Regional Impact of Unemployment

HC Deb 24 January 1983 vol 35 cc670-709 3.58 pm

Mr. Cyril Smith (Rochdale)

I have taken part in many debates on unemployment. I have often said that it is doubtful whether any such debate takes one person off the dole queue. I accept that that is likely to be the outcome of today's debate as well, but it is right that debate should take place and continue.

One of the functions of parliamentary opposition is to press constantly for Government action and to spotlight the Government's weaknesses. If this Government have a weakness, it is in their unemployment record.

I do not intend to rehearse all the humane arguments against unemployment. Suffice it to say that unemployment is soul destroying; it eats at the fabric of our future as a nation because it teaches a whole generation how to live without working; it allows skills and knowledge to be wasted when they should be used; and it takes away self-respect and human dignity. It is, indeed, evil.

My right hon. and hon. Friends refute and deny the assertion that we cannot control inflation without high unemployment. We believe that that is a myth and a lie. It is not a question of one or the other. It is possible to control inflation and reduce unemployment at the same time, provided that there is a properly devised incomes strategy.

It is grossly untrue to say that much unemployment was due to mass overmanning before the "blessed Lady" showed industry where it was going wrong. I resent deeply that jibe at management, but that is the constant jibe from No. 10 Downing Street. If industry was so grossly overmanned before 1979, that is a reflection not on the Labour Government but on the management of British industry. I do not believe that management was so grossly inefficient before 1979 that it employed about 2 million bodies more than was necessary to be efficient. If there was, or is, overmanning, the majority of it is in the administration of the public sector. It is interesting to record that most labour shedding is in the private sector rather than in the public sector where there might have been some overmanning.

My third argument is relevant to the debate on unemployment, but it is not confined to any region; it applies to them all. It is an important matter which the Government should examine. I refer to the scandal that the Government penalise thrift when dealing with the long-term unemployed. Over one million people have been on the dole for more than a year. Many are over 55 years of age and became unemployed through no fault of their own. They have saved for their retirement in five, seven or 10 years' time. Today their savings—not massive fortunes but small amounts—prevent them from receiving benefit because after one year they move from unemployment benefit to supplementary benefit. They have saved that money to assist them in retirement. The present rules are disgraceful and distasteful. I hope that the Government will find a way to assist the long-term unemployed so that their savings for retirement are not taken in account.

An endowment policy is also taken into account in assessing the £2,500 earnings limit. I accept that there must be a safeguard and that if one suddenly becomes unemployed one should not be able to stick all one's savings into an endowment policy and have it discounted, but surely if an endowment policy has been held for 12 months before unemployment it should be discounted. Something should be done about the scandalous £2,500 limit.

We seek once again to spotlight not only unemployment and the evil of it, but the Government's unwillingness to take the necessary steps to tackle it. We also seek to spotlight the growing polarisation between north and south that is emerging from the unemployment pattern.

We want a united Britain, not a divided Britain. The facts and figures cause serious concern in relation to north versus south, polarisation and regional development. For example, it is interesting that the majority of the 100 parliamentary constituencies with the highest unemployment rate are represented by Labour Members. Indeed, only two of the 100 constituencies are held by Conservatives. Only eight are in the south of England. However, almost all the 100 constituencies with the lowest unemployment rate are in the south-east. Consequently, very few Tory Members have direct constituency experience of high unemployment.

It is interesting to examine the constituencies held by Ministers responsible for employment. The hon. Member for Barkston Ash (Mr. Alison), who is the Minister of State, Department of Employment, is 580th in the list. The hon. Member for Eye (Mr. Gummer) who has just joined the Department as Under-Secretary after having asked three questions about employment since 1979—two of them were written and the third was about apprentice thatchers—is 517th in the list. The hon. Member for Norfolk, South (Mr. MacGregor), who is the Under-Secretary of State for Industry, is 464th in the list of constituencies with unemployment problems. My charge is not unfair.

Rochdale has suffered badly. About 18 per cent. of its potential working population is unemployed. I see kids leaving school resigned to their fates. I see factories demolished brick by brick. They will not start up again when the economy improves. Other companies in my constituency struggle to exist. Until 1982 Rochdale had a Left-wing council which raised rates by 77 per cent. in two years. That did not help. All these matters cause me concern and I hope that the House is equally worried.

Thousands of immigrants live in Rochdale—a factor which is not common throughout the country. The evil of unemployment is serious to the ethnic minorities. Many immigrants are unskilled and have few job opportunities.

At the end of 1982 manufacturing output reached its lowest level for 16 years. Capacity in the construction industry is almost 20 per cent. below what it was in 1979 when the Government came to power. Investment by manufacturing industry has dropped by nearly 50 per cent. since 1979 and company liquidations in 1982 were about treble those in 1979. We are experiencing a sorry mess.

If one examines the problem on a region-to-region basis, from the midlands to Scotland and from the midlands to Wales, one sees how the regions vary in their suffering. In Scotland 333,000 are unemployed—15.3 per cent; in Wales, 174,000ߞ16.9 per cent; in the west midlands, 355,600ߞ16.1 per cent. The increase in the west midlands and in many other regions is interesting. There is an increase of 183 per cent. in Shropshire, 198 per cent. in Herefordshire and Worcestershire, 236 per cent. in Staffordshire, and 208 per cent. in Warwickshire. Those are percentage increases in the 1982 figure compared with the 1979 figure.

In the south-west, 194,000 people are unemployed—11.8 per cent. In Yorkshire and Humberside, 292,000 people are unemployed—14.5 per cent. The increase in Humberside is 136 per cent., in north Yorkshire, 136 per cent., in south Yorkshire, 178 per cent., and in west Yorkshire, 185 per cent.

In the north-west, 430,000 people are registered as unemployed. That is 15.8 per cent. of the working population. There has been an increase of 199 per cent. in Greater Manchester alone between 1979 and 1982. The increase in Lancashire has been 166 per cent. In Merseyside the increase is 82 per cent., despite the fact that the level in 1979 was already a disaster. In Cheshire the percentage is 184. The figure in the north-east is 226,000, or 17.5 per cent.—an increase of 120 per cent. in three years. It is interesting to note that, even though Scotland is in the extremely serious position of having 15 per cent. unemployed, the figure for the north-east, 17.5 per cent., is even worse.

In East Anglia and Essex, the figure is 78,700, or 11.3 per cent. In the east midlands it is 170,000, or 11.9 per cent. In that area the increase has been very steep since 1979. In Derbyshire, the increase is 203 per cent., in Leicestershire, 188 per cent., and in Northamptonshire, 259 per cent. In Devon and Cornwall, 71,581 people are unemployed. In the south-west as a whole, the figure is 194,000. In the south of England, excluding Greater London, the figure is 367,000, or 9.7 per cent.

Those figures show unemployment of between 15 and 17 per cent. in the north of England, and 11 to 12 per cent. in the south of England. They are extremely serious. I do not attempt to minimise or underestimate the seriousness of unemployment in the south, but those figures demonstrate the great danger of polarisation between north and south unless the Government are determined to act on a regional basis. Region after region, from the midlands to Scotland and from the midlands to Wales, has suffered as a consequence.

I entirely accept that a proportion of unemployment is due to world conditions. That is why we should take a lead in the world and not merely within the borders of the United Kingdom. Instead, we seem to be scraping the heels of people with less experience, drive and initiative than us.

I reject the official Opposition's solution to unemployment. I do not believe that the solution is to become an allotment holder divorced from the rest of Europe or the world. We must not be inward looking. We must not demand the right to export without conceding the inevitability of imports. That is no way forward. We need stimulus, not initiative-killing drugs. We need a clear commitment to a mixed economy. We need an end to political tampering. We do not need privatisation, or denationalisation as it used to be called, on the one hand, and nationalisation, on the other. We do not want industries moving from one system to the other according to the Government in power. In terms of restructuring and reorganising industry, we should declare a truce on whether industries should be state or privately owned. We must let all state industries get on with running the job that they have been given, and we must let private industry know that its future is secure and that it will not be under threat from any future Government.

Mr. Bob Cryer (Keighley)

The hon. Member seemed to be critical about planning trade. What about the multi-fibre arrangement, which is vital to the textile industry? What is vital to the textile industry in planning trade may well apply to other industries.

Mr. Smith

The great thing about the multi-fibre arrangement is that it is multilateral and allows for imports. It is not about stopping imports but about limiting them. There is a difference between the two.

We need investment to reduce unemployment. Neither I nor my party believes that it is possible in four years to reduce unemployment to—and I stress the word "to"—1 million. We believe that it is possible in the first two or two and a half years of a Government's life to reduce unemployment by 1 million. It is much more honest to tell the people that the long-term solutions are long term and will take much longer. None the less, short-term remedies can be applied if we really want to get industry moving again and to reduce the size of the dole queues.

Sewer pipes and water mains in all parts of the country are crying out for renewal. Clapped out railway stock needs replacement. There is a desperate need to conserve energy. Our ageing population is crying out for more care and protection through, for example, an increase in the home help service. At a time of such needs in our society, 3 million people are paid not to work. It is madness that we pay people not to work but are unable to devise methods by which from the same funds we can pay some of them to work.

Mr. A. J. Beith (Berwick-upon-Tweed)

Did not my hon. Friend hear the Secretary of State for the Environment say today that we have one major mains burst and 70 minor bursts in the water system on every working day? Is not that clear evidence from the Government's mouth for the need for investment in that area?

Mr. Smith

I am grateful to my hon. Friend for his intervention which supports my argument. It is particularly true in the north-west. It is not insignificant that the first major problems in the water dispute have arisen in Greater Manchester, because the pipes that were laid in the north-west were laid earlier than those in many other parts of the British Isles. They have had far more wear and use and are in need of earlier replacement.

The Government talk about controlling public expenditure. When will they contol public expenditure on unemployment? The figure is £15,000 million. I do not like the word "billion"; it slips out too easily, and people fail to understand its significance. "Billion" is a useful word for the Government, but £15,000 million per year is being spent by the Government to keep people on the dole. Such public expenditure is nonsense when part of it could be used to pay people to work instead of paying them not to work.

Many regions require special help. I am not suggesting that we turn them all into development areas. If we did that, the development area status would be quite useless. Many regions require injections of capital for essential regional tasks that would create work particularly in the worst-hit regions.

There is a need for new hospitals. I am told that Telford and south-east Northumberland need new hospitals. The north could certainly do with one or two new hospitals.

There is a need for new prisons. We hear about prisoners being four to a cell in cells built for one. We talk about trying to cut the crime rate, yet we breed crime by putting non-potential criminals and criminals in the same cell. Money spent on improving the prison service would be well spent and would provide many jobs.

Special tasks need to be done in other regions, such as roadworks and housing. Those are general schemes for all regions. There is the Severn barrage. A recycling plant in south Wales requires building. There is a need to extend gas supplies, particularly in Devon and Cornwall. Even in my constituency of Rochdale, part of the north-west industrial area, some housing estates are unable to obtain gas supplies because the north-west gas board will not agree to the laying of such supplies. This is happening at a time when we are not short of gas and when there are people on the dole who would be well able to help to supply gas.

I have mentioned the modernisation of railways in places such as Minehead and Chippenham, where the Westinghouse Brake Company is located. The building of new railway stock and the components that would be necessary as a consequence would provide work for many people.

It was ludicrous to hear the Government talk last year about closing railway workshops and putting the men employed there on the dole, because any hon. Member who goes to any London station in the afternoon and watches the trains pull out to the south and south-east will realise what sardines must feel like when they are packed in a tin. It is staggering that we can talk about closing railway workshops and reducing the amount of railway stock at a time when there are 3 million unemployed.

Work could also be done on the Sheffield canal basin scheme. Safety barriers are required on many of our motorways, and on other roads such as the A627 in Greater Manchester. I know full well that that road would benefit from the provision of safety barriers. People could also be employed to clean the beaches at Durham, because there is a need to develop tourism and attract tourists. The cleansing of beaches in Durham and elsewhere would do much to attract more tourists. In Devon there is a need for schemes to assist with the prevention of floods.

The list is endless, and all the costs can be ascertained. Within the economy, it would be perfectly feasible to have a small injection of capital—small compared with the £15,000 million a year to keep people on the dole—of between £1,000 million and £2,000 million a year to carry out most of the schemes to which I have referred. That would have a marked and long-standing impact on the dole queues and would help to reduce them in our worst-hit regions.

