The Economy

HC Deb 31 January 1985 vol 72 cc418-510

Mr. Speaker

Before I call the Leader of the Opposition to move the motion, I should say that today's debate is not one of those in which I am empowered to use my discretion to impose a time limit of 10 minutes on speeches during the early evening. However, it is clear that many right hon. and hon. Members wish to speak and I appeal once again for reasonably short speeches. I have selected the amendment in the name of the Prime Minister.

3.46 pm

Mr. Neil Kinnock (Islwyn)

I beg to move, That this House censures Her Majesty's Government for its gross mismanagement of the British economy which has led to the highest real interest rates, the worst manufacturing trade deficit and the highest level of unemployment in the history of Great Britain.

Mr. J. Enoch Powell (South Down)

On a point of order, Mr. Speaker. I apologise to the right hon. Member for Islwyn (Mr. Kinnock) for bringing forward the point of order at this stage, but he will appreciate the necessity for doing so. The motion that the right hon. Gentleman has just moved in terms excludes part of the United Kingdom, whether the intention is to inhibit right hon. and hon. Members on this Bench from taking part in the debate, or whether it is that the Labour party does not care about the economy and employment in Northern Ireland. The ruling that I am seeking from you, Mr. Speaker, which I hope you will be able to give, is that the debate may extend generally over the economy of the United Kingdom.

Mr. Speaker

I can give the right hon. Gentleman that assurance.

Mr. Kinnock

rose — —[Laughter.] Conservative Members obviously think that the appalling levels of unemployment and destitution in Northern Ireland are a great joke. It is clear that the right hon. Member for South Down (Mr. Powell), who has just raised a point of order, perfectly properly and aptly in my view, does not share their view. That might be one of the reasons why he is on these Benches, having left the Conservative party.

In moving the motion that relates, naturally, to the United Kingdom of Great Britain and Northern Ireland, my party is bringing the Government to account for their complete mismanagement of our country's affairs. It is also holding the Government to account for the way in which their policies have brought us to the turmoil of recent weeks and inflicted on our country the dreadful uncertainty of future months. That recent turmoil and those uncertainties provide only the background to today's censure debate, as the real question that the Prime Minister and the Chancellor of the Exchequer must answer today is this: how did their regime turn a modern, industrialised country, with a wealth of energy resources and revenues that are denied to many of our competitors, into the punchbag of the world's currency speculators?

How did they let Britain's affairs get into the state where a wobble in international oil prices or the strength of the dollar could knock our economy sprawling, bring a 40 per cent. increase in interest rates in the period of a fortnight and impose massive extra costs on industries and households in Britain? That question must be answered today.

In asking that question, we are not talking the pound down, for we could not in a whole week — [Interruption.] I am glad to see the Chancellor in his place. I thought for a moment that the Prime Minister had sacked him.

In asking those questions about how the Government have got us into this state, we are not talking the pound down, for we could not in a whole week of censure debates do a fraction of the damage that is done in the average press briefing by the Prime Minister's press secretary, Mr. Bernard Ingham.

Neither are we in this debate selling Britain short. Our complaint is that we have a Government who are selling Britain out and selling Britain off. We do not delight, as we debate these matters, in the misfortunes that afflict our country because of the actions of this Government. We see too much suffering among our constituents, the people whom we represent, to take any joy in the present condition of our country.

Bad news for Britain is bad news for us all — for all in this House and for all our people throughout the country — but, of course, the news is worse for some than it is for others. It is much worse for the small business that must borrow than it is for the great corporation with massive private assets. The news is much worse for the young home buyer than it is for the property magnate. The news is much worse for those who will lose their living because of speculators and interest rate rises than it is for those who make their living by speculation and from interest rate rises.

Mr. Eric Forth (Mid-Worcestershire)

rose—

Mr. Kinnock

I did not refer to the hon. Gentleman by name, but if the cap fits, I suppose he wants to wear it.

I was talking about people — parasites on our society — who contribute nothing and inflict dreadful harm on our country. Those in that group, those speculators, we are told when it suits the Prime Minister, are the people of enterprise and audacity, the people of the market, the people whom the Prime Minister admires for their boldness, adventure, sense of commitment and risk-taking.

That is what the Prime Minister repeatedly tells us about the enterprise climate that she wants to create. Indeed, she admires them so much that she wants to run the country for their benefit. She wants a land fit for speculators, and that has been the whole tale of the right hon. Lady's policies — [Interruption.] — and her dependence during the last five years on people and institutions of that kind. Or, at least, the right hon. Lady likes those speculators, those pirates, some of the time. When they are making a killing out of buying and selling British Telecom shares, or British Aerospace, Amersham International or Cable and Wireless, they are, in the view of the Prime Minister, to be admired.

Mr. Richard Ryder (Mid-Norfolk)

rose—

Mr. Kinnock

But when they turn their sterling gains from that buying and selling into dollar purchases and take their money out of our currency, the Prime Minister starts to agree with us and to think of them as irrational and irresponsible. That is the schizophrenia of the Prime Minister.

Several Hon. Members

rose—

Mr. Speaker

Order. It is obvious that the right hon. Gentleman is not giving way.

Mr. Kinnock

That, as I was saying, is the schizophrenia of the Prime Minister, which I suppose is something of a euphemism for hypocrisy, although I know that I am not allowed to use that word in the House. All of the resulting confusion because of how the Prime Minister feels about the operations of the market has been manifest in recent weeks. Faced with a fresh attack on the currency by their soulmates in the market, the Government have had to resort to the pathetic process of offering conflicting press briefings — so much so that yesterday the Financial Times was moved to describe their activities as "secretive dithering". This secret dithering over the past few weeks has sent the money market into a spin and lenders and borrowers into a positive whirl. It has even got The Times into a tizzy. Yesterday the paper provided probably the shortest and clearest evidence of the confusion generated by the Government's vacillation and giddiness in past weeks. It had to print the following correction: Mr. Lawson said The Times yesterday said on Monday that it would 'now' be appropriate for sterling to rise against the dollar, and not 'not' as printed yesterday". If the self-proclaimed "paper of record" cannot get it right and cannot understand it, what chance have others?

The Chancellor of the Exchequer (Mr. Nigel Lawson)

Pathetic!

Mr. Kinnock

That is exactly what the Daily Mail said about the right hon. Gentleman—pathetic.

Mr. Forth

As he develops his theme, will the right hon. Gentleman please tell the House whether he will get to the stage of recommending that we should resort to the International Monetary Fund in the same way as his Government were forced to do because of their mismanagement?

Mr. Kinnock

I shall certainly get to that stage and also to the Government's borrowing record and their financial position. What the hon. Member for Mid-Worcestershire (Mr. Forth) will discover, and will have to apologise to his constituents for, is that instead of this Government following the recommendation of a former Prime Minister, the Earl of Stockton, to borrow to produce, and instead of using their debts for the purpose of generating wealth in our economy, they have been using their increasing debts for the purpose of paying the bills arising out of slump in our economy. Perhaps the hon. Member could explain that to his constituents. Then they might see that there is a preferable alternative. During recent weeks the record of the Chancellor of the Exchequer has been pathetic.

Sir William Clark (Croydon, South)

rose—

Mr. Kinnock

I shall not give way unless the hon. Member for Croydon, South (Sir William Clark) is rising to defend the Earl of Stockton.

Sir William Clark

Will the right hon. Gentleman remind the House that in 1979, because of the overseas borrowing of the Labour Government, we owed 22 billion dollars but that this Government have now repaid over half of that debt?

Mr. Kinnock

I shall most definitely and eagerly come to that point. I shall relate to the hon. Member for Croydon, South the precise record of this Government during the last five years and the comparison that can be made with the previous five years. I believe that the hon. Member will find the exercise very illuminating. Even somebody as innumerate as the hon. Member might be able to understand it. We have against the background of recent weeks and the turmoil and tension set up in our economy called on a few occasions for the sacking of the Chancellor. That would be a fitting fate for a man with his record. Other people's jobs should not depend upon a man who does his own job so badly.

We know that the Chancellor of the Exchequer wants a high growth rate. We know that he wants a low inflation rate and we know that he wants everybody to go busily about their business. But given his record, that is not really on. If I may coin a phrase from the Prime Minister—he has very good taste, but we do not think that he is really up to it.

The Chancellor of the Exchequer is a particular friend of the Prime Minister. We know that she would not like to sack him. It is a brutal old business for someone with such a gentle spirit. We know that. We also know from her previous record when she has dismissed other members of her Cabinet that she is, in her own words, a "reluctant butcher." So we should ask her to make it easy on herself and on the Chancellor. She need not go through all that brutal old business of sacking. She can call the Chancellor in one fine morning — let us say, tomorrow morning — and simply say, "Nigel dear, I think the time has come for you to grow a beard."

The trouble is — [Interruption.] I am very much in favour of the broadcasting of this House, but it is liable to widespread abuse by Conservative Members. The plan that Conservative Whips have laid down to mutter and murmur throughout the speeches of Opposition Members is so clear as to be pathetic.

Mr. Ryder

rose—

Mr. Kinnock

I give way to the junior hon. Member.

Mr. Ryder

I am most grateful to the right hon. Gentleman. The right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) has at last said that the pound has reached its right level. Does the Leader of the Opposition agree?

Mr. Kinnock

The hon. Gentleman — [HON. MEMBERS: "Answer."] The hon. Member for Croydon, South, who intervened previously, is innumerate and the hon. Member for Mid-Norfolk (Mr. Ryder), who has just intervened, obviously has a worse affliction. My right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) did not say that the pound has reached the right level; he said that it may have reached the right level. [Interruption.]

Mr. Speaker

Order. The Leader of the Opposition wishes to continue.

Mr. Kinnock

Then my right hon. Friend went on to say—

Mr. Cranley Onslow (Woking)

On a point of order, Mr. Speaker. Is it not intolerable that the Leader of the Opposition should be so anxious not to give way that he seeks to wave you back into your Chair?

Mr. Speaker

Order. I hope that we can hear the debate in reasonable silence. I am the first to appreciate that there are strong feelings on both sides of the House, but we should give each other a fair hearing.

Mr. Kinnock

It is worth pointing out that that last intervention was from the elected leader of Conservative Back Benchers—the chairman of the 1922 Committee. It is a direct demonstration of how short they are of arguments or any sensible response.

I was saying that my right hon. Friend had said that the pound may be at the right level but that it was up to the Government to say what the level should be". Perhaps later in the debate the hon. Member for Mid-Norfolk will address that question to his Front Bench rather than that we should have to wait until we hear from the Prime Minister on "Woman's Hour" to find out the Government's view on the standing of the pound.

If we were to see the departure of the Chancellor, even if the Prime Minister were to resort to that expedient, it would not be enough. What we want is not just a change of personalities in the Government; we want a change of policies in the Government.

Throughout the Chancellor's oscillations between crisis and coma in recent weeks we have been seeing the way in which a harvest of insecurity, instability, interest rate rises and record unemployment rises has been garnered from the seeds that were laid when the Prime Minister first went into 10 Downing street. Her Chancellors have been nurturing those weeds ever since that awful day.

It is not just policies that need changing; it is the whole attitude and approach of the Government to the problems of our nation. That is the truth behind today's conditions.

Faced with that fact, I hope that the Prime Minister will not simply resort to that litany of doctored statistics, half-truths and misrepresentations which has become her stock in trade when she switches to autopilot at Question Time on Tuesday and Thursday afternoons.

I hope that we shall not hear from the right hon. Lady today that we have the highest gross national product ever, as if it were a cause for great historic celebration. Until she achieved power, that was a commonplace occurrence just about every year.

I hope that the right hon. Lady is not going to say that we have the highest investment ever, at least, not without admitting that manufacturing investment is still, in 1985, 30 per cent. lower than in was in 1979.

I hope that the right hon. Lady will not talk about the highest retail sales ever without admitting that that has been achieved by a £70,000 million increase in household debt — a record level in Britain's history — and a 53 per cent. increase in manufactured imports.

We want the whole truth from the Prime Minister this afternoon. We look for that truth, as we look for the answers and descriptions of what the Government are to do in the future to make sure that we do not have a repetition of the farcical turmoil, the secret dithering, that we have seen from the Government in recent weeks.

I hope that this afternoon the Prime Minister will not tell us about her record on borrowing—

Mr. Patrick Cormack (Staffordshire, South)

rose—

Mr. Kinnock

I am responding to a point raised by two hon. Members and I shall give way to the hon. Gentleman afterwards.

I hope that we shall not hear, as we have heard so often before, about the way in which the Prime Minister has kept control of borrowing. She tells us that she has maintained that control, that she has been a prudent and thrifty housekeeper to the nation's resources over the past five years. But the truth is that, although the Government came to power planning to borrow £30 billion in cash terms, over the past five years they have borrowed £50 billion. If that is not enough from a Government who are supposed to be committed against borrowng, that figure of £50 billion is £10,000 million more than the figure during the five years of the Labour Government, who were supposed to be so profligate and careless of the country's welfare. That is the truth.

Mr. Cormack

rose—

Mr. Kinnock

I shall give way to the hon. Gentleman in a moment.

That is the truth and the Prime Minister should be wise enough to admit it. While she is in the confessional she should also acknowledge that while the Labour Government were undertaking their lower level of borrowing in order, as the Earl of Stockton, whom I have quoted before and will do so again, says—

Mr. Albert McQuarrie (Banff and Buchan)

Grasping at a straw.

Mr. Kinnock

Is that what the Earl of Stockton is in the hon. Gentleman's view — a straw? History will not record the hon. Gentleman's view that his past Prime Minister was a straw. It will compare his past Prime Minister with the plastic lady who leads the country now. He was a man of real steel and was prepared to stand up for the country, unlike the right hon. Lady.

The Labour Government borrowed to produce, not to pay the bills of slump, as this Government are doing. Moreover, the Labour Government had smaller oil revenues during their entire live years of office than this Government receive in one month. That is a massive difference between the records of those two Governments.

Today the right hon. Lady should acknowledge all of that and explain what she and her Chancellors have been doing with those massive oil revenues and that massive borrowing. She should also explain what they will do now. She should explain it here in the House, and not on radio and television chat shows. The Government should be telling us here what their policies are. [Interruption.] Conservative Members are extremely sensitive about the way in which the Prime Minister chooses to communicate with them, let alone with the rest of the nation.

As the instability of recent weeks will not be the last scare about oil prices, as it will not be the last worry about Britain's oil production and revenues, and as those events under this Government will cause lurches in the exchange rate, what will the Government do about it next time? Have they started to plan for that eventuality, which is guaranteed under their present policies? Will the Prime Minister give us a repeat performance and communicate over the airwaves? Will the Chancellor of the Exchequer go to a newspaper proprietors' meeting, as he did last night, and say to them, "A storm may have blown up largely because of events beyond these shores and outwith our control, but in due course the storm will blow itself out. Meanwhile, we have battened down the hatches and the ship remains on course."? When Chancellors choose nautical analogies we know that they are extremely close to the rocks. I suppose that the ship in this case is that majestic vessel which last week the Earl of Stockton said was sinking. That is the ship on which the Chancellor appears to be the chief engineer.

Mr. Cormack

rose—

Mr. Kinnock

The danger is that the Government will not listen to those in their party or elsewhere who counsel the course of new policies but will listen to the voices that tell them that their problems come from their laxity, softness and lack of toughness, and that they should toughen up their policies. That is the danger for our country. Those voices are coming from the markets.

Mr. Cormack

rose—

Mr. Kinnock

If the Government take that advice it will make matters even worse. The Chancellor may say to the market, "You've got us in a spot. Speculation has made us put up interest rates. That's added to our burdens, especially those of debt interest and costs in industry. All right, I undertake not to cut taxes, as I promised last November." The speculators will say, "All right, but that's not enough. It won't do the trick. It won't go far enough for what we want." The Chancellor will say, "All right, we'll reduce our spending targets." "Ah," say the speculators, "You promised to do that before, but you always overshoot." As The Times stated yesterday, that will not convince anyone. Those markets are less interested in targets than in achievements. [Interruption.] The markets then say—

Several Hon. Members

rose—

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

If they were Labour Members who were rising, they would be out of here by now.

Mr. Kinnock

My hon. Friend is wrong. If Conservative Members had any answers, they would want to listen to the questions. Their fooling and childish behaviour is entirely due to the absence of any policies, direction or convincing answers.

The Chancellor does not convince the speculators with his undertaking to reduce spending targets, because he has always overshot those targets, and so they look for real cuts in public expenditure. What are real cuts — 2 per cent., 3 per cent., or 5 per cent., of public expenditure totals? If a 2 per cent. cut were made, and £3 billion were acquired to reassure the markets and buy confidence in the Chancellor and the Prime Minister, between 250,000 and 500,000 more people would be unemployed. In the short term that might interest the markets, but only until they came to realise that by cutting £3 billion, the Government created so much extra unemployment that they had to spend a further £3 billion on that unemployment.

Several Hon. Members

rose—

Mr. Speaker

Order. I say to Conservative Members who seek to intervene, that the Leader of the Opposition is not giving way. The more interruptions there are the less opportunity there is for Back Bench Members to participate in the debate.

Mr. Kinnock

I hope that these disruptive tactics get the same coverage as other disruptive tactics have had in the past.

That system of cutting and then having to take the consequences of higher costs is exactly the policy that the Prime Minister and her Government have followed during the past five years. That is what I meant when I told her at Question Time today, that she had been increasing public expenditure, but only through paying the bills of rising unemployment. The Government have cut public expenditure on everything except nuclear weapons, fortress Falklands and unemployment. They have doubled VAT and increased the level of the tax burden from 31 per cent. to 36 per cent. of — [Interruption.] — the gross domestic product. They have given us the highest real interest rates—[Interruption.]

Mr. Speaker

Order. I repeat to both sides of the House that the more interruptions there are — [Interruption.] Will the hon. Member for Workington (Mr. Campbell-Savours) not shout at me from a sedentary position. I say to hon. Members on both sides of the House that if the Leader of the Opposition is not giving way, and clearly he is not giving way, they should not seek to interrupt.

Mr. Martin Flannery (Sheffield, Hillsborough)

On a point of order, Mr. Speaker. As it is clear that there is a deliberate plot by Conservative Members not to listen to the Leader of the Opposition, will it not make debate quite impossible because there will inevitably be a return at some time if they do not listen and if they keep interrupting the Leader of the Opposition?

Mr. Speaker

Order. This is an important debate. I hope that we can listen to each other with civility and in silence.

Mr. Kinnock

The United Kingdom has record interest rates, record unemployment, the lowest number of housing starts for years and all the problems of poverty and deprivation from five and a half years under the Prime Minister. Yet all that Conservative Members, who were elected to the House to represent their constituents, can do is demonstrate their paucity of argument and intelligence by acting like a bunch of yobbos.

Mr. Cormack

rose—

Mr. Kinnock

I hope that the time will never come when Labour Members are so impressed by the broadcasting of proceedings as to show how shamefully badly half of Parliament can react when it is given a chance.

