Autumn Statement

HC Deb 06 December 1984 vol 69 cc519-603

Mr. Speaker

I have selected the amendment in the name of the Leader of the Opposition. More than 30 hon. Members are anxious to take part in this debate. I therefore intend, once again, to apply the 10 minute limit on speeches between 7 pm and 8.50 pm. I appeal to Privy Councillors and other hon. Members who are called before 7 pm to bear in mind the interests of their colleagues and to keep their speeches brief.

It would be counter-productive for hon. Members to come to the Chair to ascertain where they stand on my preliminary list. I shall do my best to include in this debate those hon. Members who failed to catch my eye during the economic debate and the debate on the Queen's Speech. I shall give preference to those hon. Members today.

4.40 pm

The Chancellor of the Exchequer (Mr. Nigel Lawson)

I beg to move, That this House approves the Autumn Statement presented by Mr. Chancellor of the Exchequer on 12th November; welcomes the prospect of continuing low inflation and steady growth as the basis for maintaining the trend of rising employment; and congratulates Her Majesty's Government on keeping the public expenditure planning total for 1985–86 within the figure published in the 1984 Public Expenditure White Paper (Cmnd. 9143). This is the third occasion during the past six weeks on which the House has been able to debate the progress of the economy. I welcome this further opportunity for the House to consider in particular the statement I made on 12 November and to endorse the Government's economic strategy, which has already provided almost four years of steady economic growth with falling inflation and, despite the still lamentably high level of unemployment, a steady growth in the number of people in work since the spring of 1983.

That record owes a great deal to our resolution as a Government in tackling the relentless upward pressure of public expenditure, in reducing the share of national income absorbed by the public sector and in bringing forward resources for more productive use by private enterprise. As the Earl of Stockton in his recent and memorable maiden speech in another place said about slimming the public sector: it is very disagreeable…But it had to be done and it still has to be done."—[Official Report, House of Lords, 13 November 1984; Vol. 457, c. 238.]

Mr. Eric S. Heifer (Liverpool, Walton)

rose—

Mr. Lawson

Before elaborating on those matters, I should like to pay tribute to the Chairman of the Treasury and Civil Service Committee, my right hon. Friend the Member for Worthing (Mr. Higgins), and to the members of his Committee.

Mr. Heffer

Will the right hon. Gentleman give way?

Mr. Lawson

I shall not give way. The House knows that I normally give way frequently. Mr. Speaker has said that there is a shortage of time, and I shall, therefore, be a little more parsimonious than I normally am in giving way.

I pay tribute to the Committee for the expedition with which it conducted its inquiry into the autumn statement. I know that my right hon. Friend the Member for Worthing will not take it amiss if I say that I do not find myself 100 per cent. in agreement with every word of the Committee's report. My right hon. Friend would perhaps be surprised, and some members of his Committee might even be disappointed or alarmed, if that were not so.

The Treasury and Civil Service Committee can justly claim to have something of a proprietary interest in the autumn statement, because it was in response to an earlier report by its predecessor Committee that my right hon. and learned Friend the Foreign Secretary, when he was Chancellor, presented the first autumn statement to the House in November 1982. This year's autumn statement, like its predecessors, brings together a number of announcements that fall to be made at this time of the year. I know that many hon. Members on both sides of the House recognise that its particular value lies in the fact that it allows the public spending plans for the year ahead to be set in the context of a fresh economic forecast.

We continue to make better progress on inflation than most commentators have expected, and this downward pressure should continue in the coming year. Although the forecast in the autumn statement does not predict much of a change in the inflation rate during the next 12 months, we shall still have achieved a significant period when inflation has been at or below 5 per cent. That was scarcely imaginable when we first took office a little over five years ago. Now, expectations are adjusting to that much lower rate of inflation, providing the basis for the further progress on inflation that our policies are designed to achieve.

Our policies are designed to achieve something else as well. By having a firm grip on public expenditure, holding it broadly constant in real terms over a period of years, we shall as the economy continues to expand, have progressive scope for reductions in taxation not just for the few, but for the many. We have achieved that already by an increase in tax thresholds well ahead of inflation, and I hope that we shall continue to do so. As I have said to both the House and the Committee, this occurs within a wide margin of uncertainty. The scope of perhaps £1.5 billion of tax reductions in the coming budget—

Ms. Clare Short (Birmingham, Ladywood)

What about the unemployed? Tax cuts will not help them.

Mr. Lawson

—is something which will be of comfort, as the hon. Lady rightly points out, particularly to the unemployed.

We continue to hear it said that the years since 1981 have been a period of weak recovery. A closer examination of the figures shows that the pace of recovery of output has been far from weak. If growth in 1985 turns out as expected in the autumn statement forecast, the economy will have grown since 1981 by almost 12 per cent. That would more than match the output growth during the previous recovery period from 1975 to 1979. It would also compare particularly well with our competitors overseas. As the House knows, last year we had the highest rate of economic growth within the European Community. According to the Commission's latest estimates, this year, thanks to the coal strike, our rate of growth will be around the average for the Community—no better than that. Next year, however, the Commission expects us once again to be right at the top of the Common Market league table for growth. No doubt we shall hear in due course from the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) that there has been no recovery—that it is simply a figment of the imagination since, he will argue, how else could unemployment remain so high.

Of course unemployment is too high. Of course every hon. Member wants it to be lower. Only the right hon. Member for Sparkbrook could persuade himself that the four years of recovery are somehow a complete illusion. The House knows better than that, and so do business and industry, which are now earning their best rate of return for a decade.

Mr. Jack Straw (Blackburn)

Will the Chancellor explain something that has been genuinely puzzling me for the last few weeks? When the right hon. Gentleman wrote and published the medium-term financial strategy in 1980—when unemployment was below two million—he said that, as inflation came down and the public sector borrowing requirement was reduced, not only would output increase, but unemployment would come down. What has gone wrong?

Mr. Lawson

As inflation has come down, so employment has grown substantially.

There are three important ways in which this recovery differs from recoveries in recent times. First, this recovery has been accompanied by a sharp and necessary rise in the profits of industry and commerce. Secondly, there has been no great resurgence of stock building. In past recoveries, there was a great growth of stock building which proved to be an element of instability, because subsequently companies and industries tended to destock. In many cases, that is what caused the end of the recovery. Other recoveries have had to come to an end because of a resurgence of inflation, which has conspicuously not occurred during this recovery.

One great remaining worry is the level of unemployment. The level of unemployment could have improved if only real wages had grown less rapidly. It is no use the Opposition closing their eyes to that fact. I was interested to note that last weekend every Head of Government who attended the European Council meeting in Dublin — including the Socialist President of France, Mr. Mitterrand — approved the Commission's annual economic report which has, as its first item under the heading "For the expansion of employment", this statement: strict moderation in the evolution of real wages, consistent with the objective of achieving a pause in the growth or even a reduction in total real labour costs, which, with lower taxes and lighter burdens of employment regulation, would mean a cost structure of firms that would be more conducive to employment expansion. That is the policy not merely of this Government but of everyone throughout the Community who has responsibility for dealing with the very difficult and intractable problem of unemployment.

Ms. Clare Short

Will the right hon. Gentleman give way?

Mr. Lawson

However well we do in improving our own economic performance, we are inevitably exposed to the world background. The forces of protectionism threaten to poison the trading climate and weaken the fabric of international economic and political co-operation as a whole, as they did in the 1930s. The recent examples of unilateral action by the United States to limit imports of steel pipes and tubes from Community countries, and Canada's decision to maintain quantitative limits on imports of footwear, are two recent examples. The challenge before us is not merely to resist protectionism but to push forward with negotiations for further liberalisation in the framework of the GATT.

A second cause for concern remains the level of world interest rates, which is closely linked with the economic prospects for the United States. The size of the American budget deficit — in relation in particular to American domestic savings — has inevitably pushed up interest rates and thus led to a sharp rise in the value of the dollar. The counterpart to the capital inflows financing the United States budget deficit is a substantial American current account trading and payments deficit of about $100 billion a year.

The United States will soon, for the first time, become a net international debtor; indeed, it could fairly quickly become the world's largest debtor. That the world's wealthiest economy should be a persistent large borrower of capital from the rest of the world is neither a desirable nor, in my opinion, a sustainable position. No other country could sustain the imbalances that we see in the United States for as long as the Americans have done. Even they are increasingly coming to recognise the need for painful remedial action.

President Reagan made it clear only yesterday that he intends to take further action to cut the deficit. Labour Members, wo seem to persist in the delusion that the American budget deficit is a blessing that we in Britain should seek to emulate, might listen to the views of the man who has to grapple with it—the American Treasury Secretary, Mr. Don Regan. Speaking only last weekend — [Interruption.] I suspect that what he said after the election is rather more significant than what he said before the election. Mr. Regan said: Deficit reduction is by far the most serious problem facing the US, the Administration and the Congress … Reducing the deficit is the No. 1 priority.

Mr. Peter Tapsell (East Lindsey)

I do not think that anyone would disagree that the number one problem facing the United States is its deficit. Equally, I do not think that anyone would disagree that the number one problem facing Britain is its unemployment. What does my right hon. Friend say in response to the argument that if £1.5 billion is cut off taxes, much of that will be spent on imports and will help the Japanese and German workers, whereas if the same amount of money is invested in a selective capital investment programme, very few imports will be involved but a good many new jobs will be created?

Mr. Lawson

I regard it as extraordinarily defeatist to assume that whenever the British people have more money to spend, British industry is quite incapable of meeting their needs. I do not believe it for a moment.

A third area of concern is the international debt problem. We have avoided the disasters prophesied by many, but for the future it is important for financial flows to developing countries to take forms that are better suited to their needs. That means forms by which funds are committed for a longer period, and where the servicing costs are more certain or better related to the return on the assets which they finance. In particular, that means a resumption of direct investment. Many debtor countries should ask themselves whether past inhibitions on such investment should be continued. I hope, too, that those developed countries that maintain exchange controls that inhibit outward investment of this kind will ask themselves the same question.

We can be proud of the growing part that British capital has been able to play in the developing world since the abolition of exchange controls. Since 1979, private investment in the under-developed countries has averaged over £4 billion a year. Not only is that a multiple of official aid flows—about the maintenance of which the House was recently concerned — but private investment is a form of assistance that typically brings with it valuable managerial and technical skills.

Mr. Alan Howarth (Stratford-on-Avon)

I agree with what my right hon. Friend says about the American federal budget deficit and the profound danger that that constitutes, not least to the Third world countries to which he was referring just now, but will he agree that that deficit has been rather helpful to him in some of his very proper preoccupations in recent months?

Has not the effect of an over-valued dollar been that my right hon. Friend's oil revenues have been that much more buoyant and helped him to meet his target, and to put his £7 billion PSBR target back into place for 1985–86? Has not the effect also been that, because of the lower parity of sterling, our exports have been more buoyant, and my right hon. Friend's tax revenues have been more buoyant?

Does my right hon. Friend agree that is not a stable or sustainable set of circumstances and that we shall have to make further adjustments fiscally to achieve his objectives in future years?

Mr. Lawson

I agree with my hon. Friend, who made a rather long intervention — I am sure that he will forgive me if I do not deal with every point in it—that it is not a sustainable position. I do not think that it will mean making adjustments at present of the kind that he has suggested may be necessary in later years. But, as we get nearer to those years, if such adjustments prove to be necessary they will be made to maintain the integrity of the medium-term financial strategy. As hon. Members will know, following the London summit initiative last June, there are to be special meetings in Washington next April of the International Monetary Fund interim committee and the IMF and World Bank development committee to discuss these and other international financial issues that are of particular concern to developing and debtor countries.

Above all, the developing countries need imported capital for their development, and export markets for their goods. I cannot help noting that the declared policy intention of Labour spokesmen—if they ever again form a Government — is to inhibit the flow of capital by imposing controls, and to inhibit the flow of trade by imposing import controls. So much for their crocodile tears about the developing countries.

Mr. Kevin Barron (Rother Valley)

Will the right hon. Gentleman give way?

Mr. Lawson

No.

I have mentioned the report of the Select Committee on the Treasury and Civil Service. It focused on two points in particular—how the Government set their spending priorities, and the treatment in our plans of asset sales and debt interest.

Since 1981, when the Government first moved to a full cash planning system of public expenditure control, the discipline of holding to plans, while finding room for the areas of growth in spending within them, has involved an exhaustive search in each public expenditure survey for savings and economies across the board, and a rigorous examination of priorities both within and between departmental programmes. At the end of that process there are inevitably some very hard decisions to be made. The very difficulty of those decisions throws a spotlight on the process by which the decisions are reached, and it is to that process that I should now like to turn.

The annual public expenditure survey involves a lengthy period each year during which officials in the spending Departments and the Treasury prepare an analysis of programmes with assessments of the implications of increasing and reducing expenditure in specific areas. There are meetings of officials, both bilateral between the Treasury and the individual spending Departments, and multilateral, when the principal spending Departments come together under Treasury chairmanship to consider these matters. We then come to the decision-making phase of the survey, when Ministers make their political judgments on the basis of the factual material and the analysis provided by the officials. Ultimately, there are the decisions of the Cabinet as a whole, which exercises its judgment as to which matters it will examine in greater detail and which in less detail.

Because those decisions are important and because some of them are controversial, there is naturally much interest in the particular setting in which they are taken. If a group of Ministers meets late at night or is dubbed the star chamber, that is instantly newsworthy, perhaps more so than the issues being discussed. One point, however, is fundamental. Whatever the group of Ministers or Departments involved and whatever the forum or setting, there can be no magic mechanism for setting priorities within and between programmes. However detailed the factual basis provided by the officials and however sophisticated the analysis of output and performance for the programme concerned, in the end there has to be a political judgment and a political decision. [Interruption.] I am dealing with the report of the Select Committee on the Treasury and Civil Service to which I, unlike the Opposition Front Bench, have the courtesy to give serious attention.

There is a homely analogy to be drawn, which I tried to make when I appeared before the Select Committee. Just as when a family wonders whether to have the house painted or to go away for a holiday, or whatever, there must first be an appraisal of the costs and so on, then the decision and choice. In Government there is no utilitarian calculus that permits numerical comparison of the respective benefits of, say, an extra military aircraft as against more disaster relief or more equipment for the research councils. There is, of course, extensive analysis and appraisal, but at the end there is a political judgment to be made which in practice is necessarily determined as much by constraints as by priorities.

Mr. Robert Sheldon (Ashton-under-Lyne)

I agree that there is no magical solution, but it is surely in the interests of the House that the mechanism should be more widely known. Will the right hon. and learned Gentleman tell the House whether the issue of student grants went to the Cabinet or to the star chamber?

Mr. Lawson

All issues are set before the Cabinet, including that one.

There are two final points on this subject. After looking carefully at a range of spending programmes, Ministers may often make a judgment in the light of what the analysis reveals about the pressures on a particular programme and then set that programme at a particular level, leaving the Minister in charge to decide precisely how the total should be distributed among the various elements in the programme. That was touched on in the Select Committee report. I see no possible objection, methodological, constitutional, political or otherwise, to such a proceeding. If the Minister responsible thinks that he can improve on the benefit delivered by a given total expenditure, he must be free to do so.

Importantly, though not surprisingly, the repetition of the process that I have described in successive public expenditure surveys produces over time a marked change in the composition of public expenditure in line with the priorities of the Government of the day. If hon. Members take a close look at the Green Paper, "The Next 10 Years", published at the time of this year's Budget, they will see that very large shifts have occurred within total public expenditure since 1978–79 — shifts determined by the Government's policies, pledges and priorities.

The procedures for public expenditure plans are not and cannot be mechanistic either in theory or in practice. As I have said, the decisions are often controversial and always difficult, but they are made in the course of a procedure which properly constrains Ministers to weigh each decision against a range of alternatives. I note and welcome the fact that the Select Committee intends to return to this in future reports.

Dr. Jeremy Bray (Motherwell, South)

That process having been gone through and a distribution of public expenditure having been announced, if circumstances then arise in which it has to be reconsidered, why does the adjustment that follows have to fall upon the same Department, in yesterday's case the Department of Education and Science, which then has to find more money to the detriment of the science budget than to the detriment of the Chancellor's freedom to cut taxes in the Budget?

Mr. Lawson

There are two answers to that. First, it is the Government's policy to maintain the overall level of public expenditure broadly constant in real terms. That is an overall constraint due to our policy of providing scope for progressive reductions in the burden of taxation. Secondly, within that constraint—I believe that this is true for any Government—choices then have to be made and more money for one heading of public expenditure inevitably means less for another.

The Select Committee also recommends that asset sales should not be treated as negative expenditure and that debt interest should be included in the planning total. The Select Committee recognises that that is well-trodden ground and the Government's position has been made clear on a number of occasions. Purchases of assets add to public expenditure, so it is entirely consistent for sales of assets to reduce it. Since the planning total is a control total for public expenditure, it is more sensible for it to include debt interest, which is susceptible only to very limited short-term control. That does not mean, however, that either asset sales or debt interest are ignored. Debt interest is taken fully into account in assessing the total public expenditure position. As I have repeatedly pointed out, the composition of public expenditure and receipts is taken into account in assessing the appropriate size of the public sector borrowing requirement.

The real and important question to which all Governments must address themselves, however, is whether on the basis of existing definitions the PSBR is too high or too low or, perhaps, at the right level. I note that the Select Committee is silent on that, although no doubt we shall be hearing the views of its Chairman, the right hon. Gentleman—[HON. MEMBERS: "He is your right hon. Friend."] Indeed, he is my friend as well as my right hon. Friend the Member for Worthing.

Mr. Tony Marlow (Northampton, North)

As my right hon. and learned Friend the Chancellor has said, if more money is to be spent on a particular programme, that money must be found elsewhere. We are all concerned about the level of Government expenditure. But why must it be found from the same Department? Why can it not come from the total realm of public expenditure?

Mr. Lawson

In the case to which my hon. Friend refers, exceptionally an increase of £10 million was allowed for the programme in question. Nevertheless, when an agreement has been concluded between the Treasury and a spending Department, very special justification is required to reopen agreements already reached.

As I have said, the treatment of asset sales is well understood. Far and away the most important implication of asset sales, however, is the policy that lies behind it — privatisation. The privatisation programme is on course and proving outstandingly successful. Twelve major companies, a number of other enterprises and more than 400,000 jobs have been shifted from the state sector to the private sector. I stress the jobs aspect deliberately. Enough companies have now been privatised to show that privatisation is a textbook proof of the benefits of free market enterprise over collective state activity. The common thread running through each of those privatised companies is a higher turnover, leading to higher profits, more investment and more jobs. That can be seen right across the board. That is why privatisation is and will continue to be a major element in our economic strategy.

A central feature of that strategy is encouraging the spread of individual ownership. We want to make a reality of the vision of a property-owning and earning democracy that Winston Churchill and Anthony Eden first put before the British people. Last month's successful sale of 3,000 million shares in British Telecom was a massive leap forward in achieving that objective. In one day 2 million people became direct owners in one of the growth industries of the future. Probably well over 1 million of them had never before owned shares directly. When we first proposed the sale of more than 50 per cent. of British Telecom we were told that it could not be done, that it was impossible, that the market could not cope with anything of that size, that individual shareholders would not want it, that there were not enough of them to take up the offer, and that the rest of the world would spurn it.

Nevertheless, we decided to go ahead, and the ensuing sale was an outstanding success. It is the largest single issue ever undertaken in the world. It proves that the City of London has unrivalled ability in organising and arranging new finance. The sale increased from more than 170,000 to 400,000 the number of workers who have joined the free enterprise sector. It released from the shackles of state control a company of world stature in one of the industries on which our future will depend.

Mr. Eldon Griffiths (Bury St. Edmunds)

Is my right hon. Friend aware that in my constituency, and I suspect in many others, many people who successfully purchased British Telecom shares were tenants who purchased their council houses, and five years ago never imagined that they would own either their houses or shares in any enterprise?

Mr. Lawson

My hon. Friend is absolutely right. The sale is a central strand of our strategy and is of first and fundamental importance in the sort of society we wish to create.

The successful sale of British Telecom holds two important lessons. First, it reveals a vast and untapped yearning among ordinary people for a direct stake in ownership of British enterprise. They do not want the spurious, theoretical ownership offered by state capitalism. They are not even totally satisfied with the somewhat remote ownership offered by institutional capitalism. They want a direct stake in particular firms, with which they can indentify.

Investment in shares has begun to take its place with ownership of a home and either a bank or building society deposit as a way for ordinary people to participate in enterprise and wealth creation. We are seeing the birth of people's capitalism.

Mr. Dennis Skinner (Bolsover)

Is the Chancellor of the Exchequer aware that his theory might totally satisfy all his Conservative supporters if, on Sunday 30 September one of the giants in the City, Johnson Matthey—despite being in the private sector and not having had a ballot to decide the issue—had not had to be rescued by the Government and the Bank of England, the taxpayers' bank, with a sum of £75 million? Those entrepreneurs at Johnson Matthey were running an uneconomic unit and their reserves became exhausted—the Government's argument regarding coal mines. Why, when the Government are so bent on privatisation and a property-owning democracy, did the Government use the Bank of England to rescue their crooked City friends?

Mr. Lawson

I am not sure whether on reflection the hon. Gentleman will feel that his last words were appropriate. I may have something to say about that in due course, but not today.

The second lesson from the British Telecom experience is that 2 million people have chosen to ignore the Labour party's threat of renationalisation. They have put their money on the table, and put it on the blue square. The weight of their money says that there will never by another Labour Government—at least not for so long as the Labour party remains committed to nationalisation, Socialism and the destruction of free enterprise.

The millions of ordinary people, from taxi drivers to pensioners, who have brushed aside Labour's threats of renationalisation will give business a whole new injection of confidence to plan ahead and take full advantage of opportunities for enterprise and growth, which only a free enterprise society can offer.

As the right hon. Member for Sparkbrook is always a little coy about the Labour party's policies, I invite him to tell the House what type of autumn statement we could have expected from a Labour Government. Under the Labour Government there was no formal autumn statement, but an almost routine autumn crisis. In four years out of five there was a crisis, and with it came an autumn Budget to reverse the damage caused by the spring Budget or to amend the aummer or early autumn Budgets. Under the Labour Government Budgets were not merely flowers that bloomed in the spring, but weeds that flourished throughout the year. Despite that, there was not one autumn when the Labour Government could report lower interest rates, single-figure inflation, 300,000 extra jobs or 3 per cent. growth.

We shall ask the House to reject the Opposition amendment. There is one phrase in it—the allegation that our policies are calculated to sustain a high degree of unemployment — which we reject with anger and disdain. It is the very antithesis of the truth. All our policies are calculated to improve the prospects for generating jobs that can be sustained into the future. No party would deliberately foster an increase in unemployment as an objective of policy. Political parties may, and do, differ as to the best means of eradicating the scourge of unemployment, but all parties are united in pursuing that objective, as they should be.

The allegation in the Labour party's amendment demeans those who made it. What is more, it comes ill from a party that knows that the miners' strike is destroying jobs, yet calculates that it is in its interest to support that destructive conflict as long as it persists. It comes ill from a party that knows that excessive pay destroys jobs, yet calculates that it is in its interests to support militancy wherever it manifests itself. The allegation comes particularly ill from the right hon. Member for Sparkbrook, who has admitted that the Labour party's economic policy is "fatally flawed", because it ignores the link between pay and jobs. Yet, with cynical calculation, the right hon. Gentleman remains the spokesman for a policy that he has described as "incredible".

Mr. Nicholas Winterton (Macclesfield)

My right hon. Friend has touched on the most critical of all matters that face the country, unemployment. Will he tell the House what the cost in money terms of unemployment is? In doing so, I respectfully ask him to answer the question put earlier. If some of the money wasted on paying unemployment benefit and financing all the manpower schemes that the Government have introduced were directed to selected capital projects, would that not be of great benefit to the country and reduce unemployment?

Mr. Lawson

There is no benefit in capital projects unless they are worth while in their own right. I am surprised that my hon. Friend says that manpower projects are a waste of money. The youth training scheme, in particular, on which we are spending unprecedented sums, is extremely valuable to young people who will find the jobs of the future.

The alliance also participates in this shabby and cynical calculation. Its policy on jobs, such as it is, has shrunk to the proposal that we should spend £1 billion on road building and other major construction projects. Yet all hon. Members know that there is not a single major construction or road building project that is not opposed at local level by the Liberal party.

Mr. Richard Wainwright (Colne Valley)

When will the Chancellor of the Exchequer make a statement, that will be recorded in the Official Report, which even begins to bear out his outrageous suggestion?

Mr. Lawson

I am sorry that the hon. Gentleman is so sensitive on that point. It obviously drove home. When the Liberal party's calculations tell it where the votes lie, jobs go out of the window. It is generous in theory but completely selfish in practice. Unemployment has been growing in Europe every year but one since 1973.

Mr. Stephen Ross (Isle of Wight)

rose—

Mr. Lawson

I shall not give way. I have already given way to 50 per cent. of the Liberal party.

It is absurd to say that that remorseless and tragic increase has been the calculated consequence of the diverse policies pursued by all the Labour, Conservative, Social Democratic, Socialist, Lib-Lab and coalition Governments who have been in power across Europe in the past decade. Since the general election, 300,000 extra people have found jobs in this country. Unfortunately, that is not enough to absorb the unexpectedly large number of people seeking jobs, but it is a much better performance than the rest of Europe, where the number of jobs appears to have continued to shrink, and where unemployment continues to increase faster than in this country.

Those countries that have been the most successful in creating jobs have been those across the Atlantic and the Pacific, which have relied more upon free enterprise, low taxation, fewer controls, non-militant unions and flourishing enterprise culture. Those are the policies that this Government are seeking to introduce to enable this country to generate the jobs and create the wealth that we all wish to see.

The real weakness of the Opposition's case lies not in what they say but in what they fail to say. In repeated debates in the House they have made virtually no attempt to spell out a credible and coherent explanation of how they would resolve the problems that this and every other major country face. To them, 3 million unemployed is not a problem to be solved, but a tragedy to be exploited. They are like a doctor who offers his patients sympathy but refuses any diagnosis, prognosis or prescription. Real compassion requires from us more than sympathy. It requires a willingness to face tough choices and to stand up to vested interests.

Unless the Opposition parties are prepared to tell us what they would do—and why it would work now when it failed in the past and has been rejected by nearly every Government in the free world—those parties will find themselves in the wilderness not just for a few years but for a generation.

The Government have had the courage to make tough decisions and the resolution to stand up to various vested interests. They have had the consistency to pursue a long-term strategy that offers the people of this country the vision of a free economy, which will harness their energies to the creation of jobs and the generation of wealth—wealth that we want as much for the welfare of the needy as to fulfil the legitimate aspirations of the majority of our people.

5.22pm

Mr. Roy Hattersley (Birmingham, Sparkbrook)

I beg to move, To leave out from "House" to the end of the Question and to add instead thereof: refuses to support an economic policy which is calculated to create and sustain a high level of unemployment; rejects the demonstrably false belief that a constant reduction in public spending will produce an automatice improvement in economic performance; and condemns the reduced levels of regional aid, student grants, house-building and improvement, overseas aid and social security benefit which are the real, but initially unrevealed, consequences of the Chancellor's Autumn Statement. There is one aspect of the Government's motion to which I offer an immediate and heartfelt welcome. At least we have been spared the counterfeit compassion and pretence that unemployment is soon about to fall. We must assume that the Government have accepted the advice offered to them three weeks ago by the Financial Times which said: It is impossible to get away for ever with saying that unemployment will shortly begin to come down or at least level off if plainly it does not. Until today, or until the Chancellor of the Exchequer addressed the Treasury and Civil Service Select Committee and told it that his estimates on unemployment had proved false, the Government's reaction to every complaint about rising unemployment was to say, "Wait a little longer and things will get better soon."