I hope that the Government will think seriously about investment. They should pay particular regard to regional investment and regional schemes. That can and should be done, because it would help greatly towards reducing the size of the dole queues.

This will need drive, vision, will and determination. I do not believe that the Government have created unemployment for the joy of it. It is nonsense to suggest that. However, I believe that they lack the will to deal with it. If they do, they should get out and be replaced by a Government who are determined to work for Britain, who will put party doctrine in the dustbin and who will promote real partnership as the only real way forward.

4.24 pm

The Minister of State, Department of Employment (Mr. Michael Alison)

The hon. Member for Rochdale (Mr. Smith) spoke with his usual eloquence and conviction about unemployment generally and about its local and regional impact. I am glad that his common sense and grasp of reality made him avoid crude and sweeping indictments about the Government being responsible for the level of unemployment in Britain. Indeed, he had the grace to say that he did not believe that we had created unemployment deliberately in some pernicious or cynical way.

The present Government are not responsible for the growth in the level of unemployment in Britain, and the factual evidence is that overwhelmingly the British population does not believe that the Government are responsible.

The hon. Gentleman did not get far into his speech before advocating two specific governmental responses to the level of national and regional unemployment. He wanted, first, a slightly different pattern and mix of public spending and, secondly, so far as I could judge, he inevitably wanted more public spending.

At the outset of the debate, I ask both the hon. Gentleman and the House to recall, by way of background, the experiences of recent history, which teach us some sharp lessons about Government expenditure; about inflation, which public expenditure so easily begets; and about unemployment, which clearly flows from inflation. I shall take those three obvious factors in their reverse order.

The harsh reality is that unemployment in the United Kingdom has risen unevenly but persistently over the past 20 years. During the 1960s, total registered unemployment averaged about ½ million; in the 1970s, the average level of unemployment more or less doubled; and since 1980, the figure has doubled again. That increase in unemployment was accompanied by rising inflation over most of that period.

Inflation averaged under 4 per cent. in the 1960s. It is almost incredible to recall that now, although we are again getting pretty close to that figure. It averaged more than 12 per cent. in the 1970s, but we all remember the Labour peak of 27 per cent. inflation in 1977 which lurks behind that average figure.

I have seen and read many papers, articles and studies all arguing about the causes of inflation—about whether the growth in the money supply, wage costs or other factor costs are primarily responsible for persistent and long-term rises in the general price level. However, one case that I have never seen seriously argued is that in the pattern of rising unemployment and inflation since the 1960s, about which I have reminded the House, the unemployment was the cause of the inflation, and not the other way around—in other words, that we should let inflation rip as the cure-all for unemployment.

We must now accept that in the medium and long term inflation is the cancer that destroys the living cells of employment. If, as a result of allowing public expenditure to grow as a proportion of overall domestic expenditure and the quantity of money in circulation to grow more rapidly than the growth in real output, the unemployment trends that I have described could be reversed, the trick would already have been done. But we know that both public expenditure and domestic money supply, in relative terms, sky-rocketed in the 1970s. For example, between 1969 and 1979, total domestic expenditure increased by no less than 308 per cent. at current prices but by only 23 per cent. at constant prices. Thus, nearly 8 per cent. of the increased money demand resulted in an increase in output, and more than 92 per cent. resulted in an increase in prices.

Mr. Robert C. Brown (Newcastle upon Tyne, West)

If inflation is the cancer responsible for the enormous unemployment that we are now suffering, how can the Minister equate that with the fact that during the depression of the 1930s, when we had enormous unemployment, there was nil inflation?

Mr. Alison

That was an entirely different epoch in our history. However, it follows that a persistent and long period of stable prices has a much greater chance of bringing real jobs to the economy than a persistent and rising level of inflation, such as we have had since the second world war. We must grapple with the post-war phenomenon, because it is the environment in which we now live.

For that reason, the persistent and overriding priority in the economic policy pursued by the Government has been to reduce inflation. That is the route that we believe leads to the prize of more jobs and lower unemployment. There is no doubt that the Government's policies have succeeded in bringing about a marked reduction in the rate of inflation. At 5.4 per cent. the annual rate of inflation has fallen faster for the past six months than in any other major industrial country. Our record is now better than for almost 13 years. The Government are set to be the first in more than 20 years to achieve in office a lower average increase in prices than their predecessors. We are now doing better in the battle against rising prices than Europe, or the major industrialised countries as a whole, and we are still aiming at the 5 per cent. target for early this year. That is better news than almost anyone predicted as being possible 12 months ago. It shows what we can do, but America, Germany and Japan still have lower inflation rates than ours. From now on the struggle to keep reducing inflation will be tougher. We are now on the path to price stability and predictability, which in turn makes lower interest rates possible. That is probably industry's greatest need. Since the autumn of 1981, the reduction in interest rates has benefited industry by nearly £2 billion a year.

Mr. Cryer

The Minister is dealing with what he calls the post-war position and suggests that public expenditure would generate inflation. Why are the Government, in the post-war position in the Falklands, proposing to spend massively there in order to regenerate the islands' economy? They have done the same in the Turks and Caicos islands where they have built a huge runway to regenerate that economy. However, public expenditure in the United Kingdom is apparently not a solution to regenerate our economy.

Mr. Alison

The hon. Gentleman does himself no service in any serious argument about the problems by taking one item out of the overall public expenditure programme. Many items in the programme will be increased whereas others will be reduced. The Government have overall public expenditure under control for the first time in many years. That is one reason why interest rates have fallen.

I make no apology for painting this rather broader economic perspective by way of background to the Government's response to the hon. Member for Rochdale. He, the Liberal party, and—more widely—the SDP have put forward several proposals for major public expenditure to create employment. The hon. Gentleman sketched in some of those proposals this afternoon. As I understood it, the Liberal programme aimed at taking 1 million people off the dole queue over three years. That was what we were told at the Bournemouth conference. The hon. Gentleman has now brought it down to a reduction of 250,000 to 300,000 over one year. The SDP has raised the stakes a little by promising a reduction of 1 million in the number of unemployed over two years.

Both parties include in their public expenditure strategies more expenditure on public sector capital projects to increase investment and especially to increase investment-led job creation prospects. They would also argue—certainly the Liberal party spokesman in the House of Lords did not dissent from it in the Select Committee report on unemployment—for more current expenditure on low-skilled jobs in the public sector, such as the National Health Service and local government. They would probably also argue for further selective employment measures, including job creation grants in the community and voluntary sectors. Again, the hon. Gentleman's speech hinted at that.

Many of the ideas canvassed by the Liberal party, both today and at the Bournemouth conference, are already reflected, at least in part, in the Government's programme of spending priorities and economic objectives. On capital investment, for example, the House will recall that investment in nationalised industries—British Rail comes within this broad programme—was cut in real terms by the Labour Government every year from 1976 onwards. The fall was stopped in this Government's first year and reversed sharply in 1981–82, when cash investment spending rose by more than 18 per cent. In the current year, 1982–83, another 18 per cent. increase has been authorised.

The construction industry is showing real signs of recovery—[Hon. MEMBERS: "Where?"]. I am in no doubt about the difficulties faced by the industry, but there are already signs that it is responding to increased demand, especially in housing. During the first 11 months of 1982, housing starts were 25 per. cent. more than in the same period in 1981. New orders received by contractors for all construction work in the first nine months of 1982 were noticeably higher than those for the same period in the previous year.

However, the Government believe that the case for adopting what the hon. Gentleman suggested this afternoon or any other proposals must be considered within the wider framework of the policies needed to defeat inflation. Higher public spending on employment measures or infrastructure will require a mix of lower spending in other areas, higher taxation or higher borrowing, with a consequent upward pressure on interest rates.

Mr. Harry Cowans (Newcastle upon Tyne, Central)

Will the Minister give way?

Mr. Alison

I am dealing with the speech of the hon. Member for Rochdale. I shall give way if I have time during this short debate.

Each of the consequences that I mentioned carries a penalty that falls ultimately upon industry and so upon jobs. The balance of advantage and disadvantage in specific proposals cannot be properly evaluated without taking a view on how they are to be financed and the further effects that arise. To implement all the proposals put forward by the hon. Gentleman this afternoon, and others put forward by the SDP, would mean a major addition to planned public expenditure. That could all too easily undermine the success over inflation, on which the prospects of a lasting improvement in competitiveness, and ultimately employment, must depend.

Mr. Gordon Wilson (Dundee, East)

Is the Minister aware that ceilings will be placed on public expenditure on regional development? There were reports in the Sunday Standard in Scotland yesterday that some of the industrial development money currently earmarked for Scotland will, as a result of the review being conducted by the Government, be transferred to other parts of Britain. Will the right hon. Gentleman repudiate that and say that the Government have no intention of doing so?

Mr. Alison

I cannot repudiate a report about which I have just learnt from the hon. Gentleman. I hope that he will allow me to take note of his point, to research the matter and to give him an answer as and when I can.

Mr. Cowans

rose—

Mr. Alison

I shall give way in a moment, but only if I get on reasonably well.

I remind the House briefly about what the Government's substantial programme of special employment measures is achieving. The programme has proved itself to be compatible with much lower interest rates than we have seen in Britain for years, and with falling inflation. We recognise that, while there is a need for special employment measures in the short term, they must be consistent with or work in favour of the increased efficiency of the labour market. Within that constraint, we are doing more than ever before to help. Our expenditure on special measures will be almost £1½ billion in the current financial year and almost £2 billion next year.

Our main priority is to tackle youth unemployment. It is only right to devote considerable resources to programmes of training and work experience for school leavers and others in younger age groups who might otherwise have to wait for some time before acquiring useful skills and the habit of work. The youth training scheme, which will be fully operational from September, will build on the experience of the present youth opportunities programme. It represents a major development in youth training in Britain and will form a bridge between school and work. In 1984–85, the first full year of operation, we shall spend over £1 billion on training young people and, as a result, Britain will gain a better trained work force, better able to meet the needs of industry. I am not quite sure whether this is the policy of the Liberal party, but I believe that the right hon. Member for Crosby (Mrs. Williams) has either said or hinted that it is the SDP's intention to double the length of the youth training scheme programme. I ask the right hon. Lady to bear in mind that the first full year for which we are budgeting is costing £1 billion. I wonder whether she has worked out whether, in the second year, the programme could cost less than £1 billion. Certainly a substantial increase in public expenditure seems to be anticipated in that area.

Mr. Cowans

I am grateful to the Minister for giving way. I appreciate that he does not have much time to spare. The Minister lays stress on reducing inflation. Of course, that is vitally important, but it is germane to ask what is the cost. In the process of reducing inflation, is manufacturing industry to be destroyed? Are the north-east and similar regions to become industrial deserts? Is high unemployment to be endured? Prices will fall if everyone is unemployed, but if the policies that the Minister considers to be successful destroy our ability to compete in world markets, an inflation rate of nil will not do this country one iota of good.

Mr. Alison

History plainly shows that allowing inflation to rise leads to an increase in unemployment, and that there is always a lag between the achievement of price stability and the pick-up of employment. We are confident that employment will pick up on a plateau of more stable prices. All the national economies that have managed to keep inflation down to a much lower level than we have over a long period have a persistently better record of high employment. The Japanese and the Germans are the most self-evident cases. Getting inflation down, and keeping it down, offers us the best prospect of an increase in employment.

The young workers scheme, which started last January, directly tackles the problem of youth unemployment among those aged over 18 by helping employers to take on young people at realistic wage levels, which reflect their relative lack of experience and, frequently, their need for training. The scheme is already helping about 137,000 young people.

The other major group that needs help is that of the long-term unemployed. I am glad that the hon. Member for Rochdale has pointed out that it is frustrating for the public to see those on the dole getting money for doing nothing when it might, in principle, be desirable to try to find jobs for them. The House of Lords Select Committee on Unemployment canvassed the same idea. The Committee suggested that the Government should aim to get about 300,000 people into public works programmes of various sorts, direct from the unemployment register, and preferably from among the long-term unemployed. That is exactly what we aim to do through our community programme.

