HC Deb 29 June 1983 vol 44 cc579-673
Mr. Speaker

I have selected the amendment in the name of the Leader of the Opposition and his right hon. and hon. Friends.

In addition, under the powers given to me by Standing Order No. 35, I have selected the amendment in the name of the right hon. Member for Tweeddale, Ettrick and Lauderdale (Mr. Steel) and his right hon. and hon. Friends for a second Division at the end of the debate.

3.40 pm
Mr. Peter Shore (Bethnal Green and Stepney)

I beg to move, at the end of the Question, to add: But humbly regret that the Gracious Speech contains proposals that serve only to reinforce the economic and social policies that have in the past four years grievously weakened British industry; squandered the great asset of North Sea oil; reduced our national income; created mass and still rising unemployment; and which, because they offer no hope for lasting economic recovery, pose a major threat to personal living standards, to the social services that comprise the welfare state and to the future prosperity of Britain. It is customary to extend the usual congratulations and courtesies to those who have been appointed to high office on their maiden appearances, and so I do. I assure the Chancellor of the Exchequer that he will have a keenly interested audience in the House of Commons when he addresses us presently. He will find it hard indeed to match the record established by his predecessor, the present Foreign and Commonwealth Secretary. The right hon. and learned Gentleman achieved in his last 12 months a notable—but, I suspect, temporary—fall in inflation, but taking his four years as a whole he visited upon our industries, our economy and our people a holocaust of destruction. His policies wiped out one fifth of our manufacturing industry. He virtually trebled the number of unemployed from 173 million when he came in—allowing for the statistical tamperings of the Secretary of State for Employment, and the expansion of short-life job schemes — to a figure not far short of 4 million. Between one in six or seven adults in Britain is today without work, and there are roughly 27 registered unemployed people in Britain for every registered job vacancy. The plight of school and college leavers, of which we are very conscious this month, and that of the over-50s is bleaker now than it has been for half a century. In spite of the massive contribution that North sea oil has made to our national income, he has left our country poorer than it was four years ago.

When I consider the right hon. and learned Gentleman's ministerial career—I regret that he is not here to hear this — his authorship and pilotage of the Industrial Relations Act 1971, his co-pilotage of the European Communities Act — that strongly built cage For the British people, the bars of which the Prime Minister, with ever diminishing force, as the Stuttgart summit revealed, is still ineffectively rattling—and when I consider what he has done to the nation and its people as Chancellor of the Exchequer, I do not see how the right hon. Member for Blaby (Mr. Lawson), the new Chancellor of the Exchequer, can hope to equal or emulate a record of such unparalleled failure. I can only say to the right hon. and learned Gentleman, although he is not here, that if, as Foreign and Commonwealth Secretary, by peaceful means he can do as much damage to the enemies of Britain as he has done in his previous positions to the people of his own country, we may yet have cause to be grateful to him.

The new Chancellor of the Exchequer is no stranger to economic affairs. As the Prime Minister told the Daily Express in her interview on 15 June: Nigel was an outstanding Treasury Minister. Nigel has a total command, I should think an almost unrivalled command, of almost everything relating to the Treasury". After such an accolade, he needs no tribute from me. I simply remind the House that as Financial Secretary to the Treasury, as he was from May 1979 to the summer of 1981, he was the foremost advocate of the triple policies of cutting public expenditure, reducing the Government's borrowing requirement, and, most notably, introducing the medium-term financial strategy. His money supply targets have been, as he will recognise, only partially achieved, but at the price of ruinously high interest rates and the greatest overvaluation of the pound sterling that any currency has ever experienced in so short a period.

We know the right hon. Gentleman as a doctrinaire Friedmanite, a supply sider, and an obsessional anti-inflationist. We know, too, his attitude to the impact of those policies on unemployment. As he told the Association of Economic Representatives on 27 January 1982, In war, casualties are inescapable, they are neither intended, nor are they unexpected. They are a sign neither of wickedness nor incompetence. The object is quite simply to win the war while minimising the casualties incurred. Field Marshal Earl Haig could not have put it better.

Like the Prime Minister, to the right hon. Gentleman inflation is an evil and unemployment is a problem. Like her, he rationalises the deliberate creation of unemployment by asserting that by defeating inflation the conditions are created for economic growth and for alleged real jobs. We have had four years of those policies, and instead of growth we have had an unparalleled collapse of the British economy, a contraction of output, and no growth — indeed, minus growth.

At the beginning of a new Parliament, it is right that we should take stock of our national situation. We must judge the new policies—if any—that have been placed before us, and we have to take a view of the future and the prospects for Britain and its people in the four to five years that lie ahead. In the earlier months of this year, during the run-up to the election, we had, not the usual talking up of the economy that we have come to expect in the English spring, but a quite exceptional euphoria, with Ministers, CBI and the City chorusing the good news of revival that they at least were able to discern. Of course, there was a bit of good news in the first quarter of this year, following the enforced devaluation of the pound by 14 per cent., which offered some prospect of competitiveness to Britain's industry. The bad news was either ignored or its announcement postponed until after polling day. Since the general election, however, scarcely a day has gone by without fresh evidence that, far from getting better, the prospects for our economy have changed again, and radically, for the worst. I shall mention just four.

First, there was the deferred—fortunately deferred—meeting of the Building Societies Association which pushed up the mortgage rate from 10 to 11¼ per cent. It was a move that we know caused the Prime Minister much disappointment. Why she was disappointed I do not know. Mortgage rates are inevitably affected by comparable interest rates, principally those set or greatly influenced by the Government themselves. When the Government pushed up the bank base rate last November and again in January by no less than 2 per cent., it was nearly inevitable that the building societies would be forced to follow suit, and last week's 0.5 per cent. cut was quite insufficient to offset it.

Secondly, on 15 June the index of industrial production showed that in the three months to April the index for all industries other than oil and gas extraction was half of one per cent. above the level in the equivalent period a year ago. As for manufacturing production, in the latest three months it was 1 per cent. below the level of a year earlier. The only reason why the index was up at all in the past three months over the equivalent period of 12 months ago was the continued growth in the output of oil and gas. So much for industrial recovery.

Third, the following day, 16 June, we had the official figures on capital expenditure for the first quarter of 1983. For all industry, including distribution and services as well as manufacturing, it was 0.5 per cent. higher than it was in the first quarter of last year, while for manufacturing industry, taken separately, it fell by no less than 11 per cent. Manufacturing investment is now 31 per cent. down on what it was in 1979.

Fourth, on 24 June—only the end of last week—we had the official figures of the current account of the United Kingdom's balance of payments. The House should know and absorb the fact that our current balance in the first five months of this year was just £33 million—an annual rate of just over £70 million for 1983 as a whole. Last year —this is the extent of the deterioration—our current account balance was no less than £4,081 million, and in 1981 it was in surplus to the tune of £6,005 million. So in two years we have moved from a balance of £6,005 million to an annual rate this year of about £75 million. Leaving aside oil output, the deficit on our trade in goods, which was already more than £2,300 million last year, has so far reached £3,800 million in the first five months of this year and will probably reach some £8,000 million by the end of this year. In short, with North Sea oil, we are now barely in surplus. Without North Sea oil, such has been the deterioration in our industrial strength, we would be in a state of total crisis.

Mr. Tony Marlow (Northampton, North)

The right hon. Gentleman is concerned about the balance of payments. I understand that he would seek to reflate the economy considerably. What effect would that have on the balance of payments?

Mr. Shore

The package of measures that is required to give some hope to this country must include measures to assist the competitiveness of British industry. Unless we get a boost in our exports and improve the balance between our exports and imports, present trends will continue through this Parliament and there will be ruin at the end of the day.

The Government like to remind the country that the IMF lent money to the Labour Government in 1976, when our oil production had scarcely started and our balance of payments was seriously in the red, principally because of huge bills for imported oil. My riposte is that, if we did not have today North Sea oil production and exports, the size of our deficit would be such that even the IMF would not have the resources to finance it.

Meanwhile, as a result of the Government's decision to abolish controls over the export of capital, money continues to flood out of Britain. Allowing for the non-repatriation of retained profits in subsidiary countries overseas, we are exporting about £10 billion a year. The effects of that on our balance of payments have been averted so far because of the large North Sea oil surpluses engendered in 1980–82. Now that that surplus has disappeared and the current account is only just in balance—and still deteriorating—I do not see how the outflow of capital can be sustained.

The Queen's Speech has virtually nothing to say about any of those problems. Therefore, we shall expect the Chancellor of the Exchequer to give his assessment of them and to tell us what action he proposes to take to deal with them. The menace that lies in all those figures—the further threats to jobs and prosperity that they represent — stems from the continued and appalling loss of competitiveness that our economy and industries have sustained precisely since Thatcherite policies were introduced just over four years ago.

Our loss of international competitiveness is measured by the IMF's so-called relative normalised labour cost index — the higher the figure, the worse our competitiveness. That figure stood at 111 in 1979 and at 144 in the final quarter of 1982. Devaluation brought a welcome improvement to 130 in the first quarter of this year, but continued high interest rates and a rising pound have brought us back to about 135.

Such productivity in our manufacturing industry and, indeed, in our whole economy as has been achieved by the enormous shedding of labour has been swamped by the effects of an overvalued pound. As the investment figures that I have quoted demonstrate, there is no prospect of a real gain in productivity through higher and improved investment in the period ahead.

Therefore, it is no surprise that imports are flooding in while our exports remain virtually static. The reality of our gravely weakened economy and the Government's efforts to conceal it lie at the heart of the general election debate and the debates that will continue to dominate the life of this Parliament.

The inexorable pressure of low growth, failure to achieve competitiveness, failure to invest in the future and the deteriorating balance of payments further imperil the future of our social services and the welfare state, the living standards of our people and the prospects for lower unemployment.

The problem for the Government can be stated simply. It is that existing public expenditure programmes, both civil and military, cannot be sustained, in spite of the retrenchment and cuts of the past four years, unless there is either a massive improvement in the rate of growth and the performance of the economy or a massive increase in the burden of taxation.

We are all aware of that problem in general terms, but during the latter stages of the recent election campaign there came into my possession two Treasury documents, one by officials and the other by the then Chancellor of the Exchequer, describing and quantifying the problem for the benefit of the Cabinet as a prelude and framework for the Government's White Paper on public expenditure from 1983–84 to 1985–86 which was published in February this year.

The Treasury put forward alternative growth prospects. The first was a sustained growth rate of 2½ per cent. per annum, which, if achieved, would broadly maintain taxes' present 39 per cent. share of GDP. As the House knows, that share has risen from 35 per cent. since 1979.

However, as the Chancellor said in. his paper, such a growth rate could be achieved, if at all, only by an expansion of the private sector encouraged by reductions in interest rates and taxes, especially taxes and charges on business, such as corporation tax, NIS or other national insurance charges. It would also be important if we are to achieve this better growth performance to reduce personal taxation so as to improve incentives. We cannot secure the level of interest rates in the private sector if we do not hold the PSBR down firmly. The way forward to better economic performance can therefore only be through reducing expenditure. Therefore, even on that optimistic scenario, cuts in public expenditure would be necessary to give the incentives, through reduced taxation, that the achievement of that growth rate requires in the Chancellor's view.

Just how wildly improbable a 2½ per cent. growth rate is on present policies can best be illustrated by reminding the House that the achievement of the past four years has been an average minus ¾ per cent. growth in GDP per annum. Even the present so-called year of recovery was estimated in the Red Book to achieve a growth rate of only 2 per cent., and that was well before the announcement of the recent figures that I have quoted showing the deteriorating balance of payments, industrial production and investment.

Mr. Tim Smith (Beaconsfield)

What evidence is there that the right hon. Gentleman's alternative, which was so decisively rejected by the electorate, and which would involve a huge reduction in sterling and massive inflation and Government borrowing, would lead to an increase in growth? The French experience suggests precisely the opposite.

Mr. Shore

We are properly dealing with the Government's policy and the prospects. The hon. Gentleman will have plenty of opportunities, as will the House, to hear what I have to say about alternatives on other, I hope frequent, occasions. Let me complete the argument, because it is important; and now that the election is over, the problem should be faced honestly by hon. Members on both sides of the House.

In the light of the implausibility of a 2½ per cent. growth rate, the Chancellor properly turned, in his paper, to what he considered to be the far more realistic prospect of a growth rate of less than 1 per cent. per annum. The consequence of simply maintaining public expenditure programmes with that rate of growth is a £15 billion deficit at 1982 prices before the end of the decade. The implications of that were spelt out by officials in their paper: the tax burden would rise from 40 per cent. to 45 per cent. of GDP". In crude ready reckoner terms the implication is, at least, raising the basic rate of income tax to about 45p (more if the tax base was reduced through evasion or disincentive effects). Deduction for tax and NIS together would then be over 50 per cent. on a marginal pound of income for nearly all taxpayers or abolishing all allowances other than the single allowance (e.g. the married mans allowance, mortgage tax relief. relief on pension contributions, life assurance) and raising the basic rate to perhaps 33p or—if this was regarded as preferable— raising the VAT to 25 per cent. and doubling the real level of all specific duties or levying VAT at 25 per cent. on goods which now bear the 15 per cent. rate and those now zero rated (food, fuel, etc.)". The Chancellor's paper concluded: I invite my colleagues to agree that the prospects suggested by the officials' report are unacceptable and that we need to take a new and fundamental look at levels of public spending. More specifically I seek their agreement (a) that (except where work is already in hand) we should as a first step commission further studies along the lines identified by the CPRS in their paper C(82)"— That is not possible now, is it?— as well as any other possibilities which colleagues may care to suggest … (b) that meanwhile to allow ourselves freedom of manoeuvre we should agree to make no further public commitments which would add significantly to expenditure beyond 1985/6 and that we should avoid repeating Former pledges which would otherwise expire; (c) that in considering this year's public expenditure survey we should set particular regard to the longer term implications of our decision especially for the new year 1985/6 and (d) that we should consider further how these difficult issues might best be presented to our supporters in parliament and to the country at large. Those difficult issues were not presented either to their colleagues in Parliament or to the country. They are central to the discussion of our economic affairs and the proper discussion of national economic policy. They are the heart of our problem.

When I published the documents and asked three pointed questions about their implications for the different social services, the then Chancellor and the Prime Minister —whom I see in her place—were evasive, even by their standards. They accused me of attempting to scare those voters and simply reaffirmed that our fully costed plans of public spending were announced months ago in the public expenditure White Paper and confirmed in our manifesto itself. The issue cannot be left there. During her interview with Sir—I remind the Prime Minister—Robin Day on 31 May, the point was put to the Prime Minister that a serious charge has been levelled at you … and that is that you are trying to con the electorate with what appears to be a relatively moderate manifesto and you are concealing your real intentions. That is the charge. What do you say to it? The Prime Minister replied: It is an absurd charge. I believe most people know that I have been absolutely honest about what we are going to do and why we are going to do it. That honesty seems to have fallen short of any consideration of the real matters that her Cabinet had been debating only a short time before.

On Sunday, 5 June, the day that I released the documents, Mr. Walden interviewed the Prime Minister and asked her: Are you prepared to pledge—since you seem very confident about it —quite categorically that you won't cut public expenditure in the lifetime of your next government if you win on Thursday? The reply was very interesting. The Prime Minister said: Mr. Walden, I have never known in my 30 years in politics any government which has actually cut expenditure below the expenditure of the current year. Can you mention one? I can't. Mr. Walden then said: But I am talking in real terms. The Prime Minister replied: Ah, we no longer budget in real terms. We budget in the way any business budgets. We budget as any household budgets. What is the actual amount of cash I have got? I have got to keep my expenditure within that. So there we have the first get-out. Just how big a one can be illustrated by the figures for the housing programme. In cash terms this year it is slightly higher than it was in 1978–79. In real terms, housing expenditure has been cut by more than half.

The second clear indication of the Prime Minister's intent was her statement in response to another question: We have laid out our plans for the next three years on government spending. They are there for everyone to see and discuss. In a way, I wish more discussion concentrated on those instead of the scares and leaked documents we had. Indeed, yes, but that has to be read against conclusion (b) of the then Chancellor's paper to his Cabinet colleagues: to allow ourselves freedom of manoeuvre, we should agree to make no further public commitments which would add significantly to expenditure beyond 1985/6 and that we should avoid repeating former pledges which would otherwise expire. The Prime Minister and her colleagues, knowing full well the real choices that lie ahead and determined as they are to avoid increasing taxes still further, have given themselves a completely free hand beyond the fiscal year 1985–86. In the meantime, they are hoping to muddle through—as they have done with the pension uprating this year — by cutting real public expenditure by allowing the rate of inflation to exceed the cash figures that they have adopted in their public expenditure White Paper. However, events may well force a change before then. Some of the implications of their policies are already becoming plain.

With the election behind her, the Prime Minister was asked by my hon. Friend the Member for Blackburn (Mr. Straw), in an intervention in her speech on Wednesday, for a guarantee that she would uprate unemployment benefit in line with prices. She replied: No, nor did I give that guarantee during the election, as the hon. Gentleman knows full well."—[Official Report, 22 June 1983; Vol. 44, c. 59.] I do not think that my hon. Friend did know full well; nor did anyone else during the election campaign. Perhaps the Chancellor will now take the opportunity of telling the House and the nation which social security benefits are to be price-protected and which are not. What about child benefit, sickness benefit, invalidity pensions, and pensions other than the national insurance retirement pension?—[Interruption.]

One thing we can be certain of, and which we shall expect to hear from the Chancellor, is that our most regressive tax, national insurance contributions, will increase. The Prime Minister gave another interview in which she said: The national insurance contribution is not a tax. The House will be interested to know that.

It is an insurance premium that people pay to ensure that when they retire they have a pension, if they are unemployed they have unemployment benefit, and if they are sick they have sickness benefit. It is against that background — the massive deterioration in our economic prospects this year to which I have referred, and the admitted, though privately held, Government estimates of a £15 billion tax deficit in the years ahead—that we must look at the Government's strategy—[Interruption.] The Chancellor will not get much help from the document which he has just been passed because it deliberately evades the question. That is why it was written in the way it was. The question remains unanswered and that is why we require an answer before the end of today's debate.

There is not much to go on in the Gracious Speech. There is the reiteration of the Government's intention. to maintain firm control of public expenditure and a responsible financial strategy based upon sound money and lower public borrowing. Beyond that, the Government are to promote growth in output and opportunities for employment by encouraging industry to be adaptable and efficient, and to compete successfully. In her opening speech on Wednesday 22 June the Prime Minister listed the items of her strategy. One was to cut the costs of business. The second was to use taxation as an incentive to enterprise and efficient management. The third was to embark upon so-called trade union reform.

Clearly the Government, in so far as they can control the matter, are determined through their money supply policies to sustain the pound at its present uncompetitive level. As there can be no prospect of an investment-led improvement in productivity—I have already cited the figures—the logic of their position drives them into not an anti-inflation policy for wages and salaries, but a policy of real cuts in incomes. We know how the Government intend to go about it. In the public sector, as reports of Monday's meeting with the CBI leaders have indicated, a cash limit of between 2 and 3 per cent. is to be imposed. That of course will be well below the rate of inflation, which will be running at twice that level before the end of the year.

Next is the assault upon the lower paid. Wages council awards have already been set aside by the Secretary of State for Employment and the whole system has been gravely undermined by simply slashing the number of wage inspectors by one third. The manifesto pledges the Government to ensure that Wages Councils do not reduce job opportunities by forcing workers"— I stress "do not reduce"— to charge unrealistic pay rates, or employers to offer them. The young workers' scheme, as we know, subsidises employers, provided only that they pay no more than £40 per week. The new training scheme is to be held to £25 per week, against the Manpower Services Commission's recommendation of £26.50.

The third stage is, of course, the attack upon the trade unions. The legislation of the previous Parliament is to be reinforced. As the Prime Minister put it, The underlying increase in average earnings is still too high in relation to what we produce and the performance of our competitors." —[Official Report, 22 June 1983; Vol. 44, c. 55.]

Mr. John Townend (Bridlington)

The right hon. Gentleman has just said that the Secretary of State for Employment set aside wage council awards. Does not he accept that the Secretary of State does not have the power to do so and that he has not set aside any such awards?

Mr. Shore

In the formal sense, the hon. Gentleman is correct, and the Secretary of State does not have the legal power to do that. However, the right hon. Gentleman has great authority, and he took the almost unique step of writing to the chairman of a wages council asking for an award to be reduced, which it subsequently was.

Mr. John Evans (St. Helens, North)

The Secretary of State for Employment wants wages councils to be abolished.

Mr. Shore

The reduction of incomes is at the heart of the Government's strategy of competitiveness. Since Germany and Japan are to be our comparators for price increases, incomes will clearly have to be cut, and cut sharply; for the inflation rates of Germany and Japan are combined with a much more competitive exchange rate than our own and with massive increases in industrial investment. The sovereign cure for our problem of loss of competitiveness is, therefore, under this Government's philosophy, a real and sustained attack upon the living standards of the nation at work.

The other part of the strategy is to be further cuts in public expenditure to close the vast emerging tax gap, which the Goverment's own Cabinet documents have revealed. Whatever the Government may say, the axe will fall on social benefits, on the health and personal services, or on education.

During these past few weeks, which included the general election campaign and, I suppose, really the whole period since General Galtieri committed his act of aggression against the Falkland Islands, there has been a strange unreality about our affairs. It is as though our people had been numbed and bewitched, and their judgment suspended, their emotions and instincts strangely vulnerable to propositions which at almost any other time they would have dismissed with either scorn or abhorrence.

Thus the Prime Minister has been able to communicate her own strange message about a new Victorian age which is somehow to lead us back to prosperity and greatness. It is a myth and a dream. Its reality is continued and terrible national decline, and a deliberate lurch back towards the inequalities, unemployment and much of the poverty of the past. But reality will again obtrude—and soon. The spell will be broken, and the rage and disillusionment of a massively cheated people will fall upon itsprincipal author and her henchmen. The change of political fortunes will come, as Mr. Macmillan discovered after his great victory in 1959, and Mr. Harold Wilson after his, in 1966, with startling suddenness.

It will be our task then to lead the country back to sanity and to hope, and to build a new society and a new economy from the wreckage that we shall inherit.

4.14 pm
The Chancellor of the Exchequer (Mr. Nigel Lawson)

I am sorry that there was some hilarity when, in order to answer the question raised by the right hon. Member for Bethnal Green and Stepney (Mr. Shore), I sent for a copy of the Conservative party's manifesto. I quite understand why the right hon. Gentleman would not dream of sending out for a copy of his party's manifesto. However, the answer to his question is contained in our manifesto. I refer to the published manifesto—the only manifesto—where on page 26 it clearly states: In the next Parliament, we shall continue to protect retirement pensions and other linked long-term benefits against rising prices. That is our commitment.

Mr. Shore


Mr. Lawson

It is a little early for the right hon. Gentleman to intervene, but I give way.

Mr. Shore

I agree that it is early to intervene, and I am grateful to the right hon. Gentleman for gibing way. He knows that the whole House is very interested in this question. He has given us that rather bland quotation, but we want to know what he considers linked long-term benefits to be, because that is of major importance.

Mr. Lawson

The linked long-term benefits are well known to the House, and do not include unemployment benefit. The right hon. Gentleman began his speech with some courteous remarks about my new job, and I thank him for them. Let me return the compliment by wishing the right hon. Gentleman the success that he deserves in his campaign for the leadership of the Labour party. We all understand that that is what his speech today was really all about.

Unfortunately, my duties at the Treasury prevented me from hearing the earlier speeches made by the two front runners in this interesting contest, the hon. Member for Islwyn (Mr. Kinnock) — the acceptable face of the Official Monster Raving Loony party—who promises to complete the job started by the right hon. Member for Blaenau Gwent (Mr. Foot), and the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley), who possesses a formidable appeal to those for whom Wilsonism is the wave of the future. However, despite his somewhat shop-soiled speech today for those of us who value reason and principle, the right hon. Member for Bethnal Green arid Stepney is our man.

As Secretary of State for Trade, the right hon. Gentleman successfully fought the good fight against import controls and more recently we were reliably informed that he was the only member of the shadow Cabinet to object to the extremist manifesto on which his party was to fight the general election. Of course, he has now given his powerful support to the case that the Government have been making for democracy in the trade unions. So, all in all, the right hon. Gentleman certainly has my vote—although why anybody in his right mind should want the job is another question.

There is always a tendency in the first Gracious Speech debate of a new Parliament for right hon. and hon. Members on both sides of the House to refight the battles of the general election and to rehearse once more the speeches that served them so well and so often on the hustings. That is understandable and we had an example of that today from the right hon. Member for Bethnal Green and Stepney. However, what really matters now is the future. Let me, however, say just this about: the election. The result on 9 June—however unpalatable it may have been to Opposition Members—was a clear and unequivocal vote of confidence in the Government's economic policy. Throughout the campaign the economic policies of the other parties were deemed by the electorate to be so unconvincing that they were hardly ever the subject of serious debate. The alliance failed to convince the electorate that it had anything to propose that had not been tried, without success, over and over again since the war. The Labour party, among its other disabilities, conspicuously failed to answer the questions about trade union power that had destroyed its Government in 1979.

Only the Conservative party was able to present a credible and coherent economic policy to deal with the realities of life as they are understood by the people. That is why we were re-elected and that is why we are resolved to continue those policies that have begun to get Britain back on its feet. In contrast to the right hon. Member for Bethnal Green and Stepney, I should like to pay the warmest possible tribute to my predecessor as Chancellor, my right hon. and learned Friend the present Foreign Secretary, who launched those policies in 1979 and whose courage and whose steadfastness in carrying them through during four difficult years richly earned the success that eventually attended them, including, among other things, the lowest rate of inflation for 15 years. I am keenly conscious that few Chancellors of the Exchequer since the war have left that office with their reputations enhanced. My predecessor is emphatically one of that select few.

The Government's economic objectives have not changed in any way since we first took office. Our sights are set on sustainable non-inflationary growth. Our resolution to achieve that objective is unwavering. Our policies have been consistent with achieving it, and they are proving successful. They have earned respect at home and abroad and we intend to persist with them. The essence of these policies is simply stated, and I shall use this first debate of the new Parliament to do that. There will be plenty of complications on the periphery to occupy us later; this is the occasion to reaffirm the essential elements.

First, having achieved a notable success in reducing inflation, we shall continue to set a framework of sound financial policy. The heart of our approach will therefore continue to be the medium-term financial strategy. As the right hon. Gentleman mentioned, I was associated with its conception; I was there at its birth and I shall be proud to see it through its mature years and ensure its longevity.

Secondly, we shall continue to strive to bring about a more dynamic economy — by the introduction of competition where it has hitherto not existed, by improvements in the working of markets and by encouraging the development of a more flexible and responsive economy. The problems with which we have to grapple are far from simple but we will be able to tackle them with renewed vigour in this, our second term. Reinvigorating the supply side is an essential complement to our financial policies if we are to secure the benefits in terms of increased output, which our success in reducing inflation leaves us poised to achieve, and I wish to comment on both these key areas of policy.

The medium-term financial strategy provides the essential framework of financial discipline, and the heart of the strategy is continued downward pressure over the years on both monetary growth and public sector borrowing as a proportion of total output. Monetary and fiscal policy have to go hand in hand. The ranges for monetary growth have been adapted to reflect changes in velocity, due in part to changes in saving behaviour and structural changes in the financial system, and I think that everybody would agree that our monetary strategy has been operated flexibly and sensibly in the light of changing circumstances.

The medium-term financial strategy has been extended to embrace narrow as well as broad monetary aggregates, and in interpreting movements in these aggregates account has been taken of other financial indicators such as the exchange rate. But although the form has changed in these respects—and may have to change further in the future as the monetary system continues to evolve — the substance remains unchanged: to maintain the general thrust of a monetary policy designed to reduce inflation.

To achieve the objectives of the medium-term financial strategy has not been, and will not be, easy. The policies on which we embarked in 1979 have required tough and sometimes unpopular decisions. I think in particular of the 1981 Budget which, in the depth of the worst recession since the war, substantially increased taxation to reduce the public sector borrowing requirement by about £3.5 billion.

Dr. Jeremy Bray (Motherwell, South)


Mr. Lawson

I shall give way to the hon. Gentleman shortly.

At the time, we were bitterly attacked on the basis of an outdated and mistaken orthodoxy. At the heart of that orthodoxy—this was indeed the sense or theme of the speech of the right hon. Member for Bethnal Green and Stepney—is the assumption that economic growth can be brought about only by a conscious act of demand management by an expansionist Government. Were that indeed the case, it is difficult to see how mankind ever emerged from the caves to produce a world fit for Keynes to be born in.

Dr. Bray

In the original statement of the medium-term financial strategy, the Government placed great stress on its value in conditioning expectations. Can the Chancellor now say what expectations should be generated by his strategy in respect of the rate of inflation, the exchange rate or competitiveness?

Mr. Lawson

One of the outstanding achievements of the last four years has been the change in expectations, the change to a climate of realism and common sense at all levels of industry, from the shop floor to the board room. In any event, our critics, who are slaves to that old orthodoxy, confidently claimed that the 1981 Budget would inevitably turn the recession into—I recall the phrase very well indeed—"a self-perpetuating downward spiral". That was what they said, but they could not have been more wrong, for ever since then—

Mr. Shore


Mr. Lawson

The right hon. Gentleman can look up the statistics; we are talking about the past, not projections for the future.

Ever since then, there have been increasing signs of sustained and non-inflationary recovery, at first disappointingly slow but now unmistakeably quickening. With inflation now at its lowest for 15 years, there is enough room in the framework of the medium-term financial strategy for a substantial recovery in output and employment. I intend to continue to maintain rigorous control of public sector borrowing as an essential ingredient in providing the right balance between fiscal and monetary policy, with all that implies for interest rates and the health of the economy as a whole.

That in turn requires firm control of public expenditure; otherwise there will be no room for significant tax cuts throughout the lifetime of this Parliament, and there is no scope for relaxation in this context this year, next year or in any year. Our aim will be to keep the growth of public expenditure over the medium term well within the growth of money GDP.

The published plans for the next three years will mean a high proportion of the nation's wealth passing into the hands of Government, either for final consumption by the public sector or for redistribution in the form of cash transfers. The first is a substantial claim on real resources, and both place great demands on public finance. So, in extending the financial strategy forward, towards the end of the life of this Parliament and beyond, we shall be seeking ways of reducing still further the share taken by public expenditure.

Mr. David Winnick (Walsall, North)

Is the Chancellor now saying that we should be expecting a reduction in unemployment? When he speaks about recovery in output and employment, as he saying that unemployment will come down, leaving aside any playing around with the figures?

Mr. Lawson

Certainly, and the policies on which we have embarked, and which we shall continue to pursue, are the only policies that have any hope of bringing down unemployment, in Britain—[HON. MEMBERS: "When?"] Public expenditure should continue to grow—

Several Hon. Members


Mr. Lawson

As I was saying, public expenditure—

Hon. Members


Mr. Speaker


Mr. Lawson

Public expenditure should continue to grow, but only in cash terms. Measured in terms of constant prices, it should be roughly level from now on and, as the economy grows, it will fall as a proportion of GDP. Recent figures for central Government borrowing are substantially higher than those for a year earlier, but it must be remembered that this comparison is distorted by the change in the arrangements for local authorities and nationalised industries introduced last summer.