The nation and the 4 million—that is the true figure —unemployed, have now been waiting for five years, and things have become continually worse. At least it says something for the Chancellor's political acumen that he has at last begun to abandon the pretence that a strict and rigorous control of public borrowing and a constant reduction of the monetary aggregate will lead to a certain and automatic reduction in unemployment. That theory, on which the medium term financial strategy was based, and upon which all the false promises of reduced unemployment were based, is palpably wrong. It does the Chancellor's political acumen credit that he no longer pretends what has been the main thesis upon which the Government have attempted to defend their unemployment record since 1979.

Even the Government have abandoned—I welcome that abandonment—the combination of ignorance and hypocrisy which produced the constant promise that unemployment would fall. Today's motion and today's speech by the Chancellor—despite all the bogus anger at the end — offered no policy for dealing with unemployment. That is because the Government have no policy for unemployment except to sit back and watch it rise year by year while they concentrate upon the economic objectives which are more important to them and their class.

The autumn statement reaffirms the strategy — I use the word again — which intentionally increased unemployment and will increase it still further. That is the strategy for which the Government supporters will be voting tonight. They may wring their hands about the plight of the unemployed, and briefly bare their souls during the unreported evenings of economic debates; they may anonymously dissociate themselves from the Chancellor of the Exchequer privately—courtesy of the Lobby system — but tonight they will troop into the Division Lobby to vote for a high unemployment policy.

That, in the view of the Opposition, is the central issue of the debate and the issue with which the Chancellor has failed lamentably to deal. The central issue of the debate and of politics today—indeed, the great moral question facing the nation today—is the level of unemployment, the existence of an alternative which can reduce that level and the Government's unwillingness to adopt that alternative because they have higher priorities in other spheres.

Before I describe that alternative—the alternative that the Chancellor persists in saying is never offered to him but which is offered to him not just by me but by my right hon. and hon. Friends but by a large number of his Back Benchers who have tried to put the case to him today—I wish to deal with two other aspects of the autumn statement.

The first is the credibility of the figures upon which the autumn statement is based, and, in consequence, the credibility of the Chancellor. Everything that the Chancellor says is treated with virtually universal suspicion. It is the fate of most Chancellors of the Exchequer to be accused of deception by their opponents. The Chancellor has moved to the Back Benches. That is a new presence. I shall repeat the passage that I am anxious that the Chancellor should hear. It is the fate of most Chancellors to be accused by their opponents of deception, but this Chancellor's great achievement is that he has managed to be accused of it by his friends. Let me quote to him from the Daily Telegraph a leader called "Autumn Fudge". It stated: it is difficult to avoid the conclusion that he is not quite telling it like it is. On the same day, the Daily Mail rightly said: The House of Commons wanted above all to know if there was anything in the Chancellor's Autumn Statement which might make the unemployment outlook less bleak. What those listening to him heard instead was deliberately terse generalisations. One almost feels sorry for Mr. William Deedes and Sir David English who, after years of unremitting sycophantic support for the Tory party, are provoked by the Chancellor of the Exchequer into a moment of honest objectivity. Indeed, the Chancellor is so reckless about his reputation that he will do and say anything to avoid the real discussion on his own policies and on the record for which he is responsible. That is why he always wants to talk about what he falsely believes the Labour alternative to be. Let me tell the Chancellor, as I have told him before, that while he remains Chancellor and presides over an economy in which at least 3.5 million, and possibly 4 million, men and women are on the dole and that while he has no policy to produce a better unemployment record and no plans for reducing unemployment, we shall make him talk about what he has done and about what he has failed to do.

No matter how much he may try to run away from it, we are debating this afternoon the real consequences of the autumn statement. They were not revealed on 12 November. They were revealed by Ministers who were drafted in to fill in the details that the Chancellor chose not to give to the House. Those Ministers were required to have the courage of the Chancellor's own convictions in order to do the dirty work for the Chancellor and give the bad news about what the autumn statement really meant.

Let me give some examples of what I refer to. The cut in regional aid—already before the autumn statement 35 per cent. below the 1979 figure—is now, thanks to the autumn statement, to be cut by a further £1.5 billion over the next five years. Let me ask the Chancellor, in relation to the cut in regional aid, a question that I shall ask him continually this afternoon: why do this Government and the right hon. Gentleman always choose the high unemployment option?

Secondly, student grants have been cut by 14 per cent. since 1979. Despite turning and running, despite the scuffle, despite the U-turn, student grants are to suffer a further fall in real value of 1.5 per cent. in 1985–86. There is to be a further cut in overseas aid, an increase in water charges, an increase in the gas and electricity tax and, most significant of all concerning the real results of the autumn statement—not a word about which we heard from the Chancellor when the autumn statement was made and not a word about which we have heard from the Chancellor this afternoon — there is to be a further cut in the housing programme.

We are told in paragraph 2.15 of the autumn statement that the cut in the housing programme is £65 million. That in itself is bad enough. It is a further blow to the construction industry where 400,000 men and women are already out of work. It is a further blow for the badly housed and homeless families who will number 1 million by 1988. It is also a deception. While the reduction in gross capital provision for housing is said to be £65 million, the figures subsequently published by the Department of the Environment show that the change in the cash limit is £495 million. The two sets of figures are massaged into compatibility by the forecast that the income from council house sales will rise by £430 million next year.

I ask the Chief Secretary, on the assumption that he is to make a serious speech tonight, to state what evidence there is to substantiate the view that the income from sales of council houses will increase next year by £430 million, thus holding the cut in council house building to the figure that the Chancellor pretends it will be. According to a parliamentary answer from the Department of the Environment, quite the opposite is possible. The answer given on 9 November states that receipts from the sale of council houses have begun to decline. That is not surprising. The first flush of enthusiasm to buy is over. [Interruption.] The Chancellor must laugh at the Department of the Environment, not at me. The attempts by the Government to increase sales by the inclusion of old people's dwellings and disabled persons' dwellings has rightly been defeated.

What is more — here is another humorous matter about which the Chancellor may care to laugh, but which he may care to refer to the Department of the Environment—the Department says in its answer that it has no way of knowing whether income from the sale of council houses goes towards building more houses or whether it is used for other purposes. Yet the Chancellor blandly says, to justify his phoney figures, that because next year there will be an additional income of £430 million, the cut is only £65 million.

Mr. Nicholas Soames (Crawley)

Will the right hon. Gentleman give way?

Mr. Hattersley

I do not know the constituency of the hon. Gentleman, but he is the one who always seems to be attending hunt balls.

Mr. Soames

If the right hon. Gentleman were to forbid the sale of council houses, how exactly would he finance his massive building programme?

Mr. Hattersley

Let me assure the hon. Gentleman that I shall deal with the financing of the reduction in unemployment. I promise the hon. Gentleman that in a moment I shall make the case that he has asked me to make, but in my own way. May I also ask him to focus his formidable intellect upon the point I was trying to make: since there is no way of calculating the increase in the number of council house sales and of knowing what the income from council house sales will be spent on, how can the Chancellor, with any integrity, announce that that is the reason why council house building has not been cut so much as the autumn statement suggests? The answer is that the Chancellor could not with integrity make such an allegation.

The entire figure is an invention, made to balance the Chancellor's books. It has not even fooled the Building Employers Confederation, a body which is easily enough fooled by a Conservative Government. The more damage the Conservative Government do to the building industry, the more money the building industry gives to the Conservative Government. However, in this case the builders have seen through the Government. They report in their bulletin that while the Government pretend that there will be a 6 per cent. fall in building next year, in reality the fall will be 25 per cent. That is a shameful fact. It demonstrates that everybody who does business with the Chancellor—builders no less than politicians—has to look for the sleight of hand, the double counting and the dubious assumption.

The housing example which I have given has a triple significance. First, it demonstrates the Government's passion for public expenditure cuts. Secondly, it demonstrates the Chancellor's special way with figures. Thirdly, it demonstrates what I said a moment ago and shall say many times again: when given a choice, the Chancellor always chooses the high unemployment option. I say again that the Chancellor has chosen it because he has other options and priorities which are more important to him than, for instance, a building programme which would sustain a higher level of employment.

His hon. Friend the Member for Macclesfield (Mr. Winterton) urged upon him a spending programme for capital projects. The Chancellor blandly — indeed, fatuously—replied that capital spending programmes are to be commended only if what the money is spent on is worth while. [Interruption.] Let the hon. Member for St. Albans (Mr. Lilley), who laughed, tell me whether he believes that building houses for the 300,000 families who are homeless in this country is worth while. Let me ask the hon. Gentleman, or the Minister whom he serves, whether he believes that the new capital which is necessary for British Rail is worth while, whether he believes that the infrastructure for ports and roads, which is necessary for the economy of this country, is worth while. It is, I repeat, fatuous to say that capital spending is desirable only if one can demonstrate that there are projects which are desperately needed. Every hon. Member could give the Chancellor a list of capital projects which would be desirable and which at the same time would put Britain back to work.

Mr. Richard Tracey (Surbiton)

I realise that the right hon. Gentleman does not want to be pinned down too much, but will he tell the House how many jobs he considers would be created by the list he has given?

Mr. Hattersley

I promise the hon. Gentleman that I shall give him that information. It is not a new figure. It is a figure which has been quoted by many Conservative Members, to some of whom I shall refer in a moment. It is a figure which has been offered to the Chancellor by the Institute of Fiscal Studies and by the London Business School, the Valhalla of monetarism. Everybody in this country, except the Chancellor, is prepared to calculate the number of jobs which can be created by investment in the public infrastructure.

Mr. Nicholas Budgen (Wolverhampton, South-West)

Does the right hon. Gentleman agree that the rate of return for each of the proposed investments at least has to be considered?

Mr. Hattersley

When I have worked my way round to the model that I propose to describe, the hon. Gentleman will discover that we have thought of that as well. I propose to work my way round to it by dealing first with the central issue. If there is money to spare, as the Chancellor hopes and plans, how should that spare money—I put it in colloquial terms—be used?

We know that the central object of the Chancellor's economic policy is not an economic object, but a political object. It is a cut in income tax. The hard truth is that the unemployed, increasing in numbers, will have to pay for it.

It works this way: by massaging the figures, the Chancellor has produced what he calls a fiscal adjustment of £1.5 billion. That is largely a windfall, produced by oil prices being calculated in dollars and the depreciation of the pound running simultaneously with that calculation. The chief economic adviser to the Treasury told the Select Committee, to which I also pay tribute, that a fall of 10 per cent. in the sterling oil price would result in the automatic and certain disappearance of that £1.5 billion.

The Chancellor of the Exchequer seems to be shaking his head, but the comments of his chief economic adviser are on the record. If the right hon. Gentleman wishes to contradict him, I shall give way at once. Answer came there none.

Mr. Alan Howarth

Will the right hon. Gentleman give way?

Mr. Hattersley

I think that the Chancellor has a young champion who will joust on his behalf.

Mr. Howarth

The hon. Gentleman suggested that income tax cuts were a substitute for a policy to help to promote jobs. Does he seriously contend that the low thresholds of income tax that we still have, even after the improvements made by my right hon. Friend the Chancellor, have nothing to do with unemployment and do not contribute to it? Does the right hon. Gentleman deny that the unemployment trap exists?

Mr. Hattersley

I thought that the hon. Gentleman was about to attempt to deal with the point that I was making, but he asked me a different question, which I shall answer. I believe that a pound spent on reducing income tax at any level is less likely to have a direct effect on unemployment than a pound spent on public works. I shall justify that.

Before the hon. Member for Stratford-on-Avon (Mr. Howarth) sidetracked me, I was saying that the chief economic adviser to the Treasury insists that the £1.5 billion will disappear if the sterling price of oil changes by 10 per cent.

Let me reassure apprehensive Conservative Members that whatever happens, the Chancellor will find some money for income tax cuts in the next Budget—not a lot, and nothing like the additional tax burden of £22.5 billion a year imposed by a Government who were elected to cut taxes, but enough to allow them to make the bogus claim that at last income tax has been cut.

That is why the Chancellor is prepared to increase the fiscal adjustment by increasing the tax on electricity and gas. I hope that, as even the Daily Mail urges the Chancellor to stop pretending that it is not a tax, we may get a little honesty from him upon that subject. To get the surplus for a cut in income tax, national assets are being sold. To get the surplus, the Treasury is contemplating imposing VAT on books, newspapers, fuel, children's shoes and what the Treasury calls luxury foods, which turn out to be coffee and biscuits.

None of that has anything to do with economic performance, and it certainly has nothing to do with social justice. It has to do with the political imperative of cutting income tax. That political necessity, no less than other factors, such as the Government's desire to break the trade unions and their willingness to use the unemployed as a way of holding down prices, is why I repeat my accusation that the Government are intentionally running a policy which they know produces a high and increasing level of unemployment.

Mr. Sydney Bidwell (Ealing, Southall)

If income tax were cut substantially, would the skillcentres that are being under-used or closed throughout the country be re-opened or used more?

Mr. Hattersley

My hon. Friend makes the point that Conservative Members seem unable to grasp, even though it is so obvious. If the Chancellor is producing a £1.5 billion surplus to distribute in income tax cuts, every public expenditure cut made to achieve that surplus will have to be written off as the price of those income tax cuts. If Conservative Members do not understand that, they lack a knowledge not of economics, but of elementary arithmetic.

We have always argued—and I argue again today—that a substantial relaxation in the Government's fiscal and monetary stance is necessary for the revival of confidence and demand. However, I wish to argue my case for reducing unemployment not in my own terms of an increase in the public sector borrowing requirement, which I certainly support, but in the Chancellor's terms, because he keeps telling us that he will have at least £1.5 billion to spend. If hon. Members are honest, they will all concede that he could do more about unemployment than he chooses to do. Why does the Cancellor always choose the high unemployment option?

I refer the Chancellor of the Exchequer to the work done by the independent Institute of Fiscal Studies and the monetarist London Business School, which came to a simultaneous and agreed solution: £1 billion spent on tax cuts reduces unemployment by about 30,000 in four years, but £1 billion spent on investment, particlarly capital investment in the public sector on infrastructure, reduces unemployment by about 185,000 in four years.

Why, apart from the political imperative, apart from the chairman of the associations who forced the change of mind yesterday, and apart from the prejudiced opinions of Conservative supporters who do not know much—and care less—about the unemployed, does the Chancellor choose to spend the money in the way in which he is determined to spend it?

Mr. Edward Leigh (Gainsborough and Horncastle)

Do I understand the right hon. Gentleman correctly? Will the Opposition go into the next election emulating the examples of Mr. Walter Mondale who promised higher taxes? If so, they will certainly meet a similar fate to that suffered by Mr. Mondale. Alternatively, will the Opposition emulate the example of their former leader, the right hon. Member for Blaenau Gwent (Mr. Foot) and try to fudge the issue? If so, they will meet the same fate as he suffered.

Mr. Hattersley

I will tell the hon. Gentleman what we shall do, but, first, let me tell him what we shall not do. We shall not go into the next election promising to cut taxes and then increase them by £22.5 billion a year.

The hon. Gentleman asked what we shall do. I shall repeat it shortly in the prepared part of my speech, but I tell him without hesitation that if I, whether as Opposition spokesman or as Chancellor of the Exchequer, have to choose between cuts in income tax or cuts in unemployment, I will choose cuts in unemployment. Indeed, I go further. I believe that Conservative Members, with a number of honourable and notable exceptions, mistake the mood of the country if they believe that our people say, "Let us have our taxes cut if we are working, because we do not care about the unemployed." I believe that many people in work would make the same choices as I propose to make and would give priority to tackling unemployment.

I want to say two other things about the Chancellor's proposals and his attitude to unemployment. I have already observed and rejoiced in the fact that he no longer cries crocodile tears and wrings his hands in mock horror. Nor does he any longer pretend that high unemployment is an act of malign fate which has been imposed on him by some external force. Now he is prepared to talk about possible solutions. If he is prepared to talk about possible solutions, that must mean that he believes that he could do something about it in certain circumstances.

The Chancellor talks about two solutions and I want to speak about both briefly. But first is the idea that unemployment can be reduced by lower real wages. The Chancellor must know that lower real wages will not come about. He should know that even if they did, they would not reduce unemployment. To talk about lower real wages every time unemployment is mentioned is really to look for scapegoats, not answers.

Mr. Lawson

How about an incomes policy, then?

Mr. Hattersley

I shall come to that. If there were a massive injection of effective demand into the economy, it would be important to ensure that that new demand, coming from a massive increase in Government spending, was not dissipated in an increase in money wages. But that, in conditions of expansion, is quite different from what the Chancellor is now proposing at the bottom of a deflationary slide. If the Chancellor does not understand that, no wonder the country is in the mess that it is.

The second solution to unemployment, to which I hope the Chief Secretary will pay particular attention, was offered by the noble Lord Young on Tuesday. The solution that he offered to the National Federation of Building Trades Employers was the abolition of supplementary benefit for young people between the ages of 16 and 18. [Interruption.] Young people under 18 would have to be wiser and older than the Minister's Parliamentary Private Secretary for my initial contention to apply.

Lord Young proposed the abolition of supplementary benefit for young people between the ages of 16 and 18. When Lord Young was appointed as Minister with special responsibility for employment — or unemployment — I predicted that all he would do was produce gimmicks—a change in the figures rather than a change in the real level of unemployment. The idea that he might propose anything as cruelly heartless as removing young people between the ages of 16 and 18 from receipt of supplementary benefit never struck me for a moment. We want the Chief Secretary to tell us tonight whether that member of the Cabinet was speaking for the Government when he proposed that young unemployed people between the ages of 16 and 18 should no longer receive supplementary benefit.

I understand the benefit from that. It may well be that by doing that 150,000 or 200,000 names will be removed from the register of unemployed, but not a single job would be created. Not a single reduction in total unemployment would be achieved. Enormous hardship and suffering would be created. I tell the Chief Secretary a third time: we expect him to tell us tonight whether on Tuesday Lord Young spoke for the Government or whether that is a proposition which not even the Government will contemplate.

Mr. Neil Kinnock (Islwyn)

He can tell us now.

Mr. Hattersley

As my right hon. Friend says, he could tell us now if he chose to do so.

Mr. William Cash (Stafford)

rose—

Mr. Hattersley

My difficulty, Mr. Deputy Speaker, is twofold.

Mr. Cash

rose—

Mr. Hattersley

You must sit down when I am standing up.

Mr. Deputy Speaker (Mr. Ernest Armstrong)

Order. I am sure that the right hon. Gentleman does not mean me.

Mr. Hattersley

My difficulty is twofold. The first is that I am giving way more often than you, Mr. Deputy Speaker, would wish. The second is that all the questions that I direct at the organ grinder keep being answered by the monkeys. Since the Chief Secretary will not answer my question I shall let the hon. Member for Stafford (Mr. Cash) try.

Mr. Cash

Has the right hon. Gentleman accurately described what Lord Young said the other day? Did he not in fact say that it was only when young people refuse to take jobs or training that they would perhaps not get supplementary benefit? Will he please answer that question?

Mr. Hattersley

The answer is no, I did not misquote Lord Young. His speech was described extensively in the Financial Times. It was dealt with in that paper's first leader. Lord Young asked the question: Is it right that we should pay young people for doing nothing? The only possible conclusion one could draw from that question was his intention to remove supplementary benefit. That is what the Financial Times says he meant, and that is what I believe he meant. [Interruption.]

I understand the shame with which Conservative Members greet that proposition, but I assure them that it was the proposition of one of their Cabinet and I assure them that we shall want to know from the Chief Secretary tonight whether it was Government policy.

I am relieved, not to say delighted, that Conservative Members have reacted with such sensitivity to that latest and most brutal proposal. I am delighted that they are interested, particularly those who are from time to time inclined to parade their bleeding hearts whenever unemployment is mentioned. I recall vividly the hon. Member for Bury, North (Mr. Burt)—not now, I think, in his place—two weeks ago speaking movingly of the unemployed coming to his surgery and saying that they did not vote for him to obtain that result. They will correct that error next time. I think movingly, too, about such Conservative Members as the right hon. Members for Cambridgeshire, South-East (Mr. Pym) and for Worthing (Mr. Higgins), and the hon. Members for Aldershot (Mr. Critchley), for Loughborough (Mr. Dorrell) and for Stafford who were willing enough yesterday and the day before to sign an early-day motion, willing enough to take part in a rebellion under pressure from parents of the prosperous young people of the suburban areas of Britain, and willing enough to stand up for the urban middle classes and the grants that their sons and daughters should receive, but who have not rebelled on the subject about which they talk so much—unemployment in Britain.

Mrs. Elaine Kellett-Bowman (Lancaster)

rose—

Mr. Hattersley

I say this to them. Their reputation for humanity and compassion—that goes for the king wet, the Secretary of State for Energy—is eroded every time they vote for the Government on the strategy which the Government now adopt. Not until they begin to rebel on unemployment shall we treat them seriously or treat them with respect. Until they vote against the Government, no matter what they say, write in The Guardian or say in the presence of a selective audience of conservative liberals, they will be supporting a Government who, despite all their protestations, adopt the high unemployment policy. We shall vote against that tonight and if they had any shame, they would do the same.

5.57 pm

Mr. Terence Higgins (Worthing)

I am grateful for the kind remarks which were made both by my right hon. Friend the Chancellor and the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) about the report of the Select Committee on the Treasury and Civil Service. I am glad that it has been possible for the Committee to produce that report before the debate. That required a considerable effort and I want to pay tribute to the hard work that has been done by my colleagues on the Committee and by the clerks and the staff of that Committee. To have before the House an analysis of what is in the autumn statement improves the quality of our debate.

In that context, may I first say a word or two about procedure for the main debates during the year? It is true that we normally have this debate on the autumn statement, followed later, usually early in the new year, by a debate on the White Paper on which the Treasury and Civil Service Select Committee also reports, and then a debate on the Budget in the latter part of the spring. Those are the three main debates on which the Committee bases its work in the course of the annual cycle.

The arrangement for the debates on the autumn statement and Budget is a good one. However, I am bound to say that I have rather more doubt now about whether the debate on the public expenditure White Paper comes at the right time. I have a feeling that the debate, over the years, has never been a tremendous success. It often comes too close to the budget itself. We might do better to have a debate on public expenditure in, say, late June or early July, when the House would have an influence on the forthcoming round of public expenditure decisions within the Government.

In the course of some of the controversies of the past few days, there has been a strong feeling that taxation and public expenditure ought to be considered together. Indeed, that is implicit in much that was said by the right hon. Member for Sparkbrook a moment ago. That was one of the recommendations of the so-called Armstrong committee report, but the Armstrong committee also stressed the importance of having a green Budget in the autumn so that the House could have an opportunity of discussing not only the main part of the autumn statement—public expenditure—but also the provisional proposals of the Government for taxation. A final decision could then be made by the Government at normal Budget time.

I am worried about the fact that, instead of setting up some formal arrangement of that kind, which would be of immense advantage, we seem to be sliding into a situation where many aspects of taxation are debated because of leaks or rumours on particular tax changes. That is not a good arrangement. It is no substitute for a proper green Budget.

There may be a strong argument for transferring the burden of taxation from direct to indirect taxes, especially if one alters the rates of tax in the traditional way by putting more on beer, cigarettes or tobacco or perhaps even on the standard rate of value added tax. However, what worries me is that in the past few weeks there has been a series of rumours about tax changes which the Government then say they cannot deny. One often gains the impression that the rumours may have arisen from informal discussions with Treasury Ministers and others. That is a bad arrangement. The rumours have concerned VAT on books, newspapers and children's shoes, and the taxation of lump sum pensions, among other things.

There may be a case for changing the balance between indirect and direct taxation, as far as rates of tax are concerned. However, we must look carefully at any proposal—and certainly any range of proposals—which would extend the frontiers of indirect taxation beyond the area where the House has decided over many years that the line should be drawn.

There is a case for a green Budget. I do not like the constant circulation of rumours at the present time, and it would be worrying if there were any truth in the rumours that indirect taxation is to be extended into areas that the House has decided, with good reason, it should not affect.

Mr. Nicholas Winterton

Will my right hon. Friend give way?

Mr. Higgins

No, Sir. I am frightfully sorry, but I understand that Privy Councillors must not take up too much time, so I should like to pursue my own line of argument.

At Question Time today, the Prime Minister stressed the importance of raising the income tax thresholds. However, it would be a mistake to suppose that one could do that on a sufficient scale to make a serious impact on the poverty trap or the "Why work?" problem. I believe that we should be moving towards a system of tax credits. Such a system might take many years to implement and fully to finance. However, it would provide a permanent solution to the problems, and that would be better than attempting to ameliorate them occasionally, or year after year, by raising the tax thresholds.

The main part of the autumn statement is dealt with in the report of the Treasury Select Committee. The central argument on which we have concentrated this year is the question of public expenditure priorities. We expressed our increasing concern that the mechanism for determining public spending priorities, which produces the result in the autumn statement, is not working as well as it should. The events of the past few days in relation to overseas aid and student grants and parental contributions seem to confirm our view.

We drew attention to the considerable danger that bilateral negotiations between the Chief Secretary and the spending Ministers may not take fully into account the true picture across all the Departments. We stressed the fact that we took evidence from officials and from the Chancellor himself. My right hon. Friend was inclined to resort to homely analogies—as he did this afternoon—and ask members of the Committee how they reached private expenditure decisions. I am somewhat suspicious of such simple analogies, but I too will resort to one in a moment or two.

What is very worrying indeed — I commend hon. Members to the relevant section of the report—is the way in which some Ministers seem to have taken the view that if they have a certain amount to spend and if there is then a cut across the board in all Departments, that must be the limit on the amount that they can spend on the Department, even though there may be a very strong case for increasing each of the items in the Department's budget. That is a very difficult matter for some Departments with very small programmes. The Foreign Office and the Department of Education and Science are classic cases. If they have to make cuts, they feel that they must do so across the board. The Foreign Secretary, for instance, may feel that he has to cut not only overseas aid but the BBC's overseas broadcasts, the diplomatic service and the British Council, when the right answer should have been that if he needed to spend more, not less, on those areas, the savings should have been found in some other Department. But it is clear that that is not the way in which matters are being handled, and that priorities are being allocated in a very dangerous way.

The statement of the Secretary of State for Education and Science yesterday was another classic case. I believe that his original proposal was wrong. It had grievous disadvantages. The House knows all about them. However, I do not share the reaction of some of my colleagues to the package announced yesterday. In some ways, that package was even worse than the original proposal. I do not say that it was absolutely worse, but it was certainly not as good as one could have done in the circumstances, because the Secretary of State believed that he had to find within his own Department the savings that he felt ought to be made.

In answer to a question yesterday, the Secretary of State said: I should not like the House to get the wrong impression about the diminution of the money that might have to be made in the allocation to the adult education programme. As far as we can tell, it will be about £100,000 a year."—[Official Report, 5 December 1984; Vol. 69, c. 366.] When a spending Minister feels obliged to make adjustments affecting an area of public expenditure about which many people feel strongly, but announces that he is going to cut £100,000 a year, the matter is getting totally out of proportion. To coin a phrase, one might say that the Government's policy is to make a banana skin out of every candle end.