Mr. Patrick Nicholls (Teignbridge)

On a point of order, Mr. Speaker. Is it in order for the Leader of the Opposition, speaking with the full weight of a senior ex-Parliamentary Private Secretary, to refuse to give way to my hon. Friend the Member for Staffordshire, South (Mr. Cormack)? If he gave way to my hon. Friend, would that not stop the noise?

Mr. Speaker

The hon. Gentleman has not been a Member of the House for very long, but he should know that if the Leader of the Opposition, or any other hon. Member, refuses to give way, the hon. Member concerned must desist.

Mr. Kinnock

Every intervention demonstrates how much further Conservative Members stoop into numskullery.

Under this Government, we have had record interest rates, unemployment and taxation. The Government have undertaken all those policies, but those who operate the Prime Minister's beloved markets insist that they want more. They are unsatiated by the policies of the past five years. They continue to demonstrate their irrationality, irresponsibility, and their complete lack of patriotism.

Mr. Julian Amery (Brighton, Pavilion)

Will the right hon. Gentleman give way?

Mr. Kinnock

I will give way to the right hon. Gentleman, because at least he did not try to interrupt in such a yobbish way.

Mr. Amery

I am grateful to the right hon. Gentleman for giving way. Earlier in his speech he prayed in aid the remarks of Lord Stockton. May I remind him that when Lord Stockton was in office, inflation was about 2.5 per cent. and the bank rate was about 3.5 per cent. If we were to adopt Reagan economics today, our interest rates would have to be higher than those in America. Is that what the right hon. Gentleman is advocating?

Mr. Kinnock

The right hon. Gentleman should take up those matters in private with his father-in-law. The answer to his question is that Britain has its highest real interest rate for 50 years—the gap between the inflation rate and interest rates — for 50 years during which his father-in-law, the Earl of Stockton, pursued particular policies. The previous time that Britain was in such a position with its real interest rates, the Earl of Stockton had the honour to be a rebel on his Benches, demanding different policies, and eventually campaigning successfully to obtain those different policies. I wish only that that attitude ran in the right hon. Gentleman's family.

The markets are a fact of life; we recognise that and we shall deal with it. We do not worship at those markets as the Government do. But the Labour party, in common with all post-war Governments of every colour, believes that, because of the irrationality, selfishness and influence of the markets, the Government—indeed, any Government—have a basic duty to take and keep powers to ensure that they can protect their citizens against the capriciousness and the moods of the people and institutions in the markets, who have no sense of public obligation and no sense of national duty. I speak of the people who, as Upton Sinclair said many years ago, "do not need to use armies to crush countries" when they can "pick up Mr. Bell's telephone instrument."

In recent weeks, the most advanced forms of electronic communications have been used for the purposes of speculation and destabilisation. In those circumstances, more than ever before, modern Governments should retain the powers that would protect their people against those vagaries. They should take the powers that were taken and kept by other Governments. As the Labour party and many Conservative Members maintain, they should take and keep powers to control the flow of money abroad. They should take and keep powers to establish minimum lending rates. They should take and keep powers to control the production of a vital asset such as North sea oil. They should retain some convertible currency reserves to enable them to intervene, if necessary, to meet contingencies. They should use the Government's finances as a way of stimulating and developing the economy instead of using the Government's power to depress and deprive the economy. They should work actively for international economic co-operation to promote the essential well-being of the country.

In doing those things, a Government would not be over-centralised or over-powerful and would not be creating an overweening state. They would be fulfilling their responsibilities, not creating a subordinated control economy. Those are the bounden responsibilities of a modern Government which, in the name of the welfare and security of their people, a Government must accept.

Of course, the Government have a responsibility to work for price stability and cost reduction. They have an equal responsibility—as the Prime Minister is so fond of selectively quoting the 1944 White Paper, I shall do so—to seek, a high and stable level of employment. They are responsibilities that Governments of all parties should accept. However, those duties of protection, support and opportunity have been abdicated by the Government. They have wilfully abandoned every other objective and instrument for safeguarding the people of Britain, especially in times of economic storm. They got rid of exchange controls, minimum lending rates and authority over oil production. Their commitment to international co-operation is nothing more than grandiose verbiage intended to help the Prime Minister's political reputation. Millions of people know — 4 million and more unemployed know to their terrible cost—that the Government feel no obligation to introduce policies for generating employment. They are a Government of column dodgers and deserters from the national interest.

The Government scorn the history of their party and of Governments of the Labour party since the war. They are contemptuous of everything that went before the Prime Minister's reign—everything that came before what the Chancellor of the Exchequer called, "the British experiment." We have endured five years of that experiment: five years in which our trade in manufactured goods has plunged from a surplus five years ago of £1.5 billion to a deficit now of £4 billion; five years during which Britain has lost £35 billion worth of investment and £40 billion of output compared with 1979 standards; five years during which 2 million people have been thrown out of work; and five years during which industrial relations have been reduced to nothing more than conflict by policies like the one under which the Government will spend £2.4 billion to sustain a strike and to keep 20,000 miners out of work, when for that money they could have created 500,000 jobs and tried to change our economy.

Those failures of investment, output, employment, currency, interest rates, and of opportunity and justice in society, caused us to table a censure motion against the Government. The experience of the past five years has been dignified by the name "experiment", but there is nothing scientific or objective about it. If there had been, the Government would have amended or abandoned the experiment long ago. It has not been a scientific process, but dogmatic incompetence that has plunged our country into crisis and that will do so again unless there is a radical change in the Government's policy.

The Government and the Prime Minister set out to make history. They have made history in our time. They have created a historic manufacturing trade deficit. They have created historic levels of unemployment. They have created historic levels of conflict, bitterness and division. That is why we censure them. That is why the country must be rid of them.

4.29 pm

The Prime Minister (Mrs. Margaret Thatcher)

I beg to move, to leave out from "House" to the end of the Question and to add instead thereof, 'supports Her Majesty's Government in its firm action to maintain the sound financial conditions and medium-term strategy which have brought about the lowest level of inflation since the 1960s, nearly four years of sustained economic growth, record output, sound exports, record investment and record living standards, and which provide the best long-term prospects for a fundamental improvement in the performance of the British economy and for the creation of new jobs.'. We have heard from the Leader of the Opposition his customary speech. It was distinguised by a paucity of argument. I noted a number of the things that he said. He began with some comments about British Telecom, home owners and privatisation. In regard to privatisation, I would rather listen to the millions of our citizens who bought shares in British Telecom, to the many employees of the British Freight Corporation who made such a success when that was privatised and to the millions of council house tenants who, under this Government, had an opportunity, that they never would have had under Labour, to purchase their houses.

The right hon. Gentleman went on at length about my right hon. and noble Friend the Earl of Stockton. I remember his policies vividly. He kept public expenditure down; he kept income tax rates world competitive; he turned back the tide of nationalisation; he began the process of leading Britain into Europe; and all in the teeth of the then Labour Opposition. In his maiden speech in another place, he pointed out that President Mitterrand, who had started off with a Labour policy, had had to turn to ours. I noted what the right hon. Gentleman said about exchange control.

Mr. Eric S. Heffer (Liverpool, Walton)

Can the Prime Minister explain to the House why, if privatisation and giving shares to millions of people has been so successful, unemployment has continued to rise?

The Prime Minister

The hon. Gentleman knows that the two are not connected. I am amazed that he would deny working people shares in their own industry and not let them have independence. Socialism is the doctrine not of independence but of dependence of people under the control of Socialist Governments.

The right hon. Member for Islwyn (Mr. Kinnock) also spoke about exchange control. I remind him that, even under the most rigid exchange control, there were currency speculators moving around the world because no amount of exchange control can prevent many billions of currency from moving around the world. Not even he can stop the telephones or the computers, about which ridiculous comments have been made.

The right hon. Gentleman referred to strikes. I remind him that when in power a Labour Government complain about strikes, but when in opposition, the Labour party does its level best to support every one of them.

The right hon. Gentleman's speech was empty of any serious analysis of recent events or of any convincing alternative policies which his party would pursue. I shall deal with both analysis and policies. First, I should like to spend a moment looking at the Labour party's credentials for bringing the motion before the House. [Interruption.] Of course, Opposition Members will not want it. It exposes what happened when they put their policies into practice.

The Labour Government's first act on taking office in 1974 was to introduce the same quack remedies as the Opposition advocate today. In their first year they increased public spending by £15 billion in today's money. By August 1975 inflation reached the record level of 26.9 per cent. Record inflation — the record held by the Socialist Government. Did that extra expenditure and extra inflation cause unemployment to fall? Of course not. One year later they had more than doubled the unemployment level that they had inherited. What they have to prove now is why, if those policies had that effect then, they would not have a similar effect if put into execution today.

Mr. Jack Straw (Blackburn)

rose—

The Prime Minister

I shall give way when I have finished this point; as the hon. Gentleman knows, I customarily do.

By the autumn of 1976 the Labour Government's credit was exhausted. No one would lend them money and they had to go to the International Monetary Fund for help. That was their policy in practice. Record inflation, and it doubled unemployment.

Mr. Straw

The Prime Minister must know that, compared with the other six major industrial nations in the world, unemployment under the Labour Government was the average for those seven and that our inflation was also average. The Prime Minister must know that that was the reality in 1974 and in 1979. She must also know that inflation today is still only the average of the OECD seven, but that unemployment is the worst of any of those countries. Will she explain that difference?

The Prime Minister

Twenty seven per cent. was never the average of European inflation. That was the Socialist record.

The hon. Gentleman mentioned unemployment. Unemployment has again doubled in Britain, but, according to the European Commission — I do not use my own figures — unemployment has also doubled in Europe. [Interruption.] If hon. Members request me to answer questions I shall, of course, answer them. If I am to give way, there is no point in doing so unless I answer the questions. The hon. Gentleman cannot stand the answers because they are right. That is his trouble.

What happened when the Labour Government followed that policy? After they had gone to the IMF, the next year they had to cut spending by £10 billion in today's money — the biggest single cut ever known. Those are the credentials of the party which now brings this censure motion on our economic management.

The House deserves a more serious analysis of the causes of recent increases in interest rates than it received from the Leader of the Opposition. Let me say at the outset that it is no use the right hon. Gentleman deriding the operation of the markets. The markets are part of the world we live in and we cannot escape their operation any more that his Socialist predecessors could. As a major trading nation it would be disastrous for this country, of all countries, to turn its back on the markets of the world.

The right hon. Gentleman scarcely mentioned the real reasons for the recent speculation against the pound and upward pressure on interest rates. Incidentally, he urged us to bring back the minimum lending rate. I thought part of his complaint earlier in the week was that we acutally used it. It clearly did not suit the right hon. Gentleman's purpose to examine the real reasons for recent speculation, for none of them substantiates either his speech or his motion.

There have been three reason for the recent speculation against the pound and the upward pressure on interest rates. First, the dollar has been very strong against every other major currency. Since May 1979 the dollar has risen against the Swiss franc by 36 per cent., against the deutschmark by 40 per cent., against the French franc and the Italian lira by 55 per cent. and against sterling by 46 per cent.

That process cannot go on indefinitely. It is distorting the pattern of world trade, making it more difficult for debtor countries to service their loans, and rekindling protectionist pressure in the United States. It is perhaps for those reasons that the G5 countries in Washington reaffirmed their commitment, made at Williamsburg, to undertake co-ordinated intervention as necessary. That agreement has already helped to check the rise of the dollar against the rest of the world. That was very largely the initiative of my right hon. Friend the Chancellor of the Exchequer.

The second reason has been uncertainty over oil prices, and particularly the Geneva meeting of OPEC.

Mr. Dennis Skinner (Bolsover)

Is the Prime Minister aware that there is one central weakness in her argument about the pound being affected by dollar domination and oil? During the course of previous Governments, including those of Mr. Macmillan and her other predecessors and Labour Governments, at all times the Italian lira traded at a discount against the pound. This week, for the first time since the end of the war—ever since the right hon. Member or most Members in the Chamber have been in politics — the Italian lira was trading at a premium against the pound. As the man on the Clapham omnibus said to me this morning, "What a load of wallies!"

The Prime Minister

I think that "What a load of wallop" would describe the hon. Gentleman's intervention about the state of the dollar. What he said does not accord with the facts in my speech about the strength of the dollar, when I explained the way in which the dollar has risen against the Italian lira by 55 per cent. and against sterling by 46 per cent.

The second reason is the uncertainty about oil prices, and particularly the Geneva meeting of OPEC. That was certainly a major factor affecting sterling in the last week or two, but it is hardly rational, because oil represents only 5 per cent. of our GDP. The effect of a $1 fall in the oil price would in itself reduce Government revenue by less than half of 1 per cent. So oil remains a major asset to the British economy.

If we were to exercise powers for depletion of oil in the North sea—the Leader of the Opposition will remember the Varley assurances that he would not do so and the assurances from us that we would not do so — investment and exploration in the North sea would not take place. Investment and exploration is vital for jobs in that part of Scotland. If we used that power, we should put down the possibility of creating more jobs in that part of Scotland. That would be the result of the right hon. Gentleman's policy.

The third factor which has affected the recent fall in sterling was the fear that the Government were weakening in their resolve on inflation and sound finance. That fear, however unreasonable, could not be dispelled by words of reassurance alone. If my right hon. Friend the Chancellor had resisted the upward movement in market interest rates, it would have given a totally wrong signal to the markets and would, indeed, have led them to believe that their fears were justified.

Perhaps the right hon. Gentleman can tell us, since he has made criticisms, what he would have done. [Interruption.] He has specifically refused to do that. When the Opposition criticise, they are supposed to put forward an alternative. The right hon. Gentleman does not have one. So far as we can deduce from previous policies, he would do everything possible to damage confidence in the country's future direction.

The right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) recently commented on the sterling exchange rate. I gather that he did not say that he thought that it was right, but that it "may" be right. One thing is clear. If an element in the speculation against sterling has been market fears about the Government's resolve to contain inflation, the Opposition have no remedy whatever to offer. Their policies would make the prospects for inflation infinitely worse.

Of course we do not wish interest rates to be high, even for a short period; but, if they are necessary to protect the long-term strategy, we shall not hesitate. These high interest rates emphasise just how important it is to exercise the tightest control on Government spending and borrowing. Had we not done so, interest rates would have had to be even higher.

What the right hon. Member for Islwyn is complaining about is that the Government have had the guts to take the measures necessary to maintain our strategy. The response of the market has shown that. The Opposition, by contrast, have lost no opportunity to talk inflation up.

Does the right hon. Member for Sparkbrook recall saying during the last election: Despite all claims that inflation has been conquered, there is no doubt that inflation will be in double figures by the end of the year if this Government remains in office."? That is what the right hon. Gentleman said in May 1983. In December 1983, inflation was 5.3 per cent.

The right hon. Member for Plymouth, Devonport (Dr. Owen) is no doubt similarly disgruntled. Does he recall that on 24 July last year he predicted that inflation would be 7.5 per cent. by the end of 1984? The outcome, of course, was 4.6 per cent.

This Government believe that a prosperous and competitive economy requires both a clear financial framework and a Government with the resolve to stick to it.

Mr. Chris Smith (Islington, South and Finsbury)

How many times over the last four years has the right hon. Lady and her Ministers predicted that unemployment would start coming down immediately?

The Prime Minister

I do not think that the hon. Gentleman can find one prediction—[Interruption.] I do not think that he can find one prediction from me about unemployment. I challenge him to find one from me. He will not be able to find one, because for years when I stood at the Opposition Dispatch Box I watched Ministers in the Labour Government refusing to predict, and I thought, "How wise." Do not blame me for being wise.

Mr. Chris Smith

rose—

The Prime Minister

For many years the financial discipline required for a stable economy came from the system of fixed exchange rates under the Bretton Woods agreement, but rising inflation throughout the world brought about the collapse of the Bretton Woods system.

Today it is recognised, not only in Britain but throughout the industrial world, that the only foundation is the discipline that the Government impose upon themselves — unless, like Labour, they yield their very sovereignty to international bailiffs.

It has been suggested many times that Britain should join the exchange rate mechanism of the European monetary system. We have on many occasions said that we are ready to join when the circumstances are right, and I said that again this afternoon. Of course the position is reviewed regularly, but I should make it clear that joining the EMS is not a way of avoiding a rise in interest rates. It is a mechanism which yields benefits only if the Government are ready to accept the financial discipline that it entails, including a rise in interest rates, if necessary, to maintain the agreed parity, reductions in public expenditure, if necessary, and all the other things that discipline involves and to which other countries have had to agree.

The EMS is not a way of escaping discipline or rises in interest rates. It is a way of saying that if certain relationships obtain, one must put into effect rises in interest rates or changes in public expenditure.

Mr. Stuart Bell (Middlesbrough)

No one is arguing with the Prime Minister's thesis. We are arguing that, because there is no exchange rate policy, she has given sovereignty on the exchange rate to the market, to OPEC in Geneva, and to the next crank who comes along.

The Prime Minister

I do not know how the hon. Member for Middlesbrough (Mr. Bell) would stop large sums of money moving around the world. He cannot do so. It is a ridiculous argument. No Government can stop large amounts of money moving around the world. When there are fixed exchange rates, we have to change the exchange rate in very sharp steps. Even in the EMS there are times when there has to be a realignment. Indeed, Socialist France has already had them.

Dr. David Owen (Plymouth, Devonport)

Will the right hon. Lady give way?

The Prime Minister

I shall gladly give way. I enjoy it. However, I give notice that my speech will take longer if I do, because I have certain things which I wish to say. On that understanding, of course I give way.

Dr. Owen

Everybody in the country is pleased that inflation has been kept to the low levels that the Prime Minister mentioned. But will the Prime Minister admit that if the exchange rate during her period in office had not oscillated up to $2.40 and down to $1.10, many more people would now be in employment? One of the arguments for exchange rate stability and entering the EMS is that it will allow us to have higher levels of stable employment.

The Prime Minister

The EMS has nothing to do with the dollar rate, as the right hon. Gentleman ought to know. When the dollar was very weak, he said that deprived us of jobs because we got a lot of American imports. If he takes the reverse of that argument, when the dollar is strong we should have the opportunity of creating jobs and making a lot of exports. But the right hon. Gentleman seems to be wrong all along the line.

The Government have set their own disciplines, for that is the only basis for the creation of wealth, prosperity and jobs.

Although Governments — and I want to make this very clear — can create the financial framework, they alone cannot create jobs. Jobs come when enterprise has the freedom and vigour to meet the demands of the market, to produce the goods and services that people want and are prepared to pay for. The right hon. Gentleman does not like that.

I shall read what the Opposition said when they were in government, because they said almost the same thing. The right hon. Member for Leeds, East (Mr. Healey) said: The only answer to the economic problems which have dogged Britain ever since the war is to improve the performance of our manufacturing industry. That means higher productivity, better design, more vigorous salesmanship, more reliable delivery and servicing. That means good management, good relations and co-operation with trade unions and management, and fewer strikes and better delivery dates. That, of course, was what the then Chancellor said when Labour was in power.

