The Economy

HC Deb 13 November 1984 vol 67 cc538-634

Mr. Speaker

I have selected the amendment in the name of the Leader of the Opposition and his right hon. and hon. Friends. In addition, under the powers given to me by Standing Order No. 35, I have selected the amendment in the name of the right hon. Member for Plymouth, Devonport (Dr. Owen) and his right hon. and hon. Friends for a second Division at the end of the debate.

3.36 pm

Mr. Roy Hattersley (Birmingham, Sparkbrook)

I beg to move, at the end of the Question, to add: But humbly regret that the Gracious Speech reaffirms policies which have already done severe damage to the British economy and will, in the future, further hold back the prospects of economic recovery At the end of the exchanges which yesterday followed the autumn statement on the economy the hon. Member for Suffolk, South (Mr. Yeo) complained about what he called a slur which I had cast on the Government's reputation. The assertion to which he took such histrionic exception was my conclusion that unemployment was now not so much a consequence of Government policy but an integral part of it, planned, intended and essential to the present economic strategy.

If we assume, as we must, that the passion of the hon. Member for Suffolk, South was genuine, it was the product of one of two possible errors. The first possibility is that he does not know the meaning of "slur". The second is that he fails to comprehend the workings and the intentions of the medium-term financial strategy, which is the centrepiece of the Government's economic policy. Anyone who adopts that policy or supports it is, at the very least, accepting a high level of unemployment as a price that is worth paying for the achievement of other economic objectives.

I ask the Chancellor of the Exchequer a question which I asked him three weeks ago and which he singularly failed to answer on that occasion. Does he or does he not accept on behalf of the Government any responsibility for the present level of unemployment? It is not me alone who believes that the Government are guilty in this particular. I quote from yesterday's edition of The Guardian in which these words appeared: there does seem to be some slight difficulty in constantly lamenting the high level of unemployment while at the same time pursuing policies which drive it even higher. That is the judgment of the right hon. Member for Chesham and Amersham (Sir I. Gilmour) and not the opinion of a radical leader writer. I note that the Chancellor laughs at the very mention of the right hon. Gentleman's name, but he was happy to serve in a Cabinet with the right hon. Gentleman when things were going rather better for him.

The Opposition's first charge against the Government is that the concept of their economic strategy is that high levels of unemployment are inherent within the policy which they pursue. Our second charge is that that policy ignores the real economy and concentrates instead on artificial and arbitrary financial targets which in the end become an object in themselves. Hence the fact that yesterday the Chancellor had the effrontery to claim some kind of victory because he had almost met the public expenditure targets which last year he had set for himself. He claimed that victory while the real world, outside the theoretical model which he has created, is depressed and moving into slump, in no small part because of the deflation that he has created by pursuing his public expenditure and money supply targets.

Let me once more quote from the right hon. Member for Chesham and Amersham. It is a quotation which was mentioned in part yesterday by my right hon. and learned Friend the Member for Monklands, East (Mr. Smith). It describes the present economic condition so perfectly that the full paragraph deserves an airing. The right hon. Member for Chesham and Amersham said: there are nearly two million fewer people in employment than there were in 1979. Manufacturing production is still 12½ per cent. below its peak level in 1979. Though now rising, manufacturing investment is still 30 per cent. below 1979. Our non-oil trade has declined from a surplus of £500 millions in 1981 to a deficit of £7½ billion in 1983, and will probably be in deficit by over £10 billion this year. That is a resume by the right hon. Member for Chesham and Amersham of the economic success which the Chancellor describes, and it ends with a reference to the deficit of £7½ billion.

It was upon that basis that yesterday the Chancellor commented upon the balance of payments prospects. He said: We expect it to be in surplus by about £2½ billion next year. He added: If a Labour Government had achieved anything like that, they would not have been able to believe their good fortune." —[Official Report, 12 November 1984; Vol. 67, c. 420.] "Good fortune" are exactly the right words to describe the position. Without North sea oil, a bonus which no other Government have enjoyed, our balance of payments would be in deep and chronic deficit, and yet the Chancellor brags of his balance of payments record which is wholly and completely dependent upon that gratuitous advantage.

I never cease to be amazed by the Chancellor's self-destructive willingness to say things on one day which are exposed as errors and distortions on the next. That typifies his comment upon his alleged balance of payments success. It typifies almost all he did yesterday. The BBC last night spoke of his "creative accounting". Today, the Financial Times, with magisterial understatement, observes that: Mr. Lawson's November utterances are hardly a reliable guide.

Mr. Tim Yeo (Suffolk, South)

Does the right hon. Gentleman regard his general election utterances as a reliable guide to the rate of inflation? It is of course one of the largest influences on the level of unemployment. Under his government and that of his colleagues. the rate of inflation was high and increasing; under the present Government the rate of inflation is low and decreasing; notwithstanding the right hon. Gentleman's predictions.

Mr. Hattersley

I suspected that one of the weaker-minded Back Benchers would return to the inflation prediction that I made during the general election. The Chancellor and I made seven economic predictions during the last general election. I was wrong about one and right about six; with the Chancellor the position is exactly the opposite.

The Chancellor of the Exchequer (Mr.NigelLawson)

Give us them.

Mr. Hattersley

Let me give the right hon. Gentleman the obvious one—his promise that unemployment was about to fall. There is one problem with the Chancellor's unemployment forecasts — he makes them only at election time. When he makes them, they invariably turn out to be wrong.

It is highly undesirable for this country as a whole to possess a Chancellor of the Exchequer who is written about, as was the present Chancellor in this morning's newspapers, in terms of the managing and manipulation of statistics and the inability or unwillingness to tell the House of Commons the truth about his programmes. When the Government's economic policy is defended as it has been this week by the partnership of the Chancellor and the Secretary of State for Employment, the problems of believing the Chancellor are even greater. The Secretary of State for Employment always addresses us as though he were the head boy at morning assembly — and then, after Tom Brown, we get Flashman. That attitude is revealed, as it was yesterday, in the Chancellor's comments about North sea oil. Next year, North sea oil revenues will amount to £11 billion, yet, despite that massive amount, they will total less than the cost to the Exchequer of the 3 million unemployed. The money will be wasted on financing unemployment rather than spent on increasing jobs.

There are two central serious arguments about the alternative ways of using North sea oil that should be explored by the House. The Opposition believe that the abandonment of exchange control combined with the effect of the Government-induced recession have encouraged far too much of the North sea income to be exported and invested in other countries' economies, jobs and industries and, therefore, invested in our unemployment. We believe also that the oil income should have been specifically used for the reinvigoration of the industry against the time when the oil revenues began to diminish —a reduction that almost certainly begins next year. Those are serious questions, yet the Chancellor's response on this subject to a question from the hon. Member for East Lindsey (Mr. Tapsell) is recorded in Hansard. The Chancellor said: He need not worry too much about North sea oil … for it will certainly see out his active life.

Mr. Lawson

Tell the full story.

Mr. Hattersley

A full stop followed the sentence that I read. The Chancellor stated: He need not worry too much about North sea oil … for it will certainly see out his active life."—[Official Report, 12 November 1984; Vol. 67, c. 425.]

Mr. Lawson

Read on.

Mr. Hattersley

The Chancellor will not divert me from reminding him that, although that may be true in the case of the hon. Member for East Lindsey—although, after yesterday, we all certainly hope that it will not be —North sea oil will not last for the lives of this year's school leavers, 150,000 of whom are still unemployed.

Mr. Peter Tapsell (East Lindsey)

I point out to the right hon. Gentleman that if I reach the same age as my father and grandfather I shall be here for another 30 years.

Mr. Hattersley

I probably greet that news with more pleasure than the Chancellor of the Exchequer. I suspect that the Chancellor really meant yesterday that North sea oil revenues will easily see out the life of this Government. His real concern is that his policies should be cushioned by that unusual boon and unique benefit.

Yet even with £11 billion of North sea oil revenue the Government both anticipate and plan for a permanent reservoir of 3 million unemployed. They use that pool of unemployment as a sort of incomes policy to hold down the total wage bill. They hope to use it as part of their attempt to emasculate the trade unions. That, on the evidence of the Chancellor's performance on "Weekend World" three weeks ago, is a major object of present Government policy.

Yesterday I pressed the Chancellor on unemployment prospects. I asked him whether the Financial Times was right to say that the Government Actuary hypothesised an increase of 400,000 in unemployment this year. In fact, the Financial Times was wrong. The new assumption for this year is that unemployment is 150,000 higher than was originally estimated in last year's autumn statement. But the real significance of the Government Actuary's work lies in his next statement, his assumption for 1985–86. The Government Actuary assumes that unemployment will remain just as high in 1985–86 as this year. There is to be no fall, reduction or improvement, just a steady grind on of unemployment at—even on the Government's phoney figures—3 million or more.

It is no good the Chancellor saying that the Government Actuary does no more than make assumptions.[Interruption.] "Conventional assumptions", says the Chancellor. The Chancellor is wholly dependent on those conventional assumptions being right. If they are not right, the entire public expenditure forecast on which the Government hypothesise their tax cuts is wrong. Those assumptions have to be right for anything that the Chancellor said yesterday to work out in practice next March or the March after

The truth is — I think that the Chancellor would improve his reputation if he honestly admitted it—that the Government do not anticipate any reduction in unemployment in the foreseeable future. If I do the Chancellor or his colleagues less than justice by saying that, he can confound me at once by telling me when the fall in unemployment is anticipated. After all, he used to say that a reduction in unemployment would follow certainly, inevitably and automatically from a reduction in inflation and public borrowing. So I ask the right hon. Gentleman: How long do we have to wait? Did he and his colleagues make it clear five years ago when they first embarked on that policy that at the end of five years or more, far from the automatic and inevitable solution coming about, unemployment would be 2 million or more higher and there would be no reasonable prospect of its being reduced? Of course, they did not.

The country has not been told the hard truth that, despite all the fancy talk about controlling monetary growth and of the relationship between interest rates and the public sector borrowing requirement, the Government have held down inflation by collapsing the economy. Yet, as the hon. Member for East Lindsey reminded us, Japan and America thrive on budget deficits. As Conservative Members recall — or should recall — even this Government began a small, temporary but genuine recovery in 1982 by relaxing credit control, increasing the PSBR and, above all, extending public capital spending.

Yesterday the hon. Member for Croydon, South (Sir W. Clark) insisted that unemployment is most likely to be reduced If that money is left in the hands of the taxpayers—[Official Report, 12 November 1984; Vol. 67, c. 421.] I congratulate the hon. Gentleman on venturing far enough out of the backwoods to accept the need for a boost in demand. He joins those other notable progressive revolutionaries and Socialist theorists, the Confederation of British Industry and the Daily Mail, in demanding that more activity is injected into the economy as a direct result of Government policy. I ask the hon. Gentleman to take a further step and join the CBI and the Daily Mail in accepting that the best way to increase employment and reduce the unemployment about which the Government claim to be so concerned is for whatever funds that are available to be spent in the public sector, and particularly in capital programmes.

Sir William Clark (Croydon, South)

The logic of the right hon. Gentleman's argument is that he believes that, if the Government spend, spend, spend on public projects, unemployment will disappear. Will he explain why that did not happen in France under President Mitterrand and why the previous Labour Government did not spend, spend, spend to bring down unemployment?

Mr. Hattersley

That is not the logic of my argument; that is the illogic of the hon. Gentleman's conclusion. The Opposition have not suggested that we can spend, spend, spend indefinitely, down to zero unemployment. We have suggested that other countries have demonstrated that by prudent investment in capital works unemployment will certainly be reduced.

I do not expect or ask the hon. Gentleman to take my word for that. I simply ask him to read some of the published texts. This is the subject in which he is supposed to be interested and on which he is an alleged authority. Let him read the work of the Institute of Fiscal Studies. If he disregards the institute because it is objective, unprejudiced and unbiased, let him read the work of the London Business School, once the Valhalla of monetarism.

Both those institutions agree that £1 billion spent on public works will create six times more jobs than £1 billion used to reduce taxation. That is the result of their detailed studies of the British economy. I do not know any reputable economist who argues with that, though I know some disreputable politicians who say that they would rather give the money away in tax cuts than reduce unemployment. However, I do not know one authority that disregards or contradicts the formula produced by the London Business School and the Institute of Fiscal Studies.

Mr. Lawson

I do not agree with it.

Mr. Hattersley

Perhaps not, but I was talking about reputable economists.

I insist that the use of any surplus for job creation by investment in the public sector is exactly how any funds that the Government have available ought to be employed. By doing it that way, rather than simply increasing private consumption, the Government would reduce whatever dangers there might be of a deterioration in the balance of payments as a result of the deflation—a danger which largely results from the damage done by the Government to manufacturing industry over the past five years.

I am aware that when the upturn comes, under one Government or another, the Government will have left manufacturing industry in the worst position to meet an upturn that it has been in for the past 50 years.

I repeat that whatever surplus might be created ought to be used directly to generate jobs. Yet the Chancellor is determined to use any surplus that he can contrive to cut direct taxation. As he knows the alternatives and is determined to choose tax cuts, how can he claim, here or anywhere else, that his prime object, or even his serious intention, is to reduce unemployment?

I understand, in part, the political reasons why the Chancellor is determined to make some cuts in taxation. After all, he and his party were twice elected on the false prospectus that that would be done, and done quickly. Today annual taxation is £22.5 billion higher than it was in 1979. If the Chancellor achieves his objective of cutting income tax by £1.5 billion, he will have to reduce the overall tax burden by only another £21 billion to get it back to the level that he inherited from the Labour Government

It is not surprising that the Prime Minister confines her comments on the subject to income tax alone; nor is it surprising that she always defines the tax bill according to her immediate convenience. When the national insurance surcharge is reduced, it is a tax cut. When the national insurance contribution is increased, national insurance has nothing whatsoever to do with tax. We know, and every reputable economist confirms, that national insurance contributions are in effect a tax and that including them in the overall bill means that an extra £22.5 billion is taken out of the economy every year by the Government.

Mr. Alistair Burt (Bury, North)

If the right hon. Gentleman is so certain that national insurance is a tax, and a damaging tax, why was a surcharge imposed while his colleagues were in government, and why did he take no steps to remove it?

Mr. Hattersley

Not because it was not a tax. No Labour Minister would have made the feeble pretence that it was not a tax. The hon. Gentleman is entitled to argue that the surcharge was damaging to industry and undesirable. but that is not the point at issue. The surcharge was a tax when we imposed it and it is a tax when the Conservative Government abolish it; and so is every form of national insurance contribution.

Mr. Jerry Hayes (Harlow)

The right hon. Gentleman is confining his arguments to the volume of taxation. He does not refer to the rate of taxation, which is being reduced considerably. He ought to consider what happened in the 1984 Budget, when the largest number of people since 1948 were released from liability to tax; and he should also reconsider his own record.

Mr. Hattersley

If the hon. Gentleman wishes me to comment on the distribution of taxes, I will say that, over the past five years, the richer the taxpayer, the bigger the volume of tax relief he has enjoyed. I am sure that my hon. Friends would be delighted for me to expand on that significant observation on the distribution of tax relief.

Last week the Prime Minister made selective claims about reducing income tax. She used to be the high priestess of monetarism and the personification of the cliché "There is no other way". Last week, after her temporary desertion of the Chancellor — and he only damages his reputation further by denying it—there was speculation about a U-turn.

Mr. Lawson

The right hon. Gentleman should have heard my right hon. Friend last night.

Mr. Hattersley

The Chancellor says that I should have heard the Prime Minister last night. Is he telling me that he did not want a bigger cut in the housing programme and that the Prime Minister did not fail to support him in that?

Mr. Lawson

I was concerned, as I always have been and as previous Chancellors have been, with achieving a particular total of public expenditure, and that total was achieved.

Mr. Hattersley

In other words, "I was right". There has been much speculation—since the event which the Chancellor has by implication confirmed — that the Prime Minister is undergoing a change of heart, that there is to be a U-turn and that she is about to distance herself from monetarism. The situation was likened by the right hon. Member for Chesham and Amersham in The Guardian yesterday to the Narvik debate, with the right hon. Lady playing the part not of Churchill but of Chamberlain.

I can reassure the Chancellor, however, that all the whispers about dumping him are premature. For the time being, the Prime Minister will continue to posture as a conviction politician, and the poor and the unemployed will pay the price of her convictions. However, the conscience of the country is beginning to stir at the thought of high, prolonged and intentional unemployment. Some Conservative Back Benchers have caught the mood already — for instance, the hon. Member for Staffordshire, Moorlands (Mr. Knox), who spoke on the first day of the debate on the Queen's Speech, and many others who have spoken in a similar vein during the past four days. Eventually, for electoral purposes, the Prime Minister will catch the same mood. Eventually she will lower her voice and say that unemployment is a scourge that, given a chance, she will eradicate. She has had the chance and has refused wholly to take it. She will riot be forgiven

4.5 pm

The Chancellor of the Exchequer (Mr.Nigelawson)

Yesterday, I was able to outline in my autumn statement an outlook which is in many ways encouraging. We have the prospect of stable public expenditure in line with our long-term plans, inflation edging still lower, still lower interest rates, strongly rising investment and scope for reducing further the burden of taxation and leading to [Mr. Nigel Lawson] sustained economic growth and a rising level of employment for our people. I want to make it quite clear that the Government are doing and will be doing all that they can to create the conditions for a reduction in unemployment.

The prospect to which I have referred has been made possible because, among other things, we have stuck firmly to the promises that we made at the time of the general election. The planned total public expenditure of £132 billion in 1985–86 — which I was seeking and which my right hon. and learned Friend the Chief Secretary sought during the public expenditure round —is in line not just with last year's White Paper but with the figures set out in the White paper published before the 1983 general election. Indeed, when my right hon. Friend the Prime Minister declared that we stood on the plans published for all to read in the public expenditure White Paper, that is precisely what we did. The public expenditure figures for 1985–86 printed in the autumn statement yesterday are the very public expenditure totals on which we fought and won the general election.

In our first Parliament, we had the crucial priority of bringing down the unsustainable level of Government borrowing which we had inherited from the Labour Government of which the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) was a rather stout pillar. That excessive borrowing not only fuelled inflation but drove up interest rates and represented a burden of deferred taxation which, sooner or later, would have to be paid. We achieved our objective of bringing down the borrowing requirement. We repaid all the foreign debt which we inherited from the Labour Government and reduced the annual level of Government borrowing to a more reasonable proportion of our gross domestic product.

In this Parliament, our fiscal priority can shift to the reduction and reform of taxation. That process began in the 1984 Budget when I laid out a structure of company taxation to endure for the rest of this Parliament and beyond. In that Budget we also began the process of tax reduction. The process had been initiated in the 1983 Budget by my right hon. and learned Friend the present Foreign Secretary. Personal allowances were raised substantially in excess of the rate of inflation, and that took many hundreds of thousands of people out of the income tax system entirely and reduced the poverty trap and the "why work?" syndrome.

The main target for our first round of cuts was the final elimination of the national insurance surcharge. It has frequently been described as Labour's tax on jobs. We remember that it was strongly advocated by the Liberal party when it was a member of the Lib-Lab pact.

Mr. Richard Wainwright (Colne Valley)

Is the right hon. Gentleman unable to conceive that in the utterly different circumstances of full employment a beneficial tax can turn to a curse when unemployment reigns?

Mr. Lawson

Circumstances are always completely different in the hon. Gentleman's eyes. I must remind him that there was not full employment then.

The final abolition of the pernicious surcharge took effect only on 1 October this year. Thus, jobs have been free of tax for precisely 44 days—scarcely enough time to assess the benefits of abolition. The tax changes that I announced in this year's Budget have their full effect in 1985–86. Thus, there is already built into the system a tax cut of some £1.75 billion next year. The fiscal adjustment that I described yesterday, with the necessary qualifications, gives the prospect of scope for net tax cuts in the next Budget of a further £1.5 billion.

The right hon. Member for Sparkbrook seemed to accuse me of being interested in statistical manipulation and inaccurate forecasts. His problem is that he always looks on the dismal side of the economy, in regard not merely to unemployment—which worries us all—but to all other aspects, even when things are going well. For example, I looked back at his reaction to last year's autumn statement, when he strove to cast doubt on my forecast for investment. I have the relevant copy of Hansard with me in case he would like me to read from it. He declared that all of the commentators agreed that I was far too optimistic. I was forecasting that investment would rise by 4 per cent. in the current year. With the bulk of the year now behind us, it is clear that investment is likely to be up, not by 4 per cent., but by 7½ per cent. I apologise to the House for my undue pessimism last year.

In regard to the manipulation of statistics, the right hon. Gentleman is something of a rascal as he is always striving to make comparisons between the record of the Government in which he served and that of the present Government by taking the growth of output during the Labour Government's years from the first quarter of 1974, which was unusually low as a result of the adverse effects of the three-day week, to the second quarter of 1979, when it was artificially high reflecting the recovery from the winter of discontent. Any reputable economist, to the use the right hon. Gentleman's phrase, knows full well that a correct comparison is between the calendar years 1973 and 1979, which avoids the strike complications and takes the period between the two peaks of the business cycle. We shall do that and take the equivalent six-year period from 1979 to the forecast in the autumn statement for 1985.

During the six years from 1973 to 1979, under the Labour Government, gross domestic product rose by 8 per cent. The forecast that was published yesterday shows a level of output in 1985 of nearly 8 per cent. higher than the 1979 level. In other words, taking broadly equivalent six-year periods, the growth of output is virtually the same. However, the right hon. Gentleman made it clear that we should take no notice of North sea oil in our calculations. Excluding North sea oil, growth in output between 1979 and 1985 goes down to 5½ per cent. If we exclude North sea oil from the Labour years 1973–79, GDP rose by only 3½ per cent.

I agree that the world has changed. There has been a world recession, as some hon. Members are aware. However, between 1973 and 1979, when British output rose by 8 per cent., output in France rose by 20 per cent. and output in Germany rose by 15 per cent. In other words, their output was growing at least twice as fast as ours. The comparison with other European countries is much better for 1979–85. On the basis of the latest OECD forecast for France and Germany and the autumn statement, output will have risen at roughly the same rate in the United Kingdom as in France and Germany. If anything, it has grown faster in Britain. Europe has experienced difficulties in the past few years, yet the United Kingdom's growth performance in relative terms has improved beyond all recognition.

The right hon. Gentleman is also worried about employment. Although I am glad to say that employment is rising strongly, it has fallen in the past five years. That must be seen against the background of performance in the years 1973–79. The only reason why employment did not fall sharply during that period was that productivity grew appallingly slowly. Excluding North sea output, it grew by only 2 per cent. in six years. By 1979, hidden unemployment and overmanning was massive. As many Opposition Members would now agree, that represented hidden unemployment which was bound to emerge sooner or later. Productivity growth since 1979 has had to make up the ground that was lost during the 1970s. Since 1979, manufacturing productivity growth in the United Kingdom has been faster than in either France or Germany. Recapturing the lost productivity has been a painful experience, but it has been absolutely necessary if a basis is to be laid for improved efficiency and jobs in the future.

Inflation has also improved dramatically. During the period 1973–79, inflation averaged almost 16 per cent. compared with an OECD average of 10 per cent. During the past five years, inflation has averaged less than 10 per cent. and has now stabilised below 5 per cent.—roughly in line with the OECD average.

Mr. Hattersley

If we are contending statistical veracity, the House will want to be reminded that the Chancellor has compared two six-year periods. The Labour period that he has chosen began before the Labour Government were elected, let alone had had any effect on the economy. The Conservative period that he has chosen ends up not with fact but with forecasts. The first lesson of statistics is not to compare fact with forecast unless one is trying to cook the books.

Mr. Lawson

As I reminded the right hon. Gentleman by quoting my investment forecasts — I could have quoted others — my record on forecasting has been modest. In the event, reality has been better.

The right hon. Gentleman argues that our only recovery was in the wake of measures to stimulate demand in anticipation of the general election. He is completely wrong. Growth has averaged 2¾ per cent. per annum since the trough of the recession in 1981. It would have been 3½per cent. this year, had it not been for the coal strike. That growth has been due in large measure to lower inflation and lower interest rates, not to a short-lived fiscal stimulus which would all too soon have been dissipated in higher inflation. The right hon. Gentleman wants just that sort of fiscal stimulus. Once again, he has offered the House a remedy that he acknowledges is incredible and discredited —a dose of reflation. It is true that, before the election, he was a professional reflationist. He believed that public spending was the cure for all ills. Accused by my right hon. Friend the Prime Minister of wishing to solve all problems by pouring public money over them, he said, "I plead guilty to that charge."

One month after the election the right hon. Gentleman made a sincere and praiseworthy effort to go straight. He admitted: Labour's economic policy — the promise to put Britain back to work—was a net vote loser. Nobody believed that Labour's theories could be put into practice. Labour's vague hopes of achieving growth through Government spending were barely understood and rarely believed. The right hon. Gentleman continued: people—not being stupid—realised that the whole strategy lacked two essential ingredients: a coherent plan for investment and a scheme to combat inflation. Alas, the right hon. Gentleman could not go straight for long. He is a reflationary recidivist — a habitual offender. He was back at it again today, offering the old reflationary package.

Does the right hon. Gentleman imagine that the House will accept what the British people—not being stupid—have already firmly rejected? He is not content with insulting the House by offering us a policy in which he does not believe, at least for part of the time. He went on to denounce the approach in which he now believes.. He now denies that excessive wages price people out of work —I voiced that proposition in an earlier debate—and that wage moderation could price more of our jobless back into work. Yet he believes in an incomes policy. What is the point of an incomes policy if it is not to price people into work? The right hon. Gentleman accuses us of using high unemployment to curb wage inflation. As usual, he is totally wrong. We do not want high unemployment to curb wages, but we want to curb wages to reduce unemployment.

Mr. Hattersley

I have waited for some time for an opportunity to explain to the Chancellor two distinctions which sooner or later he must understand. I support the view that while a Labour Government reflate the econorny and create expansion, there must be an agreement with the trade unions that ensures that that expansion and reflation are used to create new jobs. The distinction between that agreement at a time of reflation and expansion, and the pretence, at a time of slump, that anything can be achieved by lower wages is total and absolute. It is astonishing that the Chancellor cannot tell the difference.

Mr. Lawson

It is astonishing that the right hon. Gentleman is unaware that this is a time not of slump but of economic recovery with high unemployment. That view is echoed by the CBI, which he cited in his remarks as a great authority. The right hon. Gentleman has his work cut out for him in convincing some of his hon. Friends of the virtues of his incomes policy. I should like to know when it becomes the official policy of a united Labour party.

The right hon. Gentleman knows that wage moderation can generate more jobs. Indeed, it is the right way to generate jobs. The recent CBI survey conducted by Gallup provided telling confirmation of that. It showed that the one factor that a sizeable proportion of all firms believed would lead them to take on more employees was moderation in pay.

The House will have noticed that the right hon. Gentleman was unusually reticent about one important development: the miners' strike. He must know that it was wholly unnecessary, pursued by evil means, in pursuit of impossible demands and for political ends. No Government of any political party could concede to the demands of Mr. Arthur Scargill. The right hon. Gentleman knows that the strike has wrought untold damage on the industry, riven communities asunder, destroyed jobs in the industry's suppliers and, through its effects on interest rates, damaged employment prospects throughout the economy. Yet throughout, the dispute has been backed and, therefore, unnecessarily prolonged by the Labour party. [Interruption.] I am referring to resisting the strike. The country can judge where its priorities lie.

The right hon. Gentleman spoke eloquently about the compassion that he and his party feel for the poor and the unemployed. I am certain that those feelings are sincere, although I regret that he is unlikely to acknowledge that all Conservative Members fully share the same feelings. I am certain that his compassion is genuine, although he offers the unemployed a remedy in which he does not believe, although he now denounces the one approach which he formerly proclaimed as vital, and although he feels compelled to back a strike which has grievously aggravated the problem. But I am also certain that the poor and the unemployed will not thank him or his party for a compassion which stops short of reasoned analysis and credible policies.

It is impossible to expect any consistency from the right hon. Gentleman. He publicly proclaimed: whatever policy the London Party stands on at the next election, I will support it. The man of principle!

Today, the right hon. Gentleman proposed the very policies which were tried when his party was in government and found wanting. They were tested, and failed. They gave us high public spending and borrowing, high taxation, high inflation, high rates of interest and rising unemployment. Our policies, however, have been shown to lead to growth, as we said they would. We said that we would bring inflation down, and we have. We said that lower inflation would lead to growth, and it has. We said that with growth would come new jobs, and they have.

None of that would have been possible without first bringing down inflation. Nevertheless, we have always recognised that low inflation is not enough. We also need policies to reawaken the spirit of enterprise, to spread ownership and to fashion new attitudes about the creation of wealth. Much of our effort has concentrated on the small business sector of the economy, and for good reason. Britain is short, relatively speaking, of small companies compared with the United States and our major European competitors. The number of new businesses is a fair barometer of the vigour of enterprise in an economy. Today we suffer from a lack of new businesses which should have been created a decade ago. By now they would have been sizeable enterprises, which would continue to expand and create jobs. Their absence is a key feature of today's unemployment picture.

The recent CBI Gallup survey confirms that view. The results reveal a particularly optimistic attitude among small companies about the prospects for new employment. Those companies, above all, see themselves as needing to take on new employees in the year ahead.

Mr. Eric S. Heifer (Liverpool, Walton)

In view of the fact that the Government are basically responsible for the wholesale destruction of large enterprise, is it not clear that the only chance of their making progress is through small businesses? The Government are not doing particularly well in that direction either.

Mr. Lawson

I am glad that the hon. Gentleman, who often has more sensible contributions to make than the Labour Front Bench, which he once adorned, agrees with me about the importance of small businesses.

The Government's economic policies are designed to facilitate the creation of wealth and jobs. We have not hesitated to provide encouragement through the tax system where the circumstances demanded it. The business expansion scheme was introduced by my predecessor. It greatly extended and improved the earlier business start-up scheme, which was inaugurated in 1981. We have been monitoring the results of the business expansion scheme. Final figures are not yet available, but the picture that is emerging for the first year of the extended business expansion scheme—1983–84—is most encouraging.

The House will be glad to know that we estimate that at least £75 million, and probably more, was raised by small businesses under the scheme in 1983–84. More than 10,000 investors have put their money into more than 400 small companies. Inevitably, the sums raised have varied enormously. About 30 per cent. of companies each raised £50,000 or less. About 60 per cent. raised between £50,000 and £250,000. A few raised more than £1 million each. Particularly encouraging is the fact that well over half the total amount invested—at least £41 million—went to young, or very young, start-up companies. The rest went to more mature, but still relatively small, companies.

The purpose of the scheme is to encourage new and expanded activity in the small firms sector, which is so vital as a source of new jobs and prospects. The full results of the survey will be published fairly shortly. One of the most important features of the scheme is that the investor, even if he invests his money through a trust, becomes the direct owner of shares in the company in which his money is invested. That gives him a direct interest in the way in which the company is managed. It means that the company can benefit from an informed and active body of shareholders who can assist the management in the effort to expand and to create more jobs.

Throughout the Conservative Government's period of office the importance of direct ownership has been a constant theme. We have enabled an extra 1.75 million people to become owners of their own homes, so that the proportion of home ownership is now more than 60 per cent. The expansion of home ownership has aroused a much broader interest in the whole concept of owning, and the privatisation programme has helped to satisfy that new demand. Whenever we have moved a company from state control to the private sector, we have provided the employees with shares on special terms. The response has been enormous. The great majority of employees have accepted the offers and become shareholders in their own companies. Owning shares has given the workers a new sense of identity of interest with their companies and a new incentive, and companies that have moved back into the private sector have invariably performed better as a result.

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

Jaguar?

Mr. Lawson

Yes—Jaguar, too.

The result has been that the work force is now able to participate directly in the success of the company. The interest in sharing in the ownership of major companies goes far beyond the companies' employees. It is interesting to note, for example, that British Telecom has already handled 1 million or more telephone calls requesting information about or expressing interest in the sale.

Even outside the privatisation programme the Government have been willing to use the tax system to stimulate acquisition of shares. That, too, has been remarkably successful. When we came to office there were fewer than 30 profit-sharing schemes in the whole of British industry. Today, there are 788—more than 25 times as many — and there are many more in the pipeline. Since 1979, more than half a million employees have benefited from approved schemes.