About a quarter of our total expenditure is being directed to special employment measures for the long-term unemployed—for those over 25 who have been unemployed for 12 months or more and those aged between 18 and 25 who have been unemployed for six months or more. The Government are only too anxious to help those who have experienced what the hon. Gentleman rightly described as the profoundly demoralising effects of being out of a job for a long time. We recognise that the skilled may lose their skills, and others even their basic working habits, after a long period of unemployment. It was in 1981 that we introduced the community enterprise programme, the forerunner of the present community programme, which provided temporary jobs on projects of benefit to the community for those who had been out of work for the periods that I have described.

From 1 October last year, the community enterprise programme was incorporated into our new community programme, the largest-ever initiative in Britain to help the long-term unemployed. The programme is intended to provide up to 130,000 places at a gross cost of approximate £400 million in the build-up year 1983–84, and it will cost about £583 million in 1984–85. That is not a bad step in the direction of the 300,000 whom the House of Lords Select Committee on Unemployment thought that we should be trying to get off the register.

Mr. Richard Wainwright (Colne Valley)

The Minister must be aware that the words on the Order Paper for the debate are The Regional Impact of Unemployment". When will he be coming to the regions and to the effect of unemployment on the regions, about which my hon. Friend the Member for Rochdale (Mr. Smith) spoke so eloquently?

Mr. Alison

The whole idea of the community programme, with which I am dealing at present, is precisely to try to have the most significant impact where the greatest number of long-term unemployed are to be found. The programme is specifically geared to have the response that is most likely to be forthcoming where unemployment is highest. If there is long-term unemployment in the hon. Gentleman's constituency, the whole range of resources of the community programme—provided that he can find or encourage sponsors—will be available in his locality. The very word "community" shows that the programme is designed to spark or elicit a response exactly and precisely where the greatest number of unemployed and the greatest number of long-term unemployed are to be found.

With regard to regional employment policy—going slightly wider in the economic sense—the programmes available from the Department of Industry and so on are topics that my hon. Friend will be seeking to cover in his wind-up speech.

At the end of December 1982, a total of about 12,000 places had been formally approved under the community programme. Agreements have also been made with managing agents for 34,000 places, and a further 50,000 places are now under negotiation. Therefore, we are going a long way already towards filling out the capacity of the community programme to take off the register 130,000 of the long-term unemployed—most significantly in the areas where those long-term unemployed are more than proportionately represented.

The remaining quarter of our special employment measures expenditure goes on a series of measures that are not aimed at particularly identifiable groups but generally help the unemployed in ways consistent with the development of the labour market. For example, the job release scheme, which started in 1977, and helps to do something for older people, is designed to encourage workers who are nearing state pension age to give up work early and so release their jobs for unemployed people. The job release allowance is currently being paid to about 75,000 people and the estimated cost of the scheme this year is £244 million.

In addition, we are testing the effectiveness of the enterprise allowance scheme. We recognise that many unemployed people would like to start up in business, but the fact that in doing so they lose their entitlement to unemployment or supplementary benefit may deter them. The scheme compensates for the loss of benefit by providing a weekly taxable allowance for the first year while the business is being established. It is currently operating as a pilot scheme in five areas.

So far the take-up has been encouraging. At the end of November, about 1,600 people were receiving the allowance under the pilot scheme. We must, however, be sure that this is the best and most cost-effective way of helping such people before deciding whether to extend the scheme to other parts of the country. We are always ready to consider new ways of helping the unemployed.

Our newest employment measure was introduced on 3 January this year. That is the job-splitting scheme, which is designed to help employers split full-time jobs and so open up part-time jobs for unemployed people. It offers a Government grant of £750 to employers who split jobs under the scheme provided that the part-time jobs created are filled by unemployed workers or those in the same establishment who are facing redundancy. Although the scheme is in its very early days, the initial response from employers has been encouraging.

This extensive package of measures reflects our real determination to help all those worst hit by the recession and, we believe, provides a constructive alternative to unemployment.

In conclusion, I return to my earlier theme. Of course we all want the level of unemployment to come down, but this will happen only when British industry becomes more competitive and world trading conditions improve. It is profitable firms which create jobs, so the more goods and services that our firms can sell at home and abroad, the more new jobs we shall see in all regions throughout the country. The Government's task is to create the right environment in which firms can prosper. We have already made a good deal of progress on this front; inflation and interest rates, for instance, have been considerably reduced. But industry has its part to play, too, by continuing to increase productivity and improve the quality and design of its goods. Meanwhile, we are helping those groups worst affected by the high level of unemployment through the considerable scale and range of special employment measures that I have enumerated this afternoon, many of which synchronise—and are not at all incompatible—with the objectives mentioned by the hon. Member for Rochdale. These will go a long way to making things better, but the public expenditure implications of doing more must be weighed carefully. We are doing as much as we can afford, consonant with keeping inflation on its downward trend. My hon. Friend the Under-Secretary of State for Industry, when he replies, will have something to say about the scope of the Industry Act and the Department of Industry in channelling specific aid to areas of particularly high unemployment.

4.51 pm

Mr. Giles Radice (Chester-le-Street)

We are debating a highly important topic. The hon. Member for Rochdale (Mr. Smith) made a useful contribution in introducing the debate, although occasionally he appeared to be making a tour of the marginals which the Liberals hope to win at the next election. I noticed one or two of the prime targets. Chippenham was mentioned, and so were one or two south-western constituencies, but, frankly, it was nothing like the blatantly electioneering speech of the Minister, in which he seemed completely to ignore the subject of the debate, which is the impact of unemployment on the regions.

Nobody would have thought that we have more than three million unemployed, by whichever count we use. Nobody would have thought that six regions have more than 15 per cent. unemployment and that only one region has unemployment under 10 per cent.—the south-east region, with 9.7 per cent.

Whichever way one considers the figures, there has undoubtedly been a catastropic increase in unemployment in all the regions since the general election. I shall use the Government's figures which are on a new claimants basis. For every 100 unemployed in the north when Labour left office, 215 are unemployed today. The equivalent figure for Scotland is 216; for Wales, 226; for the north-west, 243; for Yorkshire and Humberside, 272; for the east midlands, 281; for the south-east, 288. But of course the highest increase of all is in the west midlands, where for every 100 unemployed when Labour left office there are 319 today

If one compares the regional rates of unemployment in May 1979 and December 1982, one again finds an appalling increase. In those far-off days of May 1979, which many people in my constituency may regard as glorious days—

Mr. Gordon Wilson

Labour doubled unemployment, too.

Mr. Radice

In the north at that time 7.7 per cent. were unemployed—much too high—but today the figure is 17.5 per cent. In Wales the figure was 7 per cent. Today it is 16.9 per cent. In Scotland, 6.9 per cent. were unemployed in May 1979; today the figure is 15.3 per cent. In the north-west, 6.2 per cent. were unemployed in 1979; the figure is now 15.8 per cent. In Yorkshire and Humberside, 5.1 per cent. were unemployed in May 1979; now the figure is 14.5 per cent. The astonishing figure is, again, for the west midlands. In May 1979, 4.8 per cent. were unemployed; today, the figure is 16.1 per cent. Northern Ireland is, in a sense, an exception. The figure was 10.1 per cent. in May 1979. Today it is double that at 20.1 per cent. Excluding Northern Ireland, the north is still top of the league for rates of unemployment, as it was in 1979. The new challenger is the west midlands.

I am glad that the Minister has not rested his case on the fact that there has been some slight narrowing of differentials between the most depressed regions and the rest. That is not because of the success of the Government's regional policy. Any narrowing of differentials has been caused by the whole of the United Kingdom becoming a depressed area.

I wish to examine a little more closely two of the regions—the north, because my constituency is in that region and because, apart from Northern Ireland, it is still top of the league, and the west midlands, because its economy has deteriorated rapidly over the past three years. The northern region has had structural problems for a long time, but regional policy had a number of successes. Between 1967 and 1973, 50,000 new manufacturing jobs were created by regional policy. There was also considerable diversification in the economy, so that by 1979 we were facing a future with some hope. But now, according to The State of the Region Report, one in five males is unemployed, and if that rate continues it is calculated that all men will be unemployed by the end of the century. (Interruption.] I hope that that will not happen, but with the present Government anything can happen.

In the northern region the figure for long-term unemployment is considerably above the national average. More than one person in three has been out of work for more than a year and one in eight for more than two years.

With regard to youth unemployment, 75,000 young people are available for work. I accept that some of them are on youth opportunities schemes, but today the vast majority of young people in the northern region are leaving school with no prospect of obtaining permanent employment. A number of areas are appalling blackspots, where unemployment in September 1982 was well over 20 per cent. In fact, it is worse today.

In Wearside, Hartlepool and north-west Durham, in which Consett is counted, there have been unprecedented redundancies. In 1978 there were 14,000 redundancies, and in 1980 there were 36,000. In 1981 the figure was 40,000, while in 1982 it was 30,000, and more redundancies were announced in the new year in steel and shipbuilding. We have had redundancies in all the staple industries of the north—heavy engineering, shipbuilding, steel, chemicals and construction. That is what the Conservative Government have done to the northern region. [Interruption.] The hon. Member for Hertford and Stevenage (Mr. Wells) should realise that this is no laughing matter.

In 1979 the west midlands was one of the most prosperous and thriving areas of the United Kingdom. It is now one of the United Kingdom's most depressed areas, and it is not assisted by the Government's regional policy. The turnround has been appallingly swift. From a position of relatively few redundancies, the West Midlands county council area shows that in 1980 there were 37,000 redundancies; in 1981 31,000; in 1982 26,000; and further redundancies have been announced this year at Lucas.

The growth of long-term unemployment in the west midlands mirrors that in the northern region. Forty-four per cent. of the unemployed in the West Midlands county council area have been out of work for more than a year. The vast majority of young people in the region are not likely to find a job.

The main reason for the appalling increase in unemployment in the regions is the failure of the Government's economic policy, though one would not have thought so from what the Minister said. The combination of high interest rates, cuts in public spending and an overvalued currency has dealt nearly all of British industry a devastating blow from which it shows little signs of recovery. I should like the Under-Secretary of State for Industry to give us concrete signs of a recovery in manufacturing, engineering or construction. If he is proud of the Government's policy, let him tell us whence the recovery is coming.

Of course there is a world recession, but one of the main reasons for it is that other Governments, particularly the United States Government, have been following our Government's example. Until recently the United Kingdom has been cheering President Reagan in all his actions, instead of advising him to change his policies.

I agree with those who say that regional policies alone cannot solve our problems. The trouble is that the Government's stance on regional policy has, if anything, made matters worse. The Minister will not take my word for that, so I shall quote Gudgeon, Moore and Rhodes, considerable experts on regional policy, who have been studying the matter for at least 20 years. Their considered assessment is set out in December's "Cambridge Economic Review". They say that the Government's present policy stance in the face of a rapidly deteriorating regional situation is.… firstly to incur less expenditure, secondly to concentrate regional aid on the northern conurbations"— as a northern Member I do not totally oppose that, but I will deal with that issue later— thirdly to subsidise capital expenditure rather than employment; and finally to limit policy almost entirely to manufacturing which is everywhere in decline or at the very most growing more slowly than other sectors. That is an objective assessment of the Government's regional policy. It is a case which the Government must answer and we want to hear their answers today.

Let me deal with one of the Minister's best arguments. He says that expenditure on regional preferential assistance has increased, but if that expenditure is related to unemployment one sees that it has declined. That is the criterion for regional assistance. The aid per unemployed person in 1978ߝ79 was £441 and in 1980ߝ81 it had fallen to £231.

I do not argue that at a time of overall recession regional policy can produce the same results as it did in the 1960s and 1970s. For one thing, there is now less footloose industry, if any, and for another the problems are different and, mostly thanks to the Government, more intense.

As my right hon. Friend the Member for Stepney and Poplar (Mr. Shore), the shadow Chancellor of the Exchequer, argued so cogently last week, we need a different overall economic strategy which is geared to the creation of jobs and is based on economic expansion, increased public spending and public investment, a more competitive currency and an agreement on incomes with the trade unions.

In addition, we shall need, not a contracted or weakened regional policy, but a reformed, expanded and more dynamic policy. My hon. Friends the Members for Kingston upon Hull, East (Mr. Prescott) and for Stalybridge and Hyde (Mr. Pendry) have already done much work on that subject.