We have to compete in the markets of the world, not on the basis of national self-esteem but in the eyes of people making hard-headed decisions about the design and the value of the products that we offer. The problems of the economy lie not in insufficient demand, for every category of spending is at record levels. Nor is it a lack of public spending which now takes 10 per cent. more of GDP than it did 20 years ago when unemployment was a fraction of what it is now. Nor is it a neglect of the infrastructure, since spending on major roads has increased by 25 per cent. in real terms under this Government and investment in water is increasing by 9 per cent. next year. Infrastructure investment must, however, like all other investment, be justified by its return. It is not a cheap route to more jobs.

Those who genuinely want more jobs must address the deep-seated problems of the economy, such as the amount that we pay ourselves in relation to the amount that we produce. If we pay ourselves more in relation to what we produce than our competitors, the jobs go elsewhere. When we resist change by restrictive practices while others get ahead, they get the jobs. One does not build an enterprising economy by imposing high taxation, as the Opposition wish to do.

The message of today's unemployment figures is that we have not yet resolved those three problems, and until we do we shall not create the jobs that we need.

If there were easy choices, we can be sure that other nations with governing parties of different political persuasions would be pursuing them. Although unemployment in Britain has more than doubled since 1978, it has also doubled across Europe. In the Netherlands and Belgium the rate is higher even than here. Of the major economies, Japan and the United States have done best in holding down unemployment. It is no coincidence that those economies have an excellent record on unit wage costs, because unit wage costs in Japan have actually fallen by 5 per cent. over the past year while our unit labour costs have risen by 5 per cent.

Mr. Dave Nellist (Coventry, South-East)

rose—

The Prime Minister

Unless right hon. and hon. Gentleman pay attention to these things, they will not help to get more jobs in the country.

We are often urged to adopt one particular policy from abroad, but one cannot pick and choose one policy and leave out the others.

Those who urge us to follow United States fiscal policy forget that the size of the deficit is causing great concern in America. In December Mr. Donald Regan, the United States Treasury Secretary, said: Deficit reduction is by far the most serious problem facing the United States, the Administration and the Congress. Reducing the deficit is the number one priority. Those who urge us to follow that path forget that in the United States the state and local authorities run a surplus, not a deficit, as mostly happens in our local authorities. They forget that the United States accepts the discipline of monetary targets and has experienced high real interest rates — even higher than our present rates. They forget that public expenditure takes 10 per cent. less of national output than it does here.

What about Germany, France or the Netherlands? They have taken some tough decisions which I wonder whether the House would be prepared to face. Between them, those countries have seen cuts in social services, delays in pensions increases, boarding charges for hospital patients and cuts in public sector pay.

Germany has kept its interest rates half our own, despite the rising dollar. One reason is that it has kept its inflation rate at about half of ours. It is no good yearning for the advantages of other countries and ignoring the strict disciplines by which they have been achieved.

The Opposition motion conveniently ignores all the good things about the performance of the British economy. They will not want me to state them, so I shall do so. Despite the coal strike and the most determined attempt since the war to inflict damage on the economy by denying power and light to our homes and industries and despite all that Opposition Members could do, output is at an all time high. The proportion of people of working age in employment in Britain exceeds that of nearly all other industrial countries, and employment is growing. Profits have recovered dramatically and in consequence total investment is at record levels and still growing. Despite the heavy cost of the miners' strike and all that Opposition Members could do, our current account has remained in surplus for the fifth year in a row.

The terms of the Opposition motion single out the deficit on manufactured trade. What matters, of course, is not a surplus or deficit on any particular part of our trade, but the overall balance, and that is what the Opposition cannot get away from.

Our oil surplus has enabled us to import more manufactures and invest more overseas. But Opposition Members are against both. Yet again, they wish to repeal the laws of arithmetic. What would they do to improve the balance of trade in manufactures — impose import controls? I can think of nothing more guaranteed to damage efficiency and close export markets.

What of their attitude to overseas investment? Since 1979, Britain's net foreign assets have risen from £13 billion to £70 billion. These will provide a stream of income to the country for years to come because of the policies of the Government. As domestic capital expenditure is at a record high, this has clearly not been at the expense of domestic investment at home.

Why does the right hon. Member for Sparkbrook wish to penalise companies which invest abroad to earn profits for Britain or the financial institutions which invest abroad to improve the retirement incomes of millions of pensioners? I will tell the House why. It is because the more wealth that the right hon. Gentleman can bring under the power of politicians and bureaucrats, the happier he will be. He wants to invest not where the return is highest, nor where it meets the needs of consumers, but where it furthers the political ambitions of Socialism — a Socialism that the people reject.

Mr. Alan Williams (Swansea, West)

The right hon. Lady has devoted a great deal of time and attention to interest rates and money. Would she care to say a little about the plight of the ordinary people in the country, particularly the unemployed?

The Prime Minister

If the right hon. Gentleman was listening, he would have observed that I pointed out that the only way in which we can increase the number of jobs in the country is by pursuing policies which will increase enterprise. Otherwise, the only way is to distribute what there is, and that would not help to further enterprise in the country.

The Leader of the Opposition scarcely mentioned the coal strike. Never in this country has a strike been so unjustified. Never has a strike been called by such blatant manipulation of trade union rules. Never has a strike been pursued by such tactics of violence and intimidation. In 1978–79, when the right hon. Member for Cardiff, South and Penarth (Mr. Callaghan) was Prime Minister, democracy and the rule of law were under attack by trade union extremists in the winter of discontent. The then Conservative Opposition offered the Labour Government the necessary support to take whatever measures were required. Contrast that with the Labour party today: today it supports political strikes which totally disregard democratic values and the rule of law.

By encouraging the leadership of the NUM to believe that the Government and the National Coal Board could and would concede its impossible demands, the Opposition have helped to prolong the strike and the suffering that it has caused for miners and their families. By prolonging the strike and the suffering, they have seen to it that on average, each miner has suffered an £8,000 loss of wages, the industry has lost 52 coal faces and the union is now divided against itself. Which half does the Labour party support? It supports not the working miners, but those on strike against democracy and the rule of law.

Throughout the strike, the right hon. Gentleman has had the choice between standing up to the NUM leadership and keeping silent. He has kept silent. When the leadership of the NUM called a strike without a ballot, in defiance of union rules, the right hon. Gentleman stayed silent. When pickets tried by violence to close down pits in Nottinghamshire and elsewhere, against the democratically expressed wishes of the local miners, the right hon. Gentleman stayed silent. When the NUM tried to impose mob rule at Orgreave, the right hon. Gentleman stayed silent. Only when the general secretary of the TUC had the courage to tell the leadership of the NUM that its tactics were unacceptable did the right hon. Gentleman take on the role of Little Sir Echo.

Mr. Geoffrey Lofthouse (Pontefract and Castleford)

Will the Prime Minister give way?

Mrs. Thatcher

I shall give way when I come to the end of this section.

The Leader of the Opposition knows that the demand made by the NUM leadership, that no pit shall ever close on economic grounds, is an impossible demand and that it has never been accepted by any Labour Government. The last two Labour Governments enshrined in their own Acts of Parliament grants to assist the "elimination" of uneconomic colliery capacity. That is what the Labour party put into law when it was in power. The right hon. Gentleman knows that three independent inquiries—by the Monopolies and Mergers Commission and by Select Committees of both Houses — have endorsed the principle that uneconomic pits should be closed.

Mr. Nellist

Will the Prime Minister give way?

Mrs. Thatcher

The Leader of the Opposition knows that the offer to the miners is the best since nationalisation.

Mr. Lofthouse

rose—

Mrs. Thatcher

I shall give way in a moment.

The offer to the miners is the best since nationalisation. It offers the best pay, the best investment, the best guarantee against compulsory redundancy, the best early retirement terms and the best colliery review procedure. Yet never once has the right hon. Gentleman urged the NUM to accept that offer. Never once has he urged it to accept the agreement negotiated by NACODS. An agreement on exactly the same terms is available to the NUM. If the right hon. Gentleman really wants an end to the strike, as I do, I challenge him to urge the NUM to accept the NACODS agreement.

Mr. Lofthouse

Is the Prime Minister aware that we have heard all this before? Is she further aware that it is unprecedented in industrial relations for one side to demand the terms in writing before the talks begin? Does she admit that it is she and her Government who are insisting on those terms and that they do not want a settlement of the strike?

Mrs. Thatcher

It is nonsense to say that we do not want a settlement, because we do. We never wished the strike to begin. That is why the very best terms to be offered by any Government since nationalisation have been offered by this Government. We did not wish the strike to start. It started because the NUM refused to observe democratic values, and it has been maintained by violence and intimidation. Seven rounds of talks have foundered on the same points. Unless the NUM is prepared to discuss the closure of uneconomic pits in accordance with the NACODS agreement, the next round of talks will founder as well. I do not wish the talks to founder.

I challenge the Leader of the Opposition. Will he urge the NUM to accept that agreement or will he not? [HON. MEMBERS: "Answer!"] He will not answer, because he dare not answer. The right hon. Gentleman spoke today free from the cares of office and from any serious prospect of office. Nothing underlines the irresponsibility of the Labour party more than the way in which it has abandoned in opposition so many of the lessons that reality and circumstances forced it to learn in government. In office, the right hon. Member for Leeds, East said that it was the responsibility of unions not to throw the members of other unions out of work in pursuit of a dispute". The Labour party and the NUM have no such qualms now. In office, the Labour party recognised that uneconomic pits must close, put that principle into legislation and implemented closures on economic grounds. In opposition, Labour Members pretend that that never happened.

The Leader of the Opposition attacks us on monetary policy and calls it a doctrine, but the right hon. Member for Leeds, East boasted that the last Labour Government had really given monetary policy the importance it deserves". Labour Members chant about "cuts". They should know, because their party made the biggest cuts ever. The last Labour Government cut public spending in real terms on the education and science budget, on the industry, energy, trade and employment budget, on transport and on housing, in Scotland and in Wales. Now that the Labour party is in opposition, it claims to be the guardian of the National Health Service, but in two of their five years in office the Labour Government actually cut real resources for the National Health Service.

Mr. Nellist

rose—

Hon. Members

Give way.

Mrs. Thatcher

I will give way in a moment.

Over their whole period of office, the Labour Government cut capital investment in the Health Service by 35 per cent. What has the hon. Gentleman got to say to that? [Interruption.]

Mr. Nellist

There are 5 million people outside for whom this is no laughing matter. How can the Prime Minister maintain the fiction that at the beginning of the coal strike her intention was to save £275 million worth of uneconomic capacity when in the past 11 months the Government have spent between 20 and 25 times that amount trying to destroy the NUM? If it was really about saving money, the strike could have been over within three weeks of starting.

The Prime Minister

Year by year, the amount of subsidy to the coal industry was increasing. In the last practising year it was £1.3 billion. We are pouring money into new pits. As the three independent reviews said, we cannot go on pouring money into investment in new pits and still retain all the old uneconomic pits. If we do, we shall put up the price of coal and electricity for every other industry and create unemployment. That is my answer to the hon. Gentleman.

Mr. Kevin Barron (Rother Valley)

rose—

The Prime Minister

I shall not give way. I am nearly at the end of my speech. I am sure that the hon. Gentleman wishes to catch your eye later, Mr. Speaker.

The Leader of the Opposition and the Labour party do not have even the beginnings of an alternative economic strategy. That is not just my view. It seems that a Labour party document somehow found its way to the New Statesman. I hope that no Opposition Member will complain about that. Tht Labour document apparently says: Labour has lost the economic argument. It went on to say that the Labour party has little credibility on policies for dealing with the economy. And so say all of us.

The purpose of the Leader of the Opposition in tabling this censure motion is not to help the unemployed, because he has nothing to offer them; nor is it to strengthen the economy, because he has no strategy for it; and nor is it to win confidence, because his prescription would destroy it. This censure motion is bogus. It deserves to be, and will be, overwhelmingly defeated.

5.12 pm

Mr. David Steel (Tweeddale, Ettrick and Lauderdale)

The debate so far has been a futile, noisy, bad-tempered charade. I want to deal first with the issues in the past few days and then with the Government's handling of the economy generally and to propose a change of direction. I suppose that proposal will be as much a waste of time as everything we have heard so far, because we know that the Government will not change direction.

I shall deal first with the points made by the Prime Minister at the beginning of her speech. She denied that she had ever forecast unemployment rates, and I accept that. She cannot, however, deny that she and her Ministers have predicted year in, year out, since they took office that economic recovery was just around the corner. The people want to know: is this it? If this is not the recovery, is there still another corner to go? Are there another two or three corners to go? We cannot continue to have these statements about how wonderful the economy is when people can see with their own eyes that that is untrue.

In less than a fortnight there has been an unprecedented three times increase in interest rates amounting to a 4.5 per cent. increase. The effect on our industrial costs is staggering. The CBI says that the increase will add £1.2 billion to industrial costs. There will be an especially adverse effect on new and small businesses which have no reserves to tide them over. Many of them will go to the wall because of interest rates, and they will join many others. One of the Government's achievements has been a record number of company liquidations. In the year just before the Conservative party took office, there were 4,700 company liquidations; in 1984 that number had increased to 14,000 liquidations. That represents a terrible drain not only of employment but of other resources.

The high interest rates were caused by the Government's incompetence, and the Chancellor's incompetence in particular, in the panic following the Government's earlier refusal to use either United Kingdom reserves or interest rates to ward off the speculators. I do not deny the Prime Minister's reasons for the speculation, but I criticise the Government's lack of action in dealing with it. If I quarrel at all with the Opposition motion it is because the word "mismanagement" is not quite correct—we criticise the "non-management" of the economy.

We saw the Chancellor lolling around lethargically until the last minute and then rushing about hysterically telling everyone to keep calm. There was a sudden and dramatic switch in tactics. No one in his right senses would agree with the Daily Express profile of the Chancellor just after he had taken office which described him as The Iron Chancellor behind the Iron Lady". Not even the Daily Express would seriously suggest that now.

Mr. Gerald Malone (Aberdeen, South)

Will the right hon. Gentleman give way?

Mr. Steel

I shall give way to the hon. Gentleman, because I had the pleasure of beating him in an election not long ago.

Mr. Malone

The right hon. Gentleman says that the Government did not intervene in the money markets and used interest rates to stabilise the exchange rate, and he criticises the Government for doing that. What else would the right hon. Gentleman have done?

Mr. Steel

I am not criticising the Government for doing that. I am criticising the Government for letting matters slide. They were forced to intervene sharply and suddenly because of their earlier determination to do nothing.

There are other reasons for the speculation. The Chancellor was wrong — the Prime Minister referred again to this matter — to suggest that part of the speculation was caused by a widespread international belief that somehow the Government would change course and tackle unemployment and that investors had been reading the speeches of the Labour party, the alliance or even Conservative Back Benchers. That is nonsense. Anyone sufficiently sophisticated to take note of our speeches would know that the Government have a three-figure majority in the House.

The truth is that the speculators would have been more likely to be upset by the Chancellor's speeches, his obsessive and single-minded repeated determination to indulge in tax cuts as a priority in his Budget. I do not believe that that has impressed anyone. People are also not impressed by the sheer irrelevance of much of the Chancellor's economic preoccupation—for example, the transfer of capital assets through privatisation into current account expenditure. No company chairman would be able to defend that policy at an annual meeting of his company.

On top of the Government's involvement in the principle, we should consider the loss that the Government have sustained. The Prime Minister mentioned how many millions of people have bought British Telecom shares. They would have been fools not to buy them at the price the Government were giving them away. [HON. MEMBERS: "How many shares did you buy?"] I did not buy any, but that is not the point. [HON. MEMBERS: "You are a fool."] As a matter of fact, I do not own any shares. The taxpayers as a whole have lost £3 billion because the Government gave away the shares below cost.

Yesterday the Chancellor of the Exchequer said at a City lunch that the ship was "on course". Many people would say, "We hope it is not, because if so, it is on the wrong course." The truth is that the ship is not on course at all. For a long time there has been no one at the tiller. The leaks in the ship have not been repaired. We can see the leaks throughout the country. The crew has been busy down below working out which bits of furniture or equipment to sell off to make the ship operate better.

My right hon. Friend the Member for Plymouth, Devonport (Dr. Owen) has referred to the statement made yesterday by the Governor of the Bank of England about Britain joining the European monetary system. We have never made any secret of our belief that there are wider political reasons for joining the EMS. It has been reported that the Governor of the Bank of England accepted that it would have been easier to check the pound's slide if it had been in the European 'snake' of currencies whose exchange rates are fixed against each other. I ask, as my right hon. Friend the Member for Devonport asked: do the Government agree with that statement? If they do not agree, why not? On a previous occasion, the Chancellor said, "The balance of arguments for and against are much the same." The other day he said that the balance of arguments had not changed because of the crisis in the past few days. That contradicts the statements by the Governor of the Bank of England. During an interview yesterday, the Governor of the Bank of England said: what has happened has sharpened the interest in this very important and fundamental issue. He could have fooled me. I do not detect any increase in the Chancellor's or Prime Minister's interest in this matter. It is time they were interested, because I believe it is in our long-term interests to join the EMS without any further delay.

I come now to the long-term management of the economy. The most serious aspect of the Government's record is the deficit in manufacturing trade. The trouble is that the Government and the Chancellor are mainly obsessed with the theoretical economy, the money supply and the PSBR, which is doubly theoretical. It is theoretical anyway and it is more so because the targets are theoretical compared with his actual figures.

The Chancellor is not interested in the real economy, the currency market, jobs, and capital spending. Those are the issues with which we are concerned. If we study the 1984 figures and the real trade deficit we find that it was £4 billion, but the non-oil deficit was £11.5 billion. I do not believe that the Chancellor will reject that figure. That is the extent of the disguise that oil gives us. In other words we have a non-oil deficit in trade of £11.5 billion after five years of this Government. When they came into office there was a £500 million non-oil trade surplus. That is how they have turned the economy round.

When the Chancellor accuses international markets of attaching too much importance to oil when looking at the value of the pound, he quotes oil as a small percentage of our gross domestic product and as a tiny percentage of our tax revenues. Those figures are wholly irrelevant. The rest of the world sees oil as a massive subscriber which disguises our balance of trade deficit. That is why it treats our currency more as a petrocurrency than anything else. The Government cannot deny that.

There has been a serious loss of manufacturing capacity. It has drained away from this country throughout the Government's period of office. That is why we have argued consistently that the Government have a duty to stimulate carefully and cost-effectively the process of employment and revival.

The Prime Minister says that the Government cannot create jobs. That is not the view of the CBI, the Engineering Employers Federation or any of the other bodies that have been producing reports after reports pointing out how much our public infrastructure needs repair. I shall not go into the whole litany again. We have discussed it many times recently and in the unemployment debate.

Mr. Michael Howard (Folkestone and Hythe)

Has the right hon. Gentleman failed to notice the fact that the right hon. Member for Plymouth, Devonport (Dr. Owen) in a speech in the House on 15 January said: we may have to reduce the amount of money that we put into capital spending." — [Official Report, 15 January 1985; Vol. 71, c. 223.] Does the right hon. Gentleman disagree with—I gather we are to call him this — his right hon. Friend the Member for Devonport?