The result of all those changes has been to create in business managements and work forces a whole new set of attitudes far removed from the "them and us" confrontation that has bedevilled this country for far too long. Employees know that the success of their business is linked with their own efforts and that their efforts determine their rewards. That spirit has lain crushed for many years beneath Government economic planning, penal taxation and incomes policies of the type still advocated by the right hon. Member for Sparkbrook and the minority that he leads. Today that spirit is reawakened. Better motivation means higher profits, faster expansion and more jobs. It is, of course, a long-term policy.

Mr. Hattersley

How long?

Mr. Lawson

There is no short-cut. The Government's economic strategy is to create an enterprise economy that will produce prosperity and jobs for our people. The recovery is strong, the strategy is on course, and the policy will succeed.

4.33 pm

Mr. James Callaghan (Cardiff, South and Penarth)

Like others, I wish to speak about the gloomy prospect of higher unemployment and fewer jobs. Mass unemployment is a cancer, the long-term effects of which cannot be neasured. One thing, however, we know: the lost years for young men and women cannot be replaced or overtaken. Therefore, I do not share the satisfaction of the Chancellor and the Prime Minister that the economy is in good shape. Indeed, it was perhaps a measure of the Chancellor's own uncertainty that he spent so long abusing the Labour Government. Listening to the right hon. Gentleman, one would scarcely believe that the Conservative party has been responsible for our affairs for nearly 10 of the past more than 14 years. If responsibility is to be allocated, by far the greater part must fall to the extended period of office of the right hon. Gentleman and his predecessors.

The Chancellor's selection of statistics is so brazen that one watches with admiration to see to what dizzy height he will jump next. The figures that he selects and the way in which he puts them are not an insult to the House because we all see through him and we all like him and admire his agility in these matters, but they do nothing for the intellectual level of the debate that he is leading. I do not intend to bandy figures. I shall come to my conclusion straight away so that the argument can be put to rest.

In my view, the Conservative Government have done better than the Labour Government on inflation and productivity but the Labour Government did better than the Conservative Government on employment and growth. That seems to me to be about as fair an assessment as one can make. But that is not what the Chancellor came to power for. He came to power to reverse the long-term secular decline of Britain's economy and he has failed to do that. That is the measure not of the condemnation of the right hon. Gentleman—that can follow at any time —but of the problem that the country still faces. So long as the right hon. Gentleman goes on trying to shuffle off responsibility for what was not done by the Labour Government 10 years ago he will fail to face the fact that the economy is still going backwards compared with our competitors. If we carry on as we are and North sea oil begins to fade we shall sink into a shabby genteel penury in the next 20 years. That is the measure of the task facing the Chancellor and he should address himself to it today rather than harking back to some misplaced balance sheet and comparing the present situation with what happened between 1974 and 1979.

I give one illustration of what I mean. The Prime Minister said last week—I believe that the Chancellor has said the same in the past—that private investment in manufacturing industries is improving and is now 15 per cent. higher than it was a year ago. That is welcome so far as it goes, but it does not go very far. I am delighted that private investment in manufacturing industry is 15 per cent. higher than it was a year ago, although none of us can say how much of that is due to the fact that there is to be a change in the capital allowance system, which must certainly be helping to accelerate some of the new investment. Rather than trying to delude the House with that statistic, however, the Prime Minister should look further back. I make the comparison with the Labour Government merely to show the continuing decline, which is a national problem.

New investment in manufacturing is not 15 per cent. higher than it was when I was in office. It is not even the same. It is 26 per cent. lower than it was in 1979. To put it another way, for every £100 spent on new, up-to-date plant and machinery in 1979 only £75 is being spent now,. I believe that that failure is beginning to be reflected in our capacity to export manufactured goods of the type and quality required if we are to maintain our place among the foremost industrial nations. I believe that it was partly for that reason that, as we all know only too well, in 1983 we made a loss on our trade with other countries, if not for the first time in our history, certainly for the first time since the end of the war. That is something on which the House must concentrate, because this is where our future lies. At the moment, we are depending on North sea oil to keep us afloat, but our manufacturing industry is moving backwards by comparison with others, and also absolutely.

Another factor, which is too lightly dismissed, illustrates our economic difficulties. Again, I must put it personally. When I left the office of Prime Minister, a traveller going to the United States could get $2.5 for his pound, while today he gets $1.26. We are told that this helps exports, but, although it helps the export of some of the traditional goods for which we have been famous, it does not help our imports because it increases their prices.

My major point is that the Government, after nearly six years, still have to convince us not whether they are better or worse than the Labour Government, but that they are able to reverse the long-term secular decline that, if it continues, will mean that in 20 years' time this country will be ranked among the developing countries instead of among the advanced industrial countries.

Mr. Hugh Dykes (Harrow, East)

Does the right hon. Gentleman agree that the ominous realisation is affecting more and more observers of the total scene that, in reality, this country needs billions of pounds to be invested in productive new assets, both in the public and private sectors, and this is still not taking place?

Mr. Callaghan

I agree. The hon. Gentleman has anticipated the point that I would have made, although perhaps not as elegantly as he has. What worries me about this—and it must concern us all—is that the country is now, and increasingly unless we break out of the vicious circle, trying to maintain first-class social services on the back of a second-class economy, and we shall fail to do it. We shall have a gradual and slow decline.

We need a sustained improvement in competitiveness. I see no reason to depart from the general line that I pursued when I had responsibility for these matters, and I say nothing now that is different from what I said then. As the hon. Member for Colne Valley (Mr. Wainwright), the spokesman for the Liberal party, said, when today we have a much larger, under-used volume of resources of manpower skills and under-used machinery than at any time since the 1930s, we should do more to help ourselves. That is the point that the hon. Member for Harrow, East (Mr. Dykes) was also making. Higher productivity must come about and will lower labour costs per unit, but so will higher production in many cases. The Government need to change their policies to achieve this domestically, so that we can get higher production through the measures that have been set out already, and they should use their influence internationally to achieve the same ends.

The world has not yet recognised that the debt of the developing countries is the result of a broader global disequilibrium. Several million jobs in the modern industrial western world are dependent on exports to the Third world. As many as one in six of the jobs in the United States are so dependent. Import reductions by these countries, which are taking place under the influence of the International Monetary Fund, to try to put their economies straight and offset their deficits create unemployment in our countries. We must follow policies in trade and aid that will enable debtor countries to increase their foreign exchange earnings. Last year, interest payments on old loans from the developing countries to the western world were $50 billion to $60 billion in total, with the result that there was a net transfer from the developing countries to the western industrialised countries of some $20 billion across the exchanges from the poorest to the richest countries.

We must—this is where the Government should use their influence internationally —recommit the world's economic system to growth to permit a net flow of resources to developing countries and not from them. In that way, we shall both help them to overcome their dreadful poverty and help ourselves with more jobs. I do not disguise the fact that the problem is immense, and every Government have so far failed to solve it.

We are now faced with the technological revolution that has come upon us fast. A few days ago I was in Japan. With typical thoroughness, the Japanese have set up an institute of strategic research, whose purpose is to investigate, and report on, the economic and social consequences to their society of the technological changes, and what will be involved in the new, high-density communication prospects and the processing of new materials and other methods. I suggest that the Government should begin to do the same and take a broad strategic look at this problem, not just in isolation but in conjunction with other European countries. I see no prospect at the moment of any large-scale reduction in unemployment. Indeed, I fear the reverse.

I come now to the mishandling of the miners' strike. The Chancellor referred to this, and said that the Opposition should have made more reference to it. It drags on week after week, with both sides intent on a complete victory by a knockout, irrespective of the damage and suffering that they inflict. There have been negotiations in the course of which the National Coal Board has given some ground, notably to the NUM at Edinburgh, while in the settlement with the National Association of Colliery Overmen, Deputies and Shotfirers, the board shifted its position favourably towards the miners. However, we are now told by both sides that negotiations are at an end.

I was taught that the essence of negotiation was to carry one's case to the point at which one could go no further, to recognise when one has got all that could be wrung out of one's opponents, and to leave oneself a way out so that at the end one could settle honourably and live to fight another day. I do not think that either side in the present dispute gets high marks on those tests. However, the miners are a special breed of men. Danger, loyalty and dogged determination are their lifeblood. Consider what happens when there is a pit disaster. Those of us who watched the rescue work at Aberfan will never forget the way in which the men flocked to undertake the most , dangerous and difficult tasks to rescue the children and others who were buried. During the last war they volunteered for the services in such numbers that Ernest Bevin had to hold them back.

I understand Mr. Scargill's pride in the miners, even when it leads him, wrongly, to fail to condemn acts of violence and intimidation, but whatever recent events may have done to influence public opinion, the country is fortunate to possess a breed of men, and their wives, with this stubborn determination and loyalty. We have needed them in the past and we shall need them in the future. They must never feel alienated or deserted, and I shall support their struggle to maintain the life of their villages and their pride in their communities.

Two steps are now necessary, one by the Government and the other by the miners' leaders. First, I beg the Prime Minister, the Home Secretary and other Ministers to change their tone and to acknowledge the value of the men who are on strike as much as they acknowledge the value of the men who are at work. Both are equally deserving of an appreciation of the kind of men they are. If the Conservative party can never understand that, it will never solve these industrial problems.

There is a value in all miners, whatever view they have taken. It is the same stubbornness and loyalty that demands that some of them stay at work while others will not go back. Whether they are at work or on strike, I value them all. The minority possess the same qualities as those who are on strike, and we should not separate one group from the other.

However, the Government should acknowledge, clearly and precisely, in a way that they have not done yet, that the offer of large redundancy payments is not enough to revive the communities where a pit closure could bring disaster. There should be cast-iron guarantees about the programme for replacing old pits with new pits in some of the areas that will be worst affected, when new pits have been talked about but are still largely in the air. For example, it is not yet believed finally in south Wales that the new pit that has been talked about for so long will be brought into action. There must be cast-iron guarantees.

I have read the 1974 "Plan for Coal" two or three times recently because so many references have been made to it. It is couched in such general terms that it is not possible to pin everything upon the precise interpretation of every word in it. There must be a revised "Plan for Coal" which gives coal a large place in our future energy programme, as the Government say they wish. But the Government should go even further. They should sponsor exceptional and imaginative measures to offer new jobs and new hope to pit areas faced with closures so that the communities can see a clear way ahead.

The second step is for the miners' leaders to take. They must not permit the miners' exceptional loyalty and dogged resistance to be dissipated and drained away by a ragged break in their ranks. If the leadership comes to the conclusion that no more can be gained than has been already won, they have the responsibility to say that to their members and then to put it to the test of their members' opinions. If the decision goes in favour of acceptance, they will all march back together, united, with their heads held high, in an orderly and disciplined manner. That is the way for our miners and for our Government to behave. It would then be the responsibility of everyone in the House to hold the Government and the National Coal Board to their pledges to ensure a future for all those wonderful and worthy communities.

I fear that on the economic side the Government have much more to do before they can say that they have changed Britain's attitude and that we are making our way forward rather than backward. I fear also that in trying to understand the psychology of many groups of our people the Government still have much to learn.

4.51 pm

Mr. Francis Pym (Cambridgeshire, South-East)

This afternoon we have had a characteristically robust performance from my right hon. Friend the Chancellor and an equally characteristic performance from the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley). However, the rerun of yesterday has not added a great deal to the knowledge that the House already has.

I do not intend to follow the right hon. Member for Cardiff, South and Penarth (Mr. Callaghan) in his comments on the miners' strike, but I shall seek to follow him in the longer view of events which he took at the beginning of his speech.

I want to put my remarks into the broad context of the Gracious Speech, which is the subject of this debate. As the House knows, that speech is never written as a good read. It is just a programme for a Session. There are some good measures in this one and some highly controversial measures, but it is only concerned with this Session. Yet this is the second Session of this Parliament and therefore a highly significant one in the Government's unfolding strategy over the five years.

The Gracious Speech tells us little about that strategy. The only sentence that relates to it that I can find says: my Government will continue their policies of exposing state-owned businesses to competition and, where appropriate, returning them to the private sector. The process of privatisation is a continuing theme of the Government, which I fully support. But I cannot detect anything else in the speech that I would put in the strategic category. There is, of course, firm control of Government spending, but that is a sine qua non anyway.

The speeches of my right hon. Friends from the Front Bench—all admirable speeches—also told us little of the broad strategy, although that of my right hon. Friend the Chancellor was an exception. The other speeches from the Treasury Bench have dealt essentially with short-term issues, with reference in some cases to the medium term. This afternoon I want to urge upon the Government the necessity for thinking more positively and constructively about the long term. I want them to look further ahead with more imagination. I want to press them to anticipate future trends and developments more carefully and to prepare people for the changes that will come anyway. I want the Government to adjust their policies, including their economic policy, to take account of changing conditions and new opportunities, and to to stick too rigidly to their original decisions.

Let me give some recent examples of where I observe a failure to look ahead.

My party was committed to the abolition of rates and their replacement with a fairer system. About two years ago that commitment was abandoned when it was discovered that there were no alternatives that were not worse or impossible. What happened? No preparations were made for the consequences of that conclusion. No alternative plans were looked for. We got an ad hoc measure — rate capping. Yet we all know that the present system of local government finance was and is haywire. What should have happened was the immediate start of a process leading to a major reform of local government finance. That did not happen until last month. That suggests that the Government had not thought the matter through and had reacted much too late.

Debates in the House last Session revealed profound anxiety about the state of local government and the scale of Government interference. The Government seemed impervious to all those voices and tried to hold the line that all was well. It was not and it is not. Now, belatedly, my right hon. Friend the Secretary of State for the Environment has concluded that: we need a clear and dispassionate study not only of the abuses but of the underlying changes which those abuses reflect."—[Official Report, 6 November 1984; Vol. 67, c. 134.] It would have been better to think all that through before embarking on highly controversial legislation.

Those are examples from the recent past. A current example is the welfare state and its future development. I want to say at once that I welcome the extra funding that my right hon. Friend the Chancellor was able to announce yesterday. For some time three things have been obvious about the welfare state. First, there have been enormous changes between the Beveridge period 40 years ago and the 1970s and 1980s. Those changes could not possibly have been foreseen and, as a result of them, the context in which the welfare state operates today is different from the circumstances in which it was created.

Secondly, the ever-growing demands on the welfare state will continue to increase, probably at an accelerating rate. Chancellors of the Exchequer will always have an anxiety here.

Thirdly, the Health Service, which is a vital part of the fabric of our society, is not as efficient or as cost-effective as we would like it to be. In that situation it would have been wise to undertake a review on at least as big a scale as the original Beveridge commission. My right hon. Friend the Secretary of State for Social Services has set several reviews in hand. He announced them during the past year and they are nearing completion, but I doubt whether they are far-reaching or fundamental enough to be able to recommend the adjustments that may well be necessary.

In particular, we must look in a radical way at how the social services are provided. We are most unlikely to generate anything like enough economic growth to fund the scale of social services that people would like to have. There will be a continuing squeeze on resources in relation to demand. The task is to provide the best social services that we can afford in the most efficient way. Therefore, we should at least examine the feasibility of privatising some of the social services with the Government providing people in need with the resources to buy their own services. I do not say that that will necessarily provide the best answer in all cases, but I am urging a new, radical and imaginative approach that will deal effectively with the needs and problems of the future, and thus maintain the best possible welfare state. Such a review could follow on the six minor reviews that my right hon. Friend the Secretary of State for Social Services has set up. It might well take a couple of years, but that does not matter because the work should be done.

By far the most important issue both now and in the future for our people is employment. Indeed, it has been for some years. At last the Government are beginning to acknowledge the nature and depth of the problem. I applaud all the action that they have taken, especially for the young, and the new measures announced yesterday, but the Government have not yet measured up to the scale of the changes taking place, so they have not responded to them. They adhere with notable rigidity to the economic policies prepared in the 1970s—the policies that were going to create "real jobs". Indeed, my right hon. Friend the Chancellor confirmed that in his speech today. But it cannot be denied that those policies have not yielded the results claimed for them. Despite the encouragement that my right hon. Friend the Chancellor drew from the various favourable developments, they show no sign of producing those results yet. That is because those policies are being applied in circumstances that have completely changed.

As a result of the world recession and the other events, we have rising unemployment. From the outset—from the autumn of 1979, or wherever one cares to pitch it—the Government have consistently misjudged unemployment. I believe that under present policies it will continue to rise. I am sorry to have to say that to my right hon. Friend the Chancellor, who is a much greater economic expert than I am, but that is my view. However, I cannot find any business man who does not think that unemployment will continue to rise in present circumstances. The Government are reluctant to accept that and therefore, of course, their policies cannot deal with it. They expressed deep concern in the Gracious Speech but the Government's actions and response are not commensurate with that concern.

Mr. Hayes

Is not my right hon. Friend deeply depressed by the fact that in the next three years or so 550,000 jobs will have to be created to keep employment as it presently is? Does he not agree that the most responsible thing to do with the resources set aside for tax cuts would be to invest them in improving the infrastructure?

Mr. Pym

I am in much agreement with my hon. Friend but I do not want to depart from what I wanted to say to the House. My right hon. Friend the Lord Privy Seal laughs, but in the interests of the House—

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

A direct answer to that question would be revealing for us all.

Mr. Pym

I believe that if there is money to spare when the outturn comes at the time of the Budget, it would be right to use it for the benefit of the unemployed in a job-creating role.

We need a strategy that encompasses not only the present high levels of unemployment but future developments and needs. That strategy should begin from a much better analysis than we have at present of likely future trends and, in particular, the development of the technological revolution. We know that new technology industries will create some new jobs, but they will be skilled jobs. I draw hon. Members' attention to the statement made last week by my right hon. Friend the Secretary of State for Employment. He said: I am keenly aware that, even at the present level of unemployment, it is an appalling fact that we still face serious skill shortages."—[Official Report, 30 October 1984; Vol. 65, c. 1244.]

That points to a lack of forethought and a lack of strategy in the years gone by. On that basis, I do not see how it can be thought possible that the new technological industries can provide the new jobs. It is a feature of ministerial speeches that they express the view that just as the industrial revolution generated a mass of new jobs, so the technological revolution will do the same. But I do not believe that that is so, and on the basis of that statement it seems unlikely to be able to do so.

The technological revolution will also make many unskilled workers redundant. That is at the heart of the challenge that we face on unemployment. A strategy for employment must include all aspects of the problem. There is the educational element, which in itself has two aspects. First, there is industrial training, where new efforts are now being made. Indeed, my right hon. Friend the Secretary of State for Employment spoke about that yesterday. I completely endorse all that. It may be late in the day to begin, but new efforts are being made and every drive must be made to encourage such training and to increase it as quickly as possible. Secondly, the education of our children should include an element that will enable them to appreciate and enjoy greater leisure than their fathers or grandfathers knew. Unless the education system takes that into account, people will not be able to take full advantage of the marvellous opportunities offered by technology.

The strategy must also face up to the regional problems. National statistics disguise the extreme unevenness of unemployment, ranging from single percentage figures to 30 or 40 per cent. Yesterday my hon. Friend the Member for Horsham (Mr. Hordern) made a very effective speech about Liverpool. The geographical pattern spells a major problem. National averages are not much guide. What are we going to do with the cities that were created during the industrial revolution and that are no longer wanted? Do we take work to the people in them, or help the people to go to the work? Many attempts have been made at the former, with a high failure rate, but few attempts have been made at the latter, although that policy was a feature of the recovery in the 1930s. I believe that we want both and that we want a new policy to cope with the situation. Yesterday, my hon. Friend the Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) made an important intervention about encouraging activity in the inner cities.

We must also do much more work on job sharing, and find out more about people's wishes and views about dividing their working time. We must find out how they feel about the balance between time off and reduced income. It would also be helpful to know more about what is happening in other countries. The strategy must also take account of the public expenditure implications. Earlier retirement is likely to be a feature, although it is obviously very expensive. We have already spoken about more education and training. I should add that private industry is not doing enough. It is not putting enough resources into that and is not contributing in the way that it should be doing. There are also the demands for more social services, to which I have referred.

I acknowledge that that strategy will cost something, and make no secret of it. But it is worth it, because we must find a balance in the strategy between counter-inflation, measures to deal with unemployment and growth. The strategy that I have described is, as my right hon. Friend the Chancellor of the Exchequer would say, a "credible policy". I also believe that such a strategy would be much closer to what most people want. But all of it highlights the vital need for growth. Without it, our difficulties will be compounded, with social and political consequences. Thank goodness there is growth, but we should like it to be much more extensive.

The Government are right to stress the importance of a flexible and competitive economy, but by itself that is not enough. The Government have given a lot of new help to new businesses and technology, which I strongly support, but they should not be involved only with new or small businesses. Our future depends far more on the extension and development of existing businesses. It is no longer enough just to try to create the most favourable climate for them, although that remains a vital and fundamental function of Government. The world is now much more complex. The Governments of other countries are closely involved with their industries and often support them, creating distortions in the market that cannot just be wished away. Therefore, I want to see a more effective partnership between Government, management and the unions—an unfashionable view, but fashion is a poor guide here. I remind the House that my right hon. Friend the Prime Minister has spoken of establishing a new relationship with the unions after the miners' strike is over, and she is right.

I see the Government's role as strategic and supportive; positive rather than passive. Such a strategy would incorporate practical policies to reduce unemployment. That must surely include policies to remove the obstacles to employment. It will be a slow process, but it is important.

Such a strategy should have a European dimension, too. Theoretically, that should come first. Unemployment is a European problem. Indeed, it is a world problem. No vigorous attempt seems to be made to deal with it on a European basis. The same applies to new technology. Our performance compares unfavourably with that of our competitors. The United States and Japan are outstripping us easily. The only way to compete with them effectively is on a European scale. We should make a real attempt —a far more enthusiastic attempt — to tackle on a Community basis some of the great challenges that we all face in Europe.

That leads me to the Foreign Office budget and the aid programme. The Chancellor said yesterday that it has not changed, that it is still £1,870 million. Of course, with respect to the Chancellor, it has changed because of factors such as exchange rates and inflation in other countries which cannot be quantified. The amount involved seems to be between £30 million and £100 million. That is the size of the effective cut. In my view it is a great mistake. With the world in its present unstable state the cut is unwise. It is a wrong assessment of public expenditure priorities.

The Chancellor said today that his interest was in the total figure, but it is more than that. The breakdown of that figure and the priorities are important. The Foreign Office has made its contribution to containing public expenditure over the past five years, but now that has gone too far. At the same time as reducing numbers there has been a big shift of emphasis from the political to the trade side. It was, indeed, necessary to build up the trade side, but the result is that the diplomatic service proper has been thinned down too much. In current circumstances I should like it strengthened. That is not expensive.

The same applies to the aid programme. With the present deprivations and political worries in the Third world this is a time to increase our investment in those countries. That is what aid really is. Many of the countries are Commonwealth countries which matter to us.

The recent appalling tragedy of Mrs. Ghandi's murder emphasises that. Effectively, she was the leader of the Third world and a key figure in maintaining calm and stability despite all the problems and tensions. She has no obvious successor in that role. We can expect the strains and tensions to increase. At least, it would be unwise to make any other assumption. Our reaction and response should be commensurate with that.

The Government's decision in that area of expenditure is short sighted. Some of my hon. Friends do not like even the concept of overseas aid, but I believe them to be profoundly misguided. Britain has a major and unique role in the world. Britain has an influence for stability and peace that must be used to the full.

We should increase the activities of the British Council and the BBC overseas service. Not only are they excellent ambassadors for Britain, but they are excellent ambassadors for greater understanding and harmony. They are national assets, unique to Britain, which for strategic reasons should be enhanced.

Again, I note a Government decision that neglects the long term. I urge them to think much harder about that in this and all areas of policy. If they do, the present probability of a Conservative Government continuing in office beyond the next election will become a certainty. What is more, they will deserve to continue.

5.14 pm

Mr. Roy Jenkins (Glasgow, Hillhead)

I hope that the Chancellor of the Exchequer will not leave the Chamber yet, because I have some specific things to say to him.

The right hon. Member for Cambridgeshire, South-East (Mr. Pym) made a wide-ranging and far-seeing speech to which I listened with much interest. I agreed with much of it—in particular his concluding remarks, not about the return of a Conservative Government, but about the Foreign Office, our representation abroad and overseas aid. I am sorry that the Chancellor could not stay to listen to two sentences about his right hon. Friend the Member for Cambridgeshire, South-East.

The Chancellor made an effective debating speech this afternoon. If tu quoque between him and the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) could solve our economic problems, Britain would be the most prosperous nation in the world.

I cannot recollect the reputation of a Chancellor declining as sharply as that of the present Chancellor in the past eight months. In some ways, he deserves sympathy, because his reputation has declined at least as fast as the pound against the dollar, but without the compensation of a little recent rallying which the pound has shown. One wonders why that has happened. The Chancellor has many of the qualities necessary for his difficult office. He certainly has nerve and at least as great an understanding of the technicalities of his difficult job as many, if not most, of his predecessors. However, that is all vitiated by a fatal combination of complacency and insensitivity, epitomised in a passage of his speech on 30 October, when he said: Our policies are already bearing fruit. So they should, after five and a half years. It would have been a barren tree if no fruit were forthcoming after that time. What sort of fruit are the policies bearing? The Chancellor continued: We are now in the fourth year of a steady economic recovery, and I see no sign of it faltering—[Official Report, 30 October 1984; Vol. 65, c. 1180.] I shivered for the future when I took in that misplaced self-congratulation. That description of the past and prophecy for the future would be pushing things even if our production were surging ahead, if the unemployed were being sucked back into jobs and if we had one of the strongest economies in the world. In view of recent facts and future prospects, those words are almost the equivalent of Mr. Ian MacGregor congratulating himself on his handling of public relations.

There has been some mild recovery since the deep trough of 1980–81, but, taken as a whole, the first five and a half years of this Government's policy have been barren. About 2 million fewer people are at work than in 1979. Manufacturing production is one eighth down. Manufacturing investment is still substantially lower than when the right hon. Member for Cardiff, South and Penarth (Mr. Callaghan) left office—and it was not all that magnificent then, by international standards. Above all, our balance of payments on everything except oil has gone into massive deficit in the last three years. Even in 1981, despite the damaging effect of an unnecessary and unjustifiably high sterling exchange rate, we had a surplus of £500 million on our manufacturing trade. What will the deficit on manufactured trade be this year? It looks like being between £10 billion and £11 billion.

The rational basic object of economic policy, as the hon. Member for East Lindsey (Mr. Tapsell) pointed out yesterday, should be to achieve results—primarily an increase in national wealth—and not to strike attitudes.

Judged by results, the Chancellor's attempt to portray the past four years as a golden economic age looks not only wrong, but ludicrous. It casts doubt not on his veracity— which he may regard as expendable — but on his sense. The Chancellor's "set fair" view of the future is even more disturbing. What are the salient facts about the prospect that confronts us and the remainder of the world? There is the certainty of a slowdown in the rapid rate of American economic growth that has taken place until recently. Indeed, it has begun already. In annual terms, the growth rate was 10 per cent. in the first quarter of the year, 7.5 per cent. in the second and 2.7 per cent. in the third. In addition, there is likely to be a fairly determined postelection attempt to reduce the federal deficit. I accept that that is probably necessary. Super-Keynesianism by the back door, without acknowledgement in Washington, has produced a bonanza in the United States during the past few years. The size of the deficit, and its non-inflationary, non-cyclical character, makes it very different from our deficit or the deficits of the main industrialised countries, and would certainly shock Keynes.

Let us be in no doubt that the correction of the deficit will be unpleasant for Britain, for Europe and for the world. Last year, half of the growth in world trade came from the United States. The slowing down or halting of United States growth will have a far more depressing effect on Britain and Europe than can be counterbalanced by the possibility of lower interest rates. There is a real danger that without positive corrective action in Britain and Europe, the incipient recovery will force the European countries back into the recession before recovery has really begun and before it has affected unemployment totals.

Such a likely economic scenario will have still more devastating effects upon the developing world, whose countries are already suffering from a combination of very low commodity prices and a burden of debt that, on average, pre-empts about one third of their export earnings. If those earnings fell any further, the debt would become unsustainable and we could still have a major financial collapse that would lash back upon the trade and economic performances of the industrialised world.

We in Britain have our own peculiar problem of how, when the oil supply runs down, we can earn our living and achieve a tolerable balance of payments. I am not saying that the oil will run out during the lifetime of most hon. Members, but it will certainly run down, so we cannot continue to produce a massive surplus to counterbalance a massive deficit.

Dominating everything is that massive and slowly growing lump of intractable unemployment. The Chancellor's policy is to ignore that. Yet unemployment has grown by about 15,000 a month during the past year—almost 200,000 in a year. That has occurred during the steady and sustained recovery about which the Chancellor has been so lyrical. It has occurred while the world's strongest economy across the Atlantic has forged ahead at a rate that it cannot possibly sustain. When that rate is reversed, the rate of increase in our unemployment is likely to accelerate.

The hard fact is that with present policies, there is virtually no chance of unemployment falling below 3 million during this Parliament. Indeed, there is a considerable chance that if the American slowdown is not balanced by deliberate expansion in Europe, unemployment will go beyond 4 million. The outlook is far from being set fair. The outlook for unemployment is depressing. Even on the most favourable assumptions, there are additional hazards that could make the outlook not only depressing, but catastrophic. The Chancellor's complacency in those circumstances is a national menace.

What should be done to correct the position? I do not think that we can simply hope to muddle through the international debt crisis. Of course, there is a 70 per cent. chance that we might do that, but is a 30 per cent. risk acceptable? That depends not only on the statistical probabilities, but upon the consequences if things go wrong. If we were contemplating a picnic and were told that there was a 30 per cent. chance that it might rain, we might be prepared to take a risk because of the 70 per cent. chance that the weather might be fine. Even if it rained, that would not be catastrophic. But if we were about to board an aeroplane and were told that there was a 30 per cent. chance that the aeroplane would crash before reaching its destination, most of us would rapidly leave the boarding area. When assessing whether risks are acceptable, it is important to look not only at the probabilities, but at the consequences if things go wrong.

Mr. Peter Hordern (Horsham)

The right hon. Gentleman's analogy of the aircraft and the 30 per cent. chance of crashing was one that he used when the Social Democratic party was first launched. I do not know how he rates that now.

The right hon. Gentleman is asking the European Community — he mentioned this when speaking at a function last week—to expand to take up the growth that the Americans will no longer be able to provide. How does he envisage that happening when both France and West Germany are markedly reluctant to expand their economies?

Mr. Jenkins

I did not use the analogy of the aeroplane during the launch of the Social Democratic party. I used a quite different analogy which turned out to be a singularly happy choice as the SDP's angle of ascent exceeded my expectations. I shall mention expansion in Europe, but when the hon. Gentleman intervened I was dealing with international debt. I am sure that he wants me to deliver my speech in a logical rather than illogical order.

While there is a probability that we could muddle through the international debt crisis, there is a danger that things could go wrong and that there would be a financial catastrophe. The effects of that upon world investment, confidence and trade would be so great that we cannot afford to hope that things will come out right on the night. We should mount an advance international rescue operation, not unlike that mounted by the Americans for the Continental Illinois bank.

The responsibility for the present position lies partly with the banks that lent the money, partly with the Governments of the developed countries — ourselves, America and others — who encouraged the banks because it was the only way to deal with the position after the second oil price increase, and partly with the Governments of the developing countries who borrowed the money but did not always spend it wisely. There is a spread of responsibility. Therefore, some of the costs of mounting a rescue operation should be similarly spread.

The Governments of the lending countries should set up a consortium to buy risky debts — they could be identified by the bankers themselves—at a substantial discount. That would be the penalty that the banks would have to pay. The debts could then be rescheduled at a significantly lower rate of interest—for example, 6 per cent.—which the borrowing countries would be obliged to pay. It would be a costly operation, especially for the United States, but it would be nothing like as costly as the burden that would fall on the United States and other countries if they had to mount massive rescue operations to prevent banks from becoming bankrupt. The benefits that would accrue from removing that threat or menace would be immense.

Mr. Allan Rogers (Rhondda)

Will the right hon. Gentleman give way?

Mr. Jenkins

I think that I should continue.