As I said, I do not like the idea of homely analogies, but I take up the point made by my right hon. Friend the Chancellor. My right hon. Friend suggests that we should consider what an individual does. Let us do so. If someone has to buy a new pair of trousers, he does not say to himself, "This is a special spending department; I shall have to cut back on my spending on socks." He might have to consider the jewellery department and say that, if he spent a little less on jewellery, he could spend rather more on trousers and socks. But that is not happening, and at least two departmental Ministers feel that they have to make savings in the same Department. Neither economic nor political priorities are being made on a sensible basis. That is why we clearly recommend that there should be a reappraisal of machinery for determining public expenditure priorities, with special reference to the need to improve the allocation between Departments and a more open discussion of the best machinery for achieving it.

I am mindful of your remarks about being brief, Mr. Speaker, so I shall cover just two other matters. The motion refers to keeping plans for spending in line with what was said last year. Our report makes it quite clear that the relevant measures is not whether expenditure is kept in line with plans but whether plans are kept in line with out turn or, more accurately, whether out turn is kept in line with plans. There are serious problems in that regard.

We are also deeply worried about there seeming to be systematic distortions in the planning total. My right hon. Friend the Chancellor referred to two—debt interest and asset sales. The Treasury and Civil Service Select Committee's view has been, and remains, in conflict with that of the Chancellor. It is not sensible to say that proceeds from privatisation should be treated as a reduction in public expenditure. They could conceivably be treated as revenue or, as the Select Committee would prefer, as a means of financing the public sector borrowing requirement—otherwise, they give a false impression of the extent to which the Chancellor has succeeded in controlling public expenditure. That is true in several other respects with which I shall not burden the House, but I commend our report to it.

A false impression of what is happening has been given. That brings me to the PSBR. We have to look carefully at the definitions if we are to get a clear idea about what is really happening. The Chancellor is in a better position to express his view on that than am I, but I do not think that it is badly out of line at the moment. Having looked at the forecasts that we have published and selected and those which the Chancellor has published, it is probably true that the autumn statement is rather more reflationary than the Chancellor seems willing to admit. Within the limits in which I am speaking, that is welcome.

I am more worried about the statement on the so-called fiscal adjustment. The Select Committee draws attention to the fact that, in contrast with last year, when circumstances were not vastly different, we have had statements from Treasury Ministers which clearly hold out the hope of some tax reductions in the next main Budget, to the extent of £1.5 billion. The reality, however, is that that is extremely vulnerable to changes in the exchange rate. If, by the next Budget, the exchange rate goes back to where it was at the time of the last Budget, there will be no scope for fiscal adjustment. We have to live with that. It is a new situation which arises because the exchange rate is related to the oil price, although not entirely because the oil price might change. That in turn affects revenue from North sea oil receipts. It is somewhat dangerous to predicate tax changes, which necessarily will be permanent or semi-permanent, on the basis of such good fortune, which can easily be reversed. We must take that into account.

My right hon. Friend the Chancellor referred to the effect of the American deficit. In that respect we are in danger. He referred to a balance of payments deficit, as opposed to a budgetary deficit, of about £100 billion a year in the United States. That is being financed largely as a result of the big American budget deficit, extremely high interest rates and their effect on the American dollar exchange rate which, in turn, has a repercussion on the balance of payments. That is financed by a big inflow of funds from overseas.

I do not believe that we or the Americans can assume that that inflow of funds—whether it is desirable or undesirable is another matter—will go on indefinitely. If those funds suddenly stop flowing in, everyone will decide that that is the time to get out and we shall end up with what I understand current American jargon terms a "hard landing". The implications of that, and possibly much higher interest rates to prevent the exchange rate falling, for South America and the entire financial structure are extremely dangerous. I am not yet convinced that the world community, the Chancellor or his opposite numbers in America have given sufficient attention to that problem. It is potentially very dangerous.

The dilemma is that even if the Americans take steps to reduce the budget deficit in an attempt to achieve a soft landing, we might still find that they create the same situation. I do not find that good for unemployment or any other problem. I merely raise it because the House ought to turn its attention to it, once it has dealt with the important issues that are raised in the Chancellor's statement and the Select Committee's report.

6.15 pm

Mr. Robert Sheldon (Ashton-under-Lyne)

Like many others, I am grateful to the right hon. Member for Worthing (Mr. Higgins) and his Committee for producing a report, this time only just in time for us to Use it during the important debate following the autumn statement. It clarifies the issues rather better than does the autumn statement. I agree with many of its conclusions and its lay out is wholly commendable.

Issues arising out of priorities are dealt with in paragraphs 5 and 14 of the Select Committee's report. The reappraisal of the machinery is important. The right hon. Gentleman and many of his colleagues are a little optimistic about how far we can go in that direction. I would try to achieve something much more modest. The matter has become extremely topical because of the overseas aid fiasco and the parental contribution to student grants. We can learn from the manner in which the Secretary of State for Education and Science had to come back to the House and change his course of action. There are lessons to be learned also from the way in which he had to make decisions that were based not on what his colleagues might have considered right but on the limited resources of political opinion that he was able to bring to bear.

The matter raises the issue of how Governments relate expenditure to resources. They do so in one of two ways. Either they make a total of their favoured and necessary programmes and realise that they demand a certain growth rate which they hope can be achieved, or they rely on the Treasury. The Treasury has a solution that is born out of sad experience over the years. We are fully familiar with the optimism of Ministers about the growth of resources. Their natural reaction is to oppose expenditure knowing that others will wish to overcome their restraint. They therefore stand there like executioners awaiting their call.

Neither of those methods is right. Neither undue optimism nor indiscriminate opposition to expenditure is the right approach to public expenditure. The basis of parliamentary control of spending used to rest on Members of Parliament carrying the dual responsibility for taxation, which was bad, and expenditure, which was good. In practice, those choices never come together in time. They are debated separately and any Member of Parliament can favour general economy and particular expenditure.

The problem is how we establish our priorities. Priorities are at the heart of any rational examination of public expenditure. The star chamber is not the way to handle these matters. Either there will be a preponderance of spending Ministers who are involved in the matters they discuss and are prejudiced, or there will be Ministers who are not involved and do not have the stomach for the blood-letting and butchery that is required. Because of the nature of this process, we have to look for other ways. We know that these matters come into Cabinet, where perhaps a Minister's future is at risk. Issues are fought out there, largely on the basis of the power, strength and persuasiveness of the Ministers concerned, rather than on the strength of the case that they are able to make.

Because of the unsatisfactory nature of this process, which has been with us for so long, many of us hope that there may be some role for Parliament, through the Select Committee system, to do some of the work, which would be a slight improvement. This will not happen by opposing spending programmes. No group of people responsible in public will deny the advantage of certain programmes, as the Chief Secretary will know. Instead, we can have a better way, in which competitive bidding brings together the various pressure groups. It is astonishing how slowly the pressure groups have come to realise the importance of placing their case before the Select Committees.

It may be that through better discussion and greater involvement, we shall get solutions rather better than the one that we had this week in the case of university fees for students with better-off parents. It is better to establish priorities through pressure groups and Select Committees, which are then sifted by those who understand the political pressure — Members of Parliament — than to have Ministers coming to conclusions based on inadequate political feeling. If there is to be a fight over expenditure of public money, it is better to have onlookers there to see fair play. That is what happens in the end. At the moment, particularly with the size of the Government's majority, these matters come back to the House and the Government then find themselves faced with difficulties such as those that we saw this week.

I have been interested most in the role of the Secretary of State for Education and Science. Did he come before the star chamber to put this matter, or did he go to the Chief Secretary to the Treasury and say, "I believe that we should have cuts and I agree with them. This is what the Cabinet has decided and I shall put forward this cut as my offering to the Chief Secretary."? As I understand these matters, it would be astonishing if the Chief Secretary turned him down. The Chief Secretary rarely gets offers such as that. He has so many other problems that he will just say, "Thank you very much." Privately, he may question the judgment, but he has so many other problems on his mind that he will just think that that is one less. Therefore, the issue will not go before the star chamber or the Cabinet. Matters as important as this, or even more important, can be dealt with in this way.

I am saddened because the humiliation that a Minister may suffer is unnecessary. Other ways can be found to notify those concerned about possible proposals so that they can bring to bear the accumulated wisdom and judgment of far more people than the individual Minister who suffers some setback, as happened on this occasion. There are then the consequences of agonising over £10 million out of £132,000 million. I am the last person to diminish the value of £10 million, but nevertheless, out of £132,000 million, this matter could have been solved more readily and easily and with greater co-operation all round than it was.

My next point is covered by paragraphs 49 to 53 of the Select Committee report. It is handy to deal with the report rather than the autumn statement because the report has a more logical form. I offer that advice to the Chief Secretary. Here, we are dealing with nationalised industries, but the Government have not got it right. They have never had it right. They want to interfere, often for good reasons, but they do not want to appear to be interfering. They want the best of both worlds — to control the nationalised industries, but not to appear to be controlling them.

At the heart of the problem of the nationalised industries is the basic pretence that the Government do not interfere with them and so are not answerable to the House of Commons on their operation. This is convenient because it allows the Government to avoid answering difficult questions as to what they are up to with the nationalised industries. If they want an industry to make a special concession of one kind or another, perhaps for a certain type of consumer or to a certain part of the country, it is much more convenient to pretend that all this has nothing to do with the Government but is the result of commercial considerations. Meanwhile, the arm-twisting goes on. We need a better way to explain the conflicting arguments and emphasise the commercial requirements.

The Public Accounts Committee, which I have the privilege to chair, is also concerned about the efficient use of resources, and as such it is a valuable ally to such bodies as share the same objectives. This should embrace both the Government and the nationalised industries. In reality, as we know, the nationalised industries are suspicious of the Public Accounts Committee because they want to be free to act commercially and do not fancy the idea of being questioned by a Select Committee. On the other hand, the Government want to ensure commercial efficiency but want to be free to take non-commercial decisions. Therefore, there is the basis of the deal here. The nationalised industries would he happy if they thought that the PAC would not be harassing them or pillorying them. Therefore, we need to show the way in which the Committee works, and we have to explain to them the kind of Committee that it is, and that it is composed of people who are interested in getting value for money.

Mr. Nicholas Winterton

As the right hon. Gentleman is putting forward this argument, would he advocate to the Government that we have a debate on the report of the Public Accounts Committee into the De Lorean affair and the waste of £85 million of public money?

Mr. Sheldon

I would be delighted to do so, and I hope that such a debate will take place, but that is another matter, which we are pursuing in other quarters.

We have the basis of a deal if we can show the nationalised industries that we can look at these matters in a commercial way, and show the Government that we can help to distinguish the commercial and political requirements. By doing this, we can help to achieve a greater recognition of commercial requirements — the very matter that should be at the centre of the Government's aims. We can help the Government to obtain more of an arm's-length relationship. If there are political necessities dictating another course of action, these will need to be paid for, on the lines of the commuters and British Rail.

The burden of proof should lie on those who do not wish to see Parliament following public money. What is required is a body with understanding of both the commercial and political realities. The PAC consists of politicians with the strong desire to get £1 value for every £1 spent. That points the way to a greater role for the PAC.

I agree with the hon. Member for Worthing about taxation proposals. It is incumbent upon the Government to make clear what their various proposals are, so that we have before us something more than the cascade of rumour about books, lower taxes on income or whatever. Let me offer a bit of warning. In 1962, the higher rates of income tax were reduced under the surtax changes. In 1972, the higher rates of income tax were reduced under the unified tax rate and in 1979, the top rate was reduced to 60 per cent. The people who benefited had clamoured for it. They took it, and they did nothing for it.

I hope that the Chief Secretary will make it quite clear that after four years of these policies it is incumbent upon the Government to say what they now expect from spending £1.5 million in this way rather than spending the money to reduce unemployment. We have seen one of the longest periods of a continuous economic policy that manifestly has not succeeded. We have had this large increase in unemployment based upon that very policy. After such a long and continuous period of economic decline, despite all the optimistic progress reports, we need only compare the crucial figures for output, employment, unemployment and prosperity—which is what economic management is about—to see that now is the time for a fresh look at some of the objectives set out in the rosy days of 1979.

6.30 pm

Mr. Cecil Parkinson (Hertsmere)

I listened to the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) with a good deal of interest because he began today to retract some of his more reasonable and sensible speeches of recent weeks. He has been making speeches in which he warned his right hon. and hon. Friends that it was their promise in 1983 to make a spectacular improvement in the position of the unemployed which was not believed and which he thought played a major part in the Labour party losing the general election. The right hon. Gentleman also warned his right hon. and hon. Friends that they must not make the same mistake again. He pointed out that the problem was deep-rooted, if not almost intractable, and that they would lose their credibility if they pretended that there was an easy answer.

I agreed with those recent speeches by the right hon. Gentleman, and I was disappointed when he started today to retreat from that position. He hinted at massive increases in public spending. He said that it was wrong for my right hon. and hon. Friends to be considering tax cuts. However, immediately before that, he had begun to point out that, with our present tax thresholds and our present rates of tax, unless the thresholds were changed, a number of the unemployed would start to pay income tax.

As the right hon. Gentleman knows, income tax is paid overwhelmingly by those paying at the basic rate, and it was the hon. Member for Birmingham, Perry Barr (Mr. Rooker) and Mrs. Wise, whom no one would ever accuse of being Right-wing Conservatives, who recognised the injustice of not raising the tax thresholds and that it was the low paid who would be hardest hit if they were not raised.

When Opposition Members talk about how they would spend the money saved by not cutting taxes, I hope that they will remember that they are proposing to penalise those at the bottom end of the incomes scale who start to pay tax at too high a rate on too low an income. Therefore, let us not talk about tax cuts as an easy option which we might or might not choose to implement. There have to be tax cuts—if by tax cuts we mean raising tax thresholds and reducing the burden on the low paid.

I had an example brought to my attention recently of a man who stood to lose money — because he lost rebates, he picked up tax and he lost certain benefits—if he got a pay increase of £10 a week. He was worse off with a pay increase of £10 than he would be if we did not change the tax system. That is why I urge those who talk about forgetting tax cuts to remember who are the principal beneficiaries of raising the thresholds.

Mr. David Winnick (Walsall, North)

Does not the right hon. Gentleman appreciate that the beneficiaries of the tax cuts introduced by this Government in the main have been the most prosperous among us? What benefit is it to the low paid if they receive a very small reduction in their income tax liability when, as a result, there is a large increase in indirect taxation, which obviously affects the poorer elements more than those in other sections of the community?

Mr. Parkinson

I suggest that the hon. Gentleman has a word with his hon. Friend the Member for Perry Barr and Mrs. Wise, both of whom made excellent speeches in the Committee on which I served explaining why the indexing of the tax thresholds and the raising of them was vital to the low paid. Unfortunately, I have not the time to develop that theme further.

I refer right hon. and hon. Members to the public expenditure White Paper and the Government's expenditure plans. Listening to some Opposition Members, I got the impression that the Government had not responded to problems, were not aware of the difficulties caused for the unemployed by high unemployment and had remained totally unresponsive and unheeding.

I invite my right hon. and hon. Friends to study the White Paper. Built into next year's expenditure programme, public expenditure in respect of the construction industry is a sum in excess of £16,500 million. That is a huge amount of expenditure with one industry. The idea that the Government are not aware of the problems of the construction industry is not borne out by an examination of the White Paper.

Then we see the Government's expenditure on defence. More than £8.5 billion will be spent with the private engineering sector in the main on the procurement of arms supplies and weaponry and equipment for our forces. Again, a huge demand is being injected by the Government into the engineering sector.

Mr. Donald Stewart (Western Isles)

Too much.

Mr. Parkinson

The right hon. Gentleman suggests that it is too much. But the Government are constantly criticised for not spending enough with the engineering and construction industries. I am glad to have his opinion that these sums are considerable.

More than £2,000 million will be spent next year on training programmes. That is a direct response to the problems of the young unemployed. It was Mrs. Shirley Williams who blew the gaff and said that when she was a member of the previous Labour Government she had never been able to raise money on that scale from the Treasury for training programmes, although the need was recognised then. The Government have responded to that need in a very substantial way.

In the industrial sphere, nearly £2,000 million will be spent next year on a variety of industrial supports, and those are different in content from the kind of industrial support that was being given when the Conservatives came to power, which in the main was funding the huge losses of a range of nationalised industries.

The public expenditure programme does not support the accusation made against the Government that they do not recognise the problems of British industry and have not responded to them. The public expenditure programme implies, however, that there is a limit to the amount of public expenditure that can be incurred before we begin to damage the private sector by pushing up interest rates.

I was interested to read the building industry's assessment of its prospects. It sees that the strongest growth in demand in the coming year will come from private sector expenditure on construction, which in itself is extremely interest-sensitive. I urge the right hon. Member for Sparkbrook, in arguing that we should have massive increases in public expenditure, to recognise the impact which that will have on interest rates, which in turn will have an effect on private expenditure — an important component in the economy, although one would not guess that from listening to the debate so far.

The Government's critics claim that there is not sufficient demand in the economy and that it is the Government's responsibility to increase that demand. That is the basic criticism that comes at the Government from those who do not agree with their economic policies. An examination of the facts suggests that the cause of our problems is not shortage of demand. For example, the demand in the retail sector increased by just under £6 billion from the third quarter of 1983 to the third quarter of 1984. Over the same period, imports increased by £3.1 billion. In other words, the demand was there but British products were not meeting it. The demand was being met by products from overseas.

World trade last year increased by the staggering sum of $144 billion. There was increased world demand for expanding trade as well as an increase in internal trade. Our share of world trade is about 5 per cent.

I argue that the cause of our problems lies with our failure to supply the demand that exists and not with a shortage of demand. Injecting additional demand into the economy in the way suggested by the right hon. Member for Sparkbrook is merely a distraction. It is a cruel deception on the unemployed. The people know that there is no easy answer and we should not pretend that our difficulties can be resolved quite quickly by a simple injection of demand.

Why are we not meeting additional demand? That is the central problem that any Government must face. I visited Japan recently and I went to a motor company that I had not visited for six years. In those six years, which include the recession, the company increased its production of motor vehicles by nearly 900,000. That happens to be about the total of British motor production. The company is Japan's second largest motor manufacturer.

I asked the company's leading figures to explain the basic reason for the increased production. They explained that the company has not lost a day's production through strike action in the past 33 years; every British motor company has had a strike within the last six weeks. We have been volunteering to lose production and to fail to meet the demand for motor cars but our rivals are not wasting their time on that sort of divisive behaviour.

I asked the company's representatives about the strike that took place 33 years ago and the lessons to be drawn from it. The lessons were straightforward. It was explained that the company had lost production, the workers had lost wages and the company's rivals had stolen its market. At the end of the day the company had to start again with all the problems that it had had before and the additional ones that had been caused by quickly inflicting enormous damage on itself. The strike seems to be at the heart of our problems. We use stike action as a weapon of first resort while our opponents, or many of them, use the strike as the weapon of last resort.

Mr. Nicholas Winterton

That does not apply to all British industries.

Mr. Parkinson

It does not apply to every industry but it is very typical. The problem lies with our failure to meet demand and not with a shortage of demand.

Mr. Winterton

I am not having that.

Mr. Parkinson

I do not care whether my hon. Friend is or is not. We must concentrate on meeting the demand that exists. There is no shortage of demand, and the more we claim that there is and emphasise it the more we delude ourselves and run away from the central problem of determining how to improve our performance.

Mr. Jim Craigen (Glasgow, Maryhill)

I, too, have been to Japan. I was struck by the way in which employers, trade unions and the Japanese Government get together to look after Japan.

Mr. Winterton

And to keep out all foreigners.

Mr. Parkinson

I do not disagree with the hon. Member for Glasgow, Maryhill (Mr. Craigen) about the need for us to work together. That is why I happen to think that the miners' strike is a national disaster. At the end of the day, everyone connected with the mining industry will find himself in the position in which the Japanese motor car company found itself 33 years ago. No one can possibly gain from the miners' strike. It is a maniac's way of resolving differences. We inflict damage on ourselves and consequently benefit our rivals.

I am passionately convinced that unless we find a better way of working together we shall continue to have difficulties and troubles of our own making. I do not see the Government's move to spread ownership as an incidental approach. I do not expect us to be able to emulate the Japanese system of co-operation. We are not the same people and I would not wish us to be. However, we must find a similar answer. We must find a way of working together. My right hon. Friend the Chancellor of the Exchequer was right to say that in every instance where the Government have denationalised an industry, where relations are better and where the bridge between owner and worker has started to be built, industrial performance has improved out of all recognition. I do not regard the Government's push to spread ownership as an incidental part of their economic policy. I see the spread of ownership as the heart of their policies. We must build a bridge between those who work in businesses and those who own them. We must develop an identity of purpose.

Let us not waste our time thinking that fictitous or phoney amounts of additional demand will resolve the problem when they are pumped into the economy. The problem will be resolved only by better performance and that performance will come only when there is a change of attitude. I believe that the chance of that change taking place has been enhanced by the Government's determined efforts to spread ownership and to build the bridge of which I have spoken.

6.48 pm

Mr. Richard Wainwright (Colne Valley)

The right hon. Member for Hertsmere (Mr. Parkinson) has done the Government a great service by reminding them of the current upsurge of serious strikes in important manufacturing industries. By doing so he reminded them that since 1979 they have achieved no lasting structural change in the complex framework that is used in determining income and rewards. Under the pressure of unemployment, whether created deliberately or not, there has been some respite from exaggerated pay claims and damaging industrial disputes, but the more the Chancellor of the Exchequer proclaims recovery the more shop stewards feel that it is time that they had a share of the rewards for their members. If the Government do not tackle that difficult problem they will be in great trouble, as Governments have been before, on pay.

The right hon. Member for Worthing (Mr. Higgins) has proved to be a most effective reformer of financial procedures in the House. He was correct and relevant when he reminded us today that at this time of the year we should be debating a green Budget involving both revenue and expenditure rather than just an autumn statement. I am worried that the Chancellor might get away with sheltering within the narrow confines of an autumn statement. There is no attempt to update the medium-term financial strategy, and the details of public expenditure changes are bald in the extreme. It is nothing more than a tatty progress report, which is scarcely worthy of our full attention.

This is particularly unfortunate this year, because it is acknowledged in most parts of the House, including the Government Benches, that the Chancellor is a sad man who has lost most of his faith. There are few sorrier figures than a notorious evangelist who in mid-campaign suddenly discovers that his faith has deserted him.

The Chancellor is a bold man and he has done his best. He tried hard in front of the Select Committee to show that although he has had to desert some shrines he has now found others at which to worship. That is not convincing. He has had to abandon the idea to which he clung so long and bravely, that by continued and relentless downward pressure on monetary aggregates and on public sector borrowing, unemployment would be automatically reduced. The revelation that this is not so naturally is a great disappointment to him and to those who thought like him.

It now appears that the Chancellor is increasingly turning his attention to target ranges for interest rates, in which he has become passionately interested, and to the various exchange rates for sterling. The Government will be in trouble unless the Chancellor tells us soon about his new guiding stars and how he intends to follow them.

Another article of the Chancellor's faith is the importance of a downturn in real wages. The Select Committee wanted to give him an opportunity to enlarge on his new doctrine that a downturn in the increase in real wages would have an effect on the rise in unemployment. He took refuge in saying that his chief economic adviser was busy studying the subject and that we may hear about it in the not too distant future. That is small consolation when the whole country is oppressed by ever-rising unemployment and when, despite the Chancellor's attempts to disguise it, the increases in employment are almost entirely among part-time women workers. Good luck to them—they are valuable—but that is no answer to the core problem of ever-rising unemployment. The Government have, in that and other ways, fiddled the official information about total employment.

I was interested in the exchanges about what was not very helpfully described as "income tax cuts", to which the right hon. Member for Hertsmere referred in a telling fashion. I was surprised when, in such a sweeping way, with no reservation, the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) dismissed as a low priority the lifting of the income tax thresholds. At first I thought that the right hon. Gentleman was talking about 2p off the basic rate or, worse, a reduction in the higher rate. If he had meant that I should have understood his sweeping manner. But when the hon. Member for East Lindsey (Mr. Tapsell) urged the Chancellor to forget about any tax cuts and to put all his extra resources into capital projects, the hon. Gentleman was cheered by the Labour segment of the Opposition.

A delicate balance has to be struck, but it is odd, when income tax begins to bite on a married couple at a mere £60 of earnings a week, that the right hon. Member for Sparkbrook should be so dismissive of tax cuts through lifting the thresholds or making a major adjustment in the national insurance threshold. The latter might be a more cost-effective way of relieving the poor of paying for their own benefits. However, it would create frightful poverty traps further up the scale. I find the right hon. Gentleman's sweeping approach deplorable.

Dr. Bray

I also listened carefully to my right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley). I understood that he was saying that any changes in income tax have a far smaller effect on unemployment than direct public expenditure. Any raising of the tax threshold can be balanced by increases in the higher rate of tax to ensure that the lower paid, but not the higher paid, are indexed.

Mr. Wainwright

I do not disagree with the words that the hon. Member for Motherwell, South (Dr. Bray) uses, but he will be the first to agree that this was not the argument used by the right hon. Member for Sparkbrook. I hope that the hon. Member for Birmingham, Hodge Hill, (Mr. Davis) will clarify the official Labour position.

I warmly endorse the suggestion that better information be placed in front of the Cabinet when public expenditure plans are prepared for the autumn statement. The Chancellor did his best to assure us that this is taken care of and that, up to the point where a political judgment has to be made, the present procedures fully cover the demands by reformers. He was not convincing because he is unable to claim that the original decision on the Foreign Office cut this year was agreed in detail in Cabinet. Everyone knows that it did not go to Cabinet originally. He was not able to claim that the original proposals by the Secretary of State for Education and Science for student grant cuts went to Cabinet. The House should consider how to better these procedures.

It is almost self-evident that most of the crucial domestic expenditures, especially those with large social repercussions, have heavy elements of overlap between one spending Department and others. These elements are so obvious that I should perhaps apologise for giving some instances to the House. For the record, I should like to mention the problem that most of us face at one time or another in our families — accommodation for elderly people. The provision of accommodation at the places where people are living—enabling them to stay in what they regard as their home—is a matter for the Minister for Housing and Construction, because it entails the construction of more sheltered housing and the provision of old people's housing schemes. But if it is believed that, to provide better care for those people, they should be under closer medical supervision and should go into a type of elderly persons' communal accommodation, or even geriatric accommodation, that is a matter for the Department of Health and Social Security. Inland Revenue has an interest also, because the tax treatment of the elderly is highly relevant to this matter.

There is no evidence that such overlaps — hon. Members will know of dozens of examples of similar overlaps in important matters — are properly treated. When I served on the rather notorious Sub-Committee of the Treasury and Civil Service Select Committee, which examined taxation and benefits, senior officials from the Treasury and DHSS admitted frankly that there was little mutual consultation about the interaction between taxation and social security benefits. For once, The Times was right in saying in its leading article on star chambers that the trouble with star chambers is that they have no basis of comparison of the economic or social merits of the output of different departments, because there is no part of government whose task it is to provide such an evaluation. I believe that there should be machinery for carrying out that task. The star chamber method where matters are fought out among Ministers sitting in twos and threes, which sometimes ends with blood on the carpet, threatened resignations and all the rest of it, is no way to settle these important matters in an advanced country.