Nevertheless, at a time when the monetary aggregates are growing rather quickly, we shall be watching the course of borrowing closely in the coming months, and I stand ready to take action if our objectives are endangered. It is because of the Government's firm intention to keep a tight grip on expenditure and borrowing that I am confident of further progress in reducing taxes.

What about the Labour party? Its members will not need reminding how they gleefully seized on the opportunity afforded them by the Dissolution to force us to drop a whole range of measures from the Finance Bill, including important tax reliefs announced in the Budget. They thus gave very early notice to the electorate—who duly noted the fact and voted accordingly—of their attitude.

The House will know already that we are moving swiftly to undo that piece of mischief. Last week I tabled Ways and Means resolutions to pave the way for a short Finance Bill restoring the main tax reductions and dealing with a few other essential measures, and I trust that the House will pass those resolutions tomorrow. The new Finance Bill will then be published on Friday.

I could not reasonably ask the House to consider the remainder of the original Finance Bill proposals in the same time scale, but I am urgently reviewing them so that I can announce as soon as possible, and in as much detail as possible, how we intend to proceed. I have already announced that the oil taxation provisions, which are urgently needed if important North sea developments are not to be delayed, will be introduced in the autumn in a separate oil taxation Bill. Other proposals will be included in the 1984 Finance Bill. Wherever possible I propose to publish draft clauses in advance.

The Government are not in the business of financing inflation either in the public sector or in the private sector. After decades of accommodating policies in which excessive pay awards could be passed on to the public in higher prices, we now have a framework that encourages realism in pay bargaining and in industrial relations more generally.

The rediscovery of financial discipline has forced pay bargainers to face the crucial link between pay and jobs. This link has a positive as well as a negative side. The rates of monetary growth envisaged in the strategy have been set at levels that provide room for substantial growth of output and employment if inflation continues to moderate. Such growth, unlike the short-lived reflationary upswings that we have seen in previous cycles, will be sustainable because it is based on lower inflation. While so much remains to be done, our achievements to date enable us to face the future with confidence.

Looking first at inflation, in 1980 retail price inflation peaked at 22 per cent. A year ago it was running close to 10 per cent. In May of this year it was only 3.7 per cent., the lowest level for over 15 years. This has been achieved without any resort to wage or price controls.

Mr. John Evans

There has been massive unemployment instead.

Mr. Lawson

As we have always said, there may be some temporary rise in inflation to 5 or 6 per cent. by the end of the year. However, there is and will be no sudden resurgence of inflation of the sort that we have seen in the past. The underlying trend has been firmly downwards since 1980 and we intend to keep it that way.

Sound monetary conditions together with firm control of borrowing have enabled falling inflation to be accompanied by lower interest rates. Though, inevitably, there are fluctuations in interest rates, influenced as they are, among other things, by developments in the rest of the world, short rates are down by nearly seven points since the autumn of 1981. This has substantially eased the financial position of Government. Each 1 per cent. of interest rates is generally reckoned to be worth about £250 million to £300 million to industry. We shall seek to ensure that the underlying downward trend in the cost of borrowing is maintained.

Government borrowing in relation to national output, among the highest in the OECD countries four years ago, is now one of the lowest. Again, we must keep it that way.

Industrial productivity has increased considerably even during the recession and is set to increase still further. For decades, higher productivity has been seen as the key to economic progress. It was not until the 1980s that we succeeded in converting aspiration into reality. Lower inflation creates—

Mr. Bryan Gould (Dagenham)


Mr. Lawson

It is good to see the hon. Gentleman back in his place. Lower inflation creates a climate that is favourable to the vigorous control of costs that is essential if we are to see further improvements in competitiveness and sustainable growth both of output and employment.

Mr. Gould

How do the improvements in productivity over the four years of the previous Conservative Government compare with the productivity improvements that were achieved over the four years of the last Labour Government?

Mr. Lawson

They were substantially greater compared with the average productivity improvement in the OECD as a whole. Productivity improvement throughout the world was lower—

Mr. Gould

Answer the question.

Mr. Lawson

—during that period than in the United Kingdom. In relative terms our productivity performance over the past four years has been better than at any time previously, and the hon. Gentleman knows that perfectly well. It is no accident that, on the whole, the countries with the lowest rates of inflation tend over time to enjoy the lowest levels of unemployment. The lesson of the election—if the Labour party is serious, it should really learn it—is that the British people understand that the pursuit of a recovery that is sustainable because it does not spring from artificial reflation, and hence renewed inflation, is the best and only way to tackle unemployment. Reversing the rising tide of unemployment must be a prime objective. To achieve it we must ensure that the recovery that we are now seeing is a lasting one. Hard evidence of that recovery is steadily increasing although it is causing such pain and grief to the Opposition.

Mr. John Evans

There is not a shred of evidence of a recovery.

Mr. Lawson

Only this week the latest CBI industrial trends inquiry pointed to further improvements in the business climate, stronger total order books than in any survey since 1979, and expectations of further increases in output. Figures released only today show an encouraging trend in industrial profits for both North sea and non-North sea companies, which are up 50 per cent. and 20 per cent. respectively from the average levels in 1980 and 1981. Revised GDP figures, also published today, show that total output in the first quarter of the year was about 3.5 per cent. higher than at the low point in mid-1981. For this year, the forecast at the time of the Budget, to which the right hon. Member for Bethnal Green and Stepney referred, was for an increase of about 2 per cent. in national output this year. On the basis of the latest evidence, I should expect an increase of up to 2.5 per cent. this year.

Mr. Shore

I hope that the right hon. Gentleman will not ape his predecessor in treating rather frivolously the major statistics that are published by the Government. There is no point in plundering the one or two factors that are helpful. The right hon. Gentleman is now the Chancellor of the Exchequer, and Britain's fortunes, for good or ill, are now in his hands. He should know that most of the increase in GDP is entirely absorbed by North sea oil production and has nothing to do with the rest of the British economy. Secondly, will he comment on one of the most spectacular deteriorations in our balance of trade in the past 12 months that we have ever known in our history?

Mr. Lawson

I was not aware that the right hon. Gentleman proclaimed the large surplus last year as a great triumph. It is not true that almost all the recovery is due to North sea oil and gas. A significant proportion of it is, but so what? North sea oil and gas is an important part of our economy. It is employing a growing workforce and an offshore supply industry is growing up as well. It is absurd to suggest that it does not count or that it does not exist. It is an extremely important part of our economy. That relates also to the agony that the right hon. Gentleman is suffering over the deficit in trade in manufactures. When in one part of the balance of payments there is a marked improvement, it is only to be expected that there will be a corresponding deterioration in the other components. I remember the right hon. Member for Down, South (Mr. Powell) having to lecture the House many times on the fact that the figures in the balance of payments all have to sum to zero. Therefore, a change in one component leads to a change in the opposite direction in another component. Despite the eloquence of the right hon. Member for Down, South, the right hon. Gentleman has not understood the point. That being so, there is not much point in my trying to educate him.

Mrs. Elaine Kellett-Bowman (Lancaster)


Mr. Lawson

The next step is to ensure that the recovery deepens and spreads more evenly throughout the economy and the country. Other countries face the same task. Many of the world's economies, both developed and developing, are convalescing after the fever of inflation suffered over the past decade or more. We shall all need a steady period of recuperation stretching over several years, during which economies can complete the restructing and rebuilding of their productive capacity. Above all, we need to avoid a relapse into renewed inflation and rising interest rates.

That is why, at Williamsburg, the summit countries pledged themselves unanimously to continue with disciplined non-inflationary monetary growth and to the reduction of structural budget deficits. The main burden must lie on individual countries to follow appropriate policies. However, we attach importance to working together with our partners and the International Monetary Fund to ensure convergence on non-inflationary growth and the maintenance of a stable monetary system for the world as a whole.

The United States bears a special responsibility in this context both because of the size of the American economy and because of the importance of the dollar in international financial markets.

The recovery of the world economy, coupled with low inflation and interest rates, is a crucial element in the solution of, in some instances, serious debt problems for developing countries. Continuing firm adjustment efforts by the major debtors are absolutely essential also. Most now have programmes with IMF support, and it is important that the fund should have adequate resources to play an effective role.

The Government laid the necessary order. Last week we introduced a short additional International Monetary Arrangements Bill to allow the United Kingdom to participate in the increase in IMF quotas and in the improvement of the general arrangements to borrow agreed in February under my predecessor's chairmanship.

Although lower inflation is a necessary condition for sustainable growth, it is not a sufficient condition. It needs to be combined with a strengthening of market forces, with greater efficiency, more competitiveness and a greater regard for enterprise and self-reliance. Lower inflation greatly assists the achievement of those changes, but it does not of itself bring them about. The individual efforts of those in business and industry at all levels bring them about. Governments cannot guarantee success, but we have a vital role to play in two ways: first, in setting the legislative and fiscal context for business; and, secondly, because the Government, including local government, are a major employer, and are directly responsible for 15 per cent. of the labour force.

The past four years have seen great changes in those areas, but still more needs to be done. We have abolished a whole range of damaging and unnecessary controls—exchange, price, dividend, pay and hire-purchase controls. For the first time for many years, large and small firms are being allowed to breathe again, free from the choking effect of bureaucracy. Investment and pricing decisions are once again in the hands of those best qualified to make them—those running the businesses. The cost of having prevented this in the past—although it cannot be measured directly—is undoubtedly one of the reasons for Great Britain's poor performance. The recurrent burden of prices and incomes policies, the chopping and changing of hire-purchase controls, the whole paraphernalia of so-called demand management, have added to the burdens on managers and struck at the very roots of enterprise. We want none of it.

Mr. Richard Wainwright (Colne Valley)

Since the Chancellor of the Exchequer is tomorrow to ask the House to pass important Ways and Means resolutions without any debate, will he now be good enough to explain why he has tabled the resolutions word for word as they were tabled three and a half months ago under different economic conditions?

Mr. Lawson

We made a firm commitment at the time of the Dissolution of Parliament and during the election campaign that major measures which we had not been able to enact because of the Dissolution would be brought forward first thing in a new Parliament. We have carried out that undertaking.

Mrs. Kellett-Bowman

Large areas of the north-west are now partaking in a prosperity generated by off-shore gas, not least the area that I represent. Unlike the right hon. Member for Bethnal Green and Stepney (Mr. Shore), we are very grateful for this expansion and that prosperity.

Mr. Lawson

I am most grateful to my hon. Friend for making that important point and I apologise for not giving her the opportunity to make it earlier.

A good example of what we have done is to be found in tax policy. We have deliberately and substantially reduced the tax burden on employment and business. We have reduced to 1 per cent. the national insurance surcharge, the tax on jobs that the Labour party introduced and then increased to 3.5 per cent. Stock relief has been improved. Corporation tax for small companies has been cut and we aim to do more.

We have helped small businesses in scores of ways, through the tax system and elsewhere. We have promoted schemes which help employees to take shares in the businesses in which they work. We have encouraged innovation and the application of new technology. Over the next five years we shall constantly seek new and imaginative ways to develop these and other initiatives.

We need also to improve the legislative framework in which our businesses operate, and nowhere is this more important than in trade union reform. Getting the labour market to work better requires a transformed climate of industrial relations—one in which individual workers can better see how to further the prosperity of the firms in which they work and, therefore, their living standards and job prospects. We have already legislated on the closed shop, picketing and curbing abuses of trade union power, which were often aimed as much at individual workers as employers.

We need to give trade union members their proper rights and influence over the policies and actions of their unions. We shall be introducing legislation to provide for secret ballots on three key issues—the election of trade union executives, the calling of strikes or support for other industrial action and periodic authorisation of political funds.

Mr. John Evans

Will the Chancellor of the Exchequer confirm that between 75 per cent. and 80 per cent. of strikes are unofficial and last less than three days and that his much vaunted talk of having secret ballots or facing the legal consequences will have no effect on those strikes?

Mr. Lawson

We shall have to see when the law is in place. What the hon. Gentleman and his right hon. and hon. Friends find so difficult to stomach is that these reforms are welcomed by the overwhelming majority of the British people, including members of trade unions.

The Government have direct responsibility for businesses in the state sector. Many have no place there. Some have returned already to the free enterprise sector to which they belong and where they can flourish. Britoil, Amersham International, British Aerospace, the National Freight Company, Cable and Wireless and others are enjoying this new-found freedom to raise funds in the private capital market and to succeed or fail on fair terms against competition. I am glad to say that all of them are succeeding. Competition and efficiency are enhanced, and, above all, quality and service to the consumer are improved. By the end of our second term in office many more state-owned businesses will return to the free enterprise sector where they rightly belong.

Privatisation may be an unattractive word, but the fruits are there for all to see. There is still a long way to go before the British economy is fully restored to wealth, but this is where the prospect for more jobs truly lies. To pretend otherwise and to suggest that there is some short cut to more lasting jobs and some easy way to keep people at work in a competitive world, is wilfully misleading. What happened on 9 June showed that the people will not be misled.

Meanwhile, we are faced with the problem of a distressingly high, and still rising, level of unemployment. I fully share the concern expressed by the right hon. Member for Bethnal Green and Stepney and by the House. It is a grave social evil that so many of our young people cannot find work and that many others have their working lives prematurely curtailed. No one in the House would dispute for a moment the need to tackle the problem. Where we differ fundamentally is over the method. The Labour party talks of reflationary packages, of the Government creating jobs by spending more, printing more and borrowing more. The country's post-war history and the current experience of countries throughout the world, and, indeed, just across the Channel, show that this simply does not produce a lasting cure — quite the reverse.

Governments have an important role in easing the transition to a low inflation-high employment economy. The Government are spending substantial sums—some £2 billion this year — on special employment and training measures for this purpose. To reduce unemployment on a lasting basis we need to reduce inflation and costs and to improve productivity. It is precisely because the Government are so concerned about unemployment that we are determined to go on doing just that. Our employment policy is a positive one which aims to create a climate in which jobs will take root and flourish. It is not interested in perpetuating ancient customs with the help of subsidies. It has nothing to do with the cruel hoax of promising to employ more workers with money that we do not have. It is based firmly on sweeping away the accumulated obstacles to employment and allowing business to operate within a reliable and predictable economic and financial framework.

A sustainable increase in jobs depends upon sound money, low inflation and greater efficiency. That will be my objective as Chancellor. I ask the House to reject the Opposition's defeatist amendment as decisively as the people rejected the same claptrap on 9 June.

4.49 pm
Dr. David Owen (Plymouth, Devonport)

Despite profound disagreement with some aspects of the Government's policy and the Queen's Speech, we hope that the Prime Minister and her Government succeed. We have no vested interest in the failure of the Government. If they fail, the country will have failed. [HON. MEMBERS: "You put them there".] We did not put the Government there. Those who put them there, more than anyone else, were those who endorsed the Labour party manifesto, which was decisively rejected by the people.

We speak in the House for 3.5 million voters and on behalf of 7.75 million voters who endorsed candidates standing on the joint programme of the alliance. That voice, 26 per cent. of the electorate as opposed to the 28 per cent. who voted for those who pose on the official Opposition Benches, will be heard in the House and in the country. The Prime Minister has more chance of having a successful Government if she is prepared to widen the base of her support. She needs no reminding that she is supported by only 31 per cent. of the electorate.

When she was the Leader of the Opposition, the Prime Minister was strident on the issue of the mandate. Before the Gordon Reece voice was invented, on 23 March 1977, when the then Labour Prime Minister claimed that he governed as of right, the present Prime Minister said: By what right? The right of a minority Government; the right of supposed mandate based on 38 per cent. of the votes cast or 29 per cent. of the electorate? They govern by no right except the arrogant right of Socialism."—[Official Report, 23 March 1977; Vol. 928, c. 1285.] I would not be so arrogant as to use the word "right", but the Prime Minister might consider—

Mr. Eric S. Heifer (Liverpool, Walton)

the right hon. Gentleman was in that Labour Government.

Dr. Owen

I shall deal with that in a moment.

The Prime Minister governs by the moral authority of a supposed mandate based on 43 per cent. of the votes cast, or 31 per cent. of the electorate. I shall reply now to the hon. Gentleman the Member for Liverpool, Walton (Mr. Heffer). I was honoured to serve in that Government. The day after 23 March 1977 the Labour Government broadened the base on which they had support. They went into the Lib-Lab pact—[Interruption.] Yes. It may be hard for some right hon. and hon. Members to remember it, but at that stage they were extremely grateful for having Liberal votes. I was grateful, too.

One of the facts that must be remembered is that the Government then spoke for 58 per cent. of the electorate. They were a much better Government for it. If anybody remembers the Government during the Lib-Lab pact, they will remember that they brought down inflation, carried conviction and were a Government of greater coherence and authority than they would have been if they had continued to speak on behalf of only 29 per cent. of the electorate.

Mr. Michael Colvin (Romsey and Waterside)

If the right hon. Gentleman feels that the Lib-Lab pact led to a greater consensus of political view in the House, will he explain how the first measure that was passed following the Lib-Lab pact was the nationalisation of the aircraft industry? What mandate did he have from the people for that?

Dr. Owen

I am not saying that we had a mandate on every aspect. All I say is that if the measure went through —Liberals did not vote against—I believe that the decision to create British Aerospace was a sensible rationalisation of industry, although I now support the taking of equity shares in British Aerospace — [HON. MEMBERS: "Oh."] The two are not as incompatible as some right hon. and hon. Members may think.

The hon. Gentleman asked about consensus. Before the Lib-Lab pact was formed, the Labour Cabinet, by a majority, agreed to proportional representation for European elections. Soon after that a measure was put to the House that ought to be put to the present Prime Minister, to introduce proportional representation for the European elections, and 222 hon. Members, including 61 Conservatives, voted for it. It would have been a great deal better for our representation in Europe, our authority, the voice of the people and this country's representation if there had been proportional representation in the European elections.

It is on such issues that the Prime Minister will be judged. She must widen her base and listen to other people. She much govern for the good of the whole nation. We shall be a constructive Opposition. We shall not spend our time looking back over the past—I HON. MEMBERS: "All six of you."] Yes, all six of us, but we are joined by 17 Liberals. [Interruption.] We know that the House of Commons, playground as it sometimes is, like last night, will scoff. We know that behind us lie 3.5 million voters in our own right and behind the alliance 7.75 million voters. Of course, the old class-based parties will scoff. The Prime Minister will play her games as she did in the last election, making the extraordinary statement that we should have stayed in the Labour party. Does the House believe that we should have endorsed that manifesto, which we would have had to do had we stayed in the Labour party? The Prime Minister must now speak for the nation.

In many respects, I welcome the Chancellor of the Exchequer to his post. Back in 1966, we were allies on economic policy. [HON MEMBERS: "Oh."] The then editor of the Spectator was a firm critic of deflation and a strong supporter of a competitive exchange rate. I hope and believe that the Chancellor of the Exchequer will remember those days. I shall remind him of an apt quotation. He said: We have had the deflationary measures which will create the idle resources. In those days the right hon. Gentleman worried about idle resources. He went on to say: Now therefore is the right time to devalue the pound so that those resources, instead of lying idle at immense human and economic cost, are diverted for producing for export. The greatest of all this Government's economic crimes will be if, when it does decide to reflate the economy, it does so again by reflating demand at home. Those words were written in July 1966. The House would do well to remember the then unemployment rate of 291,700. It shows the extent of the decline in our fortunes that there are now 3.5 million unemployed, which is unacceptable. Let this be clear to the Chancellor. We shall not tolerate a continued rise in unemployment. The Chancellor was somewhat vague about how he would handle that issue. The crucial question is whether he will keep rigidly to the target range for the money supply announced by his predecessor, set at the time of the Budget at 7 to 11 per cent. I thought that he had talked at times about flexibility. He used an interesting phrase—"The form may have to change." I hope that the Chancellor will not take drastic action to cut back on the monetary aggregates. At the moment M3 is growing at an annual rate of 15.7 per cent. The other main parameters are also growing. He has admitted that the PSBR is overshooting its target of £8 billion, and is probably over £10 billion at the moment. The temptation for the Chancellor might be to increase interest rates to bring the money supply back to target. If he does so, he knows well that that will not only discourage investment but push up the value of the pound, pricing exports out of world markets. I hope that the Chancellor will hesitate before he does that. One of the greatest failings during that past four years of this Government has been the way in which the exchange rate has yo-yoed from $1.50 to $2.40 to the pound, and back to $1.50. The IMF index of relative unit labour cost shows that it would be better if the pound was at the level it reached in relation to the dollar in March of this year, before the rebound.

I believe that the Chancellor of the Exchequer, as opposed to the Prime Minister, might be interested in now joining the European monetary system. We are effectively a member of it— [Interruption.] People hesitate about joining the exchange control system, but one of the advantages in joining now, especially if we could join at a slightly lower rate, is that we would not be forced up so much. There is some truth in the argument used by successive Chancellors—I remember when the right hon. Member for Leeds, East (Mr. Healey), used the argument — that the market cannot be bucked. Our currency is peculiarly vulnerable to speculative changes, especially when changes are in prospect in the price of oil. If the Chancellor went into the EMS now, preferably at a lower rate, and perhaps joined as the Italians have, that would allow for more fluctuation. I do not believe in a totally fixed rate; I would wish to be able to change it in a reasonable way. The EMS would effectively ensure that the exchange rate did not, once again, rise to an uncompetitive level. The temptation to allow that to counteract the effects of inflation, with the Prime Minister at his elbow, might be great. It would have grievous and damaging consequences for the economy.

I draw to the Chancellor's attention the topic of capital investment and I do so on the authority of no less a monetarist than Professor Alan Budd. Our motion singles out the need for selective investment because here we have seen one of the most damaging consequences of the financial and monetary controls that the Government have applied. Public spending on goods and services fell between the financial years 1976–77 and 1982–83 by 6.9 per cent. No reduction was achieved in current expenditure. It was planned to fall by 1 per cent. but it rose by 5 per cent. in real terms. Capital expenditure, which was planned to fall by 35 per cent., actually fell by 40 per cent. It would be damaging if the emphasis on financial control continued, and a failure to cut current expenditure meant the further loss of capital expenditure that is so vitally needed for economic growth. The Chancellor knows that.

The Chancellor knows that he has a serious problem. He inherits a public expenditure forward projection based on a cash provision for education, which is planned to rise by more than 3 per cent. in the next two years, health and social services by 4 per cent. and overall programmes by 5 per cent., yet he has in the pipeline inflation rising between 6 and 8 per cent. He shakes his head and implies that it will be lower than that. I hope he is right. He must now offset the effect of the mortgage rise which has added at least 0.4 per cent. to the RPI. The Chancellor of the Exchequer will be fortunate if he manages, during the forthcoming year, to maintain the planned rate of 5 per cent. Otherwise, it means cuts in expenditure.

The Chancellor might say that it is no use promising increased expenditure in every area, and the Social Democrats do not intend to do so. We have singled out areas which must have an increase in expenditure. These are the personal social services as they affect the elderly and disabled, which have not been well served. There has been an increase in home helps of 4 per cent. between 1978–81, but to keep pace with the demographic change, with more people living beyond 80 and more people wishing to live within the community, the home help provision should have risen by more than 6 per cent. When trying to do something about employment, we should not only look at industry. A great need exists for female employment and also a social need to keep people at home. I hope that the Chancellor will consider expanding the personal social services to 40,000 home helps and overall 100,000 people working in the personal social services.

I hope, too, that the Chancellor rethinks the commitment in the Gracious Speech to yet further centralisation of Government control of local government. The degree of centralised control of local government that has taken place in the past 20 years is horrendous. I do not offer it as an absolute panacea, but there is no doubt that a fairer voting system would lead to far less extremism in council chambers.—[Interruption.] I hear cries from the Labour Benches. More Labour voters want a change in the voting system now than ever before. It is changing, and it will change, because as they turn out to be the third or fourth party in the House the Labour party will cling to the raft of proportional representation as the only way to survive.

Defence is the other central question facing the country. I must say something about last night's events. The Secretary of State for Defence, the Leader of the Opposition and his deputy protest too much. The reality of the decision over the modernisation of theatre nuclear forces is somewhat different from that which they try to pretend. The fact is that at the NATO summit in 1977 the British Government committed themselves to establishing a working group to examine theatre modernisation—a prudent and sensible decision, taken by all of the NATO countries. When some people give the impression that there was no discussion about those matters, it should be noted that the then Secretary of State for Defence made it clear to the House in November 1977, I think, that we were examining cruise missiles so as to be able to participate in the Alliance discussions. That has never been a secret. It is no use trying to pretend that the cruise missile option was not fully discussed during that period. Of course it was. The decison as to how theatre nuclear weapons were to be modernised was left over, as was always envisaged, to the NATO summit meeting at the end of 1979. There is some disparity between a press release in April and a communiqué —not for the first time, I suspect, in Government circles. What is nonsensical to pretend is that the then Government had not—quite sensibly, in various discussions within NATO and bilaterally with the Americans at the Guadelupe four-power summit—discussed the reality of theatre modernisation. The Conservatives are wrong to pretend that the Labour Government made a commitment to ground-launched cruise missiles. I have looked back through the records and the memorandum shows that I was rather opposed to such a commitment.

I plead guilty to advocating submarine-launched cruise missiles. At that time I was fighting a great tussle, resisting the purchase of the Trident missile system, because I could see that it would have grave and damaging effects on arms control negotiations. I was advocating in its place a minimum deterrent, which is all that Britain needs—a last resort system—that could be handled by submarine-launched cruise missiles. Not everyone agrees with that and I do not want to get into that dispute now. But it is interesting that they are now being fitted into United States submarines, and do provide an effective weapon system.

Mr. Roland Boyes (Houghton and Washington)

Does the right hon. Member agree that, except for telephone polls, the pollsters predicted the general election result fairly accurately? At the same time, if they were right on that, they were probably right on other questions. One of the questions they asked was whether the British people would agree to the installation and deployment of cruise missiles. Overwhelmingly, the pollsters found that the British people were against cruise missiles. Does the hon. Member agree— I am thinking of some of the points put forward by my Social Democratic opponents—that the Government have no mandate whatsoever to install cruise missiles in Britain this year?

Dr. Owen

Traditionally, we do not break up the issues upon which a Government fights an election. They are endorsed or rejected by the electorate across a broad spectrum of policy. Let us deal with the issue the hon. Gentleman mentions. It is broadly true to say that the opinion polls, which fluctuated on the topic of cruise missiles, have still had a fairly narrow majority of people against. The opinion polls are interesting in that they show that, were the Government to introduce a dual key for cruise missiles stationed in this country, public opinion would dramatically change. Instead of a narrow majority against, there would be a considerable majority ready to accept such a policy. This is another issue on which the Prime Minister must show breadth and vision. She must ask herself why it is that she would carry conviction with the people of this country if she were to have a dual key for cruise missies.

The answer is simple, and it was well understood by an earlier Conservative Prime Minister—Harold Macmillan —when he faced the same choice in relation to the only other comparable weapon system introduced into this country — the Thor missile. It is that the people of Britain would then know not just that there was, as I believe there is, a perfectly viable agreement between the United States President and the British Prime Minister but that there could be no accidental and irreversible launching of cruise missiles from this country's territory without the active involvement of RAF personnel.

I know that many Conservative Members want dual control. The Leader of the House knows it, too, but with the deftness to which we have become accustomed he avoided the moment of decision before the election. With great skill, he avoided a debate in which there would undoubtedly have been a motion on dual key because he feared that the Government might lose the Division. In those days, there were at least 35 Conservative rebels and, in their hearts, probably 150 to 200 more. I do not know what this new Parliament will do, but this issue goes wider than party politics. Would it not help the Prime Minister to know that she had more conviction with the people of this country? It is not enough to go on ranting about joint decision between herself and the United States President. That is not what we are worried about. We want to know the actual mechanism for launch and to be sure that it is controlled.

The greatest concern is about the initiative that needs to be taken on intermediate nuclear missiles in Europe. The United States is increasingly concentrating on the START talks. That is the greatest concern for United States Senators and Congressmen. This House should be concentrating on initiatives in the INF. As my right hon. Friend the Member for Glasgow, Hillhead (Mr. Jenkins) said yesterday, we are prepared to look seriously at the proposal put down by the two joint negotiators in Vienna. That proposal has not been decisively rejected, but it would mean a trade-off. It would mean that the United States would not deploy Pershing II missiles, which we know are feared by the Soviets because of the 12-minute maximum in-flight time from European bases to Soviet territory. It would mean the Soviet Union considerably restricting the number of SS20s targeted on western Europe. It would also mean—let us be clear about it—some deployment of cruise missiles, but it need not be a permanent deployment. It would be part of a first phase. Then, one hopes, negotiations would proceed to the complete eradication of cruise missiles.

I regret the rather strange assumption in the Queen's Speech that cruise missiles will be deployed regardless. The 1979 NATO decision was clear. We were to be ready to deploy—to mean it, and to spend money to be ready — but not to deploy unless we were convinced that no satisfactory negotiations were available from the Soviet Union. Neither the Social Democrats nor the Liberals can endorse an unconditional commitment in the Queen's Speech to cruise missiles. We want the negotiations to succeed, as still they may. I profoundly hope that they will, but we shall judge that decision in the light of factors such as the Soviet response, the attitude of our NATO partners, whether there is dual control, and many other aspects.

I want the United Kingdom to be ready to put down initiatives. We should urge the Soviets to dismantle their older SS4s and SS5s, perhaps under an initial two-year first phase agreement. We should urge them, too, to freeze SS20 deployment. The United States would temporarily forgo Pershing II deployment and limit the number of cruise missiles. Bombers would be limited to, say, 300 on each side.

We could then go on to a second stage in which both sides would cut warheads—currently about 11,000 on each side. At that stage we could ask the Soviets substantially to reduce the number of SS20s. We might abandon any plans to deploy Pershing II. At that stage, too, there would have to be agreement on how to handle the question of Chinese weapons, United States nuclear weapons in Asia and the French and British deterrents. Even the Prime Minister, as reported in Time magazine the other day, made it clear that there were conditions in which she would have to consider the number of warheads deployed by Britain if there were major deep cuts. I remind her that, if we reduced the number of warheads to 5,000 on each side, France and Britain would be providing 20 per cent. of them. It is inconceivable that we should not have to cut the number of our warheads in those circumstances.

If the Government's strategy is to have a minimum deterrent, the balance of Trident with current Soviet power is irrelevant. We need sufficient force to pose a credible threat in a situation in which we can no longer rely on NATO. It is strange that we have totally locked ourselves into a highly sophisticated system—the Trident system —which depends entirely on supply and service by the United States when the only time when we would want to use it would be when the United States was no longer linked into us. To many senior service men it is by no means as obvious as the Prime Minister and the Secretary of State for Defence sometimes imply that we should go for the Trident system. Indeed, it was admitted that the C4 system was quite sufficient and that we went for the D5 only because we were locked into American technology.