Mr. Steel

It depends upon what spending we are talking about. We have both argued, and continue to argue, that we can identify projects up and down the country on which there should be capital spending as much by the private as the public sector. I shall give one example. What about house improvement grants? They are cost-effective and labour-intensive, but the Government have chosen to axe them. They provide a continuous flow of contracts for the construction industry in the building and in the equipment that goes to make the industry. I give that as an example because it is an area in which the Government have deliberately cut and created more unemployment.

We believe that the benefit of the oil revenues that the Government have had uniquely — they were not available to previous Governments of any colour — should have been used for forward investment in our country in the form of capital expenditure and training and education and not solely to extend indefinitely current expenditure on an ever-lengthening dole queue. Those revenues have been wasted in a literal sense in that way. They have forced upon the country years of determined deprivation, and people are entitled to turn round after five years and say, "What is it all for? When will the promised recovery come? It has all been for nothing."

I wish to go to the heart of what I believe is a fundamental disagreement between us and the Government. The Prime Minister believes that politics is a triumph of the will; that if she wills something to happen, it does. We believe in the politics of persuasion. We do not necessarily believe that what we say ought to happen will happen. She believes in the politics of confrontation as a virtue. We believe in building the politics of consensus.

There is now a growing consensus in the country on a range of economic issues, which is absent from the Floor of the House. The Earl of Stockton talked of building a national approach. He is right. That national approach exists in the country; it does not exist in here.

There is a consensus in the country that there should, in these internationally depressed times, be a sense of shared sacrifice. [Interruption.] The Government do not accept that. Last week the report of the pay and benefits bulletin confirmed the evidence of our own eyes—that over the past five years, in the words of the Daily Mail, which is not a notably Left-wing journal: The rich are getting richer and the poor are becoming poorer". That cannot be right, and it is not what the country wants.

There is a consensus in the country that the growing division between the wealthy, comfortable south—

Mr. Skinner

They are attacking Owen again.

Mr. Steel

—and an impoverished, resentful north is wrong, but the Government are not interested in that.

Mr. Skinner

He is attacking Owen again.

Mr. Steel

There is a consensus in the country that while there is great merit in the further extension of home ownership and popular capitalism of all kinds, those objectives are no substitute for the creation of necessary public assets and the common benefits of thriving communities. The official Opposition do not accept the first part of that equation, and the Government neglect the second.

There is a consensus in the country that sees a direct link between the rise in unemployment and enforced idleness, and the appalling increase in crime that we have seen, especially theft and robbery. The Prime Minister denies that consensus.

There is a consensus in the country that recognises that the coal industry cannot be immune from everyday reality, and that some uneconomic pits must close. The official Opposition says no, and the right hon. Member for Chesterfield (Mr. Benn) said in the House the other day: not a single pit in Britain is uneconomic".—[Official Report, 29 January 1985; Vol. 72, c. 154.] What absolute balderdash.

There is further consensus that more effective plans are needed to help the mining communities that will be hit by that reality. The Government have been grossly insensitive to that and we press them constantly to bring forward more effective schemes.

There is a consensus in the country that before there is any industrial stoppage those being asked to strike should be given the chance to vote in a secret ballot. The official Opposition sold the pass on that one early in this dispute.

Mr. Skinner

Will the right hon. Gentleman give way?

Mr. Steel

I shall not give way to any hon. Member who has been interrupting constantly from a sedentary position.

There is a consensus in the country that picketing should be confined to the numbers necessary to persuade those going to work of an alternative view. It should not degenerate into mass intimidation, let alone violence. The official Opposition have been utterly spineless on that issue. I do not know how the Leader of the Opposition can talk about conflict in our country today when he has done little, with the great authority that he could have had, to resolve this kind of conflict early.

We know that there are no moderates left in the Labour party, only prisoners posing as moderates. The new general secretary describes himself as from the soft Left. That is an apt description as we see Members of the House giving up the reselection battle against the militants without so much as a fight.

There is a growing consensus in the country that one route back to prosperity is a far more dynamic structure of partnership in our industrial life. When we consider the thrusting economies of Japan, to some extent the United States, and even Taiwan and Korea, we find that they have in common a greater pattern of take-home pay in the form of a share in profits. There is no interest in that approach by the Government or the official Opposition. They are happy to continue the debilitating trench warfare and class struggle that passes for British industrial relations.

There is a consensus in the country, as every opinion poll shows, that the House would be more effective in easing the running of the economy if it properly represented the political views of the country, but we know that neither Government nor Opposition will agree with that. We all know what the result of the vote tonight will be. We know that we cannot win with the rules of this place, but we represent the consensus on those issues in the country and we are winning the argument in the country. We do not need to build a consensus on those issues. It is already there.

Last of all, there is consensus that a resolute approach has its time and place. When it is used properly it is supported both in the House and in the country. However, on economic policy, the Prime Minister and the Chancellor have proved obstinately and resolutely wrong. We shall support the censure motion in the Lobby tonight.

5.30 pm

Mr. Peter Hordern (Horsham)

It is difficult to know why so much fuss should have been engendered about this debate. I had understood that it was to be a censure debate. I looked forward eagerly to hearing the Leader of the Opposition describe what, in his view, the Government were doing wrong. I listened to the leader of the Liberal Party with similar expectations. However, as the right hon. Member for Islwyn (Mr. Kinnock) must know, the present crisis does not rate in comparison with crises of the past.

I remember that in 1968 the right hon. Member for Glasgow, Hillhead (Mr. Jenkins), the then Chancellor, came to the House at 3.20 am and announced that the banks and the stock exchange were to be closed for three days. On the fourth day, he announced that the IMF was to lend us £4 billion, that purchase tax, through the regulator, was to rise by 10 per cent., and that the price of a bottle of whisky was to be increased by four shillings, a pint of beer by a penny, and a packet of cigarettes, I believe, by fivepence.

I cannot understand why the right hon. Member for Islwyn thinks that the present situation rates as a crisis, compared with the position in those days. It does not even begin to do so. So far as I can understand it, my right hon. Friend the Chancellor is talking about reducing taxes, not increasing them. It is difficult to understand the basis on which the Opposition have launched their censure motion.

Mr. Robert Sheldon (Ashton-under-Lyne)

The answer is obvious. Because of oil, for the first time since the war, we do not have a balance of payments problem. That is what has changed the situation.

Mr. Hordern

I do not believe that that is true. I shall take up that point later.

I had always understood that the Labour party thought that the pound was too high, and wanted to devalue it. A paper was produced in November 1982 under the auspices of the right hon. Member for Bethnal Green and Stepney (Mr. Shore) in which it was argued that the pound was too high and should be reduced in two annual dollops of 15 per cent. I have done a few calculations. In November 1982 the exchange rate was $1.65 to the pound. We allow for the 15 per cent. In November 1983, the exchange rate was $1.47 to the pound. If the right hon. Gentleman's policy had been carried out, the rate would now have been $1.09.2 to the pound. I admit that we have not quite reached that situation, but I cannot see why the right hon. Gentleman should complain.

Mr. Peter Shore (Bethnal Green and Stepney)

I am sorry to disappoint the hon. Gentleman, but the position with which he should make his comparison is not that of November 1982, but that of April 1982, which was the position against which those simulations were made. The pound sterling then stood at $1.80. On that basis, the arithmetic is somewhat different.

Mr. Hordern

I am not sure that it would be very different. What is certain is that the exchange rate for sterling has moved in much the same way as the right hon. Gentleman suggested at that time and as the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) suggests it has moved since.

The right hon. Member for Sparkbrook has suggested that there should be a realistic and competitive rate of exchange. What does he call a realistic rate of exchange? He is very reluctant to define it. He says that it may be about right now. The House and the country are entitled to know what the Labour party considers to be a proper exchange rate.

Apart from commenting on the exchange rate, the right hon. Member for Sparkbrook also says that the Government should adopt a new policy. They should make overseas investment more difficult and, better still, in the right hon. Gentleman's view, retract some of the very substantial investments which have been taking place in the United States and elsewhere during the past few years.

I wonder whether, if the Prime Minister had not given him a clue, the right hon. Gentleman would have had any idea of the substance of the overseas investment that has taken place during the past four years. I hesitate to correct my right hon. Friend the Prime Minister on this matter, but according to the autumn statement, overseas investment has grown from £15 billion in 1979, representing 7.5 per cent. of gross domestic product, to some £70 billion now, which represents 22 per cent. of GDP.

What would the right hon. Member for Sparkbrook do with that investment? He thinks that we should bring back the money. What would be the effect of bringing £70 billion in investment back into this country? Does the right hon. Gentleman have any idea? He wants to make the pound more competitive. What would be the effect of bringing back £7 billion — let alone £70 billion — into this country? It would raise the exchange to such a level as completely to destroy all the manufacturing industry in this country. Is not that an extraordinary policy? It is akin to that of a seedy solicitor in some provincial town making off with other people's goods.

No doubt some of that money was drawn in to finance the American deficit. But, whatever else may be said about investing that vast amount of money overseas, the investment has certainly proved to be a very good one. People ask what is to happen when North sea oil runs out. The answer is that there is substantial investment overseas, both direct and in portfolio form—

Mr. Austin Mitchell (Great Grimsby)

For some.

Mr. Hordern

—which will stand us in good stead for many years to come. The hon. Gentleman says, "For some." There are 11 million people with shares in pension funds. The Labour party cares nothing for those with shares in pension funds, or in anything else.

Mr. Harry Cohen (Leyton)

Will the hon. Gentleman join me in making representations to the Chancellor not to tax pension funds in the Budget, as he proposes to do?

Mr. Hordern

I am lucky that I do not have to anticipate my right hon. Friend's budget. I shall not do so now.

When the right hon. Member for Sparkbrook, who produces these solutions, was prices Minister, he was—as a result of the failure of his policies, and of the attentions of Professor Clegg — directly responsible for the most disastrous increase in prices that we have ever had. Everything that the right hon. Gentleman touches seems to turn to dross.

What is the truth about the so-called sterling crisis? There is the question of oil. There can be no doubt that we are regarded as an oil country. Oil represents only 5 per cent. of GDP but, when we came to office, the price of sterling rose sharply against the dollar because of the perception that since the price of oil was rising sterling must rise too. It did. It rose to the uncomfortable level of $2.42 to the pound. It was as natural as day following night that when the price of oil fell the price of sterling would fall too, because of how this country is perceived abroad.

The fall in the price of sterling provides business and industry with the best opportunity that they have ever had. Business and industry are taking advantage of that opportunity. In the past two years, company profits have risen by some 35 per cent. and private sector investment is at an all-time high. Provided that business and industry have the confidence that their order books should certainly give them, there is no reason why the economy should not continue to grow—and, ultimately, employment too.

The question of confidence is all-important, particularly in relation to the American deficit. The House should recognise that the perception of how the American economy is being run has also changed. It is a very different affair under President Reagan from what it was under President Carter. There is a good deal more confidence in investment in the United States now than there was in those days. The higher rates of interest are not the only important factor.

The United States statistics are most impressive. Inflation is controlled by firm monetary policies. Wage increases are substantially lower than they are here. There is a free enterprise economy which works, and which has been the engine of growth in world trade for the past two or three years. People are prepared to pay a premium to be in the United States and they are helped in that by high interest rates. The United States provides us with a huge and comparatively open market. Oil, and the United States as an investment haven, are two reasons why sterling is low.

Was my right hon. Friend the Chancellor right to increase interest rates? I do not think that he had any choice. He was right to mention all the good things that are happening, but when every economic commentator of every shade of opinion is poring over the books it is extremely important to present a balanced view of the economy. I do not believe that my right hon. Friend has always done that. When he claims that monetary policy is under control, it is important that all the measures of money should be under control, not just the ones that he mentions such as the narrow measurement of MO or the measurement of M3, which can be adjusted by selling more gilt-edged investment than is strictly necessary for the task.

A more accurate measurement of money at the moment is the wider one of PSL2. Any indication that we might like to draw upon about spending and credit and the level of bank lending, which is at a record level, must leave us with no doubt that credit and spending are extremely easy at the moment. It would be only right for my right hon. Friend to refer to every measure, not just those that suit his argument.

Credit is perceived to be easy at the moment. The combination of that fact and my right hon. Friend saying in the autumn statement that there was £1.5 billion to go in tax cuts gave, quite wrongly, the impression that the Government were going soft about inflation. There is no denying that that is what the markets thought. That was a mistake. Indeed, I think that the autumn statement was a great mistake. I would rather do away with the whole thing, but if it must be done I beg my right hon. Friend not to talk about the giveaways that will be made in the future and to remain as silent as he can about the prospects. It was all his fault in the first place, because if it had not been for the Rooker-Wise-Lawson amendment we should not be in this state.

The public expenditure White Paper is also a rather improbable document. I sometimes think that my right hon. Friend is determined to disprove the old saying that out of every thin man a fat one is trying to escape. Perhaps my right hon. Friend is trying to prove the opposite because he is showing that he has great determination to reduce public expenditure, but it has increased in each of the past three years, as is shown by the public expenditure White Paper. People find it increasingly difficult to envisage public expenditure being reduced to 39.2 per cent. as my right hon. Friend says. There must be a clearer and more forceful examination of public expenditure. It would be of great advantage to do so in the context of bringing public expenditure and revenue together so that the whole country could see what the plans are.

Anyone who looks at the national accounts will be pleased to see that borrowing is taking place solely for profitable investment. The accounts could be presented as they used to be, below the line — only for profitable borrowing—and above the line. Nobody would object to lending for that purpose. The increase in interest rates has put paid to any inflationary fears that there might have been. My advice to my right hon. Friend, for what it is worth, is to ignore the foreign exchange markets, not to give too much away in the Budget and to say as little as possible. When I think of the disasters in the past 20 years that have resulted from Governments spending without counting the cost and the ruin that that has brought to many people, I am astonished that the Opposition should have the nerve to table this motion. I wish my right hon. Friend every success.

5.44 pm

Mr. Richard Caborn (Sheffield, Central)

This is an important debate, but I have little hope of Conservative Members joining us in the Lobby. Their conduct, which has been described as an organised demonstration against the speech of my right hon. Friend the Leader of the Opposition, has been deplorable, bearing in mind the problems that face the country. The Opposition motion has not been tabled light-heartedly, although Conservative Members have treated it in that way.

I should like to consider the serious problems caused by social discontent in northern cities. Listening to the hon. Member for Horsham (Mr. Hordern), one would think that there is no crisis simply because, as he said, the financial markets are OK. However, there is a human crisis in Britain. In many northern cities suicide rates are increasing, homelessness on a scale such as has not been seen for many years, and an increase in the number of young people glue sniffing and taking drugs. An increasing number of families are breaking up. Earlier this week we discussed corporal punishment in schools. Social discontent caused by the factors that I have outlined is now spreading into schools, making control there extremely difficult. Many young people's parents, brothers and sisters are unemployed. They go to school and ask, "For what?" It is extremely difficult to keep discipline.

Conservative Members can kid themselves or hide behind the Prime Minister. To corrupt the analogy of the three brass monkeys, they can hear all, see all and, as we say in the north, say nowt. They seem able to divorce themselves from the growing chorus of criticism of the Government from every quarter. That criticism comes from industrialists, churches, the academic world and even some Conservatives in the country. Unfortunately, much of that criticism is falling on deaf ears.

I should like to give an example of the criticism that is coming from industry. My local paper, the Sheffield Morning Telegraph, produced an industrial survey on 9 January. One of the articles was written by the chief executive of Johnson and Firth Brown, under the heading: Leadership has been singularly lacking". The author mentioned the breakdown of social order because of mass unemployment. To illustrate his case he quoted Michael Howard, professor of modern history at Oxford — not the Prime Minister's favourite academic institution at the moment, but still well qualified. The article said: Professor Howard warns of 'the long-term threat' to Britain's social cohesiveness from the volatile masses of unemployed, especially among the young 'who simply do not feel part of society at all and so defiantly turn their backs on it'. He continued by offering advice on how the energy industry should be run: The strategic importance of coal for our economy in both the short and long term is unquestioned. Indeed, it is suggested that the additional oil purchased as a substitute for coal-fired generating stations is costing the CEGB an additional £20 million each week. Whilst this strategic importance lasts there cannot be an absolute 'right to manage' which is divorced from logistic, political, social and occasionallly geo-political realities. The energy industry, per se, has to be an industry that responds to broader criteria than doctrinaire economics, and manages its affairs in the broader national interest by consent within a coherent strategic framework. The 'right to manage' is not obtained by right, or force … we are not capitalists and socialists, we are workers and managers who should all share in the legitimate reward of success. The best managers are working all of the time … The best workers are managing all of the time. We should adopt a collective approach to the problems of our industrial framework, rather than make demands and take actions which result in the confrontation that seems to be the order of the day under the present Government.

According to the unemployment figures announced today, the nation has 3.25 million people unemployed—equal to 13.7 per cent of the work force. In Sheffield, my city, 43,918 people are unemployed — an increase of 1,100 since the figures were last announced — representing 15.2 per cent. of the work force. When the Conservatives came to office in 1979, Sheffield had 13,000 unemployed, or 4.5 per cent. I assure the hon. member for Horsham that that is a crisis.

In 1979, in my constituency unemployment stood at 3,900, or 8 per cent. It is now 10,200, or 25.7 per cent. The worst aspects are masked by the figures, because in the centre of Sheffield unemployment is over 50 per cent. The deprivation caused by that must he seen to be believed, as 53 per cent. of the unemployed have not had a job for a year and 30 per cent have been unemployed for over two years. That, too, is a real crisis.

About 10,000 young people in the city of Sheffield have not had a real job since leaving school. That is a crisis for them. More than 40,000 jobs have been lost since 1979 in the steel and associated trades in the proud steel city of Sheffield, and there is a growth industry among the companies producing "For sale" signs.

It goes deeper than that, because what is occurring is a reflection of the Government's approach to industry. The Government's simplistic approach could be likened to the Prime Minister going into a restaurant and looking at two different menus. First, she picks up the a la carte menu and immediately sends that to the Common Market, with a PS saying, "Please look after the CAP."

The right hon. Lady then picks up the second menu—we can liken this situation to British industry—which is a much more limited menu because, for starters, everybody gets the same: free market forces are allowed to run wild, with a touch of trade union control.

We come to the main course. There is a limited choice, although there is a selection of chefs. For the steel industry we are given Ian MacGregor. He is there to dish up phoenix I, II and III. Phoenix I was not a raging success, being denationalisation, to which the Prime Minister referred earlier.

Phoenix III was supposed to represent an important part of our steel industry — steel forging — but industrialists, trade unionists and even some civil servants said that phoenix III was based on rocky financial foundations. A rescue attempt involving more than £10 million had to be devoted to that after only two years of its life; so phoenix III has not been a raging success, either.

Everybody is waiting for the announcement of phoenix II, which has been in the oven of the Department of Trade and Industry for about six months. There were 100,000 job losses in the industry in five years and the chef, Mr. MacGregor, relegated the industry, both the special and bulk steel sectors, to being not even comparable with the steel industries of some Third-world countries.

