for statistical confirmation of those impressions, the evidence is all too clearly at hand. In the first year after the arrival of the Government, manufacturing output fell by 10 per cent. By 1981, it had fallen by 14 per cent., and the current level is around 15 per cent. Output in the textile industry fell by 16 per cent. in 1980. The figure had reached 24 per cent. in 1981, and it is now 30 per cent. below its level when the Government took on their responsibilities. Output in the metal manufacturing industries is down 28 per cent., which explains the devastation brought to the west midlands by the Government's policies.

4.45 pm

Company liquidations are an all-time record and would be much worse but for the fact that the banks, with the large profits created for them by the Government's high interest rates, have hesitated to close down firms whose flimsy balance sheets would long ago have forced them into liquidation. In such circumstances, investment in manufacturing industry has collapsed. By the end of 1982, we were investing 26 per cent. less than four years ago, and even that miserable total has been achieved only because commercial and financial companies that are still making profits, in order to reduce their tax liability, have leased assets to industry and so made use of the capital allowances that the profitless manufacturing sector has been unable to use.

In fact, with more than £30 billion of unused capital allowances, many manufacturing companies have no investment incentive whatever from the tax system—a wholly new situation. In these circumstances, leased assets have increased and the present low level of investment would be much worse without them.

As a direct consequence of their economic policies, the Government have seen a desolation of industry without parallel in the western world. Faced with this wholly exceptional situation, the alarm bells should have been sounding all over Whitehall. Money, assistance and measures should have been provided immediately to rescue our greatest economic asset — the means of production and the means by which we earn our living.

Newly emerging oil revenues from the North sea should have been poured into the structural retention and development of our industrial companies. Public sector orders should have been provided, expedited or even diverted to them so that they could retain their capacity while planning their expansion and diversification. In the Government's lifetime, no priority was greater than that.

The Prime Minister is fond of looking at the lessons of Japan. The most important lesson I see is the relationship between Government and industry in that country. Can anyone visualise a collapse of industry in Japan with Government looking on, impassive and inert? Assistance should have taken the place of economic theory. Industry was a swimmer in the sea struggling for its very existence. At such a time we do not start worrying about the cost of the life belt—deliverance is all.

Our entire national effort should have been directed to the rescue of British industry. It is a giant failure of opportunity that the nation's resources, involving the whole of industry and our people, were not called upon to safeguard our basic wealth-creating processes. The Government's incomprehension of those important matters troubles us most.

The trouble is that we are a divided nation—divided between class and class, north and south, and Government and industry. Government failed to understand the industrial world, and this Government's failure is the worst. The Department of Industry is a burlesque of such a department as it exists in France, Italy or Japan. That would be bad enough, but the problem is aggravated by prominent industrialists who seem at times to indulge their preference for politics rather than profit, let alone industrial expansion. How else can one explain the reaction which greeted the director general of the CBI when, foreseeing the industrial devastation which was to lay waste so much of what he as an industrialist stood for, he called for a "bare knuckle fight" to halt the ruin that he anticipated?

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

Will my right hon. Friend give way?

Mr. Sheldon

In a moment.

The Economic Secretary to the Treasury (Mr. Jock Bruce-Gardyne)

Why not give way now?

Mr. Sheldon

I shall give way shortly. Some of us always give way. I plead that I am one of those.

The forced withdrawal of what the director general of the CBI said put an end to one of the few hopeful attempts to forestall the disaster that was to come. However, it showed the unprofessional nature of our industrial leaders who prove, time and again, that party politics are of greater interest to many of them than their role as custodians of our industry.

Mr. Campbell-Savours

Is my right hon. Friend aware that many observers of these matters, having studied the CBI's report in detail, began to wonder from where the CBI drew its conclusions? Is he further aware that anyone who examines that document will note that there are innumerable examples of deterioration rather than amelioration because the Government, in conjunction with the CBI, have misrepresented these matters to the British people? Is he also aware that the country will not be fooled at the next general election? Whatever the Government say which sounds positive, affirmative and supportive of what they have done, the people will recognise the truth, which is that matters are deteriorating each day.

Mr. Sheldon

I entirely agree with my hon. Friend. I am delighted that I gave way to him, as he has emphasised some of the crucial aspects of the issue.

I am saddened most by the Government"s failure to comprehend what is going on in British industry today. If the Economic Secretary to the Treasury went just a few miles north of his rural constituency to the centre of Manchester to see what is happening in the industries there and talk to the people, the Manchester chamber of commerce and others, he would get the same response as I get. When I ask them which Government produce the profit and output as opposed to what their politics are, the answer is always the same: they say that they do better under a Labour Government. Although their politics is Tory, their profits are Socialist. I have been accepted by many such people with whom I am happy to engage in discussions and debate.

The Chief Secretary to the Treasury (Mr. Leon Brittan)

Will the right hon. Gentleman give way?

Mr. Sheldon

In a moment. [HON. MEMBERS: "Oh."] I am merely showing that the right hon. and learned Gentleman, who is alway so slow to give way, will never have that problem with me.

Mr. Brittan

I think that the right hon. Gentleman will find that the average interval which elapses between giving way is no greater than the time that has elapsed between his giving way to his hon. Friend the Member for Workington (Mr. Campbell-Savours) and me. If it is so clear to the captains of industry that they are better off under Labour, to what does he attribute their open support for the Conservative party? Does he attribute it to idealism, altruism or what?

Mr. Austin Mitchell (Grimsby)

Or the peerage.

Mr. Sheldon

One of the sad aspects of the relationship between industry and the Conservative party is that the leaders of industry have too frequently looked to their future, their personal taxation, the class barrier and on which side they see themselves rather than to the success of their industry. They have contributed significantly to the divisions in society that I have mentioned.

The CBI is not represented by its economic experts, who are good, and we get a completely different picture from those who really represent industry. The statements of the National Economic Development Office have been quite different from those of the CBI. In its report on 13 March which was based on the sector working parties, it said: None of the committees which have reported foresees an increase in employment in its sector up to the end of the decade; continuing productivity improvements will be needed in order to maintain sectoral competitiveness, and many committees expect further reductions in employment to take place. It is rare indeed for a body from industry to show such unanimity. It is right that we should consider what it says in the light of its membership. If we examine the membership of the sector working parties, one thing stands out. Their views reek of the factory and the producer which is so absent from the after-dinner political comments of those who claim to represent an industry but cannot justify that representation.

With regard to the electronic components sector working party, the comments that I have already referred to are supported by such people as the managing director of the solid state division of the Plessey Company Ltd., the managing director of Marconi Electronic Devices Ltd. and the managing director of Ferranti Electronics Ltd. In the gauge and tool sector working party, those views are supported by such people as the managing director of Novogage Ltd., and the managing director of Exel Mould and Tool Ltd. In the process plant sector working party, those views are supported by such people as the managing director of Orbit Valves Ltd., the managing director of Babcock Power Ltd. and a few trade unionists such as Mr. Perkins, the divisional organiser of the Amalgamated Union of Engineering Workers. Those people spend their days working and struggling to keep industry afloat. They do not tend to go to political functions organised by the CBI, which does not have the same connections with the industries that I have mentioned. I believe that the people to whom I have referred represent industry much better. Their views are at considerable variance with those expressed by some members of the CBI.

It is even more interesting to note that one sees something completely different in the CBI's figures as opposed to its comments. Few things better illustrate the gulf between Government and industry than the interview which Steve Vines conducted with the Secretary of State for Industry in The Observer on 20 March 1983. The Secretary of State had this to say about the Engineering Employers Federation: They have been banging and banging away at us because we had to stop the small engineering firms investment scheme (SEFIS). Then they say there's nothing in this Budget for our industries, and here we are with £100 million over the next three years to revive SEFIS and I don't think they've even noticed. It's so damned unfair. The report continued: Patrick Jenkin, in other words, is not a happy man. He reckons this has been a marvellous Budget for business, but no one seems to notice. Manufacturing industry has declined by 15 per cent. in the past four years. In other words, demand has been shorn by 15 per cent. That represents more than £10 billion a year, even without adding the normal growth that should have been expected in that time. Manufacturing industry has lost £10 billion a year in orders. The Secretary of State offers £30 million a year and is unhappy because he is not greeted as the great deliverer. Faced with the enormity of the damage to industry, he is not only quite unaware of what the Government have done; he even believes in the remedial effects of the corn plasters that he brings out of the dusty first aid box to dress the gaping wounds that he is unable even to perceive.

So uncomprehending is the right hon. Gentleman that, when asked in that interview a question about control over enterprises, he is reported as follows: 'What the hell do they want' challenges Jenkin, 'They want the fun of being in a small business and they want someone else to take the risk. The Secretary of State for Industry may consider it fun to run a small business under this Government. More than 20 years ago Harold Macmillan tried to convince those who scoured the world for orders, staying in a different hotel each night and living out of a suitcase, that exporting was fun, and he earned the scorn and derision of overseas salesmen. Bigger by far is the incomprehension of a departmental Minister of those whom he should be trying to encourage.

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The article ended with the comment by the author: The suspicion lingers that the jobs boost will not be great". Let it linger no longer. We know that unemployment will continue to rise, and we know the combined views of the Government, the public expenditure White Paper, the NEDO report, the CBI survey, the TUC economic review and countless others. Rather than the gloss put on the position in the CBI report, the figures in the survey show that 89 per cent. of firms report insufficient demand as against the 93 per cent. who were asked the same question in January. The figures also show that the firms expecting an increase in employment in their enterprises represent only one quarter of those who expect a decrease. Only 4 per cent. of companies that were asked whether their present stocks of finished goods are more than adequate, adequate, or less than adequate replied that their stocks were less than adequate.

The Chief Secretary was right to deny that there is a boom, because there has been hardly more than a hiccup and we cannot guarantee that even that will take place. Assistance must be given to industry. Although that is not the only measure that we wish, it will play an important part in recovery. In moving the new clause, we do not say that this is the only action that must be taken to assist industry. It is one of a number of policies that we hope to introduce to help to increase demand for its products, improve its manufacturing process and reduce its costs. It is an important new clause and I commend it to the House.