Sir William Elliott (Newcastle upon Tyne, North)

Having followed the affairs of the northern region for many years, I am amazed at some of the hon. Gentleman's comments, particularly his suggestion that the northern region was one of the most prosperous in the country in 1979.

Will the hon. Gentleman explain what he meant when he said that a Labour Government would need an agreement with the trade unions on incomes? Is he suggesting that there would be an incomes policy?

Mr. Radice

I believe that we must have a national economic assessment. When one looks at the successful countries, such as Austria and Sweden, or at any country that is trying to expand its economy, it is clear that there must be a broad agreement with the trade union movement on the direction of economic policy. Our Government do not bother about that, which is one reason why we have 3 million unemployed.

I must correct the hon. Member for Newcastle upon Tyne, North (Sir W. Elliott), because I did not say that the northern region was prosperous in 1979. I said that the west midlands was prosperous. I merely pointed out that, thanks to regional policy, the northern region was able to face the future with more hope at that time.

It is clear that we shall need a wider coverage of regional assistance. It will have to cover, for example, the west midlands, which, on any criteria, is a depressed area.

Mr. Gordon Wilson

If the hon. Gentleman proposes that regional policy should be extended, does not it follow that the benefits to other areas, such as Scotland and Wales, will be correspondingly reduced? There is a limit on the amount of footloose industry and if incentives are given to areas such as the west midlands, which has only recently suffered the problems of unemployment, that will be to the disadvantage of depressed areas that have suffered from high unemployment for decades.

Mr. Radice

Obviously we need more resources devoted to regional policy. The Opposition want to see a reformed regional policy which is not related so much to capital grants and actually includes a limit on such grants, which already account for more than half of all regional assistance. If the main criterion is the creation of jobs, the current priority given to capital grants must be wrong.

We need to devote more assistance to subsidising employment and we must give far more attention than any Government have given to helping service industries, because they will be the source of many new jobs. We must also broaden the development agency concept, which has been successful in Scotland and Wales and is working effectively in the west midlands and in London.

In its last manifesto the Labour party committed itself to development agencies for the English regions, and that idea was strongly supported by the northern region because we believe, rightly, that regions must have a much greater influence than at present over direction of their regional economies. One cannot just direct regional policy from the top. That was one of the troubles of the past—there was not enough input from the regions.

We also need to ensure that public spending takes more account of regional needs. Labour's plans for spending and investment need to be concentrated in the regions. I hope that that is where many of the jobs will come. In short, we shall need a much stronger rather than a weaker regional policy. What is so depressing for northern Members of Parliament, and for a Labour Member of Parliament representing a constituency with a high level of unemployment, is the lack of concern—

Mr. Cowans

I have been listening carefully to my hon. Friend's eloquent speech, but will he concede that in any regional policy the national Government must not concentrate on only one region? This Government, while shedding crocodile tears about losses of jobs in the regions, have either closed all regional offices or depleted them to such an extent that there has been a considerable loss of jobs—this is relevant to the northern region—in the income tax and travel offices. One could list a number of those offices, and I am sure that this applies in other regions where the Government have brought about a loss of jobs, while shedding crocodile tears about wanting to create more.

Mr. Radice

My hon. Friend is right. Any Government who are serious about regional policy have to be serious about their own occupations and spending. They have to see that they take account of regional needs and that nationalised industries take account of regional needs. One thing about the northern region, for example, is that many of the centres of decision making are outside the region. That is also true, although perhaps to a lesser extent, of Scotland and Wales. If there had been more centres of decision making—this applies to the nationalised industries as well—in the northern region, we might have done better out of the recession.

What has been so depressing about listening to unemployment debates over the past three years in the House is the lack of concern shown by the Conservative party about these issues. The Government appear to believe, and we have heard it again today, that a reduction in inflation will automatically bring unemployment down. I am glad that my hon. Friend the Member for Newcastle upon Tyne, West (Mr. Brown) reminded us that in the 1930s, when we last had mass unemployment, prices were falling. It is not surprising that prices fall when there are 3.5 million unemployed, when output is down by 15 or 16 per cent. and when one is in a deep world recession that affects commodity prices. The real trick is to combine expansion and full employment with stable prices, and the Government have not even bothered to attempt that.

Be that as it may, it is clear that the Government's political strategy is that they hope that when the election comes people will forget about unemployment. We heard a hint of that today. It may be that there are not many Tory Members of Parliament with direct experience of unemployment in their constituencies. Incidentally, there are not many Liberal Members who have direct experience of unemployment in their constituencies. I have just been looking at the league table.

Mr. Gordon Wilson

The hon. Gentleman cannot say that about SNP Members of Parliament.

Mr. Radice

Even if the Government think that they can ignore the problems of the northern region, as they have done, and those of Scotland and Wales, there are many marginal seats in the north-west and the midlands, particularly the west midlands, which the Government need to win if they are to be returned at the next election.

Mr. Gordon Wilson

So do the Opposition.

Mr. Radice

If the Government are prepared to brush aside the economic and social arguments for a strong employment and regional policy, there is a strong political argument to which they must pay attention. If, through lack of concern, stupidity or pride, they go on ignoring unemployment, they will be defeated at the next election and will richly deserve that defeat.

5.16 pm

Mr. D. A. Trippier (Rossendale)

I begin by warmly congratulating the hon. Member for Rochdale (Mr. Smith) who initiated this debate in his inimitable style. He was most fluent and articulate. This is not the first time that I have complimented the hon. Member. It was my pleasure to serve with him for many years on the metropolitan borough council of Rochdale and before that on the county borough council of Rochdale. They were happy and memorable years.

Whatever may be the differences between us politically, he correctly identified the problems. The solutions may be different, but the hon. Member for Rochdale cares. He cares very much, and I suspect that he knows that I care too. I hope the hon. Member for Chester-le-Street (Mr. Radice) realises that when he talks about the Government showing a lack of concern it is so much nonsense. No political party has a monopoly of concern over the unemployed.

I have complimented the hon. Member for Rochdale on a number of occasions. I think that I can say to him, perhaps slightly tongue in cheek, that I hope that our friendship will extend so far that he will be in the fortunate position of persuading the Liberal party in Rossendale not to put up a Liberal candidate against me at the next election. He might care to consider that.

I said that the hon. Member for Rochdale identified the problems—particularly the problems between north and south—correctly, but I do not think that he identified the problems within the regions particularly well. I have never forgotten the time when the sub-region of north-east Lancashire, in which my constituency lies, made an appeal to the Secretary of State for Industry for regional assistance. It seemed to me to be complete nonsense that the case that I was trying to fight on behalf of Rossendale, as was my local authority, could be identified with other problems that were within that sub-region, say in Clitheroe. Unemployment in Clitheroe was extremely low, whereas in Rossendale it was very high. I pointed this out to my hon. and learned Friend who is now the Minister of State at the Home Office, but who was formerly a junior Minister at the Department of Employment, and he agreed with me. It seemed nonsense that we were asking the Government to give blanket assistance to the whole sub-region.

I wish to try to convince the hon. Member for Rochdale that there are problems within constituencies that are not shared by adjoining constituencies. His constituency and mine touch, yet whereas Rochdale, fortunately, has diversified much more successfully away from textiles, we have enormous problems in Rossendale where 45 per cent. of the working population is employed in textiles and footwear. That must make it a unique constituency. The vast majority of that percentage is employed in the footwear industry.

The hon. Member for Rochdale knows that I have spoken on many occasions in the House on behalf of the footwear industry, as he has spoken on behalf of the textile industry. I put it to him that it may be a better argument, and one that will carry the House with us, if, instead of asking for regional assistance, we ask for selective industrial assistance. For example, we could ask for assistance in the textile industry or the footwear industry. The hon. Member knows that that would not be a precedent. Selective assistance was given to the woollen textile industry not that long ago. Many of us on both sides of the House would be prepared to support a similar case again. I am sure that the hon. Member would.

We in Rossendale are fortunate in that the Government have recognised that we have a structural problem. It is obvious that we have a structural problem if we still have 45 per cent. of our workpeople employed in textiles and footwear, and it is a mystery that we managed to get into this position without diversifying into new, more modern and more competitive industries. Whereas areas such as Rochdale have become well known for spring manufacturing—Burnley has diversified, Bury has diversified and Blackburn has also diversified, all towns around us—we are not in that fortunate position.

I know that the Secretary of State for Industry would not have given us development area status if we had not convinced him that we were prepared to help ourselves within the community. I shall return to that later in my speech when I discuss the formation of the Rossendale community enterprise trust.

There was a great deal of antagonism when Rochdale and Rossendale received development area status, as I am sure the hon. Member for Rochdale will acknowledge. The reason was simply that all the surrounding areas asked themselves "Why them and not us?" The answer lies basically in the structural problems. But, in addition, I am grateful to my right hon. Friend the Minister of State and to my hon. Friend the Under-Secretary of State who is responsible for small businesses, the hon. Member for Norfolk, South (Mr. MacGregor), for what they have done for my constituency with the enterprise allowance scheme. This was referred to by my right hon. Friend. It is very much a pilot scheme, though in my view my right hon. Friend understated its success. He said that the take-up had been encouraging. But in my constituency and in others in north-east Lancashire selected for the scheme the money ran out not all that long ago and we had to persuade Ministers in the Department of Employment to go knocking on the Treasury's door for the scheme to be allowed to continue.

I make a further appeal to my right hon. Friend today asking him to continue the scheme after March. It is very successful. It is very appropriate. It is cost-effective, and it does not cost a great deal. The Government pay £2,000 a year to assist in starting up a business. In my view, that is very cost-effective and extremely cheap.

I am also grateful, I think, to the Secretary of State for the Environment for giving my constituency an enterprise zone. I say "I think" because it can be a mixed blessing. Members of Parliament who get enterprise zones in parts of their constituencies invite hostility from the parts of their constituencies which do not get them. There is an argument, which I have heard advanced by hon. Members on both sides of the House, to the effect that all that an enterprise zone does is remove labour from one area to another, which is robbing Peter to pay Paul. Having studied the position more carefully, I am satisfied that an enterprise zone assists business start-ups. When a business is started, it can hardly be described as taking labour from one area to another.

With the package of the enterprise allowance scheme and enterprise zones plus the grants which are available through the area having development area status—those three ingredients—we have the recipe for success. However, to draw them together it is necessary to set up an organisation such as a community enterprise trust which can guide those whom we call entrepreneurs through the dark and dismal paths through which they must go to start up businesses. I was extremely impressed two years ago when I visited the St. Helen's trust, which has been an enormous success in the north-west of England, and saw what was being done there.

It has to be emphasied that such a trust will work only if it does not itself have any money to hand out to new businesses and it is not too closely tied to the local authority. Many trusts have been formed, especially in the north-west of England. Membership of the governing bodies has come partially from directors of industrial companies in the area who have felt a moral obligation to help in the community to combat unemployment. Their main aim is to create jobs. Membership has also come partially from the local authority, although in my view it should never have a majority vote on such a governing body. But, most important of all, such a trust must have a director. In our case, we have a secondee from the National Westminster Bank, and he is an excellent director of the trust.

The trust has been going for about 18 months and we can safely say that we have been responsible for encouraging the start-up of 400 new businesses, some very small—one and two-man businesses—and some rather larger. The task of the director has been to become an expert on the numerous grants that are available both from national and local government. Even Members of Parliament, however much we may flatter ourselves, are not experts on the various grants. It is necessary to have someone who can get hold of the chap who walks into the office saying that he wants to start a business, who can take him to see either the green field site—preferably the developed site—and show him the units, who can help fill in the application forms which have to be submitted to the Government or to the local council and which are a headache for many people, and who can work closely with him. He also has to encourage firms of solicitors and chartered accountants, without whom, unfortunately, no business can operate successfully, to give their time free interviewing prospective start-ups, between the hours of 5 and 6 o'clock in the evening for example. We have two firms of chartered accountants and three firms of solicitors in the area which are prepared to provide this service free.

The community is working together. It is not wholly the responsibility of the local authority that unemployment is so high. It is not the responsibility of the sitting Member of Parliament for Rossendale or of the last Member, and it is not the responsibility of this Government or of the last one. We are all in this together, and we all have to work on it. It is an exercise in pulling ourselves up by our bootstraps. It is an exercise in self-help. I have received enormous encouragement, especially from my hon. Friend the Member for Norfolk, South, in all that I have attempted to do.