There will be a crisis when, if the economy is reflated and we are in the aerospace, nuclear power and high technology industries, we need the base materials. They will have to be imported, because the technology, investment and research and development suffered one cut after another. Mr. MacGregor relegated Britain to a position well down the league of major steel manufacturers. The chef, having done that to the steel industry, was moved to the NCB to create havoc there.

The next course is the sweet—which we in the north call pudding—and that involves leaving the mess to the local authorities and local communities to sort out. But the Government add a little vindictiveness, and the local authorities are called irresponsible and Left loonies. To make sure that they cannot respond, they start to remove their rights, and with that step we have an undermining of the democratic basis. "Public expenditure" is made a dirty phrase in the English language — even worse than Oxford university. Democratic rights having been removed, local authorities are unable to govern in the interests of the community.

It may be said that I make somewhat light of the problems of the steel industry. I assure Conservative Members that those working in that and allied industries do not take the situation lightly. The nation will regret the day when Ian MacGregor set foot on the steel industry.

I am privileged to represent Sheffield, Central. I join many others in warning the Government that if they do not change course and step aside from the policies of confrontation which are undermining our industrial base, deliberately creating unemployment, along with treading on people and their institutions, the stability which enables the financial institutions to function will itself be undermined.

There exists in society today great anxiety and frustration. Unless there is a change in Government policy, confrontation will be the order of the day and stability will disappear. The Opposition have tabled the motion, not to score points off the Government, but genuinely to bring before the House the concern that is felt not only by the millions who are unemployed but by the British people generally, and especially by those who are living below the poverty line. If the Government do not heed our advice, it will be to their sorrow and detriment in the future.

5.57 pm

Mr. Spencer Batiste (Elmet)

The central accusation in the censure motion is that the Government have mishandled the economy. I understand why the official Opposition, and some of those who have had the responsibility in the last 30 years of managing the economy, would now like to pretend that all our present industrial problems and our relative industrial weakness are the consequence of the actions of the present Government. For them to do otherwise would be to admit that they have a share in the heavy burden of responsibility for our long-standing problems and for the deep-seated danger signals that have been emerging for many years.

I exclude, in fairness, from that general condemnation the Leader of the Opposition, because he has been responsible for nothing. However, when previous Prime Ministers have trooped up to Oxford to collect their honorary degrees, I wonder how many of them paused to reflect that the academics who were honouring them were the same people who looked on technology transfer as some unworthy activity, beneath their intellectual dignity.

Those same academics would diligently pursue their research at public expense, collect their Nobel prizes and then sit back complacently as the development of their work and the jobs that their ideas generated were taken up in the United States or Japan. We in this country must now re-import goods manufactured overseas for which we did the basic technological work and research.

Ms. Clare Short (Birmingham, Ladywood)

Has the hon. Gentleman visited the west midlands? Is he aware that in 1979 we had 6 per cent. unemployment and were a manufacturing region, whereas unemployment there is now as high as it is in any other region of the country? That is the type of damage that has been done to the British economy — it is encapsulated in the west midlands — by the Conservatives since 1979.

Mr. Batiste

Many jobs and millions of pounds worth of work would be done in Britain today had we had the foresight in the 1950s, 1960s and 1970s to take up the ideas that we generated in our universities. Our traditional areas of industry, such as those in the west midlands and in my area of west Yorkshire, would have been the prime beneficiaries of that foresight. Technology transfer is not an alternative to the adequate funding of higher education. Nor is the adequate funding of higher education an alternative that enables those institutions to ignore the need for technology transfer.

Because of the pressures that this Government have put upon the academic world, it has been prompted for the first time into the surge of technology transfer that has taken place during the past few years. This Government have recognised the importance of new technology and have done something about it. They have fostered, developed and encouraged the Alvey programme in information technology, a field in which we once led but which we have since neglected. This Government set up the National Space Centre to bring together the diverse and complex threads of a vital industry that we once led, but it is a lead that we have squandered. This Government are fighting against the claims of the United States for the extraterritorial application of their law in high technology industries. It is the companies in my area and in the other industrial areas that will be the beneficiaries if the Government stand up robustly against those claims and against American interests and fight for the interests of this country. The shame lies with those who over the years have neglected these opportunities. The shame lies not with this Government who are trying to pick up those opportunities.

For years profit has been a dirty word in this country, and in the Opposition's vocabulary it still is a dirty word. Yet profit is the mainspring of opportunity, of investment and of jobs—

Ms. Clare Short

All the hon. Gentleman is interested in is profits for him and his friends.

Mr. Batiste

That intervention by the hon. Lady shows just how right I am when I say that "profit" is still a dirty word in the vocabulary of the Opposition. Until they have learned that, they have learned nothing. Until they have learned that, they will never understand how a free economy can grow and prosper and how jobs can be created. This Government have restored profitability and investment to British industry.

Mr. Gerald Bermingham (St. Helens, South)

rose—

Mr. Batiste

I shall give way to the hon. Gentleman in a moment. This Government have restored profitability and investment to British industry and have reversed the strength-sapping spread of creeping nationalisation with a brilliantly successful privatisation programme leading to genuine public ownership—that is, ownership by people for themselves, not ownership by bureaucrats on their behalf.

Mr. Bermingham

Would not the hon. Gentleman agree with me that the real question is where the profit goes? Does it go into a few hands, or does it go into the hands of all those who participate in the production of the product?

Mr. Batiste

No, I do not agree with the hon. Gentleman at all. Unless a company produces profits it will be unable to employ people. If there is no profitability there will be no employment. And if one wishes to increase employment one has to increase profitability. I am sorry that the hon. Gentleman does not understand that point.

For years, across the world, particularly in the developed nations, inflation has been rightly regarded as the enemy of economic progress and as the enemy of employment and of savings. Yet in this country it is only this Government who have demonstrated a clear and consistent will to take the steps necessary to keep inflation under control. I shudder to think what level interest rates and the pound would now be at if the right hon. Member for Blaenau, Gwent (Mr. Foot) had won the last general election and had implemented the disastrous Labour party manifesto. Upon these issues, and to such matters as the development of small businesses, successive Governments have for years paid lip service. Yet for years the share of the economy held by such an important sector as small businesses has declined. However, the experience of the United States economy and of the German economy shows that it is this sector that is best able to provide new jobs. It is this Government who have changed the pattern. They do not say, "We shall pay lip service to this concept." They produce the programmes that will help small businesses. This Government have produced the business expansion scheme, the loan guarantee scheme and the enterprise allowance scheme. This Government have promoted and expanded local enterprise agencies.

Dr. John Marek (Wrexham)

Will the hon. Gentleman give way?

Mr. Batiste

No, I shall not give way. My speech must be brief because there are many other hon. Members who wish to take part in the debate. I have already given way twice without any enlightenment being proferred by the Opposition.

It is the actions of this Government that have been successful in promoting the expansion of small businesses and in creating new jobs in the small business sector—and not just in the small business sector. The example of the United States shows clearly that the service sector provides many new jobs, yet over very many years Government after Government in Britain have introduced policies that have progressively handicapped, frustrated and hindered the development of service industries. It is this Government who have turned that tide and abolished the tax on jobs which Labour introduced.

The most important feature that underpins a successful economy is the handling of industrial relations. After lurching in industrial relations, from the sledgehammer approach of the Industrial Relations Act to the pre-emptive cringe towards militancy of the Opposition—so good an example of which is shown by the faces now on the Opposition Benches — it is this Government who have had the wisdom and the tact to set about creating a legal framework for industrial relations by means of a steady, step by step process that has gone along with public opinion and that has taken public opinion along with it.

Mr. Lofthouse

Would the hon. Gentleman tell the young miners in his constituency, or the youngsters who would normally go into the pits, what are their employment prospects when pits in his constituency, such as Ledston Luck and Saville, close?

Mr. Batiste

I shall tell them and the hon. Gentleman very clearly. Every miner in my constituency who may be faced with redundancy and who comes from those pits and who wishes to continue in mining will be offered alternative employment by the National Coal Board in another pit in the area. What is the threat to those young men? What is the threat to those miners? It is the attitude of the Labour party and the continuation of this terrible strike. It is this Government who have taken steps to put industrial relations into their proper legislative framework and who have the determination to stand up to those militants who are so well represented on the Opposition Benches and who believe that intimidation is an alternative to industrial democracy.

Many of those hon. Members who came into Parliament for the first time in 1983 were motivated by the belief, reinforced by the record of the previous four years, that this Government and this Prime Minister would demonstrate the guts, the determination and the foresight to reverse what had hitherto appeared to so many of us to be an irreversible national decline. After one and a half years of this Parliament and having seen the manifest withering on the vine of the Opposition, I am pleased to say that I can see no reason to doubt that belief and that I have no reason to do other than support this Government in their handling of the economy.

6.7 pm

Mr. Robert Sheldon (Ashton-under-Lyne)

The hon. Member for Elmet (Mr. Batiste) referred to the help given by the Government to small businesses. Nobody can dispute the fact that small businesses are of enormous importance to this country, but I wish that I were able to say that the help given by the Government to small businesses, compared with the disadvantage to them, both by the number of bankruptcies from which they have suffered and the high interest rates under which they labour, was as great as the hon. Gentleman suggested. If one adds up the "pluses" and deducts the "minuses", the Government's record is not as good as the hon. Member for Elmet and so many other Conservative Members believe it to be. Their record does not come up to the standards for which we would have wished.

The starting point of any examination of the effectiveness of a Government is how much power the Government have to influence events and how they use that power. The general rule is that Governments come to office believing that they have many levers to pull and many buttons to press. However, after a year or two they realise that some of the levers have rusted up and that some of the buttons are not connected to anything at all. That inevitably leads the Government to blame others for their own errors. However, it also leads a sensible Government to learn from their own mistakes and towards the end of their term in office to put right those misjudgments that they started with in the happy, optimistic days when they came to office. But to any observer the fact remains that there is asymmetry about the operations of the Government.

It is much easier for the Government to harm the economy than it is for the Government to do good. It has some of the characteristics of any mechanism about which we know too little: tightening the screw here, removing a component there. That cannot be guaranteed to improve performance.

Previous Governments have been humbled by the fact that they must contend with the despotism of reality. They have learnt the limitations of power and acquired some of the skills of relating to that knowledge. The acquisition of such wisdom has been called U-turns.

We have seen the famous U-turns of Governments since the 1960s. But true wisdom comes when one realises that one does not know that which one thought one knew. Such wisdom is a recognition that the Government have had second thoughts, and the embarrassment of having to deny previous assertions is a small sacrifice for the greater good of the British people.

The Government have not learnt from their period in office, and they present that failure to learn as proof of their consistency and determination rather than a blindness to the damage done to our fellow citizens, when they are the only real reason why we are in the House at all.

The particular damage is that done to our manufacturing industry. The Manchester chamber of commerce and industry regularly presents the voice of reality in our factories. It is different from that which the Government hear from the more luxurious dining rooms in the City which benefits so much from the Government's policies which devastate so much of the rest of Britain.

The disadvantage for industry is that the City is nearer to the Government, and industry is far away and thought to be dirty. Ministers have that rapport with the City. The Chancellor of the Exchequer has an especial rapport with the City. One third of the firms in my constituency closed in the first two years of the Government's period in office and my constituency consists of small firms. We have no international finance, no international insurance and no international banking. We see the problems that small firms face, and we take no comfort from the preference given to the service industries, with which we have little to do.

Dr. Marek

My hon. Friend hits upon an important point when he says that there have been bankruptcies. There has been a record number of bankruptcies in the past year. How does he square that with the speech by the hon. Member for Elmet (Mr. Batiste), who told us that only the Government and those on the Conservative Benches have done so much for small businesses?

Mr. Sheldon

That is true. There have been 12,000 bankruptcies, and that is a record figure. It is about four times the rate of only a few years ago. That is the danger for the small companies in so many of our constituencies.

There is the problem of international trade in goods which one can see benefiting my constituency but which is of less importance to other parts of Britain. I recall well the right hon. Member for Old Bexley and Sidcup (Mr. Heath) talking about the favoured parts of Britain which are dominant and which should be less dominant. The telling argument that the right hon. Gentleman used had great repercussions. There were echoes of it in my constituency and anywhere north of this city.

The Prime Minister has endorsed fully the medium-term financial strategy, the main statement of which was set out in the Financial Statement and Budget Report in 1980. It said: The Government's objectives for the medium-term are to bring down the rate of inflation and to create conditions for a sustainable growth of output and employment. That has been the aim of all the Government's efforts over the past five and a half years.

One of the arguments used by the Prime Minister was that her economic policy, which embraced her attitudes to monetarism, the PSBR and so on, was a necessary, if not sufficient, condition for prosperity. The notion of "necessary" and "sufficient" is one that was devised by philosophers and appropriated by scientists to distinguish in a laboratory that process which is essential to a successful experiment from that which is not. It does not ensure a successful outcome on its own.

The Government tried to show that one must reduce inflation and have a monetarist policy before anything else can occur. One could argue that a necessary condition for our prosperity is an improvement in morality. Such things cannot be tested, and the essential task for politicians is to provide policies which can be tested by results and can be seen in operation.

One possible regret is that the Labour party never thought of that one first. How clever it would have been if we had said that the nationalisation of the steel industry was a necessary if not sufficient reason for a manufacturing rebirth rather than what it was — an attempt to control and assist a beleaguered industry.

How imaginative if we had said that capital transfer tax was a necessary if not sufficient reason to improve industrial performance rather than what it was — an attempt at fair taxation.

The Prime Minister is able to hide behind that as an essential step along the road when the end has no connection with it. It is to reality that we must turn again and again. When we look at the Government's policies on incentives—

Mr. Tim Eggar (Enfield, North)

Am I right in thinking that the Treasury team of which the right hon. Gentleman was a prominent member, at least from 1976 onwards, also believed that it was essential to follow a monetarist policy?

Mr. Sheldon

No. The hon. Gentleman will surely know that I strongly disapproved of that. I disapprove of it now and I disapproved of it during the interim period.

The Government's essential task has been to carry out their fixed monetarist policy, which has resulted only in deflation and a loss of output to the disadvantage of Britain, but to the particular disadvantage of the area which I have the privilege to represent.

We have been round this course many times before. In 1962 we provided advantages to those surtax payers. In 1972 we introduced a unified tax system to help the better off. In 1979 we reduced the highest rate of income tax from 83 to 60 per cent. In 1983 we removed the investment income surcharge. Those were tax changes of enormous advantage, designed for the so-called entrepreneur, but they did not come out of their closet as a result. The money was given to no avail at all, and so it will remain during the Government's period in office.

Let us turn to the particular problems that we see. How was it that we failed to take advantage of the enormous benefit given by North sea oil? The period of greatest prosperity, the period when something can be done about such a windfall, is when the revenue from that particular product is increasing. As it increases year by year, so there is extra money to disburse. The greatest period of prosperity that we can recall individually is always when our income rises the most — not when we have the highest level of income, but when it rises the most. That is when we have spare money over and above our previous needs. That is what the Government had. For the first time ever this century, the Government had an enormous increase in income—in wealth.

The question was what should be done with that windfall, which, because it was provided by oil, was non-recurring. What we should have done was use it to prepare Britain for investment in those areas which would produce a return. It is a pitiful return to think that that money went abroad to help other countries' industries and that we cannot be sure it will return to Britain. The days of tax exiles remain. They have not been brought back to Britain by low levels of tax. They are still abroad and the fleet-footedness of so many of those individuals is likely to lead to them staying abroad.

That money should not have gone abroad. It should have gone into industry because we depend on it for so many jobs. We have 50 million people in the United Kingdom, and we cannot earn our, living by providing banking and insurance services. We can earn our living in Ashton-under-Lyne only by making things. There is no other way. If we give an advantage to service industries over manufacturing industries, we are saying what the Secretary of State for Trade and Industry said about regional incentives — that there is no economic case, only a social case, for regional incentives.

Mrs. Edwina Currie (Derbyshire South)

rose—

Mr. Sheldon

I shall give way in a moment.

That is an appalling statement to make. It implies that we are the recipients of handouts, and that there is no economic case for dealing with the large numbers of people who are unemployed and with the many people who daily see what is happening in the favoured parts—the south and south-east. They believe that they have skills which are still relevant in the modern world but which are not being called upon.

Mrs. Currie

rose—

Mr. Sheldon

I am afraid that I am overrunning my time.

That is what is happening today, and we must be aware of it. Not all that long ago Quintin Hogg was sent to the north-east, with his cap, to do something for that area. He did not do very much, but he showed that his Government cared. We should like to see a member of the Government, preferably the Prime Minister, go to such areas to show that they care. We know that the right hon. Lady is not happy about showing that she cares about these matters. She never travels on the railways — we know that she does not like them. She has never said a nice thing about civil servants — we know that she dislikes them. She does not go to those regions, because she does not think they matter. But they are important. She must overcome her aversion and show that we are one united country. That is an essential task of politics, not economics.

Five and a half years is long enough for any political or economic experiment. The prosperity of the country and the uniting and knitting together of the people should be foremost. Those are the tests by which a Government should be judged. I regret that the Government have failed them.

6.22 pm

Sir Peter Emery (Honiton)

I shall try to confine my remarks to the 10 minutes that the Select Committee I chair has urged on the House. In so doing, I hope to prove that one can still debate points. I shall take the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) slightly to task. At times he is a travelling companion of mine, even in financial matters. His argument that, because there have been some failures within the small industry section, we have not achieved three times more than anything that was introduced by the Labour Government, does not hold up. It is a sign of the weakness of the Opposition's case. He argued that we had the strictest monetarist policy, but he knows that I am not a strict monetarist. Perhaps that is why I speak from below the Gangway. There is a vast difference between the Government's policy today and the strictness that we expected in 1979. The right hon. Gentleman knows that, in all honesty.

I shall deal with four matters. We must consider the Socialist approach if we are to accept the criticisms of the motion. What would that Socialist approach be? Within the shortest possible time it would bring about a return to a massive increase in inflation. It would ensure that there was a major increase in industrial costs and, therefore, a considerable decrease in the level of increase in productivity within the industrial structure. We would see a major reduction in international confidence in sterling, a genuine flight of foreign investment from Britain — I hope that all hon. Members would wish to encourage that investment in Britain — and a major departure of the foreign currency balances that are in London at present, especially those relating to America and Arab investment. The Opposition's policies would be disastrous. They are a farrago of financial fiction. They are complete nonsense—the proper definition of a farrago.

I shall put another point to those who seriously support the motion. Today's attack from the Opposition Front Bench achieves nothing; indeed, it works against sustaining the growing confidence in sterling's recovery and our economic recovery. I believe that the country is in favour of those who work to benefit the economic expansion of this nation, and not of those who work against it.

For that reason I ask the Chancellor of the Exchequer not to be waylaid by the siren voices of the false expansionists. I am worried that those who suggest a massive injection of public capital spending do not realise how in the past we have suffered from that approach. We have seen a major dash for growth by a Conservative Chancellor of the Exchequer, my late colleague Mr. Reginald Maudling. We have seen what that did for the economy. I criticised my party in the past, and I say that that did not prove to be either successful or helpful.