Mr. Richard Wainwright (Colne Valley)

New clause 4 tabled by alliance Members is identical in purpose to the new clause that has just been moved by the right hon. Member for Ashton-under-Lyne (Mr. Sheldon). It is always a pleasure to go in to bat on matters of industry and trade on a wicket prepared by the right hon. Gentleman. Today he has mown, rolled and watered the wicket so well that I shall speak more briefly than I had intended. His arguments were so sound that they confirmed my view that when eventually the grateful British public erect stained glass windows commemorating the golden age of the Lib-Lab pact the right hon. Gentleman will be one of the artist's chief themes, because he represents the respectable side of Socialism—I hope that my remarks do not cause him pain—and his knowledge of industrial matters far exceeds that of the Members on the almost empty Conservative Benches, and would exceed it even if those Benches were full.

Mr. Bruce-Gardyne

I was interested to hear what the hon. Gentleman said about the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) watering his wicket. The right hon. Gentleman and his hon. Friends watered his wicket, if that is the appropriate phrase, in 1976–77 by introducing the national msurance surcharge. Thereafter, during the Lib-Lab pact, the hon. Member for Colne Valley (Mr. Wainwright) and his hon. Friends voted for the enlargement of that tax. Now we are asked to believe that the logic of the Lib-Lab pact is that they always went together in opposite directions. Is that correct?

Mr. Wainwright

I hoped never to be in the Chamber when a Treasury Minister, forsooth, would expatiate in such a ponderously nonsensical way about something that he long ago exhausted of any small grains of truth that it might have had.

I mentioned the empty Conservative Benches, which prompts me to say that the Committee should be especially diligent in discussing the national insurance surcharge, simply because few of those who pay it can vote in a general election. The employers of the vast majority of British people are corporate bodies, and Conservative Members have refined the art of doing down bodies that have no vote. That is why they retained the rating system, despite all their promises to replace it, because most of those who pay commercial rates cannot vote. In its better moments, the House is careful about taxes that are paid by those who cannot be directly represented in the House.

Circumstances and the labour market have changed greatly since the national insurance surcharge was introduced. Part of the patchwork gospel of Conservative Members is that we should learn to adjust to market forces, and that successful business people have made that adjustment. In times of high or almost full employment there is something to be said for a payroll tax. Although I agree that full employment was already on the wane when the National Insurance Surcharge Act 1976 was introduced, Britain was not suffering from the tragic and deliberately induced high and increasing unemployment of today. It behoves the Committee to take note of the labour market. It is a pity that the Government did not note it much earlier, because this tax should have been abolished two years ago.

The right hon. Member for Ashton-under-Lyne has said, although not today, that it is high time that an adjustment was made in the Government's treatment of men and women in industry compared with their treatment of machinery. At one time skilled workers were desperately scarce and Governments were right to encourage industry rapidly to invest in labour-saving machinery. There is still a case for labour-saving machinery that improves the long-term competitiveness of a firm, but it is high time that the balance was redressed between the over-generous treatment of those who buy labour-saving plant and the absurd tax on jobs, which affects those who wish to engage men and women, especially for work requiring craftsmanship or skill. An employer who wishes to take on a young person from a district that he knows, or who wishes to improve the skill force in his company, is penalised by this tax.

The Treasury and Civil Service Select Committee did not mince its words when discussing this year's Budget. An eloquent passage that has been widely commented on in the press stated that sterling and costs are the key to the United Kingdom's economic success. It went on to say that it hoped that the Chancellor would pay more attention in his Budget to the needs of business than to the clamant demands of the admittedly overtaxed individual. Panic struck the Government in the sphere of personal taxation. The Government did not heed that Committee's advice this year and decided instead on an over-indexation of the thresholds of income tax.

In the days before the CBI was suddenly seized with a short-sighted passion for entering party politics, it made the valid point, and I quote from the "CBI News" of 25 March 1983: By levying an NIS, we are imposing a tariff on ourselves. That is just what it is. This tax should not merely be reduced by instalments but the Act ought to be repealed so that no instrument is to hand for any future Government to revive the tax whilst unemployment is high.

When the CBI was in a healthier frame of mind than its president now allows it to be, it recommended to the Chancellor earlier in the year that the abolition of the NIS would improve competitiveness, reduce costs, boost profitability and encourage employment. To maintain a special tax on jobs that hindered exports and boosts imports, with unemployment at its present high level, was perverse.

The Government are maintaining a special tax on jobs, albeit at a reduced rate. The Government will do nothing that might be taken as a tacit admission that inflation will soon rise because they wish to disguise from the British public the fact that they do not leave behind any structural improvement whatever in the economy, but only the temporary effects of a deliberately induced depression. They have prescribed short-term drugs for the economy and when the effects of the drugs wear off the British public will find out that these years, and North sea oil, have been frittered away.

My hon. Friend the Member for Gateshead, West (Mr. Horam) emphasised yesterday that the Committee should take all possible measures to reduce the effect of a reviving inflation rate which will take place in the autumn. That was the motive behind the Social Democratic and Liberal parties' proposal yesterday that VAT should be reduced in the autumn and is part of the motive for the proposal that, as from 1 August, the National Insurance Surcharge Act 1976 should be repealed. I welcome the fact that some companies, in a patchy way, are reporting a rather better rate of return in their profit statements over the past few weeks. But it is sad that the real rate of return on industrial and commercial companies, if North sea oil activities are excluded, showed a slight falling back in the fourth quarter of 1982. The real rate of return is estimated on average to be under 4 per cent.

No industry in the present competitive industrial world could survive for very long in a healthy condition on a real rate of return of under 4 per cent. As the surcharge represents a direct reduction in profits, it is eating the seedcorn of industry in a blatantly uneconomic way to help the Government pay the social costs of the unemployment that they have created. The alliance considers that this tax has long overstayed its welcome. It is one of the godparents of unemployment. It is high time the Government repealed the Act.

5.15 pm

Mr. Campbell-Savours

The Economic Secretary to the Treasury intervened at the Dispatch Box to point out that a Labour Government introduced the surcharge legislation in 1976. That was in different circumstances. A different configuration existed in the tax system as it affected corporate bodies in 1976, which arose from the stock relief provisions that were introduced by the previous Chancellor of the Exchequer. A different configuration also existed at that time in the labour market, with different skill shortages and excesses, and different levels of employment in various parts of the United Kingdom. There was a different configuration of industrial support from the Government.

Whereas the Labour Government were willing to intervene to protect and support industry, where necessary, by long-term restructuring arrangements that were beneficial to it, the Conservative Government have refused to intervene. It was not right of the Economic Secretary to say that because the Labour party introduced the tax it should bear responsibility for its present existence. We are not responsible for that. The hon. Gentleman is aware that since this Government's election and the implementation of their strategies my right hon. and hon. Friends have demanded the removal of the surcharge, because of the damage it is doing to British industry. [Interruption.] If the Economic Secretary does not accept what I have said, instead of intervening from a sedentary position, he should make a statement so that it is on the record. Then I will reply.

Mr. Bruce-Gardyne

It is perfectly true that the hon. Gentleman's right hon. and hon. Friends began to clamour for the abolition of the tax that they had introduced from the moment that they ceased to have responsibility for its administration. It is easy to do that.

Mr. Campbell-Savours

The hon. Gentleman has said that the clamour began from the date that the Labour party ceased to have responsibility, but that is not the point. The Labour party began to demand the abolition of the national insurance surcharge when it realised the damage it was causing to the economy within the new financial constraints of the Conservative Government's first Budget on 12 June 1979.

The Government have listened to the Labour party's attitude and views on exchange rates. Yesterday my hon. Friend the Member for Blackburn (Mr. Straw), in a useful and interesting contribution, drew attention to the substantial reduction that has occurred in the value of sterling since the argument became public last year. It is interesting to note in retrospect that whereas a few months ago the Government were accusing the Labour party of being irresponsible in its recommendations for a further devaluation in sterling that same Government have now refused to intervene on the exchanges and have allowed sterling to fall to as low as $1.46. That shows that they recognise the sanity in our proposal. I trust that the Labour party's critics at that time will have that matter slapped in their faces at the next general election. I hope that it is drawn to the voters' attention that it was the Labour party that did the positive thinking and that understood what was necessary in the interests of British industry.

As we heard yesterday, the chairman of the chamber of trade in Blackburn said that for the reasonable future a competitive exchange rate must be secured for British industry to be competitive. Even so, the effective devaluation has been marginal. As we all know, sterling is now rising on the exchanges. However, it cannot make up for the damage that has been done to the British people since 1979 by this Government. As has been pointed out, there has been a 15 per cent. reduction in output. There has been a collapse of even worse proportions in the textile, chemical, paper and steel industries and in many other parts of our manufacturing base. We are all aware of that, because every week we are confronted by industrialists in our constituencies, who demand action to protect them and to help them become more competitive.

Those industrialists are not simply asking the Government to introduce fiercer employment legislation to enable them to hold down wages and to increase the pool of the unemployed so that the labour market operates in their favour. They are asking the Government to make financial legislative changes that will have an immediate effect on the payroll costs. One of the most notable costs is the national insurance surcharge, which acts—as the hon. Menher for Colne Valley (Mr. Wainwright) pointed out—as a payroll tax of inordinate proportion. While the Government whistle in the wind, with their platitudes about the upturn, prominent organisations refute the Government's statements and are making every effort—[Interruption.] The Economic Secretary spends most of his time lying across the Bench, making noises and groaning into the nearest microphone. I wish that he would reply to my suggestions from the Dispatch Box, instead of responding in that way.

Mr. David Winnick (Walsall, North)

Is it not quite likely that the Economic Secretary is acting in that odd way because he is thinking of what he is going to write in the editorials of the Daily Telegraph, in the event that he becomes its next editor?

Mr. Campbell-Savours

If that is the case, the Economic Secretary would do well to precis the speech made by my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) and publish that in the Daily Telegraph. I am sure that he would find that there was more support for that among the Daily Telegraph's commercial readers than for his contributions, which blatantly and openly misrepresent the facts about the economy.

The NEDO working party commented on the national economy and foresaw an increase in unemployment in its sector up to the end of the decade. Many committees expected there to be a further reduction in employment. It will be shattering news to many of our constituents when they hear that the Government accept the pursuit of a strategy that ensures that people will remain on the dole queue until the end of the decade.

The CBI published a statement of its demands following its request that the Budget statement should introduce measures to remove the national insurance surcharge. Most of those demands have not been recognised by the Government. Indeed, they refused to implement them. In the report that the CBI produced only this week and that is based on a survey of, I think, 1,700 firms that make up its membership, it said that 64 per cent. of its membership was no more optimistic about business prospects than it had been four months ago, at the time of the previous survey.