The Prime Minister owes it to the House to look constructively and creatively at the whole subject of arms control. Arms control is neither sin nor salvation. To hear the temporary Leader of the Opposition at times, one might think that it was salvation, and the Prime Minister sometimes makes it sound like a sin to endorse arms control, but in fact it is neither. It curbs the perilous competition between the United States and the Soviet Union. It does not end it, but it produces a more ordered relationship and it is essential for world peace.

The Prime Minister has taken less interest in arms control and disarmament than any of her predecessors since the war. As a precedent to emulate, she would do well to look no further than Harold Macmillan, who showed that it was possible to be solid in support of NATO and a friend of the United States and yet to take independent initiatives on behalf of Britain with our allies in this matter, to carry respect in the world and to influence the arms control debate. Too often Britain seems like a cypher of President Reagan. Too often, the British Government's position merely reflects the most hawkish statements in Washington. It is high time that we remembered that the power of the President is not like that of a Prime Minister with a massive majority in this House. He has to negotiate with Congress. He is already negotiating with it on arms control and disarmament, and there is a grave danger that we shall be left behind because even the current President may have to make changes in his arms control posture. I beg the Prime Minister—again on the principle that, whether we like it or not, we shall probably have her for four to five years—in the interests of this country to take a wider vision of her responsibility than she has in the past four years arid to reconsider her position on arms control and disarmament.

On these two central issues—the continued fatalistic acceptance of unemployment and the inability to sense the need to take arms control and disarmament seriously—we shall be constructive but virulent critics of the Government and the Prime Minister. For the rest, I simply urge the Chancellor of the Exchequer to make no hasty decisions and not to become a slave to the monetary aggregates, which would gravely damage the economy of this country. There is now the potential to achieve perhaps 3 per cent. growth. If inflation is held down, unemployment will then begin to fall. Anything less must mean that unemployment will continue to rise.

The Chancellor takes office at a very difficult time for the economy. He deserves good luck and good fortune, but many of us believe that he will not succeed if he blindly adheres to monetarist policies. Of course he must take account of these things — I do not ask him to ignore them—but he must now take account of the need to maximise the resources of this country and to put more and more of our people who want to work back to work.

5.19 pm
Mr. Francis Pym (Cambridgeshire, South-East)

For the first time in 21 years, apart from a few months in 1975, I speak in the House without either the responsibility or the opportunity of Government office or party position. Like everyone celebrating 21 years, I am thinking of the future and not the past.

During the past two or three weeks, as hon. Members may well imagine, I have persistently been asked to comment on my loss of office. I have resisted the temptation to do so until now because this House is the proper place to express such views. The press and television have a vital role to play in our national political debate, but the centre of that debate is here.

It was an honour to serve as Secretary of State for Foreign and Commonwealth Affairs. I had hoped for the opportunity to continue serving the country and the Government in that capacity. Indeed, I expected to do so, but instead I was abruptly dismissed. As some of my right hon. and hon. Friends and others know, that is an acutely hurtful experience. It is all the more so in the light of press speculation which, if not deliberately inspired, was remarkably well informed. In my case, it was as much the manner of the event as the event itself which bruised me. I say this to the House today so that my silence should not be mistaken for indifference. By expressing my feelings this once, there is no more to be said about it. I shall not allow what has happened to colour my approach to the future.

It is the future that matters. I should like to say three things today. The first concerns the interpretation to be placed on the general election. We now stand at the dawn of a new Parliament, which is the right moment to reflect on the meaning of the event that has returned us all here — before it is consigned to the recesses of our memories. It is extremely important at the outset of every Parliament to interpret very carefully the election that has brought it into being. The verdict of the British people is seldom as simple as the sheer numbering of the seats might suggest. That is especially true of this general election.

For the past 60 years two great political parties have held the stage of British politics. At this election, in different ways and to vastly differing extents, a warning has been served to each. There are some hon. Members, but more particularly people outside, who claim that the disastrous performance of the Labour party was due to a manifesto that was not advocated with sufficient vigour or sufficient unity by the party leadership, or even to a manifesto that was not Left-wing enough. If the Labour party listens to those people when deciding its future it will be listening to the same siren voices that have lured it on to the rocks of its present abject defeat. An objective person examining the results of the election must surely conclude that the country wants and needs as an alternative Government a moderate, left of centre party with a clear leadership and clear policies that belong to the future, not the past.

The electorate has made it abundantly plain that if the Labour party fails during this Parliament to become such a party again, it will turn elsewhere for that requirement. What is more, I profoundly believe that that change can occur — if that is what the electorate wants — without recourse to electoral reform. Our system has never yet failed to respond appropriately to the popular will and it will not fail to do so in the future.

I believe that a final warning has been served on the Labour party. It has been served by the massive defection of its own supporters and by the size of the Liberal-SDP vote. If that warning is not heeded, the next general election will indeed break the mould' of British politics. In the meantime, it is my hope — though, I confess, a forlorn one — that the three opposition parties will, between them, somehow provide the strong and measured opposition that every successful Government needs. A coherent voice of constructive criticism from Opposition Benches is a vital indeed, an integral — part of the effective working of this House. It would be some irony if the Prime Minister had to begin the next general election campaign by saying that she did not want a landslide.

The warning that the electorate has served to my party is of an utterly different scale and nature but it must still be understood and heeded. In the euphoria of victory, we should not forget that the Conservative party polled fewer votes than in 1979, despite the weakness of the main opposition and despite the political inheritance of the Falklands conflict. It would be churlish indeed not to acknowledge that the victor of the campaign has been the Prime Minister. It was a great victory for her. In that case, the warning is to her as well. I believe that the message of the people to the Prime Minister is this: "We admire your leadership, we admire your determination, we admire your sense of national pride. Will you now please prove to us that you really can use these formidable talents to serve all the people of this country—not only those who can stand on their own two feet but also those who cannot?"

That is why the challenge to the Government is the challenge to nurture and sustain the unity of our nation. The key to meeting that challenge is how the Government cope with what is by far the overwhelming problem on the nation's mind—unemployment.

Mr. Tam Dalyell (Linlithgow)


Hon. Members

Sit down.

Mr. Pym

The past four years have seen an enormous improvement in our economic competitiveness and the Government are entitled to take a lot of credit for that. And yet for every gain there is a price to be paid. In this case, the price has been the highest level of unemployment for 50 years. That is not the Government's fault. The Government have not caused unemployment, but part of the current level of unemployment is the price that the nation has paid for our greater economic competitiveness. The fact is that many people in Britain have made a sacrifice for a principle that they do not yet understand. The only way in which the principle will be understood and accepted is if we can now demonstrate to the nation that the sacrifice was not in vain.

I am inevitably reminded in this context of the Falklands war. In that instance, the principle for which we fought was understood throughout the nation and all round the world. On that point I am, I think, well qualified to speak. The sacrifice that was made then was not made in vain and the reward for it lay in victory.

The reward for economic sacrifice lies in victory of a different sort. It lies in the victory of hope over frustration. It lies in the prospect of a better life to come. It lies, ultimately, in the tangible fulfilment of that better life. The task of this Government is to give substance to that hope and to create the means for its fulfilment.

If we assert, as we justifiably do, that unemployment is not the Government's fault, we must, equally, acknowledge that neither is it the fault of the unemployed. We must understand their feeling of disillusion and be responsive to it. We must see to it that this country never has to make the choice between being divided but rich, or united but poor. It is our duty to ensure that such a choice never has to be made.

In saying that, I must make it clear that I do not call for a reversal of Goverment policy. I do not disown decisions made by the Government of which I was a member. I shall not attack colleagues with whom I worked closely for many years. I shall do nothing other than to help to make this Goverment's tenure of office highly successful. I ask for an imaginative long-term approach to the problem of unemployment, which should become the first priority of economic policy. I ask us all to face the fact that many of the jobs lost during the recession will never return. I ask us to be sensitive to the enormous social and human problems that are with us today. I ask us to acknowledge that the technological revolution on which we have embarked will call for completely new attitudes towards employment, and that finding the policies to meet them will be the great political and social challenge of the rest of this century.

I spoke about such matters two years ago, when some members of my party believed that I was wrong to do so. How shortsighted they were. This third industrial revolution will bring far-reaching changes and we should debate its implications much more deeply and widely. We must pursue sound economic policies, but we must also measure the commitment in the Gracious Speech to seek a further reduction in inflation against the cost of that in jobs. To have reduced inflation to 4 per cent. is one of the Government's major achievements, but a balance must be struck and the human aspect must be uppermost in our minds. We must concentrate on creating real and lasting jobs. That is the most important task of all, and that is why the Government are right to give all possible incentive and encouragement to the industrial, commercial and business world. That world is the source of all our wealth, as the Prime Minister said last Wednesday, but as the economic recovery will be slow and gradual, let us not become so doctrinal about real jobs that we pay no regard to work that people could usefully do in the meantime. I have always argued that there is good sense in constructive investment in capital projects, and I welcome the development of policy in that direction. It is right to mitigate the worst effects of unemployment with special employment schemes and training schemes, although I ask the Government to keep those schemes under careful scrutiny because they each have problems of their own.

However, even with all that, we still do not have the answer to unemployment. We must consider the possibility of, for example, job-sharing and more flexible retirement arrangements. I know that that is expensive and that it can be done only gradually, but so is it immensely expensive to have so many young people out of work. Again, a balance must be struck. We must re-examine our traditional attitudes towards work and employment. We are entering a new era in which new circumstances will require new thinking and a different outlook. At the same time as the Government are helping to stimulate recovery in industry we must address our minds to the implications of the post-industrial revolution — to the structural change in the scale of employment opportunity. Our traditional ideas about how men and women spend their lives must be revised and new concepts are required. We must ensure that the new prosperity to which we all look forward is a shared prosperity and that the work which creates it is also shared. I ask the Government to take the lead in addressing these great issues of our time.

The need to resolve those problems in a way that unites the country is one message of the election. However, there is also another message, which brings me to the last point that I wish to make today. It is the clear view of the overwhelming majority in this country that we need, as a nation, to be strong enough to defend ourselves. But there is equally no doubt that people are still deeply and understandably concerned by the present arms race. They wish to see a strategy based on the twin pillars of firmness and dialogue, and not one based on firmness alone. It seemed to me that over the years the dialogue had become a bit thin. I believed it important to start to talk more to the Soviet Union. I was doing that, and I hope that my right hon. and learned successor will continue the process.

We need to show the Russians that a more constructive relationship could be available. We need to put over to them our point of view and our aims and try to discern theirs. By talking we do not compromise or diminish our own ideals: indeed, we can make our position even more clear. And, even more important, we need to avoid the very real danger of misreading each other's intentions. None of these things is possible unless we talk to each other. I can see nothing to lose in closer contacts, and we stand to gain an understanding that can help all of us. It is something that we need to do, and something that the nation expects us to do.

Today there is a sea of new faces in this House, most of them on the Conservative Benches, many of them representing constituencies that have been Labour strongholds for generations. I have no doubt that they are all aware that they have been elected to think for and to fight for all the people in those constituencies. I ask them to remember the historical role of the Conservative party in this respect. At its best, the Conservative party has always been broad in its view, national in its interest, tolerant in its outlook, constructive in its debate, and unifying in its aim. This is the party that I have always served, and that I shall continue to serve in whatever capacity I can.

5.37 pm
Mr. Donald Stewart (Western Isles)

The right hon. Member for Cambridgeshire, South-East (Mr. Pym) made a revealing and powerful speech, and one regrets that it is his first speech from the Back Benches for 21 years. However, during the previous high offices that he has held, one was always certain that he was making a case, although we might have disagreed with it, that was rational and civilised. I especially support his latter point about an improvement in dialogue and progress towards arms control. The country is waiting for that, and the Government would be better served if the Prime Minister was less prone to saying amen to everything that emanates from President Reagan. If we showed a little independence from time to time, the British Government might carry more weight in the negotiations.

I shall discuss the Scottish aspect of the Gracious Speech, such as it is. There was only one sentence on rates, which is a United Kingdom matter, and on roads in Scotland. The Gracious Speech contained almost nothing for Scotland, as was the pattern of the previous two Gracious Speeches. That is not surprising, because the Government got little from Scotland in terms of seats, so their attitude is, "Why should we put anything back?" As long as the people of Scotland continue to vote on a British basis, they are liable, more often than not, to get an English Conservative Government. They are beginning to realise that and to reassess their position.

This debate is mainly about the economy and unemployment, and Scotland has borne the brunt of the economic failure and mismanagement over the past decade. The Chancellor concentrated on the Government's achievement in reducing the rate of inflation, but he spoke as if this had occurred in a vacuum. There was not a word about the other side of the balance sheet, which was the appalling cost in human suffering through unemployment that went along with the reduction in the rate of inflation. It is obligatory on this Government and this Parliament to reverse that trend. Reduced unemployment will be linked with policies that allow the Scottish economy to grow naturally. This can only be done in Scotland by a Scottish Parliament. That is the choice of the people of Scotland. The Prime Minister blames the high levels of unemployment on world recession, but countries such as Norway, Sweden and Austria have unemployment levels of under 4 per cent. That is the league in which an independent Scotland should be playing.

I have some sympathy for the Labour party in Scotland. It has been stranded high and dry by the collapse of the Labour party south of the Border. It will be difficult for it to break the British connection, which used to be its strength but is now its Achilles heel. Its choice is either to break that connection or to disappear into oblivion. Going it alone, as in the last Parliament, will no longer suffice for the Scottish people. The Liberal-SDP alliance had a good election in Scotland, but more Members here mean increased responsibility on it to press for a Scottish Parliament, as promised in its manifesto. It will be weighed in the balance on its response.

The Gracious Speech says about the Falklands: My Government will … discharge their obligations to the people of the Falkland Islands. Had the Government done their duty to the people of the Falkland Islands at an earlier stage, the war would have been unnecessary. They gave a signal to the Argentine Government that they had lost interest and everything developed from that. Now, enormous sums of money will be spent on the Falkland Islands. I have already spoken about the role of fortress Falklands into the future, and I shall not develop that further today. At the same time, the islands have gained far more than Scotland.

Northern Ireland has gained a form of devolved government that it does not want while Scotland, which is asking for devolved government, is refused it. That is another aspect of the negation of democracy in the House.

The Chancellor of the Exchequer said that oil is an important part of our economy, and that is so. Were it not for the oil from Scottish oilfields, the United Kingdom economy would have had to file its petition of bankruptcy. No other country would tolerate a situation in which, like Scotland, it had become the fifth largest oil producer in the world, with £1 million of revenue passing from Scotland to the Treasury every hour of every day, with so little to show for it. Scotland has become poorer and our economy has been ruined in the process.

As to the stimulation of the economy and the improvement of economic performance, all the old promises have been regurgitated —"increase economic prosperity", "promote growth in output", "reduce unemployment". Such promises are laughable because the Tories has been promising them since 1979 and none of them have materialised. The Chancellor of the Exchequer was at it again today, but there is still no evidence that the upturn is on the way.

Such failures are recognised in Scotland and this Government and their policies were rejected firmly by the Scots in the election, when 72 per cent of Scots rejected the Government. They cannot, under any system, claim to have any mandate to rule in Scotland. As outlined in the amendment tabled by my hon. Friend the Member for Dundee, East (Mr. Wilson), the Government should now concede that Scotland has rejected them, and refrain from enforcing legislation in Scotland without gaining the support of a majority of Scottish representatives. The constitutional crisis would be solved if the Government would concede that the Scots want self-government and have voted for it. The people of Scotland want not only self-government but a substantial form of self-government.

The Prime Minister said at the time of the referendum in Scotland: A 'No' vote will not kill devolution. She will have to redeem that promise, and if she does not the Scottish people will oblige her to do so. That is what the political argument in Scotland is about and that is the issue that has come to the fore.

5.45 pm
Mr. David Howell (Guildford)

As, in the lexicon of the right hon. Member for Down, South (Mr. Powell), I am neither a maiden nor a harridan—or not yet any rate, although perhaps that will come—it would be best if I took refuge in Mr. Speaker's injunction, given when he became elected. He made a strong case for brevity and asked Privy Councillors to set an example in brevity in the coming Parliament. I shall do my best to obey that injunction, which is a healthy and desirable one.

I shall steal just 30 seconds of extra time to speak about Mr. Speaker, although he is not in the Chair at the moment. He comes from my town of Guildford, and the people of Guildford draw enormous pleasure from his election as Speaker. I do not know whether my saying so will gain me any future indulgence from the Chair—I suspect that it will not—but it is true and I should like to put it on record.

I warmly congratulate my right hon. Friend, and also my friend of many years, the new Chancellor of the Exchequer on his appointment. I know of no man, inside the House or outside, who is better equipped to grapple with the complexities of the monetary system and financial markets—or with the mumbo-jumbo of some financial analysts—and nobody who is in a better position to recognise the important truth that monetary economics is an art and not a science. It is an important art, but it does not lend itself to the scientific precision and formulae that some believe it should.

The Chancellor has been and will be pressed—we have heard a little of this already today — from the moment of his assuming office and making his first speech in the House, to do something more on the vital and central matter of jobs and to come up with some new solutions and methods to meet the understandable demands from all sides that the appalling level of unemployment be reduced. However, the worst job destroyer is inflation. Right hon. and hon. Members on both sides of the House have said that repeatedly, and they know it to be the case. We have to look not into a crystal ball to prove it, but merely at the record of the past and see that, when a nation such as ours has had a relatively higher level of inflation, that is the most certain destroyer of markets, rubbing out jobs, firms, companies and enterprises, yet devised by man.

The Chancellor's contribution to the preservation and creation of new jobs is one upon which he rightly laid emphasis. He has to maintain the battle against inflation and keep inflation down, because that is the arch job destroyer. He is right to put that first. He is right also to say that that is a necessary but not sufficient answer to the search for job opportunities in the future. If he succeeds in his battle against inflation, and I think that he will, that will be a necessary condition for job creation in the future, but it will not be sufficient.

The reality that we have now to begin to face in this coming Parliament is that the unemployment suffered by millions of people in Britain, the threat of unemployment, and the danger that our school leavers will not get jobs, lie beyond the reach of macroeconomics and broad economic strategy, whether of the Keynesian or the monetarist variety. I was interested to see in The Economist two weeks ago that Sir John Hicks, who is certainly no monetarist economist, recognised that, and said that in many senses it could be argued that we have even now, with the appalling levels of unemployment that we suffer, what could nevertheless be called Keynesian full employment; in other words, there is no scope, through generalised talk of inflation, for eating into the unemployment problem or for overcoming the grave difficulties involved. I believe that that is right and that the Chancellor of the Exchequer was right to imply that if we are to go—and, of course, we must—for a high and stable level of employment, which was the objective set in the 1944 White Paper and the objective to which we must return, it must be by changes in the economic structure and by removing—in the rather grim jargon of the economists — the rigidities, in opening up the markets of Britain, and in loosening up the economy generally. That is how the changes must be made. It is in that area, rather than in the general area of economic policy. that we must now press forward faster than ever.

Mr. Jack Straw (Blackburn)


Mr. Howell

If I give way to the hon. Gentleman I shall not be able to obey the Speaker's injunction to be brief, and there are many other hon. Members who wish to participate in the debate.

I think that we are right to continue on the path that we have sought, in the context that I have mentioned, in wishing to break up the great monopolies that have ossified our economy and prevented the emergence of a vast range of new opportunities and new enterprises. That applies particularly to the nationalised monopolies, and there is much further progress to be made in that respect.

When I read in The Guardian, of all newspapers, yesterday an editorial advocating that the ownership of the coal industry should now be removed from the state, I really began to think that we were making progress, not just in the actual grind of privatisation and broadening out the ownership of those traditionally Morrisonian state industries, but beginning to win the intellectual battle, even possibly with Labour Members, to get those industries away from state ownership and open them up with opportunities for private enterprise and private capital.

We also have to do much more than we have so far to encourage small enterprise. The atmosphere has improved for some of them but for many it has not improved at all. There has been a major improvement in understanding in the last four years that small business is not just a side show, but the cutting edge of industrial advance I think that people now realise how vital it is to ensure that we create a policy environment in which small business can prosper. That is relevant not merely in industry and commerce but in agriculture. I am far from happy about the adequacy of opportunities that have been available for the smaller farmer, particularly the livestock fanner.

When the right hon. Member for Glasgow, Hillhead (Mr. Jenkins) was talking yesterday about the common agricultural policy and saying, I think rightly, that on present trends that policy is heading for explosion, he went on to argue—and I believe that it is right—that we shall have to begin to think about developing national support systems for our agriculture. I hope that in our case our national support system will be one that gives the greater benefit to the smaller end of agriculture, just as I hope to see our policies give greater benefit to the smaller end of commerce and industry. That is another area in which, if we are looking for job creation and a positive job creating machine, we should be applying our minds and developing our polices.

As I have said, unemployment is beyond the reach of generalised economic, monetarist or Keynesian policy making. I believe that that has been understood by the Chancellor of the Exchequer. It has also been understood by some Labour Members but not by all, because we still hear the cry, "Please could we go back to a policy of reflation and higher public spending?", which would lead to a still greater loss of jobs than in the past.

Nevertheless, I have two suggestions to make to my right hon. Friends. My first suggestion may sound presentational, but it may help us to open out in the future some prospects for economic development and job creation which we have not perhaps exploited in the past as much as we should. I hope that in the next Budget., and in the public expenditure figures for 1984, we shat put our public expenditure White Paper documents into two separate series, one covering our current spending and one covering our capital investment.

I do not believe that the Chancellor has any room to expand the amount of Government borrowing. I believe that he is right, on the contrary, to go for a smaller level of Government borrowing. But I believe that, if the picture were to be set out in the way that I have suggested, there would be a beneficial effect on funding. It would be understood that some borrowing is for vital basic investment in our infrastructure whereas other borrowing is for current expenditure and current outgoings, which are still running at a formidably high level in many cases too high. It is a presentational move but a first move that I urge on the Government to enable them to fund a given level of borrowing possibly more successfully, because it would be more widely understood that a large proportion of that funding was going into basic Government capital investment, which is a vital concomitant of investment in the rest of the economy and of economic recovery.

My second point concerns unemployment, on which I have some recent fresh experience, having received my P45 in the postbox this morning. I plead with the House that we should try to get away from dealing with the concept of unemployment as a global idea, as a piece of rhetoric on its own, as an item to be railed against or apologised for or regretted, so that we wring our hands over it and then pass on to further parts of the debate. If we begin to look at the component parts of our unemployment problem, I believe that we shall begin to see some of the solutions and some of the possibilities opening up which have not been sensibly discussed in the House in the past.

In the last Parliament, my right hon. Friend the Member for Barkston Ash (Mr. Alison), who was an exceptionally effective and sensitive Minister of State at the Department of Employment—he has since been transferred to other duties—made several speeches, both inside and outside the House, in trying to draw the attention of hon. Members and other people to the different component parts of the global unemployment figure. He explained that it was among the under-25s and the unskilled and semi-skilled that the real burden, the real difficulty and the real horror of long-term unemployment lay. If this House can focus on that component part of unemployment and see the policies required to begin to ameliorate it, we shall be making a great advance in our understanding of how to deal with the unemployment problem.

As my right hon. Friend the Member for Cambridgeshire, South-East (Mr. Pym), the former Foreign Secretary, rightly said in his very impressive speech a few minutes ago, in the hearing of the whole House, the very nature of work is changing. The whole pattern of work is changing at a speed and in a way that is probably comparable with the way in which the nature and pattern of work changed between the middle of the 18th century and the middle of the 19th century. That is the size of the revolution through which we are going. If the pattern of work is changing and if the work needs of the future are changing, it is vital for us to look at our present unemployment in its different component parts.

I should like to see the Government begin to move—perhaps quite quickly — towards a White Paper that would be comparable in its importance with the full employment White Paper in 1944, and setting out an understanding, which so far is lacking, of the new nature of the unemployment problem, of the new nature and pattern of employment and where the jobs are to come from, and showing how policies should be shaped in the coming years to meet those points.

Mr. Straw

The right hon. Gentleman has referred twice to the 1944 White Paper and its commitment to full employment. I understood that that commitment, which was accepted by all previous Governments in the post-war period, had been repudiated by the present Government. Does he believe that the Government should subscribe to that commitment to full employment in today's society?

Mr. Howell

The hon. Gentleman is not quite right about the commitment in the White Paper. If he reads it, he will see that it commits the Government to a high and stable level of employment, not full employment in the sense in which it came to be translated in the 1950s and 1960s. It recognises that that has to be achieved, not necessarily exclusively, or even mainly by Keynesian measures of reflation and manoeuvring the aggregates, whether by monetary or other means, but by changes in the processes by which work and workers could come together. It recommends various social and housing changes to enable the labour market to work. Subsequently, of course, in many of those areas the labour market was not allowed to work, not least because of the imposition of restrictive practices, and, I am afraid, legislation passed by the hon. Gentleman's party, which had the effect of deliberately and systematically undermining work opportunities. All that has had to be reversed, and that reversing trend must continue.

I have already spoken for longer than I said I would when I spoke of brevity. I have put to the House only some preliminary thoughts on a matter to which we shall return again and again. I had an opportunity, which I greatly appreciate and treasure, during the past four years to help to lay the foundations of what I believe will be a secure and prosperous nation with a high and stable level of employment so that the millions of people within it can live a satisfactory and fully occupied life. I am deeply grateful for that opportunity. In Government I have tried to make progress on capital spending and the nation's infrastructure, which I believe are of vital importance. Much more remains to be said on these matters, but if we can say it in the way and context that I have described we should begin to persuade people outside that we are addressing the issues seriously and in a way that we have perhaps not always done in the past.

6.1 pm

Mr. Michael Meacher (Oldham, West)

Listening to the Queen's Speech produced for me irresistible echoes of that famous report from the war front, "Situation unchanged, only worse." How the Chancellor of the Exchequer managed to conjure up out of it the fantasies that he produced today of an accelerating recovery is beyond my imagination, when the facts show that almost all of the small recovery in output that there has been over the past two years comes from North Sea oil. In fact, only about 0.25 per cent. comes from an improvement in actual manufacturing output outside the North Sea. I suggest that to call that a recovery is to divest the English language of any real meaning.

There is almost nothing new in the Queen's Speech. Nevertheless, the central point of Thatcherism is that the key dilemma of post-war British economic policy—how to bring about sustainable economic growth so as to begin to reduce unemployment without a surge of inflation—has patently still not been solved. Otherwise one might ask why the NEDC report just before the election, in one of its most dismal forecasts ever, predicted that there would be no new jobs under current policies until at least 1990. Moreover, why did Sir Campbell Fraser, who as president of the CBI is perhaps an independent witness, say that the paper was so gloomy that it should not be published because anyone reading it would want to take the first boat out of the country? Perhaps even more significantly, if a recovery were really brewing, as the Chancellor of the Exchequer sought to make out by talking it up today, why is manufacturing investment — perhaps the best mirror that we have of the future—still stuck at 36 per cent. down on its mid-1979 level, and why did it fall by a further 41/2 per cent. to 5 per cent. in the first quarter of this year?

If the recovery that the Chancellor of the Exchequer wants were to occur, what would then happen to inflation, which is perhaps the one jewel left in the Prime Minister's otherwise distinctly tatty economic crown? How then would she hold down inflation when she has managed to do so up to now simply by terrorising people by high unemployent? What if that ugly threat were removed, and unemployment began to come down—where, then, her claim to have somehow exorcised inflation out of the body economic once and for all?

As a huge rise in the money supply has been followed — contrary to all the economic theory—by a continuing fall in inflation during the past few months, any simpleminded claims that inflation in that situation could be held down by monetarist controls, as opposed to outright old-fashioned deflation, have been blown clean out of the water. Or are we supposed to have confidence that the institutionalised trench warfare that passes for industrial relations in this country has undergone a sea change for the better as the Government are always telling us, and that attitudes in industry are now somehow fundamentally different?

Let us consider what happened at Cowley. At the very first whiff of an upturn, disruption returned immediately and wholly predictably because, as David Buckley, the Oxford Transport and General Workers Union secretary put it, "The men are being treated like animals." We know that the Prime Minister calls it the resolute approach, but it is the politics of fear and intimidation, and it has not worked. Nevertheless, I have no doubt that it is the Prime Minister's distinctive brand of politics, and I am quite sure that we shall see a great deal more of it.

The Queen's Speech is a mixture of the boring and the vindictive. It has precious little new in it—certainly no new vision — yet it is full of menace. The Prime Minister's pet hate, the trade unions, are threatened with the curbing of their legal immunities, while the metropolitan county councils and the GLC have been told that if they do not comply they will be abolished. The Prime Minister is always talking about freedom, but all the time she uses state power to extinguish individual freedoms.

The Police and Criminal Evidence Bill is to be reintroduced, bringing back the indiscriminate stop and search in the streets of the old sus law, legalising detention without charge for up to four days, preventing access to a solicitor for up to two days, and legitimising the repulsiveness—if I may put it that way—of intimate body searches.

Even before this election and their huge majority, this Thatcherite Government were quite prepared to use their financial muscle and power over resources to lean on those whom they did not like. That is always the way the bully behaves. They tried to pressurise the citizens advice bureaux by withholding part of their grant. They contemplated trying to reduce civil liberties by making people pay for their own policing. They have used the new National Health Service immigration checks to deter applications for medical aid by putting at risk the applicants' residential status.

Now, even so soon after the election, we are already seeing the arrogance of the Prime Minister, fortified by her huge majority. She does not take long to get to the miners. They are threatened with the axing of 65,000 jobs. The Health Service workers are threatened with privatisation, to teach them a lesson. The Think Tank has been abolished — presumably because of its leaking, which in my opinion is a euphemism for telling people what is really going on in Whitehall under this Administration. Even in this place, not only have the wets been moved or sacked, but the Chairman of the Treasury and Civil Service Select Committee—a very good chairman, if l may say so—is now being victimised because of his Committee's recent report which disclosed the secret of the last election, that up to, or more than, half the rise in unemployment is due to the Government's monetarist policies.

The Queen's Speech deepens still further the rapidly sharpening class divide that I believe is already deforming the face of the nation. Just before the election was called, on a day when the Stock Exchange burst through the 700 FT industrial ordinary share index barrier, the number of people living in poverty, depending on supplementary benefits, had just soared to 7 million. That is an increase of 60 per cent. in four years and is in addition to the 7 million people who are earning less than two-thirds of national average earnings and, by any standards, are low paid.

Huge tax handouts have been showered on the already rich, while everyone with incomes below the magical level of £30,000 a year has been forced to pay more tax. Those at the bottom of the pile have had their unemployment benefit cut and taxed and now their earnings-related supplement has been abolished. That is gratuitously nasty. Those people have lost their jobs through no fault of their own and they find that their standard of living has been cut by nearly half.

Perhaps the poor do not yet have to grovel for their benefits, but the concept of insurance entitlement in adversity has been destroyed by the Government, even for those who have contributed through payment of their own taxes. They paid towards that entitlement, but they still find it taken away from them.