We should not forget — this is not frequently mentioned — that such an action lasts for only a limited period. Opposition Members do not consider what will happen when that injection of extra money from Government ceases. If it is the pump-priming exercise, which the Opposition try to suggest that it will be, unless the massive artificial level of Government capital expenditure is sustained, it will come to an end right in the middle of the period when the pump-priming should be working. That will have a deleterious effect on the economy because false jobs will have been created. The economy will suffer, and the policy will do nothing in the long run to achieve growth in genuine jobs, the creation of which all hon. Members wish to ensure.

I shall now deal with two matters that are frequently forgotten. I ask the House and the country to remember the number of people who are employed at present, as well as those who are unemployed. It is interesting to note that more than 24.2 million people are in work in the United Kingdom.

If we examined the position when the Government came to power in 1979 and took account of the increase in unemployment since then, we would expect to see only 23.2 million people employed. Therefore, 1 million new jobs have been created, jobs that are different from those that were in existence in 1979. That does not alter the great need to deal with the problem of unemployment. However, those who wish to attack the Government on their record frequently neglect that point.

The Government have failed to make the country realise the economic cost to the nation of Scargill's strike. It is not just a matter of fighting for the coal industry; between £2 billion and £2.5 billion has been artificially removed from expansion and from our economic recovery simply to deal with the whims of a man who wishes to bring down a democratically elected Government. More people should consider not only the arguments about the strike, but the massive economic effect, deleterious to everyone in the nation, of Scargill's policies.

There are several views about Britain entering the European monetary system. However, although we may disagree with him, we must respect and examine the opinions of the Governor of the Bank of England. A major argument that I advanced for Britain's entry into Europe was that we would have a structure of European reserves to combat the strength of the dollar. We are fast approaching the time when Britain must join the European monetary system. It may not be a popular belief, but I have always believed that the problems that the Chancellor has had to tackle during the past two weeks, especially the reduction in the value of sterling against the dollar, would have been lessened if Britain were a part of the EMS.

A fact that is seldom, if ever, considered in the Chamber — perhaps because it is unpopular — is that we shall never return to the over-full employment of the 1950s and 1960s. Anyone who believes that that is not true is living in cloud-cuckoo-land. Therefore, we must consider how best to use our valuable manpower resources. It must be sensible that the unemployed, who are being sustained, rightly, by the vast expenditure of public funds, should be asked and be able to make a social contribution to the society that sustains them. I do not advocate placing them in full-time jobs, which would mean removing work from those already in employment, but there must be enough work to be done by able-bodied men in hospitals, in caring for the elderly and disabled, and in our streets and countryside. They could do many of the jobs that we cannot afford to do within the present structure of local government or public expenditure. The payment of tens of billions of pounds in order to keep people sitting on their behinds doing nothing cannot be a proper use of resources. Hon. Members on both sides of the House would be doing a favour to the unemployed, many of whom wish to believe that they can still make a contribution to society, if they considered my suggestion.

It is easy to criticise a Government in retrospect, and we can always point to ways in which things could have been done better. But I urge the House to realise that the Government's achievements are real and that they will continue for the benefit of the nation. What is more, the Opposition have put forward no alternative.

6.35 pm

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

I support the motion of censure, which would be carried overwhelmingly this evening if Conservative Members faithfully represented the views of the people who put them there rather than gave slavish support to their slave-mistress, the Prime Minister.

I make no apology for concentrating on the northern region. As I said to the Prime Minister earlier this afternoon, the northern region has been crucified by the policies pursued by her Government during the past five years. I grew up in the north-east during the bad times, under successive Tory Governments in the 1930s, but even in those days the despair was not so complete as we see in the region now. Never in my lifetime has a Prime Minister shown such callous disregard for so many of our people. One cannot run a great ship of state as though it were a small rowing boat on a park lake, but that is the inevitable price that we must pay for the Prime Minister's corner-shop mentality.

Were it not for more than £1 billion of support received from the European Community, God knows what the northern region would be like today. It has the highest unemployment in mainland Britain, and it is becoming steadily worse month by month. It would not be so bad if we could see a faint light at the end of the tunnel, but we cannot. For every 100 jobs created in new, innovative industry in the northern region, the south-east receives no fewer than 500 jobs. That cannot continue. It is immoral for a Government to allow the soft underbelly of the country to receive five times more jobs than does the northern region.

I have argued long and loud for Government intervention in the north in the shape of a Government research and development agency, yet the northern region is the only one in the United Kingdom without such a facility. It is no coincidence that the growth of such establishments — like mushrooms growing in the morning mist — alongside the M4 has created a new silicon grove in the area between west London and south Wales. When will the Government recognise the facts and give nothing less than a fair deal to the north? The Government have the power to give a lead. When will they do so?

No one can deny that good road communications are much more vital in a peripheral region like the north than in other regions, particularly the south-east. Yet the Government have failed completely to realise this important geographical factor. Since 1979 expenditure on roads in the north has on average been only 40 per cent. of that in the south-east. In the last financial year nearly £11 million was spent in the south-east compared with £4 million in the north.

Airports are crucial to an area like the north-east. The local authorities in north-east England are to be commended on the way in which they developed the little airport outside Newcastle from a pleasure-based airport to an excellent regional airport with international potential. The local authorities combined have spent no less than £8.5 million on building a new terminal. Because of the success of the airport we have ever-increasing traffic and need a parallel taxiway. The Government last May refused authorisation for such a project. In other words, they are not even prepared to allow us to help ourselves while at the same time the Prime Minister is willing to commit countless millions of pounds in national resources to suck up to the French of all people by supporting the building of a channel tunnel. This is one of the most offensive of the many offensive things that she has done to the north-east in the last five years.

The north badly needs more resources for health care, bearing in mind that there is far too much ill-health and a high death rate.

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

Is my hon. Friend not unsettled when he hears Conservative Members saying that unemployment is here to stay? Does that not send a signal to regions such as ours that they cannot look to Parliament to resolve the problems of unemployment over the longer term? So long as the Government refuse to raise the level of benefits, does that not indicate also that they would leave people on the dole for decades in receipt of a very small amount of money every week? Does that not disturb people in the north?

Mr. Brown

It disturbs me. More than that, I am disturbed when I see hon. Members who represent parts of the west midlands, which has suffered badly under the Government, looking as though they were enjoying the talk about unemployment. My hon. Friend the Member for Workington (Mr. Campbell-Savours) said that the Government were not prepared to increase welfare benefits. The reverse is the case. They have reduced them in real terms.

That brings me back to the point I was making about the high death rate in the north. I attribute much of it to suicides caused by the grim economic plight of high unemployment. Infant mortality was consistently higher in the north than in the rest of England and Wales until, thankfully, in 1980–81 the rate reduced to slightly less than the national average. We have fewer doctors and dentists than the rest of the country and the number of patients on their lists is appalling.

In the face of all these facts, what do we see? Do we see the Government rushing to help a region that has been under-privileged in regard to health care? Do we heck. The 1984–85 capital allocation to the northern regional health authority has been cut by this pathetic Government by no less than £4 million, just under 10 per cent. of our total expenditure. Does the House wonder that we in the north suffer deep anger and almost despair at the unfairness of the incumbents of the Treasury Bench?

In regard to energy, gas sales in the north fell by 8.2 per cent. between 1979 and 1983, compared with a national fall of 1.7 per cent. The most serious part of the fall in energy sales was in industry, where sales of gas decreased by 17 per cent. That point cannot be lost on the House. The same can be said about electricity. There is a reduction of 12 per cent. in industrial take-up. That illustrates what has been happening to manufacturing industry.

We have reached the stage where nationally, for the first time in our history, we are importing more manufactured goods than we are exporting. I need hardly say in this Chamber, of all places, that an island nation depends on importing raw materials, turning them into ploughshares or whatever, and exporting them. If we are not doing that, what chance have we of survival?

Disposable incomes in the north are well below the national average.

Mr. David Winnick (Walsall, North)

Will my hon. Friend agree that in the west midlands and the black country, the very heartland of the manufacturing regions of the United Kingdom, there has been absolute devastation because of the Government's economic policies? In 1979, when they took office, the unemployment rate was 5.1 per cent. Now and for some time it has been between 12 per cent. and 15 per cent. In my travel-to-work area the official figure is 17 per cent.

Mr. Brown

The whole country has been devastated by the Government's employment policy. I sympathise with my hon. Friend. I still maintain, as I said last year in a similar debate, that all the facts and figures I have exposed must be a fair indication to the Government that they should understand the message that we are long past the time when, for survival, the north needs positive discrimination.

6.48 pm

Sir William Clark (Croydon, South)

The hon. Member for Newcastle upon Tyne, North (Mr. Brown) has made a regional speech; I shall refer to some of his comments when I talk about manufacturing industry.

One must admire the audacity of the Leader of the Opposition in introducing a motion such as this against the Government. We should consider the background against which he introduced it, one where the Government of the day have repaid over half the money that the Labour Government borrowed from the International Monetary Fund. [Interruption.] It is all very well to talk about oil. When I asked the Leader of the Opposition why they had had to borrow the money, he could not answer.

Mr. Stuart Bell (Middlesbrough)

rose—

Sir William Clark

I shall not give way yet. The motion has been introduced against a background of a panic visit to the IMF by a Labour Chancellor. This Government have never been to the IMF in such circumstances.

The Opposition criticise the Government's record over the last five years, but in 1979 we took over rapidly rising inflation. Today inflation is down to 5 per cent. That is no cause for criticism. We took over high and increasing overspending. We have brought the public sector borrowing requirement down through strict monetary policy and it is now about 2 per cent. of GDP. When we took over production was falling. Now production is rising.

When we took over, grossly excessive wage and salary awards were being made. One of the mistakes that the Conservative Government made was to accept the Clegg recommendations. Today claims are far more moderate. When we took over, there was gross over-manning. Today over-manning has been slimmed down, certainly in the private sector and to some extent in the public sector.

When we took over, industry was experiencing falling profits. Now profits are rising. All that is against the background of a world recession which increased in intensity after 1979 until a year or so ago. Despite the temporary setback, I cannot understand why the Leader of the Opposition has moved his censure motion.

There must be a reason. One of the reasons must be the pressure from the Left wing of the right hon. Gentleman's party. We are to have a debate about the miners on Monday, but for weeks the Leader of the Opposition said that we would not have such a debate. It would have been easy to arrange a debate on a Supply day, but the Leader of the Opposition said no. The pressure built up. I understand why the Leader of the Opposition did not want a debate on the miners' strike. The public are fed up to the back teeth with the violence that they have seen on their televisions sets.

Today's debate is another sop to pacify the right hon. Gentleman's Left wing. The Leader of the Opposition had nothing positive to say today. All he did was criticise. He had nothing positive to offer about what a Labour Government would do.

The Leader of the Opposition today admonished Government Members and said, "Don't you realise that the miners' strike has cost the economy between £2 billion and £3 billion?" That must have an effect on the value of sterling. When has the right hon. Gentleman condemned the miners for causing that loss to the economy? He has never said anything.

Is the Leader of the Opposition saying to the country that the cost is too high and that the Government should give in to the demands of Mr. Scargill and his executive? We all know that the NUM executive has been infiltrated by the Left. Again the Left is using pressure. Of course it has cost money to import coal, although our balance of payments last year was in surplus.

Mr. Robin Corbett (Birmingham, Erdington)

Oil.

Sir William Clark

It is no use saying "Oil.". Opposition Members believe that the country is not fit to live in, but I believe that the country should be congratulated. Instead of trying to run down Britain, it is about time the Opposition talked about our achievements.

Mr. Winnick

Will the hon. Gentleman give way?

Sir William Clark

No. I want to be brief.

The Government are criticised for defending democracy against the impossible demands of Mr. Scargill, but what has he been offered? He has been promised no lost jobs. Surely that is good. He has been offered the best redundancy terms in the nationalised industries. Certainly they are better than anything in the private sector. He has been offered more investment in the mines. It is sometimes forgotten that retired miners have index-linked pensions. Any trade union leader could accept such a package.

The British taxpayer cannot continue to pour money into uneconomic pits. That is the nub of the problem. For some time my considered opinion has been that the strike has nothing to do with pay, economic pits or the welfare of the miners. I believe that the strike is about bringing down the democratic system. I am certain that the Government are right to resist. Opposition Members know as well as I do that under no circumstances can any Government give way to such demands by any union because if they did Governments in future would be subjected to the whims of any trade union leader.

The strength of the dollar is an enigma and many people do not understand it.—[Laughter.] Opposition Members may laugh, but the United States has a 200 billion dollar deficit, which is increasing, and its national debt went up last year by 15 per cent. It is an enigma that the dollar stays so strong. Why does it stay so strong? I believe that one of the main reasons is that the United States is self-sufficient. There is no point in trying to compare Britain with the United States because we are not self-sufficient; consequently, we are in a different position.

Mr. Campbell-Savours

Will the hon. Gentleman give way?

Sir William Clark

No.

As my right hon. Friend the Prime Minister said today, oil provides about 8 per cent. of the Chancellor's revenue. If the oil price comes down by 1 per cent. that revenue will be reduced to 7 per cent. and the Chancellor's income will be reduced by about £1.2 billion. If that were added to the public sector borrowing requirement, instead of PSBR being 2 per cent. of GDP it would be 2.5 per cent. or 2.75 per cent. of GDP. With such reserves there is no reason why the price of oil should affect the pound. The effect is over-exaggerated because of the so-called link between oil and our total economy.

I deal next with the question of the balance of payments. Last year we had a surplus. The hon. Member for Birmingham, Erdington (Mr. Corbett) in an intervention referred to oil. Of course oil helps. One accepts that we now have a deficit in the manufacturing industry, but one must ask why we have that deficit. For example, why is it that the car industry no longer has the same share of the world market or, indeed, the domestic market? The simple reason is that we have not been sufficiently competitive. We must therefore identify where the trouble lies in the manufacturing industry. In the last five years we have increased our service industries, in addition to oil, with the result that we were able to balance our books on the balance of payments.

I have attempted to point out where I think the censure motion is misplaced. In my view it is frivolous, and a diversion to cover up the differences between the Left and Right wings of the Labour party. Nobody should doubt what might happen if, the Labour party ever got in. In the last five years our overseas investments have gone up by £55 billion, roughly the amount of revenue that has accrued from North sea oil. One has to realise that from those investments abroad come not only dividends but also the influence that we can have on making overseas subsidiaries buy British. Anybody who knows about imports and exports knows that that will help in the long run.

I feel sorry for the Leader of the Opposition. He has an impossible task in trying to straddle the two extremes of the Labour party. One section of his party is not really interested in democracy, and moderate Opposition Members know that I am right.

I hope that we will throw out the motion, knowing that it is a frivolous and merely diversionary tactic by the Leader of the Opposition, and a sop to the Left wing of his party.

7.2 pm

Mr. Donald Stewart (Western Isles)

The hon. Member for Croydon, South (Sir W. Clark) devoted a good part of his speech to dealing with the miners' dispute, as did some of his hon. Friends. I began to think that I had transgressed into next Monday's debate on the mining industry.

The hon. Gentleman repeated some of the usual excuses of the Government—for example, that we have not been competitive enough. There may be something in that. Next came the old chestnut about a world recession, but there is no world recession. I can point the hon. Gentleman to a number of countries in Europe which have far lower levels of unemployment than the United Kingdom.

I was surprised to hear the hon. Member for Honiton (Sir P. Emery) say that we would never get back to levels of full employment such as we have enjoyed in the past. He may well be right, but, if the Government had the will, there is no reason why we should face such a situation. We are lacking many amenities that would provide work for people. No Government, if they had the will, need accept the dismal forecast that we will never see anything like full employment again.

I thought that the opening speeches on both sides were rather poor. If I do not embarrass the Leader of the Liberal party by saying so, his speech was the first coherent one in the debate, although I did not agree with it by a long shot. At least it was something to listen to compared with the mixed up excuses and recriminations that were offered by the Opposition and Government Front Benches.

The Leader of the Opposition made what I thought was a good point when he said he took offence not only at the policies but the attitude of the Government. The whole ethos of the Government is wrong — their meanness of spirit and purpose and their incompetence, compounded by their stubborn refusal to heed the warnings even of members of their own party. It makes for a dismal prospect.

Some hon. Members have suggested that the entry of the United Kingdom into the EMS snake is a way out of our difficulties. I differ entirely from that point of view. Whatever readjustments might be made in the United Kingdom when we have the power to make them, we would lose to a great extent if we joined the EMS.

There are many ways still in which we could save money. We are to continue with Trident, for instance, although many people have lost faith in it as a weapon and have questioned its escalating costs. Some people are discussing the building of a Channel tunnel, although they seem to have learnt no lesson from the fate of Concorde and the way in which its costs rose gradually inch by inch. Initially it was going to cost £125 million. The ultimate cost was approximately £1,200 million. The public was conned stage by stage — "We have spent £x million. Therefore, we must go on to the next stage."

I hope that, whatever other mistakes they have made, the Government will not become involved in building a Channel tunnel. Let us leave that to the private people who like profit. Although some people allege that profit is a dirty word, I do not take that view. However, I object to the view that profit is all that matters in the world. I hope that the Government will not make the mistake of backing the Channel tunnel. As some hon. Members in business life know, in the few months before a business goes bankrupt it often sets out on the maddest spending spree of all.

In my brief intervention, I intend to deal mainly with the Scottish aspect. Today's figures for unemployment in Scotland are tragic. The unadjusted figure of 362,000— 16 per cent. unemployment — equals the peak figure experienced early in 1983 before the Government carried out their exercise of massaging the figures later that year.

I was amused to hear the Secretary of State for Trade and Industry, on the "Today" programme, chiding Mr. Brian. Redhead for describing the number of unemployed as 4 million. It may not be 4 million, but it is near enough. While we may accept the official figures, it was the right hon. Gentleman who fiddled the books with regard to future figures. Thus, he was in no position to pull up his interviewer on that point.

In the last few years, the official Scottish Office propaganda has suggested that Scotland is leading the United Kingdom out of recession. Nothing could be further from the truth, as I have told the Secretary of State from time to time. Today's unemployment figure proves that beyond measure. Unemployment in the United Kingdom has risen by 122,000, but Scotland has borne about 19,000 of the total.

The spurious claim that Scotland was leading some sort of recovery was based on the fact that the proportionate rise in Scottish unemployment throughout the recession had been smaller than in the United Kingdom as a whole. That is not in the least surprising to anybody who knows anything about Scotland, because our pre-recession level was higher. Like the noble Earl of Stockton in another place a few days ago, I was not impressed by that argument. When output and unemployment statistics are analysed, it is abundantly clear that Scotland's dive into recession has been just as deep and that its present recovery is in fact less advanced.

The manufacturing base in Scotland has been almost destroyed in the last six to seven years in particular. Under the policies of the Government, neither Scottish oil nor the advent of the silicon glen has been able to replace the jobs lost. The Labour Government failed to improve the Scottish situation, but this Government have taken the failure to new depths.