The CBI added that talk of a boom was premature, as the recovery was starting from a low level of activity. Indeed, 84 per cent. of the CBI's membership failed to report a rise in the volume of orders, and 75 per cent. of its membership did not expect further and larger rises in output in the next four months. Seventy-two per cent. of its membership reported that they were working below capacity. The CBI pointed to further escalating unemployment, although at a diminished rate. Only 11 per cent. of its membership expected an increase in employment. It also pointed to an increase in the rate of price rises in the coming months. On stocks, the CBI said that only 13 per cent. of companies expected an increase in work in progress.

Under the general heading of "Constraints" the CBI said that the major limitation on companies' output continued to be the lack of demand, although the 89 per cent. which expects lack of orders or sales to limit output in the next four months is the lowest for three years. Again, 89 per cent. expected a lack of orders or sales to influence their decision on increasing output. I would have thought that a high figure, but it illustrates that it is possible to wrap up the CBI's report in very different language. It is possible to pull out very different indicators from those given by the Secretaries of State for Industry and Trade and the Prime Minister in the past four days.

Some of us must ask why the CBI chose to present its report in that way when it knew that its membership was saying the very reverse in regional reports. In addition, the CBI's membership is drawing the attention of its regional officers to the lack of demand throughout the United Kingdom. One can make the figures say what one wants. That is what I have done. Equally, the Government have done that. That is why the British people should not believe the Government and the statements that they have made in the past few days on the CBI's report. No one can believe the Government on such matters. At about this time of year we always get an annual statement from the Dispatch Box that draws attention to the changing circumstances and to alleged ameliorations in the economy. We all know that things have not got any better. Ministers know that, yet every year they persist in the ritual of trying to convince the British people that we are running along the bottom of the recession's trough and that things can only pick up.

The Chancellor of the Exchequer is now famous for his false dawns. As The Guardian so beautifully put it this week, Would you now buy a secondhand inflationary recovery from the Chancellor of the Exchequer? The answer is no, and nor will anyone else in British industry. Factories close every day. The recession deepens. Only this afternoon there was a further announcement in my constituency that 62 more jobs have been lost at Spillers. Over the years that company has made a valuable contribution towards providing work for my constituents.

We cannot go on like this. These things must stop. That is why, once again, we rise to speak in support of the new clauses and amendments, and say that the Government should restore demand to the economy and should remove the national insurance surcharge, which is now penalising British industry in an unparalleled way.

Sir Kenneth Lewis (Rutland and Stamford)

The hon. Member for Workington (Mr. Campbell-Savours) seemed to admit that he was making of the CBI report what he wanted to make of it. I am sure that the report is correct, because it was produced on the basis of soundings throughout the country. I am not aware that the CBI said that the economy is bounding upwards. It said that there was a sign that things were improving, but did not go much further than that, which was correct. There is a sign that things are improving, but they have to go a good way yet before we — never mind the hon. Member for Workington—shall be satisfied.

I was interested to hear the speech of the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), and that of the hon. Member for Colne Valley (Mr. Wainwright). A long time ago, in 1951, I fought Ashton-under-Lyne and the Tory vote was a little better then than it has since become. It is a place for which I have some regard. I always thought that the Lib-Lab pact probably arose because the right hon. Member for Ashton-under-Lyne and the hon. Member for Colne Valley were so close to each other that they could get together and fix it. In those early days, I was involved with a neighbouring constituency. I saw the Liberal party lose in Colne Valley.

5.30 pm

Mr. Robert Sheldon

To bring the hon. Member up to date with the circumstances of Ashton-under-Lyne, I would point out that they are by no means as happy as they were at the time he fought his election. In the past four years, a quarter of our firms have closed.

Sir Kenneth Lewis

That is a particular of the right hon. Gentleman's constituency and there are other places where a similar story can be told. It is not entirely due to what happens in this country. It is because there is a recession.

The Lib-Lab pact seems to be on again this afternoon. Having both supported the national insurance surcharge, the two parties now want to get rid of it. When they worked together they not only did not get rid of the surcharge in total, but did not get rid of any of it. They added to it, and made it worse. I want to get rid of this tax. In the present circumstances, it is a daft tax. I give credit to the Government for bringing the rate down while they have been in office. If there is one thing that I have learnt in the time that I have been in the House, it is that it is easy to put taxes up. The higher one puts tax up, the slower it is in coming down. That applies to whichever party is in office.

If anybody is to blame for the national insurance surcharge, it is the right hon. Member for Ashton-under-Lyne and his hon. Friends when they were in government, not because they put the tax on—there might be a case for some sort of tax—but because they put it up too high. They allowed it to become so heavy that any future Government would find it difficult to take all of it off in two to three years because it would restrict the way in which they could reduce other taxes. The Government have wanted to reduce other taxes and have therefore had to go more slowly than I should like on reducing national insurance surcharge. At one stage in the Budget I thought there would not be any further reduction, and that my right hon. and learned Friend the Chancellor was going to rest on the 0.5 per cent. reduction of last year. I was pleased, and I am sure that British industry was pleased, when he announced a further reduction, as that will help British industry during this year.

It is, however, ridiculous to continue with this tax because, it is a tax on labour—an employment tax. I wo0uld call it not the national insurance surcharge, but the national industrial tax on employment. I want to see it go, as there is no justification for it continuing in the present circumstances. We are presently subsidising jobs. There are many complaints that the Government are not doing much to stimulate the economy, but during the past 18 months there has hardly been a Ministry that has not spent £10 million, £20 million or even £100 million on packages of Government support for industry right around the country. Soon we shall have the youth training scheme which will cost a large amount of taxpayers' money. We must remember that it is not just Government's money but taxpayers' money as well. The Government are spending a great deal of money to stimulate employment in various ways, so there is nothing to be said for keeping on a tax that encourages, and will continue to encourage, employers to maintain their employment levels and not add to them, or even to get rid of labour.

There is also the problem of the future effect of technology on industry to consider. It is interesting that at a time when we have a recession firms have to lay off labour—those that are in business at all—and others are closing because they do not have the markets either because of imports or because they no longer have export markets. There is a heavy stimulation and encouragement to add to our technology. There is therefore a world recession plus the impact of new technology imposing itself, across the board, on British industry. This new technology has gathered pace since the recession and will double in the next two or three years. That will mean that as things get better and we get out of the recession there will be a further squeeze on employment because of this new technology. As we get out of the recession, there will therefore not be the same increase in the number of jobs that many of us as politicians would like to see or think that there should be.

Unemployment will continue because this new technological development has enabled goods to be produced with less and less manpower. Because of that, it must be for us in the Conservative party as we go into the next general election to say that this payroll tax will go. The present Government have brought it down, and can justify having done so over the past four years. If I am right in what I have said about the impact of technology, clearly this tax must go in the next Parliament. I do not suggest to my right hon. and learned Friend the Chancellor that he gets rid of it at this minute, but it must be an early objective in the next Parliament.

Mr. Tony Marlow (Northampton, North)

I have followed my hon. Friend's argument carefully, and I have much respect for what he is saying. However, is he not being a little pessimistic about the outlook for jobs? Given the Government's economic policies and the fact that our manufacturing industry is becoming more effective and efficient, and that we shall be able to produce more goods and therefore more wealth with fewer people, surely more money will go into the consumer's pocket and we shall be able to spend more on services. Little services will be big services and it is possible that—

Mr. Austin Mitchell

Everyone will then buy German cars.

Mr. Marlow

—within a relatively short time the present great gloom that we have about unemployment will be reversed. Does not my hon. Friend agree that he is being a little pessimistic?

Sir Kenneth Lewis

I wish that I were. I am a realist and I do not believe that, whichever Government are in power, there is a total solution to unemployment. I do not believe that it will return to the 1 million level that was considered acceptable when I came into Parliament.

Mr. Campbell-Savours

When?

Sir Kenneth Lewis

When I first came into Parliament, unemployment in Britain was a little more or less than 1 million.

Mr. Oswald O'Brien (Darlington)

Which year?

Sir Kenneth Lewis

When I came into Parliament—in 1959, 1960, 1961—unemployment was low.

Mr. O'Brien

Is the hon. Gentleman saying that it was 1 million?

Sir Kenneth Lewis

I am saying that under no Government shall we get back to a figure of 1 million unemployed. The new technology that is being developed throughout industry—not only in British industry but in all industry round the world — will make that impossible. As we come out of the recession we can reduce unemployment by a reasonable amount, although I should not like to put a figure on it. Perhaps we can reduce it by 1 million as a result of an increase in trade in Europe, America and elsewhere.

We shall then have the problem of what to do with the remainder of those unemployed. That is where the new technology will mean that there is no scope for any further reductions. That is a problem for Government in future. Therefore, this tax cannot be other than temporary. If it does not go in this Parliament, it must go soon after.

When we debate a new clause such as this, we naturally talk of it in the context of high unemployment, but we must consider that unemployment is not necessarily a disaster if we learn to share out the work. However, sharing out the work does not allow for a tax of this kind because it would simply make such a step impossible for employers.

Mr. John Horam (Gateshead, West)

I congratulate the hon. Member for Rutland and Stamford (Sir K. Lewis) on his temerity in making a speech from the Conservative Back Benches in support of the Government. It showed some of the perils of embarking on that course in an economic debate. Government supporters have been fairly rare specimens over the past three days in our discussion of the Finance Bill. The only other Conservative Member who has spoken is the hon. Member for Northampton, North (Mr. Marlow) and that was yesterday. The hon. Gentleman's speech can hardly qualify as one in support of the Government since he too took a somewhat contrary line, just as the hon. Member for Rutland and Stamford has. He wanted not merely to reduce VAT, as proposed by the Labour, Social Democratic and Liberal parties, but to abolish it and replace it with purchase tax. That is an interesting piece of nostalgia. I prefer purchase tax myself.

Mr. Austin Mitchell

The Common Market stopped that.

5.45 pm

Mr. Horam

As one who voted against entering the EC, I regard that as one of the least pleasing aspects of our present membership.

Mr. Marlow

The hon. Gentleman says that he is nostalgic for purchase tax in preference to VAT. Will he acknowledge that as long as we have the present arrangements with the EC we have no rights in this matter because our civilian powers have been conceded and we must retain VAT?

Mr. Horam

That is a correct statement of the position, but it is none the less—unfortunately perhaps —one of some nostalgia rather than realism.