Unemployment has increased for all groups. Some might say that it was the only growth industry in this country. According to the EC labour force survey, unemployment among the professional classes is only 3 per cent. in this country, but the level is 18 per cent. among unskilled manual workers. Perhaps inequality, even in misery, is the hallmark of Thatcherite Britain.

Welfare, too, has been polarised between rich and poor. Subsidies through mortgage relief to owner-occupiers has risen considerably per household during the past four years and, as a result of a measure included in the Queen's Speech, will rise again. I have no objection to that, but I do object to the fact that subsidies to poorer council tenants have plummeted from £275 per household to £63 in the past four years. Tenants have not so much been allowed to buy their council houses as virtually forced to buy them to escape soaring rents.

That sort of society is, by any standard, deeply divided and unattractive, and the Queen's Speech will take that unattractive prospect further. Under Thatcherism rampant it will be a mean-minded, callous, get-rich-quick, devil-take-the-hindmost, Robin-Hood-in-reverse society. As the Prime Minister has said, it represents a return to Victorian values, with all the cloying hypocrisy and uncomprehending class antagonisms in which poverty is dimissed as the victim's own fault and women are forced back into a subordinate status and relegated back into the home as a result of the admonishments of the Cabinet's family policy group.

It is an alienating prospect which, as my right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) wisely said, will steadily repel the British people as they recover from their post-Falklands numbness. I do not believe that that day will be long in coming.

6.13 pm
Mr. Tom Sackville (Bolton, West)

I am grateful for being allowed to make my maiden speech in a debate in which so many right hon. and hon. Members wish to speak.

I begin by giving a geo-electoral description of the constituency that I am proud to represent. Like many new constituencies, it is not quite what it appears. Only 48 per cent. of it comes from the old Bolton, West constituency, and the remainder comes from the old Westhoughton constituency.

I pay tribute to Mrs. Ann Taylor, the former hon. Member for Bolton, West, and to the hon. Member for Wigan (Mr. Stott), who previously represented Westhoughton, for their work in previous Parliaments. My impression is that they were hard-working, conscientious and popular Members, and it will be a privilege for me to try to carry on their work for all my constituents.

I hope that the three hon. Members for Bolton will work as a team to get a better deal for Bolton. As might be expected, I am already working closely with my hon. Friend the Member for Bolton, North-East (Mr. Thurnham), and I hope to develop a similar working relationship with the hon. Member for Bolton, South-East (Mr. Young). We started on a good footing last weekend, when I assisted him in judging a beauty contest to find the Westhoughton carnival queen. His evident long experience in matters pulchritudinal was an inspiration to the judging panel.

The people of Bolton are rightly known for their humour, optimism and industriousness. A few weeks ago, I visited a jam factory and was told by the manager that 80 per cent. of production goes for export. When I asked whether that meant that he sold into that great tariff-free market, the European Community, he replied. "No—Yorkshire."

The people of Bolton are equally well known for their innovation and enterprise, as the names Whittle, the inventor of the jet engine, and Crompton, the inventor of the spinning mule, bear witness. That spirit of enterprise enabled Bolton to weather the storm of the decline of the textile industry during the 1950s, 1960s and 1970s. Unfortunately, unemployment has shot up by 11 percentage points, to 16 per cent., in the past 18 months.

However, despite that and the fact that Bolton is sandwiched to the east and west by the development areas of Rochdale and Wigan and to the north and south by enterprise zones, the people of Bolton, particularly those involved in these matters, are aware of the limited possibility of job creation by conventional Government aid schemes, welcome though they are.

We in Bolton expect help from the Government in cases where they can have a direct effect on jobs—where they are the customer for local products and services. I take the case of British Aerospace. Some hon. Members may know that the RAF has a requirement for an anti-radar missile, which takes out enemy anti-aircraft systems by homing in on a radar beam.

British Aerospace Dynamics, which employs 3,500 people in my constituency, has done the high-level research and development on such a weapon, but there is a rival American weapons system, and a decision on the purchase of equipment has been repeatedly delayed over the past few months.

If the American system is chosen, there will be at least 1,000 redundancies at the British Aerospace works, much advanced technology will be lost and never recovered and up to perhaps £500 million in export sales will be lost. The American system would not produce advantages for us, though there would be short-term employment through offset arrangements.

I appreciate that only the Ministers and officials responsible for the decision have the full facts before them when assessing the qualities of the two systems. However, British Aerospace Dynamics, formerly Hawker-Siddeley, has been in Bolton since 1937 and is undoubtedly the flagship of the local engineering scene. It employs 3,500 people and 400 apprentices. Over the past 30 years it has sent thousands of apprentices out into the wider world of industry. It is a model employer which I do not want to see damaged.

The ALARM system, as the British Aerospace weapon is called, was a dominant issue in Bolton, West during the election campaign. The livelihood of about 2,000 families depends on that firm's success. The delays and press speculation have been a black cloud hovering over those people's livelihood. If there were a genuine technical or cost reason why the American system had to be chosen —to put it in other words, if the British system were no good — I think that people locally would accept that. However, if we are to believe the press, the main objection to the selection of the British system has been the result of pressure from our American friends to buy their system, perhaps using it as a lever for larger exports of British equipment to America in future. That is unacceptable. I am sure that with all the facts in front of them Ministers will, as always, come to the appropriate decision and I ask them to do so as soon as possible.

6.21 pm
Mr. Bryan Gould (Dagenham)

I congratulate the hon. Member for Bolton, West (Mr. Sackville) on his maiden speech. We look forward to hearing him in equally good form on future occasions and we wish him an enjoyable, if not necessarily long, period of service in the House.

Maidenhood is something that once lost cannot be regained but it is a particular pleasure for me to return to the House and to begin my first speech as the hon. Member for Dagenham by paying tribute to my predecessor. John Parker was the Father of the House in the last Parliament. For nearly 48 years he served both the House and the people of Dagenham faithfully and well. I fear that I have little chance of matching his record of long service, but I hope to cram into a shorter period the same quality of service that he was able to offer.

I am also pleased and proud to be here representing Dagenham. Dagenham is known to several hon. Members for a range of things. I was privileged to attend a recent performance by the Dagenham girl pipers. However, for most people Dagenham is synonymous with Ford. Many in Dagenham say that that ought not be the case and that there are many other employers in Dagenham of great importance. However, the link between Ford and Dagenham serves to emphasise the extent to which Dagenham's economy and prosperity rests on manufacturing industry.

My constituents have suffered with the rest of Britain from the calamity that has befallen manufacturing industry over the past four years. Sadly, we are now familiar with that litany of facts and figures which charts the decline and disaster. I want to repeat some of the cardinal points so that their awful significance does not slip by too easily. Manufacturing industry has lost one fifth of its capacity in the past four years. One fifth of British industry has simply been obliterated. Two thirds of the 2 million jobs lost have been in manufacturing industry. They have been lost not because of new technology but because factories have closed down. The remaining 80 per cent. of industry has suffered a loss of competitiveness in relation to its major rivals of up to 25 per cent.

I listened with great sympathy to the speech of the former Foreign Secretary, the right hon. Member for Cambridgeshire, South-East (Mr. Pym). However, he made the mistake of giving further currency, I am sure unintentionally, to the myth that all the sacrifices have been worthwhile because our competitiveness has improved. Time and again one hears Ministers emphasising that point, yet from all the available indices it can be seen that our competitiveness has declined sharply. Little wonder that we cannot sell anything and that our factories are closing down.

For the first time in our industrial history we import more manufactured goods than we export and that imbalance is rising at an alarming rate. The car industry is no exception. It has lost one third of its capacity in the past four years. Ford, which used to be proud of its record as a major exporter, now imports one of every two of its cars sold in Britain from a Ford plant abroad. That is a measure of the decline in the car industry and is an illustration of what has happened to manufacturing industry generally.

There is no mystery about why that has happened. The Government tend to spread their hands wide and say that it is inevitable, that it is the result of the recession or an act of God. Whenever present Government policies have been pursued in the past they have led inexorably to the same results. It happened in the 1920s and 1930s and, going further back, it happened in the in-mediate aftermath of the Napoleonic wars and led to the massacres of Peterloo. It was eminently predictable that output would suffer and unemployment rise as a result of squeezing the economy so tight that nothing moved. Not only was it predictable, but it was predicted. I make the modest claim that I was one of those who predicted precisely those consequences in 1977 and 1978. Therefore, I shall listen to no argument about there being no cause and effect relationship between Government policies and the present perilous state of British industry.

At least we have a glimmer of hope in the arrival of a new Chancellor of the Exchequer. He has some claim to be an economist, unlike his predecessor who simply read the briefs. But there are dark rumours that the present Chancellor was the man who wrote those briefs. I fear that the words of inflexibility and rigidity that he uttered in his speech this afternoon sound the death knell for the hopes of new jobs and new industry for Britain's unemployed. Even so, I beg him to reconsider his predecessor's policies in terms of the real economy. I beg hire not to be put in a straitjacket by a monetary measure of dubious accuracy and significance. I beg him not to follow the Americans in pushing up interest rates. I beg him to cut free the pound sterling from its parity rate with the dollar and to let it fall to a more competitive level. Of course the dollar rate is not the only one that matters; it is simply the one most often quoted. We have suffered from an appreciation against European currencies, particularly the deut- schmark. How can Ministers call for a 2 per cent. pay norm when, since March alone, the pound has appreciated by 10 per cent. against the mark, putting up all costs, not just labour costs, throughout industry?

Those may seem esoteric questions but they are not. They matter to my constituents, not only to those 11 per cent. who are unemployed but to those who are working in manufacturing industry and who see the writing on the wall—their jobs threatened. They matter to all of us. It is a myth, assiduously propagated by the Conservative party, that unemployment is the concern only of those who have lost their jobs. Unemployment impoverishes us all. It makes us a poorer country. We have poorer social services, roads, sewers and all the things that a civilised society should have. We have allowed unemployment to rise and we have too easily accepted the fatalistic nonsense peddled by Conservative Ministers. There is no necessity or inevitability about the evil of unemployment. What is odd and aberrant is the acceptance during the past four or five years that little can be done about it. However, for 40 or 50 years prior to that we knew what could be done about it, and we did it. The Chancellor of the Exchequer asks what guarantee there is that growth can be brought about and sustained, but the guarantee lies in our recent history. We had 40 years of a prosperity that the present Government hardly even dream of.

I am not the only one to make such points. I was delighted that during the election campaign the Treasury and Civil Service Committee brought out its report. I was particularly pleased that it took very much my view about the role that the monetarist ratchet of tight money, high interest rates and an over-valued exchange rate had played in bringing about unemployment. I do not flatter myself that my evidence to the Committee persuaded it. It is more likely that it was persuaded by the virtual unanimity of all the witnesses from the academic and industrial world. They all said much the same thing.

I was particularly interested to find that the Ford Motor Company, in addressing itself to such questions, had expressed a view that was remarkably similar to that argued from these Benches. In the evidence that it submitted it began by pointing out that the effect of an exchange rate misalignment on manufacturing industry could be devastating.

The company was asked whether the exchange rate was misaligned. It gave a common sense answer that I entirely agree with: Sterling is over-valued because British manufacturing industry is shedding labour and the prospects for that labour being re-employed are at best unclear. The Ford Motor Company — not me — said that. The consequences of an over-valued exchange rate for the following three aspects of the company's operations were then considered: the company's future capital investment plans, its policy of sourcing the British market from various plants round the world, and its policy on purchasing components. In each case it concluded that the present exchange rate made it impossible for it to take action to benefit the British economy. Indeed, the company went further and stated that if the exchange rate remained out of line for more than six months—we are now talking about a four-year period—there would be a substantial misalignment, which would mean a marked rundown in British manufacturing industry over the next ten years. That testimony simply cannot be dismissed. It is the evidence of a major multinational manufacturing company, whose political preferences almost certainly do not lie with this side of the House. Nevertheless, the company makes it clear that with unchanged policies, the prospect for our economy is dire. We ignore that evidence and testimony at our peril. It is no good the Government saying that it is nothing to do with them, and that it is a free market. An over-valued exchange rate is the deliberate, automatic and inevitable consequence of the extreme monetarist policies that the Government have pursued. It is the product of a ratchet that tightens the money supply, forces up interest rates and inevitably pushes up the value of the pound.

Unless there is some change in policy, the future viability of the Ford plant at Dagenham will be at risk. Another four years of what the Chancellor of the Exchequer claims as success will leave a major question mark over all of those jobs in my constituency. However, that would not be the only significant result. If the Ford Motor Company were compelled substantially to restrict, or even to close, one of its major manufacturing plants in this country the knock-on effects, and its significance for the rest of the economy could be imagined only too well. I give this pledge: I shall do all I can both in the House and outside to ensure that that does not happen.

6.33 pm
Mr. Maurice Macmillan (Surrey, South-West)

I can, I think, welcome the hon. Member for Dagenham (Mr. Gould) back to the House, especially as he has replaced another Labour Member. I have some sympathy with him, having been in his position myself. However, I am sure that he will understand that I give a much warmer welcome to the maiden speech of my hon. Friend the Member for Bolton, West (Mr. Sackville). He spoke both forcefully and vigorously on behalf of his constituency. But perhaps I should give him one word of warning. Ministers and their officials may or may not be the best informed people, but he should not underrate his own sources of information or his own judgment vis-a-vis that of Ministers. However, we look forward to hearing from him again.

I wish to be brief and to refer only to the overseas aspects of economic policy and of the Gracious Speech. In doing so, I must take up a point made by the hon. Member for Dagenham who referred to 40 years of prosperity, which had ended fairly recently. However, he has not made a good comparison. We were then wholly dependent on the captive market of the Empire and Commonwealth, and on its extension, the overseas sterling area. In the past, we seldom exported our goods successfully other than to economies or enterprises for which we had provided the capital, and which we controlled. Perhaps our current rate of overseas investment will bring us again slightly nearer to that position.

I shall discuss the overseas side of Government policy, because the dilemma posed in this debate can be resolved only in the context of the economic policies of the developed and industrialised countries of the world-in fact, broadly speaking, of the OECD. The sustained rate of growth and the low rate of inflation we require must be sustained throughout those countries if there is to be any possibility of recreating jobs and of dealing with unemployment—a problem close to the hearts of all who have spoken.

There is an inherent contradiction in the Gracious Speech if it is considered solely in the context of the United Kingdom's economy. For example, it states that the Government will continue to maintain firm control of public expenditure and a responsible financial strategy based upon sound money and lower public borrowing. That is fine, but it would be better still if the Government and the Treasury one day learnt to distinguish between borrowing for capital development and expenditure, and borrowing for current expenditure. If a private business does not learn that lesson it goes bankrupt, and if the Treasury refuses to learn it its economic decisions will be distorted.

That line of policy is, of course, sound, but things can go wrong in the world. For example, it is quite possible that countries such as Japan and Germany could see an even lower rate of growth than at present and that their very low inflation rates might move to the negative and become deflationary. It is possible that nothing can be done to prevent interest rates in the United States of America from increasing. It would be difficult to stop that affecting our own policies especially if the dollar remains strong.

The signs of economic recovery that are being seen throughout the industrialised world may fall away. If such things happen, too rigid an adherence to such aspects of policy as the control of public spending, lower public borrowing and strict monetarism could lead to the danger of deflation, and depression in the old sense of the word.

The other side of the coin in the Gracious Speech can be seen in the desire to increase economic prosperity and reduce unemployment. That, too, is fine, but there is a danger that it may lead us, particularly in difficult times, to measures that are likely, in themselves, to increase inflation. There is a danger of protection and of in effect paying our overseas customers to buy British, by lending them the money which they will never repay, and by giving undue inducements to overseas firms to invest in Britain and so to create more work here. There is even a temptation to keep interest rates low by allowing inflation to rise.

In other words, there is the danger that if we try to create work and deal with the unemployment problem in the wrong way, we shall go back to the old level of inflation, of between 5 and 10 per cent., with no growth or very limited growth. That is why I was pleased to see in the Gracious Speech the statement that the Government intend to seek a further reduction in the rate of inflation. That is essential if a 3 per cent. growth rate, which is what we need, is to be attained.

World pressures could lead to depression on the one hand and stagflation on the other. That is why they must not be ignored in our economic strategy. We must establish in the industrialised free world a more stable system and a more coherent method of dealing with the world economy. That is why I was glad to see in the Gracious Speech that the Government will work in close co-operation with governments of other countries and with international institutions to promote international recovery on a non-inflationary basis. That sounds splendid, but deeds are harder to achieve than words. It means, if it means anything, that a concerted and continuing effort must be made to keep down international interest rates, to achieve greater stability in exchange rates — many hon. Members have referred to yo-yoing exchange rates causing difficulties for exporters—to maintain consistent measures against protectionism by way of tariffs or non-tariff barriers, and to promote much more co-operation to achieve consistency in planning for the longer term.

Those aims will not be achieved by themselves or because it has been agreed at Williamsburg or elsewhere that a certain line is the right one to take. We need a greater effort, and I hope that it will come primarily from Her Majesty's Government.

To give us greater standing and enable us to lead in the EC and in the wider context, our first action should be to join the EMS. The experts say that this is the wrong time to do that. It is always the wrong time; the pound is either too high or too low. The pound is today at about its value of four years ago. It is arguable that had we been in the system, the pound would not have suffered the fluctuations we have experienced during those years.

It is hardly an exaggeration to say that the success of the Conservative Government on the economic side and their continued success in reconciling the pressures that could lead to one extreme or the other, including following policies leading to higher unemployment with continuing low inflation, depend on turning the words used at Williamsburg into action. That should be one of their first priorities.

6.44 pm
Ms. Clare Short (Birmingham, Ladywood)

I am grateful for this chance to make my first speech, as I prefer to call it, in this House. I intend to follow tradition and speak about my constituency. However, it is impossible for me to follow the tradition of not being controversial, for what is happening in my constituency encapsulates much of the harm done to many parts of the country by the policies of the Conservative Government.

I wish first to pay tribute to my predecessor, Sheila Wright, who was the hon. Member for Birmingham, Handsworth in the last Parliament. I am the Member for Ladywood and a large part of Handsworth has come into my constituency. Sheila Wright worked with me when I was a candidate and she was a Member of Parliament. For a long time she supported and helped me in my work. She is a friend of many years. She worked for the people of Handsworth for five years as a Member of Parliament and, before that, for 25 years as a councillor. The best tribute I can pay to her is the one that was paid during the election campaign by many people in the area who spoke warmly of her, sent their regards to her and remembered all the help she had given to them and their families.

It is a great honour for me to represent Ladywood in this House. It is an honour for all of us to represent our constituencies, but in my case there is an added honour in that I come from Ladywood. I was born there, grew up there, have many friends there and many members of my family live there. Therefore I care about my constituency with the intensity with which people care about the place from which they come. I make the pledge to my constituents that I shall work with all my ability and energy to represent and fight for their interests for as long as I am here.

The people of Ladywood are suffering terribly from the Government's policies. According to the census of April 1981, Ladywood has the sixteenth worst unemployment in the British Isles. The male rate of unemployment then was 25 per cent. Unemployment in the country has doubled since then, and the male unemployment rate in my constituency is now 50 per cent. For school leavers it is 95 per cent. People say cynically that it cannot get much worse than being nearly 100 per cent. It can, because the period of unemployment is getting longer all the time; young people leave school and go on a YOP scheme—now being replaced by the youth training scheme, which will be no better, and in many ways will be worse, than the scheme it is replacing—and are then unemployed for ever-lengthening periods.

In Britain as a whole, two out of every three school leavers are unemployed, as are one in four of all under-20s and one in six under-25s. A whole generation is being blighted. Of the total unemployed, more than 1 million have been unemployed for one year or more and more than 500,000 for two years or more. They are living in grinding poverty, and the hopelessness they feel about their future is destructive and intolerable.

Long-term unemployment is growing faster for young people than for any other group. Of the 1 million who have been out of work for one year or more, 250,000 are under 25, and they comprise the group for whom long-term unemployment is growing fastest. That is damaging to the future of the nation. When we damage our youth, we damage ourselves.

Half the population of Ladywood is black and half is white, and we are nearly all immigrants. I am a child of Irish immigrants. The white community is made up of immigrants from Ireland, Scotland, Wales and many other parts of Britain who came to Birmingham in more prosperous days to seek a better life for themselves and their children.

The black population similarly came, more recently, from India, Pakistan, Bangladesh and the Caribbean for exactly the same purpose. We are the same sort of people. We sought out our homes in the west midlands because we wanted to better our lives and those of our families.

Now, everything they hoped for and came to the west midlands to achieve is being snatched from them as a result of the collapse of the west midlands in the recent past. In the 1930s the west midlands escaped much of the suffering that went on in Britain. Today the west midlands symbolises the destruction that is being done to the British economy by Conservative policies.

We were told by the Prime Minister yesterday that recovery is patchy. Indeed it is; there are no signs of recovery in my constituency. As has happened in many other areas since the election, another major closure has been announced and unemployment is rising. It is not true to say that this amount of unemployment, misery and suffering is creating anything good. Nothing is coming out of it except pure destructiveness, and that is not only intolerable but stupid. It is said that productivity is going up. In fact, the less efficient firms are closing down; inevitably productivity goes up, but nothing new is created.

Investment is at an all-time low. That means that we are laying down nothing new for the future. We cannot secure a recovery and a better future without investment and that investment is not taking place. The money that is available is flowing out of Britain to invest in other countries. We have North Sea oil—we are lucky to have it—but it is being wasted. I understand that £17 billion a year is being poured down the drain merely to keep people unemployed. These people want to work. They want to be productive and we must recognise that a large part of the nation's wealth is our people and their capacity to produce. We are arranging things in such a way that they cannot produce. We are damaging them and ourselves.

During the election campaign I was asked repeatedly, "Why are the Government doing this to us?" The people in the west midlands see clearly that there is destruction everywhere and that nothing new is replacing it. They said, "It is claimed that the Government's policies are designed to reduce inflation but when we had inflation we all had incomes, our incomes increased and we lived better. We now have nothing and we still have inflation." There are two rates of inflation in Britain and the one for the poor— for those who live in council houses, for example—is still increasing. Nothing is coming out of the Government's policies.

The right hon. Member for Guildford (Mr. Howell), the former Secretary of State for Transport, said that we must get rid of inflation to create jobs, but that is not true. Inflation has been decreasing and more jobs have been destroyed. We have seen that happen in the recent past and we know that we are not creating jobs. The policy is not working.

In answer to the question that was put to me by my constituents, I explained, "We have an extremist and dogmatic Government who are deliberately using unemployment" — that is what monetarism is — "to reshape our society. They are using unemployment to frighten workers, destroy trade unions and cut wages. They have a vision of a more unequal society, a more competitive society. They say that from that will come more efficiency and, therefore, more economic prosperity."

The people of Ladywood, my right hon. and hon. Friends and I reject the Government's policies. We do not want the future that they hold before us. It is not acceptable to us and, what is more, it is not even working.

We frequently hear the excuse that the problem in Britain is the problem of the international economy, over which we have no control. It is clear from OECD figures and American Bureau of Labour statistics that unemployment in Britain has increased massively faster than in any other industrialised country. Britain led the world into recession, but an international recession is made up of individual national recessions. If in turn we each throw our economies into recession, we shall have, of course, a great international recession. We started it and similar policies to ours have been pursued in the United States of America.

We can now start to undo the recession. We can work with international partners to change the world economy. There should be no excuse there. There can be jobs for all, and it is our duty and obligation to organise our society in such a way that everyone can work, make a contribution and get a decent income. Anything less than that is unacceptable.

There are nine old people's homes in my constituency, and I visited them all during the election campaign. They are all desperately short of staff. There are nine old people's homes in a sea of unemployment. People are queuing for jobs all around them, but those responsible for running the homes are not allowed to employ more staff to take care of the elderly. That is the result of public expenditure cuts. Pretence is made that cuts in public expenditure are cuts in bureaucrats but that is not so. The cuts lead to reductions in the staff who can care for the elderly and the very young. It is disgraceful and unnecessary.

The great sadness for the people of Ladywood is that they see what is going on in the knowledge that they have rejected it. However, they must continue to suffer because it seems that the rest of the country has to learn the hard way. The Government's policies are not beneficial to any of us.

Racial equality is important to the people of Ladywood. As I have said, half of my constituents are black and half are white. However, we are united in our need for jobs, decent schools for our children, decent housing and proper health care. We need to respect one another. We must respect all the various racial groups in our society and we must work alongside one another, or it will not be a good place in which to live and work.

The black community in Ladywood has been undermined and hurt badly by the Government's actions. The Nationality Act 1982, which was placed on the statute book in the previous Parliament, has made the black community feel insecure and unwanted. That includes the generation which came as immigrants and the generation that is growing up that was born in Britain. These people must be made welcome and be part of our society, or it will be dangerous for us all.

Black people, especially those who originated from the Indian subcontinent, are harassed constantly by disgraceful immigration procedures. Many of them have approached me already to make representations. There are families which want to look after their aging parents and which can afford to do so. They have a house and they want to care for them. However, we do not allow Asian families settled here and which are prosperous to look after their aging parents.

I am making representations to the Minister of State, Home Office about a case which encapsulates all that is wrong with our immigration procedures. It concerns an old man who is a citizen of the United Kingdom and the colonies. He fought for Britain in the first and second world wars. He was made a prisoner of war by the Japanese. He has come to Britain and has been refused entry. He is here on temporary admission while I make representations. That old man is shocked and astounded that the country that he respected, honoured, worked for and fought for will not allow him to come in as a visitor. That is what has been done to a large part of the population in my constituency and it is not good enough. It is not the behaviour of a civilised society and we can do better than that.

I shall draw my remarks to a conclusion in a form that will reflect part of the speech of the right hon. Member for Cambridgeshire, South-East (Mr. Pym), who was the Foreign Secretary in the previous Government. The Government must not think that their increased majority means that they have a mandate for their policies. They were given a smaller vote than that which the previous Government secured in 1979. They did not win a great victory in areas such as Ladywood, where more than 50 per cent. of the people are opposed to them. The intensity of that opposition is great. It is not an exaggeration to say that the Government are hated in my constituency, especially their leadership. People hate them with vigour. This is divisive, destructive and damaging to our society. If there are not changes, I fear for us all.

6.57 pm
Mr. Kenneth Warren (Hastings and Rye)

I pay a genuine tribute to the hon. Member for Birmingham, Ladywood (Miss Short). She has brought to the House compassion and a real strength of feeling which reached out to us all. I assure her that that passion and feeling are shared on both sides of the House in our concern for the unemployed. We may have different ways of moving forward to solutions, but we share with her a desire to achieve a solution to the awful ogre of unemployment that strides through our country.

The hon. Lady's speech reflects the prevailing conditions in my constituency, which lies in the much sunnier south; but 20 per cent. of my constituents are unemployed. School leavers are dreadfully concerned about their employment prospects. They are almost scared about the opportunities that some of them will have to find employment. The youth traning opportunities that we provide are good, reasonable and right, but I would not wish any of us to think that they can be a substitute for real jobs when there is a depletion of the training courses.

I served an apprenticeship in a factory and I am conscious that time can often be wasted on training courses. It does not give young people a chance to regain the opportunity of learning in later life. In putting forward the excellent training schemes that have been brought into reality by the Queen's Speech and the promise of legislation to come, I hope that the Government will continue carefully to monitor the schemes to ensure that they are real and relevant to job opportunities and not merely patching up the problems that young people have to face.

I am concerned that there is a feeling—it concerned me throughout the election campaign and it has continued to do so during the debate on the Queen's Speech—that perhaps the House is divided in our determination to conquer unemployment. I do not think that there is a division. If there is, I hope that it will not be allowed to grow. We must acknowledge that for 10, 20 or 30 years we in Westminster have often deluded ourselves into believing that we can solve within the House the problems of unemployment or have professed that they cannot be solved by the House and that they are problems for commerce and industry. Whether we are in Westminster, in industry or commerce, we are all in the battle to defeat unemployment.

Since the second world war we have often created the illusion that we could solve problems that were beyond our powers to solve. In 1944 there was an excellent all-party White Paper based on the belief that during the post-war years we should maintain high and stable employment by demand management. That was generally accepted. Who could think of saying anything against such a concept? The problem was to put it into practice.

We have since the second world war created the illusion at Westminster that Governments of any political persuasion could solve all problems and that all the taxpayer had to do was pay. We seem to have ignored the fact that in the 1950s West Germany became a competitor, in the 1960s France joined West Germany, in the 1970s Japan joined them and now in the 1980s south-east Asia has become a competitor, taking away our jobs to employ their own people. Great Britain was the last country in western Europe to recover from the second world war because it did not learn that only it could solve its problems.

In 1955 at the Messina conference we chose to ignore Europe. I believe that the Government sent two civil servants for the drafting of the treaty of Rome. From 1957 to 1973 we manoeuvred around the outside of the European Community and let others get ahead of us in exploiting it. I should like to share with the House my concern about what happened during that period. We seem to have had a unique ability to waste our human and financial resources. We seemed to kindle and rekindle the expectation that the Government could and would solve all problems. Party manifestos said so repeatedly, they suggested that all taxpayers had to do was give the Government their money which they would throw at the problems which would then go away.

The tale of the nationalised industries, particularly the steel, coal, shipbuilding and aircraft industries shows that that waste was perpetuating the illusion that taxpayers' money would solve all problems. If one studies what has happened in the past 20 years, one can see the sources of our present unemployment. Between 1960 and 1980, while this country's productivity increased by just over 2 per cent. per annum, the other 23 OECD countries managed to double their productivity. Those countries are our competitors for markets. Productivity per head in our country today is only two thirds that of Italy, one half that of France and less than one half that of West Germany, the United States of America and Japan. They are all competing for our jobs.

During that 20-year period we increased our wages at about twice the rate of that of our competitors in the OECD. Unit wage costs doubled in our competitor countries but ours increased five times. We began to price ourselves out of markets. Worse still, profitability—a word which will perhaps be applauded on the Conservative Benches but not on the Opposition Benches—dropped from about 13 per cent. per annum in real terms in 1960 to about half that in 1970 and to 2 per cent. in 1980. As a result, manufacturing industry lost the ability to reinvest profits, something which is always being called for.

The only way to obtain money was to borrow more or to increase prices, both of which became self-defeating. Manufacturing industry's profits in this country are running at only one third of the rate of West Germany or the United States. They are the people who can afford to re-equip their factories with the latest equipment and machine tools to keep their employees working. The result was inflation. Over those 20 years our inflation increased on average about twice as fast as that of all our competitors. We are debating the inevitable result tonight —while unemployment in all countries has increased, in this country it has increased at twice the rate.

Our people have paid severely for a long time, not just over the last few years, for a failure by Government, industry, management and trade unions to understand that one cannot create jobs unless one's goods and services are competitive. The disappearance of our markets and the growth of imports is a lesson that we must learn once and for all.

During those 20 years domestic demand in this country rose and, although the cost of living increased, life became steadily better for people. While demand increased by over 50 per cent., our share of world trade decreased by 50 per cent. and our imports doubled. We moved from providing the major technical products of the world to becoming one of the major importers of technical products from countries which should never have been allowed to become our competitors.