The direct and central need—this brings me to the issue raised by the hon. Member for Horsham (Mr. Hordern) — is to co-ordinate European expansion to offset the American slowdown. The hon. Gentleman anticipated correctly what I would say. If this does not occur, world growth rates will decline and all the problems of both the poor and the rich countries will be exacerbated.

I stress the need for co-ordinated action. If one country makes a dash for expansion on its own, it is likely to get into balance of payments and exchange rate problems and hence inflation problems. That was to a considerable extent the experience of France in 1981–82.

The Community's trade is now sufficiently integrated within the Ten to make expansion reasonably safe and sustainable if it is co-ordinated. Could an agreement on co-ordinated expansion be achieved? I do not know for certain, but I know that it will not be achieved unless we try to achieve it, and Britain is certainly in a position to take a lead. Britain has the lowest percentage public sector borrowing requirement of any Community country—in those terms it has almost the lowest requirement of any country in the world — but it has the highest unemployment rate of any major country in the Community. Given the depression of the early 1980s, it may be that Britain has the highest growth potential, if it can be released, of any Community country. However, we shall not achieve expansion and we shall not encourage others to move with us in the absence of any agreement.

The House will recall that a conservative expansion plan was agreed at the Bonn western economic summit in 1978. That was aborted by the world oil price increase which came along immediately afterwards. That, at any rate, will not come again. If a plan for expansion were to be agreed, it would not be appropriate to seek agreement with the United States, which has been out of phase with us with its extremely rapid expansion during the past few years. I think that a plan can be agreed with the other European countries, but it will not be achieved so long as we adhere to the inappropriate aim of a further reduction in public sector borrowing.

Our public sector borrowing is low by international standards. Furthermore, the total weight of public debt in Britain is low by historic standards. It is barely half what it was 20 years ago, at the beginning of the 1960s, in a non-inflationary period.

I am not against some stringency in public finance. I am not against stringency, when necessary, in public sector borrowing. It is almost boringly well known that I was the only Chancellor since the war to have a negative public sector borrowing requirement, but that was in different circumstances. If the Chancellor were in his place, I would tell him that he and the Government have no chance of reducing unemployment significantly below 3 million so long as the Government adhere to their obsession with the public sector borrowing requirement, which the Chancellor is not very successful in controlling in any event. In the right hon. Gentleman's absence, I give that message to the Leader of the House.

I believe that many Conservative Members are deeply uneasy about unemployment and its consequences. They know that as long as they support such a policy they, or their party, will be responsible for having spent the proceeds of the oil spate upon unemployment benefit and little else.

I am surprised that every Cabinet public expenditure engagement is now fought out almost entirely in public. We are told that the Chancellor has won or has lost. It might almost be more appropriate to introduce television cameras into Cabinet meetings. That would be more appropriate than leaving it to civil servants to leak documents. To what does the Chancellor attribute this extraordinary publicity? Does he think that it is primarily the amiability of his character or the loyalty of his colleagues? In any event, it has achieved remarkable proportions.

Even if the Prime Minister is distancing herself slightly from the Chancellor of the Exchequer, he should not try to distance himself from public expenditure decisions on overseas aid. The Foreign Secretary is no longer the Chancellor of the Exchequer. The right hon. Gentleman is in that position, not the right hon. and learned Member for Surrey, East (Sir G. Howe). Any cut in real terms in the meagre total of our overseas aid would be unacceptable lunacy when we are trying to deal in Ethiopia with an eruption which arose from a much more widespread, longer-term and underlying problem, which is the relentless advance of the desert across sub-Saharan Africa, the destruction of the topsoil and the increasing inability of a growing population to feed itself. In those circumstances, the medium-term need for water is as necessary as the short-term need for grain. To respond to a crisis and then to implement a policy of aid reduction would be to make the repetition of the disaster more likely. That would be typical of the tactical skill and strategic sterility of the Chancellor.

5.38 pm

Sir William Clark (Croydon, South)

The right hon. Member for Glasgow, Hillhead (Mr. Jenkins) devoted much of his speech to the international debt. Many of my right hon. and hon. Friends, and probably many on the Opposition Benches, agree that it is a world problem. One of the difficulties of the world debt is the tremendous interest burden. There has to be rescheduling from time to time, and so the debt increases without the country concerned receiving any cash. I agree with the right hon. Gentleman that some concerted effort should be made to sell whatever debts have been left by a bank. The best way would be to channel the debts through the IMF or the World Bank. The World Bank, for example, could then reschedule the interest.

If, for example, an American bank has a debt of 100 units at 12 per cent. with a particular country and it sells the debt for 50 units to the World Bank—the original bank has probably already discounted the value of the security—the World Bank will have the responsibility and authority to charge a lower rate of interest. The IMF will then be able to have some control over the economies of the borrowing countries. One of the difficulties with overseas debts is, in some instances, the profligacy of the borrowing countries. That must cease.

The right hon. Member for Hillhead spoke about the topsoil structure of the starving countries. We must remember that in many instances their problems have been brought on by their Governments. Many of them have spent their economic resources on building up arms, not helping the population. I do not want to spend too much time on the overseas debt.

I am sorry that the right hon. Member for Cardiff, South and Penarth (Mr. Callaghan) is no longer in the Chamber. He rather blamed Governments for their policies of the past 10 or 15 years. It will be in your recollection, Mr. Deputy Speaker, that Conservative Administrations have never borrowed from the IMF, but Labour Administrations have. I mention that merely for the record. When the Conservative Government took over, there was $22 billion of overseas debt. Today, there is $11 billion. The Government have repaid half the debt.

My right hon. Friend should keep on the course that we have followed over the past four or five years. Many people, including some of my hon. Friends, would like more expenditure. That has been tried in many countries. We have tried it here in the past. We have tried to spend our way out of recession, and what has happened has been disastrous. One has only to look across the channel at the French economy. When President Mitterrand came to power two or three years ago, he did the same, and spent and spent. That eventually caught up with him.

One of the matters that has come out of the Gracious Speech very forcefully was the anxiety felt in all parts of the House about the scourge of unemployment. It is unfair and unreasonable of Opposition Members to say that the Conservative party has no compassion for the unemployed. It is not the prerogative of the Labour party, the Liberal party or the SDP to have compassion for the unemployed. If one considers the history of unemployment, the House will be aware that from the early 1950s the unemployment trend has been upwards.

Mr. Peter Shore (Bethnal Green and Stepney)

Nonsense.

Sir William Clark

The right hon. Gentleman can refute that when he replies to the debate, if he does.

This country may have suffered from poor management or the intransigence of trade unions and so on more than any other Western industrialised country. We have been industrially overmanned. That is why unemployment has increased and why, with the world recession, private enterprise particularly had to shed labour to stay in business. We keep talking about unemployment and what we can do to help it. The Government spend over £2 billion of taxpayers' money on the youth training scheme and other schemes. We all applaud that, but it is a deeper problem and throwing money at it will not solve it.

We should consider the position of the potential employer. I declare an interest because I am in business with various companies. We ask why an employer does not take on another man. We should study our employment legislation. Wages councils, for example, inhibit the taking on of an extra employee. Unfair dismissal procedures, the employment protection legislation and the Manpower Services Commission are supposed to be looking after employment, but I believe that they are interfering with the engaging of an individual.

The United States and Japan have been mentioned. Over the past 10 years 15 million new jobs have been created in America. Why is that? The Americans do not have any wages councils, employment protection, or unfair dismissal procedures. They allow the employer and the employee to make their own arrangements. I should have thought that we would want to do that. Over the years successive Governments have tried to regulate employment, and that just does not work. The proof of the pudding is in the number of unemployed that we have.

My second point relates to the cost of the welfare state. I support my right hon. Friend the Member for Cambridgeshire, South-East (Mr. Pym), who drew attention to the different circumstances at the time of the Beveridge report and today. The total budget for social services today approaches £40 billion. I accept that that includes unemployment pay and so on, but the magnitude of the figure and percentage of our GDP is very different from what Beveridge thought about. I agree with my right hon. Friend that we should have another Beveridge report.

I know that my right hon. Friend the Secretary of State for Social Services has set up various investigations, but I do not believe that they will be sufficiently comprehensive. I hope that I am proved wrong. We cannot nibble at this subject. There are many matters involved in the welfare state, and we hear about them daily. There are the people who go down to the south coast to live on holiday and who receive an allowance. There is something wrong with that. Foreign students come over here and take money, and then there is legal aid for foreigners. I know that such things probably do not add up to much, but they are symptomatic of the slackness within our welfare services. A proper investigation would be extremely helpful.

We seem somehow to have our priorities wrong when we deal with welfare benefits. I have never understood why a voluntary one-parent family receives better treatment than a married couple in similar domestic circumstances. Something should be done about that. It would do some of our leading clergymen good to pay a little more attention to the morality of the nation than to its politics.

The third point that I wish to make is about pensions. I must declare an interest because I am a consultant for the Life Insurance Association and Commercial Union Assurance Company. I wish to take the matter in its long term. Our occupational pensions are an adjunct to our welfare services. If we did not have occupational pension schemes, the social security and supplementary benefit burden on the taxpayer could be tremendous. The fact that people can obtain from their employer when they retire a pension to which they have contributed during their working life keeps them away from the supplementary benefit board, and consequently nothing should be done to harm occupational pensions.

There have been rumours about the "lump sum" part of pensions. The House will recollect that in many cases one can have a reduced pension by taking a lump sum which is roughly one and a half times one's earnings when one retires. That system has been in operation since 1909. It was enjoyed at first only by civil servants. It has grown ever since, and was considered by the Wilson committee when it was studying the City. The committee found that the lump sum was an anomaly but that it had been going on for so long that it would be extremely difficult to get rid of it.

There are other rumours that my right hon. Friend the Chancellor might take it upon himself to tax the income of pension funds. At the moment pensions funds enjoy a tax-free status. That means that those people who have been paying into pension funds over the years expect, when they reach the age of 60 or 65, to receive a certain sum each year based upon a formula of the number of years that they have worked, and so on. The actuary has worked out the pension on the basis of the pension fund remaining tax-free. If tax is charged, the expectations of all those who are working towards the date when they receive their pension will necessarily be reduced. It would be folly to upset the balance, because occupational pensions relieve the burden on the taxpayer.

I wholly share the Government's philosophy that people should own their own houses. We have had wonderful success in the sale of council houses because of discounts and mortgage interest relief. I hope that there is no talk of taking that relief away. I should have thought that pensions were in the same category as those measures. They are a form of saving, and we should not do anything to damage them.

The Chancellor's statement was generally well received. Although there have been some snide remarks and a few sneers, I congratulate my right hon. Friend on reaching a target of £132 billion. We can argue about the breakdown of that figure, but it was an extremely successful operation to keep to that target. I remind those hon. Members who say that our public sector borrowing requirement and overspending levels are low that next year it will cost the British taxpayer £16.5 billion to pay just the interest on the national debt. I accept the fact that that will be only 2 per cent. of our GDP, as the right hon. Member for Hillhead said, but that amount is in addition to the £132 billion. I should have thought that a cost of more than £45 million a day is one that we would not want to increase.

The abolition of unemployment must have the highest priority, and I know that the Government have taken that aim on board. Despite what some people have said, the Government are giving high priority to that aspect. We should be cautious about wage claims. It is extremely worrying that those involved in, for example, the car industry, which is just about on its feet, are to go on strike. Strikes mean only that jobs will be lost. Over the years, we have seen our car industry go downhill, simply because some trade unions have priced their men out of work.

I welcome the tax cuts. The right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) has been. involved in an altercation about those cuts. I believe that the £1.5 billion tax cuts that are promised should go into the pockets of the taxpayer. I do not like talking logically with the right hon. Member for Sparkbrook, because he gets mixed up with illogicalities. When there is a £1.5 billion reduction in taxation, why complain that taxation is high? However, when the Government say that they will reduce taxation, the Opposition say that they must not. Does the Labour party, if, God forbid, it ever regained office, intend to increase taxes so that we will hake more money to spend in the public sector and create more jobs? I am sure that that would be a recipe for disaster.

Many claims will be made about the suggested £1.5 billion tax cuts. I am sure that the Chancellor's postbag will contain suggestions not only from Members of Parliament but from people all over on how to spend that £1.5 billion. We should concentrate on taking as many people as possible in the lower income range out of the income tax bracket. In view of increasing privatisation—British Telecom, British Airways and the rest—my right hon. Friend the Chancellor should ascertain whether some of that £.1.5 billion can be used to help people to invest in that privatisation.

I believe that our economic base is firm and that we should not change course. We have a firm base, and we should build on it.

5.55 pm

Mr. Eric S. Heffer (Liverpool, Walton)

The hon. Member for Croydon, South (Sir W. Clark) was right to say that we must look at the welfare state. Everyone who is serious about the future of the welfare state knows that certain things must be done. The hon. Gentleman suggested that the welfare state should be dismantled, that the wages councils should be abolished and that there should be certain arrangements for the system dealing with unfair dismissal.

Sir William Clark

I did not say that.

Mr. Heffer

I believe that the hon. Gentleman was clearly hinting in that direction. His speech added up to an expression of a Right-wing reactionary view which we often hear from Conservative Members—all the benefits that working people in particular have gained over the years should be taken from them as a way of dealing with our severe economic crisis.

Sir William Clark

rose—

Mr. Heffer

I shall not give way too quickly or too early.

Sir William Clark

The hon. Gentleman should not misrepresent me.

Mr. Heffer

I do not think that I have misrepresented the hon. Gentleman. That is the only conclusion to which anyone could come after listening to the hon. Gentleman's speech.

One thing is clear: the economic crisis in this country exists in just about every western European country, the United States and Canada. The economic crisis is basically a product of a type of economic system. The problems in Britain are worsened because of the Government's policies. The Government have deliberately used unemployment as a weapon to deal with that crisis at the expense of the mass of ordinary people. For many years, hon. Members on both sides of the House were dedicated to Keynesian economics, but Keynesian economics are no longer sufficient to deal with the depth of the crisis.

I agree with my right hon. Friend the Member for Cardiff, South and Penarth (Mr. Callaghan) that we cannot have an expanding welfare state with a declining economy. I think that everyone recognises that that is an impossibility. If we try to have both, we end up with constant confrontation and, as has happened in some other countries, with such a severe economic and political crisis that the democratic structure is destroyed and one form or other of dictatorship is brought in. That is the reality of where we stand. We need new radical economic policies that move from either the Government's policies of confrontation or the old Keynesian economic policies. We have to move towards a Socialist solution to the economic problems of the day.

The Government have decided that the way to deal with the economic problems is through confrontational policies against the trade unions and by putting the burden of the crisis on to the shoulders of ordinary working people. They are not arguing for a redistribution of wealth.

Mr. Yeo

Will the hon. Gentleman give way?

Mr. Heffer

I know that I shall upset Tory Members, but I hope that they will stay in their places. That will then mean more time for everybody else to speak.

I should like to refer to what I think is the important issue overshadowing the debate in the House and the country at present. Clearly, I am referring to the miners' dispute, which is serious. I have never seen, in 20 years in the House of Commons, so much hatred displayed by hon. Members in the Tory party against any trade union leaders as I have seen recently in relation to the leadership of and the trade unionists in the National Union of Mineworkers.

Let me make it clear. In defending the mineworkers' leaders, I have disagreed not once but many times with Arthur Scargill, and I have no doubt that I shall disagree with him again. I am renowned for disagreeing with many people, so Arthur Scargill is not beyond the pale when it comes to arguing with people. For example, I do not agree with Arthur Scargill's view on worker control. I believe that we need forms of management by workers in big industry. Arthur does not believe in it. He accepts something that many hon. Members should take into their bosoms. He actually agrees with proportional representation. I think that he is wrong. I told him so. Arthur also does not support Solidarity in Poland or the development of free and independent trade unions in the Eastern European states in same way as I do. Therefore, I disagree with Arthur Scargill in many areas.

However, I support Scargill, the leaders of the NUM and the workers who are on strike. I particularly support the leaders because they are courageous fighters for their union, their members and working-class people who are suffering under the Government's policies. They deserve the unqualified support of each and every one in the trade union and Labour movement. They have received that support, despite what the press has tried to make out, from the Labour party. Since March the national executive committee of the Labour party has given its support to the mineworkers and urged the constituency Labour parties to raise money for the miners. That has been done on a tremendous scale, to such an extent that I heard some of the mineworkers' leaders saying that the Labour party had raised more funds for the miners in their struggle than any other body.

Last night the Prime Minister used the Lord Mayor's banquet at the Guildhall as an occasion to attack the NUM leaders. Undoubtedly it was an appropriate place for her to be. There they were, sitting there, well fed and having a nice evening. No doubt the occasion was lavish. Yet the working class is suffering poverty and misery in some areas of the country and miners are at the soup kitchens, being kept going only through the support of fellow workers who collect their pennies so that the miners can have a meal.

The Prime Minister implied that the miners' pickets were similar to the IRA. She knows that that is not true. However, if people constantly tell a lie over the years—we saw the Goebbels machine in Germany—in the end people believe that lie. That is what is happening today, with what the Government are trying to do in relation to the miners. I found to my cost that the lies and innuendoes in the press are difficult to combat.

It does not seem to cross the Prime Minister's mind that the Government's policies are responsible for the atmosphere of violence in this country. My right hon. Friend the Member for Cardiff, South and Penarth (Mr. Callaghan) made an important speech. Pointing to the Government Benches, he said that it is time that the Government changed their basic attitudes towards the miners and understood that they were decent, loyal, honest people. That applies to those who are on strike, not just to those who are working. They must be understood. But the Prime Minister does not even begin to understand them. She does not try to understand them.

Many Tory Members went to public schools such as Eton and Harrow and then joined a Guards regiment. They are very proud of being in it. They are proud that they can be part and parcel of a great regiment, fighting together for what they believe. They say "Unity is strength." Miners and the trade unionists are their own Guards regiment. They have the same loyalty to their organisations as Tory Members had when they were gallant officers in a Guards regiment. One must understand and realise that. One must reach an accommodation in the end. The Government have not done so.

My right hon. Friend said that the National Coal Board had made certain concessions. I do not deny it. But it is not generally known that the NUM has also made concessions. It has issued statements to the press saying what it has done, but not one word has been printed. I wonder why. I wonder why the NCB's statements were printed, but not those of the NUM.

We must change the atmosphere of violence. The Prime Minister has heightened the fight against the miners and the trade unions by saying that she regards trade unionists as the enemies within. She talks about trade unionists as being subversive and being ruthless leaders. It is the Government's policy of unemployment, anti-trade union legislation, extra and new powers for the police and unqualified acceptance of judges' decisions that is causing workers and trade unionists, employed and unemployed, to feel frustrated and to feel fear. It is causing an atmosphere in this country that we have never known, certainly not since I was a young lad. That worries me. I do not know where this country is going, but I warn the Government that if they continue with their confrontational policies against workers and trade unions, only disaster can lie ahead.

Some Conservative Members know that the Government's policies are wrong. They must stand up and tell Ministers, "Change course before it is too late." They cannot remain silent. When a Labour Government were in power and Back Benchers thought that their policies were moving in the wrong direction they said so. I should like to see some courage and determination from Conservative Members. They make wishy-washy, wet speeches about the economy, but they ought also to concern themselves with civil liberties and the future of our country.

I do not agree with SDP policies and, after my hon. Friend the Member for Bolsover (Mr. Skinner) was thrown out of the Chamber yesterday, it is difficult for me to have to admit that the Leader of the SDP, the right hon. Member for Plymouth, Devonport (Dr. Owen) made some good points in a radio interview this morning, along the lines of what I have been saying. Conservative Members ought to realise that the Government are increasingly in a minority position over the miners' dispute and the general drift of affairs in this country.

I have been involved with many strikes. People have to know when to strike and when to go back. They have to know how far they can go and how much they can achieve. They must not allow their forces to be so dispersed that the future of the organisation is put in jeopardy.

I once had to tell thousands of workers who had been on strike for six months over the dismissal of myself and five other senior shop stewards, "Go back, brothers. We will not win this one. March back onto that site as a group and elect your new stewards immediately." That was difficult for me, but I knew it had to be done.

I do not believe that the miners are in that situation, but we must remember that they must be supported by the Labour movement so that they can come out of the dispute with an honourable settlement, in the interests of themselves and their families and in the interests of the people of this country.

I ask Conservative Members not to be too keen on jumping into confrontation. Let us all seek a proper solution that will benefit the miners and their families, help the fight against unemployment and ensure that the trade union movement maintains its unity and strength in the face of future moves by this anti-trade union Government.

6.13 pm

Mr. Michael Marshall (Arundel)

If I do not take up the theme of the hon. Member for Liverpool, Walton (Mr. Heffer), it is not because I think that he has not raised important issues or because I do not respect many of his views. However, when he said that the NUM had made concessions, he did not mention the condition on which the union continues to insist—the maintenance of all pits, however uneconomic. I suggest that when the hon. Gentleman was a trade union leader he would never have imposed such a condition. That claim by the NUM differentiates the present dispute from any other industrial dispute that is likely to take place in this country.

However, I agree with the hon. Member for Walton that the review of the welfare state is important. I am glad that the issue was referred to by my hon. Friend the Member for Croydon, South (Sir W. Clark) and by my right hon. Friend the Member for Cambridgeshire, South-East (Mr. Pym), who also referred to new technology. I wish to concentrate on those matters and I shall, therefore, leave aside the mining dispute for today.

I remind the House that this Government is the first for 20 years to face the prospect of a second full term of office. I especially welcome the fact that my right hon. Friend the Member for Cambridgeshire, South-East took a positive and constructive approach and drew attention to the medium and longer term.

The fact that I have a pamphlet coming out tomorrow which attempts to show that 3 million jobs could be produced by the end of the century will not prevent me from advancing some of those ideas today, because I should like to attract the interest and support of hon. Members on both sides of the House.

The pamphlet sets out actions that could be taken by the Government and by industry. I shall concentrate on the role of the Government, and I am glad to see my hon. Friend the Minister who is responsible for the Civil Service on the Front Bench, because I have some points to put to him. The ideas that I am putting forward are not only my own. My co-authors are a computer consultant and an industrial journalist, so our work over the past two years has been fairly widely tested.

In putting forward arguments about the wholesale embrace of new technology, I take head on the frequently-expressed worry that new technology will lead to net job losses. I do not believe that that will be the case, but there is a difficulty in quantifying where the continuing change in moving from old to new technology will occur. Our objective of 3 million new jobs by the end of the century is realistic and is spelt out in more detail in the pamphlet.

We have to accept what my right hon. Friend the Member for Cambridgeshire, South-East called certain inevitabilities. He was right to draw attention to the fact that shorter working lives, shorter working weeks, earlier retirement and a society in which people live longer will present challenges, but also opportunities. The United States and Japan have come to terms with the needs of the service industries, and this country could do much more in that regard.

For example, let us consider the role of the Government as an employer. They have shown little imaginative thinking in getting away from the nine-to-five mentality. Surely it is ridiculous that the majority of people who wish to get help and assistance from the DHSS, the Inland Revenue or electricity or gas offices have to find time during their working day to visit the offices where such help can be provided.

With the adoption of new technology, it should be possible to move to staggered working hours—which may involve debates on flexi-time, job splitting, part-time working and so on—and the Government ought to be able to take a lead and reassure those who might be worried about the introduction of new technology and more flexible working. New technology, leading to the provision of services out of hours and at weekends, would not only help the public and improve the relationship between the public and the instruments of government and the nationalised industries, but provide better job opportunities, because there is evidence that people are prepared to view sympathetically the opportunities that a more flexible working pattern would allow.

My next suggestion is directed towards the Department of Trade and Industry and particularly to the information technology interest in the Department. The question of cable television is still most important. It is worrying that much of the earlier enthusiasm has died away. There have been problems, but I believe that they could have been overcome. The question of establishing interactive television, which is the key element in building on many of the social service and service industry aspects of this development, is still important. I hope that the Government will rethink the question of pay-per-view, because that is the only way in which the process can be accelerated within the private sector. In the public sector, the use of interactive television should be considered as a cost-effective way of providing an additional service.

Secondly, there is the question of copyright. I believe that within two years we must extend to computer software and all forms of electronic publishing the copyright protection already enjoyed by videos. If we do not, pirates may decimate a substantial proportion of that important industry, which offers important export opportunities and provides the background for British software skills.

Thirdly, the creation of small businesses is important. The time has come for a more imaginative look to be taken at the planning laws. The idea of working from one's own home should be fostered in the most direct way. I am thinking about planning laws which inhibit people from working at home at a time when the microcomputer society provides opportunities for many home-based, one-man businesses or partnerships. In such an area, the way ahead could be shown by Department of the Environment circulars. There may not even be any need for legislation.

There is also the wider question of industrial and commercial estates where the laws frequently forbid people from living in industrial premises. In the case of non-polluting businesses in residential and industrial areas, some flexibility would be of help.

There are enormous opportunities for helping pensioners and the disabled. The Department of Health and Social Security has done some work on the question of bulk purchasing, but a certain amount of money could usefully be spent on research in this field. More could be spent on considering the kind of equipment which could provide manufacturing jobs and export opportunities. It is time for further consideration of these matters. For instance, I think of the use of robotics in providing artificial limbs not just for those who are usually considered to be severely disabled but for those who, as they get older, could use such appliances in their own homes.

There have been developments in recent years in the provision of sheltered accommodation. We could assist the process by doing nothing — by not chopping and changing in terms of the impost of taxes and other legislative burdens on such developments within the private sector. The public sector also has an opportunity to develop purpose-built facilities in sheltered accommodation, including such equipment as I have mentioned, and using robotics and modern information technology to provide services for those who live in such accommodation and to create further industrial activity.

Turning my attention to what the Chancellor can do in such matters, I should like to reinforce his enthusiasm for the shift from direct to indirect taxation. We should be willing to face the more unpopular aspects of this shift when we consider the opportunities which the Chancellor will take to collect revenue through indirect taxation. But if my right hon. Friend were to accept that it is possible to exempt some areas from indirect taxation, he could make changes which would be positively helpful. I think, for example, of not applying value added tax to repairs and extensions to sheltered accommodation, because in that case VAT is a disincentive.

Governments rarely show a propensity to rethink policy once it has been announced, but my right hon. Friend should be flexible and when he pursues his shift from direct to indirect taxation he should be responsive to the benefits which that shift could bring with it.

One step which my right hon. Friend could take would be to raise the VAT threshold. The last uprating did no more than keep the figure below the recent increase in inflation. A VAT limitation of £30,000 would be helpful to small businesses in some of the areas which I have mentioned.

The Chancellor should look urgently at the question of the tax allowances which could be provided for the average user of a number of services. I am particularly interested in bringing the black economy back into the world of legitimate trading. My proposal on VAT would assist with that process. It is nonsense that enthusiastic —or unenthusiastic—amateurs such as myself should be left to tackle do-it-yourself jobs when we could revive and legitimise the work of craftsmen. There is a market for their skills, yet in many parts of the country it is difficult to find such help, particularly for the elderly. The figures show that there are substantial numbers of people who have sufficient means to seek such assistance and who are made increasingly anxious by their failure to get such work done through the welfare state.

I accept the fact that my proposals would involve a certain amount of rethinking and a certain ability to look ahead. My right hon. Friends will know the terrible sinking feeling which one suffers when the process of legislation, stretching into the months ahead, seems to block any opportunities for new thinking. However, because for the first time in 20 years we have a Government with a prospect of completing two full terms —this is an uncertain world, and I choose my words cautiously—we should be thinking now about new ideas and about the medium and the longer term. We have a reforming Chancellor, and a Prime Minister with an enthusiasm for harnessing science and technology. They should encourage their ministerial colleagues to move in these and other ways towards the reform of the welfare state and the wholesale embrace of the new technology.

6.27 pm

Mr. Robert Litherland (Manchester, Central)

Nothing that I have read in the Queen's Speech and nothing that I have heard in the autumn statement, in yesterday's debate on industry and employment, in the Chancellor's speech today or in this debate will be of any consolation to my constituents. The Government's past, present and future economic policies have nothing to offer the major inner city areas such as Manchester except continued decay. The city and its neighbouring areas have felt the full impact of the long and bitter economic depression, and our manufacturing and industrial base has been laid to waste, never to be revived.

We have passed through depressions before, but this one is different. This is not a question of the peaks and troughs of the trade cycle. Workers used to be laid off because of temporary overcapacity in the production of goods, and the machinery and the factories lay idle until there was an upturn in the economy and labour was required again. Then the word would go along the grapevine that the firm was taking on labour again and that if one went down to the factory gates there would be the chance of a job. That happened in the 1930s. Factories that were closed because of over-production had laid men off. There were gangs of men at street corners with nothing better to do than kick an old football around. However, the factories remained. They were still at the end of the street. The skills remained in the hands of the workers and the machines were still in the factories. Then the whisper would go around, "They are taking men on." Engineers would go to the factory gates and be offered jobs.

Those days have gone for ever. When a firm closes now, it closes for good. There are no more whispers on the grapevine that jobs are available and that firms are offering people their old jobs. Livelihoods are also lost for ever. The labour and the skills are no longer required. It is not that they are no longer needed. They could be put to good use, providing much-needed facilities and a higher standard of living for all. The powers-that-be, however, decree otherwise. The worker is humbled by the might of high finance and the money manipulators—that is where the real power lies. With a Government such as this who champion the few who control the system, what earthly chance is there for the unemployed, especially in my constituency?

There is no chance for workers while we have a Government who, without conscience, introduce monetarist policies and laws to crush organised labour and to shackle trade unions. Is it any wonder that millions are on the dole and that there are many others who live in daily fear for their jobs? In Manchester, unemployment has increased to record levels. Although there are no seasonal factors which make more adults and school leavers unemployed during September and October, the increase in unemployment has been higher than expected. Nothing that the Chancellor said yesterday or today will help to reduce unemployment.

Figures for the travel-to-work areas around Manchester are farcical as they do not show the true picture of high unemployment in the inner city. There is 51 per cent. unemployment at one office in Moss Side. The city planning department has shown that 34 per cent. of men in part of my constituency are out of work. What prospects do such loyal workers who have given their lives to their firms have? As they say, they are bleak. They know that the firms at which they spent a lifetime are shut permanently. Firms that once had international reputations have been demolished or stand like giant tombstones, symbols of a once industrious past. They include household names such as Richard Johnson and Nephew. From its title, it was clearly a family concern. It existed for more than 200 years. It provided jobs in the area and produced some of the finest wire in the world. It was bought out by a South African consortium and was closed within 18 months with the assistance of Government grants in a so-called rationalisation programme. Workers were put on a three-day week and one day, when they returned to work, the factory gates were locked in their faces. That firm is one of many in a catalogue of closures and disasters for workers in my constituency.

Lawrence Scott was an engineering firm of many years' standing. It is now a heap of rubble. That is where the workers wanted to work but could not force their way through the huge picket line of police. The police even assisted by allowing helicopters to lift machinery out of the factory over the heads of the workers, over the roofs of the houses and over the schoolchildren playing in the playground. That was the role of the police in those days —to stop workers going to work.

The closure of such firms is felt by the small businesses that used to supply them, by shops, pubs and clubs. It is also felt by the community. But none feels it more than the workers who have no hope. I shall relate an incident that might seem humorous. After the closure of Richard Johnson and Nephew, a man walked the street in blue overalls because he did not accept that the firm at which he had worked since he had been a boy of 14 would never reopen. He is now in his fifties and has no hope because the firm is closed for ever.

if I could select just one industry to which the Government should apply their initiative to provide jobs and to boost the economy, it would be the construction industry. We have all heard about the further horrific cuts that were contemplated for that industry. We also heard about the threatened resignations of Ministers if the original sum suggested by the Treasury was agreed. In spite of the Secretary of State for the Environment's so-called triumph, more cuts have been made and yet more are contemplated in public sector building.

What is the public's reaction? I have received correspondence from the Group of Eight which consists of representatives of the construction industry — builders, civil engineers, material producers, designers and unions. It believes that the construction industry could make a valuable contribution to our economic revival. It wrote: The point that the Construction Industry should not be used as an economic regulator has been made to Government many times. It can only be assumed, from the lack of notice taken of this point, that Members of Parliament and Civil Servants either do not understand or choose to disregard it. It is perhaps understandable that a major force, such as the Construction Industry, should be used as a counter in political bargaining but the consequences of such an action should be seen for the folly they are. The group believes that, if money is spent on housing, highways and renewing sewers, there could be a spin-off in terms of jobs. It says that liquidations in the building industry continue. It also says that repair and maintenance are reaching critical levels, that existing building stock is deteriorating and that infrastructure such as sewers, highways and waterways are not being renewed as necessary.