I cannot miss this opportunity with the Budget looming up, to make a plea for some consideration for small businesses and others of my constituents. Many Conservative Members who represent industrial or semi-industrial constituencies are very anxious that, in considering his Budget, my right hon. and learned Friend the Chancellor of the Exchequer should ignore the appeals that may be made to him by, for example, the Institute of Directors asking him to reduce the standard rate of income tax by 1p or 2p in the pound. Instead, my right hon. and learned Friend should listen more carefully to what the CBI is saying, since the confederation believes that it would be better to have the indexation of personal tax allowances.

I hope that my right hon. and learned Friend will listen to me and to other Conservative Members who represent industrial constituencies when we say that we would rather have indexed personal income tax allowances. I have said already that the vast majority of those employed in textiles and footwear are low paid. Many of them would very much appreciate personal tax allowances being increased. It would take many of them out of the tax net. It would also restore the incentive to work, which the Conservative Party spoke about a great deal prior to the last election. I cannot fail to make the point that we gave the pledge at that election that we would reduce taxation overall.

I see that the CBI is asking for a de-rating of some 15 per cent. on business properties. I wish to try to persuade my right hon. and hon. Friends that this is perhaps not the way to proceed. It would require primary legislation. Although I have much sympathy with the idea, it is much more important to raise tax allowances, for all the reasons that I have tried to give.

I conclude by making an appeal about the temporary short-time working compensation scheme. Many hon. Members representing constituencies with traditional industries, such as textiles and footwear, are familiar with the scheme. I did not like the Labour Government's idea of introducing the temporary employment scheme. It was at the time a much abused form of subsidy. It was not used for the purposes for which it was originally intended. At the risk of being crude, it was an absolute rip-off.

The temporary short-time working compensation scheme is more accountable. The trouble is that it is not sufficiently flexible. The rules that govern it are so stringent and so tight that many of the firms operating in the two industries I have mentioned—just as much in Rochdale as in Rossendale—are teetering on the brink and are worried about whether they will go to the wall. I plead with the Minister to persuade his right hon. Friend the Secretary of State for Employment to examine this issue again, preferably before March, to see that the scheme is allowed to continue and to become more flexible. I do not have to outline the details of what I want. I have made two representations and brought lobbies from the trade unions and the employers to see Ministers. We all stand together on this matter. I plead with the Minister to be more flexible.

It will be realised from my remarks that I have much to thank the Government for—the fact that Rossendale has been made a development area, the fact that we have an enterprise zone and also the enterprise allowance scheme. Those benefits, together with the continued success of the Rossendale enterprise trust, will ensure that the Rossendale valley becomes strong and vigorous once again.

5.31 pm

Mrs. Shirley Williams (Crosby)

I should like to thank my hon. Friend the Member for Rochdale (Mr. Smith) for introducing the debate and for the excellent manner in which he presented the case to the Government. Without boring the House by repeating the figures that he gave, which ranged from 17.5 per cent. unemployment in the north-east down to the much more acceptable 9.7 per cent. rate in the southern counties, it should be stated, as hon. Members know, that those figures do not represent the true situation. All the proportions and all the absolute figures should probably be increased by between 25 and 30 per cent. to take account of the substantial number of people who are not registered or the number of people who, while registered, can no longer claim benefit.

My hon. Friend the Member for Rochdale put his finger on an extremely important point. The greater the proportion of long-term unemployed—they now exceed one-third of the total—the larger the number of people who disappear from the dole figures because they have savings exceeding £2,500 and therefore cannot claim any form of benefit. There is a profound irony about a Government who are committed to the concept of thrift and savings penalising people to this extent, not only by refusing them supplementary benefit but by taking them out of the unemployment figures altogether. This has happened only as a result of the change in the Secretary of State's manner of collecting the statistics.

It is also true to say, as the hon. Member for Chester-le-Street (Mr. Radice) remarked, that the figures represent, not a single stagnant situation, but a situation that is dynamically going down, if that is a possibility in physics. In recent weeks, I have travelled, like, I suppose, many hon. Members, from the north to the south of this country, from Scotland, through the north-west to the west midlands and London. It is striking to learn in every regional centre about yet another round of redundancies either here or on the way. The hon. Member for Chester-le-Street referred to some of them.

The hon. Gentleman referred to Manchester Steel and to Lucas Industries, where, I believe, 1,800 jobs are at risk. One can add the shipbuilding industry, where another 2,300 jobs are about to be lost in the north-east. One can refer to the 1,400 jobs lost last week in the car components and car parts industry of the west midlands. One can refer to the disappearance in the north-west, part of which I represent, of the Bowyer's meat company in Walton, Liverpool, and to the suggestion that even Halewood, that great project of an earlier regional policy, is severely at risk.

When the forecasts for the Government hint at the possibility of another 300,000 unemployed this year, one has to say that the first month of the year shows them to be well on target. I make that point because I sometimes think that the Minister—a hard-working and decent Minister—sounds increasingly like a man who is bringing struts and girders to hold up a collapsing building. All the special employment schemes, well-intentioned though they are, were designed mainly to deal with temporary cyclical unemployment. They are being used today desperately to try to hold back the tide of what can only be described as a level of unemployment that is beginning to add up to the collapse of a large part of the industrial economy.

Hon. Members will be aware that what is being seen now is very different from the brief recessions of the mid-1970s or the late-1950s. Factories are no longer being mothballed. They are no longer being closed down but maintained. More and more the story is one of machinery being sold off, much of it abroad, at second hand, and factories being made derelict and sold off for their site value. The evidence is clear in receiver's reports for one firm after another.

There is no point in going on with this despairing litany which the House knows well, except for the purpose of saying that those hon. Members, whatever their party, who represent the north-east, the north-west, Scotland and Wales sometimes have the sense that the sheer despair that is overtaking our cities and villages is not fully appreciated in Downing Street, in the Cabinet and in Whitehall.

I see no point in continuing to say what has been so eloquently expressed so many times. I should like, rather, to underline the dilemmas faced by the two historic parties and then to mention precise areas where the Government could now make a substantial change in the level of unemployment. The first dilemma is that faced by the Government in their growing recognition that any steps towards reflation and recovery of the economy put at risk their own precious inflation record. The Government have not been able to persuade themselves, let alone anyone else, that they have permanently broken inflationary pressures other than through an intolerable level of unemployment.

I say this to the Government. Bit by bit, other countries that share their monetary views are changing their minds. Only two weeks ago President Reagan signed a massive public works scheme amounting to $13 billion in the United States. Soon, the Government will be the only Canute glumly watching the sea when everyone else has left for safer pastures. The Government's dilemma—it is a dilemma—is how they can bring about a recovery without putting their one achievement at risk.

The reason goes one stage deeper, and I do not believe that any Minister has yet seriously addressed himself to the topic. In the desperate attempt to cut public expenditure, the Government necessarily created redundancies, which in turn created Government public expenditure on unemployment benefit. This, in turn, led the Government to chase further public expenditure cuts, which in turn increased the number of unemployed, and which in turn again increased public expenditure on unemployment benefit. Simply, the Government are caught in a Catch 22 situation.

One result has been that last year, 1981ߝ82, the Government had a larger share of the gross national product going into public expenditure than the Labour Government had in 1978ߝ79. The reason was, of course, that expenditure on unemployment benefit alone went up from £5,000 million to £16,000 million in those three years. As the hon. Member for Newcastle upon Tyne, West (Mr. Brown) said, the Government are chasing their tail and they see no way out of the vicious circle they have created.

I do not deny that the Labour party is thinking hard about how to get back to a high level of employment. I pay tribute to the Labour party for pursuing that goal, which my party, too, pursues. However, the Labour party has a dilemma which comes in two parts. First, the party is being driven towards the logic of an incomes policy. The hon. Member for Chester-le-Street said as much, and what he says is true. Incidentally, he did not say a wages policy; he said an incomes policy. There is an important difference. One cannot escape from an incomes policy if one reflates without inflation.

The second part of the Labour party's dilemma is how to get reflation without an outflow of capital over a short period of weeks, which would put the party's whole policy at risk, without imposing a form of protectionism. The difficulty here is that, whether one calls protectionism the planned growth of trade or by some other attractive euphemism, we all know that the world is poised for a beggar-my-neighbour feud of retaliation.

The Labour party, like the Government, thinks that it is seriously addressing itself to our economic problems. But I want to point out to Labour Members that the last Special Commissioner for Trade for the United States Administration, Mr. Robert Hormats, who resigned six weeks ago because he did not like what the Reagan Administration were doing, is on record as having said that if any substantial European Government were to adopt protectionist policies, the inevitability of massive retaliation—the United States has limited itself to selective controls, as we have—is quite immense. However much hon. Gentlemen may shout, there is a clear distinction between massive protection and some measures of selective protection, which I agree do not go as far.

Mr. Radice

The Labour party is not putting forward a policy of protectionism. We say that it is necessary to plan trade and that there may be a case for selective import controls. However, there is also a dilemma for the right hon. Lady's party. If her party ever came to power, how would it reflate the economy when it has no relationship of any kind with the trades union movement and, on the contrary, has done all that it can to oppose that movement at every turn?

Mrs. Williams

I should be prepared to accept the hon. Gentleman's charge more readily if it were not for the fact that his party gave mine no support when we moved amendments requesting industrial democracy and the acceptance of the fifth directive in our deliberations on the Employment Bill before the Christmas recess. What the hon. Gentleman said about protectionism may be true. All I can say is that it was not the impression given in the speech of his right hon. Friend the Leader of the Opposition at the weekend, which I read carefully and which specifically indicated a movement from the Labour party's previous support for limited systems of selective import controls.

I want to deal now with three areas which I hope the Minister will consider. They have nothing, or little, to do with the argument that rises in public expenditure would make them impossible. The first area concerns the enterprise allowance scheme, of which the hon. Member for Rossendale (Mr. Trippier) spoke. He is more fortunate than my hon. Friend the Member for Rochdale, in that the enterprise allowance scheme neatly stops at the border of his Conservative constituency and neatly excludes my hon. Friend's Liberal constituency.

Mr. Trippier

The point has been made several times that the decision to give me an enterprise allowance scheme may have been political. What nonsense. Within the area we have Accrington, which has a Labour Member of Parliament, Burnley, which is also Labour, Nelson and Colne, which is Conservative, and my constituency. I cannot let the right hon. Lady get away with that.

Mrs. Williams

I never believed that the Government had it in as much for the Labour party as for the Liberal party, so my point stands. Perhaps I might be allowed to develop the point.

The enterprise allowance scheme has been limited to a small number of pilot schemes. The scheme appears to be successful, or going very well, as the hon. Member for Rossendale said. However, last week's Financial Times implied—perhaps the Minister will comment on this when he winds up the debate—that the enterprise allowance scheme was now at considerable risk, that no further applications would be taken after March, and that the Government would review the scheme and decide whether it could continue. That is a devastating reaction to what most of us regard as one of the few promising schemes that the Government have brought forward and, incidentally, one that is totally compatible with the Government's philosophy, because it is an attempt to persuade people to set themselves up on their own and not be a burden on the state. If this attractive mouse of a scheme is not now to be supported, what hope is there for the much larger schemes which many of us here would like the Government to adopt? The second area, also affecting small businesses and high technology, relates to the disturbing fact that the Government, in the shape of the Department of Industry, are now reconsidering the minimum loan guarantee scheme for small, high-tech businesses. That scheme is pathetic. Last year it was worth £150 million—big deal! In Germany the scheme is worth £1,400 million. The British scheme is made available at commercial rates. The German scheme was made available at a 9 per cent. fixed rate of interest.

If all that does not make hon. Members' blood run cold, perhaps I should quote a letter addressed to the editor of The Economist this week by the managing director of an electronics company, which says that Japan is now making £20 billion a year of subsidised low-interest loans available to high-tech small business, while we are making £150 million available and the loan rates are not even subsidised. When the Government call, as they frequently do, for more competitiveness, I wonder whether they begin to realise what we are up against with the amount of Government support that less dogmatic Governments give to their small businesses and to their public sector, in high technology.