The hon. Gentleman will also be united with his hon. Friend the Member for Rutland and Stamford because today, like yesterday, they will be voting against amendments which they support—the one an attempt to do something about VAT and the other to do something about the national insurance surcharge. I suspect that that view is held by many Conservative Back Benchers and that that is why their attendance has been so lamentable during the past three days. If the public knew just how few Conservative Members cared about the problems of unemployment and the economy, they would be even more of a public spectacle than they are today.

Mr. Campbell-Savours

rose—

Mr. Horam

I shall not give way. I do not want to speak for too long and the hon. Gentleman has already made one contribution. I know that other of his hon. Friends also want to speak.

One of the Government's outstanding characteristics is that at a time when the overwhelming problem—as all admit—is one of industrial decline, they have had no strategy for business expansion. From the beginning, they have never asked themselves what the necessary conditions are in which industry can have confidence in the future and can plan on a long-term basis. Instead, from the beginning they have imposed on industry their own narrow and rigid view of what is best for it.

In addition, the Government's priorities have been equally inflexible. They have chosen at all times and in all circumstances to say that inflation is the mumber one enemy. As far as one can detect from what has been said in the twists and turns of the Government's economic policy over the past four years, they have also tried to "deal" with the unions. The measures that they have chosen to tackle their priorities have been the cause of their downfall. Their policies in pursuit of those two objectives have been simply old-fashioned deflation, more unemployment to terrify the trade unions, and more unemployment to reduce inflation.

That is why we have had such an appalling record of economic growth and general industrial improvement; why production has dropped by nearly one fifth since the Government took office; why investment, according to the CBI, is down by one quarter since 1979 — indeed, investment is down by one third if leasing, which has become more popular in the past few years, is ruled out —and why research and development expenditure has been cut to the bone and, indeed, in some cases, through the bone. That is why cost competitiveness is still a quarter worse than it was in 1979: why import penetration is at a much higher level; and why profitability is so low in real terms. One could go on endlessly describing the appalling picture that we see before us of the real state of industry compared with the calculations in the Red Book and the Blue Book which the Minister puts before us from time to time.

The Government have simply thrown out the baby with the bath water in pursuing their aim to reduce inflation. Not only have the Government brought about this terrible scene, but they cannot offer any hope for its improvement. Their method of dealing with inflation and trying to achieve more industrial harmony is deflation, and as soon as inflation rises, as it will later in the year, they will have to impose more deflation. As a consequence, we will bump along the bottom of the true and proper path of economic growth rather than attempt to lift ourselves into a sustained period of expansion.

Great play has been made over the past few days of the report of the CBI and other forecasts that there may be a small improvement—some small lifting off the bottom. Unlike the hon. Member for Workington (Mr. Campbell-Savours)— indeed, unlike the Government —I believe there is improvement, even though it is small and patchy. I accept that the CBI's "Quarterly Survey of Industrial Trends" is a reliable, accurate and on the whole unbiased picture of what is happening in British industry. In those circumstances, it is a pity that the CBI president and others have found it necessary to say the things they have said over the past few weeks—for example, when the Prime Minister attended the CBI dinner. It is a pity that the CBI feels it necessary, with a general election looming, to ally itself with the Conservative party. It is equally a pity that the TUC is so closely in tune with the Labour party. This is part of a regrettable polarisation of our society. It gives credence to the idea that the CBI's accurate and independent forecasts are subject to political bias, which I am sure they are not.

The Chairman (Sir Michael Shaw)

Order. I am finding it difficult to relate what the hon. Gentleman is saying to the new clause.

Mr. Horam

What I am saying is deeply relevant to new clause 4. The new clause is designed to reduce industrial costs for which the CBI has called in report after report and pre-Budget statement after pre-Budget statement. It is highly relevant that the CBI view should be called in aid in support of new clause 4. I apologise if I appear to be labouring the point.

Having considered the CBI report, one should not neglect the report of the sector working parties of the National Economic Development Office. An article in The Guardian says of the report: NEDO's report, which was compiled from assessments made over the past year by 40 different sectors of industry and commerce, is among the most gloomy long-term forecasts prepared in recent years. Boiling down the comprehensive data and forecasts of the 40 industrial sectors, the report warns of poor employment prospects, skill shortages, and poor vocational training, an overcautious financial community, too little spending on research and development, continuing structural change in key industries such as engineering, and lack of Government help to assist industry. If the Government really wish to give people an accurate view, as they pretend they do, it behoves them to summarise what the NEDO sector working parties have said and place that summary in the Library. If they insist on suppressing the report, which I am sure is objective, they should at least, in the spirit of contributing to a real debate on our economic prospects, give the House the information about what NEDO is saying. NEDO is addressing itself to the fundamental problems that are of concern to all who work in industry, on whatever side they may be, and of great concern to the House. The Chancellor of the Exchequer cuts a poor figure when he tries to dismiss the NEDO report by saying that it took no account of the recent improvement due to the fall in the value of sterling. The NEDO report is not about the short term but about our long-term fundamental industrial problems to which the House should be addressing itself and the Government should be addressing themselves with more single-mindedness than they have hitherto shown.

In defence of their position the Government would argue that industry is leaner and that, although we have seen a large increase in unemployment, industry is now in a better position as a result of de-manning and so on. It is true that, in some respects, we are leaner than we were, but it is largely a myth that there has been a great improvement in productivity. We are leaner but also weaker. In an article on 14 March on British manufacturing industry, the Financial Times made that plain. Under a headline "Leaner … but Weaker" the article said: After three long years of recession and an over valued pound, Britain's manufacturing industries are leaner than ever, but large parts of them are certainly not fitter. The article went on to point out at some length the sectors of industry that fall into that category.

The Government's second defence of their handling of industrial policy and industrial costs is that industry is not only leaner but attitudes have changed. In discussing that matter they tend to call in aid what has happened, for example, at British Leyland. They point to improvements in British Leyland's marketing and industrial performance over the past few years to vindicate the measures they have taken on the economy.

Although we have today discussed the Lib-Lab pact in a rather jocular way, it is a fact that Sir Michael Edwardes was appointed by a Labour Secretary of State for Industry in 1977. In his book "Back from the Brink", which I have been reading recently, Sir Michael says that many of the improvements that he got under way were made in the years 1977, 1978 and 1979, before a Conservative Government came to power. Sir Michael makes it equally plain that the biggest threat he faced when he was in charge of British Leyland was the enormous increase in industrial costs and the loss of export competitiveness following that huge change in the value of the pound in the first three years of the Conservative Government. That rocked British Leyland back on its feet and made it impossible for the company to recover properly within the time scale that the Labour Government, and subsequently the Conservative Government, presented to it. Those problems arose because of a Conservative Government who were unaware of the consequences of their economic policies for the industrial improvement that Sir Michael Edwardes was trying to bring about.

My point is that it is possible to bring about the supply side improvements that are definitely needed in this country without having the repressive fiscal regime to which the Government are committed. We can on the contrary have supply side improvement in an expansionist atmosphere which we on the Social Democratic and Liberal Benches support through new clause 4. We shall get those supply side improvements and at the same time get improvements in productivity, research and development expenditure, investment and productivity, which will not come from the Government's approach, however long they remain in office. It is a tragedy that when our national priority is so clear, we have a Government who are so threadbare and impoverished in their approach that they will never be able to get British industry expanding in the way of which it is capable.

Mr. Marlow

If what we have just been listening to is "the new politics", you, Sir Michael, will probably agree with me that it is not really likely to catch on.

We have been told that the trouble with the two old parties is that they spend all their time slanging each other. We have just heard the hon. Member for Gateshead, West (Mr. Horam) slanging first Her Majesty's Opposition and secondly Her Majesty's Government. We in the two main parties do not have a monopoly on slanging. I should think that the Committee has heard more slanging from the hon. Member for Gateshead, West today than it has heard all week.

I have not been greatly persuaded by the arguments of the hon. Gentleman. He said that, on the one hand, the Labour party has certain policies and, on the other hand, the Conservative party has certain policies. He said that Labour party policies will not work and that Conservative party policies will not work and that, somehow or other, we must split the difference and come down in the middle. I believe that the opposite is the case. I am convinced that the policies advanced by Her Majesty's Government have been successful, are becoming more successful, will succeed and will bring about a new dawn for this nation.

I believe also that the hon. Member for Grimsby (Mr. Mitchell) and his colleagues have some real ideas and believe that if their ideas were brought into effect they would have beneficial effects on the nation. Our policies are working and will work and the Opposition believe that their policies might work.

6 pm

But to suggest that we can bring forward policies that are right in the middle—not making any decisions and splitting the middle on every issue—is absurd. Even new clause 4 is halfway between the existing situation and new clause 2. It seems that the alliance is suggesting that for ever we should mudge and fudge and for ever go down the centre line. That is no policy at all. That is purely a negation of responsibility and an example of not being able to make up one's mind about anything. That is a waste of time and a fudge. The result is that there are no convincing ideas to put before the electorate. I am sure that we are going to find out that this approach will reap its own negative reward in the not too distant future.

Yesterday I did my utmost to help the hon. Member for Gateshead, West. The hon. Gentleman said that he was looking for signs of recovery. After he resumed his place, I had the opportunity to tell him that the chairman of ICI, Mr. Harvey-Jones, who I understand is a member of the hon. Gentleman's faction—

The Chairman

Order. I am listening for references to the new clause.

Mr. Marlow

Sir Michael, may I put it to you that as the remarks of the hon. Member for Gateshead, West were relevant to the new clause, if I respond in kind to what he was saying that would likewise—

The Chairman

Order. I intervened in the speech of the hon. Member for Gateshead, West (Mr. Horam) and I think that he appreciated my point. I trust that the hon. Member for Northampton, North (Mr. Marlow;) will equally appreciate the point.

Mr. Marlow

Of course, Sir Michael.

We are very much concerned about the industrial recovery that is taking place. The hon. Member for Gateshead, West said that he was concerned about the industrial recovery and that his new clause is predicated on the basis that it will help to accelerate the industrial recovery. No doubt he will know that the profits of ICI have more than doubled. I suggest to him that he gets in touch with that member of his faction, Mr. Harvey-Jones, because he will then brief himself rather better on the subject.

Mr. Brittan

It seems that Mr. Harvey-Jones is a pillar of the faction of the hon. Member for Gateshead, West (Mr. Horam).