Housing is needed. We have thousands of construction workers on the dole and millions of stockpiled housing bricks. It is sacrilege that millions of people should be waiting for decent housing. Th men who have left the construction industry during the past decade have probably been lost for ever. The Government should realise that all the palliatives in the shape of training courses and all the false talk about creating real jobs mean little to my constituents. They know from bitter experience that the Government's economic policies have brought only misery. People want work, and they want it now. They want their dignity back. Above all, they want a future—especially the young. Any Government who steal the future of so many young people stand condemned. They should cut the cackle, cut the pretence and give us action, not words.

6.39 pm

Mr. Terence Higgins (Worthing)

By tradition, the Leader of the House replies to the debate on the Queen's Speech. I shall begin by making some points about procedure before I turn to the broader issues which we have been discussing.

The debate is about the Queen's Speech. Although you, Mr. Speaker, suggested that we should talk about economic affairs, the debate is not on the Chancellor's autumn statement, although, inevitably hon. Members tended to refer to it both yesterday and today. It is extremely important to distinguish the debate on the Queen's Speech from that on the Chancellor's autumn statement.

I hope that we shall debate the autumn statement in the near future. If that debate is to be of high quality, and if we are to be properly informed, it is important for the Treasury and Civil Service Select Committee to have an opportunity to take evidence and present a report to the House. Hon. Members can then be fully informed about some of the detail which is not apparent from a 24-hour examination of the statement.

Last year's report of the Select Committee concluded: We hope that in future the House will be permitted to receive its Committee's report before the debate takes place, which in normal circumstances would certainly be before the Christmas adjournment. Our programme. for economic debates has become less than satisfactory, especially when, as on this occasion, the Queen's Speech and the autumn statement come together. The House must use the usual channels, and decide what the right approach to that programme should be and how to spread the major debates on the Budget, autumn statement and public expenditure White Paper so that we have opportunities at reasonable intervals and without too long gaps or too much crowding in any one period to debate major items affecting the economy and how the economy is being managed. I am worried by the large number of leaks to the press about public expenditure and possible changes in taxation. That seems to reinforce the case made in the Armstrong report for a green budget in the autumn. Hon. Members could then express their views on matters before final decisions were taken.

I wish not to make a speech about broad macroeconomic principles, but to take up some points already raised. I hope that the hon. Member for Manchester, Central (Mr. Litherland), who spoke with such conviction and compassion about the plight of the unemployed, will excuse me if I do not pursue that subject. I hope, however, to be able to speak about it on another occasion.

I shall concentrate on three matters. We must consider the question of priorities. Many hon. Members have spoken about priorities. My first point relates to the section of the Queen's Speech that states: Following the agreement at Fontainebleau on the fairer sharing of the Community's budget burden and on the overall control of Community spending, my Government look forward to the further development of the European Community. They will continue to press for improvements in the Common Agricultural Policy". The Select Committee took evidence on that. The Economic Secretary to the Treasury and his officials were helpful in putting forward the Government's position during the negotiations. We have not yet reached a satisfactory agreement following Fontainebleau. I am a fundamental believer in the importance of the Common Market and the great benefits that can stem from it, but if we think that it is going in the wrong direction we should tell the Government in the hope of bringing them and the Common Market back on the right lines.

We have the best opportunity since we joined the Common Market of bringing under control excessive spending on the common agricultural policy. We have run up against the 1 per cent. VAT own resources limit, which puts us in a strong bargaining position. The Common Market has spent more money than it has, and it is running out of cash. Under the negotiations which are continuing, the Government propose, subject to limitations, to increase the funds available, not by increasing the own resources limit, which the House has not had an opportunity to debate, but through an intergovernmental agreement. That would provide additional money over and above the amount which is covered by the limit which the treaty imposed and which the House by implication accepted. That is a worrying development.

In considering the Chancellor's statement, we must ask whether we wish to spend more money on support for agriculture, especially support for French farmers, rather than on other areas of public expenditure where there have been cuts. I am not convinced that adequate consideration has been given to that increase as against the cuts which have taken place. Therefore, I ask the House to pay attention to that matter, and the Government to take action on it.

We are told that the intergovernmental agreement will be subject to a guarantee of agreement on budgetary discipline. It is a question not merely of mechanics, though they are important, but of the allocation of resources. We are told that Common Market expenditure on agriculture is not to increase as fast as expenditure generally. I have yet to hear a convincing argument that we should spend more on agricultural support in the Common Market. The Common Market has accumulated vast surpluses of agricultural products. That is extremely wasteful. It is difficult to see how the guarantee of budgetary discipline will work when the system of agricultural support is open-ended. We must consider the proposals carefully. It is extremely important that the House should have an opportunity to express views on them before a final decision is taken.

I turn to the related question of the aid programme, which has been a matter of controversy during the past 24 hours and, indeed, for longer than that. I am worried that we are accumulating huge surpluses at considerable expense. I tried to get figures for the cost of storage. The annual cost for cereal items is about £35 a tonne—that is probably a minimum figure. It is doubtful what will happen to those surpluses. They may be sold to the Russians at a greatly reduced price. We must consider whether it would reduce public expenditure if, instead of storing those surpluses indefinitely, we shipped them overseas. We may save money that way, even allowing for the cost of transport. A charitable organisation quoted the price of transport at £40 a tonne in a 10,000-tonne cargo ship. That is not the cheapest way to transport goods. If the surpluses were transported in a cleaned-out super tanker, it would be cheaper. On an annual basis, the cost of shipping surpluses would be less than the cost of storage.

I am worried that there is not sufficient co-ordination between the Foreign Office, with its aid programme, and the Ministry of Agriculture. There is scope for savings in public expenditure while meeting the understandable anxiety expressed throughout the country about aid to developing countries.

Watching the television, it is easy for all of us to feel an upsurge of emotion. It is much more difficult to fight the battle for a more rational long-term policy on aid and agricultural surpluses. The problems of the Third world will not go away. It is often argued that shipments of grain will put local producers out of business, but there is no way in which people in many of those countries will ever be able to pay for grain on a commercial basis. The overall picture is very worrying. It requires careful analysis and co-ordination among Government Departments which, alas, does not seem to be happening at the moment.

The ambiguity of the Government's position on aid in the past few days has been unfortunate. It is very odd and most worrying to be told that it all depends on the decisions of the Foreign Secretary and what other cuts he decides to make. As we all know, the Foreign Office has a very small budget. Unlike the Ministry of Defence or the Department of Health and Social Security, it cannot lose huge sums and barely notice. As soon as the Foreign Office is caught by the cuts, it is in a very difficult position. If it is to maintain its basic tasks of diplomatic representation and so on, it has to cut some other item. It may be the overseas aid programme or the BBC overseas service, on which the House has expressed clear views in the past.

I believe that there is a clear case for the Treasury and the Government in general to distinguish the main functions of the Foreign Office from overseas aid and other items. I strongly support the Chancellor's efforts to cut public expenditure, but unless such a distinction is made those efforts may lead to some very foolish decisions. I hope that progress can be made in co-ordination between Departments and the assessment of priorities.

On a quite different subject, the Government seem to be making greater efforts and assessing the priorities correctly. I refer to drug abuse, drug trafficking, and so on. I am glad to see that in this case the Government are not making cuts but spending money to tackle a problem which is a very great danger to this country. One has only to visit the United States to be aware of the constant fear of many parents that their children may become addicted to drugs even at school at the age of 10, 11 or 12. So far, we have managed to avoid that, but we must not underestimate the real danger to our society.

I therefore welcome the references to these matters in the Queen's Speech and the reasonable co-ordination that there seems to be between the many Departments involved, including Customs and Excise, the Home Office, the Foreign Office and the DHSS. There is now considerable activity in all those areas. I am glad that the Chancellor has confirmed as permanent the 60 additional staff checking the illegal import of drugs and has indeed provided for a further 100. That is a great advance. I had four years' experience in charge of Customs of Excise and I know that it does a magnificent job, but it needs the additional resources. At the Foreign Office, too, more is being done. There is now a Customs officer posted in Pakistan and the Foreign Office is spending £1 million over a period of years trying to persuade people in Pakistan not to produce the raw material that forms the basis of narcotic drugs. The Home Office, too, has taken action. The Home Secretary has said that in future he will not parole people sentenced to more than five years for drug offences and that he proposes to introduce a sentence of life imprisonment. That is absolutely right for people convicted of drug trafficking. More resources are also being made available in the DHSS.

All those developments are good and show that the Government are moving in the right direction in their increased preoccupation with the problem. Nevertheless, I do not believe that the scale of the operation is yet right. The value of recent Customs hauls is far in excess of the amount being spent to try to prevent the import of narcotic drugs. Since the beginning of this year catches have included cannabis with a street value of £20 million, cocaine with a street value of £3 million and heroin with a street value of £11 million. Those sums, which would go into the cash flow of the people involved in the traffic:, are vastly greater than the £1 million being spent to deter people from growing the raw material and the other sums allocated to prevent drug abuse. A single haul may be worth £3 million. It is fine to have a further 160 Customs officers doing a magnificent job, but the cost of that is far below the value of a single haul seized at the east coast port near the constituency of my right hon. Friend the Member for Cambridgeshire, South-East (Mr. Pym). The Government are moving in the right direction, but I am not convinced that co-ordination and the assessment of public expenditure priorities are yet quite right.

In all three areas—the development of the common agricultural policy and financial discipline in the EEC, overseas aid, and the prevention of the import and abuse of narcotic drugs — more co-ordination and, in many cases, more finance are required. On the broader issue, I hope that once the Select Committee has reported we shall be able to discuss macro-economic policy, as we traditionally do. In this debate, however, I believe that it is right to bring those three issues to the attention of the House, to encourage the Government when they are going in the right direction, and to point out the error of their ways when they are going down the wrong path.

6.57 pm

Mr. Richard Wainwright (Colne Valley)

Liberal Members fully share the view of the right hon. Member for Worthing (Mr. Higgins) that the Chancellor's response on the vital question of overseas aid has not been good enough. I hope that the Leader of the House will be more responsive when he winds up the debate. In a series of written answers Secretaries of State have told the House how they intend to allocate the bulk of the sums allotted to their Departments in the autumn statement, but the Government have not told us their intentions about overseas aid. It is important that this issue should be taken up.

For a number of years I have also fully shared the view of the right hon. Member for Worthing that the form of the autumn statement is inadequate and that the House should request a green budget providing a more comprehensive picture of the state of the economy and Treasury thinking in advance of the Budget. All the matters that need not remain secret until Budget day could then be properly aired and discussed throughout the country, led by debates in this House.

I end this catalogue of agreement with the right hon. Member for Worthing by sharing his hope that, in considering the timing of the customary debate on the autumn statement, the Leader of the House will give the Select Committee on the Treasury and Civil Service the opportunity to assist the House by preparing with its usual promptitude a report on that very Complex and difficult document.

The complacency of the Chancellor's autumn statement, to which many Members on both sides have referred, has been widely attributed to a supposed desire to soothe and reassure investors before the flotation of British Telecom and to do nothing which might upset that enormous operation. There may be something in that, but I believe that two other important factors contribute to the pronounced smugness of the autumn statement.

First, this complacency reflects the fact that the Chancellor knows that he has nothing to fear from the Labour segment of the Opposition, and that was made crystal clear this afternoon. He knows that he can get away with it, as the Conservative party did at the 1983 general election, very largely because of the lack of firm and convincing opposition from the Labour party. That smugness is also due to the fact that the tasks that the Chancellor chooses to set himself are substantially irrelevant to the plight of our economy. He is playing a game with targets that may give him satisfaction but do not belong to the real world. He fixes his eyes, at present with great satisfaction, on the state of the money supply and the prospects for the public sector borrowing requirement. Both of these are, from time to time, important indicators for a Chancellor of the Exchequer, but, as the supreme targets of economic policy, they are wholly unsuitable. In our view, the Chancellor should have as his targets the three main aspects of the economy, which are the growth of GDP in money terms, the rates of interest, and the sterling exchange rate. For a Chancellor to repeat continually the idea that he does not need to have a policy or targets for the sterling exchange rate is the depth of unreality. We need targets that, among other things, have a direct and manifest relation to the rate of unemployment.

As to policies aimed directly and specifically at relieving the unemployment problem, but with other benefits as well, I draw the attention of the House to some conclusions in the recent report of the EEC Commission to the Council of Ministers. It is an annual report, published only a fortnight ago, and traditionally it reports on the economic situation throughout the Community and suggests economic policy guidelines for member countries. As one would expect from its source, the report is prepared by people who are keenly aware of the dangers of reviving inflation, and who are in no sense madcap expansionists airing some dogma of their own. They believe, and make it clear, that the time has come for some expansion and selective reflation in the major economies of the Community.

For instance, referring to the growth rate — and incidentally without reference to the particular complications of the coal strike, which is affecting our growth rate —it says: when combined with measures to increase the trend of growth of potential output, an actual growth rate of 3½ per cent. to 4 per cent. might conceivably become possible for a period … With a more favourable pattern for economic growth, it should be possible to achieve a substantial annual growth of employment … Programmes of public investment should be strengthened, especially in countries whose public finances have been adequately consolidated and where the construction sector is underutilised. That last point is clearly addressed to the United Kingdom, among other countries.

At the moment, a large number of important industries —industries that we cannot forgo—are in great danger of serious contraction because they have such slender order books. It is nonsense that industries that require teams of skilled workers accustomed to doing complicated work as teams and industries that require a high degree of technical management should be left in the doldrums, contemplating widespread redundancies because of an unnecessary shortage of orders from the public sector.

There is a danger that the House may share the Chancellor's complacency about housing, because so great were the fears that he might get away with an appallingly large cut in housing finance that there has been comparative relief at the announcement that the cut is to be just £65 million for next year. However, that in itself is a shocking reduction in a crucial sphere of public investment. The National Home Improvement Council reports that 4.3 million dwellings in England are in a poor condition and need repairs costing on average £2,500 per house. That is 21.7 per cent. of the housing stock in England; and there are many more examples and further figures for Scotland and Wales. I quote that simply as an example of a crying need in the economy that can be met at a low import cost by skilled people who are available but who are in danger of being left idle.

What perpetually seems to pervade Government statements is the idea that in some way public investment should be sharply differentiated from investment in the private sector. I do not see why that should be so, because the overwhelming consequence of an increase in public investment is orders to the private sector. There are few parts of the public sector that construct their own capital works or attend to their major projects in-house. The overwhelming amount of public investment directly means orders for the private sector. Therefore, I do not see why there should be doctrinaire stigma attached to public investment, especially by the Chancellor, who seems to rejoice in private sector investment flourishing and public sector investment declining.

The aspect of the autumn statement that we criticise most is the repeated hammer blows at public sector spending. Implicit in the words of the statement is that in education, the housing stock and many other spheres of local government, there will be reduced capital expenditure. In paragraph 1.43 the statement says: The rapid growth of private investment is likely to be offset in part by lower public investment". That is poor stewardship, as well as an unnecessary addition to the risks of even higher unemployment.

The assumed rate of unemployment for 1985–86 in the Government's publication must mean that, in addition to the high cost of unemployment benefit and of PAYE forgone, we are losing as a community at least £20 billion worth of goods and services that could have been produced by the unemployed. For the Government, with apparent equanimity, to instruct the Government Actuary that he must account for at least 3 million unemployed for the financial year 1985–86 is a dreadful admission of failure.

I despair most at the Government's unwillingness to accept any real responsibility for the unemployment position. It is against that background that my right hon. Friends and I, and our friends in the SDP, will vote for our amendment tonight.

7.9 pm

Mr. William Cash (Stafford)

The economy will be judged not by what we say about it but by its performance. The words "output" and "productivity" do not merely mean producing things, nor just a return on capital or labour. They contain elements of all those but require the added yardstick of efficiency and effectiveness. In addition, innovation, competition, marketing, advertising, production engineering, quality control and design, the practical application of new technology, including information technology, are all part of the general package of effective output and productivity. But human motivation and the enthusiastic interest of those at every level in British industry surely remains at the centre of gravity of wealth creation, even in the age of robotics.

Output and productivity of the highest quality of goods and services which people want and need and buy so that profits can be made to finance new investment, pay justifiable wages and create more growth, combined with the remarkable and successful policy of the Government in containing inflation, must be a first priority in the economy today, accompanied by the incentive to achieve it.

Money to pay for reasonable public expenditure and wages and to help those in need cannot be conjured out of thin air, nor can companies, including those which have been privatised, survive and prosper unless we are competitive and successful in world markets with a firm domestic base. That means that we must sell more and better products and services than our rivals abroad, including the United States and Japan. That is a matter of great importance in my constituency of Stafford which includes important exporting companies such as the General Electric Company, British Reinforced Concrete, Universal Grinding and Evode.

What we lack in the availability of those natural resources which we have to import we must make up for in the quality of what we produce and in keeping to delivery dates, in reliability and design. We no longer dominate the routes and rules of international trade as we did in the days of empire. Pure free trade was then more of a possibility because we exercised control in so many parts of the globe. Today there is much more of a tightrope for British industry. We live by what we sell, but mere output or productivity, unrelated to quality and to what is needed or in high demand, will not enable us to pay our way in the world.

That brings me to the connection between incentives and motivation and the efficient production which must lie at the heart of our economy. We have a responsibility to future generations to develop our longer-term economic strategy on a basis which maximises the advantages of North sea oil but does not wholly rely upon it.

The skills, labour and inventiveness of British workers and management in businesses large and small are no less capable of being stimulated and revived today than ever before, but they need personal motivation and tax reductions throughout the work force from top to bottom, from the shop floor to the board room, so that there is an enthusiastic, real and personal interest in producing and selling high quality goods here and abroad. Therefore, I greatly welcome the Chancellor's determination to stay on course and to keep inflation down while allowing room for further tax reductions so long as they go across the board.

We often look across the world to Japan. We blame our management and exporters and the world recession but Japan too imports a vast amount of its manufacturing materials. Japan's level of advanced technology and use of the microchip put us to shame. The microchip, with which labour has to compete in the present day, can be a potent source of new, small and larger businesses unless we allow the Japanese to dominate the market entirely. We must encourage mobility in our work force with incentives to train and to acquire skills in that sphere.

Education for schoolchildren and for school leavers and retraining schemes in the new technologies are being provided by the Government. The problem is that too often the opportunities are not taken up, or we find that dreadful sense of pointlessness which characterises so many young people these days and which they seem to acquire at school.

Greater emphasis must be placed on communicating the practical value of those opportunities and schemes. We need to be less on the defensive and to acknowledge that we live in difficult times with a significant change, as in the 1840s, in the nature of our economy and employment. Over and over again in past centuries we have as a nation faced up to that challenge and won through. I have complete confidence that we shall do so again, providing that we give those to whom the challenge is ever present the incentives and encouragement which they need to make the challenge a reality, and, in so doing, reduce not only taxation but the deadweight of over-regulation. I say "over-regulation" because some regulation is necessary, but our tax laws must be comprehensively reviewed to put emphasis on the making of profits rather than losses so that we can produce financial advisers rather than tax avoidance experts.

I am glad to note that the Chancellor has tax reform in hand. We can and must look across the Atlantic and learn some lessons from the United States in that area. The sheer volume and complexity of our statute book, compounded by subordinate and EEC legislation, is in itself a disincentive to enterprise and the creation of small businesses.

We need a radical review of our legislation to make it more responsive to people and simpler to understand and to apply. There is simply too much of it, and we underestimate the impact that it has on our economy and on the cost that is involved for public expenditure and for public administration. What people do not understand they may be inclined to disregard. That has dangerous implications for the rule of law. The black economy is not a healthy development; it is enterprise driven underground. Nor do I subscribe to Truck Act perks such as substitution for real pay with freedom to choose what to do with it.

The sum total of our economy is the efforts of the people. If productive effort is rewarded by lower taxation and the creation of new businesses, with lower interest rates, buttressed for the time being by North sea oil as we move from the older to the newer industries and services and invest in training and skills relevant to future employment, we could emerge by the end of the decade with lower unemployment.

With lower inflation and lower and simpler taxation, the pay packet will be larger and there will be a constant reminder of the relationship between pay and effective productivity and output. Of course, there is a real connection between wages and inflation, but lower taxation throughout every level of industry is the key incentive to containing wages reasonably and to increasing profitability and competitiveness. Lower taxation means higher real wages for more people in more businesses.

We need to relate wealth creation to what people do and think at work. The Third world indebtedness and the world recession make that problem more acute and the need for a practical response at home becomes more important. We need to encourage in our schools and elsewhere a new attitude of mind towards work. We can and must restore the confidence of those in the economy who produce the wealth, and we must provide every incentive to make that happen.

7.19 pm

Mr. Tony Lloyd (Stretford)

Perhaps I have one thing in common with the hon. Member for Stafford (Mr. Cash). I, too, have a GEC plant in my constituency.

Conservative Members' speeches have given the debate an air of unreality. Earlier, I listened to the Chancellor of the Exchequer's almost disgusting complacency about the state of the British economy. He seemed to be saying that, instead of our being in the midst of the most profound economic crisis to have occurred in the lifetime of almost every hon. Member, we were on the verge of the dawn of a new British economy. If the right hon. Gentleman is right, he is talking about an economy that exists only in very selective parts of the country or just in his own mind. If he came to the north-west or to the Manchester area, about which my hon. Friend the Member for Manchester, Central (Mr. Litherland) has spoken, he would find, for example, that one in three of my male constituents are out of work. Half of those men, or some 17 per cent. of the total, have been out of work for more than a year. In Moss Side, one out of every two adult males is out of work. They do not believe that this economy is on the mend and they show no sign of believing that there is a bright future for them.

The hon. Member for Stafford spoke about the disillusionment of youth, but if a generation of children is brought up with literally nothing to look forward to—not even the end of the day, because they go home to poverty and to a future without prospects—it is not surprising that they should show the signs of apathy and disenchantment that he saw in our schools. That is the reality for many children in our inner-city areas and it is not confined to the north of England.

But the tragedy for areas such as the north is that they have become increasingly marginalised within the economy. We are now treated as economic residuals. When Conservative Members say that Opposition Members have no monopoly on compassion for the unemployed, their words have a hollow ring. Whatever their views may be about the intellectual undesirability of unemployment, we at least recognise it as something that concerns people and as something that therefore conditions the policies that we are determined to put into practice. This Government's policies do not recognise in any way that unemployment is a problem. It is something to be regretted and that can be calculated by looking at the number who are out of work.

In my area we do not even mind so much about new jobs. Often we would like simply to hang on to the jobs that we have. My constituency once housed the biggest industrial estate in the world, Trafford Park. Even now, under this job-creating Government, 19 jobs a day are being lost from that estate. Indeed, many more jobs have gone during the past four or five years.

Since coming to power, this Government have been caught up in the economics of prejudice and lack of choice. They have pretended that there was only one way of governing an economy and that was a way that did not allow for any social choice. We were told in 1979 that inflation was the major problem and that it could be solved by public expenditure cuts. We were also told that tax cuts would revitalise the British economy. By cutting public expenditure and squeezing the economy into abysmal poverty of opportunity, the Government crushed inflation but at the same time discovered that there was no room for those tax cuts.

Perhaps I should congratulate the Government on their learning facility, because we now hear that they can no longer justify talk of tax cuts as an automatic solution, albeit they are still part of the Chancellor's package on a much more modest scale. Instead, we hear exhortations about wage cuts for those who already bear the brunt of the economy.

At GEC in my constituency 200 people are on strike, many of them because they are paid about £80 a week. That is a disgrace, given the work that they do. Their wages do not bear comparison with those in similar industries in the area and they have not had any pay increase for two years. If the idea of wage cuts worked, that factory and factories throughout the north, where labour rates are lower than in the south, would be bristling with economic activity, but as my hon. Friends the Members for Liverpool, Walton (Mr. Heffer) and for Manchester, Central have said, that is not happening because wage cuts avoid the real question. It is interesting to note that the managing director of GEC, Lord Weinstock, had an income of more than £500,000 last year. Although his work force had no increase, he received an increase in excess of 15 per cent.

I would be the first to agree about the need for a new Beveridge report, but we also need to look at the real problem of the maldistribution of income and wealth in our society, in which the disgustingly rich exhort those on poverty wages to take even bigger cuts. That is the reality behind the Chancellor's exhortations to cut wages.

The Government do not recognise the real problems, or their total failure to provide demand within the economy. Even the Manchester chamber of commerce has come out with a report suggesting that about 44 per cent. of the firms sampled had a capacity utilisation of less than 90 per cent. Clearly, nearly half of the firms are waiting for the Government to put some demand back into the economy, as that would then produce jobs as well as goods and services for consumption by ordinary people.

Instead, the Secretary of State for Employment yesterday said that the level of demand was extremely enouraging. He said: The problem is the capacity of British industry to compete with overseas suppliers and to win back demand."—[Official Report,12 November 1984; Vol. 67 c. 400.] Ironically, I might agree with him, because as the Government have destroyed many firms during the past few years and as there have been record bankruptcy levels, there will be real problems about supplying demand when demand increases. The would-be suppliers have been destroyed through the Government's deliberate actions.

The Government do not recognise the problems caused by the export of capital. In the first six months of this year, those great patriots in the City exported more than £7 billion. Not one penny of that will go directly towards creating jobs in the United Kingdom or towards producing plant, machinery or factories. Conservative Members talk about the need for investment, research and training. As I believe my right hon. Friend the Member for Cardiff, South and Penarth (Mr. Callaghan) said, manufacturing investment is about 26 per cent. below what it was when the Conservative party took power. Yet if we were to believe this Government and their glowing prospectus, the confidence of industrial investors should be sky-high.

However, that simply is not so. Often, investment in manufacturing industry is only made to enable it to tick over. We are seeing disinvestment and reinvestment overseas. That is disastrous for this country's manufacturing base.

There is an appalling level of investment in research and development, and the situation has been made worse by yesterday's announcement by the Minister for Information Technology. He has said that there is to be a cut in support for research and development projects. Indeed, he said: no further application will be accepted for: research and development projects from individual firms on standard support for innovation terms development and investment projects under the microelectronics industry support scheme and the fibre-optics and opto-electronics scheme and application, development and installation projects for flexible manufacturing systems and robots. That research and development is needed. Ironically, because the scheme was successful the Minister has said that applications will be processed within the limited funds still available."—[Official Report,12 November 1984; Vol. 67 c. 87.] Thus a cost constraint is being imposed on those valuable schemes at a time when we should be guaranteeing more money for them.

There are skill shortages even in the Manchester area. Over half the firms sampled said that there was a shortage of skilled and other labour. That is happening even in depressed areas. In areas of demand the shortage is much worse.

Since 1980 under this Government the north-west, which once relied upon the engineering industry, has lost nearly 20,000 engineering jobs. A report by the four county councils in the area refers to a mass exodus of jobs from the area. They prophesy that between now and 1987 over 100,000 people will be forced to leave the region, not because of a desire to get on their bikes, but simply because they will be driven out of the area in which they were born by the policies, lack of compassion, lack of understanding and lack of integrity of this Government when representing the interests of those who want a job. I am talking of those who have given a lifetime of work and wish to continue to work and of young people who see no future under this Government.

7.32 pm

Mr. Julian Critchley (Aldershot)

I enjoyed the robust speech of the hon. Member for Liverpool, Walton (Mr. Heffer), although I fear that he will find my speech to be both wet and windy. However, it will be made with all the authority, not of a former officer in the Guards but of a lance-corporal in the King's Shropshire light infantry.

At least all of us who have spoken this afternoon will have escaped the slings and arrows of the scene writers upstairs, all of whom have been scribbling in another place. Not for the first time have the heavyweights on the two Front Benches been upstaged by the Earl of Stockton, the last of the great men. I did not hear his maiden speech, but, from what I hear of it, it should be required reading, for my Front Bench at least.

If nothing is done to reverse the inexorable rise in unemployment, the United Kingdom will be heading either for apathy or for social disruption. Let me place that at its lowest for the benefit of some at least of my hon. Friends. Unemployment is a fertile ground for the advancement of revolutionary Socialism. Unemployment is not simply a social or economic matter, but a political one of the utmost importance.

I have no wish to re-examine the Government's economic policy since 1979. I have no wish to go over all that awful dead ground, save to say that we have heard much less about monetarism than we used to hear. Monetarism was, of course, a policy which seemed insane when it was not hypocritical, and hypocritical when it was not insane.

I do not wish to minimise the difficulties ahead, but far too often the Government have given the impression—I use those words carefully—that they do not sufficiently care about the unemployed or about the plight of the less prosperous regions of the country. That impression has been strengthened in recent weeks by the Chancellor's washing of hands—for instance, on "Weekend World" a fortnight ago.

The Chancellor should look again towards the American example. He may still believe that the only role for Government is the removal of controls and allowing markets to work better, yet he knows that the Americans have done far better than us. This, he believes, is due to the greater flexibility of United States labour markets and greater mobility. There may be some truth in that. American workers are more mobile, possibly because one part of America looks much like another, but there is more to it than that. In America the money supply was squeezed between 1980 and 1981 and 1 million jobs were lost. Constraints were subsequently relaxed and unemployment began to fall swiftly without a return to inflation. Would that we had done half as well.

The Chancellor's assertion in the July debate that the Government's economic policy had been "vindicated by events" was the most remarkable statement since Hitler was accused of having missed the bus. The Chancellor rattled out a series of figures, but by sleight of hand he was careful to start from the second quarter of 1981 and not the second quarter of 1979. He left out the sad and sinister story of the radical decline in Britain's share of world trade. The balance of visible trade, excluding oil, has deteriorated by nearly £11 billion since 1981. The Times this morning describes the Chancellor as a "conjuror". From now on, let us have more hats and fewer rabbits.

What should be done? There is no easy way. A foot flat on the accelerator would bring about a financial and trade crisis and ensure a return to inflation. However, to do nothing more than is proposed would be to risk — I quote Lord Macaulay— The wreck of laws, the confusion of ranks and the dissolution of the social order. I have two modest suggestions to make. We must have a modest further increase in Government spending. A restructuring of the national insurance contributions is needed so that they bear less heavily upon the lower paid, the elimination of national insurance contributions on new jobs, and a 1 per cent. overall cut. The cost of that would be £600 million over two years. Secondly, there should be additional Government spending on capital projects of about £900 million.

Speaking at the CBI conference, Mr. Roland Long, of International Harvester, said: The sad decline in manufacturing and rise in unemployment has been — linked and together they constitute the price which has to be paid for the Government's success in the reduction and control in inflation. Yet some of those close to the Prime Minister still hanker after zero inflation. God preserve us from them. Mr. Long continued: and there will be no substantial fall in the number of the unemployed without the restoration and regeneration of manufacturing industry. Amen to that.

Does the Prime Minister, after her many successes, wish to go down in history as the leader of the Conservative party who breathed new life into the old jibe that the Tories are the party of unemployment? I should not like to think so.

7.37 pm

Mr. Allan Rogers (Rhondda)

I do not know whether I need say anything after the speech by the hon. Member for Aldershot (Mr. Critchley). The case that needs to be put against the Chancellor and this sterile Government has been ably made.

I listened with interest to the speeches by right hon. and hon. Members on the Government Benches. We agree on some issues at least. I agree in particular about the need for drug control. More money should be spent on that important fundamental problem. It is one of our gravest dangers. I recently visited Athens and discovered that the Greeks face the same problem. It is becoming out of control in western Europe and more resources should be devoted to it.

The Chancellor's statement yesterday is fundamental to today's debate. It demonstrates that the Government have no solutions to offer. In the limited time available, I want to discuss certain parts of the Chancellor's statement and the prospects for the future of the economy.

Like my hon. Friends the Members for Manchester, Central (Mr. Litherland) and for Stretford (Mr. Lloyd), I wish to emphasise that when all the esoteric arguments in the Chamber have come to an end, the issue of unemployment is about the people in our constituencies. For those hon. Members who represent the fringe and marginal areas of Britain, unemployment is a severe problem.