Mr. Leigh

Will the hon. Gentleman give way?

Mr. Wainwright

This must be the last occasion on which I give way or I shall be in trouble with the Chair.

Mr. Leigh

The hon. Gentleman cannot be allowed to get away with the Liberal economic policy, which is all things to all men. The hon. Gentleman rightly attacked the iniquities of levying taxes on people who earn just £60 a week. How does the hon. Gentleman intend paying for the Liberal inflationary and reflationary policy programme—by higher taxes or high borrowing?

Mr. Wainwright

There is no secret about that. Three years ago, we published a compendious booklet called "Back to Work", which made it clear that, over three years, we wanted an approximate addition of £9 billion to the public sector borrowing requirment. That does not mean a crude £3 billion a year—it means building up the PSBR so that over three years there is an additional £9 billion.

I must record the alliance's bitter disappointment at the lack of reference in the autumn statement to unemployment measures. There was no mention of the task of matching the tens of thousands of people who could be employed with the public works crying out to be done. Worse still— I hope this point appeals to those hon. Members who are accountants — nothing in the document shows any Government awareness of their failure to keep up with depreciation and obsolescence of public assets. That criticism applies as much to Labour Administrations as to the Conservative Administration.

The public is painfully aware that the yearly depreciation of our public assets has not been attended to and that their conditions have become much worse. It is no answer to cut the external financing limits of important public services. I do not think that hon. Members have fully appreciated, for instance, the fact that the autumn statement shows that the return the Government expect from the water industry will almost double during the next three years. If we were to tell any business, however brilliantly managed and successful, that the shareholders expect the return to be doubled within three years, we would be asking a great deal and would often—not always—be accused of greed and of asking for far too much. It is far too much to ask, for example, the water industry —whose assets are clearly clapped-out and which cannot deliver more than about 70 per cent. of the water gathered, into the pipes and bathrooms of the people who pay for it—to be used as an unofficial tax-gatherer. To ask such industries to be under-the-counter tax-gatherers when they are experiencing distressing physical conditions would be a breach of stewardship.

We on the alliance Benches have no time for this autumn statement. We do not believe that it is matched to the needs of the country. If it foreshadows the Budget we are to expect, the sooner the Government pack up, the better.

Mr. Deputy Speaker (Mr. Paul Dean)

Order. The 10 minute limit on speeches is now in operation. I appeal for the co-operation of hon. Members.

7.6 pm

Mr. Nigel Forman (Carshalton and Wallington)

This debate, which seems to occur every year, gives us a useful opportunity to consider the development of the economy and to question some of the assumptions underlying the Treasury's forecasts. Clearly, the figures on the growth of output, the reduction in inflation, the recoveries in investment, profits and productivity and the buoyancy of exports are all on the positive side and are to be warmly welcomed. They are moves in the right direction.

As my right hon. Friend the Chancellor said earlier, a number of serious worries remain — notably, the problem of mass unemployment with more than 3 million registered unemployed and the risk that the Treasury assumption on unemployment for the next two years or so may well turn out to be optimistic. Equally, there is obviously a clear connection with the difficulty of controlling public spending intelligently, as the Select Committee pointed out in its report, and there are worries about the shortcomings in the manner in which the Government address themselves to the ordering of priorities which is implicit in that public spending.

Without sufficient overall growth in the economy during the coming period, and bearing in mind the difficulties of controlling public spending in aggregate and disaggregate forms and the threat that unit costs may start to increase again with earnings beginning to take off in an alarming way, the prospects held out by the Chancellor for substantial fiscal relief or improved international competitiveness are not as good as some of us would wish.

Further recovery of output will be delayed as long as this dreadful miners' strike goes on. I strongly agree with the remarks by hon. Members about the need for Scargillism to be defeated in the interests of not only working miners but the entire economy. The inflation prospect could be prejudiced again by a substantial real increase in earnings and the possibility of a continued fall in the value of the pound in relation to other currencies. Investment recovery is vulnerable if profits are not sustained. Everything the Government can do must be done to expand the available market domestically and internationally and to ensure that we have realistic pay settlements.

The continued export recovery on which we heavily depend will require energetic efforts in the EEC and other international gatherings to ensure that we tackle the issue of non-tariff barriers, which must still concern my right hon. and learned Friend the Chief Secretary, since he was formerly the Minister for Trade. But underlying all those problems is the very tricky nexus between productivity and unemployment. That seems to be the "Catch-22" of our economy at the moment.

I think that the whole House would agree that we need productivity increases at least as great as output increases if we are to remain competitive in a very tight world economy. But that inevitably will tend to increase unemployment, which in turn will increase public spending, which in turn will make it harder to boost the private sector with the lower taxes and lower borrowing that we should like to see.

On the other hand, if we were to go in the direction of the so-called alternative economic strategy espoused by Labour members we might see a decline in the rate of productivity increase over the years ahead, and perhaps unemployment falling for technical reasons as a result—but, of course, at a very great price in terms of diminished international competitiveness. If the Labour party were ever to come to power, it would be driven into a siege economy, whatever weasel words it might use in a future manifesto.

The only sensible choice for Britain is to work for a higher-output, higher-productivity economy and then to use a good part of the extra income and wealth so created to alleviate and help reduce unemployment, which is the principal adverse consequence not only of an economy in decline but also, paradoxically, of a successful economy that is experiencing a recovery based on high technology and strong competition from overseas. In these circumstances, it behoves us all to give some indication of what we think the Government should be doing in addition to the sound policies upon which their programme is already based. I have not the time this evening to go into the large range of micro-economic, supply-side policies that I and several of my hon. Friends favour in that regard. I am sure that there will be other opportunities in the House over the coming months to talk about that.

I should like to concentrate briefly on next year's Budget, since it seems to me that this is an opportune moment at which to put down a few markers about the things that many of us would like to see. I want to see that Budget framed with a top priority for employment creation in as many sensible and effective ways as we can possibly manage.

We should seriously consider reducing the non-pay costs of employing more workers, because these are now very significant. They are not necessarily as significant as wage costs, but they are a factor that was very much in mind when the EC Commission was writing its excellent report recently. We should do so by cutting the employers' national insurance contributions, possibly to 9 per cent.

Secondly, we should raise the lower earnings limit of national insurance contributions to £60 a week, which is only the sort of level at which most people enter income tax for the first time. That would help greatly to alleviate the problem about which many hon. Members have spoken—that of the low paid in work.

Thirdly, I should like to mention a longer term objective which could be started in the Budget and taken forward later. We need to synchronise national insurance rates with income tax rates as far as we can, and in doing so to raise the upper limit of national insurance contributions. From the Treasury's point of view, that would have the desirable effect of bringing in some extra revenue which could be used partly to offset the costs of some of the other measures that I have mentioned.

My fourth point is not so much in the sphere of the Treasury, but it underlines the point that the Government as a whole must make a co-ordinated and trans-departmental response to deal with the problems of unemployment. We should put the enterprise allowance on a demand-led basis. It is very nearly there now, because the Government, under continual pressure from their Back Benchers, are responding positively. But we should make it a formal position in which anyone who could usefully take advantage of this excellent scheme should be able to do so with the minimum of delay. My only caveat is that those who are going into the scheme need to benefit from the best possible advice as to which sectors to go into and in what concentration. I have already had some rather awkward cases drawn to my attention. For example, in some parts of the country there may be more shoe repairers than can be justified by local market conditions. Clearly, a little steering and guidance are required.

Finally, I should like to see the community programme expanded. It is now helping about 126,000 people at a net cost of about £1,500 per place. That is a fairly cheap and effective way of assisting people, many of whom have previously been unemployed for a long time. If we can do that—and do it in a way that also injects a greater training element into the programme — we shall be serving those people as well as can possibly be expected in tight economic circumstances.

I realise that the overall scale of any economic stimulus which might be implied in my remarks is not all that significant in itself, but it might help to nudge the economy in the right direction in regard to job creation. Above all, it will make an important psychological contribution to the needs of the many people in Britain who may feel that they have been forgotten and that their interests are not uppermost in Ministers' minds. Therefore, I was delighted to hear my right hon. Friend the Chancellor of the Exchequer say this afternoon that the tackling of unemployment is a priority task of the Government.

I hope very much that whether my right hon. Friend does good by stealth, through something called fiscal drift, or whether he does good openly, which I should like to see him do, he will address himself principally to bringing forward an employment-creating Budget—and, indeed, a series of such Budgets for the rest of this Parliament.

7.16 pm

Mr. David Winnick (Walsall, North)

The debate on the autumn statement must be seen against the background of mass unemployment. I have a list of the constituencies where male unemployment is very high. In some places male unemployment is near to 40 per cent. In my own constituency in the west midlands it is 22.5 per cent. My constituency is not alone in the region in having such a large amount of joblessness, as the list shows. The latest overall figures show that in the west midlands the unemployment rate is 15.3 per cent., and that in my own travel-to-work area it is 17.4 per cent.

In looking through my files in preparing for today's debate, I saw from the lists that were sent from the appropriate jobcentres that in March 1980, in my travel-to-work area, unemployment was 6.7 per cent., that in the west midlands it was 5.9 per cent., and that nationally at the same date it was 6 per cent. When the Government first took office, unemployment in the west midlands stood at 5.1 per cent.—the same in fact as in my own travel-to-work area.

On Tuesday evening there was what was described as a private meeting of Tory MPs upstairs, to deal with student grants and parental contributions. It seems that 250 Conservative members attended the meeting. It was apparently a very noisy meeting. From downstairs, I understand, one could hear the banging on desks. Whenever anyone criticised the Government, there was a loud cheer. The one or two brave spirits who stood up to defend the Government were apparently heard in total silence. If the same pressure were to be applied by Conservative MPs to their Government over unemployment—

Mr. Nicholas Winterton

It is.

Mr. Winnick

—it would be interesting to see the result. Suppose that, at a meeting of about 250 Conservative MPs, the Prime Minister and the Chancellor of the Exchequer were told, "We shall not support your policies, which are causing unemployment and mass misery throughout the country. We shall not support you in the Chamber. We want a change of policy." I suggest that that type of pressure could well bring about a modification of economic and social policies, just as the meeting on Tuesday produced a statement yesterday from the Secretary of State for Education and Science.

There is an urgent need for investment in public services and facilities. That is the most important way to create jobs. My right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) in opening for the Opposition, spoke of the cuts in housing in the next financial year. There should be a substantial increase instead. There is certainly no justification for any cuts. Reference has been made to the letter sent to Members by the Building Employers Confederation which states that spending next year is likely to be between 15 per cent. and 25 per cent. less than in the current year. The confederation also believes, with considerable justification, that public housing starts will be 14 per cent. down and private housing grants 17 per cent. lower and that there will be a 6 per cent. reduction in improvements to public sector housing stocks.

Since 1979–80, Government finance for public sector housing has decreased by about 60 per cent. in real terms. If there were an increase instead of a cut, two results would follow. First, many people in the dole queue could go back to work in the construction industry for which they were trained. Secondly, it would produce the improvements and building so urgently required in public sector housing in my constituency and in so many others. In my borough, no contracts at all have been entered into for council house building since 1979. Undertaking that urgently needed housing work would be a very effective way both of reducing unemployment and of providing urgently needed improvements and new housing.

As a result of changes made by the Treasury and the DHSS, some pensioners will lose £1 of their supplementary benefit heating addition. They are, of course, the poorest pensioners. If they were not, they would not be receiving supplementary benefit in the first place. Yet, earlier this week, when British Telecom was sold off at £1.3 billion less than the market price, the financial institutions made enormous gains. The difference in the Government's treatment of the poorest and the most prosperous elements in society is highlighted by that comparison. There is no possible justification for taking £1 from people on very limited incomes who already suffer great hardship in trying to keep warm in winter.

The former Secretary of State for Trade and Industry, the right hon. Member for Hertsmere (Mr. Parkinson) argued in favour of tax cuts, but there is no purpose in cuts which in the main would benefit the well off if the result is an increase in indirect taxation, which bears most heavily on people with low incomes. I am extremely concerned about the possibility of VAT being imposed on certain zero-rated items such as children's footwear. The whole House should be extremely worried about that. If such items become subject to VAT, how long will it be before food is taxed as well?

I also strongly oppose the imposition of VAT on books, newspapers and periodicals. A tax on books is a tax on knowledge. There is no justification for that, and it should be resisted. As for newspapers and magazines, it is interesting to note that in 1977 the Royal Commission on the press recommended that any proposal to end zero-rating should be strongly opposed because of the harm that it would do. I understand that there is no pressure from the European Commission on the British Government to alter the zero-rating of newspapers. Moreover, if VAT were imposed on the cover price it would undoubtedly discriminate against papers for which one pays as opposed to the free newspaper.

Therefore, I agree with the industry that VAT on newpapers would raise issues far greater than purely economic considerations. As a Labour Member, I must concede that most national and provincial newspapers are not on our side—that perhaps is an understatement—but that does not alter the argument that the imposition of VAT would be a retrograde measure and should be strongly opposed.

As in all Budget and autumn statement debates, the Government have sought to minimise what they can do to end mass unemployment. They virtually wash their hands of the matter, saying that there is little that they can do, that it is not for the Government to act, and so on. We utterly reject such excuses. We believe that the unemployment created in the past five years has been principally due to the Government's economic and social policies. These policies are largely to blame for the misery of millions of families in this country. We know only too well what happens to people who, once made unemployed, cannot find alternative work.

I believe that our amendment is entirely justified. I only hope that Conservative Members who say that they are as concerned as we are about unemployment will have the courage to join us in the Division Lobby.

7.26 pm

Mr. John Townend (Bridlington)

I have been a consistent supporter of the Government's original policy to reduce public spending. I have also been a consistent critic of their failure to achieve that objective. I was therefore greatly saddened by the change to the revised objective of containing public spending.

To achieve that revised objective, the Government set great store upon keeping the planning totals in line with the expenditure White Paper. Year by year, that involve increasing use of what we in the Select Committee on the Treasury and Civil Service call "creative accounting". One of the most important aspects of this is that the budgeted amount for asset sales is increased, thus keeping the planning total in line. Cmnd. 879, published in 1983, shows a planning total for 1985–86 of £132 billion — exactly the same figure as this autumn statement. At that time, however, asset sales were budgeted at £500 million. They are now budgeted at £2.5 billion. The increase of £2 billion has all gone in increased departmental spending. So much for the Opposition's claims that the Government are viciously cutting spending.

The planning totals also do not include interest payments, which are rising this year and are due to rise by a further £1 billion next year. As I said in the debate on the autumn statement last year, although my right hon. and learned Friend the Chancellor has my sympathy and support, year by year he is losing the battle with the spending Departments. The biggest culprit is the DHSS, which this year is spending £2 billion more than was scheduled in the 1983 White Paper. I welcome the setting up of the review boards but I am perturbed that a recent report suggests that Ministers have said that any savings achieved will be used to increase benefits rather than to reduce taxation for the low paid.

I am delighted that this year the Department will at last look at the appalling scandal of the board and lodging allowance. I hope that the Minister will be sufficiently severe to stop the financial incentives that encourage young people to leave the parental home. The cost of housing benefit, which doubled last year, has been greater than anyone anticipated. Many people in receipt of the benefit, which costs the country £2 billion, pay income tax.

We should also examine the amount paid in social security to striking miners and any other strikers. Is it right that taxpayers should subsidise people who are costing the country so much money? Should we pay social security to young people who turn down the chance of a place on the youth training scheme?

The current year's expenditure is running ahead of the budget by about £4.25 billion. About £2.75 billion will be met from the contingency reserve, leaving an outturn of £1.5 billion more than planned. We are told that it has been caused principally by the coal strike. Surely a contingency reserve is meant for unforeseen circumstances such as a coal strike. Based on this year's experience, was my right hon. Friend wise to reduce the contingency reserve in the autumn statement by £750 million?

All hon. Members accept that unemployment is the greatest problem facing our country. I do not believe that this terrible situation can be dealt with by increasing public spending. I agree with the Chancellor, who said to the Select Committee: The level of unemployment would have been improved if real wages had grown at a less rapid pace. The experience of the United States during the past 10 years supports that view. Between 1975 and 1984, 14 million new jobs were created and real wages in manufacturing industry fell by 3.5 per cent. In the United Kingdom, even during the height of the recession, wages continued to rise, —during the past 10 years they rose by 13 per cent. — and the number of jobs fell by 1 million.

In the autumn statement the Government seek to restrict pay increases for public sector workers next year by 3 per cent. If the Government are serious about letting market forces work in the labour market, as they do in the United States of America, and about removing rigidities in the market; they should take action. Some Select Committee members were disappointed when, in answer to a question, the Chancellor said that he and his colleagues spoke only in general terms about measures to reduce rigidities in the labour market and that no firm conclusion had been reached about these. Is it not nonsense that, while the Government try to limit wage increases in the public sector to 3 per cent., employers of several million employees in the private sector must increase their wages year by year by more than the rate of inflation at the diktat of wages councils, which are set up under Government legislation? As the time is approaching when the Government, under their international obligations, can give notice to abolish the wages councils, they should give that notice as quickly as possible.

Further restrictions which affect the free operation of the labour market and which should be considered seriously include the national dock labour scheme. It has already destroyed Liverpool, is well on the way to destroying my home city of Hull as a port, and is doing its best to destroy Southampton. We must re-examine the Employment Protection Act 1975, which still puts the fear of God into many small employers. It is a disincentive to taking on more staff. The Government must examine the Equal Opportunities Commission, which is a bigger nonsense than before since the recent decision that a lady who works in the canteen should be paid the same rate as a skilled shipyard worker. We should look at the Commission for Racial Equality, the code of practice of which is full of bureaucratic nonsense.

Ms. Clare Short

The hon. Gentleman is a nasty man.

Mr. Townend

My next remarks will sound even nastier. We can never consider unemployment without reminding Opposition Members that if the Labour Government had had stricter immigration controls we would not have the problems that we have today. In the south-east we have 250,000 foreign workers, mainly working in the catering, hotel and service industries. Why are those jobs not filled by our own unemployed people?

Ms. Short

Join the National Front.

Mr. Townend

The reason is that many young people are not prepared to accept the wages, terms and conditions for those jobs. Perhaps we pay them too well on social security, especially in areas such as the south-east, where jobs are available. The Government should consider dealing with this problem from the public expenditure point of view and with a view to getting people back to work.

There is a great deal that is encouraging in the autumn statement. Inflation is decreasing, productivity is increasing and the rate of growth is increasing for the fourth successive year. I plead with the Chancellor to open up the labour market, to remove the rigidities and to make the mobility of labour possible by dealing with the Rent Acts. He should take out his knife and slit away the legislation and bureaucracy, which is killing jobs.

7.36 pm

Mr. Jim Craigen (Glasgow, Maryhill)

If the hon. Member for Bridlington (Mr. Townend) sees anything encouraging in the autumn statement, he needs a pair of spectacles. He has not changed his penny-pinching ways since we served on the Select Committee on Employment. Some of the folk whose pay and benefits he wishes to cut would have been glad to receive the consultancy fees paid in connection with the sale of British Telecom. Massive public expenditure was devoted to that, but I shall come to that matter later.

The Chancellor referred to vision. He has no clear idea where the United Kingdom is going, far less any idea of the growing lack of social cohesion that accompanies his policies. The autumn statement is probably becoming more important than the budget in determining the living standards of the many people whom we represent. The right hon. Member for Worthing (Mr. Higgins), the Chairman of the Treasury Select Committee, was right to talk about some of the problems that arise when one looks at matters in compartments. There is a growing body of opinion in the Conservative party about the cost of Trident and the extent to which that expensive project is pushing out other priorities within the defence budget, let alone extinguishing some valuable social projects and priorities.

It is outrageous that the housing benefit system was altered so that many young people were encouraged to leave home to get a better rate of benefit in a lodging house. The Secretary of State for Social Services is penny-pinching and wants to change the lodging house benefit arrangement to put the young people out on the street. The Minster should not underestimate the social problems that have emerged in our cities. There is growing homelessness and unemployment among young people, and there are more problems of drug addiction. We must address ourselves to those serious political issues.

It is all very well to look at one side of public expenditure and decide to cut housing benefit, but the present system is open-ended regarding income tax relief for home purchase. The Treasury effectively loses £3 billion through income tax relief. About £500 million goes to people who live in big houses and happen to pay the highest rates of income tax. There is no housing need relationship there; it is a house purchase relationship. That may well have to be looked at in terms of equity and parity of treatment.

The right hon. Member for Hertsmere (Mr. Parkinson) mentioned the construction industry when he was talking about the importance of the private sector. The turnover of many building firms depends upon public contracts. They are building, rehabilitating, maintaining and repairing properties, and the Minister should not overlook the interrelationship between the public and private sector. The one depends upon the other. I believe in successful private and successful public enterprise, but I object to the way in which the Chancellor's policies do down both. The Chancellor is shaking his head, but that is a fact. Many private companies have found it extremely difficult to maintain their profitability while he has been Chancellor.

Last night, my Scottish colleagues and I saw a lobby from the housing asssociations in Glasgow and the west of Scotland, because the people involved in community-based housing associations are worried about what will happen with the lack of funding and resources to tackle the problem of sub-tolerable standards, let alone engage in the new build projects that we should like to see.

The hon. Member for Carshalton and Wallington (Mr. Forman) said that he hoped that the Chancellor's next Budget would create employment. We all hope that, but we did not see it in the previous Budget, far less in the autumn statement. It behoves the Chancellor to realise the implications of some of the decisions that are being taken in Departments.

Value added tax has been mentioned. The Chancellor is presently trawling the highways and byways seeking extra resources to pay for the own resources contribution to the EEC. The Government's approach is inconsistent. The Prime Minister asks manufacturers why they produce goods that people do not want. However, it would appear that we encourage agriculture within the European Community to produce what consumers are incapable of consuming at a great cost to national Treasuries because we have to pay vast amounts to store the produce and to keep the warehouses busy.

There is a suggestion that children's clothing and footwear are to be subjected to VAT. Local education authorities face problems at present. They have to hand out clothing grants to kids who cannot go to school because they are not properly attired. That is serious. I hope that that suggestion will be excluded from any trawling that the Chancellor is doing while looking for extra sources of indirect taxation.

When we talk about the spread of ownership, I hope that we realise the responsibility of management, because when public assets are being sold—often at a real loss —it is strange to think that one is bringing a few people into the ownership of assets that we all owned before they were floated off at public expense.

I wonder how much longer this country can afford the present Chancellor and his policies. We should be in "never-never land" were it not for the fact that we have singularly benefited from North sea oil and that the Chancellor is presently receiving some cash on the side from the sale of public assets. What will happen when the last drop of oil goes or when the last asset—the Crown jewels have not been sold yet—goes?

The Government have become corrupted by their own power. They have become oblivious to their mismanagement and the shortcomings of their policy. The sooner they change their ways, or better still go, the sooner this country will be better off.

7.45 pm

Mr. David Howell (Guildford)

We had a robust exposition of the Government's economic policy from my right hon. Friend the Chancellor. We also had an excellent speech from my right hon. Friend the Member for Hertsmere (Mr. Parkinson) in defence of Government policy, with most, if not all, of which I agree. The debate has brought out the point that the Government are facing two dangers—problems which they need to examine carefully to see how they can get round them if there is to be a successful development of the economic policy that my right hon. Friend the Chancellor is rightly trying to put forward.

The first of the two problems is the strategy of using tax cuts as a means of reducing unemployment. It is a strategy in which I believe, but I do not think that it is getting across. It has not reached the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley), nor do I think that it has reached a number of my hon. Friends. The difficulty is that we are dealing with a completely new labour market and entirely different conditions of unemployment from those of the 1930s. It is an unfamiliar idea to many people that jobs can be created through tax cuts. Hon. Members have almost expressed bewilderment, as if they thought that tax cuts and employment were alternatives. If hon. Members study the labour market as it is developing, with the new conditions that we face, they will see that tax reductions are the most effective engine of job creation.

The second problem is that the mechanism for settling public expenditure priorities appears to be in danger of falling into some disorder and decay. I do not have time within the 10-minute rule to discuss that at any great length, but in any case, my right hon. Friend the Member for Worthing (Mr. Higgins) in his excellent chairmanship of the Select Committee on the Treasury and Civil Service has made an excellent start, and the Committee has produced a good report which raises a number of questions.

I say to my right hon. Friend the Member for Worthing—I echo what my right hon. Friend the Chancellor said—that there is no trouble-free or political agony-free method of settling the priorities for public expenditure between Departments or even between programmes within Departments. President Reagan, for one, is clearly finding that out now as he struggles with his budget deficit.

But I should like to think that the battle could be more between policies and less between Departments. For what it is worth, the intention of those of us who drafted the White Paper setting up the Central Policy Review Staff in 1970 was to create a mechanism which would not solve the political problems but would at least set out the choices between policies rather more clearly for central Departments and the Prime Minister than in the past. It was not our intention that the CPRS should become a think tank. It did, however, first become labelled that and then became the Think Tank. But we saw it as a mechanism precisely for trying to set out some of the expenditure choices across Departments rather more effectively than had been the case.

We are now being corralled into a greater emphasis on the famous bilaterals between Departments, and those plainly lead to dangers. It may not necessarily be right that if a Department's expenditure on one programme increases another of its programmes should be cut.

That may be Treasury logic, and a rather effective way of bringing down our bloated public spending. It has been used over the years but it is not the pattern of real life and it leads to the difficulties that we have experienced recently.

I turn now to the prime issue, around which much of the debate has revolved: tax cuts versus spending. I hope that we can put aside the question of who believes or does not believe in the importance of reducing unemployment. There is an overwhelming commitment by responsible persons in public affairs to the reduction of unemployment. The issue is how effectively and speedily it can be brought about. The right hon. Member for Sparkbrook put forward a thesis in which he clearly believes: that there is a choice between tax cuts and unemployment. I believe that to be a completely false choice.

The right hon. Gentleman spoke of a number of economic models which have clearly influenced him. He has obviously been talking in detail to economists. If he is interested in economic models, there are plenty of economic models which put the opposite view with great vigour. I commend them to the right hon. Member for Sparkbrook if he wants to get a better grip on views about economic policy. The Liverpool economic models—Professor Minford's group—argue that for every £100 million used in tax cuts, 10,000 jobs would be created, or that for every £1 billion used in tax cuts 10 times that number of jobs would be created. He says that 5,000 jobs would be created by cutting the standard rate of income tax and that 8,000 jobs would be created by cutting the national insurance contribution.

The Warwick institute of employment research says that £1 billion in tax cuts would produce 203,000 jobs after four years, whereas it argues that if one is dealing with increases in public expenditure the figures would be very much smaller.

There is another argument which the right hon. Member for Sparkbrook ought to take on board. When he says that increases in public expenditure are the way by which to create jobs he is not reflecting the proper range of economic thinking. He ought to understand that the modern labour market is quite different from anything that we have had in the past. It is not comparable with the 1930s. We ought to realise that tax reductions and reductions in the NIC are a powerful engine of job creation.