Mr. Marlow

Yes, he is one of the few. May I further reassure the hon. Gentleman about the industrial recovery about which he is so concerned, quite rightly. Had he been with several of my hon. and right hon. Friends at a meeting with IBM today, he would have heard from its representatives that they are convinced that the United Kingdom is on the threshold of recovery and moving into recovery. Not only that, it is doing rather better on the road to recovery than other major countries in the EC such as France and Germany. I am glad to be able to reassure him on those points.

I am surprised, amazed, overwhelmed and breathless that Her Majesty's Opposition have tabled the new clause. Nobody likes this tax. Nobody likes any tax. But it was Her Majesty's Opposition, with their Liberal supporters, who brought this tax forward in the first place. Her Majesty's Government, God bless them, have reduced it by about 2½ per cent. They have removed a burden of £2,000 million from the shoulders of industry and allowed industry to retain the money for its own investment, improvement and recovery, and for improving its efficiency. Industry has taken advantage of that.

For Her Majesty's Opposition to suggest that we are the villains of the piece when the villainous tax was theirs in the first place—well, it is absurd.

Mr. Campbell-Savours

This is the worst speech that the hon. Gentleman has ever made.

Mr. Marlow

This tax now raises £780 million in a full year. We are all here to help industry. If Her Majesty's Opposition were to abolish the tax and not raise £780 million, they must ask themselves what they would do. Would they increase Government borrowing by £780 million? They probably would. Alternatively, would they raise the sum by a different form of taxation?

Let them increase Government borrowing by £780 million. What effect do they think that that would have on confidence in Her Majesty's Government, or confidence in the revival of the United Kingdom economy at this stage? If £780 million were to be slashed and thrown away from Government resources and Government income, what effect would that have?

Mr. Robin Cook (Edinburgh, Central)

Perhaps the hon. Gentleman would like to share with the Committee the effect on confidence of last week's discovery that the Government were borrowing £1.7 billion more than they thought.

Mr. Marlow

I think that the hon. Gentleman knows full well what the answer is to that question. What we are talking about now is what should be done in future. A lot of that increased figure that the hon. Gentleman is talking about—I am surprised that he is prepared to raise the issue in a form such as this—is due to overspending by local authorities, and the vast majority of those local authorities are doctrinaire and dogmatic Labour-controlled authorities. I am surprised that the hon. Gentleman is not ashamed—

The Chairman

Order. We cannot pursue that matter now. Doubtless there will be other occasions when it can be discussed. Let us return to new clause 4.

Mr. Marlow

I apologise, Sir Michael. I was provoked. I should not have allowed myself to be provoked and I apologise profusely.

So we do not raise the £780 million and the Government have to forgo £780 million of their revenue. What is going to happen to sterling? What is going to happen to inflation? What is going to happen to interest rates? We know what will happen to sterling. We know what will happen if the Government, who have an economic policy, suddenly throw it out of the window and cease to draw the money that they need to balance their books.

What is the international community going to think in those circumstances? The Opposition know full well that there would be a loss of confidence in Her Majesty's Government. With that there would be a fall in the value of the pound, an increase in interest rates, an increase in inflation and massive wage claims. We would be back on the same old wretched cycle again. The right hon. Member for Ashton-under-Lyne (Mr. Sheldon) knows that and I am surprised that he is prepared to raise these matters in front of the Committee.

That is what the Opposition suggest, and I think that it is irresponsible. The alternative would be to raise the revenue in different ways. How are we going to do that? Is that going to be done by increasing income tax? Surely one of the most important things that the Government did in the recent Budget was to increase the tax threshold on which our ordinary people have to pay their taxes. Let the people keep the money in their own pockets. By so doing they are able to make their own choices with their own money to buy from our industries, therefore making our own industries more busy and bringing more jobs into our industries. Having so done, they will have made our industries more efficient and more able to tackle foreign markets that are important to us for the continuing recovery on which we are currently launched.

This is an irresponsible new clause—I am sure that you agree with me, Sir Michael—and I shall take a lot of pleasure in voting against it.

Mr. Winnick

I think that the hon. Member for Northampton, North (Mr. Marlow) took the view that he had made so many speeches and interventions critical of the Government that he had a moral duty to try to defend them today. Obviously, he has done his best.

I regard the new clause as a measure to try to save jobs and to reverse the tide of unemployment. As one would expect, we have heard much from Treasury Ministers about recovery. In the past few days they seem to have been aided by the CBI. Labour Members are naturally suspicious that this is pre-election talk. In the west midlands we continue to lose 1,000 jobs a week. Obviously we want the Government to take the action that is outlined in the new clause.

The west midlands has been decimated in the past few years under this Government. In the past three years it has lost 319,000 jobs. That loss, when expressed as a percentage, is greater than the loss that has been suffered in any other region. Britain's overall loss of jobs was about 9.5 per cent., but in the west midlands it was over 14 per cent. As a result, one in five of the male work force in the west midlands is now out of work. If that is not a grave position, I should like to know what is.

It is all very well for Treasury Ministers and the Prime Minister to speak about the recovery that is taking place and to express optimism. We have an obligation to examine the position as it really exists, particularly the way it affects our constituents, and when we examine it from that angle we see that there is little cause to share the Government's enthusiasm. We must consider not only the numbers unemployed but the periods for which they have been unemployed. In January of this year, four out of 10 unemployed people in the west midlands had been out of work for more than a year. The hon. Member for Northampton, North asked how our proposals would be financed. In reply, I must ask him how he thinks the unemployed are being paid unemployment benefit, supplementary benefit and the rest.

Let us consider the position just before the Conservatives came to office and the position now. In April 1979, 34,000 people in the west midlands had been unemployed for over 12 months. Today, the figure is 150,000. That is surely an indictment of the Government's policies. It reveals the devastation that has occurred in the west midlands. If recovery is on the way, the first signs of it should be occurring in the west midlands, the heartland of the engineering industry. Far from there being any signs of recovery, the opposite is the case.

In the Walsall travel-to-work area, when the Government took office 2,495 people had been unemployed for 12 months or longer. Today there are 13,452 such people. Anyone who is familiar with the area, and particularly the black country, will know that, where previously there had been much industrial activity —allowing for all the problems that existed before the Government took office; I am not suggesting that there were no problems—today one sees factories and other industrial establishments closed down all over the place. Instead of industrial activity we find derelict areas. I often say that if one wants the best illustration of monetarism and Thatcherism, the best area to visit is the west midlands and the black country. There one sees what this Government's policies have achieved in four years, with some people having almost given up hope of working again.

Nobody of course is suggesting that the abolition of the national insurance surcharge is all that is necessary to restore employment and industrial activity in the west midlands. It is however one useful measure that we can take and, naturally, we on these Benches are bound to support it. The circumstances today are totally different from those which existed when the surcharge was introduced by a Labour Government. Its abolition would provide more job opportunities and prevent some of the redundancies which are now taking place.

6.15 pm

It is impossible to go round parts of my area without meeting people who have been unemployed for considerable periods. As I meet and talk to them, I discover that about one in three has been unemployed, and many of them explain how they have been unemployed for some time. I agree with my hon. Friends that we need more than just this new clause. We need an expansion of the economy, an end to deflation and an increase in demand to provide job opportunities and get industry anywhere near the position it was when the Government took office. A whole range of measures will certainly be needed if that is to be achieved.

What Labour has outlined in its programme has been heavily criticised by Conservative Members. It is interesting to note that when some time ago we suggested a more realistic exchange rate, that too was attacked by the Government; they said that such a step would cause great harm to Britain. The more realistic exchange rate which we have seen in recent months has clearly helped industry. Other measures which we are advocating would be equally beneficial, including the abolition of the national insurance surcharge.

The west midlands needs new industries and the application of new technology. We rely on too narrow an industrial base; that too has been part of our trouble in recent years. First and foremost, we need a reversal of Government policy. Indeed, the only way to turn the tide in that area and provide opportunities for more people to earn a living is for the Government to accept the need to change their policies.

For some time my hon. Friends—and a few hon. Gentlemen opposite — have been warning Ministers about the effects their policies are having on the west midlands and, late in the day, they have appointed what has been described as a Minister for the west midlands, an Under-Secretary of State for Industry, and they seem to believe that that will persuade the people of the west midlands that the Government are taking effective action to revitalise industry in the area. The people there will not be so convinced. They will look on it as a gimmick.

Mr. Marlow

He is a first-class man.

Mr. Winnick

I am not here to argue the qualities of the hon. Gentleman. I have said in a previous debate that sending a Minister to the west midlands for perhaps two days a week will hardly resolve the problems of the region, when so much of the trouble stems from Government policy. Obviously, it being a pre-election period, the Government think that such a move will persuade people that firm and effective action is being taken. I warn the Government that unless action is taken to reverse the tide of unemployment in the west midlands and assist the region—I am not alone in issuing this warning; it is a view taken not only by politicians but by many people with long experience of industry in the area — the region could go into a permanent decline.

I do not know whether there is much use trying to persuade the Government, after four years and all the damage that they have clone to the west midlands, that there is a real crisis in the region. Perhaps the Chief Secretary will bear in mind some of my points when he winds up. It would be a great tragedy not only for the west midlands but for Britain as a whole if the manufacturing industry in the west midlands went into a permanent decline. Much of the responsibility for that decline lies with the Government.

Mr. Brittan

The debate has ranged widely, but it focuses upon, and should be totally devoted to, the proposition put forward by the Labour, Social Democratic and Liberal parties that the national insurance surcharge should be repealed forthwith. Frankly, I regard it as nothing less than unparalleled effrontery and unrivalled hypocrisy for the Labour, Social Democratic and Liberal parties to make that proposition. They introduced the national insurance surcharge. It came into effect on 6 April 1977 at a rate of 2 per cent. The legislation was contained in the National Insurance Surcharge Act 1976. The rate was increased to 3½ per cent. in October 1978. That legislation and that increase were introduced by the Labour party with the acquiescence, if not the support, of its then allies in the Liberal party. The Social Democratic party did not exist, but all those who now lead the Social Democratic party were contented members of the Labour party, if not the Labour Government, happy and ready to troop into the Division Lobby in support of the introduction of the tax that they now so roundly condemn and readily call on the Committee to abolish. It is unparalleled effrontery and unrivalled hypocrisy for them to dare to make such a proposition.

Some of those people may be slightly troubled in their consciences by the contrast between introducing a piece of taxation that was unknown to the country before they thought of it and virtually doubling it, and suggesting that it should be repealed. What have those who are remotely troubled by that inconsistency to say by way of explanation?