I held a surgery last Saturday morning at the Lewis Merthyr club, Porth. The club is famous in south Wales, because it was the liaison centre of the sit-down strike of miners from the Lewis Merthyr colliery. They tried to save their jobs by locking themselves underground. A man of about 55 or 56 came to see me at my surgery. He was an ordinary chap, with nothing pretentious or special about him. He had served his country for five or six years in the Army, had then taken a job and raised a family. While talking to me he began to cry, which I found embarrassing. I am sure that most hon. Members would be embarrassed if a man cried. His anguish was caused by the fact that his 25-year-old son had never worked and had no prospect of working. The domestic tensions in the family had become too much for him. He was an ex-soldier who had fought, and perhaps faced death, for his country, yet he found it difficult to deal with unemployment in his family, and he cried. I had to tell him that I could do nothing for him, and the tears were not far from my eyes.

The same problem is faced by almost 40 per cent. of my constituents. I can weep for them, but I cannot offer any solutions. If the Labour party were in power I would want it to take action. I only hope that the Government can bring themselves to do something for the son of that 55-year-old man, who could only cry. The man showed me a bundle of envelopes that had contained answers to job applications by his son. There has been a spirit among some honourable, or perhaps less honourable, Conservative Members that if a fellow was on the dole, he was lazy. I remember one Conservative Member saying, "There is no problem. Get on your bike and get a job somewhere else."

My hon. Friend the Member for Stretford suggested that his constituency might lose 100,000 people. Where will they go? South Wales exported people in the 1920s and 1930s to Slough, Reading, Coventry and the other new areas. But those new areas are now facing 20 or 30 per cent. unemployment. Where will our gipsies go now? Where will my gipsies from the Rhondda go? They have nowhere to go.

People talk of the miners' strike, the problems in the mining industry, Scargill, the boot boys, and so on. I do not approve of the mindless violence on the picket lines. Some people react with tears while others react in another way. There is frustration and anger among the people, and the Government must address themselves to that problem. They are frustrated and angry because they have nowhere to go—they have no hole to run to, there is nowhere that they can hide. The miners will be out of work. There were once 53 pits in the Rhondda, but only one remains. The level of unemployment among males in my constituency is horrendous. If they are given jobs, they will work. They worked hard enough during the 1914–18 war and the last war, when they sweated to produce energy. They are prepared to work now if the jobs are available.

Never before have I known people to strike for nine months and subject themselves and their families to enormous hardship for nothing. They are certainly not striking for money. I know a chap of 54 or 55—Ron Windos from Tonypandy. I asked him last week why he did not take his redundancy money. I asked him how much he would receive. He said, "With my service in the pit, I would get about £27,000 or £28,000." I said, "Why not take it?" He said, "That would be giving my job away." That is how the miners see the strike. They are striking not for additional pay or bonuses, but because they are concerned about jobs.

If the miners could get out of the pits and work elsewhere, they would so so. My hon. Friend the Member for Ogmore (Mr. Powell) comes from my valley. We do not know of one miner who wants to go underground. Any of them who could find a decent job out of the pits would do so. There is nowhere for them to go, and that is the shame of the Government. Are they a Government for people or for profit? The Chancellor this afternoon spoke about interest rates, juggling with money and finance. He used City jargon. He did not once mention people. It is no wonder that the people of Britain are becoming angry.

It used to be said that the Tory party was happy only if there were two people chasing one job. I was brought up on that dictum. The hon. Member for Aldershot said that he hoped that the Tory party would not again be regarded as the party of unemployment. I hope for that also. I want the Government to succeed for the sake of those whom I represent.

There has been a commonality of interest on issues such as the control of drugs, because that affects everyone and his children — my children, the Queen's children, anyone's children. When unemployment becomes the concern of the middle and upper middle classes, they might address themselves to that problem. I know that I am doing a disservice to many Conservative Members who are now attacking the Government because they view unemployment in the same light as I do—a scourge. I only hope that the Government will change their mind.

The Government's record in Wales is appalling. Since 1979 unemployment has risen from 80,000 to 180,000 —from 7 per cent. to 17 per cent. The number of jobs, has decreased from 1,030,000 to 912,000 and in the manufacturing sector from 308,000 to 212,000. The number of employees in Welsh manufacturing industry fell by about one third between June 1979 and June 1984. More than 114,000 redundancies have been confirmed.

If the Conservative Government are not concerned with people, they might be concerned about liquidations, and over the past five years there have been about 52,000. Unfortunately, it is not possible to give separate breakdowns for England and Wales. That is an abysmal, shameful and shabby record. It is one from which no Government could derive pride. This is a Government of corrupt farmers selling off the seedcorn of the nation. I am distressed that the Government are eroding and destroying the tax base of Britain and that we shall be reduced to a level from which we shall never be able to recover.

I am not especially concerned about revolutionary Socialism arising from the wasteland that the Government are creating; I am concerned about the Fascists who rise out of unemployment. History demonstrates that out of unemployment rise jackbooted Fascist thugs. Recent history in Germany and Italy bears that out. I am concerned about Fascists, not revolutionary Socialists.

7.51 pm

Mr. Stephen Dorrell (Loughborough)

The speech of the hon. Member for Rhondda (Mr. Rogers) was one of great eloquence and passion. His passion has been aroused by genuine concern about the plight of his constituents, many of whom suffer from unemployment. I, too, shall concentrate my remarks on unemployment. The hon. Gentleman and I share a concern for unemployment that is shared also by many of those who have spoken in the debate on the Gracious Speech.

There is no doubt in the minds of the majority of hon. Members, or in those of the majority of our constituents, that the key issue on which the Government's record and our record as hon. Members in this Session will be judged, is the way in which we shall have tackled the problems of unemployment.

We have heard much about the problems of youth unemployment during the debate on the Gracious Speech. We have heard about school leavers who spend a year in the youth training scheme, feel that they are qualified to take a job—qualified for life—and find on leaving the scheme that there is no job for them. We have heard from the hon. Member for Rhondda about the 50-year-old who finds himself out of work, cannot find new work and discovers that, under the benefit system, he will be more or less destitute after one year of unemployment. He learns that the state will offer him no visible means of support after 12 months. My constituents often tell me that the benefit system is too generous. I tell them that if a person has been out of work for 12 months and has more than £3,000 in savings, he will be given no support by the state.

That comes as a surprise to many. Many of those who are aged 50 or more have no realistic prospect of work and there lies a concentration of the problem.

The hon. Member for Rhondda spoke about the concentration of unemployment in the regions, and he was right to do so. It is fitting that he should do so on the day when the Earl of Stockton made his maiden speech in another place. Unemployment in the regions was the issue that he made very much his own during the 1930s and many of his speeches of that period bear re-reading. All these issues come together in their most potent form when we consider the impact of unemployment on the coloured population. Some hon. Members may have seen a "Newsnight" programme that was shown a fortnight ago. It is staggering that 93 per cent. of coloured school leavers in Bradford this year have yet to find a job.

Mr. Terry Davis (Birmingham, Hodge Hill)

What colour?

Mr. Dorrell

That is a reasonable question. I am talking about the Asian and West Indian communities, and especially the Asian community in Bradford. Hon. Members have addressed themselves to the issue during the debate and it is right that they have done so.

This session is critical if the Government are to be remembered as the Administration who did something about unemployment. If we allow the Session to pass and we arrive at this time next year without having taken real action to tackle unemployment, all the other measures in the Gracious Speech will have been long forgotten and, instead, the Session will be remembered as the opportunity that the Government failed to take to reduce the problem of high and dangerous rates of unemployment.

What sort of action can the Government take to tackle the problem? I can do no better than refer to the document that my right hon. Friend the Prime Minister has taken to referring to recently, the 1944 White Paper on employment policy.

Mr. Terry Davis

Has the hon. Gentleman read it?

Mr. Dorrell

I have indeed. My right hon. Friend the Prime Minister has referred to the passage in the White Paper that states that jobs are not created solely by Government action. Jobs are created by vigorous private sector entrepreneurs and there is no argument about that on Conservative Benches. But that is not the only statement in the White Paper. Its importance lies in the contents of the first paragraph, which explain that post-war Governments will regard themselves as committed to the maintenance of full employment. The historic importance of the document can be attributed to the fact that it sets out three preconditions for succeeding in maintaining full employment. Two of the preconditions will cause no stirring on the Treasury Bench. The White Paper observed that full employment would not come if we did not pursue policies consistent with sound money and efficient labour markets. There is no argument on the Conservative Benches about that.

If the White Paper is set in its historical context, its remarkable feature is not its emphasis on the importance of sound money and efficient labour markets. The Governments of the 1930s were not conspicuous for their disregard of those priorities. It is remarkable for drawing attention to a third element which was regarded as an essential precondition to full employment, the commitment which was placed on Government to manage demand to maintain a level of full employment.

It seems that "reflation" has become a dirty word and I shall not quibble about that and whether it is the word that should be used. If demand is managed, that must mean that the Government accept an obligation in some circumstances to reduce demand if there is a danger of overheating—perhaps that is not the primary concern at present—and in other circumstances to increase demand to maintain the principal objective in the first paragraph of the 1944 White Paper, the maintenance of full employment.

Many have argued that conditions are now so different from those of 40 years ago that the strictures of the 1944 White Paper have become irrelevant. Those who advance that argument say that we need to find different remedies. Have the proponents of that argument thought through what they are saying? I cannot see any important difference which renders irrelevant the cures which were advocated in the White Paper. Some of my hon. Friends say that new technology destroys jobs and that its introduction means that it is impossible for us to use traditional techniques to create full employment. It is true that new technology, like the generations of machines that went before it, is justified because it saves labour.

No manufacturer ever put in a new generation of machinery if it did not hold out the prospect of producing goods more efficiently than before. That does not set the new technologies apart from the previous generation of technologies. Going back to the industrial revolution, the only thing that could set them apart would be if there were evidence that the new technologies increased productivity and therefore reduced job opportunities faster than the generations of machines that went before.

My right hon. Friend the Chancellor of the Exchequer yesterday published evidence which showed that productivity is improving not faster than in previous years but more slowly. If those machines are the threat to employment that they are sometimes held out to be, is it not passing strange that as they are introduced the rate at which we increase our productivity is below rather than above its historical trend? Furthermore, one does not have to look at theoretical arguments about productivity rates; there is clear evidence in the experience of the past two years, here and abroad, that adequate growth creates jobs.

The experience of the United States has been mentioned, but we do not even need to look that far afield; we can look at our experience with our modest growth rates, because even in Britain, the relatively modest growth rates that we have enjoyed since 1981 have created jobs.

Our slow rate of job creation in recent years has not been the result of the new machinery, the new technology that is supposed to put us in such a different world. It has been the result, in my view, of the slow rate of growth and not the result of any change of conditions that invalidates the prescriptions of the 1944 employment White Paper.

If it is not the new technology which renders the cures of the 1944 White Paper irrelevant, we move on to the argument which is even more improbable that the problem today is not one of lack of demand and, therefore, is not a problem of demand management.

If it is not a problem of lack of demand, that would be news to some of my constituents, many of whom are employed in traditional manufacturing industries where output is 5 per cent. down on May 1979. It is said by some that that is not evidence of inadequate demand. If it is not that, what is it? Some say that it is evidence that wages are too high. Those people would do well to read the speeches of the Earl of Stockton in the 1930s, because right through the 1930s Neville Chamberlain said that wages were too high. Right through the 1930s, the experience surely was that action substantially to reduce wages led into precisely the deflationary cycle out of which so many of the speeches of that time were designed to push us. We all recognise that if wage increases get out of control and the result is inflation, that is damaging to economic progress and job creation, but that is different from saying that the solution to today's problem is wage cuts.

The question, surely, that my right hon. Friend the Chancellor and other Ministers must answer is not whether wage cuts would in some circumstances produce extra jobs, because we can argue for a long time about that. The more immediate question is whether additional demand introduced now in techniques espoused by the 1944 White Paper would produce extra output or extra inflation. That is the simple question that Ministers must answer.

Like many of my hon. Friends, my answer to the question is clear. I believe that my right hon. Friend can continue—as I argued in the Budget debate earlier this year and in debates before that—the process which his predecessor started before the last general election, not of radical expansion but of drip-feeding the economy into higher growth rates. As he decides whether he can do that, I ask him to consider the fact that as Chancellor he has the opportunity, whether by tax cuts Reagan-style or by spending increases Labour party-style—in his terms it is relatively immaterial whichever way he does it — to channel demand, but not into the odd sectors where there is evidence of bottlenecks. No one can surely argue that there is a bottleneck in the construction industry, and if there is none what then is the restriction on channelling some additional demand into that industry in the same way as my right hon. and learned Friend the Foreign Secretary did just before the last election?

As my right hon. Friend is considering his answer to those questions, I hope that he will be prepared at some time during the course of the next few months, as he develops his Budget strategy, to put away the textbooks and technical papers and ask himself, as a reasonable man, whether it is reasonable to argue that an economy with 3.25 million unemployed people and a low and stable rate of inflation is so hidebound by capacity restraints that it must retreat next year from the dizzy heights of an underlying 3.5 per cent. growth rate in the current year—disregarding the effect of the miners' strike—to the safe and familiar ground of a 2.5 per cent. underlying growth rate next year.

My right hon. Friend the Chancellor might like to heed the advice of Mr. Jack Kemp, a possible Republican candidate for the Presidential nomination in 1988, who is reported in yesterday's Daily Telegraph. Mr. Kemp is not famous in the United States as a Liberal, but when asked what he thought the new Reagan Administration would do about the economy he said: The mandate Reagan got was for Reaganomics—growth, not cutting the deficit. Cutting the deficit is what Mondale ran on. That is, perhaps, an interesting comment on the scene that my right hon. Friend would like to consider.

My hon. Friend the Member for Aldershot (Mr. Critchley) averted to the fact that today has seen the maiden speech in another place of my noble Friend the Earl of Stockton. I should like to conclude by reminding the House of a speech about unemployment that he made in the 1930s. He referred to Disraeli who said in a famous phrase that the keys of India lay not in Kandahar or Herat, but in London. So it is with unemployment. The keys of unemployment lie not in Durham or south Wales but in Downing street and Threadneedle street.

8.7 pm

Mr. Bryan Gould (Dagenham)

I am glad to have the opportunity of following the hon. Member for Loughborough (Mr. Dorrell) because among other reasons, he has the curious distinction—if that is the correct way to put it—of being a former pupil of mine. At least in his thoughtful speech, with which I substantially agreed, he spared us what we have become far too accustomed to in recent years, and that is the experience of hearing Ministers at the Dispatch Box trying to justify and explain what has happened and what has gone wrong by the selective use of statistics.

In view of the complexity of our economy and the great panoply of statistics, it is by no means impossible for the diligent researcher, winnowing through all the available material, to come up from time to time with statistics that support almost any view. By the careful selection of base dates and the use of percentages rather than absolutes, comparing like with unlike and so on, Ministers no doubt feel that for the purposes of any debate they can produce figures and arguments which satisfy the needs of the moment. I doubt whether anyone in the House of Commons is convinced by that type of argument. We heard an excellent example of it this afternoon from the Chancellor.

First, it is easy enough to set aside those little sweepings of statistics on the margins, and to invite Ministers to confront the central importance of the maze of statistics — those about our output, trade and investment, and most of all those about unemployment. That has been done so often that even Ministers must know the truth and importance of those terrible figures.

Another way of rebutting that statistical sleight of hand is open to any member of our society who looks around him in Britain today, particularly if he is able, by virtue of foreign travel, to compare the way in which other societies are confronting similar problems. Inevitably he will conclude that Britain is poorer, scruffier and shabbier. It has failed to arrest its economic decline and has started to run out of faith, hope and confidence in itself. It has a society that is turning in on itself, demanding sacrifices from those least able to make them. It has a lower level of public services and it does things worse than other countries. After looking around the world, I find that it is a society that is almost a byword for failure.

That is the reality that lies behind the Government's false claims, the Prime Minister's vainglorious posturings and the Chancellor's complacency. It is a reality that Conservative Members know as well as Labour Members. That is why we are increasingly hearing a chorus of demands from Conservatives for a change in policy.

The "ship of state" is a familiar metaphor, but our ship of state, under its present command, is like an aging passenger liner whose paint is peeling and whose engines are belching smoke and on which we are heading for the rocks. On the bridge is the Prime Minister, the captain. She appears to be unaware of us. She is enjoying wearing the uniform. She is told by her mate, the Chancellor, not to worry about the impending disaster—the fact that we are heading inland instead of out to the open sea. He says, "Don't take any notice of the course that has been plotted or of the facts and figures that show that our speed and direction are leading to us running aground. We are, believe it or not, heading for the open sea, and the last thing we must do is change course, repair the engine or provide some more fuel."

The Chancellor says, "If we happen to run aground, there is an easy remedy. We have been using that remedy for five years now, and no one so far has been worried too much, at least on our side. The remedy is that, as we get into shallow waters and the disaster is impending, we merely jettison a few skilled crew and a few essential bits of equipment. We shall float off the sandbank—don't worry too much about it. The last thing you must do is listen to the creaks and groans from the shuddering ship, the cries of pain and the sounds of conflict from those on board." That is the reality of the Government's economic policy.

There is a growing realisation not just among Conservative Members but throughout the country—not least in industry—that the Chancellor is finally running out of options and excuses. I believe that the Chancellor senses that also, and that is why he is scraping the bottom of the barrel. He knows that his somewhat quixotic interpretation of success stories around the world, not just in America but in many diverse countries such as Australia, Sweden, Japan and Austria, will not convince many people. The Chancellor, however, persists in the unlikely argument that their success is due to real wages. He seems unaware of the fact that if he succeeded in convincing people that that is the course that we should follow, he would announce the final denial of hope and confession of failure.

The Chancellor's problem is that he continually says that any attempt to grapple with unemployment will be self-defeating. In his own terms, that is true, because he postulates a completely unchanged monetary polciy. As long as the Chancellor's monetary targets remain sacrosanct, there is no escape from increasing unemployment. What is true of the remedies that the Opposition would pursue is true also of the remedy to which the Chancellor points. No solution will be found by cutting real wages if the Chancellor does not insist on adhering to the other aspects of his policy.

Let us assume that the Chancellor could persuade people that cuts in real wages were necessary. I concede immediately that the right hon. Gentleman is right to say that we must improve our international cost competitiveness, which has declined substantially under this Government, despite ministerial rhetoric about the constant need to improve. Incidentally, it always strikes me as odd that Ministers continually disclaim responsibility for the shocking decline in our manufacturing trade performance, because they say that it is the inevitable consequence of North sea oil; yet, at the same time, they argue that we must improve productivity and competitiveness, force down wage costs and so on. What would be the point of achieving those difficult changes if no improvement in our trade performance were possible?

Such failures and lapses of reason underlie much of the Chancellor's current policy. If the Chancellor were to try to resolve his difficulties by forcing down real wages, almost certainly he would not succeed. If 3 million-plus unemployed are not sufficient to force down wages, one shudders to think how many more jobless we need and how much more social bitterness we have to endure before wage rates fall. Even if the Chancellor could, by some miracle, force down wage rates, how many people would believe that he could do it sufficiently quickly and effectively to close the gap on our competitors, whose unit wage costs are falling because of expansion, not contraction? The Chancellor concedes that their wage unit costs are falling. It defies all credibility to believe that we could force down our wage costs by contraction and compulsion to a degree sufficient to match the effort made by our competitors and catch the train that is leaving the station.

Let us go further and assume that, despite all those difficulties, the Chancellor is able to cut real wages. The Chancellor says that, if only real wages had been 1 per cent. or 2 per cent. lower, many hundreds of thousands of jobs would have been created. From where would those jobs have come? There would have been no increase in effective domestic demand, no stimulus to output or additional resources to finance more jobs. Nothing would have happened in the domestic economy that would conceivably have provided the resources to provide a single extra job, simply on account of cuts in real wages.

The Chancellor might argue that the improvement in our cost competitiveness would create new export markets and that that is where the increase in output would come. The Chancellor must know that, with an unchanged monetary policy, any improvement in competitiveness to improve our balance of payments would be immediately counteracted by a rise in the exchange rate and negated by an appreciating rate for the pound. Any temporary benefit to investment, output and employment would be quickly stifled. That would be entirely in accordance with the Chancellor's stated policies. There would be no solution to the problem. Not a single extra job would be provided from domestic demand. There would be no solution from increased demand from abroad for our goods.

Where will the Chancellor find the increased resources to create the additional jobs? He certainly cannot look to a further fall in the savings ratio, because that is already at its lowest point since 1971. Even if the savings ratio fell further, the Chancellor would find that, by his policies, he had achieved no solution. He would still have had to fund the PSBR and pull in funds from abroad by raising interest rates, and that would mean dearer money and a higher exchange rate. So again the Chancellor would square the circle and box himself into a contractionary policy.

The Chancellor's predicament is increasingly recognised. That means that the days of the Chancellor and his policies could be numbered. It is significant that he lost his battle in the Cabinet a week ago and that he was able to sustain his position only by virtue of what all the commentators called creative accounting and relying on windfalls. It is significant that he did not, so one is led to believe, enjoy the full support of his own Prime Minister. The example of the American economy is simply too overwhelming to be ignored, not just in economic but in political terms. Within a year, when we shall be halfway through this Parliament, literally dozens and scores, if not hundreds, of Conservative Members will start to say to themselves, "Can we win the next election? Can we hold our seats without a change in policy?", particularly when they have the glowing example of a Right-wing American President sweeping to a virtually unprecedented victory on the strength of policies which, so far, have been anathema to the Conservative Government.

The one glimmer of hope on the horizon that I see is that those pressures could induce the Prime Minister to consider a change in policy. For her, the fact that the Chancellor is so closely associated with the present policy could be a bonus because she could announce the change by replacing the Chancellor with someone more amenable and less committed to the existing disaster.

The tragedy for the Chancellor—perhaps I should not express any sympathy for him personally—is that we are constantly told that he is an intelligent man. If he is as intelligent as his admirers lead us to believe, he must know that his options have been closed and that he has nothing further to offer. He also has the experience of having engineered successfully a recovery on a previous occasion. He did it in 1982–83 as a pre-election manoeuvre. He did so in very clever ways — by overfunding so that the money supply looked to be unchanged and then funnelling back to the private sector through the sale of commercial bills the money that he had apparently taken out of the money supply. Therefore, he knows how to engineer a recovery. He knows that his present policies cannot work. I believe that that is why his recent performance has been so bad. If he really is as intelligent as we are told and knows that his policies have failed, that would explain why he has so little to offer. That is why he can only continue to mouth the same old unconvincing platitudes.

If the consequences of the long, sad and disastrous experiment in monetarist policies is that the Chancellor of the Exchequer is to be sacrificed, I shall feel sorry for him, but it would be a tiny price to pay for restoring hope to the vast majority of the British people.

8.23 pm

Mr. Tim Yeo (Suffolk, South)

I am glad to follow the hon. Member for Dagenham (Mr. Gould), who made an eloquent contribution to the debate. However, like so many contributions from the Opposition Benches, it was long on criticism and short on solutions. Without wishing to follow the hon. Gentleman too far down the route of seafaring metaphors, I should like to say that it was not clear from what he said whether he would rather the Government succumbed to the temptations of the Scylla of everlastingly higher public spending than to the Charybdis of giving in to the trade unions on every issue.

Not for the first time since I have been in the House, some of the most constructive contributions to the debate on the economy have come from Government Back Benchers. Like my hon. Friend the Member for Aldershot (Mr. Critchley), who made a stylish contribution, I agree that the most urgent economic issue of the day is unemployment. I am sure that that view is shared on both sides of the House. Many hon. Members have stressed their personal experience in coming to that conclusion. I also believe that if we fail to solve that economic problem quickly, unemployment will become the most urgent social problem of the day.

I should like to refer to the speech by the hon. Member for Liverpool, Walton (Mr. Heffer). I am sorry that he is not present, but I shall say what I tried to intervene to say while he was making his speech, but he did not give way. I admit that I cannot even match the military distinction of my hon. Friend the Member for Aldershot, who is a former lance-corporal. My only connection with the services is that I was a humble cadet pilot in my university air squadron. In a way I am relieved that the hon. Member for Walton is not present, because I would have to tell him that it was the Cambridge university air squadron.

The hon. Gentleman attacked the Government for confronting the workers. I should like to ask the hon. Gentleman who is confronting members of the NUM who wish to go to work. Are they not being confronted by their leader, Arthur Scargill? I do not want to be too unkind to the hon. Gentleman, as we in the Conservative party have much to thank him for, because he contributed more than anyone else to the growth in the Government's popularity by his chairmanship of the Labour party conference.

Contrary to what the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) said, I understand clearly the aims of the Government's medium term financial strategy. It is part of an overall policy designed to achieve a low and stable rate of inflation. That is an essential precondition for the creation of new jobs. Yesterday I rebutted the outrageous slur that the Government do not care about unemployment. They are certainly not using high unemployment as an instrument of policy, still less as an objective of their economic policy.

However, apart from inflation, there are two other essential preconditions for new jobs. The first is the proper control of public expenditure and the public sector borrowing requirement; the second is the achievement of a steady rate of economic expansion. The figure of 3.5 per cent. next year is modest, not excessive. I suppose that we can regard it as satisfactory, but only just. This year, we must not overlook the contribution of the miners' strike in cutting the rate of growth in 1984. That reduction in the growth rate has been a means of destroying other workers' jobs. I hope that the leader of the NUM is aware of the damage that he is causing to fellow workers.

I approach the subject of unemployment as an optimist. Like some hon. Members, I do not accept that technology means no return to full employment. Some 150 years ago, two thirds of the British work force worked on the land. Today less than 5 per cent. is on the land. If the pundits in the 1830s had foreseen that decimation of jobs in agriculture, undoubtedly they would have predicted vast unemployment. Yet during that space of 150 years, when there have been huge advances in technology, the work force and employment have increased manyfold. Therefore, as my hon. Friend the Member for Loughborough (Mr. Dorrell) said, technology can be the creator, not the destroyer, of jobs.

For that reason, and also because of the forthcoming demographic changes that mean that after the next 30 years the number of people of working age relative to the number of people of retirement age will go down sharply, I do not support fashionable schemes for encouraging early retirement and lowering the retirement age. In the first place, such schemes are not terribly effective because their proponents acknowledge that for every two people who are forced to take early retirement, the best that one can hope for is one new job for someone coming off the unemployment register. Secondly, such schemes are expensive in terms of extra pension costs, and the resources needed for them would be better used elsewhere.

It is generally agreed that there are three causes of unemployment. The extent to which one believes that any one of them is dominant depends on one's political viewpoint. The first is the cost of labour; the second is macro-economic policy, particularly the level of public expenditure as it relates to the amount of demand in the economy; and the third comprises the non-financial obstacles to employment, some of which were referred to yesterday by my right hon. Friend the Secretary of State for Employment. I wish to concentrate on the first two causes, because the Government can act on both those fronts without abandoning their responsible fiscal and monetary policy.

My right hon. Friend the Chancellor of the Exchequer has often stressed the cost of labour as a principal cause of unemployment. In our debate on unemployment two weeks ago, he said that a 3 per cent. real increase in wages could have cost 500,000 jobs, and his analysis is supported by academic research at the London School of Economics into the inelasticity of employment relative to real wages.

The Government could reduce the cost of labour by cutting employers' national insurance contributions. It is becoming fashionable to advocate tinkering with the contributions, but I believe that it should be a priority for the available cash — we were told yesterday that it would be £1.5 billion, but let us hope that by the time of next year's Budget it proves to be more than that—to be used to cut employers' national insurance contributions. That is far more urgent than tax cuts, which are not in great demand now that we have got rid of the confiscatory rates that we inherited from the Labour Government. Tax cuts for individuals are not such a high priority, because they do not directly affect job creation.

Employers' national insurance contributions are 10.45 per cent. of wages up to £13,000 a year, and the contributions total £11.68 billion per annum. A 3 per cent. cut would cost about £3.3 billion, of which £1.2 billion is already borne by the public sector. The net impact on the public sector borrowing requirement would be only just over £2 billion — not much more than what the Chancellor hopes to have available next year.

If we assume no increase in public sector employment, the consequence of such a cut in the employers' national insurance contributions could be the creation of 300,000 private sector jobs. The cost of unemployment, in terms of benefits and lost revenue, is more than £5,000 a year for each unemployed person. Therefore, the creation of 300,000 more jobs could produce an eventual saving of £1.6 billion. Therefore, the net final cost to the PSBR would be little more than £500 million.

Of course, there would be a time lag of perhaps two or three years before the full effects were felt, but some impact should emerge in the first 12 months and, if the policy proved acceptable, the trick could be repeated in 1986 and 1987 and, with one final heave, the whole of the employers' national insurance contribution could be phased out before the end of this Parliament.

Mr. Gould

Why is the hon. Gentleman prepared to concentrate help on the employers' national insurance contribution? Why should it not be concentrated on the employees' contribution? That would have the great advantage of producing a substantial increase in take-home pay at no inflationary cost, which is one of the major factors in the American recovery.

Mr. Yeo

I accept the hon. Gentleman's analysis of what would happen if cuts were concentrated on employees' contributions. Our priorities reflect our differing views of the most effective agent of job creation. I believe that reducing the costs of employers will create jobs more quickly. The hon. Gentleman presumably believes that putting more money into the hands of the workers will produce the same result by increasing demand. There is room to split the cuts according to our individual viewpoints.

The abolition of employers' national insurance contributions would have the incidental advantage of allowing us to do away with the national insurance system —the contributory principle was abandoned many years ago — and employees' contributions could be merged into income tax without any change in take-home pay. Getting rid of the national insurance system would produce an administrative saving of £100 million a year.

As regards the second cause of unemployment, I do not advocate huge increases in public expenditure, but there will be continuing dismay at the restraints on expenditure on house building and home improvements. Those are particularly labour-intensive activities which have low import penetration and a far greater job-creating potential than many other public sector capital projects.

The Department of the Environment's spending on housing has been trimmed in the autumn statement to £2.3 billion, which, even after making the necessary adjustments for capital receipts from the sale of council houses, is quite a lot lower in real terms than the 1979 figure. I hope that the Government will soon reverse that decline. If resources are needed from elsewhere to finance a return to higher spending on housing, we need look no further than the suggestions made in yesterday's excellent speech by my hon. Friend the Member for Horsham (Mr. Hordern), who referred to the regional grants of £600 million, spending on agriculture, and so on. I cite those examples for illustrative purposes.

I support the Chancellor of the Exchequer's efforts to switch from taxes on income to taxes on spending. That is the right way to go, but I must point out that charities are the one category that is exempt from income tax but not from spending taxes. It is odd that a Government who are so committed to a partnership with the voluntary sector should continue to penalise charities by switching taxes without giving those charities any concession.

However, that switch is only one aspect of tax reform. Another equally urgent aspect is the need to integrate income tax and the social security system. Tinkering with either component in isolation will merely produce more anomalies and complications. I hope to see a commitment to that vital reform in next year's Queen's Speech, by which time the results of the social security reviews put in hand this year will be known.

I make a plea for one other small tax concession that would be completely self-financing. I suggest that individuals who wish to employ people in a personal capacity and take someone from the unemployment register should be allowed to set the employment costs against their income tax. By definition, that would be a self-financing concession, and I believe that it would be a small but helpful move towards new job creation.

The Queen's Speech makes no mention of an important contribution to tackling unemployment that would carry no public sector cost. It involves the mobility of labour, which has been an important but often overlooked factor in the American success in job creation.

The new jobs in America are being created not in the old industrial heartlands; they are down in the sun belt. There has been a huge movement of the working population and that process has been facilitated by the availability of accommodation. We have been hampered for decades by the immobility of our labour force, which has been an obstacle to job creation. I believe that that immobility will continue.

Mr. Michael McGuire (Makerfield)

Is the hon. Gentleman aware that the move from the industrial areas in the United States came about as a result of anti-trade union laws? The jobs have been created in what are known as the right-to-work states. The laws were a way of getting at the unions and making them weaker. Perhaps that is why that example appeals to the Tories.

Mr. Yeo

If it is true, which I doubt, that anti-trade union laws have created millions of new jobs in America—and Opposition Members have frequently cited the American experience as a good example for the Government — perhaps our Government have been derelict in their duty by not bringing in tougher anti-union laws.