The third area is infrastructure, or the basic foundation of industry. The Minister said, and he said it sincerely, that he wanted us to address our minds to public expenditure. Regional support has fallen in 1982 price terms from £1,300 million in 1975ߝ76 to £600 million in the current year, 1982ߝ83. My hon. Friend the Member for Rochdale mentioned this, as did my hon. Friend the Member for Truro (Mr. Penhaligon), who spoke about regional support. It has fallen to £600 million in real terms. The crucial aspect of this regional money is that two-thirds of it, £400 million, has gone to capital assistance. As the hon. Member for Chester-le-Street said, under the Government there has been a major shift towards capital assistance and away from subsidies or support for individual jobs.

I should like to leave the Government with the thought that in net terms it costs between £4,000 and £5,000 to create a job in energy conservation. The returns on energy conservation are about 30 per cent. a year in savings on fuel bills. In other words, the scheme more than pays for itself over a four or five-year period. The French Government have announced an energy conservation scheme that will create 330,000 permanent jobs over the next three or four years. We have virtually nothing. We are cutting what we had. For the £40,000 that we are spending on regional assistance to create one measly job, the Government could create eight jobs in energy conservation.

The Minister asked about the two-year scheme for training put forward by the Liberal party and my party. That scheme accepts the concept of splitting starter jobs for school leavers so that they spend half their time training and half in work. That scheme has already been tried by GEC in Coventry, with great success. The tragedy is that the Government's job-splitting scheme does not include any allowance towards a split school leaver job if the other half of the time is spent on training and not another half job. I believe that that is a great mistake by the Government.

We have tried to put forward concrete suggestions for creating more jobs for the same amount of money. The Government seem unaware of the scale of despair that is now engulfing a large part of the country. The right hon. Lady the Prime Minister is presiding, not over a united kingdom, but over a divided one, and one in which the divisions will grow more profound unless more radical steps are taken to deal with the current levels of regional unemployment.

Several Hon. Members

rose—

Mr. Deputy Speaker (Mr. Paul Dean)

Order. The winding-up speeches are expected to begin at about 6.25 pm. Many hon. Members still wish to speak, and short speeches will help everyone.

5.52 pm

Mr. Mark Lennox-Boyd (Morecambe and Lonsdale)

The right hon. Member for Crosby (Mrs. Williams) described the unhappy regions of England. If she had gone to Lancaster, she would have learnt that in the Lancaster and Morecambe travel-to-work area unemployment is 13.9 per cent. which is higher than the English average but lower than the north-western average. It is no comfort to my constituents to know that matters are worse elsewhere.

The area from which I come has had a continuing problem for the past few months. My hon. Friend the Member for Lancaster (Mrs. Kellett-Bowman), who is in the Chamber, will know as well as anyone else that we had disappointing news before Christmas.

I want to make three general comments about unemployment as it affects both the regions and the nation. I know that my first comment is regarded by many people as highly controversial. I shall qualify it. To my great surprise, although on analysis I can see how it is reasoned, I believe that people do not blame the Government for unemployment. I say "To my great surprise", because it is plain that previous Governments were blamed. I make the qualification that what I have just said does not deny the fact that the Government's policies are understood by people to have an immensely important effect on unemployment. The opinion polls show such a continuing degree of support for the Government that it is difficult, when the polls also show that unemployment is a major public preoccupation, not to conclude that the public find that there are other extremely important factors which are not directly the Government's responsibility.

The hon. Member for Chester-le-Street (Mr. Radice) said that it was well known that the Government have doubled the level of unemployment. The hon. Member for Dundee, East (Mr. Wilson) said "You did as well." That is perhaps the single most shining fact that leads the public to conclude that the dreadful levels of unemployment that we are suffering are not directly the Government's responsibility and that the Government's capacity to affect them can only be marginal. If we fail to recognise that fact, we shall fail constantly to face the problems realistically and sensibly.

Shortly before Christmas, my hon. Friend the Member for Rossendale (Mr. Trippier) was given an enterprise zone. I was given a domestic computer for Christmas. It is an object that in W. H. Smith costs less than half today's national average weekly wage. It gave me, as I am sure it will give anyone who has sought to be familiar with such machines, even greater cause for worry. Just as the slide rule is an antique instrument today, I believe that in a decade or perhaps a little more the occupation of clerk will be as antique as the copywriter or scrivener.

I believe that many thinking members of the public realise that as well, and accept that it will take at least a decade, if not longer, to overcome the problems of unemployment. When we do, we shall have different employment structures. There will be much earlier retirement, job sharing and a much shorter working week. Hon. Members should foster that understanding as the right hon. Member for Down, South (Mr. Powell) did in last Wednesday's debate on the economy when he said that we were facing a revolution as significant as the industrial revolution of 150 years ago.

In my constituency the financial hardship arising from unemployment, hard though it is, is the least of the difficulties faced by an unemployed person. I believe that isolation, moral degradation and psychological depression are far harder for people to face. During the recess, many hon. Members may have seen Professor Dahrendorf's progammes on the state of our nation. He made one remark that I consider significant. He said that unemployment was not the problem of the future; the problem of the future was lack of activity. He said that the working week inevitably will be shorter and inactivity, whether enforced and involuntary or voluntary, will be the problem that we shall have to face.

This is a debate on the regional impact of unemployment. As hon. Members have said, it is important to distinguish between two factors—whether the Government should be spending more, and how should they be spending within the regions. It is upon the latter point that I wish to concentrate my concluding remarks.

The Government's policies for the regions are well founded. The only possible qualification that can be made is about the funds that are made available and that relates more to an economic debate than to one on regional unemployment. The Government are seeking to extend their policy in three ways. First, there is the development of city areas such as Liverpool, Rochdale and Wigan. There is the Merseyside task force, the enterprise agencies and the enterprise zones. It is of fundamental importance that regional policies should be more concentrated upon the city areas than upon the regions as has been the case in the past because it is within the city areas that there is the significant and high unemployment.

Secondly, Government help is being directed towards activity, as Professor Dahrendorf suggested. Increasingly, those schemes will be combined with others undertaken by local people. In recent months in my constituency, organisations, formed by people who feel that they can make a contribution to the problem of inactivity, have been cropping up. We have heard from hon. Members about similar schemes in their constituencies. In the course of the next few years it will be the duty of Governments to foster such activities.

Finally, the Government should help those areas of Britain where unemployment is high by spending money to improve the infrastructure of services in such areas—for example, roads. In doing so, we should first consider the cost, secondly whether such expenditure can improve an existing resource, and thirdly whether, having spent that money, that resource will create more jobs. One such scheme is the M6 link road which is in my constituency. That is a project to link the M6 to the port of Heysham. I need not embarrass the Ministers because the Under-Secretary of State for Transport is not present. However, I shall continue to press the scheme with all vigour because it fulfils the criteria which I have mentioned. The port of Heysham is a resource with a potential which has not been fully exploited. If its communications with the M6 can be improved, the port of Heysham will be improved immeasurably, making it more likely that jobs and prosperity will be created.

6.4 pm

Mrs. Renée Short (Wolverhampton, North-East)

We are grateful to the hon. Member for Rochdale (Mr. Smith) for giving us the opportunity to have a brief debate on regional policy. I am sorry that the Minister did not deal with the Government's positive proposals to help the regions. That is what we want to hear today and I hope that we shall do so when the Under-Secretary of State for Industry replies.

This is a serious debate on a depressing subject. Despite what the hon. Member for Morecambe and Lonsdale (Mr. Lennox-Boyd) said about people not blaming the Government for unemployment and the economic position, the fact remains that unemployment stands at the highest level in living memory, with the highest inflation rate, until very recently, and with widespread poverty among families, affecting young and old alike. The most depressing part concerns the stopgap measures now being used to help young people gain experience. While they are all right as far as they go, at the end the young person goes back to social security pay or whatever he is entitled to and does not get a job, which was the function of the youth opportunities programme and other such schemes.

We are in a no-growth economy and if the Government continue in office future prospects will be grim. The National Institute of Economic and Social Research forecasts only a 1 per cent. growth in 1983–84, with ever-rising unemployment. If the Minister has better news for us we shall be delighted to hear it. The Prime Minister is told continually by Labour Members and by many in industry, including the employers' associations, that she must stimulate output by cutting taxes on industry and increasing Government expenditure. However, all that we hear from the right hon. Lady is that British industry must become more competitive by shedding even more labour, thus increasing still further the unproductive work force, which must be supported on social security and unemployment benefits. If that recipe is continued, unemployment will go on rising, despite the Government's method of counting the unemployed.

That is the picture of what has happened in the west midlands. Basic industries such as steel, other metals, car, building and building components—basic industries on which our former prosperity was based—are all in a seriously depressed condition. Five years ago over 40 per cent. of the work force in the west midlands was engaged in the metal industry, yet those industries have now gone to the wall. Unemployment in the west midlands is now very high—above the national average. My constituency, which prospered for so long in the production of industrial goods of high quality that were sought all over the world and which exported well-developed high technology products to developed and undeveloped countries alike, now has an unemployment level of 18 per cent. That is appalling. Every week we hear of more short-time working, more closures and lay-offs, particularly in the motor components industry, and there are no jobs at all for the thousands of men, women and young people who are unemployed today.

The Prime Minister says that we must become more competitive and produce goods that people want to buy while at the same time she is reducing their ability to buy. The right hon. Lady complains that industry is not standing up to competition from the EC and the Far East. Firms are being forced to cut back on the investment capital that they need to modernise. The Prime Minister is not prepared to do anything to ensure that imported goods are of the standard of quality and safety that we expect. Therefore, the market is flooded with tons of cheap, tasteless, shoddy and frequently dangerous consumer goods.

Why are we not more discriminating? I am not suggesting that there should be overall import control but why do we not employ selective ones? Why do we allow tons of rubbish to come into our shops? Why do we not use the mechanism that exists in the EC? We could use the same regulations to control the standard of goods and raw materials that come to Britain. That has been done in France, Belgium and Germany, yet every industry in Britain is threatened by the continuing stream of poorly made and substandard goods, whether they be clothing, toys, household equipment, gadgets of all types, televisions, computers and even motor cars. We therefore have a throw-away syndrome. We buy cheap, shoddy and poorly designed goods that soon break down, throw them away and buy a similar replacement. All the while, our jobs in manufacturing are disappearing.

The scheme that is employed in the EC means that British firms which export to countries such as France, Belgium and Germany must comply with stringent certification requirements. That process can take two or three years. That is a jolly good way of holding back imports from foreign firms. Moreover, firms that want to export to those countries must pay for certification. Therefore, not only is there freqently a delay of two or three years but the firm must pay about £30,000 to obtain the necessary certification if the outcome of the tests is successful. If they do not achieve certification, the firm just loses money.

Why do we not do something to protect our firms from unfair competition from abroad? Why do not the Government realise that every unemployed person in Britain represents a loss of revenue to the Treasury in income tax—which has increased from about 32 per cent. to 36 per cent.—insurance contributions and other welfare payments and, above all, in the contribution made by working people to the gross national product? The unemployed only consume. They make no contribution to the GNP, however much they may wish to do so. Moreover, it is expensive to pay people to be unemployed when they could be producing goods that we should export.

The revised plan of the West Midlands county council describes the situation in the west midlands. I should like the Minister to answer the points that it raises as they are important for our manufacturing industry. It says: the dramatic rise in unemployment, now over 17 per cent. in the county as a whole, rising to over 30 per cent. within certain inner city areas, with youth employment an even more serious problem. These levels are showing signs of becoming permanent and even increasing as the recession deepens, with long-term unemployment now a major problem. Rising unemployment is accompanied by serious social consequences. The West Midlands, once the workshop of the world, is facing the worst economic crisis in its history. It has suffered from being too heavily reliant on a narrow range of declining metal-based industries and having too low a proportion of fast growing service industries. Because we have such a small proportion of manufacturing industries producing consumer goods we have to import such goods, when we should be exporting them to our competitors.

6.14 pm

Mr. Hal Miller (Bromsgrove and Redditch)

I am happy to follow the hon. Member for Wolverhampton, North-East (Mrs. Short). I strongly agree with her about the importance of British standards, the remedies that they offer for unsatisfactory goods and the need to develop the necessary quality assurance as a basis for our exports. I was a little puzzled by the rest of her speech. She seemed to assume that Government spending would create jobs in the service industries. That concept is foreign to Conservative Members.

The right hon. Member for Crosby (Mrs. Williams) gave an engaging travelogue for last week while most of us were detained in the House until quite late at night. I notice that she was pictured on a beach in Devon with her hounds of war, in an un-Canute like attitude, with the tide going out rather than coming in, as support for the SDP ebbs.