When we examine the areas that should be giving Scotland a bright future, even the signs there are disturbing. Directly oil-related employment in Scotland fell by 2,700 between December 1983 and June 1984. Many firms in the oil industry in Scotland are subsidiaries of foreign companies — British, French, Dutch or Norwegian. The Norwegians know how to handle their economy and politics. Unlike Scotland, Norway has control over its vast oil resources. Unemployment, which was far lower in any case, has fallen by 18 per cent. in the past year. There are now about 16,000 unemployed in Norway. When one compares that with the situation in Scotland, one realises how much we are losing through being part of the United Kingdom set-up. Scotland would do well to emulate the Norwegian example of gaining independence as a prerequisite for a healthy and prosperous economy.

Investment in the oil industry and other industries in Scotland has come heavily from overseas, while the British Government have used the massive wealth from Scottish oil most unwisely. Instead of using it for capital investment in industry and infrastructure, they have squandered it on undesirable objects and tax cuts for the wealthy. In view of the attacks on health, education and local government expenditure, it is deplorable that that money has been consumed by tax cuts for the wealthy. The value of sterling has fallen from $1.57 in June 1983 to $1.11 now. That should provide a great opportunity to embark on an export drive which would greatly benefit Scotland, but the Government's general mismanagement of the economy has probably precluded that.

There is a social and economic crisis of tragic proportions in Scotland, and it has been growing for many years. One sign of the crisis has been the haemorrhage of skilled people through emigration, which is on an upward trend. In 1982, net migration from Scotland was 15,100. In 1983, it rose to 18,000. The crisis facing Scotland results from the fact that we do not govern ourselves and cannot control our own economy. Only Scottish independence can solve that problem for the Scottish people.

7.11 pm

Mr. Michael Morris (Northampton, South)

The right hon. Member for Western Isles (Mr. Stewart) ought by now to have accepted that the Scottish electorate has thrown out the idea of Scottish independence. It seems entirely appropriate that the Government should use the revenue from North sea oil to maintain the purchasing power of pensioners, to ensure a decent level of subsistence for the unemployed and to maintain real expenditure on the National Health Service. Those seem entirely laudable objectives.

Today's debate raises two questions. Have the Government mishandled the economy? And have the Opposition put forward any viable alternatives? Looking back over the Government's policy, I see, first, their success in reducing inflation. I hope that the whole House agrees on that. The right hon. Member for Ashton-under-Lyne (Mr. Sheldon) will recall that when he was a Treasury Minister inflation was edging towards 30 per cent. We have come a very long way since 1976.

Secondly, have we got the economy moving? The latest CBI report shows that the economy is growing quite substantially.

Thirdly—the Opposition may wish to forget this—the key dimension of the Government's objectives when they came to power in 1979 was to remove controls. They have removed all price controls, exchange control, dividend control and wages control. Those are major successes for any major Western Government. Finally, they have had some success in making British industry competitive, restoring profitability and helping entrepreneurs to succeed in this environment.

The whole House will agree, however, that the remaining challenge is that of unemployment. I do not share the view of my hon. Friend the Member for Honiton (Sir P. Emery) that we shall have to live with the current level of unemployment for the rest of time. Looking back over the past six years, I believe that the Government's broad strategy has been correct. When my right hon. Friend the Chancellor presented his Budget last year, I was certain and I still am certain that it was a major reforming Budget of great help to British industry, and I believe that that will continue to be the case.

Conservative Members too easily forget that the Prime Minister and the Cabinet have had to roll back 40 years of Socialism. Some of us have lived in parts of the country dominated by Socialism for 40 years. [Laughter.] Hon. Members may laugh, but the hon. Member for Sheffield, Central (Mr. Caborn) was not laughing because he knows what that has done to Sheffield. The results of 40 years of Socialism are all too clear in my old borough of Islington. Rolling that back takes time. Inevitably, minor mistakes are made. A recent one was the removal of the pound note. Another current mistake is the attack on the National Health Service and parts of the pharmaceutical industry by my right hon. and learned Friend the Minister for Health. But those aspects are not central to the overall situation.

What alternative policies do the Opposition propose? The speech of the Leader of the Opposition contained little of substance but much bombastic insult directed at my right hon. Friend the Prime Minister. Let us consider the reality of what the Opposition are offering. There is the miners' strike. Mr. Scargill, having been three times defeated by his own membership, decided that it was time to attack the democratically elected Government. He did so without a ballot because he knew that he could not win one. He set forth to challenge the Government on the basis of uneconomic pits. Three times the right hon. Member for Salford, East (Mr. Orme) went cringing to Mr. Scargill to try to bring the parties together and three times he came away empty handed — not from the National Coal Board, which has been prepared to discuss uneconomic pits at any time, but from Mr. Scargill and his Left-wing friends.

Only in recent weeks have Labour Members voiced any objection to the strike. I have listened to all the recent energy debates and as a member of the Select Committee on Energy I have listened to the evidence of Labour Members, but not once until the past few weeks have they made any attempt to resolve the strike. Even now they will not admit that uneconomic pits will have to be closed. It was in the Labour Government's "Plan for Coal" and in their legislation, but they still refuse to accept it.

Let us consider another aspect of nationalisation. Did the Opposition spokesman on transport, the hon. Member for Kingston upon Hull, East (Mr. Prescott), tell the Southampton dockers that the only way to keep container traffic was to be economic and efficient? No one in the Labour party told them that. As a result, container traffic has left Southampton, major redundancies are likely and the future of Southampton as a container port has gone.

There is indeed a crisis in Liverpool and places like it, but it results from the attitude of local authorities and some trade unions in those areas. Until that attitude changes, no industrialist — British, Scottish, Welsh or foreign — is likely to go there. The sooner the Labour party realises that, the sooner it is likely to solve the unemployment problem in those areas.

Mr. Eddie Loyden (Liverpool, Garston)

Is the hon. Gentleman aware that in the Merseyside area, where there has been a loss of 80,000 jobs, many firms have never had a day of industrial unrest or had any strikes? The image of Merseyside seen by many people, including the hon. Gentleman, distorts the reason why Merseyside is in its present position.

Mr. Morris

I am sad to say that parts of British industry do not change or face changing realities. Unless firms provide products for today's needs there will never be high employment. The problem is that the investigators go where they are welcomed, and not to those areas where they are not welcomed.

Although the speech of the right hon. Member for Tweeddale, Ettrick and Lauderdale (Mr. Steel) was coherent, it did not contain much policy. He criticised the Government for not believing in sharing profits among employees, yet my right hon. Friend the Chancellor has done more for wider share ownership than any other Chancellor since the war. I shall be disappointed if my right hon. Friend does not do more in the coming Budget.

I appeal to my right hon. Friends in the Cabinet to remember that we are an exporting nation. If I have a criticism of the Government, it is that we have lost a little of the impetus we had when we came to power in 1979. Our former colleague, Sir John Nott, was very much involved in the engine room of the Treasury, cutting out Government forms and making a drive for exports. There is a need for more impetus.

I have just spent some time in south-east Asia, and I know that British investment would be greatly welcomed in Indonesia, which is just one country that needs investment. Indonesia is crying out for further investment from Britain. There are many opportunities in Indonesia for industrial companies, including companies from Ashton-under-Lyne.

We need to re-emphasise our determination to create jobs. It is criminal that factories in my constituency in Northampton are short of skilled labour. That is unacceptable when there are 3 million unemployed, and is a sad reflection on our education and training systems. My right hon. Friend the Secretary of State for Employment should push ahead vigorously to ensure that every young person takes part in training and that no young person is allowed to go on the dole. Young people should be encouraged and should be cajoled into taking a skill, as happens in Germany. No wonder the Germans are more successful that we are.

I say to my right hon. Friends on the Front Bench, for heaven's sake, carry on boldly trimming public expenditure but do not fall into the trap of doing that in a Socialist way.

Mrs. Currie

What about the Health Service?

Mr. Morris

I shall come to the Health Service if necessary. I say to my right hon. Friends who are responsible for local government and housing, stand firm. There is still excessive expenditure in Camden, Hackney, Islington and Northamptonshire. We should get tough with the Ministry of Defence. We know about the overruns of expenditure which are considered by the Public Accounts Committee. It is time a cut was made.

My right hon. Friends should push ahead with privatisation. They have had a major success with British Telecom in bringing about a private shareholders' market, and we want more of it. My right hon. Friends should also remove restrictions on overseas trade.

There is a real need to undertake a drive to remove the impediments to the private sector and not to forget the role of manufacturing industry. I do not share the views of those who believe that manufacturing industry is finished.

I do not complain about what the Treasury is doing, but I complain about the lack of consultation, sensitivity and understanding in certain Departments by certain junior Ministers. Our party needs a drive to see through our strategy and to communicate our conviction that this country will and must compete successfully in the world. There is no reason why our share of world trade should continue to decline. If we undertake that drive and build on last year's Budget—this year, we have to deal with the other half of our strategy in terms of direct tax cuts—we will complete our strategy. Now is not the time to waver. Given that consistency, confidence will return to the Conservative party, the country and the exchanges.

7.24 pm

Mr. Eddie Loyden (Liverpool, Garston)

Conservative Members have asked whether the censure motion is justified. I believe that it is justified and necessary. I have been amazed at the mixture of arrogance and ignorance portrayed by Conservative Members about the real issues in the debate, and I am sure that people outside will note the way in which they have dealt with the motion.

Regardless of the wording of the motion, the central issue is, and will remain, mass unemployment. So far, Conservative Members have said nothing that will help to deal with that matter. The dissension among Conservative Members, which has been apparent from time to time—it was mentioned by the hon. Member for Northampton, South (Mr. Morris) — disappeared when the censure motion was tabled by my right hon. Friend the Leader of the Opposition. In recent weeks, we have seen the nervousness of Conservative Members when Government policies have affected their constituency or class interests. There have been murmurings from Conservatives about the Government's policy. No doubt those murmurings will disappear when the Division is called tonight.

Conservative Members should take on board the statement consistently made by the Opposition—that the northern regions are facing tremendous economic and social problems which appear to be totally ignored by the Government. I do not want to be parochial in a debate that concerns the whole of Britain, but hon. Members should consider what is happening in certain parts of the country. The hon. Member for Northampton, South, who talked about unemployment, should note what is happening in places such as Merseyside, the north-east, the north, Scotland and Northern Ireland. There are pockets where there are male unemployment rates of 50 per cent., 60 per cent., or 70 per cent. That is the reality in which people live today.

The facts and figures that have been bandied about today ignore the real human problem that develops from mass unemployment. Conservative Members have said nothing that shows they want the Government to alter direction in order to tackle unemployment. Unemployment has been used by the Government, especially the Prime Minister, as a battering ram against the employed. Since 1979 the Government have made it clear that their prize would be a considerable reduction in the power and rights of the trade union movement. The Government have sought to roll back not 40 years of Socialism, but 40 or more years of the advancement of the living standards of ordinary working people.

Lord Donovan, the chairman of the Royal Commission on trade union employers' associations, said that the conflict of interest at the point of production was an integral part of capitalist industry and could not be removed. Clearly, there is a conflict of interest if Labour pursues better living standards—that aim is justified—and those who own and control industry and capital pursue the maximisation of their profits. That fact should not be denied by the Conservative party which places profitability above all else.

Conservative Members argue that they are rolling back 40 years of Socialism, but I believe they are whipping back 40 years of advancement under previous Labour Governments and ignoring the role played by the trade union movement in abolishing the hyper-exploitation that existed from the turn of the century until after the war and enabled people to begin to achieve a better standard of living.

Capitalism can no longer afford to make concessions. It can no longer allow working-class people to enjoy better living standards. The Government know that the first shield against them is the trade union movement and that that must be weakened. That is the prize that the Prime Minister has been pursuing. That is why she has taken her stand against the National Union of Mineworkers.

The Government have missed the point of the NUM dispute. It is not about wages for those who are employed at the moment. It is not good enough to say that there are good redundancy payments. The Opposition have made the point—it has not been answered by the Government — about the next generation of job seekers. Who will provide them with jobs, or will they join the 3 million-plus—in reality 4 million or 5 million—who are now in the dole queue and on the scrap heap?

Nothing has been said so far from the Conservative Benches to give any hope to the youth of this country who have been completely alienated. Why do people think that in areas such as Merseyside and others drug abuse and crime are in the ascendancy? The answer does not come from the left-wing press. The current edition of Police gives details of the aftermath of Toxteth. The police say that there is a direct correlation between youth unemployment and crime and drugs. The Government disregard the consequences of that. The Opposition would be reneging on their responsibilities if they did not table a censure motion such as the one that we are debating.

The hon. Member for Honiton (Sir P. Emery) mentioned new technology. Anyone who knows the writing of Tom Paine will recall that, in his book, "The Rights of Man", he said, in relation to Louis of France, that he was admiring the plumage and ignoring the dying bird. We are all aware that the new technology will come and will be beneficial, but it will be beneficial only if it helps all society, not merely those who make profits from it.

New technology offers, possibly for the first time, the opportunity for us not to rely on human resources to produce wealth. Wealth will be produced. It will allow a compassionate Government to look at the areas of poverty, but not, as the hon. Member for Honiton implied, to compel the unemployed to carry out social work. There is a tremendous amount of work to be done by human labour. Our schools, hospitals and infrastructure need human labour. The opportunity to do that work has never been as great as it is now that we have the new technology. The new technology is releasing—if I may use that word—millions of people from the need to be involved in production. That labour is lying around. Human labour is the most precious commodity that we have. It is being left to rot. The Government have made it clear that they do not intend dramatically to change their political course.

Not until we see an end to the Government will we see an end to the poverty, frustration and inhumanity of mass unemployment.

7.33 pm

Mr. Barry Porter (Wirral, South)

The hon. Member for Liverpool, Garston (Mr. Loyden) said that the Government had done nothing for the people of Merseyside. May I point out to him as gently as possible that only this week the Ministry of Defence has placed an order with Cammell Laird in Birkenhead which will provide work for 1,000 men for three to four years? Whatever the economic rights and wrongs of that, it was regional policy in everything but name. He might at least be grateful for that aspect of Government policy. One might think that Liverpool was the only place in this country that had unemployment. The hon. Gentleman might care to remember that on my side of the River Mersey we have a higher rate of unemployment than the city of Liverpool.

I thought that the debate was about a censure motion on the Government. We have heard a number of remarks about hon. Members' own areas. I should like to try to bring back the debate to what the motion is alleged to be about. I shall be supporting the Government tonight without the slightest hesitation.

Mr. Campbell-Savours

The hon. Gentleman always does.

Mr. Porter

Not at all. The Whip is an utterly unnecessary instrument for that purpose.

I support, as I have always supported, the general strategy of making the control and eventual defeat of inflation a priority. It seems to me, as it seems to the Government, that without that control none of our other economic objectives of increased competitiveness, investment and production and eventually increased employment is attainable. I shall return later to the subject of unemployment.

In offering my vote to my right hon. Friends tonight, I do not pretend that they are necessarily the acme of perfection, because all Governments make mistakes although often they are more obvious in retrospect than at the time they are made. For instance, many years ago VAT was introduced on far too narrow a base even though the exemptions and zero ratings appeared to have virtue at that time.

While the principle of broadening the VAT base is being widely canvassed at the moment — every suggestion is met with howls of indignation and gloomy forecasts of the collapse of civilised society as we know it—it strikes me, and I hope that it strikes my right hon. and hon. Friends on the Treasury Bench, that the long-term political and social cost of a radical revision of the present VAT arrangements would be difficult, if not impossible, to bear.

It was, in my view, an error in the Government's first term of office to raise VAT to 15 per cent., for reasons which I hope have become glaringly obvious. It is fair to say that the hon. Member for Workington (Mr. Campbell-Savours) pointed that out at the time. If VAT is to remain at that level to counterbalance any reduction in the standard rate of tax or to raise income tax thresholds, I hope that my right hon. and hon. Friends will consider raising the VAT turnover ceiling, under which VAT is not payable, to about £50,000. It would be of enormous benefit to small business and of relatively little consequence to the Treasury in terms of tax revenue.

May I deal briefly with the events which have brought about this debate and which the Opposition declare are the result of the mismanagement of the economy? It enters my mind that the latest opportunity that the Opposition had to do a bit of managing is hardly the most solid basis on which to declare that they would do any better now. It may have entered people's minds that the Government cannot do a great deal about the United States budget deficit and high interest rates, although President Reagan's inaugural speech gave me some hope that the deficit will be reduced, that interest rates will fall and that accordingly the dollar's external value will decrease.

There is not a great deal that the Government could do — if I may borrow a quote — about the irrational behaviour of the market in relation to sterling. Whether we like it or not—and we do not—the market treats sterling as a petro-currency, although the facts to a large extent gainsay that view. I believe that with the present level of the pound some of the original objections that we had to joining the EMS have disappeared. We should take a long hard look at the possible advantages of the relative stability that could flow from our joining.

As it happens, it looks as though the OPEC agreement and the Chancellor's intervention in the market, which was inevitable and might have taken place sooner, have stabilised the position, although there will probably be a further small fall in oil prices. However, as our major oilfields would still be profitable at $20 a barrel, I face that prospect with some equanimity.

The position of the past few days was a touch tricky, to say the least. It was not a crisis, as the Opposition thought.

Mr. John Prescott (Kingston upon Hull, East)

It was straight panic.

Mr. Porter

The Opposition certainly panicked.

There is a wide expectation that the base rates can be reduced in the near future, and the impending and inevitable end of the miners' strike can do nothing but good to the economy both in the long and the short term.

Whatever the rights and wrongs of the arguments about coal, the opinion has been widely held that the militant trade union activity had to be shown to be a total non-starter. The Government deserved the support of the country, which they got, and the congratulations of my hon. Friends, for their courage, determination and consummate skill in dealing with a totally unnecessary dispute.

That is the nice bit. The blot on the Government's escutcheon is the rate of unemployment. When I came to the House in 1979, having supported in every possible way the policy of my party in the period leading up to the election, neither I nor any other new Member nor the incoming Government expected that, almost six years later, unemployment would be at its present level.

Mr. Campbell-Savours

We said that it would.

Mr. Porter

The hon. Member for Workington has made many forecasts to his own satisfaction, but that forecast was not made.

Unemployment has risen for various reasons, many of them unconnected with the policy of the Government. We should not forget that 23.5 million people are working. A higher proportion of the population of working age is working than in any other country in western Europe except Denmark.

Even so, I am not prepared to accept that it is beyond the capacity of the Government to deal with some of the problems. The Government have a role to play. Like my noble Friend the Earl of Stockton, I am not an 1860s Manchester Liberal. That does not mean that the demand side of the equation is the only side by which the matter can be dealt with. Domestic demand can be boosted by fiscal or monetary means. However, the evidence of the past 20 years shows beyond a peradventure that the benefits of such a stimulus have been more and more quickly dissipated by accelerating inflation.

On the other hand, the efficiency of markets has not been vindicated by experience. There is not much point in exhorting workers to restrain their wage claims. That is futile. It is equally futile to ask employers to resist wage claims. However, there are methods by which Government can assist the process of re-employment. I do not pretend that I know the exact answers. No one does. However, we could do more within the general economic strategy of the Government—that is the important point—to generate employment.