We lack suitable accommodation for employees who seek jobs in different parts of the country. The council house system—

Mr. Eddie Loyden (Liverpool, Garston)

There is a vast difference between the economic and geographical situation in the United States and that in Britain. In America one can travel thousands of miles in order to obtain employment, but in our tight little island people who have been advised to move away to other regions often find the same situation prevailing there as at home. The hon. Gentleman's parallel between the United States and Britain is erroneous with regard to the movement of labour.

Mr. Yeo

The parallel has been cited more frequently by the Opposition than by the Government. It is the Opposition who hold out the American example as a useful one. I think that the parallel about the movement of labour is fair. Indeed, with a smaller country, it should be easier to move from one region to another.

If there were a proper private rented accommodation sector, there would be places for people to move to in their search for jobs. It is not true, as the hon. Member for Liverpool, Garston (Mr. Loyden) suggests, that conditions are the same wherever one goes. I am surprised to hear an Opposition Member make that suggestion. One of the Opposition's criticisms—and it has some validity—is that conditions in the north are very different from those in my constituency and in many parts of the south-east, where jobs are available but there is no accommodation. The Government could repeal the Rent Acts at no cost to the private purse, and we could then start to recreate the supply of accommodation. Many property owners, who at present are afraid to offer accommodation for rent, would be willing to let parts of their houses or flats. We would release to the economy a quantity of new resources not at present usefully employed. Greater mobility between regions is an essential precondition to reducing unemployment. I ask my right hon. Friends the Chancellor and the Secretary of State for Employment to urge my right hon. Friend the Secretary of State for the Environment to introduce the necessary legislation in the coming Session.

I have summarised the measures that I believe would reduce the level of unemployment. I commend them to the House and, in particular, to my right hon. Friend the Chancellor, especially as they would in total leave next year's public expenditure at £132 billion.

8.43 pm

Mr. Richard Caborn (Sheffield, Central)

Neither the Queen's Speech nor the Chancellor's autumn statement holds out anything for my constituency, which at pre sent is suffering an overall unemployment level of over 25 per cent. and where in large areas it exceeds 50 per cent.

It is evident from the speech of the hon. Member for Suffolk, South (Mr. Yeo) that he has no comprehension of the problems and the hardship faced in the northern inner cities. The solutions which he has just pronounced show that he has little or no understanding of the problems. In the Sheffield, Central constituency about 10,300 people are unemployed, and the deprivation has to be seen to be believed. The only actions that the Government are taking are compounding the problem. The unemployment figures that I have given are the official figures. They do not include all the unemployed. Many people, especially married women, are now being denied the opportunity to take part in community programmes, and old people are being deprived of an extra pound in connection with the heating allowance. The Government are continuing to attack people in the most deprived regions.

Hon. Members may remember that Sheffield was once famous for its steel industry. Two years ago, the Government decided to embark upon the denationalisation of that industry by means of the development of the Phoenix schemes — part private and part public. We were told that that was the way forward, the new formula for privatisation and the panacea for the ills of the industry. The Government brought in Mr. MacGregor—the man who has committed 100,000 steel workers to the dole queue in the past five years.

I draw attention to the role of Mr. MacGregor in the Phoenix schemes, and particularly Phoenix III. On Saturday, an exclusive report in the Morning Telegraph said that Sheffield Forgemasters—which is Phoenix III—was on the brink of disaster. According to the report, Mr. Scholey, the chief executive of the British Steel Corporation, had made an announcement to the Steel Industry Management Association. He had not told the workers at the factories concerned or indeed the management there. He announced to the association that the BSC would have to pick up the tab for paying the wages. That article exposed the situation, and on Saturday an article in the Financial Times entitled Forgemasters set to receive a major cash injection stated: A major cash injection at Sheffield Forgemasters, the engineering and special steels company formed jointly by the British Steel Corporation and Johnson & Firth Brown almost two years ago, is expected to be announced within two weeks. That is the success story. Two years ago the employers — not the trade union side but the employers — were pleading not to be forced into a shotgun marriage between the private and the public sector. They believed that that was the wrong way to approach a major sector of the industry. Nevertheless, Big Mac came in. The industrialists — not the trade unions, though they had their point of view—said that the way in which he was insisting on the merger and on developing that part of the steel industry was doomed to failure. Mr. MacGregor persisted. Two years later, when he has gone on to be the butcher of our mining industry, 100,000 jobs have been lost in the steel industry. That situation should be compared with that of the steel-producing countries of the EEC. Mr. MacGregor forced a privatisation against all the advice. Two years later the banks have to go in with a rescue operation and the BSC announces that it will have to pick up the tab.

This sector of the British steel industry supplies the nuclear industry and aerospace, and provides the open die forgings which are an extremely important part of our industrial base. If we are to develop the high-technology industries and if we are to move into new markets in aerospace, this is the type and quality of steel that will be needed. The destruction wrought on the industry by Mr. MacGregor could set it back by two to three years.

The Morning Telegraph is not famous for supporting the trade union movement but it states: Hindsight is often patronising and arrogant, but there are many who often feared that Sheffield Forgemasters had been formed and was being operated on too tight a shoestring, given the huge problems of rationalisation and recession that it has faced from day one. That has always been a problem of the steel industry, especially the private sector. The steel industry has also had to bear some of the highest energy costs in the EEC because of Government policy. It has also had to make substantial interest payments. In 1980, Aurora paid £6.7 million in interest, Hadfields paid £3.3 million and Johnson Firth Brown paid £9.7 million. That money could have produced a hell of a lot of jobs. If the money had been invested, especially in research and development, we should still have a fairly competitive edge.

I should now like to discuss Phoenix II. About two years ago Hadfields was the centre of attention. The Tories were crying out against pickets outside the gates saying, "Carry on working, lads: we will be right behind you." Hadfields is not only ,shut—there is hardly a brick of it left. That is the result bf the help of the Tory Government who condemned people who were fighting for their jobs in the steel industry. The Government dare not announce the carve-up of Phoenix II because of the problems with Phoenix III and financial difficulties which arise not out of market share, management or the labour force but out of the financial structure that the Government forced through. Although the Government dare not announce Phoenix II, they have sold Hadfields down. Working miners should compare the promises that the Prime Minister gave at the Tory party conference and again last night with the promises that she gave to workers who crossed picket lines at Hadfields when they were asked to stand and defend their jobs. The Government's record on defending those who scab against their fellow workers in defence of their industry is appalling.

In the past four years Sheffield has lost about 25,000 jobs in the steel industry. The local authority's employment department has attempted, through innovation and consultation, to develop the local economy. It has developed about 20 co-operatives and created 1,000 new jobs. But what have we got from the Government who are crying crocodile tears about unemployment? They have condemned such initiatives that are now to be suppressed by rate-capping. The metropolitan counties, which have also tried to develop such schemes, are to be abolished. Successive hon. Members have talked about putting money into the economy — it is difficult to establish whether the Government are acting in concert with their Back Benchers. We have tried and trusted mechanisms which understand local needs, but when they try to generate local economies the Government, through legislation, by destroying the metropolitan counties and by rate-capping, destroy their initiatives.

It is time that the Government took basic manufacturing industries on board. Nobody denies that new technology must be accepted by trade unions and others, but industries such as the steel industry and basic manufacturing should not be written off as the Government are trying to write off many. Their performance in regard to the steel industry under the leadership of Mr. MacGregor has been appalling.

8.53 pm

Mr. Alistair Burt (Bury, North)

Although I lack the advantage of being a member of the General Synod of the Church of England or a spiritual Member of another place, I should like to say something about the north-south debate in relation to the current state of the economy and its development as envisaged by the Queen's Speech.

Conventional wisdom is directed to increasing the divide between north and south. There is more than a grain of truth behind some recent expressions of concern. I was unable to hear the speech of the hon. Member for Manchester, Central (Mr. Litherland), but the hon. Member for Stretford (Mr. Lloyd) made some telling points. I should like to remind him and others, however, that there is another side to the coin. It is not correct to allow people to believe that sitting at the northern tip of a prosperous south is an economic desert. I do not wish to deny that there are problems in the north of England, but it is after investment like everyone else and if we continue to beat our chests and to tell people all over the world how dreadful it is, who on earth will want to invest capital there and provide jobs for us? It is important to give the other side of the story.

The north-west has seen some of its traditional manufacturing industry decline, but it has done its best not to stand still. Any new industrial survey of the area would show our successful aerospace industry, new technology industries, important work being done in regard to the offshore oil and gas industries and heavy investment in the nuclear power industry. We have the new freeport at Liverpool docks and the finest airport outside London—Manchester international airport, which should also be a freeport. They are success stories for the north-west and they join the best of our older industries which continue to change with the times and are working hard and successfully.

The hon. Member for Stretford referred to a recent economic survey produced by the Manchester chamber of commerce and industry. In that connection I am reminded of the old joke in which the optimist looks at a bottle and says, "It is half full," and the pessimist says, "It is half empty." There are two sides to the survey. Welcome improvements in deliveries and orders are shown in the report, as are booming home and export markets. There are better figures for manufacturing production. Some 56 per cent. of firms now work at or above 90 per cent. capacity compared with only 43 per cent. in June. General business confidence in the region has also shown a change for the better.

For the first time, the survey recorded a significant difficulty in recruiting skilled workers. The shortage of skills is noticeable throughout the country. It is surely at that that the Government are directing some of their youth and adult training measures. I refer right hon. and hon. Members who are worried about the expansion of public sector borrowing to the comments of my right hon. Friend the Member for Cambridgeshire, South-East (Mr. Pym) who said where public expenditure could be used to good purpose. It is not enough for Conservative Members to say that all public expenditure is bad and for Opposition Members to say that all public expenditure is good. We should be able to distinguish between good and bad investment. Investment by the Government in the training of young people to meet skill shortages is good and we should not he afraid to say so.

I recently toured the youth training service in my constituency. I can only praise the work of the local authority and the sponsors who have produced more than a 60 per cent. success rate from the first 12 months' work. It is wrong to characterise the north of England as entirely derelict. If people there are doing their best to survive in difficult times, how much better they could do if they received a little more help from their friends in government. Although I appreciate the success of the north-west, it is impossible to disguise the appallingly low base from which that success is springing. Inevitable industrial changes in trade and technology have affected the traditional industries of the north-west, and given a boost to higher unemployment.

There is a perceived trend in the Government's economic policy, which is deeply worrying to people in the north. They wonder whether, while they fulfil their side of the bargain, the Government are fulfilling theirs. I refer to the continuing change between the manufacturing and service industries. The shift from manufacturing to service industries has not been kind to the north-west. Those setting up in the new service industries are not settling in as quickly as we would wish. It is proper that the economy changes with time and that market forces direct the Government to support what is best for the country as a whole, but it is not proper for Governments to consider that manufacturing industry has reached its timely end and must wither and die with their blessing. Although the manufacturing sector provides only 30 per cent. of jobs, it contributes nearly 70 per cent. of foreign currency earnings.

Some sectors of manufacturing industry can outstrip anything offered in terms of world competition, but they cannot defeat manufacturing industry subsidised by foreign Governments. The Government must make it clear to those in manufacturing industry that strong support is there not merely in word but in deed. I see nothing in the Queen's Speech to reassure me of that.

Britain cannot afford an economy entirely of services or entirely of manufacturing industries. There must, of necessity, be a balance between the two. The Government should be capable of discernment and of supporting the best of manufacturing industry without committing themselves necessarily to an industry which could never be competitive in any environment. The Government can do two things in particular.

First, in a review of areas of high unemployment and difficulty, the Government should examine industries in decline and those which are doing well. They should then consider what assistance they can give to allow those industries to do even better, because that is where jobs will be created. Perhaps the Government could think about collective reductions in national insurance in regional areas of high unemployment.

Secondly, the Government could take a wider view of their supportive role in industry. For example, for many years our heavy manufacturing industry has been at a disadvantage regarding energy costs. We know that the French have done well because of the nuclear element in their fuel supply. Surely we can produce a better deal for our intensive energy users. In France, energy policy is directed to producing the cheapest energy for the benefit of French industry. Our energy prices should not he directed towards providing the Treasury with a back door way to cover up its inadequacies.

The Government are right to look at some of their successes, notably the real reduction in inflation, as a stepping stone to future recovery, but they must beware of the language in which they couch the description of the recovery. To be told that we are in the fourth year of recovery with unemployment at 3.5 million, is a definition of an economic boom unknown to me. It is all very well to talk about it, but, as unemployment climbs in a constituency such as mine, optimism must be tempered with realism if the Government are to retain credibility.

Unemployment in the Bury-Bolton travel-to-work area is touching 17 per cent., which is the seventh worst in the north-west of England. To my sorrow and concern, I see my home town of Bury comparing itself with industrial wastelands with which it never before had anything in common. That is the basis of the anger in the debate between north and south and of the obvious anxiety expressed by the hon. Members for Stretford and for Manchester, Central. Unemployment is abysmal, and it is time the Government recognised the pain that hon. Members must endure in their constituencies when they deal with the problem. Whether the Government deny it or not, it is time they realised that many people are saying that some of the unemployment problem is their fault.

My constituents understand the kernel of good sense at the heart of the Government's message and know, because they are sensible, that a number of factors contributing to unemployment cannot be laid at the Government's door. However, they will look hard at those who continue to propound the wearing of the hair shirt of unemployment because somehow it is good for them. The Government must explain how wage cuts can be the next answer, when those industries in which there is competition for jobs are the unskilled low-wage industries. In industries where labour is not plentiful, the inevitable market forces work in the opposite direction. My constituents will be anxious to see what lessons the Government learn from the United States' experience. They will be anxious that the right lessons, not the wrong ones, are learnt.

My constituents will continue to try to understand the benefits of industrial policies based on sound money, but in their heart of hearts they will want to see the Government wide open to every option available to reduce unemployment. Many of them were rehearsed in a thoughtful debate recently, and a number were spelt out in more detail in a recent book, "Jobs Ahead", written by my hon. Friend the Member for Beckenham (Sir P. Goodhart), which is based on the work of the One Nation group.

My constituents will not demand to see the Chancellor perform miracles in the desert, but they expect him to be out there with his stick tapping at the rocks with a shrewd idea where the water might spring from. Above all, they echo the sentiment expressed so well yesterday by my hon. Friend the Member for Devizes (Mr. Morrison)—they share the desire for taxation to be reduced as a result of efficiency but they are not at all sure that cuts in direct personal taxation should be a priority to the exclusion of all else. The clamour for reductions in taxation is declining as the number of unemployed rises and those fortunate enough to be paying tax look over their shoulders, fearing the day when for them, too, taxes will no longer be a problem. If the Chancellor can find £1.5 billion to be sensibly used before the next Budget, he would do well to consider all the options open to him to direct that money to the nation's most pressing problem. It is no longer sufficient for him to say that there is no alternative. There are plenty of alternatives.

My constituency and the north-west in general are composed of brave, hard-working people who have not stood still as times have changed. The industrial relations records of Bury, Tottington and Ramsbottom are second to none. People there have played their part and accepted the need to change their old industries. They are living up to their side of the bargain and they are looking for a sign that the Government have confidence in them. A wider perception of the Government's interventionist role and investment by the Government in the kind of industry and infrastructure that will truly boost the recover of the northwest will show my constituents that their sacrifices have not been in vain. Above all, they look for a display of open-mindedness by those in charge of Government economic policy and a willingness to seek all the options available to defeat unemployment, a fresh look at the PSBR and an understanding that, as times and conditions change, so, too, can economic policies and aims. All those things would be welcome and would reassure my constituents and others in the north-west that their problems are not just recognised but on their way to being solved.

In essence, it comes down to this. The Government must never lose sight of the fact that economic policy is only a means to an end, not an end in itself. If the Conservative party and the Conservative Government do not exist to improve the condition of the people in a variety of ways, through their handling of the economy and their all-round policy, they are out to achieve nothing at all. Conservative Governments — and this one is no exception — have a fine record of social reform, of following a variety of economic theories and of showing a pragmatic grasp of the aspirations of the people which has enabled them to retain the trust of the people. In the cause of material and spiritual advancement, economic theory is a fine servant of Governments, but it is a dreadful master.

9.7 pm

Mr. Austin Mitchell (Great Grimsby)

It is interesting to note the cool reception of both the Queen's Speech and the autumn statement by those who have hitherto acquiesced in every folly of the Government's economic policy. In so far as there was any economic message in the Queen's Speech, it received a very cool reception from Conservative Back Benchers who are at last beginning to realise that something is disastrously wrong. It also received a cool reception from that sycophantic body, the CBI, and the leaders of British industry, whose main economic preoccupation so far has been to clamour for more of the rod for their own backs and more of the machinery for the destruction of their own industries. Bought off with knighthoods and tax cuts, they acquiesced in all the Government's previous follies. Both those groups are now beginning to turn against what the Government are doing.

The worms are truly beginning to turn — a generic description from which I exclude the hon. Member for Bury, North (Mr. Burt), although he was certainly turning quite dramatically. The worms are turning because they see that the Chancellor is trapped. The Government's whole economic strategy has led them into a trap from which it is virtually impossible to escape—the trap of trying to talk up, by sheer pressure of exhortation, an economic revival which obstinately refuses to flicker into life while at the same time implementing policies directly harmful to any possible revival and to the productive manufacturing sector of the economy. The pound is still substantially overvalued against the currencies of our principal competitors, especially West Germany but also Japan. Our export prices as against those of West Germany are 45 per cent. higher than they were in the last quarter of 1976. It is almost impossible for British industry to overleap that competitive barrier in any circumstances.

Competitiveness is eroded still further as a direct result of Government policies, and the increase in the cost of power and fuel has become another burden on British industry — a burden amplified by labour costs. The Government have made a fetish of labour costs, but have not told us that, even under their policies, unit labour costs have increased by about 7 to 8 per cent. as against the last quarter of 1982. In the same period, in the United States, thanks to the expansion that has gone on there, unit labour costs have come down about 6 per cent. Unit labour costs have fallen in West Germany. In this country they have gone up, and that is a competitive gap that puts the Government in a trap. Either they allow the pound to come down, to erode that competitive gap, or they continue the long-term comparative decline that has gone on for so long.

The Government are also imposing the burden of high interest rates. Unusually, interest rates failed to come down, in their annual ritual, in time for the Tory party conference to allow the Government to give a little good news to their supporters. They could not praise themselves then because interest rates had not come down from the insane levels to which they were misguidedly increased in July. It is no good the Government claiming that the recent news on interest rates is good, because the real level of interest rates is still at an unprecedented level, and interest rates are a crippling burden on investment, industry and the whole economy. That burden will make it difficult for expansion to be resumed.

The Chancellor is trapped in the same cupboard in which too many Chancellors have been trapped—I do not mention their names because a number of them have been Labour Chancellors. Perhaps it is not a cupboard but a coalhole, because the Chancellor will almost certainly blame the miners for his problems, but the fact that he is trapped is inescapable. The tragedy is that the country is trapped at a far lower level of economic health and vigour than at any previous time, because of the enormous harm and destruction that have been inflicted on the economy by policies that have been directly harmful to its core—manufacturing industry. Manufacturing industry provides so much of our ability to survive, and it used to provide many of the jobs.

The harm that has been done makes it difficult for us to survive in the position to which the Chancellor has reduced us. He has taken us into his trap with a real level of unemployment of about 4 million. We are a net manufacturing importer, instead of the workshop of the world and the exporter that we used to be. He has taken us there as the balance of payments benefit of North sea oil has been frittered away into the predictable deficit position.

We are in that trap despite the examples of how to deal with economic difficulties that have been proffered to us by all too many countries overseas, which are either ignored by the Chancellor or described as manifestations of original sin. I give as instances Sweden, where a 16 per cent. devaluation has led to a substantial rate of growth and a fall in unemployment, Australia, where a 10 per cent. devaluation has produced both those results, and, more importantly, the United States, which is often quoted.

After two years of trying to implement similar fiscal policies to those of our Government, President Reagan reversed those policies. President Reagan is the only Keynesian economist left in the world who does not have grey hair because he has been following the policy of Keynesian expansion by deficit financing that many of us would wish to be followed here. The result has been the generation of 6 million real jobs which are paying real money to people to participate in the economic advance of their country by policies which the Chancellor tells us are impossible and directly harmful in Britain.

It is clear from that failure to learn from examples overseas that the Government's economic policy is now a busted flush. It is exhausted. Unless the policies are reversed — the Chancellor is not the most adept and flexible person at learning lessons and is not the most willing person to admit when he is wrong — all that faces the country and the Government is a prolonged downhill slide while other countries advance, prosper and grow.

The Government have given us the exact reverse of the policies that are necessary to deal with an economy in comparative decline, turning to absolute decline, as it was, as world trade faltered. They have given us confrontation where we needed corporatism; cuts where we needed Keynes; an export of capital on an enormous scale when we needed investment in the productive strength of Britain; high interest rates when we needed cheap money; over-valuation when we needed a competitive pound; and free market economics when we needed management, planning and growth. The only way out of that trap is to reverse the policies; otherwise, there will be a long three-year slide downhill for the Government.

9.15 pm

Mr. Peter Shore (Bethnal Green and Stepney)

We have come a long way verbally since, with customary glitter and glamour, the Queen's Speech was first read from the Throne in the other place a week ago. The debate that has followed has been wide-ranging. I would not wish for a moment to understate the importance of the debates on health and social security, local government and transport, nor on disarmament and foreign affairs, but it is only right to say that the main focus of the debate has been the state of the economy, both domestic and international, and, above all, the levels of unemployment in the United Kingdom.

We have had during the day a number of notable contributions to our debate. We heard the wise words of my right hon. Friend the Member for Cardiff, South and Penarth (Mr. Callaghan) on how to settle the long-standing mining dispute, or at least what attitudes of mind to bring to that solution—sentiments rightly echoed by my hon. Friend the Member for Liverpool, Walton (Mr. Heifer). It will be well worthwhile for Ministers to study those words in Hansard tomorrow.

We have also had a timely reminder of the crucial importance of the international debt problem and what we all owe to the American economic expansion from the right hon. Member for Glasgow, Hillhead (Mr. Jenkins). We too easily fail to recognise just how much of the expansion in world output, including British output, which has taken place this year, we all owe to the American expansion. The right hon. Gentleman was right to say that that hectic pace of expansion cannot be sustained, that it would be wrong if it were sustained, and that, therefore, unless we in Britain and other countries of similar weight in the EEC are prepared to rake up the baton of expansion, the world economy is likely once again to fall into a no-growth position, at any rate in 1985–86.

There is no prospect of Third world countries being able to carry the weight of the international debt which weighs so heavily on so many of them unless the markets of the western world are expanded. Otherwise, those countries simply cannot earn the exports and the revenues from exports which they need to service the ever-growing mountain of debt. The right hon. Member for Cambridgeshire, South-East (Mr. Pym) made a striking contribution. He spoke for most Opposition Members and for many Conservative Members when he deplored the clipping and paring of overseas aid moneys and of other external services at a time when not only Ethiopia hut much of sub-Saharan Africa face an historic catastrophe. He also hit a responsive chord when he rightly said in relation to Ministers' frequently expressed concern about unemployment that their action was not commensurate with their concern. The hon. Member for Aldershot (Mr. Critchley) made the same point succinctly, when he said that the Government give the impression that they do not sufficiently care.

On Thursday evening we tabled our amendment regretting that the Gracious Speech reaffirms policies which have already done severe damage to the British economy and will, in the future, further hold back the prospects of economic recovery. Nothing that I have heard today from the Chancellor and certainly nothing that I have read in the autumn statement has given me any reason to change my mind about the relevance and accuracy of our amendment.

What those damaging policies are is now all too familiar to hon. Members. They are policies to deflate the economy, and thus to run it at a far lower rate of growth of output and a far higher rate of unemployment than would otherwise be necessary. These policy aims have been achieved first by the imposition of money supply targets which have necessitated high interest rates. Secondly, those high interest rates have in turn encouraged a high exchange rate, thus making exports—except to the United States—more expensive and imports cheaper than they would otherwise be. Thirdly, deflation has been promoted by the continued cuts in public expenditure, cuts that have damaged the quality of community services and radically reduced capital investment in the infrastructure of our community. Fourthly, deflation has been pursued by a massive increase over the five years as a whole in total taxation — direct and indirect combined — with the greatest increases falling upon those with the smallest incomes, and the only reliefs being enjoyed by the very rich.

No country in the Western world had deflated more fiercely or, to use the technical term, tightened its fiscal stance more seriously, than Britain. Not surprisingly, Britain has suffered both the highest increases in unemployment and the lowest increases in output as a consequence. Those deflationary policies are restated in stark terms in the Gracious Speech in the following words: My Government will continue to pursue policies founded on sound money and lower public borrowing and aimed at securing a further reduction in inflation. When those policies were first embarked upon, in 1979, it was the Government's contention that once inflation had been reduced, the economy would spontaneously resume growth and job creation. Prosperity and real jobs were, and according to the Government have always been, "just around the corner."

In November 1980, when unemployment stood at 1,600,000, the Prime Minister told us: We are reaching the trough of the recession and it will start to turn up towards the end of next year. In the following year, in June 1981, the Prime Minister told the House: There are now clear signs that the worst of the recession is over."—[Official Report, 24 June 1981; Vol. 7, c. 332.] Unemployment then stood at 2.5 million. In the Government's third year of office, in March 1982, the Prime Minister assured us, and an audience in Harrogate, that after three years of battling, we are beginning to see the regeneration of our economy". Unemployment then stood at 2,900,000. In their fourth year of office, in May 1983, the Chancellor of the Exchequer was telling us: There is every prospect that by next year we will see the start of the fall in the level of unemployment. Unemployment then stood at 3,100,000. Now, in the Government's fifth year of office, in September 1984, unemployment has reached 3,284,000, which is the highest figure ever reached in our history. It is higher even than in the very depths of the world recession in the early 1930s.

We are dealing not with one or two years but with five years of continued failure; of policies stubbornly and stupidly adhered to long after the damage and folly has been demonstrated to all. How fitting it is, therefore, that the Chancellor should end his speech today with the resounding affirmation that his was a "long-term" policy. How fitting it is that the Leader of the House, in a BBC interview about the Queen's Speech last week should conclude his remarks with the assertion patience is a great virtue in politics and in the long run we are all dead. Against that background of unchanged deflationary policies, proudly reaffirmed in the Queen's Speech, and the scandalous level of unemployment, we must judge the sincerity of what the Government have to say about the plight of the jobless.

The Queen's Speech states: my Government remains deeply concerned about unemployment". The right hon. Member for Cambridgeshire, South-East will agree that concern is nothing if it does not lead to, or express itself in, action. The truth is that the actions required to increase jobs in Britain are directly contrary to the Government's main economic policies.

The Prime Minister, as evidence of her good intentions, has recently taken to quoting selectively from the 1944 White Paper on employment policy in Britain by the late Lord Keynes. At her conference in Brighton she had the impertinence to claim that the 1944 White Paper policies were basically the same as hers. When she opened the debate on the Queen's Speech a week ago the right hon. Lady tried again and quoted from the first and central paragraph of that White Paper to which she had previously not referred. She quoted from that paragraph in reply to a question by the right hon. Member for Plymouth, Devonport (Dr. Owen) who asked her whether she accepted the primary aim of maintaining a high and stable level of employment. In her reply the Prime Minister said: The first paragraph of that White Paper says that the Government should 'accept as one of their primary aims … the maintenance of a high and stable level of employment after the war'. The Prime Minister went on to say: As I said at my own party conference, I accept most parts of this Paper—pretty nearly all of it except those aspects which over time have changed. We would all like to return to a low level of unemployment." —[Official Report, 6 November 1984; Vol. 67, c. 24.] The Prime Minister failed to quote the whole of the first paragraph of that White Paper. It does not say: The Government accept as one of their primary aims the maintenance of a high and stable level of employment after the war. It reads: The Government accept as one of their primary aims and responsibilities the maintenance of a high and stable level of employment after the war. The right hon. Lady has sent me a note telling me that she cannot be here because she is entertaining the President of Finland. I regret that she is not here, because it is important that she should be aware of what she omitted to say and of my comments.

It is unbelievable that the Prime Minister should inadvertently delete that crucial word "responsibilities" when purporting to quote from the White Paper, because responsibility is the heart of the matter. It is at the heart of the White Paper. No Government before 1944 had accepted that responsibility. The dictionary definition of "responsibility" according to Chambers is a trust or charge for which one is responsible.

The same problem afflicted the Secretary of State for Employment when he tried to intervene in the speech by my hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott) yesterday. In the debate on unemployment the Secretary of State said: I was asked by the right hon. Member for Plymouth, Devonport (Dr. Owen) whether we had noted the first sentence in the 1944 White Paper. We have noted it, and I assure the House that we certainly want to see the highest possible employment level in this country".— [Official Report, 30 October 1984; Vol. 65. c. 1246.] But to note is, once again, not to accept responsibility. We should ask the Leader of the House, who is to reply to the debate, the Chancellor and the Prime Minister, when she returns to the House on Thursday, whether the Government accept not only the aim but the crucial responsibility for the maintenance of a high level of employment, which was central to the 1944 White Paper and crucial to the whole economic policy of successive Governments from 1944 to 1979.

Let us consider what the Chancellor has said about responsibility for employment. Three weeks ago he was interviewed on television by Brian Walden. He was asked, as Mr. Walden put it, about carrying the can. The Chancellor replied: We have always made this clear what the Government can do to create jobs is very, very little indeed. It is largely a matter of how the economy works, which…in a free society depends on a whole myriad of decisions taken by the millions of workers, employers and managers up and down the country, that's what will determine how the jobs are. There is a little bit the Government can do to help them. What we can do we will do. But to fall into the error of thinking that the Government can determine the level of employment, that is totally false. That is something that not only the Chancellor but the Prime Minister and the whole of the Treasury Bench believe. It is a convenient belief because, undoubtedly, a high level of unemployment assists the Government in keeping down inflation, in weakening the power of trade unions, in reducing pay claims and in redistributing income and wealth in favour of the well-to-do. Above all, that convenient doctrine exonerates the Government from blame and relieves them of their proper responsibility. But to describe these policies as stemming from the 1944 White Paper is a falsehood and a deception of the grossest sort.

There is a great hole in the middle of the Queen's Speech. The clamant problem of 1984 is the return of mass unemployment to our land. It has brought with it great suffering to individuals and communities, it has sharpened and increased industrial conflicts, it has actively destabilised our democratic system and it is alienating a whole generation of youngsters upon whom the brunt of the burden of unemployment has fallen. Yet the Queen's Speech has nothing to say that has the least relevance to their predicament. The autumn statement is, basically, a no-change document. As the document itself concedes, the present record level of unemployment will be sustained in 1985–86—the same appalling level as it has reached in 1984.

Since the productive potential of the economy is certainly not less than 2.5 per cent. per annum—that is the national increase in productivity per man at work—and as the predicted underlying growth rate in the autumn statement is 2.5 per cent., unemployment levels are bound to remain the same. If we are to bring down unemployment, and if the Government accept responsibility for a high and stable level of employment, we need a period of years during which the rate of growth is deliberately set at well above the productive potential, so that the unemployed total can be reduced. That is what has happened in the United States—a level of growth well above productive potential, well above the national increase in the labour force, and successful in bringing down the unemployment rate from well above 10 per cent. to just over 7 per cent. in less than two years.

There is plenty of room to discuss the pace and the pathway for the reduction of unemployment in the United Kingdom. However, that discussion will begin only when we have a Government who have the will and the wish to reduce unemployment and accept that they have a responsibility for maintaining a high and stable level of employment, and that will not be until we have got rid of the present occupants of the Treasury Bench.

9.35 pm

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

It is a week ago that the debate on the Gracious Speech and the Loyal Address was initiated with contributions of wit and perception by my hon. Friends the Members for Boothferry (Sir P. Bryan) and for Wiltshire, North (Mr. Needham). Since then the debate has been continued over a wide range of topics and today it has been set upon its concluding stages with a debate upon the economy that was initiated by my right hon. Friend the Chancellor of the Exchequer.