I do not rule out the suggestion that there should be increased capital spending by the Government, but I do not believe that that will be the main engine of job creation. The right hon. Member for Sparkbrook has not understood the nature of the modern construction industry and its very limited job creation capacities. Certainly, a great deal needs to be done for the infrastructure of this country, for a number of social reasons. By far the best report on the subject has been published by the Policy Studies Institute. It is entitled "Building the Infrastructure". I must declare an interest because I am involved with the Policy Studies Institute. It says in its report that it looks forward to a 10 year spending programme of about £3.3 billion on the infrastructure—£330 million a year. It says that the public spending element—the pump priming element via the urban programme—would need to be only one third and that the other two thirds each year of the £330 million could be induced from the private sector. The Government should include that point in their thinking.

As for the scope of the tax cuts, which are the real engine of job creation and the quickest and most effective way to restore the kind of employment in the new job market which is emerging—in particular the far better range of part-time and flexi-time employment that people are demanding nowadays—room is available not only from the £1.5 billion about which my right hon. Friend has spoken. He has more room than that. I suspect that there will be some easing room from the revenues from dollar oil prices, although I realise that that is a gamble. But I question whether adherence next year to the £7 billion PSBR is necessary.

The financial markets are not interested in precise Pstatistical figures each year. They are interested in being assured that in the medium term, over four or five years, financial, monetary and fiscal policies will coincide and be in harmony. If the financial markets saw that the Chancellor was accelerating his tax cuts and bringing forward £1 billion next year on top of the £1.5 billion, with the aim of getting on top of job creation, as I know it would do, I do not believe that the financial markets would worry about it or put him under any pressure about interest rates. So a £2.5 billion move in the Budget next spring would be a good start to the tax-cutting, job-creating strategy which is necessary to create the new jobs which are being demanded in the wholly different conditions we now face. The old labour market of the past no longer exists. I beg hon. Members opposite to understand that we are facing new conditions.

What incentives should take priority within the £2.5 billion? Good arguments have been put forward about the need for tax reductions on lower wages. I do not understand why the Labour party wants to dissociate itself from the cause of lifting the intolerable tax burden on those first going into jobs who find that they pay immediately 39p in NIC and income tax out of the first pound that they earn. That cannot be right. We must have the support of a modern, understanding Labour party. It must not turn its face against those sort of tax cuts for people in lower income groups who are in real need.

The second kind of tax cuts that I wish to see are those which my right hon. Friend the Chancellor mentioned in his speech. I refer to the need for wider ownership. This is the theme which for 10 years some of us have been pleading for in the Conservative party. It is a theme which all politicians who are opposed to old-fashioned state Socialism should embrace. This is the path to more jobs, more employment and a fairer society than anything the welfare state has been able to develop. There ought to be a massive increase in the support of for wider personal ownership. I should like 1 million more council houses to be sold. I should like there to be more specific and positive tax incentives for share ownership, following the success of BT. I should like there to be far fewer barriers to setting up new businesses. This could be done. It would lead towards employment in a way that none of the proposals could achieve which have been put forward, in particular by members of the Labour party who keep looking back to the past. Labour Members must understand the nature of the new labour market and the fact that it is through tax deductions that we shall create the jobs that we need.

7.57 pm

Mr. Mark Fisher (Stoke-on-Trent, Central)

The right hon. Member for Guildford (Mr. Howell) and his right hon. Friend the Member for Hertsmere, (Mr. Parkinson) will not find many people on the Labour side of the House who agree with them, either in their detail or their priorities. However, they recognise the problems that face this country and I am pleased that at least it is possible to have a serious debate with them about priorities, speed and the method of tackling unemployment. We recognise and welcome this commitment to tackling unemployment, even if we cannot agree entirely on the details. However, I am sure that the right hon. Gentleman will readily admit that that kind of recognition from him was totally lacking in the Chancellor's own speech.

The Chancellor does not recognise those problems. He lives in a different world. He referred to four years of steady economic growth. I do not know why he believes that. The claims which he made were not credible. He claims that the Government have a firm grip on public expenditure. If a firm grip on public expenditure means such expenditure going up by £1.5 billion to £128 billion and increasing by 6.5 per cent. last year, is that really the firm grip that is needed? It is not even being held constant in real terms.

The Chancellor also spoke about inflation. He claimed that better progress had been made on inflation. However, table 1.3 on page 9 of his autumn statement shows that, except for housing, inflation is going up. It is only because of a radical drop in housing inflation that the Chancellor can show a constant inflation figure.

When the Select Committee tackled the Chancellor on this point and asked him what interest rate assumptions allowed him to show that housing inflation was corning rapidly down, he was unable to give us any evidence or facts. It is hope and assertion rather than anything else. The Chancellor is whistling in the dark to keep up his courage. Hon. Members on both sides of the House cannot believe what he says. Nor should they, because in the same debate last year the Chancellor said that unemployment was levelling off. That prediction was wrong. Many of the things that the Chancellor has said today are wrong. His track record is not good. The House ought to recognise that in the autumn statement the Chancellor has juggled with the figures to create the impression of a Chancellor in control of his own economic policy. But the real world is very different.

Let us look at some of the figures on the expenditure side. The right hon. Member for Guildford referred to a commitment to bring down unemployment, but in the autumn statement the Government accepted that unemployment will stay "stable" at 3 million. It is already at 3.25 million and shows no sign of coming down. If it is to stay stable at that level, the Government should have included an extra £370 million in their planning total.

The Government predict a 3 per cent. cut in local authority spending in real terms. No hon. Member can seriously believe that that will happen. Even if the Government achieve a freeze through their draconian targets and penalties, which is unlikely, they would still have to allow an extra £1,000 million in their planning total.

The Government say that public sector pay will be held to a 3 per cent. increase. Again, no one can seriously believe that. Most ridiculous of all, the Government assume that the miners' strike will be over by Christmas, in three weeks' time. No one believes that either.

The figures on the other side of the equation are equally unrealistic. An extra £500 million has been included for asset sales. The Chancellor of the Exchequer gave no evidence or statistics to the Select Committee to justify that assumption. Council house sales are assumed to be £400 million. The Chancellor was also unable to justify that figure to the Select Committee, and the 1983 sales figures were down by 35 per cent. It beggars belief how the Chancellor can assume another £400 million of receipts.

No one can believe the figures in the autumn statement and Conservative Members ought to recognise that they are phoney. The Select Committee refers to "systematic distortions" in the planning total. That is a polite way of saying that the Chancellor is misleading himself and the House on the contingency and the planning totals, both of which are inaccurate.

Not all the Chancellor's forecasts and assumptions will be wrong. Some will probably be correct, but it is undeniable that he will almost certainly be wrong on some. He has taken the most optimistic view of every fact. They will not coincide. The Chancellor is living in a fantasy world.

The Chancellor is especially living in a fantasy world over North sea oil. If there is one characteristic of the autumn statement, it is that it depends on the Chancellor's view of what will happen to the exchange rate and with North sea oil. He has included £2.5 billion extra revenue for this year. He assumes that the sterling-dollar exchange rate will remain at its present weak level. As the right hon. Member for Worthing (Mr. Higgins) said in his excellent speech, that is a dangerous and unsafe—to say the least—approach. It is a complex and hazardous area in which to speculate and for our economic policy and the autumn statement to depend on the sterling-dollar exchange rate, particularly when the Government, on their own admission, have no target for that exchange rate, is an unsafe way of presenting the Government's economic strategy to the House and the outside world. I urge Conservative Members to look at the figures in the autumn statement and to recognise that they are being asked to accept figures that are, at best, highly optimistic, and often phoney.

If the Chancellor is satisfied with the figures, he is deluding himself. Different things are happening in the real world. Public borrowing and public spending are up. Government expenditure is up, because of increases in demand-led programmes, such as unemployment and housing benefits. Wages are running 3 or 4 per cent. above prices. The Chancellor's aspirations for parity between wages and prices will not be realised.

There are genuine demands, which the autumn statement does not face up to. Our infrastructure is collapsing and we have an older population and vastly increasing costs for the Health Service, social services, pensions and housing.

There is demand for more spending on skills, education and better services. Those are not selfish or fantasy demands. We must meet those demands if we are to respond to the challenges facing our industry.

Other problems are raised by the decline in our manufacturing industry. The right hon. Member for Hertsmere touched on that matter. The balance of trade in manufacturing has been sliding away from us in the past 18 months. The autumn statement does not address that fact.

Investment in infrastructure is inadequate and revenue from the North sea has peaked and will decline. The autumn statement does not face up to that problem. I beg Conservative Members to recognise the weakness of the autumn statement. When they see how unsafe and unsure it is, they will turn on the Chancellor and then it will be possible for us to have the necessary serious debate, which has begun in simple terms, on these matters.

Despite the fact that the Chancellor pretends that his figures add up and that he can produce a balanced autumn statement to the satisfaction of himself and other Ministers, our decline in manufacturing industry, skills and infrastructure is continuing. The Government are economically rudderless. I trust that Conservative Members will recognise that and will vote against the Government, if not tonight, at least later.

8.6 pm

Mr. Robert Harvey (Clwyd, South-West)

The debate has reflected the fact that one of the main concerns of Conservative Members is not so much the general economic strategy enshrined in the autumn statement as the reluctance of the Government to accept and to give priority to what must be the most pressing issue in this Parliament.

The continued rise of unemployment after more than two years of recovery is alarming and it is no consolation that European countries suffer from the same ill. Of course the Government should continue to make balanced, stable economic growth their main goal and we should be proud of the reduction of inflation from 18 per cent. to less than 5 per cent. That is one of the greatest economic achievements of the past 20 years.

However, it would be an astonishing order of priorities if we made the reduction of inflation from 4.5 per cent. to zero our main priority for the next three years at a time when there are 3.25 million out of work and when more than 1 million people have been out of work for over a year.

Let us remember what government is for. Like all my hon. Friends, I believe that the less government, the better. Private enterprise should be left in peace to help to create wealth, but if greater wealth is created and a major group of people are being left without any share in that wealth, social tension will inevitably be generated as the lives of those people become pointless. It is the Government's duty to come up with an answer.

The Chancellor of the Exchequer has given two reasons why unemployment has failed to fall. First, there are large numbers of working women joining the labour force. One can accept that. Secondly, the unions continue to price their members out of work. One can also accept that, although those of us who have long believed in pay restraint in the public sector, and have seen the Government come round to that principle, could have seen that problem coming.

However, both those factors are merely symptoms of the larger industrial revolution in working patterns which is staring us all in the face, but with which no political party has yet come to terms.

Is it not possible that the reason why unemployment keeps going up during a period of sustained economic recovery is that fewer jobs are required to create more wealth, as a result of the introduction of new technology?

Is it not possible that the reason so many more women and part-time workers are coming onto the labour market is because that is the kind of non-union labour that the new industries prefer to employ? Is it not possible that the reason earnings are up for those in work is that, because of the productivity improvements made possible by the new technology, employers can afford to pay more while employing fewer people?

In 1970 there were 6,000 general purpose computers in operation. By 1980 there were 175,000. By 1983 there were 750,000. The revolution in working patterns brought about by technological change is already upon us.

Ms. Clare Short

rose—

Mr. Harvey

I would prefer not to give way because I have limited time. I am sorry.

In one industry after another throughout Britain, employers are working with more computers and fewer people. A local electricity board that serves my constituency employs 3,000 fewer people.

The country is looking to us to get to grips with the problem, but not by imitating an American example that cannot be repeated here. Jobs are being created in the United States, first, because a massive amount of enterprise capital was available to start up service businesses, and, secondly, because the Administration was prepared to run up a huge budget deficit. My right hon. Friend the Chancellor was entirely right to argue that we cannot do that here because we are an open economy and budget deficits to stimulate demand merely lead to import binges.

But that is not an invitation to sit on our hands and do nothing. There is a need for a significant, responsible, job-creating, capital spending programme to improve our rundown services in the regions. We need hospitals, housing and schools which will provide employment for some of the unskilled and semi-skilled labour which otherwise faces a truly bleak future. That is not an import-intensive area and if the price is to push up inflation from 4 to 5 per cent., it is a price worth paying.

Secondly, because of the conservatism of institutional investors in Britain, the Government need to go further into the business of channelling risk capital to new and expanding enterprises. Thirdly, there is a need for large-scale, voluntary, early retirement schemes, conditional upon providing new jobs for those entering the labour market. There is also a need for the expansion of job-sharing, sabbaticals and shorter working hours for those who want them. The Government must give a lead.

The alternative is too terrible to contemplate. It is of a society where the employed, union-protected majority grow richer while life for the minority out of work remains idle and impoverished.

I was elected last year in a constituency where unemployment averages 18 per cent. and touches 40 per cent. in some pockets. A generation is facing the future, and what ought to be the bright adventure of their lives, without hope, without a choice in life and without the opportunity to better themselves, which is, after all, what the Conservative party is all about.

The great tradition of helping those who cannot help themselves, which underlines the British way of life, has averted social upheaval in the past. Let the new wealth that the new technology is bringing be of benefit to all the British people.

8.13 pm

Mr. Michael Hancock (Portsmouth, South)

Since coming to the House in June, I have hoped to see some spark from the Government that would lead me to believe that they had learned some of the lessons of the by-election in Portsmouth, South. I looked to the Queen's Speech in the hope that the programme that the Government were laying before the House would offer some semblance of hope to the British people. I am sure that I am not alone in saying that I was bitterly disappointed at what that speech contained.

I then looked to the next major platform — the Chancellor's autumn statement. Once again, sadly, having read it and witnessed two occasions on which the Chancellor has tried to justify it, I am amazed at the complacent and cynical way in which the Government completely ignore the problems facing the British people. That is not a unique experience for me, because in the past 15 years I have sat on two Tory-controlled local authorities. Each year, at about this time, we have the preliminaries to the budget meeting in March. Each year, the Tory-controlled councils in Hampshire and Portsmouth would wheel out their political policy and budget, which would always have some element of doom in it and which would always be grasped by the majority of Back-Bench Tory members of those councils, and certainly the media.

Over the years I have begun to realise why that was done. I have begun to realise the purpose of a smokescreen—to divert attention from the issues facing those local authorities and people in the community. It was for no other reason than to hide the complete inadequacies of the main plank of what those councils were proposing to do. Now it is the Government's turn.

What we have witnessed in the Chancellor's autumn statement is surely not what was intended in 1982, when it was supposedly intended to bring before the House a full-scale green Budget as a preliminary to allowing the House to discuss the Government's programme for the next year. This is paying but lip service to that idea of 1982.

This year we have had a charade from the Chancellor. I can only suspect that there was some sort of conspiracy in the Cabinet, when Ministers discussed what they could slip in to cause such upheaval in Back-Bench ranks that it would create a smokescreen that would cover up the programme's inadequacies. They must have decided that the most acceptable face in the Cabinet to bear the brunt of a Back-Bench rebellion was the Secretary of State for Education and Science and the subject that would gain most support on the Back Benches in an attempt to divert media attention was student grants. What a neat ploy it was. Today is rather like after the Lord Mayor's show. After yesterday's back-tracking is the pay-off — the smokescreen being so effectively deployed.

But the real crux of what this Parliament should be about and what we should be saying today is contained on page 20 of the autumn statement. Listed there is point after point, which Labour and Conservative Members have tried to expose. They have tried to say that what the Chancellor is doing is not enough and, where he is making an attempt to offer some semblance of hope, he is doing so in the wrong place.

I come from a city with an appalling housing problem. The housing waiting list increases daily. At the same time the local authorities' housing programme and ability to do anything about it recedes. That is because the Government have reduced the authority's ability to spend and to deal with the real social problems of housing. The urban programme, once grasped by local authorities to offer some added incentive to their community, is, again, being reduced. Once again opportunities are being lost. Opportunities that were readily available only two or three years ago are now being reduced until they are virtually non-existent.

The real irony of what has happened over the past couple of days on education grants must be spelled out. The changes announced yesterday do nothing to counter the impression that the Government's education policy has no direction and no strategy other than to be penny-pinching. There is not the slightest spark of inspiration or imagination. One can offer some sympathy to those Ministers in the spending Departments who have somebody breathing down their necks daily to remind them that the Chancellor is watching every move they make and reporting them back.

Despite the changes conceded by the Secretary of State yesterday, real hardship persists. Fifty thousand families must still find an extra £260 a year. The same number of students will be totally dependent on their parents. There will still be increases in the parental contribution, causing the burden of supporting the student to be shifted to the parent and away from the state. It seems that we expect those in higher education to be independent enough to vote and to fight for their country but not independent enough to make choices in education without their parents' consent, or to seek further education at all unless their parents are prepared to finance them.

The Conservative Back Benchers have been bought off at a high price. The budget for adult education, training and research has been cut, although those are the types of expenditure that we need to increase if we are to do anything about our economic decline.

Public expenditure plans allow for no priority to be given to training and retraining, yet all the evidence is that that is crucial to the nation. We should spend more on it. The engineering training board published a report last month which stated that there are many signs that skill shortages are becoming a serious impediment to national output. The report "Competence and Competition" reinforces that view.

The engineering training board showed that the demand for technicians in the engineering industry will be under-met by one third over the next few years, yet the spending plans take no account of the problems facing that industry—and that industry is not unique in today's economic climate. The money to buy off the Back Benchers was taken from the very areas on which we should be spending money. I have been a Member of this House only since last June, but I would have expected Conservative Members to see the folly of pursuing such a policy year in and year out.

Hon. Members have talked about tax cuts as a solution to unemployment. That suggestion has been made for three or four years, but the unemployment figures have continued to rise. Yet we are still persistently told by Conservative Members that tax cuts will rescue us from our unemployment mess. How long must we wait? How long must the list of the unemployed grow before we see some semblance of a return of those promises?

8.23 pm

Mr. Anthony Nelson (Chichester)

It is disappointing to follow the hon. Member for Portsmouth, South (Mr. Hancock) who seems to be so disillusioned so early in his parliamentary career. It was even more disappointing to realise, as his speech progressed, that he seemed to have nothing to offer except a return to the old ways of spending, and borrowing and taxing, more. If he is searching for imaginative alternatives, it is not sufficient to criticise the autumn statement without explaining—as the SDP so often fails to do—what he himself would do instead.

I should like to refer to the international scene, which was touched upon by my right hon. Friend the Chancellor and also by my right hon. Friend the Member for Worthing (Mr. Higgins) who did the House a singular service by preparing the Select Committee report.

It is important for us to be aware that the Government's best hopes, in terms of budgetary expectations or fiscal plans, will inevitably depend on the world in which we live and with which we are increasingly interdependent. Having read some of the expectations set out in the autumn statement, I take the view that the waters will be rough in the world over the next year and that it is right to pursue a prudent course — such a course as is, broadly speaking, epitomised in the autumn statement.

Some of the world trends with which we shall have to cope give cause for concern. The United Kingdom's output has risen only half as much as that of other industrialised countries, while inflation is above average. In the United States, output is significantly above that of the average industrial country, while trends in capital investment, inflation and re-employment exceed those in this country.

At the same time, the most dramatic feature of the international economic scene is the record surplus that the Japanese economy is earning on its foreign balance of payments — £35 billion in the past year alone — compared with the record deficit by the United States of some $100 billion over the past year. Those massive movements of funds, and the trade that they imply, are to some extent areas of opportunity on which we are missing out. They reflect the still relatively poor level of productivity and competitiveness of British industry, on which my hon. Friend the Member for Carshalton and Wallington (Mr. Forman) commented so ably.

It is also a matter of great concern that the United States, which in terms of interest and currency dominates so much of the international trading scene, continues to maintain a federal deficit this year of around $167 billion. That, together with tight monetary control, means that the rest of the world is essentially financing the resurgence of the American economy. America is recovering at our expense and—as my hon. Friends are aware—at the expense of the developing countries which face problems with their foreign currency deficits because of the strength of the dollar, sluggish commodity prices and the burden of high interest rates. However, it is the continuing rapid development of the Pacific basin, with low actual and unit wage costs, lower real interest rates, and a surge in output, trade and investment, which provides the greatest challenge—and, I hope, opportunity—as we enter the new year.

It is important to bear those international factors in mind as we try to make value judgments about how we should spend our limited public resources on industry or on social requirements.

We must recognise the importance of keeping the new United States Administration to their undertakings on achieving lower deficits. We must also move, wherever possible, to strengthen the European Community as a trading and manufacturing bloc, by means of stability in exchange rates and industrial investment, and procurement strategies which direct fewer of our capital resources to the United States and the far east. We should remove internal Community barriers to capital investment and services. We must continue to uphold policies of free capital movements internationally. The substantial increase in the United Kingdom's net assets internationally, which has resulted from the release of exchange control some years ago has been vindicated by the enormous income that we now receive—some £2 billion a year—in the form of dividends and interest from those investments. It has more than offset the enormous and tragic decline in the invisible income generated by our merchant shipping fleet, a decline of £1 billion on the level of three years ago.

The autumn statement is well set out, and a considerable improvement on the statements of previous years. I broadly support the overall level of spending for the next financial year and the intention to maintain that real level for the following two years. I am, however, concerned about the volume and nature of certain changes in spending plans since the White Paper. In particular, over £2.2 billion has been switched from some programmes to others, and much of that switch is from capital to current expenditure. For example, is it coincidence that cuts in spending on housing and roads amount to £680 billion whereas extra spending on the Department of Health and Social Security also amounts to £680 billion? One is a cut in capital expenditure, and the other an increase in current expenditure. That is difficult to justify. In my view, it is also difficult to justify spending on nationalised industries that amounts to over £1.3 billion in the next financial year when some £11 million—a relatively small sum—is being cut from the research budget of the universities. It is difficult to defend an increase of 21 per cent. in current expenditure by rate-capped local authorities when other local authorities will suffer significant cuts in support for essential and employment-promoting activities such as housebuilding and improvement and the maintenance of educational standards.

My greatest worry concerns the seeming inability to stem the ever-rising DHSS bill which now amounts to £56 billion or 42 per cent. of public expenditure. Why has it proved necessary to increase the provision of social security by £470 million when the Chancellor anticipates that the number of unemployed will remain roughly the same next year and when the rate of inflation, and therefore assumptions about the cost of increasing benefits, were no different when the last White Paper was written?

What has happened with the major review, which we discussed last year, on the future provision of social security? Can we sustain a social security bill of this size and satisfy ever-increasing expectations from benefits when we are cutting capital investment, spending oil revenue and selling off nationalised industries not to reinvest but to pay dole, supplementary benefits, pensioners and the rest?

The charges that we should be making are not those which are determined by immediate demands for larger handouts in Britain, but those determined by what is happening elsewhere in the world. We should be aware of and responding to the industrial challenge coming from the Pacific basin.

We should be rising to the competitive challenges coming from the United States and Europe in services and in manufacturing industry. We should be insuring against the day when the oil runs out. What will we say to pensioners and the unemployed then—that the money has run out because we have spent the seed corn? I believe that the Government are aware of these changes and of the course needed to avert them. This is the time to rise to those challenges. I hope that we shall have the conviction to do so.

8.31 pm

Ms. Clare Short (Birmingham, Ladywood)

The complacency of the Chancellor's speech was quite shocking. It means either that he does not live in the real world or that we have two nations in Britain. Birmingham, which is the second city of Great Britain and the heartland of its manufacturing, has 30 per cent. registered unemployment in its inner core, as was made clear by my hon. Friend the Member for Walsall, North (Mr. Winnick). When the Government came to power in 1979, unemployment was between 5 per cent. and 6 per cent. All that deterioration and all the misery, suffering and poverty in Birmingham has come about since the Government came to power and is the result of their policies.

The hon. Member for Clywd, South-West (Mr. Harvey) suggested that our problem is new technology and that we are producing less because robots are taking over the jobs of people. That is not the problem. If we discount oil-related growth from our total economic growth, we find that we are producing less than in 1979. It is not true that we have applied new technology and are therefore producing more. We have thrown people out of work and closed down factories and are now undermining our economic base. When the oil runs out, we shall be in enormous trouble.

The suffering of the people of Birmingham is disastrous. We have the highest level of long-term unemployment in Britain. The only higher level is to be found in Northern Ireland. Until recently, our region was as prosperous as the south-east. We have the greatest concentration of poverty in the United Kingdom measured in terms of the poorest census enumeration districts. The people of Birmingham experience that suffering and worry about the economy because anyone who drives out of the city on major roads will see factory after factory, which used to employ people, closed and decimated.

We are told that Birmingham has benefited from the recent announcement on regional aid because we have been included in a second-tier authority for the first time. Birmingham is highly dissatisfied because the new travel-to-work area, which the Government are using as a building block of their regional policy, is so massive that it includes areas such as Stratford-on-Avon, which is highly prosperous, thus reducing the average level of unemployment in the region, which means that we are in the second rather than the first tier. There is also a grave danger that when new investment comes to the area as a result of the aid, it will go to areas such as Stratford-on-Avon and possibly make central Birmingham even more poverty-stricken.

Another feature of the Chancellor's speech which I found highly objectionable was the re-writing of the history of unemployment in Britain which he has pursued for some time. Every time he makes a speech on this subject he suggests that unemployment in post-war Britain has risen relentlessly under successive Governments and that therefore some radical measures must be taken to deal with it. The truth is very different. Until 1970, unemployment in Britain was either just below or just above 500,000. We then had the Tory Government of 1970 with the philosophy of Selsdon man—one might say, the first time round for monetarism—under which unemployment shot off to 1 million. We then had the famous U-turn because, in those days, 1 million was considered unacceptable. Unemployment came down again to 500,000. We then had the Labour Government of 1974 and the first oil crisis. Unemployment rose to 1.7 million and then came down again, before Labour left office, to 1.3 million. That was the figure on the posters designed by Saatchi and Saatchi—

Mr. John Maples (Lewisham, West)

Will the hon. Lady give way?

Ms. Short

No, I have only 10 minutes—saying, "Labour isn't working." The Conservative Government formed in 1979 inherited an unemployment level of 1.3 million and they have taken us from there to 4 million. That is not a long-term trend: the graph shoots up in 1979. It is false of the Chancellor to suggest that it is a long-term problem and that unemployent has risen steadily. The massive unemployment that we have experienced since 1979 is a straightforward product of Government policy. It is wrong that the Government should try to re-write history, appropriately enough in 1984.

Another feature of the Chancellor's speech which was highly misleading, is the claim that Britain is doing better than most other countries. To make that case, he uses figures selectively to compare the performance of the British economy with that of other European economies. Some of the most reliable figures by which we compare unemployment rates in different countries are assembled by the United States Bureau of Labour—hardly a Left-wing organisation. It is necessary to do major adjustments to compare unemployment rates in different countries because the figures are collected in different ways—sometimes by census and sometimes by registration. Those figures show that our unemployment is significantly higher than that of all of our competitor countries, and we started in 1979 from a lower base. We are doing worse than other countries. Our unemployment is worse as a direct result of Government policy.

Another feature of every statement that the Chancellor makes about unemployment, which is immediately echoed by his Back Benchers, is his argument that only a cut in wage levels will produce a drop in unemployment. We know a lot about that in the west midlands. In 1979, we were one of the highest-paid regions in the country. As a result of the collapse of manufacturing since 1979, we are now among the lowest paid, yet there is no sign of that massive cut in wage levels leading to any regeneration. Indeed, a recent survey of major economic investors made by West Midlands county council showed that they regarded the west midlands as a disastrous area for new investment because of the low level of economic activity in the region.