We move from the Queen's Speech to a period of legislation which will last for 18 months. I hope that the policy put forward by the Government during that time will continue the abolition of price, dividend and exchange control, which we enjoyed during the past four years, and will move towards a reduction in taxation to stimulate further investment and growth of employment opportunities.

I continue to be worried by the fact that the Government take so much of the gross national product to finance the goods and services that they provide. We expect everyone else to cut their cloth according to what they can afford, and the Government should show more strongly that they can learn that lesson. We want to see our health, education and welfare services preserved. I shall fight for them to be preserved. The only way to reduce the proportion that the Government take from the national economy is to increase our output of goods and services and to allow the economy to become steadily more profitable.

There was a brief discussion about regional policy at Question Time this afternoon. It emerged that we are spending over £800 million a year on regional policy. I find it hard to see any jobs arising from that. That £800 million comes from profitable companies and is distributed to those which are unprofitable. In the end the competitiveness of both is reduced and jobs disappear.

I want the Government to study regional policy, which benefits certain parts of the country only. It should benefit all parts. We can do with some benefits in Hastings and Rye.

I should like to see the Government concentrate on the 108 initiatives to help small businesses which we proudly proclaimed in our manifesto, and achieve a more comprehensive and understandable package for those who want to start up small businesses. New sources of employment are more likely to arise from the growth of small businesses than from the resurrection of large companies.

I appeal to the Government to construct a creative purchasing policy for the goods and services that they acquire. They spend an enormous amount of money, over £130,000 million, each year. The Government are the largest single customer of most companies, either directly or indirectly. The style of purchasing by Government and the way in which they spend money can be a tremendous incentive to the creation of goods and services that can have an export viability.

The hon. Member for Bolton, West (Mr. Sackville), who made a valuable contribution in his maiden speech, identified the problem exactly when he talked about the competition between Britain and America over the purchase of a much-needed anti-radar missile to protect our aircraft. There is not only the question of recycling the taxpayers' money through the economy, which means that the British equipment would, in net terms, cost less than the American equipment, but there is the fact that the Government could encourage the company in this country, British Aerospace, to compete more effectively if the Government as a purchaser went for a fixed price contract. At the moment the Government are shying away from such a concept. They say, "But you will make a big profit, and that is bad." However, surely a Conservative Government should encourage profit. If someone does better than the target profit that has been agreed, the Government should applaud that, and we in the Conservative party should do so also. The Government need to be more creative about the way in which they purchase goods and services and so become a pace setter for the competitiveness of industry and commerce.

During the four years when I was a parliamentary private secretary serving a Secretary of State, I not only found it a most valuable and unique experience, but was concerned about the way in which the Government practise what they preach. We all believe in education; it is so easy to say so. However, I am gravely concerned whether, having spent many thousands of millions of pounds on education, we are getting a quality of education that is value for money.

At the end of the statutory education period, the real measurement is not only whether there are job opportunities but whether those who have received the education can match it to those job opportunities. In my constituency, over 5,000 people are unemployed. One company recently wanted to recruit 15 school leavers. It asked the jobcentre — which has twice as many job opportunities as a year ago — to ask each of the candidates how many pennies there were in £1 and 50p. Out of the 15, only four got it right. A food factory had 100 job vacancies, but only 50 people applied and only 36 were taken on. An electronics company with 100 vacancies had to scour the country to get people to work in the sunniest part of the United Kingdom.

I am concerned that, when the technical press is awash with advertisements for employment opportunities, so many people remain unemployed. I ask the Government to examine the reasons why people are remaining unemployed, when there are real job opportunities.

I applauded the thoughtful and striking speech of my right hon. Friend the Member for Cambridgeshire, South-East (Mr. Pym). I believe, with him, that the Conservative Government have been given a second lease of opportunity to prove the slogan "Conservative freedom works". However, I believe that in the next five years time will not be on our side for us to prove that. Since 1979, the Government have made wonderful progress in restoring the British people's belief in themselves. The Prime Minister has led us in a way that could not have been excelled by any other person.

The time has come when we Conservatives must match the reality of our power with the proof that we have the ability and the will power to subdue and drive back the ghastly ogre of unemployment which sits at so many people's firesides. That must be our prime duty to our people from this debate onwards.

7.16 pm
Mr. Michael McGuire (Makerfield)

I hope that the seat of the hon. Member for Hastings and Rye (Mr. Warren) remains the same after the recent redistribution, one cannot be sure about constituencies or their names. Few fixed points remain.

At the beginning and end of his speech, the hon. Gentleman discussed the theme of unemployment and the Tory attitude to it and I intend to refer to this too. For me the general election was a most unreal event. I had the impression that the Labour party had been in power for the past four years, had trebled unemployment, had seen manufacturing investment and capacity reduced by 20 per cent. and apprenticeships fall by 4 per cent. and had created the unemployment of 1.25 million people aged 25 and under, some of whom have never had a job. My right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) was right in the opening and the peroration of his speech that we did not get our message across. I shall not say that we did not score one or two own goals or shoot ourselves in the foot when we were on the starting line, but the fact was that by a skilful operation, the Tories were able almost to persuade the people that they were voting against a Labour Government who had been in power for the past four years. The old adage is that one does not put in Oppositions as much as vote out Governments.

The theme running through the election that bugged me enormously was the Prime Minister's theme, which came across stridently at times, of harking back to Victorian values. In a wonderful maiden speech, my hon. Friend the Member for Birmingham, Ladywood (Ms Short) talked about the consequences of Victorian values. There were probably some noble values, but essentially it was a time of great hypocrisy, inequality and injustice for the ordinary working people. It was a time of cruel and crushing poverty. The Labour party, of which I am proud to be a member, was founded in 1900 because of those terrible conditions. It seems that it is now a requirement for every Tory to praise the sagacity and wisdom of the 1945 Labour Government. It is almost a prerequisite that they pay tribute. One would think that they were paying tribute to a Tory Government. That great Government of 1945, the first all-powerful Labour Government, swept away for ever, they hoped, those so-called Victorian standards.

The Lord Privy Seal and Leader of the House of Commons (Mr. John Biffen)

indicated dissent.

Mr. McGuire

The right hon. Gentleman shakes his head. I do not have to read in books what Victorian values meant. They existed until 1947–48. The Labour Government swept them away. Let me give one example. I am sponsored by the National Union of Mineworkers, of which I am very proud. When I was going round the clubs telling people not to be seduced by the Tory propaganda which seemed to suggest that it was our fault that unemployment had trebled, I said that when a man was injured before 1948 he had to choose between compensation or prosecuting his employer at common law. He had to overcome a formidable difficulty created by the common law—even if he could manage without weekly compensation, which very few people could—known as the doctrine of common employment. He had to overcome a shared danger. One of the great achievements of the Labour party was the sweeping away of that relic of Victorian inequality. I do not think that even the Tories, in going back to Victorian values, would seek to reintroduce it.

Mr. Robert Kilroy-Silk (Knowsley, North)

Does my hon. Friend think that they can understand that?

Mr. McGuire

The Government have been returned to power with a massive majority but, as the right hon. Member for Cambridgeshire, South-East (Mr. Pym) reminded them, with, because of the quirks in our political system of first-past-the-post, fewer votes than they polled in 1979. I am one of the minority of Opposition Members who believe that the British public will not let that inequality endure. We must look at proportional representation. I am not sure of the precise form, but I am absolutely sure that we must do it. [Interruption.] I know that my hon. Friend the Member for Great Grimsby (Mr. Mitchell) has not changed his views. He is a great supporter of proportional representation. The present position is that the Government have fewer votes than they polled in 1979 and have an overwhelming majority. I warn them that they cannot be considered to have a mandate to carry on trying to introduce Victorian values which were swept away. If they do, I think they will have taken on one of the biggest legitimate fights of their lives.

The Gracious Speech should be addressing itself—it only touches on the subject—to how we can deal with unemployment. I am fortunate in that since I left school at 14—I hope that my constituents think that I am in gainful employment, although sometimes in voice and in letters they seem to think otherwise—I have never felt the cruel lash of unemployment. When I enterer the House in 1964 we used to boast that there was no unemployment problem if the figure was not more than a quarter of a million. When unemployment came it was always visited or inflicted on my class of people—the manual working class. The great change now is that well-qualified people in good jobs are terrified of losing them. Well-qualified people have been thrown on the scrapheap. That is the change that has come. The cancer of unemployment has created fear across the country. If the Government are serious about tackling the problem, they should put forward constructive proposals to that end.

Do any Conservative Members seriously doubt —I address my remarks particularly to the Leader of the House — that the real figure of unemployment now is 4 million? If we were to use the calculations that the Labour party used when it was in government, that would be the figure. Jobs are still being lost at the rate of 22,000 a month. All the signs are that the position will not get better. Does anybody seriously pretend that, given another two or three years of these policies, when unemployment has grown to 6 million, the Tories will still be sitting on their hands saying, "We are very sorry. We do not want to see people unemployed but there is nothing that we can do about it."? The social fabric of this nation will not endure a Government not wanting to deal with 6 million unemployed, and all Conservative Members know it. What will the Government do to stop the figure going beyond 6 million that it cannot do now? The answer is nothing.

All that is preventing the problem from being tackled in a realistic and sensible way is the stubborn pride of a stubborn Prime Minister and her colleagues. They have used the acronym TINA—there is no alternative. They know that there is an alternative. Provision to combat unemployment had better be introduced as quickly and as sensibly as possible. If that does not happen, the social fabric of the nation will not endure, and strife will follow. Let no one have any doubt about this. The British people will not sit by and see the unemployment figure grow and grow. I ask the Government to take this matter on board. I believe that that is the overriding consideration. It would have been the overriding consideration of the Labour party. We have a plan to deal with it.

The Labour party's great misfortune was that by a combination of skilful advertising and problems that we created, the election was not fought on the real issues. As has been said, the electorate was suffering from a post-Falklands trauma. When it emerges from that, it will inflict retribution on the Conservative party. Such retribution will be fully deserved. For the Government to sit back and say that they can do nothing and that employment must continue to grow, is something that the British nation will not tolerate. It will give its verdict much sooner than the Tories think—much sooner than four or five years from now.

7.24 pm
Mr. Michael Howard (Folkestone and Hythe)

I begin, Mr. Deputy Speaker, by echoing the remarks of my hon. Friend the Member for Bolton, West (Mr. Sackville) and of the hon. Member for Birmingham, Ladywood (Ms Short) for being permitted to make my maiden speech today. I am particularly pleased to have caught your eye at such a relatively early stage in the Parliament because it enables me to pay an early public tribute to my predecessor, Sir Albert Costain. He is a much loved man both in the constituency and, as I have discovered during the past fortnight, in this House. He is not a man who seeks the limelight but he has rendered sterling service both to his constituents and to the House. More than 22 years ago he first became a member of the Public Accounts Committee and, I believe, the length of his service since then is without equal in the history of that Committee. During a much shorter period when I was a prospective parliamentary candidate, he was unstinting in his kindness to me. That was somewhat remarkable as he had some cause to be disenchanted with those who, like me, enter the House as practising banisters. On one occasion he was waiting to catch Mr. Speaker's eye but felt constrained to visit the room which was referred to with such affection by Mr. Speaker in his acceptance speech. Before he left the Chamber, Sir Albert entrusted his notes for safekeeping to one of his hon. and learned Friends. When he returned to the Chamber, he was somewhat dismayed to find that hon. and learned Gentleman addressing the House in a most accomplished manner with Sir Albert's notes in his hand and Sir Albert's words on his tongue.

My constituency of Folkestone and Hythe is a richly varied area, containing some 20 miles of coastline, Romney marsh, a most beautiful stretch of the north downs and the two towns that give it its name. Its economic activities are similarly varied. Communications to the continent of Europe are excellent and communications with the rest of England will also be excellent when the missing link of the M20 motorway between Maidstone and Ashford is completed. I am grateful to my right hon. Friend the Member for Guildford (Mr. Howell) for reinstating that project in the road programme when he was Secretary of State for Transport. His successor will hear a good deal from me about the priority to be given to it and the date on which we may expect completion.

I cannot pass from my constituency without reminding the House that it includes, in Hythe and Romney, two of the original Cinque ports which answered the summons issued by Simon de Montfort in the name of King Henry III to send representatives to what is usually regarded as our first Parliament in 1265. They have valued the closeness of their links with their Members of Parliament over the centuries since then and the loosening of those links which would be a consequence of the proposals for electoral reform presently being put about would be something I should greatly deplore. When one considers not just the proposals for electoral reform but also those for regional government espoused by the alliance parties and the sympathy with the creation of a federal European state expressed by the right hon. Member for Tweeddale, Ettrick and Lauderdale (Mr. Steel), it is not always appreciated how much the total package of alliance proposals would emasculate the powers of this House. I hope to retain for many years the trust of the people of the Folkestone and Hythe constituency who have sent me here, and I hope to continue to serve their interests in a House of Commons that has not been shorn of its powers.

I understand that there is still a view that a maiden speech should keep its distance from controversy. Although as a practising barrister of nearly 20 years' standing I cannot pretend to be a stranger to controversy, I shall do what I can to honour that tradition in the hope that the two brief points that I wish to make will command such widespread assent that no question of controversy can arise.

In the recent election, it was widely recognised, not only by Conservatives, that strikes and industrial action contribute to the problem of unemployment. Increasing recognition of that in recent years has been reflected in the increasing reluctance of workers to take industrial action. My right hon. Friend the Chancellor referred earlier to the importance of the reform of trade union law, especially as it affects the rights of individual members of trade unions. There is one critical area — critical for the personal freedom of individual workers as well as for the link between strikes and unemployment—in which in my view the legislative support given to the individual is inadequate. I refer to the position of the worker who refuses to join a strike, who may be excluded from his trade union as a consequence and who in a closed shop may lose his job for that reason. It may surprise some of my hon. Friends to know that, despite all the legislation of the last Parliament, it is still possible for that fate to befall a worker and for that worker to be denied any of the compensation or other remedies generally available at law for a worker who is unfairly dismissed.

The Government have not been wholly insensitive to this issue. In some circumstances, set out in the code of practice on closed shop agreements and arrangements which in its revised form came into operation last month, it is likely that compensation will be payable. In my view, however, that is by no means good enough, for two reasons.

First, as a matter of basic individual freedom a worker should be entitled to know without qualification that he cannot be sacked for refusing to strike without being entitled to all the remedies for unfair dismissal provided by our law. That protection is rightly conferred on the worker who is sacked because he is or proposes to become a member of a trade union. The worker who is sacked for refusing to strike is surely entitled to the same protection.

Secondly, in the real world it is stretching credulity beyond breaking point to suppose that a worker faced with an extremely difficult decision and subject to considerable pressure will sit down and go through the code of practice line by line to determine whether the circumstances set out in it correspond with those of the strike in which he is involved. The full absurdity of the situation becomes apparent when one appreciates that the definition of the circumstances set out itself involves very difficult questions of law and a consideration of the meaning of statutory provisions recently described by Lord Diplock, sitting in a judicial capacity in another place, as most regrettably lacking in the requisite degree of clarity. That brings me to my final point, which has far wider application than the law relating to employment. When the same case was before the Court of Appeal, the Master of the Rolls made a plea to Parliament which we should do well to heed. He said: My plea is that Parliament when legislating in respect of circumstances which directly affect the 'man or woman in the street' or the 'man or woman on the shop floor' should give as high a priority to clarity and simplicity of expression as to refinements of policy. He continued: When formulating policy, Ministers, of whatever political persuasion, should at all times be asking themselves and asking parliamentary counsel 'Is this concept too refined to be capable of expression in basic English? If so is there some way in which we can modify the policy so that it can be so expressed?' Having to ask such questions would no doubt be frustrating for ministers and the legislature generally, but in my judgment this is part of the price which has to be paid if the rule of law is to be maintained. I do not believe that the refinement of policy which gave rise to the inclusion of some circumstances and the exclusion of others from the code of practice on the closed shop can be justified. Even if it could, I believe that the questions posed by the Master of the Rolls should have been asked. Had they been asked, I believe that the answer would have been to abandon that refinement of policy.

In the first maiden speech of this debate, my hon. Friend the Member for Derbyshire, South (Mrs. Currie) asked for greater simplicity in the law as it affects the right to buy council houses. I endorse that plea, but the area that she identified is not the only one that calls out for such treatment. For the reasons that I have given, lack of clarity in employment law can cause injustice and can damage the economy. I hope that my right hon. Friend the Secretary of State for Employment will introduce measures to alleviate that injustice in the near future and that my other right hon. Friends who bring forward legislation will pay full attention to the plea made by the Master of the Rolls. Many of us on the Conservative Back Benches intend to encourage them to do so in the months and, I hope, years ahead.

7.39 pm
Mr. Jim Craigen (Glasgow, Maryhill)

I welcome you, Mr. Deputy Speaker, to your new office as Chairman of Ways and Means. I compliment the hon. Member for Folkestone and Hythe (Mr. Howard) on the delivery of his maiden speech. I noticed that he, unlike his predecessor, held his notes firmly in his grasp although I did not agree with their content. I once visited his constituency some time ago because I took a wrong turning as a result of all the roadworks down that way.

I should also like to pay tribute to my hon. Friend the Member for Birmingham, Ladywood (Ms Short), who made a strong and feeling speech on unemployment. She has a great deal of experience of youth unemployment problems as she is the former director of Youthaid. She made her case exceedingly well.

I was interested in the speeches of two former Cabinet Ministers — the ex-Foreign Secretary and the ex-Secretary of State for Transport. The theme of unemployment seemed to run through both. I do not see the point of the Government publishing a White Paper on employment, as the right hon. Member for Guildford (Mr. Howell) suggested, as I suspect that the Government are more interested in hoisting a white flag on unemployment than in preparing a meaningful White Paper on the subject. I would willingly exchange the rate of unemployment in my constituency for that in the constituency of the right hon. Member for Guildford. I have also visited his constituency and recall that it has its share of prosperity.

We have a new Chancellor of the Exchequer who speaks in more strident tones than his predecessor but the message that he hammers out is essentially the same. I noticed that he said that reversing the rising trend of unemployment must be the Government's priority. I also noticed that he said little about how, when and where that would or could be done. He would not give way when I tried to point out that the Treasury figures already forecast another 300,000 on the dole queue. That is a built-in assessment in the Manpower Services Commission's calculations. During parts of his speech I felt that the mechanistic Treasury language was coming to the fore. Indeed, I wondered whether some Treasury official coming up from Brighton on a dull day had pre pared parts of the right hon. Gentleman's speech on how we must go through the agonies of a tight money policy.

Part of my weekend reading was The Sunday Times. There was an interesting article about how exercise is good for one. The author disputed conventional wisdom about dieting. I was interested by the article because I have always followed the dictum of Mark Twain—I get my exercise by walking to the funerals of my athletic friends. The article suggested that, if only we exercised in a certain way and in certain forms, that exercise would be far more effective than dieting, which makes us grumpy and is too much of an obstacle for most of us.

Would it not be a dreadful tragedy if the formulae that have been worked out in the Treasury were proved wrong —as, I believe, most common sense people believe they will be? In our constituencies, as my hon. Friend the Member for Makerfield (Mr. McGuire) pointed out, we see the human effects of the Government's policies. What will the Government do when the oil revenue starts to run out? Indeed, what will the country do when the oil runs dry towards the end of this decade? The previous Conservative Administration were singularly blessed with the windfall of energy from the North sea. The tragedy is that much of the revenue from the North sea has been absorbed by coping with longer dole queues. Several hon. Members have referred to the decline, collapse and, indeed, eclipse, of manufacturing in many parts of the country. If today we had the same level of employment in manufacturing that we had in 1970 we would have no unemployment. That is the measure of the decline in manufacturing capacity.

There is no message in the Queen's Speech about what will be done about our shipbuilding, steel and engineering industries. They are basic industries that are still important in the west of Scotland. In the longer term, those industries will affect our balance of payments. There is talk of returning to Victorian values. We now have circumstances that the Victorians would have shuddered at. We now have a trade deficit in manufacturing. Moreover, the worrying feature of that is the extent to which there is a decline in investment in new forms of manufacturing.

I should have thought that the Government could give a glimpse of hope by saying that they will go ahead with the gas-gathering pipeline and will bring forward some oil rig construction. They have already announced that there will be changes in the rate of oil taxation. What faith can we have in a Queen's Speech that talks of increasing economic prosperity, reducing unemployment and seeking a further reduction in inflation when the reverse is happening in each respect?

Several hon. Members have gone on about the relationship between trade unions and inflation. The trade unions are always convenient scapegoats. The decisions taken by the Council of the Building Societies Association sometimes bear more heavily on affairs in households throughout the country than those that are taken by the TUC general council.

I notice that there is no mention in the Queen's Speech of new legislation to deal with the role of building societies. I hope that the Government will not leave it to building societies to sort out their internal affairs, as mortgage interest rates now have considerable influence on the retail price index. I have said that before.

I am depressed most by the fatalism of the belief that Britain will not be able to create gainful employment for its citizens. Have we really run out of work? Many of us can see tasks that need to be done in inner city areas. We notice that virtually no maintenance or repair work is being done by many local authorities on their housing stock because their housing support grant has been slashed. We also notice that Britain imports manufactured goods that we should produce for ourselves and that we are failing to invest in our future.

Moreover, we are not giving our young people the best opportunity in primary and secondary education. It is ironic that a Government who talk about the need for a more skilled and professional work force have cut the number of university places and places at other higher and further educational institutions. I firmly believe that Britain has a great deal to offer its people. The trouble is that the shares are being meted out unequally. The shares are being meted out unfairly between groups of people — like the unskilled, the semi-skilled, the young, the over-fifties and the disabled — and between different parts of the country.

The right hon. Members for Cambridgeshire, South-East (Mr. Pym), for Guildford and even for Surrey, South-West (Mr. Macmillan) talked of unemployment, but they do not know the half of it. They do not understand that when people from many other parts of the United Kingdom talk of unemployment they mean long-term unemployment or permanent unemployment for many people. Millions of people are now no longer able to make their contribution to society as they would like.

On Monday, the House debated the welfare state. Our social security system is based on the contributory principle, and people wish to contribute and to build the social security system so that they can benefit from it when they are sick or retired or whatever. There will be a real funding crisis in the system unless we realise the interrelationship between employment and policies that create full employment and the present position.

The most significant omission from the Queen's Speech is any message of hope for a younger generation that desperately wants to contribute to our society and that has been brought up in the schools to believe that it is part of its duty to contribute towards society. The Government continue to trot out special programmes, which have become a political apology for a lack of political preparation and imagination in dealing with the problems of labour market. We now spend £2 billion on those programmes, and I wonder how much of that sum goes towards building up bureaucratic procedures and much paper-passing rather than the creation of permanent employment.

Some hon. Members have referred to the Government's massive majority, which must be the envy of many postwar Prime Ministers, and indeed a few pre-war Prime Ministers. Perhaps, when she was putting the finishing touches to the Queen's Speech, the Prime Minister's head expanded a little. Despite what we say about her, she is human, and she must have taken great pride in the fact that she had a big majority. The right hon. Member for Cambridgeshire, South-East was sacked after suggesting that she should not have it.

I hope that when the Prime Minister listened to Her Majesty reading the speech from the Throne she realised that Britain runs enormous risks, and that the Crown has become the common denominator in the country because so much of the political landscape has been otherwise fractured. We can see that in the House of Commons, in the representation from different parts of the country. I hope that the Prime Minister, who suggested that we should put the "Great" back into Britain, does not continue the policies that she has pursued during the past four years, because otherwise there will be no Britain as we know it.

7.53 pm
Mr. Terence Higgins (Worthing)

I am happy to join the hon. Member for Glasgow, Maryhill (Mr. Craigen) in congratulating my hon. Friend the Member for Folkestone and Hythe (Mr. Howard) on his maiden speech. He talked about his predecessor, Sir Albert Costain, who was held in great affection in the House and whose service on the Public Accounts Committee was important. My hon. Friend spoke with great expertise about trade union law, and it is unlikely that he will escape service on the Standing Committee that will discuss the trade union legislation envisaged in the Gracious Speech. If that is so, the Government Whips are unlikely to welcome his speeches as much as we shall welcome them on the Floor of the House.

Traditionally, the Leader of the House makes the final speech in a debate on the Loyal Address, so I shall begin by making some points that will be of special concern to him, as he acts as the link between Parliament and the Executive. The previous Parliament will be remembered for the Falklands war, but when we look back at it after many years it will also be remembered for the major changes in parliamentary procedure. The creation of the Select Committee system was a memorable innovation that will be of the greatest importance.

As a result of the recommendations of the Select Committee on Procedure (Finance), which were accepted by the Government, the House now has the opportunity to debate the details of public expenditure on the new Estimates days. The old Supply days have been changed to Estimates days and Opposition days. As a result of delay in establishing the new Select Committees and departmental Committees, there may be a slight hiccup before the mechanism is fully operational. However, it was an important innovation that I hope will become firmly established.

May I make a commercial for the first report of the Select Committee on Procedure (Finance) which was completed just before the general election and which sets out the further reforms that are necessary in our financial procedure if we are to build upon the foundations laid in the previous Parliament. I had the honour of chairing that Select Committee, and the report makes several specific recommendations. The first deals with non-Supply expenditure, which represents about half the total public expenditure, where we propose changes in the debates on rate support grant. Hon. Members have often said that the fact that those orders are not amendable causes them considerable concern, so our proposal will assist the House. We also propose more effective control by the House of long-term projects where the initial estimate may be modest but where, over a period, the total cost may run into hundreds or thousands of millions of pounds. We also recommend for the first time some parliamentary control over borrowing. If Henry V wished to go to war and could borrow the money, there was no parliamentary control. If he wished to raise taxes, he had to come to the House. Borrowing is a substitute for taxation and should be controlled by the House.

The Committee also considered the procedural implications of the so-called Armstrong committee report with regard to a Green Budget, and recommended that there should be a debate after the autumn statement but before the main Budget when the House could express a view. We also called for an early debate on whether the procedures with regard to taxation and expenditure should be brought together.

I hope that my right hon. Friend the Leader of the House will find time for an early debate on all those matters before the recess, because if the House is to have an effective influence on economic policy it must implement those proposals. We must continue the process of reform that has done much to redress the imbalance between the Executive and Parliament and if we carry out those further measures we may reasonably say that the reforms have been brought to a satisfactory conclusion.

Unemployment has been one of the major points of this debate. I begin by congratulating my right hon. Friend the Chancellor of the Exchequer on his appointment, and his predecessor. The new Chancellor has an immensely difficult task. It is clear that the electorate rejected the proposals for dealing with unemployment put forward by both the Labour party and the Liberal-SDP alliance. The electorate did not find those reflationary remedies credible. If we are to tackle unemployment, we must control inflation, and there is no longer a trade-off between the two possibilities. Present unemployment is different from that which we experienced in the post-war period. We have seen, as a result of the economic climate of the past few years, a major reduction in overmanning. Many firms find that they can probably produce as much as they could before with a much smaller labour force. It is not likely that we shall find those firms re-employing those whom they have made redundant. Therefore, we face immensely difficult problems.

There is also a difficult financial problem arising for industry, and this perhaps is a particular responsibility not only of the Chancellor but of the Governor of the Bank of England. Lord Richardson, who is due to retire as Governor of the Bank of England this week, has done a magnificent job during his period of office, and he has held office during some extremely difficult Limes. We all wish his successor well. There is a danger that the clearing banks, having over the whole period of the recession clone much to preserve viable firms, may now feel that they can adopt a more restrictive stance. That could be extremely dangerous for future employment. There is a danger that, if finance is not provided for the expansion, the strains on companies may be greater than they have been during the recession.

Therefore, the new Chancellor and the new Governor of the Bank of England have great responsibilities. If we are to provide a long-term solution to the unemployment problem, we must encourage investment, and in particular investment in the private sector. This must necessarily turn on the relationship between the rate of interest and the rate of return obtainable in industry. The reality is that there is too large a gap between those two magnitudes, with the result that we shall not see a rapid upturn in investment.

This brings me to economic management generally. The Chancellor, when he was Financial Secretary, made a number of speeches setting out his understanding of the workings of the economy, at least two of them being remarkable contributions to the general economic debate. The first two years of the Conservative Government in the last Parliament were unsatisfactory in a number of respects. We saw a major wage explosion, particularly in the public sector, that went far beyond the needs of the commitment to fulfil the Clegg obligation. Moreover, we on the Treasury and Civil Service Select Committee described what we then had as a "funny money" policy, whereby the money supply was controlled not with a small gap between taxation and expenditure so that the PSBR could be financed by low interest rates, but with a very large gap. As a result of that large gap and the high interest rates necessary to fund it, we found that we had a considerable degree of deflation. That happened when the Chancellor was Chief Secretary.

Following that, there have been some radical changes in Government policy. In particular, the preoccupation, almost obsession, with M3 was dropped and a broader view was taken. There was also a radical change in the attitude to the exchange rate. It is now important that we should try to discern as clearly as possible what the Chancellor's policy will be. He spoke in general terms this afternoon and left to one side what he described as the details. If we are to analyse these problems correctly, we must look at the details closely.

Our economy is closely linked with that of the United States, and in particular there is a close relationship between our interest rates and those of the United States. There is now a massive prospective American deficit in what is called, in the new jargon, the "our years—roughly speaking, from the end of this year onwards. That creates a danger. While I welcome the reappointment of Mr. Volcker as chairman of the Federal Reserve Bank, the extent to which he is able to reduce interest rates will be severely curtailed by the size of the deficit with which he is faced. That necessarily means that our position will be difficult.

I hope, therefore, that the Chancellor will spell out in rather more detail than hitherto precisely what his attitude will be towards the exchange rate as well as towards interest rates. It is not clear from what he said this afternoon to what extent he is to continue to be preoccupied with the money supply rather than with interest rates. It is a truism in economics that it is possible to control either price or quantity but not both at the same time. His statement that he will continue with the medium-term financial strategy is of considerable interest, but we still need to know what position he will take on the relationship between interest rates and the exchange rate.

It is therefore important that the Chancellor should continue to give priority to inflation because without that we cannot hope to solve the problem of unemployment. At the same time, we need to look carefully at a speech that my right hon. Friend made while he was financial Secretary. He said: in the world of monetary targets, the level of demand is effectively determined by the rate of inflation. A rate of inflation higher than the monetary target will cause demand to be depressed, as a smaller volume of goods is purchased at a higher price; similarly, a rate of inflation lower than the monetary target will give rise to a boost to demand. In other words, what matters is the rate of change in the real money supply. I believe that he was right about that.

We have seen what might be called the "Lawson crossover" in terms of the relationship between the rate of change in the money supply and the rate of change in inflation. There is a real prospect, with the rapid fall in the rate of inflation, that we shall see an increase in the real money supply and, as a result, a resumption of steady growth. The problem will arise if the rate of inflation then begins to rise significantly in relation to the monetary targets. We need to look at the arithmetic in some detail. It is clear that a resumption of inflationary wage claims will create a situation in which the rate of inflation will go up and the real money supply will decline in relation to the Chancellor's medium-term financial strategy.