I have had the advantage of listening to the most formidable troika of contributions from the right hon. Members for Cardiff, South and Penarth (Mr. Callaghan) and for Glasgow, Hillhead (Mr. Jenkins) and my right hon. Friend the Member for Cambridgeshire, South-East (Mr. Pym). I pay heartfelt thanks to them all for their collective efforts to prevent our occasion being entirely upstaged by the Earl of Stockton in another place. His performance must but be watched with envy and concern by the National Coal Board.

The contribution of my right hon. Friend the Member for Cambridgeshire, South-East so excited me that I made a momentary intervention, which I hope he will not think in bad taste. I must tell my right hon. Friend that a year ago it was my privilege, in undertaking the same task that I now perform, to offer a message of personal congratulation, though from the Treasury Bench, on his speech on that occasion. That message was genuine. I hope that it will not lead to complications for him, at any rate, if I repeat my good wishes and congratulations. His speech elevated the level of debate in the Chamber and it will be remembered long after this day.

That said, I must say to my right hon. Friend the Member for Cambridgeshire, South-East that I felt as though he had taken me by the elbow and propelled me to one of those better eating houses in the area of St. James. As I sat down I was passed the menu, and with the delicateness of those circumstances I found that it was rich in suggestion but devoid of prices.

Mr. Patrick Cormack (Staffordshire, South)

Why did my right hon. Friend not go a la carte?

Mr. Biffen

I do not do that when I am a guest of my right hon. Friend. Confronted by a menu which was the pinnacle of social discretion, I had this fascinating vacuity where in grubbier minds details should have been evident. When it came to the wine, I needed no memory. The bouquet rushed to meet me; it was vintage 1970–74. I say to my right hon. Friend—

Mr. Rogers

When will the right hon. Gentleman address himself to unemployment?

Mr. Biffen

This is a friendly discourse. It is a good-natured reflection between friends, a characteristic that is unknown on the Opposition Benches. I say to my right hon. Friend that perhaps our next assignment will be at a Wimpy bar. However, I am certain that the areas he outlined for policy debate are the most legitimate of all and that they will persist throughout the Session.

The three main elements that I shall touch upon in the substance of my speech concern procedure, which is customary for the Leader of the House in replying to this debate. It will include also certain aspects of the Queen's Speech and the legislative tone of it, which is the heart of the debate and, finally, the general economic background against which we shall be transacting our business and which comprised the majority of the speech of the right hon. Member for Bethnal Green and Stepney (Mr. Shore).

I shall take account of procedural points raised by my right hon. Friend the Member for Worthing (Mr. Higgins), and will be in touch with him in due course.

The point on which I should like to detain the House for a moment is that about Opposition time. During the debate on the Queen's Speech it has become clear that there is continuing unease among Liberal and SDP Members over the present Standing Order governing the allocation of Opposition days.

That Standing Order, approved by the House in 1982, lays down that the use of the 19 Opposition days provided for should be at the disposal of the Official Opposition. Hitherto, there had been informal consultation between the Official Opposition and the other Opposition parties through the usual channels about the use of Supply days but the House declined to formalise these practices as in an amendment proposed by the hon. Member for Berwick-upon-Tweed (Mr. Beith). The events of the past few days have made it clear that these informal arrangements give rise to dissatisfaction on the Liberal-SDP Bench.

I am anxious to see whether progress can be made on this matter. I must, however, stress that the procedures of the House are determined by a majority of the House itself. It cannot be otherwise, and whatever new arrangements might require, an amendment of Standing Orders can only be put into effect by the consent of the House. In the first instance, there is merit in seeing whether the existing conventions over Opposition days can be reconsidered in the light of recent complaints. I hope, therefore, that an attempt might be made through the usual channels. I believe that such an attempt will be made in good faith.

If, however, no progress could be made that way, then I realise at once that there would be the need to involve the Procedure Committee again to consider this matter.

The House will realise that the Procedure Committee has already decided to undertake a major review of public Bill procedure. This work was set in hand at the request of the House. The Committee has decided that its energies should be first directed to this work.

However, the Procedure Committee may well feel that it can accommodate the feelings that have been expressed in this debate. The right hon. Member for Tweeddale, Ettrick and Lauderdale (Mr. Steel) has argued that I should ask the Select Committee to put the issue at the top of its agenda for this Session".—[Official Report, 7 November 1984; Vol. 67, c. 120.] I am sure that the House could not properly consider this matter without a report from the Select Committee.

Meanwhile the right hon. Gentleman knows that the Select Committee is instructed by the House, and any approaches on my part should take account of that.

At this point, I should mention that I have been in touch with my hon. Friend the Member for Honiton, (Sir P. Emery) the Chairman of the Select Committee on Procedure. I know that he cannot be in his place today: parliamentary duties require him to be abroad. I have, however, been able to discuss the issue tentatively with him over the telephone. I shall be discussing the matter with him again when he has returned to this country next week.

Should circumstances so necessitate, I believe that the House should have the option of empowering the Committee to set up a Sub-Committee for the particular purpose of studying the allocation of Opposition days.

That said, I am sure that the whole House would agree with me that if at all possible this is a problem to be resolved through the usual channels. To my mind, that would be the more expeditious way of proceeding, but if that fails, then it is on this kind of problem that the House would rightly wish to look to the Procedure Committee for advice.

Mr. David Steel (Tweeddale, Ettrick and Lauderdale)

rose—

Mr. Biffen

I apologise to the House for having detained it, and I hope that the right hon. Gentleman will not press me. What I have just said is testimony of my good faith on this topic, and of the importance that I realise is attached to it on that Bench. I hope that it will be accepted as such.

The legislative load outlined in the Queen's Speech is broadly similar to last Session's load. Clearly, every Session leaves an imprint, and I have no doubt that the connoisseurs of multilateral political warfare will find that the legislation proposing the abolition of the GLC and the metropolitan counties will reward them for all their interest. I have been reminded of that not merely by the Opposition.

Important though that legislation is, I remind the House of three other proposals contained in the Queen's Speech which deserve to be put in the balance and recorded in this debate. First, by any judgment, the Representation of the People Act is a major measure. It will significantly extend the franchise by providing for postal voting for holidaymakers and by extending the franchise to certain British citizens resident abroad. I am delighted that the legislation gives a handsome response to the recommendations of the Home Affairs departmental Select Committee for 1982–83. As Parliament is rooted in popular representation, I believe that there will be strong support for this measure, implying as it does a commitment to the ballot box.

Secondly, the Pensions Bill will be designed to improve the occupational pension rights of those who leave schemes before pensionable age. This is an increasing problem with greater labour mobility. This legislation is an advantageous social measure, and I am certain that the whole House will extend good will to my right hon. Friend the Secretary of State for Social Services in securing the passage of this measure.

The third item that I choose to demonstrate the utility of the Queen's Speech is the legislation that will be necessary for Hong Kong. That legislation is of great significance—I doubt that that point will be challenged in any quarter of the House—not only because of what it portends for Hong Kong but because of what it means for us. The legislation deals with an area of growing political and economic importance and of great consideration to our overseas interests. The manner in which and the dignity with which we are adjusting our status in Hong Kong betokens greater possibilities for enhancing our future influence in not only that area but the wider Asian area that it serves. Since so much of our foreign policy in a post-imperial age derives from influence rather than the normal exercise of power, the legislation is in every sense a testimony to the negotiating skills of my right hon. and learned Friend the Secretary of State for Foreign and Commonwealth Affairs.

If I hear murmurs of discontent from the Opposition —I do not include the alliance Benches, but refer to the Labour Benches—I make this point: it is difficult for many hon. Members to believe that this country finds itself as well beyond its boundaries as within. Perhaps a country of this maritime tradition finds itself never so well far beyond its boundaries as within. That is a message to be taken to heart.

Mr. Shore

It is a great pity that the right hon. Gentleman is left to quarrel with himself and to imagine that he is engaging the Opposition in some great controversy. He is not. The only matter causing restlessness among the Opposition is his failure so far to address himself to the major issues of the economy, including our high and growing unemployment.

Mr. Biffen

I thank the right hon. Gentleman for his reassurance. I shall not disappoint him on the question of debate on the economy. I realise that it is much easier for the right hon. Gentleman to stand at the Dispatch Box to agree with me than it is for him to agree with most of those behind him.

The three Bills, serving as they do social issues, issues of parliamentary democracy and a wider national interest, are characteristic of this wise Queen's Speech. But, of course, in response to the invitation of the right hon. Member for Bethnal Green and Stepney, I say at once that I refer to the economic background against which the politics of this Session will be conducted.

In the debate, we have heard frequent mention of unemployment. That is natural enough, with the jobless levels that we have experienced in recent years and that still persist. I shall, therefore, naturally comment upon that part of the debate. However, I shall make an initial reference to inflation. I appreciate that the right hon. Member for Glasgow, Govan (Mr. Millan), who is the erstwhile shadow spokesman for Scotland, seemed to be worried that I would not discuss the issue of unemployment. I say this to the right hon. Gentleman. Any consideration of the Queen's Speech must have reference to the points that I have already made, and any reference to the economy must also have reference to the level of inflation. If Opposition Members have become unbalanced in their consideration of the matter, they cannot see it in that wider perspective.

Therefore, I make an initial reference to inflation. The success of my right hon. Friend the Chancellor of the Exchequer in securing an inflation rate of 4.7 per cent. is central to the Government's economic strategy. It represents a valuable step forward in securing a sense of realism in economic affairs, pay claims and settlements and generally in industrial relations. Indeed, it is the relative stability that comes with lower inflation that has enabled us to live with such high unemployment without a greater disruption of our social structure.

Meanwhile, my right hon. Friend is determined to build upon the success of lower inflation. He does so with the prospects of increasing national output, a prudent balance between spending and taxation and a promising outlook for British overseas trade.

Mr. Jack Straw (Blackburn)

Did the right hon. Gentleman write this?

Mr. Biffen

Every word that I say is well considered and well measured. It may be trite—that I do not deny—but it is the obvious nature of it that Opposition Members cannot accept—(Interruption.] Even so, there remains the issue of unemployment.

Mr. Rogers

This speech is like the Chancellor's tie —awful.

Mr. Speaker

Order. The hon. Gentleman's speech was heard in silence. I ask him to give the Leader of the House a fair hearing.

Mr. Biffen

Even so, there remains the issue of unemployment. The fact that it is also a major problem with our trading partners and rivals offers no consolation. The social and economic challenge remains daunting. However, the problem is trivialised by the rhetoric so freely used from Opposition Benches. I invite the House to share with me both an analysis and a prescription for the present employment situation. First I refer to the analysis—of how the unemployment toll has climbed upwards of 3 million. Some have suggested that unemployment has been the instrument of Government policy. [HON. MEMBERS: "Hear, hear."] The very cheers from Opposition Benches that greet that remark show at what level Opposition Members are prepard to discuss such serious subjects.

There has been a crude slander that the Government created the present levels of workless to weaken trade unions. That argument is fantasy. Indeed, the reality, and not the fantasy, is that there are two major factors in our present unemployment situation. First, there is the demographic factor.

Mr. Straw

Ah.

Mr. Biffen

Is it denied that there is a demographic factor in unemployment?

Mr. Straw

Of course there are demographic factors in unemployment—though the right hon. Gentleman and his colleagues always denied that when the Labour Government were in power.

Will the right hon. Gentleman explain why, while our inflation record is no better in relative terms than the records of our partners, our unemployment record is the worst of all the industrial nations? What is the answer to that?

Mr. Biffen

If the hon. Gentleman bad had the pleasure of listening to my right hon. Friend the Chancellor of the Exchequer making his autumn statement, he would know that my right hon. Friend rebutted that proposition in respect of our partners in the European Community. However, I am glad that we have elicited—not without difficulty — an acknowledgement of demographic factors. At least we have taken the debate a stage beyond the abuse that unemployment is a deliberate action of the Government and is designed to be a central part of their economic policy to harass working people.

The demographic factor of current relevance is the fact that the national work force has expanded by 400,000 since 1979, as those leaving schools and further education exceed those who are aging into retirement.

Firstly, there has been a massive transformation in the relationship between the work force and output. In 1983, the national output was almost identical to the figure for 1979, yet that identical output was being secured by a work force reduced by 1.7 million. Of course oil is a factor, but there has also been a productivity revolution, and the right hon. Member for Cardiff, South and Penarth was generous enough to refer to that.

These are real considerations which help to explain a significant part of our current levels of unemployment. They also suggest that the new patterns of activity are more likely to come about if we abandon high-cost methods of production and follow the guides of competitive price and profit. That is the mainspring of the Government's policy.

Meanwhile, the Government have never denied the importance of public action and public funds in policies for employment. That has been particularly true in the ambitious training schemes we how have for young people. These are estimated to cost about £1,100 million in the current year.

Secondly, we have sought to change our fiscal structure to encourage the expansion of wealth-creating small businesses. We have also tried to shift the burden of corporate taxation so that it weighs less heavily on employment. The abolition of the national insurance surcharge was welcome and wise. It will do more to encourage, rather than penalise, employment.

Finally, we acknowledge that employment in Britain can best be secured within an open trading system and—no less important—with the political and economic alliances of the West. Indeed, it could hardly be otherwise for a nation exporting over 30 per cent. of its gross domestic product.

Yet we frequently hear cries from the Opposition Benches demanding protectionism and neutralism. Those cries can only harm our security, our trade and our employment. Therefore, I say to Labour Members that we will debate the issue of unemployment and the personal tragedies that it implies. But we will debate it by analysis and on policy, and not by generalised and extreme rhetoric.

The return of this country to greater employment will not be by some mechanical process. It cannot be gauged by some interlocking relationship with public spending or movements in inflation. As much as anything, it will be the product of social attitudes and business confidence.

It is a reality and not an abdication to assert that in these matters the authority of the Government is conditional and not absolute. That said, I have no doubt that the policies that I have outlined are well founded and will play their role in bringing about the return to work. In the debate on employment, as in so much else, the future belongs to us, and that is what this parliamentary Session will show.

Question put, That the amendment be made:—

The House divided: Ayes 205, Noes 364.

Division No. 4]	[10 pm
AYES
Adams, Allen (Paisley N)	Godman, Dr Norman
Alton, David	Golding, John
Anderson, Donald	Gould, Bryan
Archer, Rt Hon Peter	Gourlay, Harry
Ashdown, Paddy	Hamilton, W. W. (Central Fife)
Ashley, Rt Hon Jack	Hancock, Mr. Michael
Ashton, Joe	Hardy, Peter
Atkinson, N. (Tottenham)	Harman, Ms Harriet
Bagier, Gordon A. T.	Harrison, Rt Hon Walter
Banks, Tony (Newham NW)	Hart, Rt Hon Dame Judith
Barnett, Guy	Hattersley, Rt Hon Roy
Barron, Kevin	Haynes, Frank
Beckett, Mrs Margaret	Heffer, Eric S.
Beith, A. J.	Hogg, N. (C'nauld & Kilsyth)
Bell, Stuart	Home Robertson, John
Bennett, A. (Dent'n & Red'sh)	Howell, Rt Hon D. (S'heath)
Bermingham, Gerald	Howells, Geraint
Bidwell, Sydney	Hughes, Dr. Mark (Durham)
Blair, Anthony	Hughes, Robert (Aberdeen N)
Boothroyd, Miss Betty	Hughes, Roy (Newport East)
Boyes, Roland	Hughes, Sean (Knowsley S)
Bray, Dr Jeremy	Hughes, Simon (Southwark)
Brown, Gordon (D'f'mline E)	Janner, Hon Greville
Brown, Hugh D. (Provan)	Jenkins, Rt Hon Roy (Hillh'd)
Brown, N. (N'c'tle-u-Tyne E)	John, Brynmor
Brown, R. (N'c'tle-u-Tyne N)	Johnston, Russell
Brown, Ron (E'burgh, Leith)	Kaufman, Rt Hon Gerald
Bruce, Malcolm	Kennedy, Charles
Buchan, Norman	Kilroy-Silk, Robert
Caborn, Richard	Kinnock, Rt Hon Neil
Callaghan, Rt Hon J.	Kirkwood, Archy
Callaghan, Jim (Heyw'd & M)	Lamond, James
Campbell, Ian	Leadbitter, Ted
Canavan, Dennis	Leighton, Ronald
Carlile, Alexander (Montg'y)	Lewis, Ron (Carlisle)
Clarke, Thomas	Lewis, Terence (Worsley)
Clay, Robert	Litherland, Robert
Clwyd, Mrs Ann	Lloyd, Tony (Stretford)
Cocks, Rt Hon M. (Bristol S.)	Lofthouse, Geoffrey
Cohen, Harry	Loyden, Edward
Coleman, Donald	McCartney, Hugh
Concannon, Rt Hon J. D.	McDonald, Dr Oonagh
Conlan, Bernard	McGuire, Michael
Cook, Frank (Stockton North)	McKay, Allen (Penistone)
Cook, Robin F. (Livingston)	McKelvey, William
Corbett, Robin	Maclennan, Robert
Corbyn, Jeremy	McTaggart, Robert
Cowans, Harry	McWilliam, John
Cox, Thomas (Tooting)	Madden, Max
Craigen, J. M.	Marek, Dr John
Crowther, Stan	Martin, Michael
Cunliffe, Lawrence	Mason, Rt Hon Roy
Cunningham, Dr John	Maxton, John
Davies, Ronald (Caerphilly)	Maynard, Miss Joan
Davis, Terry (B'ham, H'ge H'l)	Meacher, Michael
Deakins, Eric	Meadowcroft, Michael
Dewar, Donald	Michie, William
Dixon, Donald	Mikardo, Ian
Dobson, Frank	Millan, Rt Hon Bruce
Dormand, Jack	Morris, Rt Hon A. (W'shawe)
Douglas, Dick	Morris, Rt Hon J. (Aberavon)
Dubs, Alfred	Nellist, David
Dunwoody, Hon Mrs G.	Oakes, Rt Hon Gordon
Eadie, Alex	O'Brien, William
Eastham, Ken	O'Neill, Martin
Edwards, Bob (W'h'mpfn SE)	Orme, Rt Hon Stanley
Ellis, Raymond	Owen, Rt Hon Dr David
Evans, John (St. Helens N)	Park, George
Ewing, Harry	Parry, Robert
Faulds, Andrew	Patchett, Terry
Fisher, Mark	Pavitt, Laurie
Foot, Rt Hon Michael	Pendry, Tom
Foster, Derek	Penhaligon, David
Foulkes, George	Pike, Peter
Fraser, J. (Norwood)	Powell, Raymond (Ogmore)
Freeson, Rt Hon Reginald	Prescott, John
Garrett, W. E.	Radice, Giles
Gilbert, Rt Hon Dr John	Randall, Stuart

Redmond, M.	Stewart, Rt Hon D. (W Isles)
Rees, Rt Hon M. (Leeds S)	Stott, Roger
Richardson, Ms Jo	Strang, Gavin
Roberts, Ernest (Hackney N)	Straw, Jack
Robertson, George	Thomas, Dr R. (Carmarthen)
Robinson, G. (Coventry NW)	Thompson, J. (Wansbeck)
Rogers, Allan	Thome, Stan (Preston)
Rooker, J. W.	Tinn, James
Ross, Ernest (Dundee W)	Torney, Tom
Ross, Stephen (Isle of Wight)	Wainwright, R.
Rowlands, Ted	Wallace, James
Ryman, John	Warden, Gareth (Gower)
Sedgemore, Brian	Wareing, Robert
Sheerman, Barry	Weetch, Ken
Sheldon, Rt Hon R.	Welsh, Michael
Shore, Rt Hon Peter	White, James
Short, Ms Clare (Ladywood)	Wigley, Dafydd
Short, Mrs B.(W'hampt'n NE)	Williams, Rt Hon A.
Silkin, Rt Hon J.	Wilson, Gordon
Skinner, Dennis	Winnick, David
Smith, C.(Isl'ton S & F'bury)	Wrigglesworth, Ian
Smith, Rt Hon J. (M'kl'ds E)	Young, David (Bolton SE)
Snape, Peter
Soley, Clive	Tellers for the Ayes:
Spearing, Nigel	Mr. James Hamilton and
Steel, Rt Hon David	Mr. Austin Mitchell.

NOES
Adley, Robert	Butterfill, John
Aitken, Jonathan	Carlisle, John (N Luton)
Alexander, Richard	Carlisle, Kenneth (Lincoln)
Alison, Rt Hon Michael	Carlisle, Rt Hon M. (W'ton S)
Amery, Rt Hon Julian	Carttiss, Michael
Amess, David	Cash, William
Ancram, Michael	Chalker, Mrs Lynda
Arnold, Tom	Chapman, Sydney
Ashby, David	Chope, Christopher
Aspinwall, Jack	Churchill, W. S.
Atkins, Rt Hon Sir H.	Clark, Hon A. (Plym'th S'n)
Atkins, Robert (South Ribble)	Clark, Dr Michael (Rochford)
Atkinson, David (B'm'th E)	Clark, Sir W. (Croydon S)
Baker, Rt Hon K. (Mole Vall'y)	Clarke, Rt Hon K. (Rushcliffe)
Baker, Nicholas (N Dorset)	Clegg, Sir Walter
Baldry, Tony	Cockeram, Eric
Batiste, Spencer	Colvin, Michael
Beaumont-Dark, Anthony	Con way, Derek
Beggs, Roy	Coombs, Simon
Bellingham, Henry	Cope, John
Bendall, Vivian	Cormack, Patrick
Bennett, Sir Frederic (T'bay)	Couchman, James
Benyon, William	Cranborne, Viscount
Best, Keith	Crouch, David
Bevan, David Gilroy	Currie, Mrs Edwina
Biffen, Rt Hon John	Dickens, Geoffrey
Biggs-Davison, Sir John	Dicks, Terry
Blackburn, John	Dorrell, Stephen
Blaker, Rt Hon Sir Peter	Douglas-Hamilton, Lord J.
Body, Richard	Dover, Den
Bonsor, Sir Nicholas	du Cann, Rt Hon Edward
Bottomley, Peter	Dunn, Robert
Bottomley, Mrs Virginia	Durant, Tony
Bowden, A. (Brighton K'to'n)	Dykes, Hugh
Bowden, Gerald (Dulwich)	Edwards, Rt Hon N. (P'broke)
Boyson, Dr Rhodes	Eggar, Tim
Braine, Sir Bernard	Evennett, David
Brandon-Bravo, Martin	Eyre, Sir Reginald
Bright, Graham	Fairbairn, Nicholas
Brinton, Tim	Fallon, Michael
Brittan, Rt Hon Leon	Farr, Sir John
Brooke, Hon Peter	Favell, Anthony
Brown, M. (Brigg & Cl'thpes)	Fenner, Mrs Peggy
Browne, John	Finsberg, Sir Geoffrey
Bruinvels, Peter	Fletcher, Alexander
Bryan, Sir Paul	Fookes, Miss Janet
Buchanan-Smith, Rt Hon A.	Forman, Nigel
Budgen, Nick	Forsyth, Michael (Stirling)
Bulmer, Esmond	Forsythe, Clifford (S Antrim)
Burl, Alistair	Forth, Eric
Butcher, John	Fowler, Rt Hon Norman
Butler, Hon Adam	Fox, Marcus

Franks, Cecil	Lang, Ian
Fraser, Peter (Angus East)	Latham, Michael
Freeman, Roger	Lawler, Geoffrey
Fry, Peter	Lawrence, Ivan
Gale, Roger	Lawson, Rt Hon Nigel
Galley, Roy	Leigh, Edward (Gainsbor'gh)
Gardiner, George (Reigate)	Lennox-Boyd, Hon Mark
Gardner, Sir Edward (Fylde)	Lester, Jim
Garel-Jones, Tristan	Lewis, Sir Kenneth (Stamf'd)
Glyn, Dr Alan	Lightbown, David
Goodlad, Alastair	Lilley, Peter
Gorst, John	Lloyd, Ian (Havant)
Gow, Ian	Lloyd, Peter, (Fareham)
Gower, Sir Raymond	Lord, Michael
Grant, Sir Anthony	Luce, Richard
Greenway, Harry	Lyell, Nicholas
Gregory, Conal	McCurley, Mrs Anna
Griffiths, E. (B'y St Edm'ds)	McCusker, Harold
Griffiths, Peter (Portsm'th N)	Macfarlane, Neil
Grist, Ian	MacKay, Andrew (Berkshire)
Ground, Patrick	MacKay, John (Argyll & Bute)
Grylls, Michael	Maclean, David John
Gummer, John Selwyn	McNair-Wilson, P. (New F'st)
Hamilton, Hon A. (Epsom)	Madel, David
Hamilton, Neil (Tatton)	Maginnis, Ken
Hampson, Dr Keith	Major, John
Hanley, Jeremy	Malins, Humfrey
Hannam,John	Malone, Gerald
Hargreaves, Kenneth	Maples, John
Harris, David	Marlow, Antony
Harvey, Robert	Marshall, Michael (Arundel)
Haselhurst, Alan	Mates, Michael
Havers, Rt Hon Sir Michael	Mather, Carol
Hawkins, C. (High Peak)	Maude, Hon Francis
Hawkins, Sir Paul (SW N'folk)	Mawhinney, Dr Brian
Hawksley, Warren	Maxwell-Hyslop, Robin
Hayes, J.	Mayhew, Sir Patrick
Hayhoe, Barney	Mellor, David
Hayward, Robert	Merchant, Piers
Heathcoat-Amory, David	Meyer, Sir Anthony
Heddle, John	Mills, Iain (Meriden)
Henderson, Barry	Mills, Sir Peter (West Devon)
Heseltine, Rt Hon Michael	Miscampbell, Norman
Hickmet, Richard	Mitchell, David (NW Hants)
Hicks, Robert	Moate, Roger
Higgins, Rt Hon Terence L.	Molyneaux, Rt Hon James
Hill, James	Monro, Sir Hector
Hind, Kenneth	Montgomery, Fergus
Hirst, Michael	Moore, John
Hogg, Hon Douglas (Gr'th'm)	Morrison, Hon C. (Devizes)
Holland, Sir Philip (Gedling)	Morrison, Hon P. (Chester)
Holt, Richard	Moynihan, Hon C.
Hooson, Tom	Mudd, David
Hordern, Peter	Murphy, Christopher
Howard, Michael	Neale, Gerrard
Howarth, Alan (Stratf'd-on-A)	Needham, Richard
Howarth, Gerald (Cannock)	Nelson, Anthony
Howe, Rt Hon Sir Geoffrey	Neubert, Michael
Howell, Rt Hon D. (G'ldford)	Newton, Tony
Howell, Ralph (N Norfolk)	Nicholls, Patrick
Hubbard-Miles, Peter	Nicholson, J.
Hunt, David (Wirral)	Norris, Steven
Hunt, John (Ravensbourne)	Onslow, Cranley
Hunter, Andrew	Oppenheim, Phillip
Hurd, Rt Hon Douglas	Oppenheim, Rt Hon Mrs S.
Jackson, Robert	Ottaway, Richard
Jenkin, Rt Hon Patrick	Page, Richard (Herts SW)
Jessel, Toby	Parkinson, Rt Hon Cecil
Jones, Gwilym (Cardiff N)	Parris, Matthew
Jones, Robert (W Herts)	Patten, John (Oxford)
Joseph, Rt Hon Sir Keith	Pattie, Geoffrey
Kellett-Bowman, Mrs Elaine	Pawsey, James
Key, Robert	Peacock, Mrs Elizabeth
King, Roger (B'ham N'field)	Pollock, Alexander
King, Rt Hon Tom	Powell, Rt Hon J. E. (S Down)
Knight, Gregory (Derby N)	Powell, William (Corby)
Knight, Mrs Jill (Edgbaston)	Powley, John
Knowles, Michael	Prentice, Rt Hon Reg
Knox, David	Price, Sir David
Lamont, Norman	Prior, Rt Hon James

Pym, Rt Hon Francis	Stradling Thomas, J.
Raffan, Keith	Sumberg, David
Raison, Rt Hon Timothy	Tapsell, Peter
Rathbone, Tim	Taylor, John (Solihull)
Rees, Rt Hon Peter (Dover)	Taylor, Teddy (S'end E)
Renton, Tim	Temple-Morris, Peter
Rhodes James, Robert	Terlezki, Stefan
Rhys Williams, Sir Brandon	Thatcher, Rt Hon Mrs M.
Ridley, Rt Hon Nicholas	Thomas, Rt Hon Peter
Rippon, Rt Hon Geoffrey	Thorne, Neil (Ilford S)
Roberts, Wyn (Conwy)	Thornton, Malcolm
Robinson, Mark (N'port W)	Thurnham, Peter
Roe, Mrs Marion	Townend, John (Bridlington)
Ross, Wm. (Londonderry)	Townsend, Cyril D. (B'heath)
Rossi, Sir Hugh	Tracey, Richard
Rost, Peter	Trippier, David
Rowe, Andrew	Trotter, Neville
Rumbold, Mrs Angela	Twinn, Dr Ian
Ryder, Richard	van Straubenzee, Sir W.
Sackville, Hon Thomas	Vaughan, Sir Gerard
Sainsbury, Hon Timothy	Waddington, David
St. John-Stevas, Rt Hon N.	Waldegrave, Hon William
Sayeed, Jonathan	Walden, George
Scott, Nicholas	Walker, Cecil (Belfast N)
Shaw, Giles (Pudsey)	Walker, Bill (T'side N)
Shaw, Sir Michael (Scarb')	Walker, Rt Hon P. (W'cester)
Shelton, William (Streatham)	Waller, Gary
Shepherd, Colin (Hereford)	Walters, Dennis
Shepherd, Richard (Aldridge)	Ward, John
Shersby, Michael	Wardle, C. (Bexhill)
Silvester, Fred	Warren, Kenneth
Sims, Roger	Watson, John
Skeet, T. H. H.	Watts, John
Smith, Sir Dudley (Warwick)	Wells, Bowen (Hertford)
Smith, Tim (Beaconsfield)	Wells, Sir John (Maidstone)
Soames, Hon Nicholas	Wheeler, John
Speed, Keith	Whitney, Raymond
Speller, Tony	Wiggin, Jerry
Spence, John	Wilkinson, John
Spencer, Derek	Winterton, Mrs Ann
Spicer, Jim (W Dorset)	Winterton, Nicholas
Spicer, Michael (S Worcs)	Wolfson, Mark
Squire, Robin	Wood, Timothy
Stanley, John	Woodcock, Michael
Steen, Anthony	Yeo, Tim
Stern, Michael	Young, Sir George (Acton)
Stevens, Lewis (Nuneaton)	Younger, Rt Hon George
Stevens, Martin (Fulham)
Stewart, Allan (Eastwood)	Tellers for the Noes:
Stewart, Andrew (Sherwood)	Mr. Robert Boscawen and
Stewart, Ian (N Hertf'dshire)	Mr. Donald Thompson.
Stokes, John

Question accordingly negatived.

Amendment proposed, pursuant to Standing Order No. 35, at the end of the Question to add: But humbly regret that the Gracious Speech offers no policies for reducing the level of unemployment.—[Mr. Beith.]

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

The House divided: Ayes 200, Noes, 364.