How low must wages fall to make Britain competitive? Should we go to the levels of Bangladesh or Korea? We already have lower wage levels than other major developed countries. Is there no minimum? Is there no decent standard minimum below which people should not be expected to work? It seems not. That is the only argument advanced by the Chancellor, but we know that, if all of us agreed tomorrow to take a wage cut, demand would be cut and there would be more unemployment. He may have other objectives, but it is not true that a cut in wages, which will not happen anyway, will produce the great solution to the problem of unemployment.

The Government are engaged in a mad economic experiment. As Galbraith said, Britain is doing its duty to the rest of the world by proving that monetarism does not work. However, the price is unbearable for the people in the west midlands, who are suffering, and unbearably worrying when we think about the future of our country and our economy. The manufacturing capacity of Great Britain is being damaged and diminished, and nothing is being put in its place. New technology is not going in, and when the oil runs out, our economy will be damaged for ever more.

8.40 pm

Mr. Michael Fallon (Darlington)

At the heart of the debate and of the economic statement itself are the issues of public expenditure, privatisation and unemployment. Public expenditure is the Sisyphean rock of any Government, and the severity of the task facing this Government is shown by the linguistic osmosis that appears to have coloured the verbs with which Ministers describe their task. First, we heard that Ministers were in the business of reducing public expenditure, then it was controlling, restraining or holding it, and now we are told that it is being contained.

Not enough tribute has been paid to this Government for their achievement. I do not share the scepticism and criticism shown by some of my right hon. and hon. Friends earlier today. To keep so close to targets set some time ago is a considerable achievement. To keep the public sector borrowing requirement in the same order of magnitude as pertained many years ago is in itself a considerable achievement. It is a remarkable achievement to have substantially lowered from over 9 per cent. to 3 per cent. the proportion of gross domestic product that is consumed by public borrowing.

It is inevitable that while the Government tackle the problem of public spending there has to be some of the trimming and shaving that has upset many of the interest groups over the past few years. Inevitably, as a result of that, there are adjustments, simply because of the nature of public spending, during the fiscal year, which again upset many of the interests groups particularly affected by such a change.

Ministers might assist themselves if they not only provided more information on the wider issues, of which Command 9189 is an excellent example, but if they publicised more of the existing anomalies, distortions and subsidies within the public expenditure programme. For example, it might have been useful to know before last week to what extent lower income groups subsidise university education for the middle income groups. It might have been helpful for the country as a whole to know the extent to which the north and the midlands, for example, subsidise commuting in the home counties. It has always amazed me that my constituents in Darlington have to subsidise, to the tune of £250 million a year, commuting in places such as Carshalton and Guildford, to name but two.

It would be helpful to know the extent of the subsidies within the tax system—for example, the extent to which companies that are exempt from paying VAT, such as publishing companies, are being subsidised by those companies that do pay VAT. Again, I am puzzled as to why an engineering company in Darlington has for so long been subsidising a publishing company in Bedford square, London. Ministers would help themselves and the wider debate if they would make available even more information about some of the background to public expenditure.

As to privatisation and the sale of assets, as my right hon. Friend the Member for Hertsmere (Mr. Parkinson) has said, privatisation is important, not just in revenue and balance sheet terms—the technical matter referred to in the Select Committee report—but because it has much wider implications. The sale of BT shows the enormous opportunities that lie ahead, not simply for the privatisation of industry but for the privatisation of utilities, which would release customers who at the moment are subject to monopoly charging and to supply-fixed industries that could be profitable and attract funds on the capital markets. We could release them and for the first time give consumers some control in return for the standing charges that they have to pay and the amount of the services of the utility that they consume.

There are many such profitable public utilities—for example, Thames water authority. Individual gas boards or regional electricity boards may be more profitable than others. I see no reason why a nationwide programme has to be initiated. Where there are reasonably profitable regional utilities that could attract funds and finance their own borrowing and expenditure measures, my right hon. and hon. Friends must give them a chance to do so.

Unemployment has been discussed very much from the point of view of the employed. We have heard continually from Labour Members about wage cuts not being part of the solution. However, a Government who have done so much to free the economy, and the south and the midlands, must do much more to free the unemployed, and allow them to price themselves back into work. I should like to see my right hon. and hon. Friends increasingly co-ordinating a right-to-work campaign that will break monopoly power and end the wages enforced either by statute or by union diktat, and will dismantle the restrictive practices, the demarcation disputes, the excessive overtime — all the practices that maintain high unemployment and prevent those who are out of work from having the chance to put themselves into work.

In the north-east, far too many people are trapped on council estates in unemployment. They cannot take part-time work without losing benefit; they cannot leave their council houses, and they have no chance in the heavily unionised industries of putting themselves back to work. It is no accident that the north-east is the region with the highest unemployment, and is the region that is the most heavily unionised. Despite that, in 1984, as in 1974, as the new earnings survey has just revealed, it still has, outside London and the south-east, the highest average male weekly earnings of any region. As the manager of my unemployment office put it the other day, there is plenty of work about but very few jobs. That is a paradox for the House to understand and for Ministers to resolve urgently.

8.48 pm

Mr. Ray Powell (Ogmore)

It is all very well for the hon. Member for Darlington (Mr. Fallon) to talk about there being plenty of work but no jobs, when he has never been to Wales. I am the only Welsh speaker to have participated in the debate so far. We have a saying in Wales "Cymru-am-byth" which means "Wales for ever". In this Chamber, it means "Wales for ever last." In the autumn statement, references to Wales are for ever last.

I have listened to a number of speeches about the autumn statement since the debate started. I have listened to a number of my hon. Friends talk about unemployment and its problems. Unfortunately, nobody is talking about the real world in the area where I live. No one is talking about unemployment, at a level in Maesteg of 25 per cent. No one is talking about the miners' strike, which is far more important than some of the issues that I have heard raised today.

The autumn statement refers to an estimated contingency fund of £3 billion. If the miners' strike continues, that £3 billion will soon be wiped out. It is estimated that the strike has cost the nation between £8 billion and £10 billion in nine months. What action, if any, have the Government taken to try to get the two sides together and resolve it?

Earlier, I listened to one of the most atrocious speeches that I have heard in my five and a half years here. I refer to the disgraceful speech of the hon. Member for Bridlington (Mr. Townend), who is part of the black economy with his company directorships, his wine shops and his employment in the House. Is it any wonder that there is unemployment outside the House?

The Chancellor of the Exchequer asked my right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) to spell out the policies of the next Labour Government. In a remarkable speech my right hon. Friend outlined the policies that a Labour Government will pursue when we get elected—and we shall be elected.

Mr. Nicholas Winterton

On a point of order, Mr. Deputy Speaker. I have no wish to interrupt the debate, but there is a courtesy in the House that if an hon. Member mentions another hon. Member, especially discourteously, it is customary to give that hon. Member notice of his intention. Did the hon. Member for Ogmore (Mr. Powell) notify my hon. Friend the Member for Bridlington (Mr. Townend) that he intended to refer to him?

Mr. Powell

Mr. Deputy Speaker, we are within nine minutes of the Front Bench speeches which will conclude the debate. The hon. Member for Bridlington left his seat almost immediately after concluding his speech, and we have not seen him since.

Mr. Winterton

The hon. Member for Ogmore has not spoken before.

Mr. Powell

No, I have been waiting to be called, and I am the last hon. Member to speak from the Back Benches.

I refer to another Government supporter who is not here now. If he is not here, it is not up to me to tell him of my intention to refer to him. He has participated in the debate. I have been sitting here since 2.35 pm. I came into the Chamber immediately after prayers.

The right hon. Member for Hertsmere (Mr. Parkinson) referred to the speech of my right hon. Friend the Member for Sparkbrook and his analysis of tax concessions at the expense of higher unemployment. However, the right hon. Member for Hertsmere overlooked my right hon. Friend's comment that the Labour party would not promise massive tax reliefs to get elected and would never implement such policies once it was elected to government. That is what my right hon. Friend said, and it is quite significant, because I believe sincerely that a Tory Government would not have been elected in 1979 if they had promised what they intended to carry out. They promised massive tax concessions and we are still waiting for them five and a half years later.

I ask the House to consider the opportunities that could be afforded, especially in Wales, for building. In Wales we have some 40,000 unemployed construction workers. We are crying out for homes, hospitals, schools, sheltered accommodation, new roads, sewers, and more transport development. Instead, under the present Administration, we are getting further cuts, further unemployment and a display of indifference from them.

On page 20 of the autumn statement, against "Trade and Industry", we read: Additional provision is made for launch aid and for shipbuilding. Recently I heard a speech by my hon. Friend the Member for Jarrow (Mr. Dixon), winding up a debate on shipbuilding. That debate spelt out what the shipbuilding industry wanted.

On page 21 of the statement, under "Nationalised Industries", we read: This reflects a number of changes including the re-classification of London Regional Transport as a nationalised industry; decreased requirements for Electricity (England and Wales), British Shipbuilders, and so on.

Can the Chief Secretary explain the differences between pages 20 and 21? What does he promise for the shipbuilding industry?

Under the heading "Capital Expenditure" we see one of the rare occasions when Wales is mentioned in the autumn statement. It says that there will be a large overspend on cash limits in England and Wales, and local authorities will be asked for further restraint. How many more jobs does that mean that we shall lose in Wales?

I am concentrating my remarks on Wales because the unemployment level in some areas has escalated to as much as 30 and 35 per cent. My hon. Friend the Member for Cynon Valley (Mrs. Clwyd) nods her approval, because her area is suffering mass unemployment as a result of the suggested closure of a number of collieries. The same applies in Maesteg. I have in mind, for example, St. John's colliery. At present we have 24 per cent. unemployment. If that colliery closes and its 834 miners are thrown out of work, it means that male unemployment will escalate to between 40 per cent. and 45 per cent.

That is what the miners' strike is about. It is not about money. It is not about increases. It is not about percentage increases. It is about jobs. The miners know, as do their wives and children, that if they do not fight now to retain their collieries and jobs it is not only the present employees who will be out of work. It means that their sons and grandsons will be without work. But not only does it mean the loss of jobs. It means the loss of communities. I was born and bred in the Rhondda, the son of a miner. I shall be proud of being the son of a miner until my dying day.

Miners are a special breed to themselves and to their communities. Conservative Members, especially the hon. Member for Bridlington, should talk to them and discuss their difficulties and problems. The people in my community have a fight. They will fight to the end because they want to retain jobs. They want to do so for their communities, their sons and their grandsons. I have great pleasure in returning to my people on a Friday and leaving the motley crowd on the Conservative Benches so that I can mix with people of real standing and stature.

8.59 pm

Mr. Terry Davis (Birmingham, Hodge Hill)

Like my right hon. Friend the Member for Birmingham, Sparbrook (Mr. Hattersley), I begin by referring to the report of the Select Committee on the Treasury and Civil Service and the speech of the right hon. Member for Worthing (Mr. Higgins). It was unfortunate that the report was available to hon. Members only at 11 o'clock this morning. Therefore, it was not available for us to read, digest and consider it before the debate. I realise that the contents of the report must have been made available at an earlier stage to the Chancellor of the Exchequer, because he dealt in some detail with his views on the report's recommendations, especially the most important ones. The lack of availability to the Opposition has made it more difficult for us to comment on it.

Mr. Higgins

The Committee was working under the most tremendous pressure of time. There was a small interval between publication and the debate because of the pressure from the Opposition for the debate to take place as early as possible.

Mr. Davis

I hope that the right hon. Gentleman will not take my remarks amiss. He is always free with his suggestions to the Government as well as the Opposition. I suggest that the Committee could have produced its report slightly earlier for the benefit of both sides of the House, and the right hon. Gentleman should not be so sensitive about a suggestion that has been made in such a modest way. The Committee did not meet until 19 November and it met twice during the following week. I leave my suggestion for the right hon. Gentleman's consideration.

For my part, I shall consider the speech of my right hon. Friend the Member for Ashton-under-Lyme (Mr. Sheldon), who gave the House the benefit of his experience and reflections on the procedure that is needed to determine priorities for public expenditure. I shall study his speech and the report and perhaps we shall return during a future debate to its main recommendation, which is the need for a better mechanism for determining public expenditure priorities.

The right hon. Member for Worthing, who, like my right hon. Friend the Member for Ashton-under-Lyme, has experience as a Treasury Minister, told the House that the present mechanism is not working. He referred to overseas aid and to the recent furore about student grants in giving two specific examples. I felt that he was criticising the Government's political judgment and not the mechanism. I wondered whether he was indulging in what I believe Conservative Members call coded language and criticising the judgments of the Chancellor of the Exchequer and the rest of the Cabinet. He criticised what the Chancellor has described as the Government's policies, pledges and priorities. However, we are debating the autumn statement and not the Select Committee's report.

The Chancellor has claimed in the autumn statement and in his speech today that the economy is making progress. He claims that we have had steady growth over the past four years. That is true if we take the output measure of growth. We shall put on one side the fact that the Chancellor has chosen the last four years and has not taken the Government's full period of office. We shall also put on one side the fact that the rate of growth has still not reached that which marked the end of the previous Labour Government in 1979.

If we are seeing steady growth and improvement in the economy, we are bound to ask what is the purpose of the improvement. During the past year, there has been no reduction in the level of unemployment. Indeed, unemployment has risen by 139,000 real people. If the level is adjusted by statisticians, there has been a greater rise, but I prefer to think of real people. Nor has there been any improvement in the standard of living of the unemployed, the sick or the elderly. There has been no expansion of public welfare or public services, which benefit not only the elderly and the unemployed but also the employed and their families.

The only objective of the Government's economic policy is to increase the private consumption of those who are still lucky enough to have jobs, especially those who are lucky enough to have jobs in privately owned industry or services. The Government are not concerned to improve the standard of living of those who work in the public service such as civil servants and National Health Service employees. It is revealed in the autumn statement that during the coming year the Government propose to squeeze the pay of civil servants and that of NHS employees by offering them only 3 per cent. at a time when the Government forecast that inflation will be running at 4.5 per cent., and at a time they forecast that wage increases in the private sector will be higher still. As my hon. Friend the Member for Stoke-on-Trent, Central (Mr. Fisher) said, that assumption is either unrealistic or unfair.

Unemployment has been at the heart of the debate, as it is at the heart of the autumn statement. Unemployment has been the theme of speeches by my right hon. and hon. Friends and Government Members such as the hon. Member for Carshalton and Wallington (Mr. Forman), the right hon. Member for Guildford (Mr. Howell) and the hon. Member for Clwyd, South-West (Mr. Harvey). Of course, most Conservative Members were careful to distance themselves from Labour party policies, but they all urged that something be done about unemployment. We disagree, not about the disease, but about the cure.

When the Chancellor of the Exchequer was talking to the National Economic Development Council yesterday, he said that he too was worried about unemployment, but that there was nothing that he could do about it. What he meant was that he cannot do anything about unemployment because he is trapped between three constraints—the constraint of his prejudice, the constraint of his obsession, and the constraint of his determination to cut income tax even though a cut in income tax does not reduce unemployment as much as an increase of the same amount in public expenditure.

The Chancellor lacks both the will and the imagination to do something about unemployment. He is not usually unimaginative. He has lots of imagination about new taxes. Earlier this year he introduced a new tax—a tax for the first time on the interest on savings. Next year I have no doubt that he will introduce another new tax—on early retirement. We shall also experience a massive increase in another of the Chancellor's new imaginative taxes — the negative external financing limits for nationalised industries.

The autumn statement shows that the external financing limits will be reduced in the coming year by £500 million. I am sorry to say that that is another example of what has been described as the Chancellor's funny figures. The real reduction in the external financing limits for nationalised industries is not £500 million, but £1.2 billion.

One of the few tables in the autumn statement which does not compare next year with this year is that which shows the external financing limits for nationalised industries. The Opposition have learnt that, when the Chancellor does not produce the figures, he usually has something to hide. When we compare the small print in the autumn statement with that in last year's autumn statement, we discover why the Chancellor is so coy. He is not comparing like with like. The lists of nationalised industries are not the same.

Next year, for the first time, he will include London Regional Transport, because of the abolition of the GLC. He will also lose British Telecom and British Airways as a result of other Government policies.

The revenue to replace the lost revenue will come mainly from the energy industries—coal, gas and electricity—and the water supply industry. The Chancellor will take £1.2 billion from consumers. At least, we assume he will. We must assume that the Chancellor will not reduce investment programmes in the nationalised industries. We must assume that he intends to raise the money, as he has before, through unnecessarily higher prices. If investment is kept at the same level even more unnecessarily higher prices will be introduced.

The consumers of water, gas and electricity include every household in the country. They include the unemployed as well as those with jobs, the poor as well as the rich, the sick as well as the healthy, the old as well as the young, and disproportionately so. The unemployed, the poor, the sick and the elderly need more heat and use more electricity and gas than the rest of us.

Electricity and gas are consumed not only by every family but also by industry. The Chancellor's decision to take an extra £1.2 billion from those nationalised industries will mean higher prices which will be paid by industry and will be reflected in higher industrial costs. That will have an inevitable effect on employment.

It is no use the Chancellor blaming trade union negotiators for every increase in industrial costs, when he is putting up the costs of every industry using gas and electricity. He is doing all that so that millions of pounds can be transferred from the gas and electricity supply industries to the Treasury to finance cuts in income tax for those who have not yet lost their jobs.

During this debate, several Conservative Members defended the use of the £1.5 billion to cut income tax by referring to the tax paid by the low paid. The right hon. Member for Hertsmere (Mr. Parkinson) was especially critical of the speech by my right hon. Friend the Member for Sparkbrook, accusing my right hon. Friend of retreating from recent speeches and of not recognising that the unemployed would pay taxes if the tax threshold were not raised. He did not seem to understand that when my right hon. Friend talked about tax paid by the unemployment, he was referring to value added tax and other indirect taxes, which bear most heavily on the unemployed, the elderly and those who receive social security payments. It is too much for the right hon. Member for Hertsmere, even if he was a member of the Standing Committee on the Finance Bill, to accuse my right hon. Friend of not wanting to raise the tax threshold. The right hon. Member for Hertsmere should know perfectly well that the tax threshold will be raised automatically as a result of what is known as the Rooker-Wise amendment.

The right hon. Member for Hertsmere, who I thought used to be an accountant, does not understand the autumn statement. Clearly, the right hon. Member for Hertsmere and the hon. Member for Colne Valley (Mr. Wainwright) have not read the autumn statement as carefully as they should have done. They thought that the £1.5 billion would be used to raise the tax threshold under the Rooker-Wise amendment. [Interruption.] That is what they thought. I refer the right hon. Member for Hertsmere to table 1.9 in the autumn statement. That table clearly shows that the implied fiscal adjustment—that is what the Chancellor calls it—is calculated at £1.5 billion, after allowing for general receipts of £148.5 million.

If the right hon. Gentleman looks at paragraph 1.59 on the previous page, he will note that, as always, the Chancellor has followed the usual practice. Receipts have been projected on conventional assumptions of revalorisation of the main direct tax allowances and thresholds". The Rooker-Wise amendment is safe without the £1.5 billion. The right hon. Member for Hertsmere will note that that statement is correct if he takes the trouble to read the autumn statement more carefully.

Mr. Wainwright

That is an important point. Is the hon. Gentleman saying that the Labour party will regard it as sufficient if the next Budget merely complies with the Rooker-Wise amendment? Would any further lifting next March of the threshold beyond the Rooker-Wise amendment be a lower priority?

Mr. Davis

I shall come to that point directly. The hon. Gentleman must not escape responsibility for his earlier remarks. He, too, accused my right hon. Friend the Member for Sparkbrook of not wanting to raise the tax threshold.

Other Conservative Members who, no doubt, react the autumn statement more carefully argued for the £1.5 billion to be used to cut the taxes of low-paid people. The hon. Member for Carshalton and Wallington (Mr. Forman) in a persuasive speech went so far as to argue for a reduction in the national insurance contributions of the low-paid. I have a great deal of sympathy with that argument. But neither the low-paid nor the Labour party—I do not speak for the Liberal party—will be taken in by that argument.

We have had five years of Conservative Government. When we consider how the Chancellor of the Exchequer will use £1.5 billion in his next Budget, we are perfectly entitled to look at what the Government have already done to income tax and national insurance contributions.

Mr. Forman

I would listen with more sympathy to the hon. Gentleman's argument if it were not for the fact that his party, when last in government, as he knows, had many opportunities to take significant action on national insurance and did not manage to abolish the national insurance surcharge.

Mr. Davis

The hon. Gentleman, who may have been in that Parliament, will also remember what happened then in regard to income tax and national insurance contributions. He argued this evening that we should treat them equally and treat national insurance the same—as taxes paid by low-paid people.

I remind the hon. Member for Carshalton and Wallington of the figures. In the last year of the Labour Government, a single person on two thirds of average earnings paid 27.7 per cent. of his or her income in income tax and national insurance contributions. After the last Budget of this Government, that person on two thirds of average earnings pays not 27.7 per cent. but 29.5 per cent. of income in income tax and national insurance contributions. For a married couple, the comparative figures would be 22.2 per cent. in the last year of the Labour Government and 24 per cent. now. If the married couple had two children, the figures would be 12 per cent. then as compared with 13 per cent. now.

Mr. Tim Yeo (Suffolk, South)

The hon. Gentleman has totally failed to answer the point made by my hon. Friend the Member for Carshalton and Wallington (Mr. Forman), which was about national insurance surcharge —the jobs tax. The hon. Gentleman's Government were only too willing to increase it. Every time they had to run cap in hand to the International Monetary Fund for a bit more money, they increased the job tax, which this Government have abolished.

Mr. Davis

What the hon. Gentleman does not know—he was not in the Chamber at the time—is that his hon. Friend the Member for Carshalton and Wallington referred to national insurance contributions, and I am now replying to the debate. I should be grateful if the hon. Member for Suffolk, South (Mr. Yeo) would be so polite as to attend a debate if he wishes to intervene in the windup speeches. I shall not give way to anyone else who was not present during the debate.

The Labour party advocated the abolition of its national insurance surcharge. It is true that it was introduced by a Labour Government at a time of crisis. The Labour party gave a higher priority to its abolition than was given to it by the Conservative party. [Interruption.] I will not be pushed from the point. We advocated its abolition, and if we had done it, we would have made sure that local authorities had the benefit as well as privately owned industry, in order to avoid low-paid people paying higher rates. [Interruption.]

However, we must look not only at the taxes on the low-paid. To get the full flavour of the Chancellor of the Exchequer's tax policy, we must look at his policy for someone who has higher than two thirds average earnings. Let us consider the position of a single person with five times average earnings. In the last year of the Labour Government, that person would have paid 53 per cent. of his income in tax. He now pays 45 per cent.

The right hon. Member for Hertsmere also claimed that the problem with the British economy is not shortage of demand. He told us about his visit to a motor manufacturer in Japan. He said that it was clear from his experience that our problems were due not to lack of demand but to trade unions and the strikers in our companies.

Mr. Parkinson

rose—

Mr. Davis

I shall not give way again. That was what the right hon. Gentleman said, and he is out of date. Obviously, he does not know that when the Rover factory at Solihull closed, under this Government, British Leyland management itself—through Sir Michael Edwardes, no less—said that it was not because of industrial relations but because of lack of demand. When men were laid off for the third time running at Metro-Cammell in Birmingham this year, it was not because of bad labour relations. There had never been a strike there. It was because of lack of demand, as a result of this Government's policies.

Mr. Parkinson

The hon. Gentleman has spent half his speech misquoting me. I do not complain about that, but perhaps he will now comment on what I actually said. I pointed out that retail demand alone had risen by nearly £6 billion. I drew attention to the huge growth in world trade and the possibilities for the sale of British goods. I also mentioned that the Japanese company that I visited, which had grown by nearly 25 per cent. during the recession, had not lost a day through strike action in 33 years, whereas every motor manufacturer in this country—and there is no shortage of demand in the motor vehicles sector of the economy—has had strike action in the past two months. That is the contrast that I emphasised and which the hon. Gentleman is trying to avoid.

Mr. Davis

We are not going to have a debate about the motor industry now, and I intend to claim injury time from the Chief Secretary's winding-up speech. One reason why there are strikes in motor car factories now is that all those factories which never had strikes have been closed under this Government. That is what they got for not being militant.

A Labour Government would increase demand by increasing public expenditure because we believe that that would increase the number of jobs, both directly by employing people in the public service—in the social services and in the Health Service, to cite just two examples—and indirectly by producing more employment in private industry by increasing demand in the economy generally.

The right hon. Member for Guildford (Mr. Howell) disagreed and drew attention to certain economic studies which I have not seen. He said that my right hon. Friend the Member for Sparkbrook did not represent the complete spread of economic thinking. That is not surprising, as there is as much disagreement among economists as there is between our parties. The answer to the right hon. Member for Guildford was given by my right hon. Friend the Member for Ashton-under-Lyne who pointed out that four years of policies of cutting income tax had not succeeded in reducing unemployment. In any case, the right hon. Member for Guildford spoiled his own case by arguing both for tax cuts and for an increase in capital expenditure, so at least we agree on something, as a Labour Government would indeed increase public expenditure.

In real terms, public expenditure this year will be less. The £132 billion is the same as this year's plan for £126.3 billion after adjusting for inflation, but the Government will actually be spending £128 billion, so there will be a reduction next year. The same total is to be spent next year as was spent in 1983–84. For two years running there will have been no real increase. That is a source of satisfaction to the Chancellor, but to the Labour party it is a confession of failure.

We must examine not just the total but the pattern of public expenditure. Within the total, compared with this year and not with the previous plans for next year, in percentage terms the budget for the EEC, albeit a small amount in absolute terms, has been doubled. The biggest increases are £2.8 billion on social security, £1 billion on the Health Service and £1 billion on defence.

The increase in social security expenditure is not due to any improvement in the standard of living for pensioners or people on social security benefits, who are protected only against inflation as determined in May. The 3 per cent. increase in real terms is due to the increased number of pensioners and, as the hon. Member for Chichester (Mr. Nelson) pointed out, the increased number of unemployed. That is the secret behind the autumn statement.

The £1 billion increase for the Health Service is a real increase of only 1 per cent. Anyone who has ever studied the Health Service knows that it needs more than that to stand still, given the effect of the increased number of pensioners and of technological improvements in medicine.

The £1 billion increase for defence, however, is a real increase of 3 per cent. For the Conservatives, defence is more important than the Health Service.

The Chancellor reminded us today that, if total public expenditure is kept constant, more money for one heading must mean less for another. The consequence of increased expenditure on social security due to increased unemployment, on the Health Service due to the increased number of pensioners and on defence due to Government policies and priorities must therefore mean that other services will suffer, and that is what will happen.

There is a reduction in real terms for education, for transport, for trade and industry and for employment. The biggest cut of all is in housing. There will be a cut of £200 million in cash when the allocation should have increased by £100 million merely to stay the same in real terms, as the Chancellor of the Exchequer originally planned. Therefore, the real reduction will be £200 million, which is a cut of 12 per cent. That cut is concentrated on capital expenditure where the real cut will be £400 million, and people in the building industry tell us that the reduction will be 25 per cent.

That is the cruellest cut of all. At present there is a terrible shortage of council houses in all our cities, and no doubt also in rural areas. In the areas where the shortage is worst, there is a major problem for owner-occupiers because houses are decaying around them. Yet the Government plan to spend not more, but less, on improvement grants. At the same time there is record unemployment in the building industry. That results from the Chancellor's insistence on an inflexible limit of £132 billion for public expenditure. It means that essential services such as housing, health, education and transport, will be cut to pay for the inevitable consequences of an aging population and rising unemployment.