The hon. Member for Workington (Mr. Campbell-Savours) who is usually quite candid and robust in his views, however repellent they may be to Conservative Members, none the less on this occasion managed to find a euphemism to justify the complete contrast between introducing this tax in 1976, increasing it in 1978 and seeking its immediate and total repeal in 1983. He said that what was different then was the configuration. The configuration of industry and our economy was different in 1976 and presumably in. 1978, and that justified the tax.

The hon. Member for Colne Valley (Mr. Wainwright) said that there might sometimes be a justification for a payroll tax in times of high employment, but not today. Between 1974 and 1979 unemployment doubled. The Labour Government of the day were extremely distressed. I say that to their credit, as I believe that they expressed their distress with sincerity. The present leader of the Labour party was appalled at the doubling of unemployment under the Government of which he was so important a member. They did not regard that time as being one of high employment in which one could afford the luxury of a payroll tax to finance I do not know what. They regarded unemployment as serious and disagreeable —but none the less they introduced that tax and then virtually doubled it.

Mr. Winnick

Will the Chief Secretary direct his mind to the fact that when his Government took office unemployment in the west midlands was 5.1 per cent.? Is he suggesting that in those circumstances it was wrong for the Labour Government to introduce the national insurance surcharge? Is he aware that now, officially, unemployment is much higher, at 16½ per cent.? Does he not see the difference?

Mr. Brittan

I am very well aware of those facts. However, not only the west midlands, but many other parts of the country had high, if not higher, unemployment. Opposition Members can wriggle as much as they like, but the fact was that unemployment doubled between 1974 and 1979. If the Labour Government and their Liberal allies, faced with that situation, had said, "Unemployment has doubled, but only from a low base, so it does not matter; unemployment is not a problem. Basically, we have full employment, so we can slap a tax on employment", that at least would have had the merit of consistency and honour. However, they did not say that. They regarded the rise in unemployment under their Administration—although it is less than now—as wholly undesirable and a serious national problem. All the disadvantages of the national insurance surcharge that they rightly point out today — we totally agree with the criticisms of it—were as valid when it was introduced and when it was doubled as they are today. That did not stop them putting it forward for one moment.

Of course, the tax is a bad tax. We have no doubt about that. What we believe about the tax is shown by what we have done about it, rather than what we have said about it. What Labour does about the tax speaks much more loudly than the words which, crocodile-like, come out today and on occasions when they do not have the responsibility of office. The fact is that we have brought it down sharply. My hon. Friend the Member for Rutland and Stamford (Sir K. Lewis) was right when he said that taxes are easy to put on, but they are much more difficult to take off, particularly when the extent of the tax is increased in the way in which it was by the Labour Government.

The Finance Act 1982, barely a year ago, reduced the rate to 2 per cent. There was a further reduction in the National Insurance Surcharge Act 1982. Now there is another reduction, which my hon. Friend was good enough to say was not even expected by many people at the time of the Budget, bringing it down to 1 per cent. Therefore, it has come down from 3½ per cent. to 1 per cent. in little more than a year.

That is the Government's record. Faced with that record, the Committee will understand why Conservative Members regard it as effrontery to be told by all Opposition parties, all of whom are guilty, that we should not just bring it down, but totally abolish it.

The effect of the successive reductions on a substantial scale, costing us £2 billion, is of considerable assistance to industry, and rightly so. It is difficult to give precise estimates of the likely economic effects, but the successive reductions in the surcharge will lower unit costs and increase the United Kingdom's cost competitiveness. That will benefit United Kingdom exporters by allowing them to lower their prices or increase their profit margins. It will also make United Kingdom producers more competitive in domestic markets, although the need to improve on non-price factors must not be forgotten.

Particularly in domestic markets, many companies are likely to be under competitive pressure to pass on, in the form of lower prices, the cost reduction brought about by the successive reductions in the national insurance surcharge. That will ultimately benefit consumers and in turn lead to a higher level of consumer demand and to more orders for industry. Companies that are under less competitive pressure and retain part of the benefit are likely to increase their expenditure as a result, particularly on stockbuilding and employment. The very beneficial changes that we have been able to make in the national insurance surcharge will result in higher output, more employment and an improvement in company profitability.

6.30 pm

It is also worth pointing out that the reduction in the national insurance surcharge—of which this is the third stage—is in addition to the Government's decision to shield employers from any increase in their national insurance contribution rates for two consecutive years and to restrict the increase to 0.25 per cent. for the contracted-in in 1983–84. Even with the NIC changes, private sector employers will pay about £1.25 billion less in NIC and MS in 1983–84 than they would have done under the rates inherited from the Labour Government.

While we are considering the costs to industry and employment, let us compare our record with that of the Labour Government. Between 1977 and 1979, the combined rate of employers' NIC and NIS payments for contracted-in employees rose from 8.5 per cent. to 13.5 per cent.—an increase of some 60 per cent. in two and a half years. Well over half that increase was accounted for by Labour's introduction of the surcharge in 1977 and its subsequent action in increasing it—with the support of its Liberal allies—in October 1978.

In spite of the fact that they left us a legacy of job-destroying taxation, which has taken a great deal of time and money to reduce to a quarter of what it was when we inherited it, Labour spokesmen at the Dispatch Box today say that the whole lot should be abolished, at a cost in additional full-year revenue of £780 million.

The question how the Labour party would abolish the tax should be considered against the background of the astonishing speech with which the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) opened the debate. He painted a picture of a Britain that was crumbling, a Britain that was sadly in need of huge expenditure, for which he would be happy to sign the cheques. It is clear, therefore, that the total abolition of the surcharge would not be financed by any cuts in public expenditure. Indeed, it was to be accompanied by a massive increase in public expenditure. It would not be accompanied, however, by any increase in taxation. With the exception of a jealous and envious swipe at the imagined wealth that could be extracted from the rich, I believe that the Labour party proposes to reduce taxation. Yesterday the hon. Member for Blackburn (Mr. Straw) told us that VAT should be reduced. The package of which the abolition of the surcharge would form a part would consist, in total, of a massive increase in public expenditure and a reduction in taxation. We are told that as a result of that package British industry will boom, fresh jobs will be created and interest rates will fall. The package cannot stand up to a moment's scrutiny, and it has been utterly discredited by all serious commentators who have considered it.

Only by borrowing could the Labour party finance—or claim to finance—this tax reduction, together with the other tax reductions and the massive increase in expenditure for which it has called. Labour spokesmen pretend that a vast increase in borrowing would have no impact on interest rates, confidence or inflation, but that is not true. The Labour party's proposal to abolish the surcharge is a penny packet on the road to perdition which its programme as a whole represents. A belief that the proposal was to be implemented would lead to a total collapse of confidence.

Attention was rightly drawn by the hon. Member for Walsall, North (Mr. Winnick) to the plight of the west midlands. Other hon. Members have rightly drawn attention to the current levels of unemployment. We all have constituents who are out of work, and we all represent parts of the country where there is unemployment. The question is not whether unemployment exists, but what we can do about it and what we can do to secure a recovery. It is qute extraordinary that when signs of recovery begin to be apparent, Labour hon. Members find them unpalatable and pooh-pooh them.

Mr. Winnick

It is not happening.

Mr. Brittan

I do not ask the Committee to believe what any Government spokesman says, but to consider the facts, which are on record, and the views expressed by every economic commentator. At the moment, the Opposition are slightly split and ambivalent in their attitude. They do not know whether to say that there is a recovery but that it will not last, or to say that there is a recovery but not much of one, or to persist in saying that there is no recovery at all.

The latter view involves a massive misreading of the situation. I do not ask the Committee to listen to the Government's claims. The chairman of ICI has been described today as a member of the SDP. That was an under-statement. He is a pillar of the SDP, and the party needs more such pillars. In his capacity as the head of a great national company the chairman expressed—not in a euphoric way but in a realistic and cool-headed fashion —his belief that conditions were improving. There has also been the CBI survey. It is interesting and mildly entertaining that those who enthusiastically embraced the CBI when it was critical of the Government now shy away from it and try to explain away its views.

The hon. Member for Gateshead, West (Mr. Horam) was rather more candid. He said that the survey was objective and reliable, but added that he did not like some of the glosses put upon it by the leaders of the CBI. That is a credible view. To deny the fact that the survey shows a substantial improvement in business optimism both about the general business situation and about export prospects does no service to the serious discussion of our economic affairs. The net balance on the question of overall business optimism is positive. It has been exceeded only on three occasions—in 1959, 1963 and 1973. The CBI survey is not just a record of how people feel. It is also a report about orders. It shows that order books have improved, and that fewer firms expect a shortage of orders or sales to limit output in the next few months. There has been a small, but none the less real, reduction in the proportion of respondents working below full capacity. Demand and output are reported to have risen from a low level in the past four months, and a further increase is expected in the next four months. That is not just sentiment. It is a report of what has occurred. Of course there has been a very low level. Nevertheless, not only the chairman of ICI, and the CBI report, but all the other major indicators tell the same story. In the three months to February, housing starts showed an increase of 33 per cent. over the previous three months and orders for new construction work increased by 6 per cent.

The important point is not that recovery started from an admittedly low base but the reason for the recovery. The reduction in inflation and in interest rates that Government policies have brought about have allowed recovery to begin in a slow and gradual but real and sustainable way. That is why the route to recovery is that which we have described. The profligate and irresponsible attempts of other parties to negate the history of their own efforts by calling for the repeal of a tax that they introduced—to be financed by extra borrowing—does no service to rational argument and should be rejected.

Mr. Cook

The hon. Member for Northampton, North (Mr. Marlow) and the Chief Secretary gave as their prime reason for rejecting the abolition of national insurance surcharge the fact that the surcharge was introduced by a Labour Government and so, presumably out of respect for the memory of that Government, it should not be removed from the statute book. If the Chief Secretary could offer the Committee the slightest prospect or the most marginal faint hope that within the foreseeable future he could bring unemployment back down to where it was when the surcharge was imposed, we should not be so vigorous in pressing him to abolish it.

The Chief Secretary taxed the Labour Government with having doubled unemployment. If by that he means that under the Labour Government unemployment rose by 600,000, I agree. He must agree with us, however, that under the Conservative Government unemployment has risen by 1,800,000—three times as much. It is against the background of that much faster increase and far higher level of unemployment that we must evaluate this tax on jobs.