Mrs. Williams

The tide was rising and it was Sunday.

Mr. Miller

The tidal predictions seem to be out of kilter with the astrological ones, never mind the political ones.

Unemployment has made the greatest impact in the west midlands, but if one listens to the speeches of Opposition Members one fails to gain any impression of what is happening in the country. The trend for unemployment over the country as a whole has diminished remarkably since the dark period of October to November 1980, when 103,000 people lost their job each month. The current rate is about one-fifth of that.

We should also bear in mind that last year about 600,000 new jobs were created every month. That represents about 20,000 new jobs each day. Moreover, four out of five school leavers were getting employment. The rise in unemployment last year was lower than in other major manufacturing countries. There were 15,000 more new firms created than went out of business. Those figures put the picture into perspective.

The problem in the west midlands is serious. Firms there must take note of what the Prime Minister has said. It is necessary to be able to compete. The purpose of my speech is to try to persuade the Government to establish the necessary conditions of competition for British firms, especially those in the west midlands. I have urged my right hon. and hon. Friends for some time to put together what I call a competition package to create an environment in which firms can compete and in which people are given confidence to compete.

In the west midlands, that package should comprise the removal of internal discrimination against our region, the first and foremost of which is regional aid. At the moment the west midlands is suffering the fastest growing rate of unemployment in Britain, and faces the highest level of unemployment bar one other area. There is therefore no reason to continue with regional aid.

I am glad to note from what my right hon. Friend the Prime Minister has said and from what my hon. Friend the Minister of State, Department of Industry said during Question Time last week that regional policy is being reviewed to examine the extent to which it effectively creates jobs. I sympathise with the right hon. Member for Crosby, who asked the same question in a slightly different form.

That internal discrimination against the west midlands extends to the special taxes on our main products, such as the special car tax and VAT on company cars. We are also discriminated against internally by being barred, as a result of Government decision, from the receipt of EC funds for specific projects. I have argued for some years that industrial aid should be concentrated specifically by sector. I congratulate the Under-Secretary of State for Industry on the success of his small engineering firms investment scheme, which I hope will be continued after the next Budget.

External discrimination against the west midlands is another factor. We have been much encouraged by the Prime Minister's strong lead against the gross inequalities and disparities in Spanish tariffs and Japanese trading practices. Other examples of discrimination mean that we do not enjoy full, fair and reciprocal trade arrangements for our products. In the interests of brevity I shall not go through the whole list, but I must mention the collapse of the EC steel cartel as judged by the prices at which steel and steel products are landed in Britain. This involves bars, washing machines and cars.

The Opposition make much of the unfair trade in imported vehicles. Let us examine the rise in the number of imported vehicles since 1975. The increase in imports can mostly be ascribed to Ford, Vauxhall and Talbot. The percentage of registrations from other exporters to Britain without plants here rose in that time from about 32 to 35 per cent. Tied imports rose from 1.5 to 22.5 per cent. That is where the damage is being done. The Government should take up seriously with Ford and Vauxhall the establishment of additional manufacturing plants in Britain to retain the design capacity and therefore the purchasing source. That is what is so important to the components industry, and that is why we are so perplexed in the west midlands about the reported decision by BL to import 30 per cent. of its components. BL has to buy complete foreign gear boxes, if not larger items, from abroad because we do not have the opportunity to supply the components since decisions about the source of supply are taken abroad.

Mr. David Alton (Liverpool, Edge Hill)

What would the Conservative party do about the even worse problem of the possibility announced on Friday of Ford taking 13,000 jobs away from Halewood and moving them to Japan to manufacture cars there?

Mr. Miller

Halewood's productivity record is lamentable. Because of pressure on Ford to make more in Britain, it has had to address itself to operating more competitively.

The hon. Member for Wolverhampton, North-East referred to another area of competitive policy in the west midlands—the need for us to be involved in the new technology industries. It is disturbing to think that, although the west midlands houses about 36 per cent. of the country's manufacturing industry, there is only 10 per cent. support for the Minister's innovation scheme, when the reverse is true for the southern region. We must, therefore, pay particular attention in the west midlands to developing skills in training and after-training, so that we can update our industry to compete in future business.

Discrimination has been exercised against the west midlands in the provision of infrastructure. Our motorway system is not complete. The largest exporting area of the country still has no direct motorway connection with the east or south coast ports. Time does not permit me to mention several other infrastructure problems. The west midlands has been discriminated against. The discrimination has spread to private authorities and it is widely believed in the west midlands that clearing banks, for example, have directed that a lower priority be given to investment in the west midlands. Pension funds are diverting investment from the west midlands because of its low growth prospects.

I call on the Government not only to recognise the region's problems, but to respond with Conservative philosophy, involving the ability and the will to compete. Following that line and what has been started by the Prime Minister and the Secretary of State for Industry will give back to the region the confidence to enable us to commit ourselves to make a success of this Government's policies and those of the next Government, which we believe will be drawn from the Conservatives.

6.26 pm

Mr. Richard Wainwright (Colne Valley)

When the Liberals chose the subject for today's debate, we knew that no Cabinet member would dare put in an appearance. One of the faults of the Cabinet, in so far as it now plays any part in our affairs, is that it contains no voice from the stricken manufacturing areas of Britain. Knowing that the Minister of State, Department of Employment, normally tries to be helpful and considerate, we accepted that he would speak at the beginning of the debate. I am sorry to have to say that, although the Minister of State may be grossly overworked clearing up the havoc caused by the Prime Minister and the Chancellor of the Exchequer, for one reason or another his speech today was not just a discourtesy, but an insult to the House—a twofold insult. He ignored the subject of the debate.

The motion covers the regional impact of unemployment, not because we complain that one region suffers more than another in the league of misery, but because the unemployment rate over many years in some of the regions threatens our industrial base. There comes a time, when double-digit unemployment persists for many years and shows no sign of abating, when the research and development and ancillary industries of some major industries are severely threatened. We wanted a debate on that subject, as we have made plain. The Minister of State simply used the Front Bench as a pulpit or podium for a press conference to advertise some of his temporary and palliative schemes.

The second part of the insult is that the Minister propounded nothing more than superstition. It is a superstition that, by means that no one on the Government Front Bench can explain inside or outside the House, just because the inflation rate is low there is bound to be economic recovery. There has never been an explanation of that superstition. I am astonished that any Minister could suppose that a drop in inflation, built largely on the misery and poverty of the primary producing countries, could create recovery in this country.

Our industries will not recover until a large part of the under-developed world receives a proper price for the products which it sends to the West. The Minister of State must know that. The present state of financial affairs is a hindrance to recovery. Three years ago the real rate of interest which a business man would compute when deciding whether to build up his stocks was negative. He could estimate that, if he conducted his business properly, at the end of the year he would benefit more from inflation of the value of his stocks than he would suffer from what he was paying in interest. That is a negative real rate of interest. Under this Government, the real rate of interest for most businesses is approaching a positive 8 per cent., and for small and new businesses, in which the Under-Secretary is rightly interested, it is approaching 9 or 10 per cent. That is a serious negative point when we are talking about industrial recovery.

The perfect example of real inflation is the graveyard, and that is what is happening in many of our regions today. That is why we have initiated this debate. The hon. Member for Chester-le-Street (Mr. Radice) admirably stressed that an incomes policy has an essential part to play in the Labour party's ambitious headline-catching schemes if reflation is to stand any chance at all. We wish that the Labour party would listen to the hon. Member for Chester-le-Street instead of ignoring his persistent and correct plea for an incomes policy.

The hon. Member for Rossendale (Mr. Trippier) was eloquent in support of his own constituents, as he has every right to be, but we do not agree with him in what we regard as his parochial approach to stimulating the economy. The problem can be tackled only on a regional footing. The footwear and textile industries in his area are in danger of losing the base on which their future depends, and that cannot, with respect, be put right just by bringing prosperity to Rossendale.

The hon. Member for Rossendale also made a plea for selective assistance to industries. The trouble is that the selection is done in London by people who are not familiar with industry. In trying to pick winners, they have often put worse money after bad and have misused resources. Decisions should be made in the region.

My right hon. Friend the Member for Crosby (Mrs. Williams) made a constructive rather than partisan speech. She reminded the Government of something that they ought to take to heart—that it is no good smugly comparing their performance with that of some previous Government. That cuts no ice with hard-pressed manufacturers and their work forces today.

What is important, and what the Government never face up to in their smugness, is what our competitors are doing today. My right hon. Friend clearly drew attention to the fact that on all these fronts—research, development, training and the rest—we are underperforming compared with our competitors. The Government are smug about productivity. Any dubious claims that they make for improved productivity pale compared with the immense improvement in competitor nations.

It is important to have a world dimension in our minds when tackling the problem of the collapse of industry in the regions, as my right hon. Friend said.

The hon. Member for Morecambe and Lonsdale (Mr. Lennox-Boyd) was intensely depressing. His broad approach was a polite form of Luddism. He said that for 10 years employment prospects will be blighted by the application of the home computer. When he talks about the computer compared with the clerk, he must remember that, whereas the clerk needs only a pen, somebody must design and make the home computer. It also has to be installed, and if it is to be of any use it must have a terminal to other people's computers. That means a tremendous amount of installation. It also has to be serviced.

My own company went over to computers, reasonably successfully, in 1968. Ever since we seem never to have had the computer supply people out of the premises. Above all—this shows that every invention properly applied increases jobs—the application of advanced technology such as the computer makes things cheaper, and leaves more money in people's pockets to buy other goods and to spend on other services. I do not accept that we must resign ourselves to high unemployment for purely technological reasons.

I understand the concern of the hon. Member for Wolverhampton, North-East (Mrs. Short). Substandard goods undoubtedly get in at our ports. That problem must be solved. I am sure that the hon. Lady does not wish to fall into the error, made by some of our complacent business men when we had an Empire that was forced to buy our goods, that imports are necessarily substandard. A lot of stultifying nonsense has been talked about cheap goods from Hong Kong and Korea, many of which admirably meet the demands of a throw-away society.

The hon. Member for Bromsgrove and Redditch (Mr. Miller) pleaded in an interesting and special way for help for the west midlands, which it very much needs. I greatly regret that two of my hon. Friends have been unable to take part in this brief debate.

The fact is that the way in which the economy is run or not run at the moment does enormous damage to most of our industrial regions because it imposes blanket restrictions on the whole of the United Kingdom which should really apply, if they apply at all, only to one or two regions in the south-east.

The perverse insistence of the Government on keeping an artificially high pound, because of their superstitious reverence for continually falling inflation, may just get by in some prosperous towns of the south-east of England, but it has been disastrous for many of our exporting industries in the regions. Overnight—and I have examples of this which I can gladly let the Minister have—manufacturers who spent years building up foreign markets suddenly found that because of perverse policies on sterling they were priced out of those markets. When that is added to the interest rates which they have been made to pay, their businesses collapse and their workers swell the numbers of unemployed.

When local government tries to palliate this misery and to put some expenditure into the economy to get people into jobs, the Secretary of State for the Environment clobbers them. That has been highly inimical to the regions. The Government have also continued the appalling practice of previous Governments by refusing to let European Community regional aid add substantially to the resources of the regions and have insisted that it must simply be used as a substitute for what the Government would have paid anyway. A typical example—and I have time to give only one—is the Government's apparent attitude to Manchester's claim for the next big airport. That project would bring real confidence and hope not simply to Manchester—I am not pleading for one particular city—but to the whole of the north of England, yet this opportunity will apparently be allowed to slip by.

The Minister of State lectured us on the evils of excessive Government spending. I understand that Government spending rouses in the mind of any Government supporter terrible guilt feelings about the prodigal waste of money spent on local government reorganisation which the Conservatives initiated and on the wild 1973 overspending in the National Health Service. They are now putting that reorganisation to rights. Another form of extravagance which they went in for included the property boom, which will always be associated with the name of Lord Barber.

The whole point of urging regional expenditure is that the money will be spent in the regions where people know what is going on. It will be spent under their very eyes. I continue to believe that we would never have had the white elephant of the Humber bridge—£100 million to get people to nowhere—had it not been for a centralised decision in this Chamber. That was partisan politics at their worst. Had the decision been taken by a regional administration, the money would have been spent instead on schools, hospitals and other worthwhile projects.