The position is worse than that. We have not yet been given the detailed figures for each departmental budget. I presume that they will be published in February. Already we can see what is happening. There is a clear and deliberate Government policy, for which every Cabinet member must share responsibility, to transfer the cost of a service to the person who needs it.

It has been the Government's policy towards the Health Service ever since they were elected. That is why they have increased prescription charges from 20p to £1.60. They will increase prescription charges by a further 20p next year. At a time of 4.5 per cent. inflation, prescription charges will increase by 12.5 per cent. The Government are transferring the cost of the Health Service from the healthy to the sick.

This summer the Secretary of State for Social Services took £1 a week from thousands of the poorest pensioners to pay for the increased cost of social security as a result of rising unemployment. Only a fortnight ago the Foreign Secretary robbed Peter to pay Paul. This week the Secretary of State for Education and Science tried to make students and their parents pay for scientific research. In exactly the same way, the Secretary of State for Employment plans to provide for a higher level of redundancy payments by closing 29 skillcentres. The Secretary of State for Transport is planning God knows what by taking away bus passes from pensioners.

That goes on in every department. Just as the Chancellor is not alone in his responsbility for public expenditure cuts, so he is not alone in his responsibility for unemployment. His right hon. and hon. Friends share the responsibility. This week they showed what they could do. They managed to make the Government Front Bench climb down over student grants. Conservative Members should help the Chancellor, just as they helped the Secretary of State for Education and Science.

As my right hon. Friend the Member for Sparkbrook and my hon. Friend the Member for Walsall, North (Mr. Winnick) pointed out, 3 million unemployed people and their families wait to see whether Tory Members care as much about the unemployed as they do about parents with above average incomes and children at university.

Public expenditure and the public sector borrowing requirement will be £1.5 billion extra this year because of the cost of the miners' strike, yet the Government refuse to spend £1.5 billion next year to create jobs. The Chancellor has the money, but he will use it to cut income tax. We know that he will not cut taxes, because he is considering the introduction of new taxes. He plans to extend VAT to tea, biscuits, books, newspapers and children's shoes, none of which has ever been taxed before. What will he do with the extra money? Will he use it to help the needy, house the homeless, treat the sick, educate our children, provide warmth for the elderly, train the unemployed or create jobs? No, this Tory Chancellor, this Tory Government and these Tory Members will use it in the only way they know how: to cut income tax for those who still have jobs and to cut it most for the people who have most.

The autumn statement shows that the Government prefer to cut taxes for people of above average earnings instead of reducing unemployment; and prefer to use the money to cut taxes rather than increase spending on essential public services. The autumn statement is a smokescreen for a deliberate and direct attack on the idea of the social compact that we all have with one another, an agreement that we will make effective provision for our common needs—education and old age—and for those human misfortunes of sickness and unemployment.

The autumn statement is a charter for selfishness. it is the financial equivalent of "stand on your own feet", and "on your bike". It shows that the Government have turned their backs on the belief that "no man is an island". It is a rejection of the idea of fraternity, and it should itself be rejected by the House tonight.

9.30 pm

The Chief Secretary to the Treasury (Mr. Peter Rees)

This has been an interesting and stimulating debate, and we have had a speech full of verve from the hon. Member for Birmingham, Hodge Hill (Mr. Davis), but that is not surprising as the questions at issue lie at the heart of this and, indeed, any Government's responsibilities.

If government is about choice, as Aneurin Bevan reminded us—essentially, public expenditure is about choice—the aggregate of public expenditure is the reconciliation of the myriad of choices, some great and some small; but the ultimate luxury of political debate is to detach one choice from all the others that must be made and assume that somehow that aggregate can remain unaffected.

It is against that background, and against the experience that I have gained—sometimes painfully, I admit, through two public expenditure rounds—that I come to the notable contributions to the debate.

I am sure that the House is indebted to the Select Committee on the Treasury and Civil Service for a thoughtful critique of the autumn statement, which has been reinforced by a powerful contribution from my right hon. Friend the Member for Worthing (Mr. Higgins). The House may not be surprised to hear that I do not accept its conclusions in their entirety, but I recognise that I am right to pay tribute to it as a valuable contribution to our debate. We have been fortunate in having contributions from two former Financial Secretaries—my right hon. Friend the Member for Worthing and the right hon. Member for Ashton-under-Lyne (Mr. Sheldon). I am sure that we were all grateful to the right hon. Member for Ashton-under-Lyne for his candid admission of what it was to be a Treasury Minister under a Labour Government.

Mr. Jeff Rooker (Birmingham, Perry Barr)

While the right hon. and learned Gentleman was advocating all the fiddles.

Mr. Rees

The hon. Gentleman can apply his forensic talents to the problems of housing. If he wishes to intervene in those debates, I am sure that he will listen with respect. He can carry his obsessions to other matters.

We were touched by the candid admission of the right hon. Member for Ashton-under-Lyne that the problem that he faced was that all the Labour Government's plans were predicated on the basis of a growth in resources which just did not occur. That is a trap which I am sure my right hon. Friend and the other members of the Treasury Front Bench do no wish to repeat in this Parliament.

Ms. Short

The right hon. and learned Gentleman is certainly ensuring that there is no growth.

Mr. Rees

The hon. Lady has made her contribution, and I hope that I may come to it in due course. She fails to observe that over the past four years the country has managed to increase its gross domestic product by 2.5 per cent. on average. I am aware that the hon. Lady and the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) find it hard to accept those facts, but I hope that we can at least debate those issues on some common ground. [Interruption.]

The Committee's report is perhaps more interesting than the contributions of the hon. Member for Blackburn (Mr. Straw), who did not take part in the debate. I do not blame him for that because I know that he has other responsibilities. The Committee's report is critical of the mechanism by which decisions in the public expenditure round are taken and calls for a reversal of the methods by which public expenditure priorities are determined. It suggests that priorities are determined somewhat arbitrarily at bilateral meetings between the Chief Secretary and his spending colleagues. I suspect that it faced the Chief Secretary with a somewhat awesome role, to which this Chief Secretary certainly does not lay claim. The reality is somewhat different.

First, negotiation takes place against the background of manifesto commitments, of individual decisions over previous years, of known governmental priorities and of the Green Paper on long-term public expenditure trends which we, the first Government to do so, published last year. Secondly, aggregate spending for next year is determined collectively by Cabinet in July. The final outcome is the subject of collective review by Cabinet. Thirdly, the process of determination is subject to inputs from many sources. The more sensitive the political issue the less likely it is that it will be determined, even in the first instance, by just two Ministers.

At the end of the day the conclusions of Government are submitted to the House of Commons whose decision must be paramount, as the Government are the first to recognise. It is tempting to suggest that the whole process should be put into commission. A moment's reflection, however, particularly by my right hon. Friend the Member for Worthing, with his experience of government, will show that this is hardly a practicable way of determining the hundreds of issues, many of great detail and complexity, which have to be determined in the course of a public expenditure round. I understand that the Japanese Cabinet goes into continuous session, which often lasts for two days, to determine these issues. Whether that suits the Japanese temperament and system is not for me to say. I am not certain whether the outcome, in British terms, would be more successful than that which we have achieved.

There were questions from the right hon. Member for Sparkbrook and others about what happened during the course of this public expenditure round. They must contain their curiosity until such memoirs as are going to be published are published. We have a wealth of knowledge and experience of what happened under previous Labour Administrations. I suspect that a little more discrimination will be shown by the members of the present Administration.

Mr. Wainwright

Since the right hon. and learned Gentleman is claiming so much for the present system of allocating public expenditure, we do not to have to wait for memoirs for him to tell us whether the original decision of the Secretary of State for Education and Science about student grants was specifically and explicitly endorsed by the Cabinet. Or did it never go to them?

Mr. Rees

The House will understand that I do not intend to gratify the curiosity of the hon. Gentleman on this point. I subscribe, as do all my colleagues, to the doctrine of collective responsibility.

Mr. Straw

Except to the lobby.

Mr. Rees

The hon. Member for Blackburn may leak all his innermost thoughts to the lobby, but his example is not followed by this Administration.

The next substantial criticism in the report is that the true underlying level of public expenditure is significantly understated. That point was made by my hon. Friend the Member for Bridlington (Mr. Townend) and also by the hon. Member for Stoke-on-Trent, Central (Mr. Fisher). It is a serious charge, with which I shall attempt to deal.

The report draws attention to the figures for increased asset sales, the treatment of the abolition of the national insurance surcharge, and the treatment of debt interest. This is a criticism of both form and substance. As regards form, so long as the accounting conventions are consistent—the accounting conventions which we follow are adopted internationally and were adopted by the previous Labour Administration—clearly understood and transparent, I see no harm in the treatment afforded to them in the autumn statement and in previous public expenditure White Papers.

As regards substance, there has been no shortfall in the previous years of this Administration in the figures for asset sales. The point has been made in this debate, as it has been made in previous debates, that asset sales should be treated in a different way. It has been said that they should be treated as a means of financing public expenditure. I throw back this question. I am bound to say that I did not receive a satisfactory answer in last year's debates and I do not anticipate that I shall receive a satisfactory answer in this debate. If that is so, it follows that the acquisition of assets should be treated in a separate way.

After the success of the BT issue, I have modest optimism about future privatisation ventures. Therefore, the figures in the autumn statement are relatively modest; they show an increase of only £500 million on the figure in the public expenditure White Paper.

Mr. Fisher

How does the Chief Secretary explain the increase in asset sales of £500 million?

Mr. Rees

That would be a matter of commercial confidentiality. I would not declare to the House the exact figures that we hoped to achieve in any privatisation venture. The hon. Gentleman, with his deep understanding of these matters, will readily appreciate that such action by me could prejudice the market. I am sure that the Opposition would say that I was giving my friends outside the House the chance to make a big killing. Such charges come all too readily from Labour Members.

The right hon. Member for Sparkbrook suggested that the figures for council house sales were illusory, but the House will recall that interest rates have come down, there have been changes in house prices and the Housing and Building Control Act has put the opportunity of buying their own homes within the reach of many more of our fellow countrymen. The appetite of the British people to own their own homes, even when those homes were generated by the public sector, is still unsatisfied.

Mr. Fisher

Will the Chief Secretary give way?

Mr. Rees

No. I hope that I have dealt fairly with the points made by the hon. Gentleman and I have many more to answer.

It is true that there has been no adjustment to the totals, in spite of the abolition of the national insurance surcharge. However, it is the convention that, with cash planning, not every such change calls for an adjustment of the planning totals. Otherwise, changes in, for example, corporation tax and VAT, which might work the other way, would have to be reflected in the totals.

Debt interest was the subject of another charge made by the Select Committee. Since 1979–80, debt interest has not formed part of the planning totals, because the amount of interest is too volatile for it sensibly to form part of a control total. However, it is, of course, taken into account in the overall strategy of the Government.

The third substantial criticism made by the Select Committee is that the Government are unlikely to keep their expenditure within the 1985–86 planning totals. I remind the House that this is the fourth year in which Government Departments have been planning in cash. In each year since March 1982, with the exception of the current year, the outturn has been within the White Paper totals. That is not a bad record. However, I candidly admit that the overshoot for the current year is likely to he about £1.5 billion.

Naturally, that is a matter of profound regret to me, but let me identify two of the main causes of the overshoot. The first is the miners' strike. I do not think that, on any fair view, that industrial encounter could or should have been foreseen when last year's autumn statement was prepared and debated. Nor do I believe that the miners' strike should be regarded as a precedent for future years. If Labour Members encourage their friends in the trade union movement to repeat that sort of encounter, the country will be able to judge their dedication to the welfare of their fellow countrymen.

The second item is the likely current overspend by local authorities, which could total as much as £1.2 billion this year. We have taken stern measures to ensure that such an overspend should not be repeated next year. First, an extra £900 million has been allocated for local authority current expenditure, a tougher holdback regime will be instituted and the 18 local authorities that, together, account for 80 per cent. of the overspend will be rate-capped. That demonstrates the purpose behind that measure.

Beyond that, we shall have a contingency reserve of £3 billion. Some have criticised us for reducing that sum from the £3.75 billion which appeared in the public expenditure White Paper. It is reasonable to have a larger reserve for later years—the greater the distance in time, the greater the uncertainties—but, beyond that, we have allocated an extra £2 billion to certain demand-led programmes—the intervention board's purchases, the Export Credits Guarantee Department and the social security programme.

I turn with less relish to the rather bombastic intervention of the right hon. Member for Sparkbrook As we know that he is a kindly person, we were sorry indeed that he should have traduced my right hon. Friend the Chancellor in the way that he did. I hope that we shall be able to maintain the courtesies of debate. I am sorry that such a genial figure as the right hon. Gentleman should try to project himself in a cold, cutting role.

The right hon. Gentleman identified unemployment as the crucial issue, but he posed a wholly bogus dilemma between cutting taxation and cutting unemployment. That is not a dilemma that I recognise. It is possible, and over the course of time the Government's policy will demonstrate, that both taxation and unemployment can be cut.

Mr. Hattersley

Ministers have been saying for five years that over the course of time their policies will cut unemployment. When will the promise be kept?

Mr. Rees

The right hon. Gentleman must contain himself with patience. Let me remind him—[Interruption.] Allow me to make the relevant point. The right hon. Gentleman was a member of several Administrations over about 20 years up to 1980 under which public expenditure, taxes and unemployment rose. Was he happy wih the record of the Administration of which he was a distinguished member? This Government states that there is not the facile correlation which he asserts between cutting taxes and cutting unemployment.

The implication in the right hon. Gentleman's proposition is that our tax cuts have been directed primarily to the better-off. Let us look at the facts. The threshold for a married man or a single man has more than doubled since 1979. Let the right hon. Gentleman ponder that simple proposition.

Let me remind the right hon. Gentleman and the House that, over and above the indexation of the thresholds, our policies have taken 850,000 of our fellow countrymen out of tax. That is a record of which we can be proud.

Mr. Straw

rose—

Mr. Rees

No, I shall not give way. The hon. Gentleman took no part in our debate. He will have other opportunities. I am not giving way to the hon. Gentleman.

The right hon. Member for Sparkbrook made a range of spurious points. He turned, predictably, to gas and electricity prices. He cannot have heard the evidence given recently to the Select Committee by Sir Denis Rooke and Mr. Philip Jones who both suggested that there would probably be no increase in real terms. Let me remind the right hon. Gentleman and the House that under the Administration of which he was a distinguished ornament—he can move uneasily on the Bench, because the facts should be known and repeated—electricity prices, for example, went up by 170 per cent.—2 per cent. for every five weeks of that Administration. Under this Government it has been 2 per cent. every two years. Did he regard that as taxation in those days?

We know, because we have all read the noble Lord Barnett's admirable work, that the right hon. Gentleman voted without conviction for those measures. The only conviction that the right hon. Gentleman shows is the conviction that he shows in these debates now. The role of the passionate compassionate defender of the less well-off members of our society befits him ill. The Franciscan habit does not sit easily on his shoulders.

Mr. Rooker

Hark who is talking.

Mr. Rees

I have never made the assertions that the right hon. Gentleman has. I know my limitations. [HON. MEMBERS: "Oh."]

However, there was one great omission from the speech of the right hon. Member for Sparkbrook. After every intervention, we were told that he would turn in due course to the policies that he would propose to the country if he were Chancellor of the Exchequer. It may be that I dozed off, but none of my hon. Friends can tell me what exactly those policies were. I will very readily give way to the right hon. Gentleman if he will tell me just one thing. By how much, if he were Chancellor, would he increase the planning total? [HON. MEMBERS: "Stand up."] If, as I suppose, the implication is that they would be increased by a sizeable amount, what would be the consequences for interest rates, and how would he finance them? By borrowing, or by taxation?

I see that the hon. Member for Colne Valley (Mr. Wainwright), who spoke for the Liberals, has been joined by powerful reinforcements in the form of the right hon. Member for Glasgow, Hillhead (Mr. Jenkins). As I often do, I shall pay unsolicited tribute to the right hon. Gentleman, who was one of the few Chancellors who has ever managed to produce a balanced budget.

At least the spokesman for the Liberal party was candid and precise, and gave a figure. That figure does not bear close examination and I do not believe that it would make a substantial contribution towards solving the problem of unemployment, but at least the hon. Gentleman shared his thoughts with the House.

Mr. Rooker

When shall we see a balanced Tory Budget?

Mr. Rees

I have said that in due course we hope to move to zero inflation. [HON. MEMBERS: "Next year?"] No, not next year.

I turn to a point that has exercised the minds of various right hon. and hon. Members, including the right hon. Member for Sparkbrook, the hon. Member for Colne Valley and my hon. Friends the Member for Macclesfield (Mr. Winterton) and for Clwyd, South-West (Mr. Harvey). This is the question of the infrastructure and capital investment. The facts should be more generally known. Since 1979—net of sales, which is what often confuses the right hon. Gentleman—we have been spending £9 billion in cash every year. In other words, if one takes away the figure for sales against which that figure has been netted off, that means a gross figure of £22 billion per annum. That figure disregards the current spending. The hon. Member for Colne Valley is worried about the deterioration of the infrastructure, but the best estimate of the Department of the Environment alone—leaving aside nationalised industries, for instance—is that £5 billion is spent on repairs every year.

Beyond that, private investment has increased considerably. Taken together in 1984–85, private and public investment is likely to be of the order of £45.5 billion. It is true that one could have a sensible debate about whether the figure should be increased still further. I believe that the supposition that every form of infrastructure investment is necessarily for the good of the country and generates jobs is fallacious, but those who assume that nothing is being done are wildly wide of the mark. The emphasis is always on movement towards the private sector, because that is the philosophy that underlines the present Government's policies.

Mr. Fisher

Will the right hon. and learned Gentleman deal with oil revenues and the exchange rate?

Mr. Rees

Yes, those are matters of importance. The right hon. Member for Sparkbrook referred to statements attributed to the Minister without portfolio, Lord Young. Lord Young did not suggest that those aged 16 and 17 should be deprived of supplementary benefits. He said that it is much better to provide them with a job or with training. That must be a better way to start off than supplementary benefit. I am sure that the House appreciates the fact that he was prepared to share his thoughts so openly. That is how we should debate these matters.

Perhaps I might now return to the main theme of the Government's overall public expenditure policy as reflected in the autumn statement. It is to hold public expenditure broadly stable in real terms. That is the basis for the figure of £132 billion in the autumn statement. It reflects the figure in the last public expenditure White Paper. It also reflects the figure in the public expenditure White Paper before that and it was the figure on which we fought the last general election—no secret manifesto there.

I do not think that I need emphasise to the House that this is not an easy objective. It was recognised by those who have had a taste of government and by my hon. Friend the Member for Darlington (Mr. Fallon). I have been and no doubt will continue to be assailed by some who say that the figure is too high and that our budgetary aims and methods are too lax and by others who say that it is too low, that the target is too stringent and too insensitive. I must say that I take some comfort from the balancing nature of these criticisms.

I take some comfort from those who argue for a higher total because, like the right hon. Member for Sparkbrook, they are usually evasive about what it should be, how it should be financed, the consequences for interest rates or inflation, and why the consequences of such a course should be different from those experienced by Administrations emancipated from Professor Hayek and the kitchen sink. There will always be siren voices that tell us that all our problems can be resolved by larger and larger infusions of public money.

To those who argue for a lower total, I listen with more respect, but I ask them to tell the House where and how they would look for the economies that would be needed, and how far they would be prepared to back such decisions when the going got rough. The course that we have adopted is in fact a tough one. That I will not deny. Contrary to popular mythology, it does not involve and has not involved a regime of savage cuts. For real cuts one has to look back to the last Labour Government who were lured by the IMF, to France and, it seems likely, to the United States, but our policies mean that the inevitable and necessary increases in various programmes should be offset by economies in others and that priorities should be reviewed from time to time.

However, if ours is a tough policy it offers three incomparable advantages. First, the advantage of stability. Those outside Government who have to chart their course with a wary eye on Government and have to decide whether to invest and whether to take on extra employees have the assurance of a stable framework within which to cast their plans. They have the assurance that there will not be 17 or 18 Budgets during the lifetime of this Parliament. The second advantage is that, as the economy grows—in spite of the gloomy fulminations of the right hon. Member for Sparkbrook, the economy has grown and is continuing to grow—the share of the country's resources taken by the state will go on falling from 43.5 per cent. in 1981–82 to 41 per cent. in 1985–86. The third advantage is that Government will have the scope to take rational decisions about the structure and rate of taxation. The figure of £1.5 billion quoted by my right hon. Friend the Chancellor for next year's fiscal adjustment may be hedged around with many qualifications, but it suggests that there should be scope for further reductions in the burden of taxation.

This is a policy of which our fellow countrymen approve, because it will take more of them out of tax altogether. It is often overlooked that demand can be created through higher net incomes just as surely as by higher Government spending. Wage negotiators are not entirely unaware of the impact of direct taxation. It is therefore right to stress that jobs, too, can be created by tax cuts—indeed, some might say more effectively in the longer term than by increased Government expenditure. The decision that we take tonight is therefore about jobs. Irrespective of whether the fiscal adjustment is used in that way, it is important that a Government's capacity to take decisions should not be frittered away by the slow remorseless drift of public expenditure.

I commend this autumn statement to the House on the basis that it is the prospectus on which my right hon. and hon. Friends fought the last two elections. That is, the prospectus which was overwhelmingly endorsed by our fellow countrymen. That prospectus is as sound today as it was when it was devised. It is the prospectus that I invite my right hon. and hon. Friends to support in the Division Lobby tonight.

Question put, That the amendment be made:—

The House divided:Ayes 199, Noes 346.

Division No.38]	[10.00 pm
AYES
Abse, Leo	Cox, Thomas (Tooting)
Adams, Allen (Paisley N)	Craigen, J. M.
Anderson, Donald	Crowther, Stan
Archer, Rt Hon Peter	Cunningham, Dr John
Ashley, Rt Hon Jack	Davies, Rt Hon Denzil (L'lli)
Ashton, Joe	Davies, Ronald (Caerphilly)
Atkinson, N. (Tottenham)	Davis, Terry (B'ham, H'ge H'l)
Bagier, Gordon A. T.	Deakins, Eric
Banks, Tony (Newham NW)	Dixon, Donald
Barnett, Guy	Dormand, Jack
Barron, Kevin	Douglas, Dick
Beckett, Mrs Margaret	Dubs, Alfred
Bell, Stuart	Duffy, A. E. P.
Benn, Tony	Dunwoody, Hon Mrs G.
Bennett, A. (Dent'n & Red'sh)	Eadie, Alex
Bermingham, Gerald	Eastham, Ken
Bidwell, Sydney	Evans, John (St. Helens N)
Blair, Anthony	Ewing, Harry
Boothroyd, Miss Betty	Fatchett, Derek
Boyes, Roland	Faulds, Andrew
Bray, Dr Jeremy	Field, Frank (Birkenhead)
Brown, Gordon (D'f'mline E)	Fields, T. (L'pool Broad Gn)
Brown, Hugh D. (Provan)	Fisher, Mark
Brown, N. (N'c'tle-u-Tyne E)	Flannery, Martin
Brown, R. (N'c'tle-u-Tyne N)	Foot, Rt Hon Michael
Brown, Ron (E'burgh, Leith)	Forrester, John
Caborn, Richard	Foster, Derek
Callaghan, Jim (Heyw'd & M)	Foulkes, George
Campbell, Ian	Fraser, J. (Norwood)
Canavan, Dennis	Freeson, Rt Hon Reginald
Carter-Jones, Lewis	Garrett, W. E.
Cartwright, John	George, Bruce
Clark, Dr David (S Shields)	Gilbert, Rt Hon Dr John
Clarke, Thomas	Godman, Dr Norman
Clay, Robert	Gould, Bryan
Clwyd, Mrs Ann	Hamilton, W. W. (Central Fife)
Cocks, Rt Hon M. (Bristol S.)	Hancock, Mr. Michael
Cohen, Harry	Hardy, Peter
Coleman, Donald	Harrison, Rt Hon Walter
Concannon, Rt Hon J. D.	Hart, Rt Hon Dame Judith
Conlan, Bernard	Hattersley, Rt Hon Roy
Cook, Frank (Stockton North)	Healey, Rt Hon Denis
Corbett, Robin	Heffer, Eric S.
Corbyn, Jeremy	Hogg, N. (C'nauld & Kilsyth)
Cowans, Harry	Holland, Stuart (Vauxhall)

Home Robertson, John	Powell, Raymond (Ogmore)
Howells, Geraint	Prescott, John
Hoyle, Douglas	Radice, Giles
Hughes, Dr. Mark (Durham)	Randall, Stuart
Hughes, Robert (Aberdeen N)	Redmond, M.
Hughes, Roy (Newport East)	Rees, Rt Hon M. (Leeds S)
Hughes, Simon (Southward)	Richardson, Ms Jo
Hume, John	Roberts, Ernest (Hackney N)
Janner, Hon Greville	Robertson, George
Jenkins, Rt Hon Roy (Hillh'd)	Robinson, G. (Coventry NW)
John, Brynmor	Robinson, P. (Belfast E)
Kennedy, Charles	Rogers, Allan
Kilfedder, James A.	Rooker, J. W.
Kilroy-Silk, Robert	Ross, Ernest (Dundee W)
Kinnock, Rt Hon Neil	Ross, Stephen (Isle of Wight)
Kirkwood, Archy	Rowlands, Ted
Lamond, James	Ryman, John
Leadbitter, Ted	Sedgemore, Brian
Leighton, Ronald	Sheldon, Rt Hon R.
Lewis, Ron (Carlisle)	Shore, Rt Hon Peter
Lewis, Terence (Worsley)	Short, Ms Clare (Ladywood)
Litherland, Robert	Short, Mrs H,(W'hampt'n NE)
Lloyd, Tony (Stretford)	Silkin, Rt Hon J.
Lofthouse, Geoffrey	Skinner, Dennis
Loyden, Edward	Smith, C.(Isl'ton S & F'bury)
McCartney, Hugh	Smith, Rt Hon J. (M'kl'ds E)
McCrea, Rev William	Snape, Peter
McDonald, Dr Oonagh	Soley, Clive
McKay, Allen (Penistone)	Spearing, Nigel
McKelvey, William	Stewart, Rt Hon D. (W Isles)
Maclennan, Robert	Stott, Roger
McNamara, Kevin	Strang, Gavin
McTaggart, Robert	Straw, Jack
McWilliam, John	Thomas, Dafydd (Merioneth)
Madden, Max	Thompson, J. (Wansbeck)
Marek, Dr John	Thorne, Stan (Preston)
Marshall, David (Shettleston)	Tinn, James
Maxton, John	Torney, Tom
Maynard, Miss Joan	Wainwright, R.
Meacher, Michael	Wallace, James
Meadowcroft, Michael	Wardell, Gareth (Gower)
Michie, William	Wareing, Robert
Mikardo, Ian	Weetch, Ken
Millan, Rt Hon Bruce	Welsh, Michael
Miller, Dr M. S. (E Kilbride)	White, James
Morris, Rt Hon A. (W'shawe)	Wigley, Dafydd
Morris, Rt Hon J. (Aberavon)	Williams, Rt Hon A.
O'Brien, William	Wilson, Gordon
O'Neill, Martin	Winnick, David
Orme, Rt Hon Stanley	Woodall, Alec
Paisley, Rev Ian	Wrigglesworth, Ian
Park, George	Young, David (Bolton SE)
Parry, Robert
Patchett, Terry	Tellers for the Ayes:
Pavitt, Laurie	Mr. James Hamilton and
Pendry, Tom	Mr. Sean Hughes.
Pike, Peter