Division No. 5]	[10.15 pm
AYES
Adams, Allen (Paisley N)	Beith, A. J.
Alton, David	Bell, Stuart
Anderson, Donald	Bennett, A. (Dent'n & Red'sh)
Archer, Rt Hon Peter	Bermingham, Gerald
Ashdown, Paddy	Bidwell, Sydney
Ashley, Rt Hon Jack	Blair, Anthony
Ashton, Joe	Boothroyd, Miss Betty
Atkinson, N. (Tottenham)	Boyes, Roland
Bagier, Gordon A. T.	Bray, Dr Jeremy
Banks, Tony (Newham NW)	Brown, Gordon (D'f'mline E)
Barnett, Guy	Brown, Hugh D. (Provan)
Barron, Kevin	Brown, N. (N'c'tle-u-Tyne E)
Beckett, Mrs Margaret	Brown, R. (N'c'tle-u-Tyne N)

Brown, Ron (E'burgh, Leith)	Kilroy-Silk, Robert
Buchan, Norman	Kinnock, Rt Hon Neil
Caborn, Richard	Kirkwood, Archy
Callaghan, Rt Hon J.	Lamond, James
Callaghan, Jim (Heyw'd & M)	Leadbitter, Ted
Campbell, Ian	Leighton, Ronald
Canavan, Dennis	Lewis, Ron (Carlisle)
Carlile, Alexander (Montg'y)	Lewis, Terence (Worsley)
Clarke, Thomas	Litherland, Robert
Clay, Robert	Lloyd, Tony (Stretford)
Clwyd, Mrs Ann	Lofthouse, Geoffrey
Cocks, Rt Hon M. (Bristol S.)	Loyden, Edward
Cohen, Harry	McCartney, Hugh
Coleman, Donald	McDonald, Dr Oonagh
Concannon, Rt Hon J. D.	McGuire, Michael
Conlan, Bernard	McKay, Allen (Penistone)
Cook, Frank (Stockton North)	McKelvey, William
Cook, Robin F. (Livingston)	Maclennan, Robert
Corbett, Robin	McTaggart, Robert
Corbyn, Jeremy	McWilliam, John
Cowans, Harry	Madden, Max
Cox, Thomas (Tooting)	Marek, Dr John
Craigen, J. M.	Martin, Michael
Crowther, Stan	Mason, Rt Hon Roy
Cunliffe, Lawrence	Maxton, John
Cunningham, Dr John	Maynard, Miss Joan
Davies, Ronald (Caerphilly)	Meacher, Michael
Davis, Terry (B'ham, H'ge H'l)	Michie, William
Deakins, Eric	Mikardo, Ian
Dewar, Donald	Millan, Rt Hon Bruce
Dixon, Donald	Mitchell, Austin (G't Grimsby)
Dobson, Frank	Morris, Rt Hon A. (W'shawe)
Dormand, Jack	Morris, Rt Hon J. (Aberavon)
Douglas, Dick	Nellist, David
Dubs, Alfred	Oakes, Rt Hon Gordon
Dunwoody, Hon Mrs G.	O'Brien, William
Eadie, Alex	O'Neill, Martin
Eastham, Ken	Orme, Rt Hon Stanley
Edwards, Bob (W'h'mpt'n SE)	Owen, Rt Hon Dr David
Ellis, Raymond	Park, George
Evans, John (St. Helens N)	Parry, Robert
Ewing, Harry	Patchett, Terry
Faulds, Andrew	Pavitt, Laurie
Fisher, Mark	Pendry, Tom
Foot, Rt Hon Michael	Penhaligon, David
Foster, Derek	Pike, Peter
Foulkes, George	Powell, Raymond (Ogmore)
Fraser, J. (Norwood)	Prescott, John
Freeson, Rt Hon Reginald	Radice, Giles
Garrett, W. E.	Randall, Stuart
Gilbert, Rt Hon Dr John	Rees, Rt Hon M. (Leeds S)
Godman, Dr Norman	Richardson, Ms Jo
Golding, John	Roberts, Ernest (Hackney N)
Gould, Bryan	Robertson, George
Gourlay, Harry	Robinson, G. (Coventry NW)
Hamilton, James (M'well N)	Rogers, Allan
Hamilton, W. W. (Central Fife)	Rooker, J. W.
Hancock, Mr. Michael	Ross, Ernest (Dundee W)
Hardy, Peter	Ross, Stephen (Isle of Wight)
Harman, Ms Harriet	Rowlands, Ted
Harrison, Rt Hon Walter	Ryman, John
Hart, Rt Hon Dame Judith	Sedgemore, Brian
Hattersley, Rt Hon Roy	Sheerman, Barry
Haynes, Frank	Sheldon, Rt Hon R.
Heffer, Eric S.	Shore, Rt Hon Peter
Hogg, N. (C'nauld & Kilsyth)	Short, Ms Clare (Ladywood)
Home Robertson, John	Short, Mrs R,(W'hampt'n NE)
Howell, Rt Hon D. (S'heath)	Silkin, Rt Hon J.
Howells, Geraint	Skinner, Dennis
Hughes, Dr. Mark (Durham)	Smith, C.(Isl'ton S & F'bury)
Hughes, Robert (Aberdeen N)	Smith, Rt Hon J. (M'kl'ds E)
Hughes, Roy (Newport East)	Snape, Peter
Hughes, Sean (Knowsley S)	Soley, Clive
Hughes, Simon (Southwark)	Spearing, Nigel
Janner, Hon Greville	Steel, Rt Hon David
Jenkins, Rt Hon Roy (Hillh'd)	Stott, Roger
John, Brynmor	Strang, Gavin
Johnston, Russell	Straw, Jack
Kaufman, Rt Hon Gerald	Thomas, Dr R. (Carmarthen)
Kennedy, Charles	Thompson, J. (Wansbeck)

Thorne, Stan (Preston)	White, James
Tinn, James	Wigley, Dafydd
Torney, Tom	Williams, Rt Hon A.
Wainwright, R.	Winnick, David
Wallace, James	Young, David (Bolton SE)
Warded, Gareth (Gower)
Wareing, Robert	Tellers for the Ayes:
Weetch, Ken	Mr. Ian Wrigglesworth and
Welsh, Michael	Mr. Michael Meadowcroft.

NOES
Adley, Robert	Conway, Derek
Aitken, Jonathan	Coombs, Simon
Alexander, Richard	Cope, John
Alison, Rt Hon Michael	Couchman, James
Amery, Rt Hon Julian	Cranborne, Viscount
Amess, David	Crouch, David
Ancram, Michael	Currie, Mrs Edwina
Arnold, Tom	Dickens, Geoffrey
Ashby, David	Dicks, Terry
Aspinwall, Jack	Dorrell, Stephen
Atkins, Rt Hon Sir H.	Douglas-Hamilton, Lord J.
Atkins, Robert (South Ribble)	Dover, Den
Atkinson, David (B'm'th E)	du Cann, Rt Hon Edward
Baker, Rt Hon K. (Mole Vall'y)	Dunn, Robert
Baker, Nicholas (N Dorset)	Durant, Tony
Baldry, Tony	Dykes, Hugh
Batiste, Spencer	Edwards, Rt Hon N. (P'broke)
Beaumont-Dark, Anthony	Eggar, Tim
Beggs, Roy	Evennett, David
Bellingham, Henry	Eyre, Sir Reginald
Bendall, Vivian	Fairbairn, Nicholas
Bennett, Sir Frederic (T'bay)	Fallon, Michael
Benyon, William	Farr, Sir John
Best, Keith	Favell, Anthony
Bevan, David Gilroy	Fenner, Mrs Peggy
Biffen, Rt Hon John	Finsberg, Sir Geoffrey
Biggs-Davison, Sir John	Fletcher, Alexander
Blackburn, John	Fookes, Miss Janet
Blaker, Rt Hon Sir Peter	Forman, Nigel
Body, Richard	Forsyth, Michael (Stirling)
Bonsor, Sir Nicholas	Forsythe, Clifford (S Antrim)
Bottomley, Peter	Forth, Eric
Bottomley, Mrs Virginia	Fowler, Rt Hon Norman
Bowden, A. (Brighton K'to'n)	Fox, Marcus
Bowden, Gerald (Dulwich)	Franks, Cecil
Boyson, Dr Rhodes	Fraser, Peter (Angus East)
Braine, Sir Bernard	Freeman, Roger
Brandon-Bravo, Martin	Fry, Peter
Bright, Graham	Gale, Roger
Brinton, Tim	Galley, Roy
Brittan, Rt Hon Leon	Gardiner, George (Reigate)
Brooke, Hon Peter	Gardner, Sir Edward (Fylde)
Brown, M. (Brigg & Cl'thpes)	Garel-Jones, Tristan
Browne, John	Glyn, Dr Alan
Bruinvels, Peter	Goodlad, Alastair
Bryan, Sir Paul	Gorst, John
Buchanan-Smith, Rt Hon A.	Gow, Ian
Budgen, Nick	Gower, Sir Raymond
Bulmer, Esmond	Grant, Sir Anthony
Burt, Alistair	Greenway, Harry
Butcher, John	Gregory, Conal
Butler, Hon Adam	Griffiths, E. (B'y St Edm'ds)
Butterfill, John	Griffiths, Peter (Portsm'th N)
Carlisle, John (N Luton)	Grist, Ian
Carlisle, Kenneth (Lincoln)	Ground, Patrick
Carlisle, Rt Hon M. (W'ton S)	Grylls, Michael
Carttiss, Michael	Gummer, John Selwyn
Cash, William	Hamilton, Hon A. (Epsom)
Chalker, Mrs Lynda	Hamilton, Neil (Tatton)
Chapman, Sydney	Hampson, Dr Keith
Chope, Christopher	Hanley, Jeremy
Churchill, W. S.	Hannam, John
Clark, Hon A. (Plym'th S'n)	Hargreaves, Kenneth
Clark, Dr Michael (Rochford)	Harris, David
Clark, Sir W. (Croydon S)	Harvey, Robert
Clarke, Rt Hon K. (Rushcliffe)	Haselhurst, Alan
Clegg, Sir Walter	Havers, Rt Hon Sir Michael
Cockeram, Eric	Hawkins, C. (High Peak)
Colvin, Michael	Hawkins, Sir Paul (SW N'folk)

Hawksley, Warren	Maxwell-Hyslop, Robin
Hayes, J.	Mayhew, Sir Patrick
Hayhoe, Barney	Mellor, David
Hayward, Robert	Merchant, Piers
Heathcoat-Amory, David	Meyer, Sir Anthony
Heddle, John	Mills, Iain (Meriden)
Henderson, Barry	Mills, Sir Peter (West Devon)
Heseltine, Rt Hon Michael	Miscampbell, Norman
Hickmet, Richard	Mitchell, David (NW Hants)
Hicks, Robert	Moate, Roger
Higgins, Rt Hon Terence L.	Molyneaux, Rt Hon James
Hill, James	Monro, Sir Hector
Hind, Kenneth	Montgomery, Fergus
Hirst, Michael	Moore, John
Hogg, Hon Douglas (Gr'th'm)	Morrison, Hon C. (Devizes)
Holland, Sir Philip (Gedling)	Morrison, Hon P. (Chester)
Holt, Richard	Moynihan, Hon C.
Hooson, Tom	Mudd, David
Hordern, Peter	Murphy, Christopher
Howard, Michael	Neale, Gerrard
Howarth, Alan (Stratf'd-on-A)	Needham, Richard
Howarth, Gerald (Cannock)	Nelson, Anthony
Howe, Rt Hon Sir Geoffrey	Neubert, Michael
Howell, Rt Hon D. (G'ldford)	Newton, Tony
Howell, Ralph (N Norfolk)	Nicholls, Patrick
Hubbard-Miles, Peter	Nicholson, J.
Hunt, David (Wirral)	Norris, Steven
Hunt, John (Ravensbourne)	Onslow, Cranley
Hunter, Andrew	Oppenheim, Phillip
Hurd, Rt Hon Douglas	Oppenheim, Rt Hon Mrs S.
Jackson, Robert	Ottaway, Richard
Jenkin, Rt Hon Patrick	Page, Richard (Herts SW)
Jessel, Toby	Parkinson, Rt Hon Cecil
Jones, Gwilym (Cardiff N)	Parris, Matthew
Jones, Robert (W Herts)	Patten, John (Oxford)
Joseph, Rt Hon Sir Keith	Pattie, Geoffrey
Kellett-Bowman, Mrs Elaine	Pawsey, James
Key, Robert	Peacock, Mrs Elizabeth
King, Roger (B'ham N'field)	Pollock, Alexander
King, Rt Hon Tom	Powell, William (Corby)
Knight, Gregory (Derby N)	Powley, John
Knight, Mrs Jill (Edgbaston)	Prentice, Rt Hon Reg
Knowles, Michael	Price, Sir David
Knox, David	Prior, Rt Hon James
Lamont, Norman	Pym, Rt Hon Francis
Latham, Michael	Raffan, Keith
Lawler, Geoffrey	Raison, Rt Hon Timothy
Lawrence, Ivan	Rathbone, Tim
Lawson, Rt Hon Nigel	Rees, Rt Hon Peter (Dover)
Leigh, Edward (Gainsbor'gh)	Renton, Tim
Lennox-Boyd, Hon Mark	Rhodes James, Robert
Lester, Jim	Rhys Williams, Sir Brandon
Lewis, Sir Kenneth (Stamf'd)	Ridley, Rt Hon Nicholas
Lightbown, David	Rifkind, Malcolm
Lilley, Peter	Rippon, Rt Hon Geoffrey
Lloyd, Ian (Havant)	Roberts, Wyn (Conwy)
Lloyd, Peter, (Fareham)	Robinson, Mark (N'port W)
Lord, Michael	Roe, Mrs Marion
Luce, Richard	Ross, Wm. (Londonderry)
Lyell, Nicholas	Rossi, Sir Hugh
McCurley, Mrs Anna	Rost, Peter
McCusker, Harold	Rowe, Andrew
Macfarlane, Neil	Rumbold, Mrs Angela
MacKay, Andrew (Berkshire)	Ryder, Richard
MacKay, John (Argyll & Bute)	Sackville, Hon Thomas
Maclean, David John	Sainsbury, Hon Timothy
McNair-Wilson, P. (New F'st)	St. John-Stevas, Rt Hon N.
McQuarrie, Albert	Sayeed, Jonathan
Madel, David	Scott, Nicholas
Maginnis, Ken	Shaw, Giles (Pudsey)
Major, John	Shaw, Sir Michael (Scarb')
Malins, Humfrey	Shelton, William (Streatham)
Malone, Gerald	Shepherd, Colin (Hereford)
Maples, John	Shepherd, Richard (Aldridge)
Marlow, Antony	Shersby, Michael
Marshall, Michael (Arundel)	Silvester, Fred
Mates, Michael	Sims, Roger
Mather, Carol	Skeet, T. H. H.
Maude, Hon Francis	Smith, Sir Dudley (Warwick)
Mawhinney, Dr Brian	Smith, Tim (Beaconsfield)

Soames, Hon Nicholas	Twinn, Dr Ian
Speed, Keith	van Straubenzee, Sir W.
Speller, Tony	Vaughan, Sir Gerard
Spence, John	Waddington, David
Spencer, Derek	Waldegrave, Hon William
Spicer, Jim (W Dorset)	Walden, George
Spicer, Michael (S Worcs)	Walker, Cecil (Belfast N)
Squire, Robin	Walker, Bill (T'side N)
Stanley, John	Walker, Rt Hon P. (W'cester)
Steen, Anthony	Waller, Gary
Stern, Michael	Walters, Dennis
Stevens, Lewis (Nuneaton)	Ward, John
Stevens, Martin (Fulham)	Wardle, C. (Bexhill)
Stewart, Allan (Eastwood)	Warren, Kenneth
Stewart, Andrew (Sherwood)	Watson, John
Stewart, Ian (N Hertf'dshire)	Watts, John
Stokes, John	Wells, Bowen (Hertford)
Stradling Thomas, J.	Wells, Sir John (Maidstone)
Sumberg, David	Wheeler, John
Tapsell, Peter	Whitney, Raymond
Taylor, John (Solihull)	Wiggin, Jerry
Taylor, Teddy (S'end E)	Wilkinson, John
Temple-Morris, Peter	Winterton, Mrs Ann
Terlezki, Stefan	Winterton, Nicholas
Thatcher, Rt Hon Mrs M.	Wolfson, Mark
Thomas, Rt Hon Peter	Wood, Timothy
Thompson, Donald (Calder V)	Woodcock, Michael
Thorne, Neil (Ilford S)	Yeo, Tim
Thornton, Malcolm	Young, Sir George (Acton)
Thurnham, Peter	Younger, Rt Hon George
Townend, John (Bridlington)
Townsend, Cyril D. (B'heath)	Tellers for the Noes:
Tracey, Richard	Mr. Robert Boscawen and
Trippier, David	Mr. Ian Lang
Trotter, Neville

Question accordingly negatived.

Main Question put:—

The House divided: Ayes 352, Noes 202.

Division No.6]	[10.30 pm
AYES
Adley, Robert	Bright, Graham
Aitken, Jonathan	Brinton, Tim
Alexander, Richard	Brittan, Rt Hon Leon
Alison, Rt Hon Michael	Brooke, Hon Peter
Amery, Rt Hon Julian	Brown, M. (Brigg & Cl'thpes)
Amess, David	Browne, John
Ancram, Michael	Bruinvels, Peter
Arnold, Tom	Bryan, Sir Paul
Ashby, David	Buchanan-Smith, Rt Hon A.
Aspinwall, Jack	Budgen, Nick
Atkins, Rt Hon Sir H.	Bulmer, Esmond
Atkins, Robert (South Ribble)	Burt, Alistair
Atkinson, David (B'm'th E)	Butcher, John
Baker, Rt Hon K. (Mole Vall'y)	Butler, Hon Adam
Baker, Nicholas (N Dorset)	Butterfill, John
Baldry, Tony	Carlisle, John (N Luton)
Batiste, Spencer	Carlisle, Kenneth (Lincoln)
Beaumont-Dark, Anthony	Carlisle, Rt Hon M. (W'ton S)
Bellingham, Henry	Carttiss, Michael
Bendall, Vivian	Cash, William
Bennett, Sir Frederic (T'bay)	Chalker, Mrs Lynda
Benyon, William	Chapman, Sydney
Best, Keith	Chope, Christopher
Bevan, David Gilroy	Churchill, W. S.
Biffen, Rt Hon John	Clark, Hon A. (Plym'th S'n)
Biggs-Davison, Sir John	Clark, Dr Michael (Rochford)
Blackburn, John	Clark, Sir W. (Croydon S)
Blaker, Rt Hon Sir Peter	Clarke, Rt Hon K. (Rushcliffe)
Body, Richard	Clegg, Sir Walter
Bonsor, Sir Nicholas	Cockeram, Eric
Bottomley, Peter	Colvin, Michael
Bottomley, Mrs Virginia	Conway, Derek
Bowden, A. (Brighton K'to'n)	Coombs, Simon
Bowden, Gerald (Dulwich)	Cope, John
Boyson, Dr Rhodes	Cormack, Patrick
Braine, Sir Bernard	Couchman, James
Brandon-Bravo, Martin	Cranborne, Viscount

Crouch, David	Howard, Michael
Currie, Mrs Edwina	Howarth, Alan (Stratf'd-on-A)
Dickens, Geoffrey	Howarth, Gerald (Cannock)
Dicks, Terry	Howe, Rt Hon Sir Geoffrey
Dorrell, Stephen	Howell, Rt Hon D. (G'ldford)
Douglas-Hamilton, Lord J.	Howell, Ralph (N Norfolk)
Dover, Den	Hubbard-Miles, Peter
du Cann, Rt Hon Edward	Hunt, David (Wirral)
Dunn, Robert	Hunt, John (Ravensbourne)
Durant, Tony	Hunter, Andrew
Dykes, Hugh	Jackson, Robert
Edwards, Rt Hon N. (P'broke)	Jenkin, Rt Hon Patrick
Eggar, Tim	Jessel, Toby
Evennett, David	Jones, Gwilym (Cardiff N)
Eyre, Sir Reginald	Jones, Robert (W Herts)
Fairbairn, Nicholas	Joseph, Rt Hon Sir Keith
Fallon, Michael	Kellett-Bowman, Mrs Elaine
Farr, Sir John	Key, Robert
Favell, Anthony	King, Roger (B'ham N'field)
Fenner, Mrs Peggy	King, Rt Hon Tom
Finsberg, Sir Geoffrey	Knight, Gregory (Derby N)
Fletcher, Alexander	Knight, Mrs Jill (Edgbaston)
Fookes, Miss Janet	Knowles, Michael
Forman, Nigel	Knox, David
Forsyth, Michael (Stirling)	Lamont, Norman
Forth, Eric	Lang, Ian
Fowler, Rt Hon Norman	Latham, Michael
Franks, Cecil	Lawler, Geoffrey
Fraser, Peter (Angus East)	Lawrence, Ivan
Freeman, Roger	Lawson, Rt Hon Nigel
Fry, Peter	Leigh, Edward (Gainsbor'gh)
Gale, Roger	Lennox-Boyd, Hon Mark
Galley, Roy	Lester, Jim
Gardiner, George (Reigate)	Lewis, Sir Kenneth (Stamf'd)
Gardner, Sir Edward (Fylde)	Lightbown, David
Glyn, Dr Alan	Lilley, Peter
Goodlad, Alastair	Lloyd, Ian (Havant)
Gorst, John	Lloyd, Peter, (Fareham)
Gow, Ian	Lord, Michael
Gower, Sir Raymond	Luce, Richard
Grant, Sir Anthony	Lyell, Nicholas
Greenway, Harry	McCurley, Mrs Anna
Gregory, Conal	Macfarlane, Neil
Griffiths, E. (B'y St Edm'ds)	MacKay, Andrew (Berkshire)
Griffiths, Peter (Portsm'th N)	MacKay, John (Argyll & Bute)
Grist, Ian	Maclean, David John
Ground, Patrick	McNair-Wilson, P. (New F'st)
Grylls, Michael	McQuarrie, Albert
Gummer, John Selwyn	Madel, David
Hamilton, Hon A. (Epsom)	Major, John
Hamilton, Neil (Tatton)	Malins, Humfrey
Hampson, Dr Keith	Malone, Gerald
Hanley, Jeremy	Maples, John
Hannam, John	Marlow, Antony
Hargreaves, Kenneth	Marshall, Michael (Arundel)
Harris, David	Mates, Michael
Harvey, Robert	Mather, Carol
Haselhurst, Alan	Maude, Hon Francis
Havers, Rt Hon Sir Michael	Mawhinney, Dr Brian
Hawkins, C. (High Peak)	Maxwell-Hyslop, Robin
Hawkins, Sir Paul (SW N'folk)	Mayhew, Sir Patrick
Hawksley, Warren	Mellor, David
Hayes, J.	Merchant, Piers
Hayhoe, Barney	Meyer, Sir Anthony
Hayward, Robert	Mills, Iain (Meriden)
Heathcoat-Amory, David	Mills, Sir Peter (West Devon)
Heddle, John	Miscampbell, Norman
Henderson, Barry	Mitchell, David (NW Hants)
Heseltine, Rt Hon Michael	Moate, Roger
Hickmet, Richard	Monro, Sir Hector
Hicks, Robert	Montgomery, Fergus
Higgins, Rt Hon Terence L.	Moore, John
Hill, James	Morrison, Hon C. (Devizes)
Hind, Kenneth	Morrison, Hon P. (Chester)
Hirst, Michael	Moynihan, Hon C.
Hogg, Hon Douglas (Gr'th'm)	Mudd, David
Holland, Sir Philip (Gedling)	Murphy, Christopher
Holt, Richard	Neale, Gerrard
Hooson, Tom	Needham, Richard
Hordern, Peter	Nelson, Anthony

Neubert, Michael	Squire, Robin
Newton, Tony	Stanley, John
Nicholls, Patrick	Steen, Anthony
Norris, Steven	Stern, Michael
Onslow, Cranley	Stevens, Lewis (Nuneaton)
Oppenheim, Phillip	Stevens, Martin (Fulham)
Oppenheim, Rt Hon Mrs S.	Stewart, Allan (Eastwood)
Ottaway, Richard	Stewart, Andrew (Sherwood)
Page, Richard (Herts SW)	Stewart, Ian (N Hertf'dshire)
Parkinson, Rt Hon Cecil	Stokes, John
Parris, Matthew	Stradling Thomas, J.
Patten, John (Oxford)	Sumberg, David
Pattie, Geoffrey	Tapsell, Peter
Pawsey, James	Taylor, John (Solihull)
Peacock, Mrs Elizabeth	Taylor, Teddy (S'end E)
Pollock, Alexander	Temple-Morris, Peter
Powell, William (Corby)	Terlezki, Stefan
Powley, John	Thatcher, Rt Hon Mrs M.
Prentice, Rt Hon Reg	Thomas, Rt Hon Peter
Price, Sir David	Thompson, Donald (Calder V)
Prior, Rt Hon James	Thorne, Neil (Ilford S)
Raffan, Keith	Thornton, Malcolm
Raison, Rt Hon Timothy	Thurnham, Peter
Rathbone, Tim	Townend, John (Bridlington)
Rees, Rt Hon Peter (Dover)	Townsend, Cyril D. (B'heath)
Renton, Tim	Tracey, Richard
Rhodes James, Robert	Trippier, David
Rhys Williams, Sir Brandon	Trotter, Neville
Ridley, Rt Hon Nicholas	Twinn, Dr Ian
Rifkind, Malcolm	van Straubenzee, Sir W.
Rippon, Rt Hon Geoffrey	Vaughan, Sir Gerard
Roberts, Wyn (Conwy)	Waddington, David
Robinson, Mark (N'port W)	Waldegrave, Hon William
Roe, Mrs Marion	Walden, George
Rossi, Sir Hugh	Walker, Bill (T'side N)
Rost, Peter	Walker, Rt Hon P. (W'cester)
Rowe, Andrew	Waller, Gary
Rumbold, Mrs Angela	Walters, Dennis
Ryder, Richard	Ward, John
Sackville, Hon Thomas	Wardle, C. (Bexhill)
Sainsbury, Hon Timothy	Warren, Kenneth
St. John-Stevas, Rt Hon N.	Watson, John
Sayeed, Jonathan	Watts, John
Scott, Nicholas	Wells, Bowen (Hertford)
Shaw, Giles (Pudsey)	Wells, Sir John (Maidstone)
Shaw, Sir Michael (Scarb')	Wheeler, John
Shepherd, Colin (Hereford)	Whitney, Raymond
Shepherd, Richard (Aldridge)	Wiggin, Jerry
Shersby, Michael	Wilkinson, John
Silvester, Fred	Winterton, Mrs Ann
Sims, Roger	Winterton, Nicholas
Skeet, T. H. H.	Wolfson, Mark
Smith, Sir Dudley (Warwick)	Wood, Timothy
Smith, Tim (Beaconsfield)	Woodcock, Michael
Soames, Hon Nicholas	Yeo, Tim
Speed, Keith	Young, Sir George (Acton)
Speller, Tony	Younger, Rt Hon George
Spence, John
Spencer, Derek	Tellers for the Ayes:
Spicer, Jim (W Dorset)	Mr. Robert Boscawen and
Spicer, Michael (S Worcs)	Mr. Tristan Garel-Jones.

NOES
Adams, Allen (Paisley N)	Bidwell, Sydney
Alton, David	Blair, Anthony
Anderson, Donald	Boothroyd, Miss Betty
Archer, Rt Hon Peter	Boyes, Roland
Ashdown, Paddy	Bray, Dr Jeremy
Ashley, Rt Hon Jack	Brown, Gordon (D'f'mline E)
Ashton, Joe	Brown, Hugh D. (Provan)
Atkinson, N. (Tottenham)	Brown, N. (N'c'tle-u-Tyne E)
Bagier, Gordon A. T.	Brown, R. (N'c'tle-u-Tyne N)
Banks, Tony (Newham NW)	Brown, Ron (E'burgh, Leith)
Barnett, Guy	Buchan, Norman
Barron, Kevin	Caborn, Richard
Beckett, Mrs Margaret	Callaghan, Rt Hon J.
Beith, A. J.	Callaghan, Jim (Heyw'd & M)
Bell, Stuart	Campbell, Ian
Bennett, A. (Dent'n & Red'sh)	Canavan, Dennis
Bermingham, Gerald	Carlile, Alexander (Montg'y)

Clarke, Thomas	Loyden, Edward
Clay, Robert	McCartney, Hugh
Clwyd, Mrs Ann	McDonald, Dr Oonagh
Cocks, Rt Hon M. (Bristol S.)	McGuire, Michael
Cohen, Harry	McKay, Allen (Penistone)
Coleman, Donald	McKelvey, William
Concannon, Rt Hon J. D.	Maclennan, Robert
Conlan, Bernard	McTaggart, Robert
Cook, Frank (Stockton North)	McWilliam, John
Cook, Robin F. (Livingston)	Madden, Max
Corbyn, Jeremy	Marek, Dr John
Cowans, Harry	Martin, Michael
Cox, Thomas (Tooting)	Mason, Rt Hon Roy
Craigen, J. M.	Maxton, John
Crowther, Stan	Maynard, Miss Joan
Cunliffe, Lawrence	Meacher, Michael
Cunningham, Dr John	Meadowcroft, Michael
Davies, Ronald (Caerphilly)	Michie, William
Davis, Terry (B'ham, H'ge H'l)	Mikardo, Ian
Deakins, Eric	Millan, Rt Hon Bruce
Dewar, Donald	Mitchell, Austin (G't Grimsby)
Dixon, Donald	Morris, Rt Hon A. (W'shawe)
Dobson, Frank	Morris, Rt Hon J. (Aberavon)
Dormand, Jack	Nellist, David
Douglas, Dick	Oakes, Rt Hon Gordon
Dubs, Alfred	O'Brien, William
Dunwoody, Hon Mrs G.	O'Neill, Martin
Eadie, Alex	Orme, Rt Hon Stanley
Eastham, Ken	Owen, Rt Hon Dr David
Ellis, Raymond	Park, George
Evans, John (St. Helens N)	Parry, Robert
Ewing, Harry	Patchett, Terry
Faulds, Andrew	Pavitt, Laurie
Fisher, Mark	Pendry, Tom
Foot, Rt Hon Michael	Penhaligon, David
Foster, Derek	Pike, Peter
Foulkes, George	Powell, Raymond (Ogmore)
Fraser, J. (Norwood)	Prescott, John
Freeson, Rt Hon Reginald	Radice, Giles
Garrett, W. E.	Randall, Stuart
Gilbert, Rt Hon Dr John	Redmond, M.
Godman, Dr Norman	Rees, Rt Hon M. (Leeds S)
Golding, John	Richardson, Ms Jo
Gould, Bryan	Roberts, Ernest (Hackney N)
Gourlay, Harry	Robertson, George
Hamilton, James (M'well N)	Robinson, G. (Coventry NW)
Hamilton, W. W. (Central Fife)	Rogers, Allan
Hancock, Mr. Michael	Rooker, J. W.
Hardy, Peter	Ross, Ernest (Dundee W)
Harman, Ms Harriet	Ross, Stephen (Isle of Wight)
Harrison, Rt Hon Walter	Rowlands, Ted
Hart, Rt Hon Dame Judith	Ryman, John
Hattersley, Rt Hon Roy	Sedgemore, Brian
Haynes, Frank	Sheerman, Barry
Heffer, Eric S.	Sheldon, Rt Hon R.
Hogg, N. (C'nauld & Kilsyth)	Shore, Rt Hon Peter
Home Robertson, John	Short, Ms Clare (Ladywood)
Howell, Rt Hon D. (S'heath)	Short, Mrs R.(W'hampt'n NE)
Howells, Geraint	Silkin, Rt Hon J.
Hughes, Dr. Mark (Durham)	Skinner, Dennis
Hughes, Robert (Aberdeen N)	Smith, C.(Isl'ton S & F'bury)
Hughes, Roy (Newport East)	Smith, Rt Hon J. (M'kl'ds E)
Hughes, Simon (Southward)	Snape, Peter
Janner, Hon Greville	Soley, Clive
Jenkins, Rt Hon Roy (Hillh'd)	Spearing, Nigel
John, Brynmor	Steel, Rt Hon David
Johnston, Russell	Stewart, Rt Hon D. (W Isles)
Kaufman, Rt Hon Gerald	Stott, Roger
Kennedy, Charles	Strang, Gavin
Kilroy-Silk, Robert	Straw, Jack
Kinnock, Rt Hon Neil	Thomas, Dr R. (Carmarthen)
Kirkwood, Archy	Thompson, J. (Wansbeck)
Lamond, James	Thorne, Stan (Preston)
Leadbitter, Ted	Tinn, James
Leighton, Ronald	Torney, Tom
Lewis, Ron (Carlisle)	Wainwright, R.
Lewis, Terence (Worsley)	Wallace, James
Litherland, Robert	Wardell, Gareth (Gower)
Lloyd, Tony (Stretford)	Wareing, Robert
Lofthouse, Geoffrey	Weetch, Ken

Welsh, Michael	Wrigglesworth, Ian
White, James	Young, David (Bolton SE)
Wigley, Dafydd
Williams, Rt Hon A.	Tellers for the Noes:
Wilson, Gordon	Mr. Robin Corbett and
Winnick, David	Mr. Sean Hughes.

Question accordingly agreed to.

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

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