There is another difference in perspective now compared with 1976 and 1977. The reason why the Labour Government imposed the surcharge is no secret. There is no need to be prim about it. We are all adults and we can face the fiscal facts of life. The Labour Government imposed the surcharge because they needed the money.

Since the Conservatives came to power, they have remorselessly unzipped the purses and pockets of the nation. They have 20 times the revenue from North sea oil that the Labour Government enjoyed, they have doubled receipts from VAT and they have boosted the national insurance contribution to the extent that it now contributes almost as much to the Exchequer as the Government receive from income tax.

Having surrounded themselves with an inward flood of tax revenue, the Government cannot possibly justify a tax for which the only possible defence was the brute necessity of raising money which was not previously available from other sources.

6.45 pm

The only measure of any significance to stimulate industry and industrial development is clause 88, which provides for the pathetic reduction of 0.per cent. in national insurance surcharge. The Chief Secretary gave a curious version of how this related to the increase in the employers' national insurance contribution. He said that the 0.5 per cent. cut in the surcharge was sufficient to offset the 0.25 per cent. increase in employer's insurance contribution. Industry is likely to see it the other way round. Industry is far more likely to see the increase of 0.25 per cent. in the employers' contribution as offsetting half the value of the cut in national insurance surcharge.

Moreover, not all employers will benefit from the 0.5 per cent. cut in national insurance surcharge. Special measures elsewhere in the Treasury's expenditure regime will ensure that the public sector is denied any advantage from the cut. I am pleased to see that the Chief Secretary and I now agree on that. The cut will be of no benefit to the public sector, whether it be local authorities or nationalised industries. There is no rational justification for denying them the benefit that the private sector will obtain. If this is a tax on jobs, why not remove it from local authorities as well as from private industry? A job in a local authority is every bit as worthwhile as a job in private industry.

If the tax makes British industry less competitive than foreign industry, what possible justification is there for retaining it for the British Steel Corporation, which is struggling against cheap foreign imports, or British Airways, which has to fly against foreign competitors on every route on which it competes for business? There is no rational justification. The only reason for the discrimination is the vulgar prejudice of Conservative Members against the public sector.

The Chief Secretary referred to signs of recovery all around. The CBI report earlier this month is not the only recent report on the prospects of the British economy. The OECD report six weeks ago was described by the Financial Times as the gloomiest survey of the British economy ever produced by that body. A few weeks later, the National Institute for Fiscal Studies produced its forecast for the British economy. That report was described by the Financial Times as even gloomier than the institute's report for November. I do not suggest that those two bodies are necessarily more objective than the CBI in their evaluation of the prospects in a critical period for the economy, which will include a general election. I merely observe that neither has a chairman given to saying that he expects most of his members to vote Conservative.

Even the CBI report, by which the Chief Secretary sets such great store, does not provide the strong evidence of recovery that he claims. If one compares this month's CBI quarterly survey with last month's CBI monthly inquiry, which covers exactly the same sample, one finds that the number of companies reporting order books below normal has increased from 45 per cent. to 51 per cent., while the proportion reporting order books above normal has fallen from 12 per cent. to 10 per cent. There is a net movement of 8 per cent. away from the idea of recovery. I do not wish to place too great weight on the figures for one month or to suggest on that basis that we are in for a fresh slump, but there is certainly nothing in those figures to support the contention that we stand on the verge of a major recovery.

Nor, if we turn to the statements by the regional offices of the CBI in the course of last month's inquiry, do we find the enthusiasm about recovery with which the Chief Secretary sought to infect us. The statement by the northern CBI, in carefully measured terms, says: The overall position has not been worsening. The London region said: The overall picture is now patchy rather than one of unremitting gloom. The north-west region—my hon. Friend the Member for Workington (Mr. Campbell-Savours), who made an impassioned contribution to the debate, will be particularly interested in this—said: The north-western economy is tending to mark time. These statements and the figures on which they are based do not sustain the claim of the Chief Secretary in the debate we had last month that the evidence of recovery around us was reaching—I use the word that he used—a crescendo. [Interruption.] The Chief Secretary did indeed say that; I looked it up in Hansard this afternoon. He said that there was "a crescendo of figures" pointing to recovery.

Whether the Chief Secretary chooses to base himself on quotations from the report or on figures, I would still argue —I believe that any hon. Member who has heard what I have been describing would agree—that it cannot be said that that evidence amounts to a crescendo of figures pointing to recovery.

Mr. Brittan

The hon. Gentleman will have heard in the course of my observations some detailed quotations from the latest survey. If he does not accept that the picture is as I have described it, can he tell us what explanation he has for the undoubted fact that in the latest survey—which he is not seeking to decry—the balance of the answers on overall business optimism was that it had been exceeded only in 1959, 1963 and 1973? What is his explanation?

Mr. Cook

That is very simple. In most factories, there is an enormous sense of relief among business men that their heads are no longer being battered against the wall. Those answers are based on the question whether they expect the next four months to be better than the last four, and, given the nadir we have seen in the last four months, to claim with the enthusiasm and complacency that the Chief Secretary does that this shows that we are on the verge of recovery is to border on hyperbole.

In our debate the week before last the Financial Secretary quoted Keats when referring to the Labour party's programme for recovery. I took the opportunity after the debate of looking through my volume of Keats and I came across a line which perfectly expresses the hyperbole of Treasury Ministers in forecasting recovery on the basis of the small bump over which the economy is going as it crawls along the bottom. It is the opening line from one of his earlier poems, which is well known for its alliterative line: I stood tip-toe upon a little hill". That is precisely where the Treasury Ministers find themselves, straining rhetoric and toes with flights of hyperbole as they stand on a tiny bump on the index. Moreover, that bump on the index is dwarfed by the chasm into which the index has been thrust over the last four years.

Let us compare where we are now with where we have to get in order to get back to 1979. Consider investment: there is a small indication of recovery in investment in manufacturing industry. It is so small that it cannot prevent the average for this year from being below that for last year. As the CBI fairly points out, this will be the fourth consecutive year under this Government in which manufacturing investment has fallen.

In manufacturing itself, there has been a recovery of precisely 1 per cent. measured over the past 12 months. The latest figures for manufacturing output are the lowest for 15 years. The figures for bankruptcies go back beyond the last 15 years. The current figures for bankruptcies are the worst that have ever been recorded.

We can trace the record for the balance of trade rather further back than that for bankruptcies. Figures now show that in the last two months Britain has been a net importer of manufactured goods. Economic historians can trace this series back for several centuries and we can now assert with confidence that there is no precedent for this position until we get back to Tudor England. Between Tudor England and the England of the present Government there is no precedent for Britain having a net deficit on its balance of manufacturing trade.

Given that appalling record and the depth of the slump we have been through, it is offensive to hear hon. Members on the Government Benches being so complacent about the modest recovery that they claim to see at present—a recovery of such moderation that it would do credit to the SDP.

There is another dimension that we cannot forget and it is particularly relevant as we consider this tax on jobs. Even if the figures for investment, manufacturing output and bankruptcies get back to the 1979 level—and there is no sign that they will — there is not the slightest indication that the figures for unemployment will do so. The very survey from which the Chief Secretary quoted earlier provides damning evidence that, far from going down, unemployment will continue to go up. Twice as many firms in the CBI survey expect to lay off staff in the next four months as expect to increase staff. The Neddy report of last month found that, of 40 industrial sectors, in not one could an increase in employment be expected. In January the manufacturing sector lost 60,000 jobs—the highest total since June 1981. The truth is that this Government offer no hope to the unemployed and no security to those at work who live in fear of losing their jobs.

Recovery does not come when things stop getting worse; recovery does not come when M3 at long last hits target. It comes when unemployment gets back to the 1979 level and when the Government recreate the jobs that they have destroyed. Until that point is reached any talk of recovery is an insult to the army of unemployed that they have created. Tonight we will repudiate that insult by voting in the Lobby against the abject failure of their industrial strategy.

Question put, That the clause be read a Second time:—

The Committee divided: Ayes 171, Noes 237.

Division No. 136]	[6.57 pm
AYES
Allaun, Frank	Bray, Dr Jeremy
Archer, Rt Hon Peter	Brown, Hugh D. (Provan)
Ashley, Rt Hon Jack	Brown, R. C. (N'castle W)
Ashton, Joe	Brown, Ron (E'burgh, Leith)
Atkinson, N,(H'gey,)	Buchan, Norman
Bagier, Gordon AT.	Callaghan, Jim (Midd't'n & P)
Barnett, Guy (Greenwich)	Campbell, Ian
Barnett, Rt Hon Joel (H'wd)	Campbell-Savours, Dale
Beith, A. J.	Canavan, Dennis
Bidwell, Sydney	Carmichael, Neil
Booth, Rt Hon Albert	Carter-Jones, Lewis
Boothroyd, Miss Betty	Cartwright, John
Bottomley, Rt Hon k.(M'b'ro)	Cocks, Rt Hon M. (B'stol S)
Bradley, Tom	Cohen, Stanley