That being so, it is tremendously important that all those in industry, particularly trade union leaders, should appreciate that we are in a competitive environment and have still not, contrary to what was said earlier, got to a point where our competitive position is as good as it was four or five years ago. Consequently, we must exercise restraint on wages if we are to get the economy competitive once more and tackle the problem of inflation.

The hon. Member for Birmingham, Ladywood (Ms Short), in what was a remarkable, indeed passionate, speech, misunderstood, I think, the true nature of the problem. She referred to the past, when there was a high rate of inflation and unemployment was comparatively low. The crucial point is that that was not something that could continue. Sooner or later the country had to face up to reality; and sooner or later we had to realise that the world does not, did not and will not owe us a living. Therefore, we have to reach once more a position where we are competitive and do not go on paying ourselves more than the value of what we are producing. We have to reach a point where companies can begin on the upward path, against the financial background and the financial dangers I have mentioned.

At the same time we must seek to encourage investment. The fall in the rate of return on industrial investment over the years as been disappointing. We have to raise that level. I believe that the Chancellor understands these things clearly. The broad policy that he outlined is the correct one, but we shall have to look at these highly technical matters in considerable detail. General debates are all very well, but at the end of the day these are highly technical matters. The dangers that we face are still great, not least internationally, both in relation to international monetary policy and to the international bank indebtedness.

We have some very difficult decisions to make. I wish the new Chancellor of the Exchequer well. I hope that in the course of reforming our financial procedures the House as a whole will give him the support he needs if he is to build upon the foundations which have been laid over the past four years.

8.10 pm
Mrs. M. Beckett (Derby, South)

First, I should like to pay tribute to my predecessors. It is thanks to the activities of the boundary commissioners that I, like some other hon. Members, have had more than one predecessor — in my case Phillip Whitehead and Walter Johnson. Both had excellent records of assiduous attention to the needs of their constituents. As I know you will recall, Mr. Deputy Speaker, both were well-respected as well as experienced Members of this House; the two do not invariably go together. In this Session we shall particularly miss the expertise which each of them could bring to bear.

Phillip Whitehead, as a former television producer, had great experience to bring to bear on debates on matters such as cable television. Walter Johnson had great experience of the realities of life in the world of trade unions, of which we have heard rather the other side from Conservative Members. It was Walter's experience of life in trade unions that was perhaps more widely shared in my constituency. It is a constituency with a very proud history of industrial development and industrial activity across a wide range of different industries. It has also, unfortunately—this it shares with other areas with the same characteristics — widespread experience of the exploitation and distress which have all too often gone hand in hand with industrial experience and activity, and which have in the past, as I expect will be necessary in the future, been alleviated only by the activities of properly run trade unions anxious and concerned for the well-being of their members.

I cannot but think that trade unionists in my constituency, should their eyes have fallen on the Queen's Speech, will have been rubbing them in disbelief at one of the Prime Minister's more extraordinary contributions. We are all well acquainted with the fact that, whatever may go wrong in Britain or whoever's fault it may be, it is never the fault of the right hon. Lady. The blame always lies with some other party—[Interruption.] As I am reminded, the right hon. Lady just takes the credit when things go right, and that does not happen very often.

One of the strange reasons that the right hon. Lady gave for the partisan attack on the trade union movement that she seems to be about to mount is that trade unions are such powerful agencies for good or harm, for creating new jobs" —[Official Report, 15 June 1983, Vol. 1, c. 58.] I find it inexplicable that the right hon. Lady, who has spent such energy, time and enthusiasm explaining to all of us why it is beyond the power of Governments to create jobs, can nevertheless assume that it is well within the power of trade unions, and that that is somehow a reason for the activities that she intends to mount in that direction.

It is true that trade unionists today are forced to spend a vast amount of time on the need to try to preserve and create employment, and that many trade unionists have more experience than they would wish of trying desperately to create jobs, apprenticeships and opportunities, especially for young people leaving school, of whom so many hon. Members have spoken in the debate, and of trying to create or preserve those jobs in the face of the obstacle course that the Government's economic policies have created for them. The Government are now threatening to increase the series of handicaps in that obstacle course. Despite the excuses and reasons that the right hon. Lady purports to give, it appears, sadly, that we are witnessing yet another of the petty, partisan attacks that we have seen her mount on any group or interest that seeks to oppose her policies.

When we look at the Government's record over the past four years, we are looking also at the record of the struggle of trade unionists to try to fulfil the traditional role of protecting employment and of contributing to employment in the future. One of the sad things which have marked even this debate—and which I fear will mark many of our future debates on the subject if the right hon. Lady carries out her pledge to introduce legislation on it—is that people have been speaking with no understanding and no grasp of the role that the trade union movement has played and will play, or of how ordinary trade unionists, whether shop stewards or members on the shop floor, struggle to find out from their management the facts about how their industry is being affected by the recession, and struggle to discover what contributions they can realistically make, without damaging too greatly the interests of their members, to the survival and future prosperity of their firms. All too often, owing to the divisive nature of our industry, they find that their legitimate interests are snubbed because the interests of the work force are of so little concern to so many managements and shareholders.

It is time that more Conservative Members recognised that trade unionists, finding themselves and their communities faced with the threat of redundancy, are conscious that they are dealing not only with their own but with their children's future. They do their utmost to deal with the problem in that spirit.

In Derby, unfortunately, as elsewhere, the record of developments over the last four years is one of redundancy followed by more redundancy followed by even more redundancy, all within the same firm, until gradually, one after the other, major employers in the constituency have closed. Under the Conservative Government, unemployment in my constituency has more than trebled. When Conservative Members speak so fulsomely of the role of small companies, they seem to forget that small companies go down with the large as their markets and the people to whom they sell their supplies and services disappear.

I have heard a great deal lately about the proud record of the Government in helping to create small companies. All too often, those small companies are created out of the large ones that existed before the Government's economic policies came into effect.

In my constituency, two recent developments are causing yet greater concern. A recent study has been published by the local authority drawing attention not only to the figures for unemployment in the Derby travel-towork area, which are themselves depressing, but to the fact that, when the pattern of unemployment in the area is examined more closely, it can be seen that in the inner city area of Derby, most of which is in my constituency, unemployment is running not at 11 per cent., which is the figure found more widely in the travel-to-work area, but at 26 per cent. or more. It is, of course, in the very areas of the inner city, where unemployment is at those levels and at its highest, that all the other worse aspects of deprivation are endured. We shall be seeking, with the local authority, to press the Government very hard for the help that the inner cities need and demand in order even to begin to scratch the surface of the problems faced by the people who live within those areas.

The second matter that is causing great concern is the comparatively recent revelation — as recent as the Conservative party's election manifesto—that not only British Rail, one of the major remaining employers in my constituency, but one of the other major remaining employers, Rolls-Royce, is directly threatened by the Government's industrial policy. The Government's dogmatic and vindictive opposition to public ownership is sufficient in itself to cause dismay, but when, as in my constituency, the jobs of thousands of my constituents and their families depend directly on the results of the Government's policy, the position is seriously alarming.

I think that it was the right hon. Member for Guildford (Mr. Howell) who mentioned the opportunities for private enterprise that the Government's privatisation policy is likely to bring. I fear that the only opportunity for private enterprise that will be created if Rolls-Royce is put up for sale will be the opportunity for its American competitors to buy it so as to close it down and remove a competitor that they much fear in world markets.

In the Serpell report about the future of British Rail, the implications of privatisation and change in the industrial structure are that British Rail should look elsewhere, if necessary abroad, for its supplies of carriages, wagons and locomotives. None of those things holds any great attraction for my constituents. The unemployment that I mentioned is principally among the unskilled and semiskilled. That is bad enough, but now we have the increase in what I shall call technological unemployment. That unemployment is among people who are highly skilled and it is the result of technological change. To add to that, and to the threat of redundancies that we already face, the threat of unnecessary redundancies because of an unnecessary, blind and stupid policy being pursued by this Government is almost too much for people to bear.

Technological unemployment cannot possibly be dealt with without investment, yet as we have already heard several times, investment is falling to about one third of previous expenditure in this respect. Even if we are not to have jobs elsewhere in new manufacturing, we cannot possibly have jobs in other services and service industries which might mop up some of the pool of unemployment without increased investment, particularly on the public side — the very thing against which this Government have set their face.

My hon. Friend the Member for Birmingham, Ladywood (Ms. Short), in a remarkable and excellent speech to which many hon. Members have referred, spoke of the way in which this Government and their leadership are hated in her constituency. I would not go so far as to say that this Government are yet hated, but I can say without fear of contradiction that they are feared, not in the sense that I am sure the Prime Minister would wish, fear out of respect, but for their arrogance and blind and senseless refusal to consider anything that will secure a future in education or employment for our young people.

The Prime Minister has made much of her admiration of the Victorians. I wish that one of the things that she admired about the Victorians was the way in which they understood investment in the future. When we look at the parts of the country that are decaying, we are looking at areas where the Victorians had the wit to invest money in projects, the future of which would benefit not just their children but their grandchildren. That wit is something that the right hon. Lady all too clearly lacks.

Every city has landmarks of which it is proud. In Derby one of our prides today is an excellent industrial museum which contains testimony to a rather glorious industrial past. My task and that of other hon. Members on these Benches during the lifetime of this Government is to ensure that under the right hon. Lady we do not reduce our city and the whole country to an industrial museum.

8.23 pm
Mr. Andrew MacKay (Berkshire, East)

I join the hon. Member for Glasgow, Maryhill (Mr. Craigen) in congratulating you, Mr. Deputy Speaker, on your new appointment. Since I last sat in this House, it seems that we have both been reincarnated. Having listened to the debate today, and the speeches of the hon. Members for Derby, South (Mrs. Beckett) and Dagenham (Mr. Gould), and seeing the new Member for Hackney, South and Shoreditch (Mr. Sedgemore) resplendent down there below the Gangway again, as he was before, and seeing my colleagues on these Benches, if the right hon. Member for Down, South (Mr. Powell) said that the House yesterday was in the midst of an ocean of virgins, today we must be seeing the age of the retreads.

I have come back to the House representing the new constituency of Berkshire, East. It is made up of three existing divisions, and I pay tribute to the work of the three Members concerned. I should like to thank my hon. Friends the Members for Wokingham (Mr. van Straubenzee), Windsor and Maidenhead (Dr. Glyn), and Beaconsfield (Mr. Smith) for all their help and consideration during the transitional experience that we have just experienced.

The new constituency of Berkshire, East is large in both area and population. It is based around the exciting new town of Bracknell, which is an invigorating place in which to live and work, with a lot of new industry, much high technology, and, I am pleased to say, relatively low unemployment. It also has many established communities, names that are well known — Ascot, Sunningdale, Sunninghill, Datchet, Crowthorn, Sandhurst and Old Windsor. My electorate is over 84,000. That shows the growth of population in the area, and why it is so important for the House to ensure that there is a Boundary Commission report at least every ten years, so that there is a fair spread of the electorate through each of the divisions that make up our constituencies.

I have already said that I represent a high technology area. We are on the edge of silicon valley. I believe that my constituents will play a major role in revitalising our economy, and that we shall be in the forefront of creating the prosperity that I believe we shall see during the course of this Parliament.

My party has been elected with a great mandate. We have a sizeable majority, but I suggest that this—

Mr. Ronald Davies (Caerphilly)

It was interesting to hear the hon. Gentleman's description of his constituency. Clearly it is a very affluent constituency, one that contains many new industries and a flourishing population. However, does the hon. Gentleman realise that there are many parts of the country that do not share the luxury of having new industries, which do not lie on the edge of silicon valley, and which do not have the prospects that his constituency obviously enjoys? Does he agree that it is his responsibility to ensure that the Government he supports are prepared to follow policies that will ensure that the prosperity that he and his constituency enjoy is freely available to those parts of the country that do not currently enjoy it?

Mr. MacKay

I agree with the hon. Gentleman. Perhaps we should consider why we enjoy that prosperity. We do so because we have encouraged new modern industries, the industries of the future, industries that will create wealth and prosperity and jobs. We also have a first-class work force with a first-class industrial relations record. I suggest that the hon. Gentleman notes those points when—

Mr. Ronald Davies

Will the hon. Gentleman give way?

Mr. MacKay

No. I am sorry, but—

Mr. Ronald Davies

Will the hon. Gentleman give way?

Mr. Deputy Speaker (Mr. Harold Walker)

Order. The hon. Member for Berkshire, East (Mr. MacKay) has said that he is not giving way.

Mr. MacKay

Only a short time is available and many hon. Members on both sides still wish to speak. I shall conclude shorrtly and if I give way again it may preclude other hon. Members from taking part.

We live in an exciting age. The responsibility that is inherent in the Government's large majority is well reflected on the Conservative Benches. Those who elected the Government did so because they believed that that would ensure the future prosperity of this country and long-term full employment. They realise that the first duty of any Government is to create the right economic climate to ensure that our great industries are competitive and can operate in the markets of the world.

We have given the voters great expectations and we must not let them down. There are three areas in which the electorate expect much from the Government in the creation of an economic recovery. The first area is unemployment. The only way of creating lasting jobs is to ensure that our industry is competitive, that we produce the goods that people at home and abroad want to buy and do so at prices that they can afford and to a quality that makes them re-order time and again.

That is why I am confident, on behalf of my constituents, that during this Parliament, as we continue our economic programme creating the right climate, we shall create lasting jobs.

The second area where the electors expect much of the Government is income tax reductions. The Conservative Government were elected in 1979 on a manifesto that pledged reductions in personal income tax. We know that we did not fulfil that pledge, and I am pleased that we did not do so, because in the economic climate of that time it would have been dangerous, immoral and wrong to have made cuts in income tax.

However, I suggest to my right hon. Friend the Chancellor of the Exchequer that, as we create prosperity, it is vital that our wealth creators should benefit from across-the-board reductions in personal taxation which will give a greater incentive to people to work harder and thus create more money.

Mr. Boyes

Will the hon. Gentleman give way?

Mr. MacKay


We must cut income tax for lower-oaid workers. Let us not fiddle with the standard rate; let us raise the thresholds across the board and take the lower paid out of tax altogether. That will give them a great incentive to work.

The final area in which the electorate expects much from the Government is essential services. In the midst of an economic recession, the electorate returned a Conservative Government because they understood why we make public expenditure cuts. We are immensely proud of making many of those cuts. [HON. MEMBERS: "Shame."] We were cutting out waste and bureaucracy. I know that Labour Members are in favour of waste, bureaucracy and jobs for the boys.

Mr. Boyes

Will the hon. Gentleman give way?

Mr. MacKay


People have regretted the cuts in essential services, in hospitals and schools, but they understand why they have been made. Education is an investment in our future and I believe that more funds must be made available for our hospitals. Therefore, I hope that when we create sufficient prosperity the Government will ensure that more money is allocated in areas where there is considerable need. That will be greatly appreciated.

As I said at the outset, we have been given a tremendous mandate. There is great responsibility with such a large majority, and rightly, there are high expectations. I am delighted to be back on the Conservative Benches to help and observe the Government achieving our economic prosperity and, as a result, being elected in five years' time for a third term in office.

8.35 pm
Mr. Austin Mitchell (Great Grimsby)

First, Mr. Deputy Speaker, I congratulate you on your appointment. It is a pleasure to see you in the Chair.

Secondly, I congratulate the hon. Member for Berkshire, East (Mr. MacKay) on his return to the House. I remember our confrontations of four years ago when he was a Member in previous incarnation. In those four years the country has become poorer and unemployment has trebled. Manufacturing production has fallen by one fifth and the hon. Gentleman has not aged a bit. Clearly, his economic views have not changed from the views that he propounded four years ago, either. Like his Government, he has learnt nothing and forgotten nothing — which does not augur well for the economic problems that Britain is about to face.

Thirdly, I congratulate the Chancellor. He has taken over, rather like a receiver taking over bankrupt stock, from the most disastrous Chancellor that Britain has had since the war and probably this century. The previous Chancellor has gone, as Foreign Secretary, to face on the international scene the consequences of his policies—high interest rates that have produced the international debt crisis that the developing world is facing, domestic deflation which has meant a depression of the demand for primary produce of the developing countries, and the collective refusal to act to take the world out of a depression for which he was partly responsible as Chancellor.

The previous Chancellor has moved on, leaving the right hon. Member for Blaby (Mr. Lawson) to cope with the consequences of his policy which the Saatchi and Saatchi-isation of politics describes as the consequences of success. In fact, they are the consequences of disastrous failure. They are the consequences of the tragic decline that Britain has experienced in the past four y ears under the previous Chancellor's policies. The right hon. Gentleman takes over as Chancellor with the sky black with chickens coming home to roost from the policies of the past four years.

In welcoming the Chancellor I have no great hopes that he will learn the lessons of the past four years. It is true that he is not a theoretical, doctrinaire, dogmatic monetarist. He is worse. He is a monetarist who makes it up as he goes along with the same enthusiasm with which, as editor of the Spectator in the 1960s, he espoused expansion and devaluation. He is the principal author of, and the sole remaining believer in, the medium-term financial strategy, and that qualifies him for the epithet of still being crazy after all these years.

The Chancellor will find that there is no escape from the consequences of his legacy. In some ways the previous Chancellor attempted to wriggle out from the strict rigours of the medium-term financial strategy like a middle-aged man wriggling out of a corset. He had managed to escape in part, but it will now be fitted back again. He was able to escape in part because the election victory that the Government have just enjoyed was in large part a consequence of denouncing the Labour party's expansionary policies when they were unveiled by my right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) only to grab them and use them for their benefit to get the Government returned.

Labour Members have consistently advocated an expansion of the economy and a devaluation strategy for the pound sterling. In fact, the Government have massively increased domestic credit. There has been a huge domestic credit expansion over the past 15 months. In the 15 months to the end of March the domestic credit expansion was some £20,709 billion. In other words, it was twice the increase in the money supply and twice the rate of increase in the money value of output.

There has been that massive increase in domestic credit during that period, more than double the amount needed to finance current transactions. There has also been a substantial devaluation and fall in the pound sterling. Both of those policies, which the Government denounced when they were put forward by the Labour party as portending the onset of economic disaster, were seized on by them as auguries of recovery, because the credit expansion triggered off asset speculation, particularly in the price of shares, to the benefit of the Government's friends. Indeed, during the past 18 months there has been a dramatic increase in the price of shares and some movement towards an increase in the price of houses.

The fall in the pound sterling meant a recovery in demand, and apparently better export prospects. When those two things were happening, the Government seized the opportunity to go to the country in a general election. Unfortunately, they did not allow those two policies to affect the economy's underlying problems, because there was no fall in interest rates, which would have allowed the domestic credit expansion to channel through into investment, and thus into growth and jobs. It was frittered away in asset speculation. The Government also began energetically to attempt to reverse the devaluation in the pound sterling. Indeed, the pound has been pushed up since March by about 10 per cent. In other words, the increase in the value of the pound against European currencies in a few weeks is higher than the common external tariff that we would have to face if we came out of the Common Market. The Government told us that that tariff would cost 2 million jobs, yet they have let the pound rise to a higher level than the tariff barrier that we would have to face. Thus, there has been an increase of about 10 per cent. with, apparently, not a care for the consequences for industry.

We now have a new Chancellor of the Exchequer who must cope with the consequences. I am fearful for the future of interest rates, because although the Government proclaim their intention and determination to reduce interest rates, all the signs are that with the money supply figures, the economic situation and the moving American economy as they are, interest rates in Britain will rise. Whether those who voted for the Government were householders, borrowers in hock to the bank, possessors of hire purchase contracts or industrialists wanting to borrow, they should know that the automatic consequence of a Government who put money before people, who manage the economy through money supply figures, and who believe that sound money is more important than the real economy of jobs and production, is high interest rates prolonged into the future, with all their crippling effects on the economy and all the consequences in terms of overvaluation of the pound sterling.

The constant prating from the Conservative party about competitiveness, and making ourselves more efficient and productive, completely ignores the chain tied by the Government to the foot of our competing manufacturing industry by the continuous overvaluation of the pound sterling, which is going on even now. The pound is still enormously overvalued compared with our principal competitors. We cannot be exposed to the blast of industrial competition and free trade with the Common Market while at the same time carrying the burden of that overvaluation. We could perhaps have one or the other, but we cannot have both at once because that is disastrous for the manufacturing economy of jobs. That is another of the chickens that must come home to roost.

Perhaps more immediately important is the balance of payments problem that the country has suddenly, but predictably, run into as a result of this Government's policies. During the past four years we have seen a rapid erosion of our industrial base, source of the manufacturing exports and international trade that we rely on for survival in the world, to pay for our imports and to provide jobs in this country. That has been decimated during the past four years and we are now seeing the consequences in the looming balance of payments problem. Indeed, the problem will get worse, because as the manufacturing base declines, imports will rise remorselessly, particularly if they are encouraged, as they are, by an overvalued exchange rate. The Government have wasted the God-given benefit of oil, which gave us the potential to expand, and was like an overdraft facility to allow us to do what we have never been able to do since the war—to grow continuously and to invest. It has been frittered away on a flood of manufactured imports, which have destroyed jobs in Britain, and the tax benefits have been used for the unemployed thus created.

Conservative strategy has been deliberately to depress and deflate the economy, destroying jobs as a discipline to the work force. The consequences we face include a balance of payments crisis. Whereas other countries have managed to build up their exports and competitiveness in such a way as to survive the increases in oil prices, we have frittered away our opportunity and the deflation which the Government have gone in for voluntarily, even enthusiastically, as a discipline on the workers will be forced on them again as a consequence of the balance of payments crisis which their policies are creating.

Imports will continue to grow because our manufacturing base will continue to decline as a result of Conservative policies, and as it declines, our ability to pay our way in the world will decline. That is the most depressing consequence of the four wasted years under the previous Chancellor of the Exchequer.

Even more alarming is the inevitability of cuts in Government spending, or increases in taxation, as a result of the policies that have been pursued. We do not need leaked papers from the Cabinet, the Think Tank or the Chancellor of the Exchequer to tell us—it is common sense—that we cannot finance an increasing burden of taxation to pay for unemployment. Each person unemployed costs about £5,000 a year in taxes not paid in and benefits paid out. That cannot be financed on a shrinking productive base.

The only way in which the current burden of expenditure for the welfare state, defence and everything else can be financed is by expanding the economy, by beginning to rebuild British industry and by the country generally starting to grow. But if the Government try to finance all of that on a declining productive base, they will have to go in for cuts.

In that context, it was interesting to see how cunning the Conservatives were during the election campaign by producing a manifesto that was full of escape clauses. How dilatory were the media and the pundits who, while busy hounding the Labour party in respect of its policies, did not ask what would be cut, if the Conservatives became the government again, as a result of the inability of Britain to finance an increasing burden of taxation on a shrinking productive base. That question was never asked and the Conservatives were allowed to get away with it. It was one of the most feeble efforts by the media to ask questions at election time.

Cuts are now inevitable and the new Chancellor of the Exchequer will have to clean up the mess if he is to continue his predecessor's policies, which are bound to mean further industrial decline and more cuts. We in Britain need a new beginning. We need a new Chancellor with a new insight and a determination to expand and rebuild so that we can compete in the world and support the burdens of the welfare state. Instead, we have a new Chancellor who believes in the strategies that produced this ruin in the first place. If we have had disaster up to now, it will be disaster cubed as a consequence of the Conservatives' failure to change their policies.

That disaster will lead on inevitably to decline. There is no conceivable way that the policies of the present Government can lead to the national greatness, growth and economic expansion that they have been promising. How can a policy of depressing investment and cutting expenditure on research, design, development, training skills and everything else that is necessary to make a country competitive in the world lead to growth, expansion and jobs? From where are the jobs to come, anyway? It is impossible for the policies to lead anywhere except to decline.

The policies of the Government will lead the country into a semi-retired—one might call it a Denis Thatcher — economy, in which those with wealth benefit and grow fat and those who produce the wealth are thrown into idleness as resources are wasted and productive capacity closes down. The country will then continue to decline, posturing in the vainglorious attitudes of the Prime Minister.

The Government tell us that we are an example to the world because we are about to expand. In fact, we are the laughing stock of the world, because we are destroying our manufacturing industry, the only factor that will allow us to survive, expand and carry the burdens of the welfare state. The country wants the welfare state and it is something that any advanced and respectable society must have. It is one of the inevitable consequences of the 20th century. It is everyone's right and we cannot finance it without investment. Industry, on which all else rests, is being destroyed or has been destroyed. That which remains will be destroyed as a consequence of the Government's policies.

The CBI has sat back and sung supine hymns of praise. In effect, it has told the Government to continue with the medicine. There can be no greater love than that a man shall lay down his firm for his prejudices in the way that British industry has been doing for the past four years. There can be no greater incompetence either.

This is not altogether the fault of industry. The fault lies with the Government, who knew nothing about industry or jobs. They might have known about law, financial manipulation. advertising and public relations. They knew nothing about the real world of industry, jobs, people, under-employed resources and waste of lives. We know the consequences of their policies and they will continue. They are felt by the people that Labour Members represent. Conservative Members who are grinning so asininely and sitting on their fat fortunes do not feel the consequences. But they will, for they lead remorselessly to decline and disaster.

8.52 pm
Mr. Michael Colvin (Romsey and Waterside)

May I congratulate you, Mr. Deputy Speaker, on your appointment as Chairman of Ways and Means? We have heard an interesting speech from the hon. Member for Great Grimsby (Mr. Mitchell). I know that the hon. Gentleman used to represent Grimsby. One day, perhaps, the electors permitting, and if he is in the House for long enough, the adjective "great" may be used to describe him. As for his speech, I am afraid that he is a very much better journalist than he is an economist.

I pay tribute to the powerful speech of my right hon. Friend the Member for Cambridgeshire, South-East (Mr. Pym). I welcome his reference to the need to face the structural change in employment in this country. His speech was a clarion call for new attitudes to unemployment, and I trust that it will be heeded.

I congratulate my hon. Friend the Member for Bolton, West (Mr. Sackville) on his maiden speech and on becoming a powerful addition to Conservative Members who speak on behalf of the aerospace industry. I echo his call for a decision in favour of the ALARM anti-radar missile. There is no acceptable excuse for not buying British in this case.

Before Conservative Members go overboard with self-congratulation on the general election result, we should perhaps remember that it is now the custom in British elections to vote for negative reasons. The electorate no longer says, "We shall vote for this party because we believe in what they say and what they are proposing to do in their manifesto." Most people, although not all, vote for certain parties because they cannot stand the thought of the alternative.

In 1979 the main election issues were prices and misuse of trade union power. Where there was a positive vote for the Conservatives in 1979, it was because our party was thought to be the only one capable of bringing down the rate of inflation and curbing excessive trade union power. We have not disappointed our supporters on either count. In the election which we have just concluded, the main issue was jobs. That was true in the new constituency of Romsey and Waterside, which I am now proud to represent. I pay tribute to my hon. Friends the Members for Eastleigh (Sir D. Price) and New Forest (Mr McNair-Wilson), who used to represent the areas which now form the constituency that I represent. Happily, the) are both still in this place.

Even with an unemployment level of over 3.5 million, there was still a landslide victory for the Conservative party. It is therefore almost impossible to find anywhere to sit on the Conservative Benches during Question Time. Why did we win so convincingly I think it was because people have become realistic. During the election they realised that there was a world recession; that things would be bad whoever was in power; that we were living through a second industrial revolution; and the truth of what the Prime Minister has said, that a quick remedy to the problem of unemployment would be a quack remedy. They realised that the long haul back to international competitiveness was bound to lead to higher unemployment in the short term, and that the Government are the first to have had the courage to reject the so-called full employment, demand-controlled policies followed by Governments of all persuasions since 1945 — policies responsible for putting off the day of reckoning which was bound to come.

Many of the unemployed voted Conservative because they could not believe what the Opposition were saying about providing more jobs while their policies seemed likely to destroy jobs. They voted Conservative because they believed that in the long term we had more credible answers to cutting dole queues than our opponents. But — this is the big "but" — the real debate about unemployment, how to face up to the structural change taking place, how to cope with the microchip and the problem of a growing proportion of elderly people in employment was never really touched on in the election campaign. No one was bold, brave or perhaps even silly enough to ask whether we would ever see full employment again in Great Britain. The answer may well be no. Consequently, no one ever asked the supplementary question, "What should we be doing to counter the threat of permanent, long-term unemployment levels in the millions?" Therefore, no one spoke during the election campaign about the way in which we will have to adapt to a completely new employment scene. To the question: Will Great Britain ever work again? the BBC in an excellent television programme at the weekend, answered with the words: Perhaps, but only if it is a very different Britain. If we wish to avoid further trouble with unemployment we must not repeat yesterday's mistakes. We have 3.5 million unemployed today because of the failure to move with the times when most of our competitors are doing so. We have had a lack of adaptability, which is probably organised labour's fault. We have seen a lack of foresight, which is management's fault. Too much of the profits of firms is being taken out, and not enough reinvested, and that is the shareholders' fault. We have a lack of incentives, too many controls and a failure to face up to the changes in business, which is probably Government's fault, although many controls have gone and many more will go.

For too long we have been pointing the finger of blame at one another. We must admit that we are all to blame. Where do we go from here? First, we must accept that we face a jobs crisis. It has been said that crisis and opportunity are the same things. We must therefore seize this opportunity for change for all we are worth. We must accept that employment in manufacturing industry is unlikely to increase. Output could rise by 25 per cent. without any new jobs being created. New investment will be in machines and not men.

Secondly, we must accept that if industry can create more work, it will have a multiplier effect—jobs will be created elsewhere, but largely in the service industries and information technologies.

Thirdly, we must accept that a new hothouse business environment is required in our university and polytechnic campuses if we are to generate the new technology ventures required to beat overseas competition. Anyone who has been to Stanford university at Palo Alto in California, which became "silicone valley", or visited Boulder or Colorado Springs, knows what I am talking about. We must encourage our professors with bright ideas to capitalise and profit from them. There is nothing wrong with that.

Fourthly, greater job mobility is a must— not just movement within the firm, from one skill to another, but more mobility from one employment to another. That means more rented accommodation and transferability of skills and pension rights. It is ridiculous that people get locked into jobs because it is impossible to move their pension from one firm to another. We must prepare the younger generation during their years of education for more frequent changes in jobs in their adult lives.

Fifthly, training must be more broadly based. The youth training scheme is a splendid start and will stay permanently with us. No one knows for how many different jobs youngsters will now have to train. Gone are the days when, on average, workers in Britain had two jobs and one career in a lifetime. We are now moving towards the United States average of six jobs and two careers in a lifetime of work. That calls for a major rethink on training and retraining. We need new attitudes towards certain jobs and pay. The young must not be fussy about what they do. Any job is better than none, even if the pay is low. A good reference is the passport to a better job. We must accept that there can be status and dignity in all work, no matter how ordinary the task. We must abolish the wages councils at the earliest opportunity. At present they are no more than a way or destroying jobs by law.