I hope that the Minister winding up the debate will refer to the enterprise allowance, which for far too long has been a tiny pilot scheme, because everyone knows that it would meet a great economic and human need. I also hope that he will say something about development agencies for England. We are full of admiration for the Scottish and Welsh development agencies, and it seems odd that the great regions of England, which are more populous, are denied such admirable bodies.

The Minister might also look at an interesting device which has helped the regions enormously in the past—the regional employment premium. That was a way of keeping sterling strong in London and the south-east while at the same time allowing for a mini-devaluation in the regions. Many hon. Members who were Members at the time of the regional employment premium will testify that it did much to keep regional business healthy.

Excessively high unemployment has continued for a long time. The United Kingdom was the first country to experience serious and self-inflicted slump. The regions that have been worst affected are rapidly losing hope. They now need a sign that the Government have confidence in giving the regions the chance to help themselves. Self-help is supposed to be the motto of the Prime Minister, but she denies the regions any chance of helping themselves. She first knocks them down and then trusses them up so that they cannot even look after some of their own needs. We believe that were the great regions and nations of our country left to choose their own way democratically, they would work together for Britain and help to get themselves and the whole country out of deep depression.

6.42 pm

The Under-Secretary of State for Industry (Mr. John MacGregor

Out of courtesy to the Liberal party, I have agreed to speak briefly. I therefore hope that hon. Members will understand if I am unable to answer all the points that have been made.

It is necessary to look first at the background to regional unemployment, which inevitably means looking at the background of unemployment generally, before looking at the remedies. The hon. Member for Colne Valley (Mr. Wainwright) criticised my right hon. Friend the Minister of State for concentrating on national employment policies, but the hon. Gentleman did precisely the same thing. I therefore hope he will understand if I spend only a short time discussing regional policy specifically.

Although Opposition Members recognise that the recession had a part to play in unemployment, they criticised the Government and drew attention to statistics. It is worth looking beyond the reasons for unemployment, because if we do not get the reasons right we shall not get the remedies right. It is necessary to point out that in the post-war era unemployment has climbed to historically high levels in most other countries. Therefore, a mere recital of the rise in unemployment levels is not an impressive way of dealing with the problem.

Some hon. Members also recognise that, because of the recession, fewer mobile international firms are seeking to take up individual projects. They therefore look sharply at all the factors—not just at the grants—that must be taken into account.

Mrs. Elaine Kellett-Bowman (Lancaster)

Last autumn the Government increased Lancaster's derelict land grant from £167,000 to £1.35 million, provided that it was spent by the end of March. Does my hon. Friend accept that if Lancaster had the funding to improve its derelict industrial sites, which he was kind enough to visit, and knew the amount of funding in advance so that it could initiate a smooth programme, it would go a long way towards solving its own employment problems?

Mr. MacGregor

My hon. Friend has made her point and I shall try to respond to it later. I have, of course, seen those problems myself. She will forgive me if I do not interrupt my theme by dealing with that matter now. There is no doubt that what she said is important, and I am glad that she was able to make that point.

We are getting more than our fair share of international companies in this period of world-wide recession. It was interesting that my hon. Friend the Member for Morecambe and Lonsdale (Mr. Lennox-Boyd) was the only hon. Member to refer to the impact of the technological revolution on unemployment. He made a profound speech, which I think the hon. Member for Colne Valley misunderstood. I do not think that my hon. Friend was in any Luddite way resisting this process of change. He was drawing attention to the exciting possibilities that exist and referring to the real challenge of competition involved in meeting that technological change.

Anyone who has visited as many firms as I have in the last two years will have noticed the astonishing speed of change, not only in the processes, but in the products that companies are now making to keep abreast of the markets. That has a profound effect on jobs—a matter that has not been brought out in the debate.

I do not agree with the hon. Member for Rochdale (Mr. Smith) that prior to our taking office there was very little overmanning. Perhaps he was trying to protect management, but many managers have told me that overmanning did exist and that it was essential that it should be tackled. The same has been said by many ex-employees of firms that have gone out of business. One need only examine the level of overmanning in industries such as the British Steel Corporation and British Leyland prior to 1979, and compare it with international competition, to realise that it must have been a factor in unemployment. [HON. MEMBERS: "That is a management problem."] I acknowledge that it is a management problem, just as restrictive practices were a union problem. The fact is that it existed and had to be dealt with during a difficult economic recession.

Demographic trends currently, but only temporarily, tend to be against us, and a final factor in unemployment, which goes wider than technology, is the speed of change in the types of product in the market place, their design, what they can achieve and the new materials used in their construction. Compared with even 10 or 15 years ago, we now face stiffer and more numerous competition from the newly industrialised countries. Such competition has come from fast moving companies in other industrial competitor nations.

That is demonstrated by British consumers through their choice in the shops, especially if our own companies fail to keep up to date or do not get the design right. The hon. Member for Wolverhampton, North-East (Mrs. Short) was wrong to talk about shoddy goods from overseas. The problem is that many of them are very good, and if we are again to build up our employment that element must be tackled by many companies and their work forces.

It was significant that Opposition Members talked in terms of more Government expenditure. Not one talked about industries and firms producing more effectively the goods that consumers both at home and abroad will buy. The video industry is an example. As was revealed clearly over Christmas, this is the fastest growing consumer market, and consumers in their thousands have demonstrated their desire for those products. Here is a huge potential for jobs, yet decisions—admittedly taken by management as much as by others—not to go into that market were taken during the period of the last Government. There is a lesson to be learnt. We shall create future jobs only by being competitive and aggressive in the market place.

Those are all reasons for the current level of unemployment, including the levels in the regions. If we are to tackle the problem, we must address our minds to all those matters.

It is only fair to say a word about the policy proposals put forward by the Liberal party, as it initiated the debate. Although I did not hear much new in the speech by the hon. Member for Rochdale, he drew attention to the large amount of Government spending on unemployment benefits. He urged the Government to pay the unemployed to work, from the same funds and using the same money. That was an interesting thing to say. Did he mean that he will be looking for work creation schemes, including some of the capital schemes of which he spoke, at wages similar to current unemployment benefit? I must assume that from the phraseology that he used. If he did not mean that, does he not realise that the cost will be very much higher, and the implications for the PSBR and interest rates must immediately be taken into account.

The hon. Member or Rochdale also spoke about a range of schemes involving public expenditure on sewerage and so on. It was a substantial list. As my right hon. Friend the Minister of State said, the Government have significantly increased annual capital expenditure in public sector industries. Such a policy, used purely as a remedy for dealing with unemployment, is expensive. My right hon. Friend the Minister of State referred to the £300 million that we shall be spending on the community programme. That is precisely what the hon. Member for Rochdale recommends, but it does not make a substantial dent, in the way that he seems to imply, on unemployment.

The difficulties about so many of the capital schemes of which the hon. Gentleman spoke is that they are capital and not labour-intensive. He will acknowledge that this is not a magic solution and that the Government have been moving in that direction both in relation to capital expenditure on nationalised industries and through the community programme.

Mrs. Shirley Williams

Would the Under-Secretary of State say that about house improvements, house modernisation and energy conservation, all of which come out at considerably lower cost than the capital investment in motor cars that we have had previously?

Mr. MacGregor

In house improvement under the construction programme one provides—I hate to use the word "creates" in this context—more jobs than many of the major capital-intensive projects. I accept that, but we have introduced some new incentive schemes that move in that direction.

There are limits to the extent to which one can go in any of those directions if one is not to clobber industry in other ways by imposing much higher interest rates and huge extra industrial costs. The hon. Member for Colne Valley shakes his head, but he must know, if he goes out and talks to industry, that that is what industrialists are saying all the time.

I am very sorry indeed that I shall not have time to discuss some of the policy proposals put forward by the hon. Member for Chester-le-Street (Mr. Radice). I hope that he will allow me to concentrate today on the alliance programme.

Mr. David Steel (Roxburgh, Selkirk and Peebles)

The Minister is missing the point. My hon. Friend the Member for Rochdale (Mr. Smith) and other hon. Members who have spoken are not saying that we would spend the same amount of money on future employment projects, but that that money would replace completely wasteful expenditure by expenditure that would be productive.

Mr. MacGregor

The hon. Member for Rochdale said "the same funds". It therefore behoves the Liberal party to say exactly where that wasteful expenditure is taking place.

The hon. Member for Colne Valley drew attention to the document "Back to Work", with which I shall now deal. Paragraph 3/19 states: The money supply would grow somewhat, in order to hold down the rise in interest rates, under our strategy of managing the exchange rate. On the point about holding down the rise in interest rates, I say to the right hon. Member for Crosby (Mrs. Williams) that it ill-behoves her to attack the Government's loan guarantee scheme on the ground of interest rates if, through her party's policy, she is advocating only holding down the inevitable rise in interest rates. We believe that it is better to get interest rates down generally and not to introduce certain schemes.

The other point that emerges from the document is that the Liberal party believes that it can pursue a policy of managing exchange rates. Recently, we have had many debates that demonstrate the difficulties of such a policy. The next paragraph of the document says: The exact rise in interest rates which comes about depends on market opinion and not on mechanical economic relationships. The House will note that it is talking about a rise in interest rates.

Mr. Richard Wainwright

Read on.

Mr. MacGregor

I have only limited time, as the hon. Gentleman knows. The document has two implications for interest rates and exchange rates that have not been thought through.

The hon. Member for Colne Valley complimented the hon. Member for Chester-le-Street on acknowledging the need for some form of incomes policy. As the hon. Member for Chester-le-Street said, the wording of the document is deliberately vague because the Liberal party knows that that is the Achilles heel of its proposals and that it will be almost impossible to achieve. It has resorted to a fudge of words which it believes will get it the best of all worlds.

Although we have debated Government regional policy a great deal in recent months, it is interesting to compare what the hon. Member for Chester-le-Street wants and what industry wishes. There is a complete contrast. The Labour party offers much higher public expenditure, reflation and much higher interest rates. As one will find from going round firm after firm, what they most want is a strategy of lower inflation, lower general interest rates and action on industrial costs. Firms also wish us to continue with action to improve the supply side of the equation and they recognise the need to improve technology nationally, not just in the regions, important though that is.

The right hon. Member for Crosby got some details wrong. The loan guarantee scheme is directed not only at high technology firms, but also at all small businesses. There are many other ways in which we are devoting resources to improving the impact of technology on industry, through support for innovation schemes—my right hon. Friend the Minister of State, Department of Employment, is doing a great deal in that area—and through the tax system. It is unfair directly to compare the way in which we do things with what happens in other countries, unless the right hon. Lady examines our general policies in providing incentives in the form of grants and allowances for technological innovation.

We have had many regional policy debates and the subject has been much discussed in the House. The Government's position is clear. As the evidence, such as it is, shows, regional policy is more effective if it is concentrated. The hon. Member for Chester-le-Street should examine closely the Labour party's proposals, because he urged that the money should be spread much more widely throughout the country. That is not the best regional policy.

Last year the Government spent £876 million on our regional economic policy. In addition, one must take into account a large proportion—about 30 per cent.—of the £313 million spent on urban policy, because much of that programme now has a regional and economic impact. It represents significant public expenditure. The fact that we have reduced coverage from 44 to 27 per cent. of the working population has been a clear policy of concentrating on the areas of greatest need.

Many suggestions have been put forward in the debate about regional policy. From the point of view of industry and the regions, it is important that there should be considerable continuity and stability in regional policy. If such policy is always being chopped about, industry has no chance to plan properly. The policy is being carried out over a five-year period.

It is known that the Government are undertaking a review of their policy, as the Opposition and as many other Governments have done. Officials have completed the first stage of the review. That was to examine the working of current regional economic policies and to identify ways in which regional policy might be made more effective. However, we must decide whether to embark upon a second stage of work and it is still far too early to say when that stage will come.

As my hon. Friend the Member for Rossendale (Mr. Trippier) said, the impact on regional policy and the restructuring of local economies of all that we are doing to encourage small businesses and new business start-ups will make a significant contribution to economic regeneration. In all those ways, the Government have a clear and consistent regional economic policy that will succeed.

Mr. Tristan Garel-Jones (Watford)

I beg to ask leave to withdraw the motion.

Motion, by leave, withdrawn.