NOES
Adley, Robert	Biffen, Rt Hon John
Aitken, Jonathan	Biggs-Davison, Sir John
Alexander, Richard	Blackburn, John
Alison, Rt Hon Michael	Blaker, Rt Hon Sir Peter
Amery, Rt Hon Julian	Body, Richard
Amess, David	Bonsor, Sir Nicholas
Ancram, Michael	Bottomley, Peter
Arnold, Tom	Bottomley, Mrs Virginia
Ashby, David	Bowden, A. (Brighton K'to'n)
Aspinwall, Jack	Bowden, Gerald (Dulwich)
Atkins, Rt Hon Sir H.	Braine, Sir Bernard
Atkins, Robert (South Ribble)	Brandon-Bravo, Martin
Atkinson, David (B'm'th E)	Bright, Graham
Baker, Nicholas (N Dorset)	Brinton, Tim
Baldry, Tony	Brittan, Rt Hon Leon
Banks, Robert (Harrogate)	Brooke, Hon Peter
Bellingham, Henry	Brown, M. (Brigg & Cl'thpes)
Bennett, Sir Frederic (T'bay)	Browne, John
Benyon, William	Bruinvels, Peter
Best, Keith	Bryan, Sir Paul
Bevan, David Gilroy	Buck, Sir Antony

Budgen, Nick	Hayes, J.
Burt, Alistair	Hayhoe, Barney
Butler, Hon Adam	Hayward, Robert
Carlisle, John (N Luton)	Heathcoat-Amory, David
Carlisle, Kenneth (Lincoln)	Heddle, John
Carlisle, Rt Hon M. (W'ton S)	Henderson, Barry
Carttiss, Michael	Hickmet, Richard
Cash, William	Higgins, Rt Hon Terence L.
Chalker, Mrs Lynda	Hill, James
Chapman, Sydney	Hind, Kenneth
Chope, Christopher	Hogg, Hon Douglas (Gr'th'm)
Churchill, W. S.	Holland, Sir Philip (Gedling)
Clark, Hon A. (Plym'th S'n)	Holt, Richard
Clark, Dr Michael (Rochford)	Hooson, Tom
Clark, Sir W. (Croydon S)	Hordern, Peter
Clarke, Rt Hon K. (Rushcliffe)	Howard, Michael
Colvin, Michael	Howarth, Alan (Stratf'd-on-A)
Conway, Derek	Howarth, Gerald (Cannock)
Coombs, Simon	Howell, Rt Hon D. (G'ldford)
Cope, John	Howell, Ralph (N Norfolk)
Corrie, John	Hubbard-Miles, Peter
Couchman, James	Hunt, David (Wirral)
Cranborne, Viscount	Hunt, John (Ravensbourne)
Crouch, David	Hunter, Andrew
Currie, Mrs Edwina	Jackson, Robert
Dickens, Geoffrey	Jenkin, Rt Hon Patrick
Dicks, Terry	Jessel, Toby
Dorrell, Stephen	Johnson Smith, Sir Geoffrey
Douglas-Hamilton, Lord J.	Jones, Gwilym (Cardiff N)
Dover, Den	Jones, Robert (W Herts)
du Cann, Rt Hon Edward	Jopling, Rt Hon Michael
Dunn, Robert	Joseph, Rt Hon Sir Keith
Durant, Tony	Kellett-Bowman, Mrs Elaine
Dykes, Hugh	Kershaw, Sir Anthony
Evennett, David	Key, Robert
Fairbairn, Nicholas	King, Roger (B'ham N'field)
Fallon, Michael	King, Rt Hon Tom
Farr, Sir John	Knight, Gregory (Derby N)
Favell, Anthony	Knight, Mrs Jill (Edgbaston)
Fenner, Mrs Peggy	Knox, David
Finsberg, Sir Geoffrey	Lamont, Norman
Fletcher, Alexander	Lang, Ian
Fookes, Miss Janet	Latham, Michael
Forman, Nigel	Lawler, Geoffrey
Forsyth, Michael (Stirling)	Lawson, Rt Hon Nigel
Forsythe, Clifford (S Antrim)	Lee, John (Pendle)
Forth, Eric	Leigh, Edward (Gainsbor'gh)
Fowler, Rt Hon Norman	Lennox-Boyd, Hon Mark
Fox, Marcus	Lester, Jim
Franks, Cecil	Lewis, Sir Kenneth (Stamf'd)
Fraser, Peter (Angus East)	Lightbown, David
Freeman, Roger	Lilley, Peter
Gale, Roger	Lloyd, Ian (Havant)
Galley, Roy	Lloyd, Peter, (Fareham)
Gardiner, George (Reigate)	Lord, Michael
Gardner, Sir Edward (Fylde)	Luce, Richard
Gilmour, Rt Hon Sir Ian	Lyell, Nicholas
Glyn, Dr Alan	McCrindle, Robert
Goodhart, Sir Philip	McCurley, Mrs Anna
Gorst, John	Macfarlane, Neil
Gow, Ian	MacGregor, John
Gower, Sir Raymond	MacKay, Andrew (Berkshire)
Grant, Sir Anthony	MacKay, John (Argyll & Bute)
Greenway, Harry	McNair-Wilson, P. (New F'st)
Gregory, Conal	McQuarrie, Albert
Griffiths, E. (B'y St Edm'ds)	Madel, David
Griffiths, Peter (Portsm'th N)	Major, John
Grist, Ian	Malins, Humfrey
Ground, Patrick	Malone, Gerald
Grylls, Michael	Maples, John
Gummer, John Selwyn	Marland, Paul
Hamilton, Hon A. (Epsom)	Marlow, Antony
Hamilton, Neil (Tatton)	Marshall, Michael (Arundel)
Hanley, Jeremy	Mates, Michael
Hannam, John	Mather, Carol
Hargreaves, Kenneth	Maude, Hon Francis
Harris, David	Mawhinney, Dr Brian
Haselhurst, Alan	Maxwell-Hyslop, Robin
Hawkins, C. (High Peak)	Mayhew, Sir Patrick
Hawksley, Warren	Mellor, David

Merchant, Piers	Shepherd, Colin (Hereford)
Meyer, Sir Anthony	Shepherd, Richard (Aldridge)
Miller, Hal (B'grove)	Shersby, Michael
Mills, Iain (Meriden)	Silvester, Fred
Mills, Sir Peter (West Devon)	Sims, Roger
Miscampbell, Norman	Skeet, T. H. H.
Mitchell, David (NW Hants)	Smith, Sir Dudley (Warwick)
Moate, Roger	Smith, Tim (Beaconsfield)
Molyneaux, Rt Hon James	Soames, Hon Nicholas
Monro, Sir Hector	Speed, Keith
Montgomery, Fergus	Speller, Tony
Moore, John	Spence, John
Morrison, Hon C. (Devizes)	Spencer, Derek
Morrison, Hon P. (Chester)	Spicer, Jim (W Dorset)
Mudd, David	Spicer, Michael (S Worcs)
Murphy, Christopher	Squire, Robin
Neale, Gerrard	Stanbrook, Ivor
Needham, Richard	Stanley, John
Nelson, Anthony	Steen, Anthony
Neubert, Michael	Stern, Michael
Newton, Tony	Stevens, Lewis (Nuneaton)
Nicholls, Patrick	Stevens, Martin (Fulham)
Normanton, Tom	Stewart, Allan (Eastwood)
Norris, Steven	Stewart, Andrew (Sherwood)
Onslow, Cranley	Stewart, Ian (N Hertf'dshire)
Oppenheim, Phillip	Stokes, John
Oppenheim, Rt Hon Mrs S.	Stradling Thomas, J.
Osborn, Sir John	Sumberg, David
Ottaway, Richard	Tapsell, Peter
Page, Sir John (Harrow W)	Taylor, John (Solihull)
Page, Richard (Herts SW)	Taylor, Teddy (S'end E)
Parkinson, Rt Hon Cecil	Temple-Morris, Peter
Parris, Matthew	Terlezki, Stefan
Patten, Christopher (Bath)	Thatcher, Rt Hon Mrs M.
Patten, John (Oxford)	Thomas, Rt Hon Peter
Pattie, Geoffrey	Thompson, Donald (Calder V)
Pawsey, James	Thorne, Neil (Ilford S)
Peacock, Mrs Elizabeth	Thornton, Malcolm
Percival, Rt Hon Sir Ian	Thurnham, Peter
Pollock, Alexander	Townend, John (Bridlington)
Porter, Barry	Tracey, Richard
Powell, Rt Hon J. E. (S Down)	Trippier, David
Powell, William (Corby)	Trotter, Neville
Powley, John	Twinn, Dr Ian
Prentice, Rt Hon Reg	van Straubenzee, Sir W.
Price, Sir David	Vaughan, Sir Gerard
Prior, Rt Hon James	Viggers, Peter
Proctor, K. Harvey	Waddington, David
Pym, Rt Hon Francis	Walden, George
Raffan, Keith	Walker, Cecil (Belfast N)
Rathbone, Tim	Walker, Bill (Tside N)
Rees, Rt Hon Peter (Dover)	Walker, Rt Hon P. (W'cester)
Renton, Tim	Waller, Gary
Rhodes James, Robert	Walters, Dennis
Rhys Williams, Sir Brandon	Ward, John
Ridley, Rt Hon Nicholas	Wardle, C. (Bexhill)
Ridsdale, Sir Julian	Warren, Kenneth
Rifkind, Malcolm	Watson, John
Roberts, Wyn (Conwy)	Watts, John
Robinson, Mark (N'port W)	Wells, Sir John (Maidstone)
Roe, Mrs Marion	Wheeler, John
Ross, Wm. (Londonderry)	Whitney, Raymond
Rossi, Sir Hugh	Wiggin, Jerry
Rost, Peter	Wilkinson, John
Rowe, Andrew	Wolfson, Mark
Ryder, Richard	Wood, Timothy
Sackville, Hon Thomas	Woodcock, Michael
Sainsbury, Hon Timothy	Yeo, Tim
St. John-Stevas, Rt Hon N.	Young, Sir George (Acton)
Sayeed, Jonathan	Younger, Rt Hon George
Scott, Nicholas
Shaw, Giles (Pudsey)	Tellers for the Noes:
Shaw, Sir Michael (Scarf)	Mr. Robert Boscawen and
Shelton, William (Streatham)	Mr. Tristan Garel-Jones.

Question accordingly negatived.

Main question put:—

The House divided: Ayes 343, Noes 198.

Division No. 39]	[10.13 pm
AYES
Adley, Robert	Fallon, Michael
Aitken, Jonathan	Farr, Sir John
Alexander, Richard	Favell, Anthony
Alison, Rt Hon Michael	Fenner, Mrs Peggy
Amery, Rt Hon Julian	Finsberg, Sir Geoffrey
Amess, David	Fletcher, Alexander
Ancram, Michael	Fookes, Miss Janet
Arnold, Tom	Forman, Nigel
Ash by, David	Forsyth, Michael (Stirling)
Aspinwall, Jack	Forsythe, Clifford (S Antrim)
Atkins, Rt Hon Sir H.	Forth, Eric
Atkins, Robert (South Ribble)	Fowler, Rt Hon Norman
Atkinson, David (B'm'th E)	Fox, Marcus
Baker, Nicholas (N Dorset)	Franks, Cecil
Baldry, Tony	Fraser, Peter (Angus East)
Banks, Robert (Harrogate)	Freeman, Roger
Beggs, Roy	Fry, Peter
Bellingham, Henry	Gale, Roger
Bennett, Sir Frederic (T'bay)	Galley, Roy
Best, Keith	Gardiner, George (Reigate)
Bevan, David Gilroy	Gardner, Sir Edward (Fylde)
Biffen, Rt Hon John	Glyn, Dr Alan
Biggs-Davison, Sir John	Goodhart, Sir Philip
Blackburn, John	Gorst, John
Blaker, Rt Hon Sir Peter	Gow, Ian
Body, Richard	Gower, Sir Raymond
Bonsor, Sir Nicholas	Grant, Sir Anthony
Bottomley, Peter	Greenway, Harry
Bottomley, Mrs Virginia	Gregory, Conal
Bowden, A. (Brighton K'to'n)	Griffiths, E. (B'y St Edm'ds)
Bowden, Gerald (Dulwich)	Griffiths, Peter (Portsm'th N)
Braine, Sir Bernard	Grist, Ian
Brandon-Bravo, Martin	Ground, Patrick
Bright, Graham	Grylls, Michael
Brinton, Tim	Gummer, John Selwyn
Brittan, Rt Hon Leon	Hamilton, Hon A. (Epsom)
Brooke, Hon Peter	Hamilton, Neil (Tatton)
Brown, M. (Brigg & Cl'thpes)	Hanley, Jeremy
Browne, John	Hannam, John
Bruinvels, Peter	Hargreaves, Kenneth
Bryan, Sir Paul	Harris, David
Buck, Sir Antony	Harvey, Robert
Budgen, Nick	Haselhurst, Alan
Burt, Alistair	Hawkins, C. (High Peak)
Butler, Hon Adam	Hawksley, Warren
Carlisle, John (N Luton)	Hayes, J.
Carlisle, Kenneth (Lincoln)	Hayhoe, Barney
Carlisle, Rt Hon M. (W'ton S)	Hayward, Robert
Carttiss, Michael	Heathcoat-Amory, David
Cash, William	Heddle, John
Chalker, Mrs Lynda	Henderson, Barry
Chapman, Sydney	Hickmet, Richard
Chope, Christopher	Higgins, Rt Hon Terence L.
Churchill, W. S.	Hill, James
Clark, Hon A. (Plym'th S'n)	Hind, Kenneth
Clark, Dr Michael (Rochford)	Hogg, Hon Douglas (Gr'th'm)
Clark, Sir W. (Croydon S)	Holland, Sir Philip (Gedling)
Clarke, Rt Hon K. (Rushcliffe)	Holt, Richard
Colvin, Michael	Hooson, Tom
Conway, Derek	Hordern, Peter
Coombs, Simon	Howard, Michael
Cope, John	Howarth, Alan (Stratf'don-A)
Corrie, John	Howarth, Gerald (Cannock)
Couchman, James	Howell, Rt Hon D. (G'ldford)
Cranborne, Viscount	Howell, Ralph (N Norfolk)
Crouch, David	Hubbard-Miles, Peter
Currie, Mrs Edwina	Hunt, David (Wirral)
Dickens, Geoffrey	Hunt, John (Ravensbourne)
Dicks, Terry	Hunter, Andrew
Dorrell, Stephen	Jackson, Robert
Douglas-Hamilton, Lord J.	Jenkin, Rt Hon Patrick
Dover, Den	Jessel, Toby
du Cann, Rt Hon Edward	Johnson Smith, Sir Geoffrey
Dunn, Robert	Jones, Gwilym (Cardiff N)
Durant, Tony	Jones, Robert (W Herts)
Dykes, Hugh	Jopling, Rt Hon Michael
Evennett, David	Joseph, Rt Hon Sir Keith
Fairbairn, Nicholas	Kellett-Bowman, Mrs Elaine

Key, Robert	Pattie, Geoffrey
King, Roger (B'ham N'field)	Pawsey, James
King, Rt Hon Tom	Peacock, Mrs Elizabeth
Knight, Gregory (Derby N)	Percival, Rt Hon Sir Ian
Knight, Mrs Jill (Edgbaston)	Pollock, Alexander
Lamont, Norman	Porter, Barry
Lang, Ian	Powell, Rt Hon J. E. (S Down)
Latham, Michael	Powell, William (Corby)
Lawler, Geoffrey	Powley, John
Lawson, Rt Hon Nigel	Prentice, Rt Hon Reg
Lee, John (Pendle)	Price, Sir David
Leigh, Edward (Gainsbor'gh)	Proctor, K. Harvey
Lennox-Boyd, Hon Mark	Pym, Rt Hon Francis
Lester, Jim	Raffan, Keith
Lewis, Sir Kenneth (Stamf'd)	Rathbone, Tim
Lightbown, David	Rees, Rt Hon Peter (Dover)
Lilley, Peter	Renton, Tim
Lloyd, Ian (Havant)	Rhodes James, Robert
Lloyd, Peter, (Fareham)	Ridley, Rt Hon Nicholas
Lord, Michael	Ridsdale, Sir Julian
Luce, Richard	Rifkind, Malcolm
Lyell, Nicholas	Roberts, Wyn (Conwy)
McCrindle, Robert	Robinson, Mark (N'port W)
McCurley, Mrs Anna	Roe, Mrs Marion
Macfarlane, Neil	Ross, Wm. (Londonderry)
MacGregor, John	Rossi, Sir Hugh
MacKay, Andrew (Berkshire)	Rost, Peter
MacKay, John (Argyll & Bute)	Rowe, Andrew
McNair-Wilson, P. (New F'st)	Ryder, Richard
McQuarrie, Albert	Sackville, Hon Thomas
Madel, David	Sainsbury, Hon Timothy
Major, John	St. John-Stevas, Rt Hon N.
Malins, Humfrey	Sayeed, Jonathan
Malone, Gerald	Scott, Nicholas
Maples, John	Shaw, Giles (Pudsey)
Marland, Paul	Shaw, Sir Michael (Scarb')
Marlow, Antony	Shelton, William (Streatham)
Marshall, Michael (Arundel)	Shepherd, Colin (Hereford)
Mates, Michael	Shepherd, Richard (Aldridge)
Mather, Carol	Shersby, Michael
Maude, Hon Francis	Silvester, Fred
Mawhinney, Dr Brian	Sims, Roger
Maxwell-Hyslop, Robin	Skeet, T. H. H.
Mayhew, Sir Patrick	Smith, Sir Dudley (Warwick)
Mellor, David	Smith, Tim (Beaconsfield)
Merchant, Piers	Soames, Hon Nicholas
Meyer, Sir Anthony	Speed, Keith
Miller, Hal (B'grove)	Speller, Tony
Mills, Iain (Meriden)	Spence, John
Mills, Sir Peter (West Devon)	Spencer, Derek
Miscampbell, Norman	Spicer, Jim (W Dorset)
Mitchell, David (NW Hants)	Spicer, Michael (S Worcs)
Moate, Roger	Squire, Robin
Molyneaux, Rt Hon James	Stanbrook, Ivor
Monro, Sir Hector	Stanley, John
Montgomery, Fergus	Steen, Anthony
Moore, John	Stern, Michael
Morrison, Hon C. (Devizes)	Stevens, Lewis (Nuneaton)
Morrison, Hon P. (Chester)	Stevens, Martin (Fulham)
Mudd, David	Stewart, Allan (Eastwood)
Murphy, Christopher	Stewart, Andrew (Sherwood)
Neale, Gerrard	Stewart, Ian (N Hertf'dshire)
Needham, Richard	Stokes, John
Nelson, Anthony	Stradling Thomas, J.
Neubert, Michael	Sumberg, David
Newton, Tony	Tapsell, Peter
Nicholls, Patrick	Taylor, John (Solihull)
Normanton, Tom	Taylor, Teddy (S'end E)
Norris, Steven	Temple-Morris, Peter
Onslow, Cranley	Terlezki, Stefan
Oppenheim, Phillip	Thatcher, Rt Hon Mrs M.
Oppenheim, Rt Hon Mrs S.	Thomas, Rt Hon Peter
Osborn, Sir John	Thompson, Donald (Calder V)
Ottaway, Richard	Thorne, Neil (Ilford S)
Page, Sir John (Harrow W)	Thornton, Malcolm
Page, Richard (Herts SW)	Thurnham, Peter
Parkinson, Rt Hon Cecil	Townend, John (Bridlington)
Parris, Matthew	Tracey, Richard
Patten, Christopher (Bath)	Trippier, David
Patten, John (Oxford)	Trotter, Neville

Twinn, Dr Ian	Wells, Sir John (Maidstone)
van Straubenzee, Sir W.	Wheeler, John
Vaughan, Sir Gerard	Whitney, Raymond
Viggers, Peter	Wiggin, Jerry
Waddington, David	Wilkinson, John
Walden, George	Wolfson, Mark
Walker, Cecil (Belfast N)	Wood, Timothy
Walker, Bill (T'side N)	Woodcock, Michael
Walker, Rt Hon P. (W'cester)	Yeo, Tim
Waller, Gary	Young, Sir George (Acton)
Walters, Dennis	Younger, Rt Hon George
Ward, John
Wardle, C. (Bexhill)	Tellers for the Ayes:
Warren, Kenneth	Mr. Robert Boscawen and
Watson, John	Mr. Tristan Garel-Jones.
Watts, John

NOES
Abse, Leo	Faulds, Andrew
Adams, Allen (Paisley N)	Field, Frank (Birkenhead)
Anderson, Donald	Fields, T. (L'pool Broad Gn)
Archer, Rt Hon Peter	Fisher, Mark
Ashley, Rt Hon Jack	Flannery, Martin
Ashton, Joe	Foot, Rt Hon Michael
Atkinson, N. (Tottenham)	Forrester, John
Bagier, Gordon A. T.	Foster, Derek
Banks, Tony (Newham NW)	Foulkes, George
Barnett, Guy	Fraser, J. (Norwood)
Barron, Kevin	Freeson, Rt Hon Reginald
Beckett, Mrs Margaret	Garrett, W. E.
Bell, Stuart	George, Bruce
Benn, Tony	Gilbert, Rt Hon Dr John
Bennett, A. (Dent'n & Red'sh)	Godman, Dr Norman
Bermingham, Gerald	Gould, Bryan
Bid well, Sydney	Hamilton, James (M'well N)
Blair, Anthony	Hamilton, W. W. (Central Fife)
Boothroyd, Miss Betty	Hancock, Mr. Michael
Boyes, Roland	Hardy, Peter
Bray, Dr Jeremy	Harrison, Rt Hon Walter
Brown, Gordon (D'f'mline E)	Hart, Rt Hon Dame Judith
Brown, Hugh D. (Provan)	Hattersley, Rt Hon Roy
Brown, N. (N'c'tle-u-Tyne E)	Healey, Rt Hon Denis
Brown, R. (N'c'tle-u-Tyne N)	Heffer, Eric S.
Brown, Ron (E'burgh, Leith)	Hogg, N. (C'nauld & Kilsyth)
Caborn, Richard	Holland, Stuart (Vauxhall)
Callaghan, Jim (Heyw'd & M)	Home Robertson, John
Campbell, Ian	Howells, Geraint
Canavan, Dennis	Hoyle, Douglas
Carter-Jones, Lewis	Hughes, Dr. Mark (Durham)
Cartwright, John	Hughes, Robert (Aberdeen N)
Clark, Dr David (S Shields)	Hughes, Roy (Newport East)
Clarke, Thomas	Hughes, Sean (Knowsley S)
Clay, Robert	Hughes, Simon (Southwark)
Clwyd, Mrs Ann	Hume, John
Cocks, Rt Hon M. (Bristol S.)	Janner, Hon Greville
Cohen, Harry	Jenkins, Rt Hon Roy (Hillh'd)
Coleman, Donald	John, Brynmor
Concannon, Rt Hon J. D.	Kennedy, Charles
Conlan, Bernard	Kilfedder, James A.
Cook, Frank (Stockton North)	Kilroy-Silk, Robert
Corbyn, Jeremy	Kinnock, Rt Hon Neil
Cowans, Harry	Kirkwood, Archy
Cox, Thomas (Tooting)	Lamond, James
Craigen, J. M.	Leadbitter, Ted
Crowther, Stan	Leighton, Ronald
Cunningham, Dr John	Lewis, Ron (Carlisle)
Davies, Ronald (Caerphilly)	Lewis, Terence (Worsley)
Davis, Terry (B'ham, H'ge H'l)	Litherland, Robert
Deakins, Eric	Lloyd, Tony (Stretford)
Dixon, Donald	Lofthouse, Geoffrey
Dormand, Jack	Loyden, Edward
Douglas, Dick	McCartney, Hugh
Dubs, Alfred	McCrea, Rev William
Duffy, A. E. P.	McDonald, Dr Oonagh
Dunwoody, Hon Mrs G.	McKay, Allen (Penistone)
Eadie, Alex	McKelvey, William
Eastham, Ken	Maclennan, Robert
Evans, John (St. Helens N)	McNamara, Kevin
Ewing, Harry	McTaggart, Robert
Fatchett, Derek	McWilliam, John

Madden, Max	Redmond, M.
Marek, Dr John	Rees, Rt Hon M. (Leeds S)
Marshall, David (Shettleston)	Richardson, Ms Jo
Maynard, Miss Joan	Roberts, Ernest (Hackney N)
Meacher, Michael	Robertson, George
Meadowcroft, Michael	Robinson, G. (Coventry NW)
Michie, William	Robinson, P. (Belfast E)
Mikardo, Ian	Rogers, Allan
Millan, Rt Hon Bruce	Rooker, J. W.
Miller, Dr M. S. (E Kilbride)	Ross, Ernest (Dundee W)
Morris, Rt Hon A. (W'shawe)	Ross, Stephen (Isle of Wight)
Morris, Rt Hon J. (Aberavon)	Rowlands, Ted
O'Brien, William	Ryman, John
O'Neill, Martin	Sedgemore, Brian
Orme, Rt Hon Stanley	Sheldon, Rt Hon R.
Paisley, Rev Ian	Shore, Rt Hon Peter
Park, George	Short, Ms Clare (Ladywood)
Parry, Robert	Short, Mrs R.(W'hampt'n NE)
Patchett, Terry	Silkin, Rt Hon J.
Pavitt, Laurie	Skinner, Dennis
Pendry, Tom	Smith, C.(Isl'ton S & F'bury)
Pike, Peter	Smith, Rt Hon J. (M'kl'ds E)
Powell, Raymond (Ogmore)	Snape, Peter
Prescott, John	Soley, Clive
Radice, Giles	Spearing, Nigel
Randall, Stuart	Stewart, Rt Hon D. (w Isles)

Stott, Roger	Welsh, Michael
Strang, Gavin	White, James
Straw, Jack	Wigley, Dafydd
Thomas, Dafydd (Merioneth)	Williams, Rt Hon A.
Thompson, J. (Wansbeck)	Wilson, Gordon
Thorne, Stan (Preston)	Winnick, David
Tinn, James	Woodall, Alec
Torney, Tom	Wrigglesworth, Ian
Wainwright, R.	Young, David (Bolton SE)
Wallace, James
Wardell, Gareth (Gower)	Tellers for the Noes:
Wareing, Robert	Mr. John Maxton and
Weetch, Ken	Mr. Robin Corbett.

Question accordingly agreed to.

Resolved, That this House approves the Autumn Statement presented by Mr. Chancellor of the Exchequer on 12th November; welcomes the prospect of continuing low inflation and steady growth as the basis for maintaining the trend of rising employment; and congratulates Her Majesty's Government on keeping the public expenditure planning total for 1985–1986within the figure publishing in the 1984 public Expenditure White Paper (cmnd.9143).

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1. BUSINESS OF THE HOUSE 22 words