Sixthly, if any job is better than none, surely half a job is also better than none. We must have another look at the Government's job-splitting scheme. It was launched in January this year, with 50,000 full-time jobs to be split, but only a handful of applications have been approved. There is not sufficient incentive to share work. Perhaps the restrictions on social security payments are too stringent. Job splitting and work sharing are here to stay. We need a better scheme to stop a good idea being stillborn.

Seventhly, there is still much talk about lowering the retirement age. Inevitably that will come, but to begin with an extension of the job release scheme, whereby those leaving employment make way for youngsters coming in, must be a better way of tackling the problem.

Finally, we must look again at regional aid policy to see whether grants to assisted areas might be related more to the number of jobs created than to the amount of capital invested. Capital intensive industries create wealth, but too often that wealth is transferred out of the region, and the multiplier effect for jobs is lost to the local population.

I have tried to cover a wide area in a short time. In doing so, I have accepted the obvious, that proper overall management of the economy is the key to greater prosperity and more jobs. Nothing will improve unless there is confidence in Britain. The parliamentary strength of the Conservative party is a measure of the vote of confidence that the Government received on 9 June.

9.7 pm

Dr. Jeremy Bray (Motherwell, South)

Today's debate has shown that this Parliament will be an interesting one. We have had realism and passion on Opposition Benches and trite complacency on Government Benches. To do him credit, the hon. Member for Romsey and Waterside (Mr. Colvin) tried to give a note of realism to the problems that the Government face. Ministers showed no interest at all in his remarks.

I welcome the fact that the Chancellor of the Exchequer's first act was to reduce interest rates when the money supply was moving further outside the target range and the exchange rate was rising. By that simple act the Chancellor signalled that he will not defend the naiveties of which he was the principal author in the original statement of the Government's medium-term financial strategy in 1980. In the Financial Statement and Budget Report, the Government said: there would be no question of departing from the money supply policy, which is essential to the success of any anti-inflationary strategy. The rule was no sooner stated than it was breached in the first year, first by the structural changes in the money market. made by the Government, and then in 1981, when the Chancellor of the Exchequer clearly shifted interest rates because of their effect on industry and the exchange rate rather than because of any considerations of money supply. The new Chancellor was the first to adopt a revisionist attitude to his own dogmatic orthodoxy when, as Financial Secretary, in his speech to the Zurich Society of Economics in 1981, which I am sure he will remember, he indicated a move away from sterling M3 as the sole monetary indicator. But it was not before enormous damage had been done to the competitiveness of British industry. The irony is that the Government most committed to the view that inflation is the root of all evil in society caused the biggest surge in inflation in any major industrial country in modern times, in the markets that matter most—for its exports.

The Prime Minister is a poor shopkeeper. She should know that shopkeepers who charge too much for their goods go out of business. British firms have been going out of business in their thousands because she has been forcing British industry into charging prices abroad that are too high. She has achieved stable prices and lower inflation at home at the deliberate expense of pushing British industry out of export markets. Is that good shopkeeping? Is that what she learnt in the corner shop in Grantham? If it is, hundreds of thousands of British industrialists could teach her a thing or two about the facts of trade in the modern world.

The Chancellor is made of more sophisticated stuff than his predecessor or the Prime Minister. He has told us that inflation is not to be measured by prices or by his own tax and price index but by the underlying growth in the money supply. Can he tell the House how big an inflationary surge we can expect as prices catch up with the money supply increase that has taken place since 1979? Or will the House get an acknowledgement that, with structural change and variations in velocity of money, to which he referred in his speech, the idea of targeting on the money supply was a disastrous and hideously expensive mistake?

Not for the new Chancellor the simple comforts found by the previous Chancellor in the conventional platitudes of the Finance Ministers and Heads of Government club. Not for him the solace found by his predecessor in the sad spectacle of the collapse of the ill-prepared Mitterrand Government into restrictive measures as, Canute-like, they refuse to face the realities of exchange rate adjustment and inflation. Even so, he will have noticed that for all its window-dressing, the EMS, by acting as a managed crawl, has kept the French franc and the Deutchmark within a far more stable band of competitiveness than sterling, with the result that it is very unlikely that French industry will be slaughtered as British industry has been in the past four years.

Where are we to go? Not, I hope, into the EMS in an attempt to make sterling fit its archaic design. Nor yet will the Chancellor want to leave British industry floating with no guide for its expectations in the type of vacuous formula that he put forward this afternoon when asked him about the expectations that British industry could form over its future competitiveness. If we wish to see the arguments and analyses that the Chancellor needs, they are spelt out in successive reports of the Treasury and Civil Service Committee in the previous Parliament, from our report on monetary policy in 1981 to our final special report on international monetary arrangements, published during the general election campaign with its two drafts, one the draft of the Chairman, the right hon. Member for Taunton (Mr. du Cann), which I think that the Prime Minister probably improperly saw before she should have, and the other my own consolidated amendments to the latter part of the Chairman's draft.

The chairman's draft represents the general line which the Committee would have taken if time had permitted it to complete the necessary work". Those are not my words. They are the precise terms that the Committee agreed unanimously and that were recorded by the Clerk at the Committee's last meeting on 11 May, the proceedings of which were published only this week. Those words appear in the Chairman's draft of the special report of the Committee circulated to members of the Committee on 11 May. Now that the election is over, I am sure that they remain the terms in which the whole Committee would commend that report to the House for consideration.

The influence of Select Committee reports depends on the quality of the arguments and the evidence that they contain, not on any ex cathedra authority. That is as it should be. In his first actions, the Chancellor has already shown how much influence is exercised, even on this Government, by the arguments that we put into that report. Those arguments are certainly receiving the attention that they deserve from the technicians in Government as well as from international organisations and other bodies outside.

A sentence from the Chairman's draft echoed around the headlines during the election period. It was: Thus something under half the rise in British unemployment may plausibly be ascribed to the world recession". Even if, on consideration, the Conservative majority on the Committee had insisted on the deletion of such sentences, the indictment of past Government policies would have remained. It is inseparable not only from the whole thrust of that inquiry but from the conclusions of the Committee throughout the last Parliament.

If there are lessons to be learnt, it is that Government and Opposition should appoint to such important Committees intelligent Members who are prepared to work hard and preferably Members who have some knowledge of the subject. There was a majority of such Members in the Committee in the last Parliament and I trust that there will be in this Parliament. That is more important than the particular prejudices with which Members may start, as the processes of careful inquiry will often change those, but they cannot remedy stupidity, laziness or lack of interest on the part of any Members with whom the Government may try to pack such Committees to neuter the examination of Government policies.

I am sorry if the right hon. Member for Taunton is not to continue as Chairman of that Committee. He gives outstanding service to the Committee, to the House and to his party. If a new Chairman must be found, and if the best solution of leaving it to the Opposition is unacceptable, I hope that the right hon. Member for Worthing (Mr. Higgins) will think twice before he accepts the chairmanship. He was not at his best on the Committee, and he showed again today the confusion into which he sometimes lapses in handling the more difficult arguments with which the Chairman will have to cope. With his particular interests, there will be no lack of opportunity for him in transport, procedure or elsewhere, and there is no lack of suitable candidates on the Conservative side. I do not expect to continue on the Committee in this Parliament, but I wish it well in its important role as the central focus of economic inquiry in the House today—which the Government, as they fall into further economic disarray, need more than any previous Government did.

Returning to the argument of the report on international monetary arrangements and the unusual circumstances of its publication, it is fair to refer to the major points of criticism made by Treasury officials of the Chairman's draft. They far exceeded their proper function of correcting errors of fact. The most interesting suggestion that they made was that in fact there might not be an intermediate position between a rigid, fairly narrow exchange rate range and no effective target at all because the exchange market would force the authorities to behave in one way or the other. I hope that the Chancellor will pay attention, as this is an important problem for him now. That suggestion could be taken to mean either of two things. It could mean that because a fixed exchange rate is unthinkable, due to the huge volume of potential capital flow, no exchange rate target is practicable, or it could mean that if an exchange rate target is chosen which is compatible with the fundamentals and is kept compatible with them—that is, with expected relative inflation rates and the current balance of payments—the exchange rate will be highly susceptible to official influences and the target will be rather closely followed with speculation stabilising rather than destabilising.

If the Chancellor examines carefully the way in which monetary policy in Germany and Japan has been conducted and what have been the objectives of those Governments in maintaining competitiveness, he will find that there is something to learn. The argument of Treasury officials here is probably sound and their conclusions are probably right.

I wrote my consolidated amendments to the Chairman's draft to answer the criticism of Treasury officials. I trust that both drafts will be examined by Treasury officials and that, when they try to help the Chancellor sort out the rather muddled state that he has inherited—as shown by his speech today—practical steps will be taken to guide him through what I think he does not quite understand is the state of the Treasury to which he has returned.

The practical conclusion on which the Chairman's draft and mine agree is that it is possible and necessary to pursue a policy that combines the objectives of stabilising competitiveness and restraining inflation, consistent with achieving a reasonable level of activity and economic growth. I believe that it is better to make explicit the objectives of full employment, stable prices and growth, with intermediate targets being the current balance and competitiveness, and the relative priorities to be attached to each.

Treasury officials are polishing up the methods for the operation of such a strategy, as are others in Britain and abroad. It will be no use to the government to retreat into a philistinism which, in the bold, brave days when they came into government in 1979, they rejected. If they now think, as a result of experience of Government, that their majority automatically confers on them wisdom that the failure of their economic policies in the past four years has shown was missing, they are mistaken. The changes of direction in the formulation of their basic economic strategy have shown this. It is open to the Chancellor—he is an intelligent fellow—and his fellow Ministers to think seriously about these matters. If they take the trouble to listen to what I suspect an increasing number of their Back Benchers will soon tell them, they will be able to learn from experience. To judge from the attitude of the Prime Minister, however, I am not too hopeful.

We shall listen carefully to what the Chancellor says. Most of all, we shall watch what he does. If he makes as many mistakes in this Parliament as the Government made in the previous one, nothing will be able to save the economy from destruction.

9.18 pm
Mr. John Silkin (Lewisham, Deptford)

It has been said that, of all the set pieces in the parliamentary year, the debate on the Address is the most theatrical. In this, the first presentation of the new Parliament, we have a new Speaker and a new Chairman of Ways and Means. I offer my congratulations to both. They symbolise the enormous change in the cast list since the previous presentation.

However, the change has been reflected in a greater collection of maiden speeches than I can remember—31 in all. Right hon. and hon. Members who have already spoken have paid justifiable tributes to all those who have spoken on previous days. I am sure that the House will forgive me if I do not recall each one. However, to judge from the high quality of maiden speeches made by my hon. Friends, the Prime Minister can count herself lucky that we did not win another 50 seats, or she would have been in for an extremely difficult time from the start.

I pay special tribute to two old friends—my hon. Friends the Members for Houghton and Washington (Mr. Boyes) and for Greenock and Port Glasgow (Dr. Godman). Both made impressive speeches, and it is good to see them here. I also welcome my hon. Friend the Member for Stoke-on-Trent, Central (Mr. Fisher), who made an excellent speech of which his distinguished father must be very proud. There were two maiden speeches from the Government Benches today. The hon. Member for Bolton, West (Mr. Sackville) paid tribute to Ann Taylor, of whom we are very fond and whom we miss greatly. Unfortunately, I missed the speech of the hon. Member for Folkestone and Hythe (Mr. Howard), but I understand that it was extremely interesting, and we hope to hear from him again soon.

The Opposition maiden speech today was by my hon. Friend the Member for Birmingham, Ladywood (Ms. Short), who has the double distinction of being the wife of Alex Lyon, an old friend of ours whose loss we deeply regret, and in her own right a formidable orator who had much to tell us about her constituency. If that is the strength of her first non-controversial speech, please may we have many more?

The Gracious Speech opened the sequel to the Prime Minister's 1979 theatrical offering. Part one, as it was produced during the past four years, bore little relation to the storyline promised in advance by the author. Time will tell whether part two conforms more closely to the bland text proffered in June 1983, of which the Chancellor of the Exchequer did not have a copy and for which he had to send to the Box. The Prime Minister's scheme for the immmediate future is one with which we are familiar, even if some of the major characters have been replaced by more stereotyped figures, perhaps better fitted to her plot.

The Prime Minister is intent on writing a role for herself as a major counter-revolutionary figure of the 20th century. The Liberals and members of the SDP—those of them that are still here—call themselves the mould-breakers, but the real mould-breaker is the Prime Minister. [HON MEMBERS: "Hear, hear.") I would not cheer quite so soon if I were on the Conservative Benches. Hon. Members must wait a little.

The last time that the Labour party experienced two consecutive general election defeats, one of its foremost thinkers, Anthony Crosland, concluded that the Conservative party aimed to preserve the present, not to reinstate the past. That may have been true in the 1950s, and it may have been true of the Tory party of Harold Macmillan and Rab Butler, but it is as plain as a pikestaff that matters are different today. The present Conservative party has dared to attempt the very thing that Crosland did not imagine was possible. It has taken up an ideology, become dogmatic and entrusted its leadership to people deeply attached to the values of a bygone age.

Under the Prime Minister's leadership, the Conservative party has abandoned the middle way of Harold Macmillan. It has been done ruthlessly and efficiently, and the major protagonists of the middle way now sit on the Back Benches. We had a good example of that this afternoon in what I believe—most right hon. and hon. Members will agree with me—was one of the great speeches of this debate. It came from the right hon. Member for Cambridgeshire, South-East (Mr. Pym). For many years he and I have shadowed each other, fought each other and disagreed with each other in a variety of different occupations, starting with the Chief Whip's job or even earlier. In all cases, we have learnt respect and affection for each other and the respect and affection that I bear him are based upon his great integrity. That integrity came through in his speech.

I do not accept the right hon. Gentleman's warning to my party, although every party that loses a general election should be warned and should look into its own soul to see where it went wrong, but I accept his warning to his own party. He stood there, in all his humanity and humidity, and said that the Conservative Government had gained fewer votes than they had in 1979, and that is the case. He went on to say that he regarded the Conservative party as a party that should serve all the people and not just those who can stand on their own two feet. That was an attack on the Prime Minister's philosophy, and a justification of his philosophy and of his belief in Macmillan's attempt years ago to preserve the middle way. Unfortunately, the right hon. Gentleman is out of date in the Tory party today. The Tory party may have gone too far. Even St. Francis would not have been able to keep the chairmanship of the 1922 Committee under the right hon. Lady the Prime Minister.

It is noticeable that there has been no press comment about the takeover of the Tory party by Right-wing militant extremists—such phrases are always left to the attacks on the Labour party. I cannot recall reading anywhere any press criticism of the Prime Minister for her extremism, even when she backed the candidature of a former member of the National Front. That is strange, for the Prime Minister's policies are extremist. It is for this reason that her view of freedom is so dangerous to the preservation of democracy. That she has a narrow view of freedom was illustrated the other day by her remarks about what lies at the heart of Tory philosophy and the link that she makes between liberty and property ownership.

The Prime Minister defines liberty in terms of the right to buy council houses at a good rate in all circumstances. She does not define it in terms of the right to work, the right to a living wage or the right to economic security, and these are the fundamentals of liberty. She draws a line between those in employment, earning average or above average wages, on the one hand, and the low paid, the chronically sick and the young jobless, on the other. She encourages not freedom but selfishness, and, what is worse, a selfishness that can flourish only in the short term, for unemployment, as my hon. Friend the Member for Dagenham (Mr. Gould) reminded us today, affects the stability of the whole country. The waste of human resources and skills embodied in this philosophy threatens the livelihood and even the security of the fortunate themselves. That was why the riots in Brixton, Toxteth and Bristol a few years ago were warning signs. Do not let us run away with the idea that another four years of this philosophy will make us immune from those things.

In 1848 or 1849, Simon, the medical officer of health for Manchester—the first such and a man to whom the country owes a great debt because he brought preventive medicine into the community and abolished such things as cholera and smallpox—was asked to report to the city fathers on the riots of young people in Manchester in 1848. He said—I have not the exact words but his point came to this—that society should not be too surprised if those whom it treats as outcasts eventually refuse to live by society's rules. His report represented good Victorian values, not bad ones.

The Prime Minister restricts freedom to those individuals who have drawn the lucky numbers in the lottery of life. We are asked to approve the philosophy of the rat race. A rat race is no less a rat race because some rats are luckier than others.

The Prime Minister's view of the appropriate role for Government to play in the economy is a throwback to the days of Adam Smith. She wishes to restore a competitive market in which only the rigorous pursuit of self-interest ensures survival. She believes that a world dominated by the market place is the best of all possible worlds. That theory was blown apart 50 years ago in Britain by the theories of Keynes. In America it was destroyed by the practical success of Roosevelt's New Deal.

The Prime Minister has chosen to open her second term of office by discerning virtue in the distress which millions of innocent people are being caused by her policies. President Roosevelt's second inaugural address contained a different lesson. He said: We have always known that heedless self-interest was bad morals—we now know that it is bad economics". Roosevelt understood that public problems cannot be solved by private solutions. Despite all the arguments by the Secretary of State for Employment, there is no bike big enough for 4 million unemployed to ride.

Boosting private health insurance and private education, and denying funds to the National Health Service and state schools is not an extension of freedom, either. What we are witnessing today is the ship of state, like a mark II Titanic, steering full steam ahead for the iceberg while the captain draws encouragement from a flourishing trade in leaky lifeboats.

As my right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) said in opening, the Labour party does not deny that the mechanism of competition can bring beneficial results. It can be a spur to efficiency and innovation. However, as he said, imports are flowing into Britain and we face the humiliating fact that the first manufacturing country in the world now imports more manufactured goods, under this Government, than it exports. That is the fallacy of relying upon the market place and of not relying upon the community as a whole. A superior, a more ethical and a more equitable result is gained if competition is placed within a broad social framework. Concern for the community and its most needy members has to take precedence over self-interest and the pursuit of profit.

The kind of society that the Labour party wants to create is one in which the market is no longer the master but the servant of society's needs. Certainly market forces have a role to play in seeing that those needs are met, but that role should be a subordinate one — a relatively minor means to an end. The market mechanism is worshipped by the Government as an end in itself, and 4 million people are being ritually sacrificed in its name.

It is absurd for the Prime Minister and the Conservative party to defend their policies on the ground that they are setting the British people free. They are not extending liberty; the truth is quite the opposite. We are experiencing the gradual emergence of a more authoritarian society. The discipline of fear—in particular of the sack—has been resurrected. It is that threat that is being used to coerce workers and their families and to secure obedience at the workplace.

The autonomy of local government is being throttled by centralised direction from Whitehall, backed up by sanctions. While capital is permitted to become ever more concentrated, the rights of organised labour to act in concert to defend working people are being destroyed.

Finally, the defence of British freedoms against attack from abroad is being mortgaged to a dangerous dependence on nuclear missiles. I read with enormous interest the speech of the right hon. Member for Down, South (Mr. Powell). What he said was logical and exact. In fact, he has been saying it ever since March 1967, when he spoke for the Conservative party as its principal defence spokesman. The conclusions that he reached are right and they are argued correctly, but it seemed to me that he missed the point, for what makes matters worse is that dependence on nuclear missiles inevitably involves restricting to a very small number participation in decision-making. The power goes to a secretive elite, and further limits the public's right to know what measures are being taken in their name. Despite the embarrassed hedging when the question was raised in the television programme that we all saw, the Prime Minister evidently believes that some of those decisions would be shared between herself and President Reagan. The reality is that only one person would make the decision, and that person would be in Pennsylvania avenue, not Downing street.

The Prime Minister is intent on pursuing her theme throughout the life of this Parliament. So what kind of society will she have created at the end, if she gets her way? We shall be even more divided into two nations, for the Government's overriding concern is to reward the fortunate and penalise the poor, the sick, the needy, and those who are without work. The also-rans will get nothing. They will not even be noticed, other than to be blamed for their own misfortunes.

When mass unemployment has become established as a permanent feature of the landscape, and all today's excuses have run out, when the Prime Minister can no longer blame the trade unions or the welfare state or the world recession for Britain's self-inflicted wounds, she will have to invent some new excuses. Unemployment will be blamed on the unemployed themselves. They will be classed as greedy and work-shy. Poverty will be blamed on social security scroungers. The loss of skills which should be for the service of the whole country and which will have gone abroad, enriching other countries, will be blamed on failure to compete. Finally, when all her plans have brought nothing but desperation and despair, she will end up by blaming the British people.

The Government have a large majority, but there will be no peace in the House of Commons. We on the Opposition Benches will expose the iniquities of the Tory programme, as it unfolds. We shall challenge and refute the spurious logic on which that programme is based. We can assure the House about that. Our opposition will be total, absolute and unremitting.

Mr. George Foulkes (Carrick, Cumnock and Doon Valley)

Hear, hear.

Mr. Silkin

That is a small start, but it is a beginning. I shall tell the Prime Minister something else, and I hope that it will give her something to think about during this parliamentary session. Yes, we were beaten, but yes, we were right.

9.38 pm
The Lord Privy Seal and Leader of the House of Commons (Mr. John Biffen)

I rise to conclude this sixth and final day of the debate on the Loyal Address. I join the right hon. Member for Lewisham, Deptford (Mr. Silkin) in congratulating you, Mr. Speaker, and the Chairman of Ways and Means on your accession to offices that will be of central importance in our proceedings in the Session ahead. I wish you well in the exercise of your duties.

This debate is always a major parliamentary occasion, setting forth, as it does, the Government's programme for the Session. It is an occasion which is further elevated when it follows a general election campaign, in this case one which will perhaps be decisive for the future shape of British politics.

I believe that over the past week the House has matched the occasion. The pageantry of the speech from the Throne has been balanced by sustained argument in the Chamber about the merits of the legislative proposals in that speech.

I congratulate my hon. Friends the Members for Torridge and Devon, West (Sir P. Mills) and for Crosby (Mr. Thornton) on their speeches proposing and seconding the Loyal Address. They made speeches consistent with the traditions of the occasion and I hope to return to the speech of my hon. Friend the Member for Torridge and Devon, West later in my remarks.

Since then, there have been 31 maiden speeches. Many have observed the convention of avoiding overt conflict. Others have, mercifully, been the authentic voices of controversy fresh from the hustings. Time alone does not permit me to give individual congratulations, but I warmly join the right hon. Member for Lewisham, Deptford in welcoming those hon. Members to the House and to our future debates.

In that context, I must express the hope that the future speeches of those hon. Members will pay some regard to the virtues of brevity and a regard for others also hoping to be called in debate. On the first evening's consideration of the motion before us, the hon. Member for Linlithgow (Mr. Dalyell) was quick to remind us of his formidable crusading skills. His speech lasted exactly 60 minutes. That, I suppose, is a new and daunting measurement of Back-Bench speaking time—an hour equals "one Tam". As an opening bid, I request hon. Members to construct their speeches in mere fractions of that unit.

Mr. Tam Dalyell (Linlithgow)

There is a very simple remedy. My speeches would be much shorter if the Prime Minister would explain the truth of her actions. [Interruption.] What answer is to be given not only to me, but to my right hon. and learned Friend the Member for Aberavon (Mr. Morris), a very careful Queen's counsel who set out a formidable list of questions? In particular, I will promise to speak very briefly if the Prime Minister will explain why she did not consult her Foreign Secretary. [Interruption]

Mr. Speaker


Mr. Biffen

I note the hon. Gentleman's opening bargaining position about the future length of his speeches and the issues that will be at stake in our negotiations. It will be a courtesy to the House if I leave it at that.

I shall touch on three topics in the substance of my speech. First, I shall make a generalised comment on House of Commons procedures and Committees. That is appropriate in view of my responsibilities as Leader of the House. Secondly, I shall comment on economic policy and unemployment — the topics specifically chosen for today's debate. Thirdly, I shall conclude with a reference to the wider political issues that could be resolved by this Parliament, of which this Session is but the beginning. Indeed, I hazard a prediction that this will be a watershed Parliament. A new political landscape is being created.

Since I have accepted the self-imposed discipline of a 20-minute winding up speech, the House will appreciate that I must deal with each matter succinctly. First, let me say a word on House of Commons affairs. The hon. Member for Berwick-upon-Tweed (Mr. Beith) asked last week: When does the Leader of the House propose to set up a Procedure Committee".—[Official Report, 23 June 1983, Vol. 44, c. 155.] As the Liberal Whip, the hon. Gentleman knows better than most that any decision to set up such a Committee is the consequence of a well-understood process of consultation. If I were to seek to pre-empt that process, it would be counter-productive and to no advantage. Therefore, in this matter I will naturally follow the conventional procedures.

I am, of course, well aware of the interest that has been shown in a range of topics that might be considered for reference to a Procedure Committee. The interest has come from all sides of the House and I am seized of the concern that has been expressed.

Another matter of interest is the reconstitution of our Select Committees. I hope that it will be possible to announce the membership of several of these shortly. Those will include the Committee of Selection, the Committee on European Legislation and the Statutory Instruments Select Committee.

I realise, however, that there is an even sharper interest in the reconstitution of the departmental Select Committees. I am anxious to proceed with reasonable haste. The Select Committees are playing a substantial and increasing role in the House of Commons. However, their appointment will necessarily be a matter for consultation and there are, of course, some 150 new Members. No doubt the Committee of Selection will wish to consider this factor in reconstituting the Committees. This argues for a modest pause while the House becomes familiar with its new composition. I hope the House will feel that this measured caution is rooted in sound sense.

Finally, in respect of House matters, hon. Members will have noted the important proposals for procedural change contained in the report published recently of the previous Session's Select Committee on Procedure (Finance), of which the Chairman was my right hon. Friend the Member for Worthing (Mr. Higgins). That report put forward several major recommendations which would among other things radically alter Budget procedures and the nature of the annual Finance Bill. We shall be giving detailed consideration to those proposals. In due course I hope that there will be an opportunity for hon. Members to express their views.

Mr. Robert Hughes (Aberdeen, North)

Will the Leader of the House make it clear now that he intends to abandon the farce of a Committee which looks at a Member's pay which only creates considerable embarrassment for every hon. Member who, before an election, is faced with the claim that the last thing that he did was to put his salary up by 40 per cent., and the claim, immediately after the election, that the first thing he intends to do is to put his salary up by 40 per cent?

Mr. Biffen

I hope that the House will have an early opportunity to consider that subject.

National economic issues have dominated today's debate which has centred on the motion in the name of the Leader of the Opposition, to which unemployment problems are central. The Conservative party's proposition is clear. There must be a revival in economic activity as a precondition for a reduction in unemployment. That view is elaborated in the Queen's Speech in the phrase which refers to a responsible financial strategy based upon sound money and lower public borrowing. In the closing minutes of the debate on the Queen's Speech I invite the House to consider three important factors that are at the heart of our general economic performance and that must be a precondition to a revival in employment. I refer to inflation, the level of pay settlements and industrial relations.

During the election campaign and in today's debate the Government put forward an impressive record in the reduction in the rate of inflation. At its current level of 3.7 per cent. it is the lowest for 15 years, indeed, the lowest since March 1968. It has come down from a peak in May 1980 of just below 22 per cent. and that is a success of which we can be justly circumspect, placing it alongside, as we must, current rates of inflation in Italy of over 16 per cent., and in France, which, probably as near as any other Western economy essays the Labour party's policies, where the figure is now 9 per cent. in the test of inflation, there is good achievement and grounds for optimism.

With regard to the second matter for consideration, pay settlements, the average earnings figures for April, which have been cited by the Treasury, are 7.25 per cent. They show a steady fall since the pay round of 1980–81. I invite those who like to look beyond Government figures to justify the approach in the strategy to bear in mind the CBI's latest figures, which show that pay settlements in manufacturing industry are now running at 5.7 per cent. for the period since January 1983, and are broadly matched by similar figures in the public sector. Again, that figure gives rise to measured satisfaction, particularly considering that the French equivalent is more than 12.5 per cent.

The third area in which reasonable progress is being made is that of industrial relations. In 1982, 5.3 million working days were lost through industrial action, which compares quite strikingly with the figure of 12 million days for the annual average in the preceding 10 years—[Interruption.] That is all part of the real working Britain, the evidence for which, judging by the noise, is so distasteful to the Opposition. Opposition Members talk to us about the real industrial world. I have also cited aspects of the real industrial world but, because they bear a message of hope, they are bitterly resented by the Opposition.

Policies dealing with inflation, pay and improved industrial relations are the preconditions for success, not its guarantors. As my right hon. Friend the Chancellor of the Exchequer said today, there are also other issues, including the legislative and fiscal framework for business. A balanced assessment of all such matters will conclude that we are beginning to see some real tangible signs, which lead to the hope of a general recovery in the economy. The evidence that I would cite —[Interruption.] There is nothing like bad news to elicit satisfaction from the Opposition, and nothing like good news to add to their misery in the post-election neurosis.

The latest CBI report states: Firms' expectations for their volume of output remain positive for the fifth successive survey, in line with the information on orders and stocks. Of course, it is a policy that requires patience. That is why it is so unpopular with the Opposition. They want us to desert the element of patience and to run for a public spending spree in what would undoubtedly be an ill-fated attempt to buttress that policy. Of course, we shall resist those siren calls.

The reason for that was well embodied in the remarkable speech made by my right hon. Friend the Member for Cambridgeshire, South-East (Mr. Pym). He said that recovery was slow and gradual. That was meant, and accepted, as a compliment. The hothouse recovery, shortly to end in disaster, has been documented more than enough in our post-war world. In a most formidable and memorable speech, my right hon. Friend advised Conservative Members that there was a message about how Conservatives should conduct themselves. He said that he was drawing upon our traditions as a party in saying that it must be national in its interests and unifying in its aim. We are more than delighted to echo that observation. [An hon. Member: "who is 'we'?"]. The unity of the Tory party on these Benches is in most striking contrast to the agonies and divisions that characterise the Opposition Benches. I thought that my right hon. Friend's words echoed remarks made from this Dispatch Box in a debate on the Gracious Speech after the quite remarkable defeat of the Labour party in 1931. I hope that no Labour Member will find the name of Stanley Baldwin a cause for ribaldry — unless the Labour party is in such disarray that it thinks that this is the last night of the proms, and not the conclusion of a major political debate. Baldwin said: We cannot be led away by the hope that our difficulties are going to be solved by the action of other people. In these matters we have to rely upon ourselves—our Government, the House of Commons and the people of this country." — [Official Report, 13 November 1931; Vol. 259, c. 459.] Those words are as relevant today for this nation as they were when he said them. There is this abiding judgment: politics is more than mere law-making. It is also style, tone and the ability to gather together loyalties to enable the navigation of the whole apparatus of state. It is our success in doing that, under the inspiration of our Prime Minister, which has set us so successfully apart from the Opposition Benches.

I have been considering a range of issues which I believe will bear upon the levels of future unemployment. Without doubt, these economic and social matters are central to our political fortunes. I suggest, however, that ultimate political fortunes go even wider than economics. In these closing minutes, therefore, I will touch on the factors that could make this a watershed Parliament.