Concannon, Rt Hon J. D.	McWilliam, John
Cook, Robin F.	Magee, Bryan
Cowans, Harry	Marshall, Jim (Leicester S)
Craigen, J. M. (G'gow, M'hill)	Maynard, Miss Joan
Crowther, Stan	Meacher, Michael
Cryer, Bob	Mikardo, Ian
Cunliffe, Lawrence	Millan, Rt Hon Bruce
Cunningham, G. (Islington S)	Mitchell, R. C. (Soton Itchen)
Cunningham, Dr J. (W'h'n)	Morris, Rt Hon A. (W'shawe)
Davidson, Arthur	Moyle, Rt Hon Roland
Davies, Rt Hon Denzil (L'lli)	Newens, Stanley
Davis, Terry (B'ham, Stechf'd)	O'Brien, Oswald (Darlington)
Deakins, Eric	O'Halloran, Michael
Dean, Joseph (Leeds West)	Orme, Rt Hon Stanley
Dewar, Donald	Paisley, Rev Ian
Dixon, Donald	Park, George
Dobson, Frank	Parker, John
Dormand, Jack	Parry, Robert
Duffy, A. E. P.	Pendry, Tom
Dunnett, Jack	Penhaligon, David
Dunwoody, Hon Mrs G.	Pitt, William Henry
Eadie, Alex	Powell, Raymond (Ogmore)
Ellis, R. (NE D'bysh're)	Prescott, John
Ellis, Tom (Wrexham)	Price, C. (Lewisham W)
Evans, loan (Aberdare)	Race, Reg
Evans, John (Newton)	Rees, Rt Hon M (Leeds S)
Field, Frank	Richardson, Jo
Flannery, Martin	Roberts, Ernest (Hackney N)
Foot, Rt Hon Michael	Roberts, Gwilym (Cannock)
Ford, Ben	Robertson, George
Forrester, John	Robinson, G. (Coventry NW)
Foster, Derek	Rooker, J. W.
Foulkes, George	Roper, John
Freeson, Rt Hon Reginald	Ross, Ernest (Dundee West)
Freud, Clement	Ross, Stephen (Isle of Wight)
Garrett, John (Norwich S)	Rowlands, Ted
George, Bruce	Sandelson, Neville
Golding, John	Sever, John
Grant, John (Islington C)	Sheerman, Barry
Grimond, Rt Hon J.	Sheldon, Rt Hon R.
Hamilton, W. W. (C'tral Fife)	Shore, Rt Hon Peter
Harman, Harriet (Peckham)	Silverman, Julius
Harrison, Rt Hon Walter	Skinner, Dennis
Hart, Rt Hon Dame Judith	Smith, Rt Hon J. (N Lanark)
Haynes, Frank	Snape, Peter
Heffer, Eric S.	Soley, Clive
Hogg, N. (E Dunb't'nshire)	Spearing, Nigel
Homewood, William	Spriggs, Leslie
Hooley, Frank	Stoddart, David
Horam, John	Stott, Roger
Howell, Rt Hon D.	Straw, Jack
Howells, Geraint	Summerskill, Hon Dr Shirley
Hoyle, Douglas	Thomas, Jeffrey (Abertillery)
Huckfield, Les	Thomas, Mike (Newcastle E)
Hudson Davies, Gwilym E.	Tilley, John
Hughes, Mark (Durham)	Tinn, James
Hughes, Robert (Aberdeen N)	Torney, Tom
Hughes, Roy (Newport)	Varley, Rt Hon Eric G.
Janner, Hon Greville	Wainwright, R.(Colne V)
Jay, Rt Hon Douglas	Wardell, Gareth
John, Brynmor	Watkins, David
Johnson, James (Hull West)	Whitehead, Phillip
Jones, Barry (East Flint)	Whitlock, William
Kilroy-Silk, Robert	Willey, Rt Hon Frederick
Leighton, Ronald	Williams, Rt Hon A.(S'sea W)
Lofthouse, Geoffrey	Williams, Rt Hon Mrs(Crosby)
Lyons, Edward (Bradf'd W)	Wilson, Gordon (Dundee E)
Mabon, Rt Hon Dr J. Dickson	Winnick, David
McCartney, Hugh	Woodall, Alec
McDonald, Dr Oonagh
McKay, Allen (Penistone)	Tellers for the Ayes:
McKelvey, William	Mr. George Morton and
MacKenzie, Rt Hon Gregor	Mr. Austin Mitchell.
McTaggart, Robert

NOES
Adley, Robert	Ancram, Michael
Aitken, Jonathan	Arnold, Tom
Alexander, Richard	Aspinwall, Jack
Alison, Rt Hon Michael	Atkins, Robert(Preston N)

Baker, Kenneth(St. M'bone)	Gummer, John Selwyn
Baker, Nicholas (N Dorset)	Hamilton, Hon A.
Banks, Robert	Hamilton, Michael (Salisbury)
Beaumont-Dark, Anthony	Hampson, Dr Keith
Bendall, Vivian	Hannam, John
Benyon, W. (Buckingham)	Haselhurst, Alan
Berry, Hon Anthony	Hastings, Stephen
Best, Keith	Havers, Rt Hon Sir Michael
Bevan, David Gilroy	Hawksley, Warren
Biggs-Davison, Sir John	Hayhoe, Barney
Blackburn, John	Heath, Rt Hon Edward
Blaker, Peter	Heddle, John
Body, Richard	Henderson, Barry
Bonsor, Sir Nicholas	Heseltine, Rt Hon Michael
Boscawen, Hon Robert	Hicks, Robert
Bottomley, Peter (W'wich W)	Higgins, Rt Hon Terence L.
Boyson, Dr Rhodes	Hogg, Hon Douglas (Gr'th'm)
Braine, Sir Bernard	Holland, Philip (Carlton)
Bright, Graham	Hooson, Tom
Brinton, Tim	Hordern, Peter
Brittan, Rt. Hon. Leon	Howell, Rt Hon D. (G'ldf'd)
Brooke, Hon Peter	Hunt, David (Wirral)
Brotherton, Michael	Hunt, John (Ravensbourne)
Brown, Michael(Brigg & Sc'n)	Hurd, Rt Hon Douglas
Browne, John (Winchester)	Irvine, RtHon Bryant Godman
Bruce-Gardyne, John	Jenkin, Rt Hon Patrick
Bryan, Sir Paul	Jopling, Rt Hon Michael
Bulmer, Esmond	Joseph, Rt Hon Sir Keith
Butcher, John	Kaberry, Sir Donald
Carlisle, Kenneth (Lincoln)	Kershaw, Sir Anthony
Carlisle, Rt Hon M. (R'c'n)	Kimball, Sir Marcus
Chalker, Mrs. Lynda	Knox, David
Channon, Rt. Hon. Paul	Lamont, Norman
Churchill, W. S.	Lawrence, Ivan
Clark, Hon A. (Plym'th, S'n)	Lawson, Rt Hon Nigel
Clarke, Kenneth (Rushcliffe)	Lee, John
Clegg, Sir Walter	Le Marchant, Spencer
Colvin, Michael	Lennox-Boyd, Hon Mark
Cormack, Patrick	Lester, Jim (Beeston)
Corrie, John	Lewis, Sir Kenneth (Rutland)
Costain, Sir Albert	Lloyd, Peter (Fareham)
Cranborne, Viscount	Loveridge, John
Critchley, Julian	Luce, Richard
Crouch, David	Lyell, Nicholas
Dorrell, Stephen	McCrindle, Robert
Douglas-Hamilton, Lord J.	Macfarlane, Neil
Dover, Denshore	Macmillan, Rt Hon M.
Dunn, Robert (Dartford)	McNair-Wilson, M. (N'bury)
Durant, Tony	McNair-Wilson, P. (New F'st)
Dykes, Hugh	Madel, David
Eden, Rt Hon Sir John	Major, John
Edwards, Rt Hon N. (P'broke)	Marland, Paul
Eggar, Tim	Marlow, Antony
Elliott, Sir William	Marten, Rt Hon Neil
Emery, Sir Peter	Mather, Carol
Eyre, Reginald	Maude, Rt Hon Sir Angus
Faith, Mrs Sheila	Mawhinney, Dr Brian
Farr, John	Maxwell-Hyslop, Robin
Fell, Sir Anthony	Mayhew, Patrick
Fenner, Mrs Peggy	Meyer, Sir Anthony
Finsberg, Geoffrey	Mills, Sir Peter (West Devon)
Fisher, Sir Nigel	Moate, Roger
Fletcher-Cooke, Sir Charles	Montgomery, Fergus
Fookes, Miss Janet	Moore, John
Forman, Nigel	Morris, M. (N'hampton S)
Fowler, Rt Hon Norman	Morrison, Hon C. (Devizes)
Fox, Marcus	Morrison, Hon P. (Chester)
Fraser, Peter (South Angus)	Mudd, David
Fry, Peter	Murphy, Christopher
Gardiner, George (Reigate)	Neale, Gerrard
Glyn, Dr Alan	Needham, Richard
Goodhart, Sir Philip	Nelson, Anthony
Goodhew, Sir Victor	Neubert, Michael
Goodlad, Alastair	Newton, Tony
Gorst, John	Oppenheim, Rt Hon Mrs S.
Gower, Sir Raymond	Page, Richard (SW Herts)
Greenway, Harry	Parkinson, Rt Hon Cecil
Griffiths, E,(B'ySt. Edm'ds)	Parris, Matthew
Griffiths, Peter (Portsm'th N)	Patten, John (Oxford)
Grist, Ian	Pawsey, James

Percival, Sir Ian	Steen, Anthony
Pink, R. Bonner	Stevens, Martin
Pollock, Alexander	Stewart, A.(E Renfrewshire)
Porter, Barry	Stewart, Ian (Hitchin)
Prentice, Rt Hon Reg	Stokes, John
Price, Sir David (Eastleigh)	Tapsell, Peter
Proctor, K. Harvey	Taylor, Teddy (S'end E)
Pym, Rt Hon Francis	Thomas, Rt Hon Peter
Rathbone, Tim	Thompson, Donald
Rees, Peter (Dover and Deal)	Thorne, Neil (Ilord South)
Renton, Tim	Townend, John (Bridlington)
Rhodes James, Robert	Townsend, Cyril D, (B'heath)
Rhys Williams, Sir Brandon	Trippier, David
Ridley, Hon Nicholas	Trotter, Neville
Ridsdale, Sir Julian	van Straubenzee, Sir W.
Rippon, Rt Hon Geoffrey	Viggers, Peter
Roberts, Wyn (Conway)	Wakeham, John
Rossi, Hugh	Waldegrave, Hon William
Sainsbury, Hon Timothy	Walker, B. (Perth)
St. John-Stevas, Rt Hon N.	Walker-Smith, Rt Hon Sir D.
Scott, Nicholas	Waller, Gary
Shaw, Giles (Pudsey)	Walters, Dennis
Shelton, William (Streatham)	Warren, Kenneth
Shepherd, Colin (Hereford)	Wells, Bowen
Shepherd, Richard	Wells, John (Maidstone)
Silvester, Fred	Whitelaw, Rt Hon William
Sims, Roger	Whitney, Raymond
Skeet, T. H. H.	Wickenden, Keith
Smith, Tim (Beaconsfield)	Wiggin, Jerry
Speed, Keith	Williams, D.(Montgomery)
Speller, Tony	Wolfson, Mark
Spicer, Jim (West Dorset)	Young, Sir George (Acton)
Spicer, Michael (S Worcs)
Sproat, Iain	Tellers for the Noes:
Squire, Robin	Mr. Tristan Garel-Jones and
Stanbrook, Ivor	Mr. Ian Lang.
Stanley, John

Question accordingly negatived.

Clause 88 ordered to stand part of the Bill.