I say at once that this side of the House is conscious of its electoral triumph. It is also alert to the dangers of that success. The point was made at the outset of the debate by my hon. Friend the Member for Torridge and Devon, West when he said: large majorities are matched by large responsibilities. Whatever the position may be, there is no change in the underlying problems of the nation." — [Official Report, 22 June 1983; Vol. 44, c. 42.] Those words serve a warning that the euphoria and commitment of the hustings can never replace the disciplines of daily administration. Constantly to be reminded of that is the challenge to these Benches. The contents of the Queen's Speech, I believe, live up to the concern of my hon. Friend. The Treasury Bench must balance a policy of reform and a sense of continuity. That is the hallmark of British public life. In so doing, over the past four years or so we have shifted the centre ground in British politics, and we invite the Opposition to accommodate themselves to the new landscape.

Thus I conclude on the prospective fortunes of the Opposition. This Parliament will be decisive for the Labour party. The proposition can be put simply. Are the Labour Benches prepared to make substantial adjustments, or do they cling to the ancestral faiths? When German Socialism was in crisis a generation ago the reaction was fundamental. In the Bad Godesberg programme in 1959 the German Socialists specifically disavowed any Marxist connection and accepted the broad framework of the social market economy. That challenge awaits the Labour Benches.

As the proposals of the Queen's Speech are put into law, the Opposition will have the chance to indicate that it recognises that a new political consensus is being created. It involves a recognition of Britain's international trading and military alliances, trade union reform and the acceptance of a mixed market economy.

As this Parliament proceeds, alliance Members below the Gangway opposite will join with us in watching how this debate evolves, for I do not think that there will be any misunderstanding about the nature of the problems implicit in the economics and politics of this Parliament. Challenge besets us all. If the Treasury Bench does not rise to that challenge, our destination is Opposition. But if the Opposition fail, their fate is oblivion.

Question put, That the amendment be made:—

The House divided: Ayes 207, Noes 375.

Division No. 2] [10 pm
Adams, Allen (Paisley N) Atkinson, N. (Tottenham)
Alton, David Bagier, Gordon A. T.
Anderson, Donald Banks, Tony (Newham NW)
Archer, Rt Hon Peter Barnett, Guy
Ashdown, Paddy Barron, Kevin
Ashley, Rt Hon Jack Beckett, Mrs Margaret
Ashton, Joe Beith, A. J.
Bell, Stuart Holland, Stuart (Vauxhall)
Bennett, A. (Dent'n & Red'sh) Home Robertson, John
Bermingham, Gerald Howell, Rt Hon D. (S'heath)
Bidwell, Sydney Howells, Geraint
Blair, Anthony Hoyle, Douglas
Boothroyd, Miss Betty Hughes, Mark (Durham)
Boyes, Roland Hughes, Robert (Aberdeen N)
Bray, Dr Jeremy Hughes, Roy (Newport E)
Brown, Gordon (D'f'mline E) Hughes, Sean (Knowsley S)
Brown, Hugh D. (Provan) Hughes, Simon (Southwark)
Brown, N. (N'c'tle-u-Tyne E) Janner, Hon Greville
Brown, R. (N'c'tle-u-Tyne N) Jenkins, Rt Hon Roy (Hillh'd)
Brown, Ron (E'burgh, Leith) John, Brynmor
Bruce, Malcolm Jones, Barry (Alyn & Deeside)
Buchan, Norman Kaufman, Rt Hon Gerald
Callaghan, Rt Hon J. Kennedy, Charles
Callaghan, Jim (Heyw'd & M) Kilroy-Silk, Robert
Campbell, Ian Kinnock, Neil
Campbell-Savours, Dale Kirkwood, Archibald
Canavan, Dennis Lambie, David
Carlile, Alexander (Montg'y) Lamond, James
Carter-Jones, Lewis Leadbitter, Ted
Cartwright, John Leighton, Ronald
Clark, Dr David (S Shields) Lewis, Ron (Carlisle)
Clarke, Thomas (Monkl'nds W) Lewis, Terence (Worsley)
Litherland, Robert
Clay, Robert Lloyd, Anthony (Stretford)
Cocks, Rt Hon M. (Bristol S) Lofthouse, Geoffrey
Cohen, Harry Loyden, Edward
Coleman, Donald McCartney, Hugh
Conlan, Bernard McDonald, Dr Oonagh
Cook, Frank (Stockton N) McGuire, Michael
Cook, Robin (Livingston) McKelvey, William
Corbett, Robin MacKenzie, Rt Hon Gregor
Cowans, Harry Maclennan, Robert
Craigen, J. M. McNamara, Kevin
Crowther, Stan McTaggart, Robert
Cunliffe, Lawrence McWilliam, John
Dalyell, Tarn Madden, Max
Davies, Rt Hon Denzil (L'lli) Marek, John
Davies, Ronald (Caerphilly) Marshall, David (Shettleston)
Davis, Terry (B'ham, H'ge H'l) Martin, Michael
Deakins, Eric Mason, Rt Hon Roy
Dewar. Donald Maxton, John
Dixon, Donald Maynard, Miss Joan
Dobson, Frank Meacher, Michael
Dormand, Jack Meadowcroft, Michael
Douglas, Dick Michie, William
Dubs, Alfred Mikardo, Ian
Duffy, A. E. P. Millan, Rt Hon Bruce
Dunwoody, Mrs G. Morris, Rt Hon A. (W'shawe)
Eadie, Alex Nellist, David
Evans, loan (Cynon Valley) Oakes, Rt Hon Gordon
Evans, John (St. Helens N) O'Brien, William
Fatchett, Derek O'Neill, Matin
Faulds, Andrew Orme, Rt Hon Stanley
Field, Frank (Birkenhead) Owen, Rt Hon Dr David
Fields, T. (L'pool Broad Gn) Park, George
Fisher, Mark Patchett, Terry
Flannery, Martin Pavitt, Laurie
Foot, Rt Hon Michael Pendry, Torn
Forrester, John Penhaligon, David
Foster, Derek Pike, Peter
Foulkes, George Powell, Raymond (Ogmore)
Fraser, J. (Norwood) Prescott, John
Freeson, Rt Hon Reginald Radice, Gilos
Freud, Clement Randall, Stuart
Garrett, W. E. Redmond, M.
George, Bruce Rees, Rt Hen M. (Leeds S)
Gilbert, Rt Hon Dr John Richardson Jo
Godman, Norman Roberts, Allan (Bootle)
Gould, Bryan Roberts, Ernest (Hackney N)
Hamilton, James (M'well, N) Robertson, George
Hamilton, W. W. (Fife Central) Robinson, G. (Coventry NW)
Harrison, Rt Hon Walter Rooker, J. W.
Hart, Rt Hon Dame Judith Ross, Ernest (Dundee W)
Hattersley, Rt Hon Roy Ross, Stephen (Isle of Wight)
Haynes, Frank Rowlands, Ted
Heffer, Eric S. Ryman, John
Hogg, N. (C'nauld & Kilsyth) Sedgemore, Brian
Sheerman, Barry Tinn, James
Sheldon, Rt Hon R. Varley, Rt Hon Eric G.
Shore, Rt Hon Peter Wainwright, R.
Short, Ms Clare (Ladywood) Wallace, James
Short, Mrs R.(W'hampt'n NE) Warden, Gareth (Gower)
Silkin, Rt Hon J. Wareing, Robert
Skinner, Dennis Weetch, Ken
Smith, C.(Isl'ton S & F'bury) Welsh, Michael
Smith, Rt Hon J. (M'kl'ds E) Wigley, Dafydd
Soley, Clive Williams, Rt Hon A.
Spearing, Nigel Wilson, Gordon
Steel, Rt Hon David Winnick, David
Stewart, Rt Hon D. (W Isles) Woodall, Alec
Strang, Gavin Wrigglesworth, Ian
Straw, Jack Young, David (Bolton SE)
Thomas, Dafydd (Merioneth)
Thomas, Dr R. (Carmarthen) Tellers for the Ayes:
Thompson, J. (Wansbeck) Mr. Austin Mitchell and
Thorne, Stan (Preston) Mr. Allen McKay.
Adley, Robert Churchill, W. S.
Aitken Jonathan Clark, Hon A. (Plym'th S'n)
Alexander, Richard Clark, Michael (Rochford)
Alison, Rt Hon Michael Clark, Sir W. (Croydon S)
Amery, Rt Hon Julian Clarke Kenneth (Rushcliffe)
Amess, David Clegg, Sir Walter
Ancram, Michael Cockeram, Eric
Arnold, Tom Colvin, Michael
Ashby, David Conway, Derek
Aspinwall, Jack Coombs, Simon
Atkins, Rt Hon H. (S'thorne) Cope, John
Atkins Robert (South Ribble) Cormack, Patrick
Baker, Kenneth (Mole Valley) Corrie, John
Baker, Nicholas (Dorset N) Couchman, James
Baldry, Anthony Cranborne, Viscount
Banks, Robert (Harrogate) Hon Nicholas
Batiste, Spencer Critchley, Julian
Beggs, Roy Crouch, David
Bellingham, Henry Currie, Mrs. Edwina
Bendall, Vivian Dicks, T.
Benyon, William Dorrell, Stephen
Berry, Hon Anthony Douglas-Hamilton, Lord J.
Best, Keith Dover, Denshore
Bevan, David Gilroy du Cann, Rt Hon Edward
Biffen, Rt Hon John Dunn, Robert
Biggs-Davison, Sir John Dykes, Hugh
Blackburn, John Edwards, Rt Hon N. (P'broke)
Blaker, Rt Hon Peter Eggar, Tim
Body, Richard Emery, Sir Peter
Bonsor, Sir Nicholas Evennett, David
Bottomley, Peter Eyre, Reginald
Bowden, A. (Brighton K'ton) Fairbairn, Nicholas
Bowden, Gerald (Dulwich) Fallon, Michael
Boyson, Dr Rhodes Farr, John
Braine, Sir Bernard Favell, Anthony
Brandon-Bravo, Martin Fenner, Mrs. Peggy
Bright, Graham Finsberg, Geoffrey
Brinton, Tim Fletcher, Alexander
Brittan, Rt Hon Leon Fookes, Miss Janet
Brooke, Hon Peter Forman, Nigel
Brown, M. (Brigg & Cl'thpes) Forsyth, Michael (Stirling)
Browne, John Forsythe, Clifford (Antrim S)
Bruinvels, Peter Forth, Eric
Bryan, Sir Paul Fowler, Rt Hon Norman
Buchanan-Smith, Rt Hon A. Fox, Marcus
Buck, Sir Antony Franks, Cecil
Budgen, Nick Fraser, Sir Hugh
Bulmer, Esmond Fraser, Peter (Angus East)
Burt, Alistair Freeman, Roger
Butcher, John Fry, Peter
Butler, Hon Adam Gale, Roger
Butterfill, John Galley, Roy
Carlisle, John (Luton N) Gardiner, George (Reigate)
Carlisle, Kenneth (Lincoln) Gardner, Sir Edward (Fylde)
Carlisle, Rt Hon M. (W'ton S) Garel-Jones, Tristan
Carttiss, Michael Gilmour, Rt Hon Sir Ian
Chalker, Mrs. Lynda Glyn, Dr. Alan
Chapman, Sydney Goodhart, Sir Philip
Chope, Christopher Goodlad, Alastair
Gorst, John Luce, Richard
Gow, Ian Lyell, Nicholas
Gower, Sir Raymond McCurley, Mrs Anna
Greenway, Harry McCusker, Harold
Gregory, Conal Macfarlane, Neil
Griffiths, E. (B'y St Edm'ds) MacGregor, John
Griffiths, Peter (Portsm'th N) MacKay, Andrew (Berkshire)
Grist, Ian MacKay, John (Argyll & Bute)
Ground, Patrick Macmillan, Rt Hon M.
Gummer, John Selwyn McNair-Wilson, M. (N'bury)
Hamilton, Hon A. (Epsom) McNair-Wilson, P. (New F'st)
Hamilton, Neil (Tatton) McQuarrie, Albert
Hampson, Dr Keith Madel, David
Hanley, Jeremy Maginnis, Ken
Hannam, John Major, John
Hargreaves, Kenneth Mallins, Humphrey
Harvey, Robert Malone, Gerald
Haselhurst, Alan Maples, John
Havers, Rt Hon Sir Michael Marland, Paul
Hawkins, C. (High Peak) Marlow, Antony
Hawksley, Warren Marshall, Michael (Arundel)
Hayes, J. Mates, Michael
Hayhoe, Barney Maude, Francis
Hayward, Robert Mawhinney, Dr Brian
Heath, Rt Hon Edward Maxwell-Hyslop, Robin
Heathcoat-Amery, David Mayhew, Sir Patrick
Heddle, John Mellor, David
Henderson, Barry Merchant, Piers
Heseltine, Rt Hon Michael Meyer, Sir Anthony
Hickmet, Richard Miller, Hal (B'grove)
Hicks, Robert Mills, Iain (Meriden)
Higgins, Rt Hon Terence L. Mills, Sir Peter (Devon, West)
Hind, Kenneth Miscampbell, Norman
Hirst, Michael Mitchell, David (Hants, NW)
Hogg, Hon Douglas (Gr'th'm) Moate, Roger
Holland, Sir Philip (Gedling) Molyneaux, James
Holt, Richard Montgomery, Fergus
Hooson, Tom Moore, John
Hordern, Peter Morris, M. (N'hampton, S.)
Howard, Michael Morrison, Hon C. (Devizes)
Howarth, Alan (Stratf'd-on-A) Morrison, Hon P. (Chester)
Howarth, Gerald (Cannock) Moynihan, Hon C.
Howe, Rt Hon Sir Geoffrey Mudd, David
Howell, Rt Hon D. (G'ldford) Murphy, Christopher
Hubbard-Miles, Peter Neale, Gerrard
Hunt, David (Wirrat) Needham, Richard
Hunt, John (Ravensbourne) Nelson, Anthony
Hunter, Andrew Neubert, Michael
Hurd, Rt Hon Douglas Newton, Tony
Irving, Charles Nicholls, Patrick
Jenkin, Rt Hon Patrick Nicolson, J,
Johnson-Smith, Sir Geoffrey Normanton, Tom
Jones, Gwilym (Cardiff N) Norris, Steven
Jones, Robert (Herts W) Onslow, Cranley
Jopling, Rt Hon Michael Oppenheim, Philip
Joseph, Rt Hon Sir Keith Oppenheim, Rt Hon Mrs S.
Kellett-Bowman, Mrs. Elaine Ottaway, Richard
Kershaw, Sir Anthony Page, Richard (Herts, SW)
Key, Robert Parkinson, Rt Hon Cecil
King, Roger (B'ham N'field) Parris, Matthew
King, Rt Hon Tom Patten, John (Oxford)
Knight, Gregory (Derby N) Pattie, Geoffrey
Knight, Mrs. Jill (Edgbaston) Pawsey, James
Knowles, Michael Peacock, Mrs Elizabeth
Knox, David Percival, Rt Hon Sir Ian
Lamont, Norman Pink, R. Bonner
Lang, Ian Pollock, Alexander
Latham, Michael Porter, Barry
Lawler, Geoffrey Powell, Rt Hon J. E. (Down S)
Lawrence, Ivan Powell, William (Corby)
Lawson, Rt Hon Nigel Powley, John
Lee, John (Pendle) Prentice, Rt Hon Reg
Leigh, Edward (Gainsbor'gh) Price, Sir David
Lennox-Boyd, Hon Mark Prior, Rt Hon James
Lewis, Sir Kenneth (Stamf'd) Proctor, K. Harvey
Lightbown, David Pym, Rt Hon Francis
Lilley, Peter Raffan, Keith
Lloyd, Ian (Havant) Raison, Rt Hon Timothy
Lloyd, Peter, (Fareham) Rathbone, Tim
Lord, Michael Rees, Rt Hon Peter (Dover)
Renton, Tim Taylor, John (Strangford)
Rhodes James, Robert Tebbit, Rt Hon Norman
Ridley, Rt Hon Nicholas Temple-Morris, Peter
Ridsdale, Sir Julian Terlezki, Stefan
Rifkind, Malcolm Thatcher, Rt Hon Mrs M.
Rippon, Rt Hon Geoffrey Thomas, Rt Hon Peter
Roberts, Wyn (Conway) Thompson, Donald (Calder V)
Robinson, Mark (N'port W) Thompson, Patrick (N'ich, N)
Roe, Mrs Marion Thome, Neil (Ilford, S)
Ross, Wm. (Londonderry) Thornton, Malcolm
Rossi, Hugh Thurnham, Peter
Rost, Peter Townend, John (Bridlington)
Rowe, Andrew Townsend, Cyril D. (B'heath)
Rumbold, Mrs Angela Tracey, Richard
Ryder, Richard Trippier, David
Sackville, Hon Thomas Trotter, Neville
Sainsbury, Hon Timothy Twinn, Dr Ian
St. John-Stevas, Rt Hon N. van Straubenzee, Sir W.
Sayeed, Jonathan Vaughan, Dr Gerard
Shaw, Giles (Pudsey) Viggers, Peter
Shaw, Sir Michael (Scarb') Waddington, David
Shelton, William (Streatham) Wakeham, Rt Hon John
Shepherd, Colin (Hereford) Waldegrave, Hon William
Shepherd, Richard (Aldridge) Walden, George
Shersby, Michael Walker, William (T'side N)
Silvester, Fred Walker, Rt Hon P. (W'cester)
Sims, Roger Wall, Sir Patrick
Skeet, T. H. H. Waller, Gary
Smith, Tim (Beaconsfield) Walters, Dennis
Soames, Hon Nicholas Ward, John
Speed, Keith Wardle, C. (Boxhill)
Speller, Tony Warren, Kenneth
Spence, John Watson, John
Spencer, D. Watts, John
Spicer, Jim (Dorset W) Wells, Bowen (Hertford)
Spicer, Michael (Worcs, S) Wells, John (Maidstone)
Squire, Robin Wheeler, John
Stanbrook, Ivor Whitfield, John
Stanley, John Whitney, Raymond
Steen, Anthony Wiggin, Jerry
Stern, Michael Winterton, Mrs Ann
Stevens, Lewis (Nuneaton) Winterton, Nicholas
Stevens, Martin (Fulham) Wolfson, Mark
Stewart, Allan (Eastwood) Wood, Timothy
Stewart, Andrew (Sherwood) Woodcock, Michael
Stewart, Ian (Hertf'dshire, N) Yeo, Tim
Stokes, John Young, Sir George (Acton)
Stradling Thomas, J.
Sumberg, David Tellers for the Noes:
Tapsell, Peter Mr. Carol Mather and
Taylor, Teddy (S'end E) Mr. Robert Boscawen

Question accordingly negatived.

Amendment proposed, at the end of the Question, to add: But humbly regret that the Gracious Speech contains no evidence that the Government, though only commanding the support of 31 per cent. of the electorate, has any intention of moderating its policies to make them acceptable to the majority of British people; and in particular call upon the Government to launch a programme of selective capital investment to reduce unemployment and improve the environment; to raise the standard of social services to help the elderly and the disabled; to abandon its plans to encroach further upon the independence of local government, and instead to transfer substantial powers and responsibilities, currently exercised by the centre, to the nations and regions of Britain; and to strengthen conventional forces while taking an initiative with our allies in relation to the INF and START talks to achieve multi-lateral nuclear disarmament.—[Mr. Beith.]

Question put forthwith, pursuant to Standing Order No. 35 (Calling of amendments at end of debate), That the amendment be made:—

The House divided: Ayes 23, Noes 366.

Division No. 3] [10.19 pm
Alton, David Ross, Stephen (Isle of Wight)
Ashdown, Paddy Steel, Rt Hon David
Bruce, Malcolm Stewart, Fit Hon D. (W Isles)
Carlile, Alexander (Montg'y) Thomas, Dafydd (Merioneth)
Freud, Clement Wainwright, R.
Howells, Geraint Wallace, James
Hughes, Simon (Southwark) Wigley, Dafydd
Jenkins, Rt Hon Roy (Hillh'd) Wilson, Gordon
Kennedy, Charles Wrigglesworth, Ian
Kirkwood, Archibald
Maclennan, Robert Tellers for the Ayes:
Meadowcroft, Michael Mr. A. J. Beith and
Owen, Rt Hon Dr David Mr. John Cartwright.
Penhaligon, David
Adley, Robert Clark, Sir W. (Croydon S)
Aitken Jonathan Clarke Kenneth (Rushcliffe)
Alexander, Richard Clegg, Sir Walter
Alison, Rt Hon Michael Cockeram, Eric
Amery, Rt Hon Julian Colvin, Michael
Amess, David Conway, Derek
Ancram, Michael Coombs, Simon
Arnold, Tom Cope, John
Ashby, David Cormack, Patrick
Aspinwall, Jack Corrie, John
Atkins, Rt Hon H. (S'thorne) Couchman, James
Atkins Robert (South Ribble) Cranbourne, Viscount
Baker, Kenneth (Mole Valley) Critchley, Julian
Baker, Nicholas (Dorset N) Crouch, David
Baldry, Anthony Currie, Mrs. Edwina
Banks, Robert (Harrogate) Dicks, T.
Batiste, Spencer Dorrell, Stephen
Beggs, Roy Douglas-Hamilton, Lord J.
Bellingham, Henry Dover, Denshore
Bendall, Vivian du Cann, At Hon Edward
Benyon, William Dunn, Robert
Berry, Hon Anthony Dykes, Hugh
Best, Keith Edwards, Rt Hon N. (P'broke)
Bevan, David Gilroy Eggar, Tim
Biffen, Rt Hon John Emery, Sir Peter
Biggs-Davison, Sir John Evennett, David
Blackburn, John Eyre, Reginald
Blaker, Rt Hon Peter Fairbairn, Nicholas
Body, Richard Fallon, Michael
Bonsor, Sir Nicholas Farr, John
Bottomley, Peter Favell, Anthony
Bowden, A. (Brighton K'ton) Fenner, Mrs. Peggy
Bowden, Gerald (Dulwich) Finsberg, Geoffrey
Boyson, Dr Rhodes Fookes, Miss Janet
Braine, Sir Bernard Forman, Nigel
Brandon-Bravo, Martin Forsyth, Michael (Stirling)
Bright, Graham Forsythe, Clifford (Antrim S)
Brinton, Tim Forth, Eric
Brittan, Rt Hon Leon Fowler, Rt Hon Norman
Brooke, Hon Peter Fox, Marcus
Brown, M. (Brigg & Cl'thpes) Franks, Cecil
Browne, John Fraser, Peter (Angus East)
Bruinvels, Peter Freeman, Roger
Bryan, Sir Paul Fry, Peter
Buchanan-Smith, Rt Hon A. Gale, Roger
Buck, Sir Antony Galley, Roy
Budgen, Nick Gardiner, George (Reigate)
Bulmer, Esmond Gardner, Sir Edward (Fylde)
Burt, Alistair Garel-Jones, Tristan
Butler, Hon Adam Gilmour, Rt Hon Sir Ian
Butterfill, John Glyn, Dr. Alan
Carlisle, John (Luton N) Goodhart, Sir Philip
Carlisle, Kenneth (Lincoln) Goodlad, Alastair
Carlisle, Rt Hon M. (W'ton S) Gorst, John
Carttiss, Michael Gow, Ian
Chalker, Mrs. Lynda Gower, Sir Raymond
Chapman, Sydney Greenway, Harry
Chope, Christopher Gregory, Conal
Churchill, W. S. Griffiths, E. (B'y St Edm'ds)
Clark, Hon A. (Plym'th S'n) Griffiths, Peter (Portsm'th N)
Clark, Michael (Rochford) Grist, Ian
Ground, Patrick McNair-Wilson, M. (N'bury)
Gummer, John Selwyn McNair-Wilson, P. (New F'st)
Hamilton, Hon A. (Epsom) McQuarrie, Albert
Hamilton, Neil (Tatton) Madel, David
Hampson, Dr Keith Maginnis, Ken
Hanley, Jeremy Major, John
Hannam, John Mallins, Humphrey
Hargreaves, Kenneth Malone, Gerald
Harvey, Robert Maples, John
Haselhurst, Alan Marland, Paul
Havers, Rt Hon Sir Michael Marlow, Antony
Hawkins, C. (High Peak) Marshall, Michael (Arundel)
Hawksley, Warren Mates, Michael
Hayes, J. Maude, Francis
Hayhoe, Barney Mawhinney, Dr Brian
Hayward, Robert Maxwell-Hyslop, Robin
Heath, Rt Hon Edward Mayhew, Sir Patrick
Heathcoat-Amery, David Mellor, David
Heddle, John Merchant, Piers
Henderson, Barry Meyer, Sir Anthony
Heseltine, Rt Hon Michael Miller, Hal (B'grove)
Hickmet, Richard Mills, Sir Peter (Devon, West)
Hicks, Robert Miscampbell, Norman
Higgins, Rt Hon Terence L. Mitchell, David (Harts, NW)
Hind, Kenneth Moate, Roger
Hirst, Michael Molyneaux, James
Hogg, Hon Douglas (Gr'th'm) Montgomery, Fergus
Holland, Sir Philip (Gedling) Moore, John
Holt, Richard Morris, M. (N'hampton, S.)
Hooson, Tom Morrison, Hon C. (Devizes)
Howard, Michael Morrison, Hon P. (Chester)
Howarth, Alan (Stratf'd-on-A) Moynihan, Hon C.
Howarth, Gerald (Cannock) Mudd, David
Howe, Rt Hon Sir Geoffrey Murphy, Christopher
Howell, Rt Hon D. (G'ldford) Neale, Gerrard
Hubbard-Miles, Peter Needham, Richard
Hunt, David (Wirral) Nelson, Anthony
Hunt, John (Ravensbourne) Neubert, Michael
Hunter, Andrew Nicholls, Patrick
Hurd, Rt Hon Douglas Nicolson, J.
Irving, Charles Normanton, Tom
Jenkin, Rt Hon Patrick Norris, Steven
Johnson-Smith, Sir Geoffrey Onslow, Cranley
Jones, Gwilym (Cardiff N) Oppenheim, Philip
Jones, Robert (Herts W) Oppenheim, Rt Hon Mrs S.
Jopling, Rt Hon Michael Ottaway, Richard
Joseph, Rt Hon Sir Keith Page, Richard (Herts, SW)
Kellett-Bowman, Mrs. Elaine Parkinson, Rt Hon Cecil
Kershaw, Sir Anthony Parris, Matthew
Key, Robert Patten, John (Oxford)
King, Roger (B'ham N'field) Pattie, Geoffrey
King, Rt Hon Tom Pawsey, James
Knight, Gregory (Derby N) Peacock, Mrs Elizabeth
Knight, Mrs. Jill (Edgbaston) Percival, Rt Hon Sir Ian
Knowles, Michael Pink, R. Bonner
Knox, David Pollock, Alexander
Lamont, Norman Porter, Barry
Lang, Ian Powell, William (Corby)
Latham, Michael Powley, John
Lawler, Geoffrey Prentice, Rt Hon Reg
Lawrence, Ivan Price, Sir David
Lawson, Rt Hon Nigel Prior, Rt Hon James
Lee, John (Pendle) Proctor, K. Harvey
Leigh, Edward (Gainsbor'gh) Pym, Rt Hon Francis
Lennox-Boyd, Hon Mark Raffan, Keith
Lewis, Sir Kenneth (Stamf'd) Raison, Rt Hon Timothy
Lightbown, David Rathbone, Tim
Lilley, Peter Rees, Rt Hon Peter (Dover)
Lloyd, Ian (Havant) Renton, Tim
Lloyd, Peter, (Fareham) Rhodes James, Robert
Lord, Michael Ridley, Rt Hon Nicholas
Luce, Richard Ridsdale, Sir Julian
Lyell, Nicholas Rifkind, Malcolm
McCurley, Mrs Anna Roberts, Wyn (Conway)
McCusker, Harold Robinson, Mark (N'port W)
Macfarlane, Neil Roe, Mrs Marion
MacGregor, John Ross, Wm. (Londonderry)
MacKay, Andrew (Berkshire) Rossi, Hugh
MacKay, John (Argyll & Bute) Rost, Peter
Macmillan, Rt Hon M. Rowe, Andrew
Rumbold, Mrs Angela Thompson, Patrick (N'ich, N)
Ryder, Richard Thorne, Neil (Word, S)
Sackville, Hon Thomas Thornton, Malcolm
Sainsbury, Hon Timothy Thurnham, Peter
St. John-Stevas, Rt Hon N. Townend, John (Bridlington)
Sayeed, Jonathan Townsend, Cyril D. (B'heath)
Shaw, Giles (Pudsey) Tracey, Richard
Shaw, Sir Michael (Scarb') Trippier, David
Shelton, William (Streatham) Trotter, Neville
Shepherd, Colin (Hereford) Twinn, Dr Ian
Shepherd, Richard (Aldridge) van Straubenzee, Sir W.
Shersby, Michael Vaughan, Dr Gerard
Silvester, Fred Viggers, Peter
Sims, Roger Waddington, David
Skeet, T. H. H. Wakeham, Rt Hon John
Smith, Tim (Beaconsfield) Waldegrave, Hon William
Soames, Hon Nicholas Walden, George
Speed, Keith Walker, William (T'side N)
Speller, Tony Walker, Rt Hon P. (W'cester)
Spence, John Wall, Sir Patrick
Spencer, D. Waller, Gary
Spicer, Jim (Dorset W) Walters, Dennis
Spicer, Michael (Worcs, S) Ward, John
Squire, Robin Wardle, C. (Boxhill)
Stanbrook, Ivor Warren, Kenneth
Stanley, John Watson, John
Steen, Anthony Watts, John
Stern, Michael Wells, Bowen (Hertford)
Stevens, Lewis (Nuneaton) Wells, John (Maidstone)
Stevens, Martin (Fulham) Wheeler, John
Stewart, Allan (Eastwood) Whitfield, John
Stewart, Ian (hertf'dshire, N) Whitney, Raymond
Stokes, John Wiggin, Jerry
Stradling Thomas, J. Winterton, Mrs Ann
Sumberg, David Winterton, Nicholas
Tapsell, Peter Wolfson, Mark
Taylor, Teddy (S'end E) Wood, Timothy
Taylor, John (Strangford) Woodcock, Michael
Tebbit, Rt Hon Norman Yeo, Tim
Temple-Morris, Peter Young, Sir George (Acton)
Terlezki, Stefan
Thatcher, Rt Hon Mrs M. Tellers for the Noes:
Thomas, Rt Hon Peter Mr. Carol Mather and
Thompson, Donald (Calder V) Mr. Robert Boscawen.

Question accordingly negatived.

Main Question put and agreed to.

Resolved, That an humble Address be presented to Her Majesty, as follows:— Most Gracious Sovereign, We, Your Majesty's most dutiful and loyal subjects, the Commons of the United Kingdom of Great Britain and Northern Ireland in Parliament assembled, beg leave to offer our humble thanks to Your Majesty for the Gracious Speech which Your Majesty has addressed to both Houses of Parliament.

To be presented by Privy Councillors or Members of Her Majesty's Household.