If the Daily Telegraph—of all organs—is prepared to say that unemployment must not drift on, I, for one, am prepared to agree. Perhaps the Government and Chancellor will be prepared to consider all or some of the suggestions made by Mr. Andreas Whittam Smith in yesterday's Daily Telegraph. They seem sensible, because they fall within the general strategy of the Government. At the very worst, they are worthy of serious consideration. At best, they could provide positive proof that my party and our Government are concerned with the plight of the unemployed, especially in the north.

I am not prepared to contemplate the possibility of the return to office of a party which, by its performance today, has shown an inability even to understand the problems, and which has also shown its inability to control the strange and disparate elements within its own ranks. The Labour party could not run a drinks party in a brewery. On that basis alone, I would support the Government. However, I also support them for positive reasons. I support them for their success in relation to inflation, and their success over the past few years in relation to investment and productivity. I merely ask that those achievements should not be thrown away in political, social and economic terms by a failure sensibly to address the problems of unemployment.

7.45 pm

Mr. J. Enoch Powell (South Down)

It is a thing about censure debates that they start off by being one-way but after a bit become two-way. It turns out that those who censure are themselves censured. It is an examination of two sides of the question, not just one side. Nevertheless, it is the Chancellor of the Exchequer and the policies centred upon his Department that have been under censure in this debate. I had always supposed that it was not merely a courtesy but the duty of a Minister whose Department was under censure to attend the debate and hear what was to be said in criticism of him. It is only a partial justification—though it is a partial justification—that the Bench from which the censure was launched has for most of the debate been empty or nearly empty of those responsible for representing the Opposition on economic and financial matters.

One count against the Chancellor of the Exchequer is the rise in interest rates, for which he is held responsible. Certainly the Chancellor has seen himself obliged on two occasions sharply to raise the rate of interest. The reason why he did so is not difficult to discern. He has to borrow. He has to borrow on a substantial scale. He has to borrow on a scale probably larger than he envisaged when he drew up the Budget, or during most of the financial year. With the pull of interest rates and investment in the United States, if the Chancellor is to go on borrowing from the public, he must borrow at a competitive rate of interest. He shares that with those who are borrowing for other purposes and not on public account: indeed, the rise in the rate of interest offered by the Government was forerun by a rise in the rate of interest offered by the private sector. The hon. Gentleman was responding, as he was obliged to respond, to the conditions in the market for loans and for savings. I hope that he has taken from that the lesson not to rely too much upon the small percentage which the public sector borrowing requirement bears to the gross national product or to the budgetary total, but to realise that it is that element which is marginal — it is the borrowing requirement that is marginal — which exerts the leverage effect upon the policies and successes of a Government.

However, the Chancellor of the Exchequer is censured by the Labour Opposition. We have no doubt about the attitude of the Labour party to Government borrowing. They want more of it. They have advocated more of it. Borrow, borrow, borrow has been the ingeminated cry from that Bench until the House almost ached with boredom at hearing it. If this alternative, this criticism, it to be pushed home — that one ought not to put up interest rates but ought to be borrowing much more — what is the solution to the conundrum? As far as I can see, there are two possible solutions. One is not to borrow from the public but to borrow from the banks—that is to say blue it on inflation. The other is to prevent those who have savings, to lend, and are within one's powers of control, from doing anything but lend them to the Government; to create, in other words, a prison state. The counter-proposition of the Opposition to the Government's raising rates of interest in the circumstances which rendered it necessary in order to continue to fund their debt from the public is either a prescription for inflation or it is a prescription for a state in which all the elements of production, of enterprise and of savings would be controlled by an iron and centralised despotism.

We have heard a good deal today in favour of the Earl of Stockton and his period — some of it, I thought, rather mythical. But this prescription does not take us back to the good old days of Stockton. It takes us back to the good old days of Lord George-Brown, and the national plan. It is the spectre of Lord George-Brown not the beneficent, angelic presence of the Earl of Stockton, that is evoked by the prescription of those who have moved this vote of censure.

The Chancellor of the Exchequer also stands accused of having failed to control the movement of the sterling rate on the exchanges. The hon. Member for Workington (Mr. Campbell-Savours), when this matter was mentioned earlier, interjected, "It is not in the censure motion." He is quite right: it is not in the censure motion. There is a reason for that. Some of us remember how the right hon. Member for Bethnal Green and Stepney (Mr. Shore)—he is not here to verify it, for he made but a fleeting attendance at the debate — used constantly to complain of the high level of the exchange rate of sterling and say that the correct course of action, the manner in which to stimulate the economy, export trade and the industries involved in it, was to bring the exchange rate down. He intended to do that artificially by creating pounds and selling them on the market — that is the way in which the exchange rate of a currency is normally brought down. However, the exchange rate has fallen. It has fallen, one might almost say, beyond the dreams of the Opposition who put it forward in earlier debates as part of their recommendations. One would have thought, therefore, that, as a change from a motion of censure, there might have been a motion of congratulation to the Government on having carried out one at least of the elements in the prescription of the Opposition, in bringing down the exchange rate to a competitively low level. [Interruption.] Apparently that does not entirely meet with the satisfaction of the authors of the motion of censure.

Mr. Campbell-Savours

Interest rates are too high.

Mr. Powell

If interest rates are too high, a floating exchange rate will adapt itself to relative advantages and attractions, including those created by the prevailing level of interest rates in the various countries.

Ms. Clare Short

What will happen to the British economy?

Mr. Powell

One of the interesting moments in this debate — which has not been without its longueurs — a point of great fascination was the dialogue between the hon. Member for Mid-Norfolk (Mr. Ryder) and the Leader of the Opposition about the alleged views of the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) on the desirable level of the exchange rate of the pound sterling. The right hon. Gentleman had been accused unjustly of saying that the present rate was, in his view, "about right". It turned out that he said that it might have been "about right".

This is not merely semantically fascinating. There is a really solid point behind what might appear to be merely a difference in the voice of the verb. If the right hon. Member for Sparkbrook is not sure that whatever the exchange rate of sterling happens to be today is the right one, how is he to be sure, and how does he ascertain, what is the right rate? If he says, "Well, it may be right," what is he waiting for, to know whether it is right? What he is waiting for is to see what will happen. Just as he waited to see the pound sterling fall to its present level before declaring that that might be "about right", so he reserves to himself the right and the opportunity, should it go either up or down, not be found in disagreement with—dare I say it?—the market. He accepts in fact the judgment of the market as an expression of the real world in its fixing of the terms on which we conduct our trade with the rest of the world.

Mr. Campbell-Savours

Does the right hon. Gentleman agree that foreign exchange dealers and bankers throughout the world believe that sterling will fall to parity with the dollar by the middle of this year? Is it not incomprehensible that the Government might wish to intervene on the exchanges and prop up the pound by high interest rates in the knowledge that it will fall? Is not that the objection of British industry? We are throwing good money after bad.

Mr. Powell

I had hoped that I had carried the hon. Member with me when I explained that the motivation of the Government in raising interest rates so as to match those being offered elsewhere was to be able to continue to borrow what they required for the financing of public expenditure, and that they were not engaged in playing the exchanges. Indeed, they have almost ostentatiously abstained from playing the exchanges.

What the hon. Member for Workington says does not, however, rescue the right hon. Member for Sparkbrook because, if interest rates or prospective prices of oil are factors, as indeed they are, that enter the interplay in the market which fixes the exchange rate of the pound sterling from day to day, the trouble is that the right hon. Member for Sparkbrook knows no more than any of the rest of us how those factors—all of them throughout the world—will move. Therefore, he wisely refrains from attaching himself to a dogmatic statement that such and such ought to be the exchange rate of the pound sterling but reserves to himself a safe position from which to observe what will happen and issue his blessing as and when he thinks fit.

Mr. Loyden

My right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) should be a politician.

Mr. Powell

I had not regarded the right hon. Member for Sparkbrook as conspicuously deficient in those qualities with which those most hostile to politicians commonly credit us. However, I might be wrong and I am prepared to accept the judgment of the hon. Member for Liverpool, Garston (Mr. Loyden)

If the exchange rate was not in the censure motion, a reference to the balance of payments and to our visible surplus was there. The fact that it features in the censure motion, and the form in which it features in the censure motion, show how little a major factor in the causation of unemployment has been grasped and understood by the Opposition. That we have suffered in the past five years, almost for the duration in office of the Government, from a corking surplus on current account on our balance of payments, which has in part, and perhaps preponderantly, been due to the fact that we had become an oil-producing and oil-exporting country, has been savagely inimical to the manufacturing activities of the British economy. That should—it is not the first time I have invited the House to contemplate the connection — evoke from those wishing to censure the Government some view on our approach to the surplus on current account on the balance of payments and to the part which is played in it by the oil production and oil exports of the United Kingdom.

Mr. Campbell-Savours

Leave it in the ground.

Mr. Powell

The hon. Member for Workington is helpful, and suggests that we leave it in the ground. I am not, however, prepared to accept that statement of Labour policy from him. I would rather have a policy statement about British oil from the Opposition Front Bench.

This subject has been too little debated in the House. Although he is not at present in his place, I align myself with the right hon. Member for Guildford (Mr. Howell) in asserting the almost self-evident proposition that for this country, of all countries, to be engaged in a sustained operation to make oil, one of the major sources of energy, dearer than it would otherwise be, must be nonsensical. Whatever else is good and stimulating for the economy of this country, to have the cheapest available sources of energy must come under that description.

I ask those who censure the Government for the inevitable fact that, within our overall current account surplus, there has been a manufacturing trade deficit, if it is their view that the price of oil should be brought down? Is it their view that we should not take part in OPEC's arrangements or in any of the cartelisations, but go for obtaining oil at the lowest possible price at which it pays to explore, exploit, extract and refine it? Is that their point of view? It is a subject on which they should have a point of view, because the issue is crucially bound up with the level of unemployment in Britain.

Sir Kenneth Lewis (Stamford and Spalding)

North sea oil is expensive because of the investment required to obtain it. Must it not, therefore, be sold at a higher price so as to get a return?

Mr. Powell

One can rarely sell at a higher price than the market price. We are engaged in keeping the world price of oil, to which we tie the price charged for British oil, way above the profit-making price for our own oil. If our oil were unprofitable at anything below the OPEC price, I would understand, though not necessarily approve of, the policy; but what the hon. Gentleman says does not fit the existing situation.

Mr. John Wilkinson (Ruislip-Northwood)

Does the right hon. Gentleman advocate the abolition of the role performed by the British National Oil Corporation in expending taxpayers' money on purchasing North sea oil at a ludicrously high price?

Mr. Powell

I am opposed to any use of public money for rigging prices. What is more, I deplore the fact that the Treasury has a vested interest in a high market price for oil. I would sooner see the price of oil, the price of energy and the price at which oil is sold in this country reduced and sacrifice the oil revenue, so that it would have to be made up in other ways to meet Government expenditure, than that we should keep that price at an artificial level, for that is a form of indirect taxation, which probably comes home to roost on our own industry and our own unemployed.

This is, therefore, a subject on which there should be a statement of views to the House from both Front Benches—certainly from those who censure the Government for their part in the present composition of the balance of payments.

Ms. Clare Short

Is it not a fact that throughout the 1960s the constraint on Britain's growth was the constraint of the balance of payments and that in the current situation we could afford to have more demand so as to reflate the economy, and not be constrained, for example, by the oil situation? That would be the way to create jobs and wealth in the economy.

Mr. Powell

I remember the period to which the hon. Lady refers. Throughout that period I used to say that we should not be constrained by the balance of payments. We were constrained by the balance of payments through our attempt to maintain a fixed parity—or, more accurately, an only occasionally altered parity — for the pound sterling. It was that which made us the slaves of the balance of payments. One of the early blessings — I hope that it will not altogether go away—of freeing the pound and allowing it to float freely is that we no longer had to read about crises in the balance of payments every morning at our breakfast tables. There is no inconsistency in the fact to which the hon. Member for Birmingham, Ladywood (Ms. Short) draws attention.

One proposition on oil has persistently been put forward by the official Opposition. They say, "We should have used the profits and revenue" — or rather, the revenue, for only that is within the Government's control—"from British oil to invest in Britain, but the Government have been spending it instead of investing it."

That sounds fine until one begins to examine it. Our revenues from oil have been part of the total revenues which almost, but not quite, met our total expenditure. If, therefore, it is the proposition of the Opposition that we should be using our oil revenues for investment — presumably Government-directed investment on public account — what are they really saying? They are saying that the total of public expenditure should be increased by the amount of that revenue and that, whether we hypothecate the oil revenues to it or not—hypothecated revenue is a silly game—or whether we simply continue to put the oil revenue in the Consolidated Fund, we should be spending that much more. It is mere spoof for them to say that because part of the revenue which the Government have currently spent — about which they did not complain — was derived from oil, the Government should somehow, by double counting, have been also spending that oil revenue on public investment.

The right hon. Member for Ashton-under-Lyne (Mr. Sheldon), in an interesting speech which hon. Members were unlucky not to hear, made an important philosophical observation. He said that there is an asymmetry in Government, whereby Governments can do harm but cannot necessarily do good. Whether wittingly or not, he there placed his finger on the fallacy by which the Labour party is hag-ridden, the notion that because Governments have certain powers and can use them to make mistakes—to do harm, to inflict problems and troubles on their citizens — therefore they also have it in their power to do not just good generally but specific good. [Interruption.]I think I hear the hon. Member for Walsall, North (Mr. Winnick), if not others, reaffirming the credo.

I am saying that this Government have abstained, and they are still abstaining, from use of their power which would bring self-evident harm to this country — either by manipulating the exchange rate so that it no longer matches the real conditions in the world or by creating inflation and thus taxing without parliamentary authority.

Mr. Robert Sheldon

I am grateful to the right hon. Member for South Down (Mr. Powell) for allowing me to correct one part of my speech. Essentially what the Government have done wrong is to pursue their monetarist policies. It is that interference which has been so damaging to our economy. I pointed out that the damage of that kind which can be done is much greater than any good the Government have done.

Mr. Powell

My difference with the right hon. Member for Ashton-under-Lyne — his experience and reflection upon these matters is very wide and deep — is that he takes it to be an interference for a Government to ensure that they finance their expenditure directly and honestly, not indirectly and dishonestly by means of inflation. That is monetarism as I understand monetarism. In holding to that principle the Government have done part, at least, of the good that is in their power, and have refrained from doing that harm which all previous Governments have done and which this Government were the first resolutely to reject. For that the Government would deserve support and not censure, even if the censure which is set out in the motion could be sustained in the terms in which it is expressed. My right hon. and hon. Friends will tonight be helping to defeat that motion of censure in the Lobby.

Mr. Deputy Speaker (Mr. Paul Dean)

Order. The House will wish to know that the wind-up speeches are expected to begin at about 10 minutes past nine, so we have less than one hour. Many hon. Members still wish to speak, so I appeal again for short speeches.

8.11 pm

Mr. Phillip Oppenheim (Amber Valley)

One of the great ironies of this debate is that if, on top of a strong dollar and weak oil prices, we also had the uncontrolled public spending, inflation and debts that we suffered under the Labour Government, we would now be talking about a real crisis—not a $1 pound but a 50 cent pound. It is also odd that the Opposition can whinge about the weakness of the pound on the one hand and propound policies which would weaken it still further on the other.

One of the main causes of the weakness of the pound is the perception that we are still spending too much. Even now, if the value of sterling was truly to reflect our higher inflation rates since 1976, it should stand at only 96 cents. So the fall in the pound over the past few months has its roots in the hyper-inflation of the mid-1970s — something which oil has been able to camouflage until now. The right hon. Member for Bethnal Green and Stepney (Mr. Shore), who is not in the House, recognised that fact not so very long ago when he called for a 30 per cent. devaluation of the pound. Now he has got it, and the Labour party is still not satisfied.

Another common theme of the Opposition is that the Prime Minister has, single-handed, put 3.5 million people out of work. I am sure that hon. Members in all parties can agree that unemployment is the key problem facing us. But, does it really help to make out that it is a problem that has suddenly arisen over the last six years? The debate turns upon whether more or less Government spending is the answer to the problem, whether a moderately tight financial policy and tax cuts will have a greater impact, or whether yet more public spending will. I am not sure whether either policy would have much effect—at least in the short term — but to find the cure for the problem it may be a good idea to look for the real causes.

For too long as a nation we have relied on the cosy markets of the Empire and the Commonwealth to keep our factories running. High inflation has further eroded our competitiveness. Some of the unemployment we suffer from today is directly related to the profligate policies pursued by the Labour Government and, indeed, all Governments in the 1970s. We are also going through a stage when the effects of new technology are causing painful adjustments which might mean net job losses in the short term. Furthermore, we as a nation have a higher proportion of women in the work force than most industrial nations. In fact, in Britain 66 per cent. of people of working age are in employment, compared with 61 per cent. in Europe.

Yet another factor which is all too often overlooked by the Opposition in their zeal to pin the blame for unemployment upon the Government is the increase in the number of people of working age. In the past six years the number of people coming up to working age has risen by 800,000. At the same time, the number of people coming up to retirement has fallen by 400,000. That is a net gain of 1.2 million people looking for jobs over the past six years. That is why we have record numbers of people in jobs at the same time as record numbers of unemployed. Even the most bigoted, rabid Leftwinger would be pushed to blame the whole of the "baby boom" on the Prime Minister.

We also have a cultural problem in this country. Too many of our best minds spurn productive industry and go into service industries. The result is that we lead the world in a great many service areas, especially in the City, but we lack good management in much of our manufacturing. Anybody who thinks that we can survive just as a service-oriented society should look at the prosperity of Germany and Japan which is soundly based upon the messy business of making things.

The key problem—not the unions, though they must take their share of the blame — is poor management in some of our industries. Too many of our vital industries have simply failed to design, produce and deliver the goods that we want at home and that we can sell abroad. British Leyland, for example, now produces only half the number of vehicles that it produced in 1970. Meanwhile its work force has been halved, and for evey job lost directly three jobs have been lost among BL's suppliers. One reason why the Consett steelworks had to close was the it had to rely upon making steel plates for the motor industry.

In too many of our industries mediocre management has led to the export not of products but of jobs. All those factors cause unemployment, but they are largely outside the Government's control. However, I am not one of those who would argue that unemployment is all the fault of extraneous forces outside Government control. On the contrary. Of course the Government can affect and influence levels of unemployment. They can cause high inflation. They can borrow money which future generations have to pay back. They can create a climate which allows extreme trade unionism to succeed. They can burden employers with national insurance surcharges. In looking for the causes of unemployment, one must not forget the pernicious effects of Socialism which has tried to make a public enemy out of business enterprise and profit. All those things, and more, cause unemployment, as the Opposition know full well.

The answer to the problem is not more Government investment. Investment in industry is at record levels and efficient companies are able to raise more money than ever before. Nor is public enterprise the answer. There is a great lie in the Socialist claim that jobs can be created merely by shifting money used for unemployment benefit into job creation. They know that unemployment benefit costs only about £5,000 a person a year. But new jobs require not just wages but buildings, equipment and, above all, products that one can sell.

The cost of so-called job creation is nearly £50,000 a person. Even jobs building roads—not something that I recall the Labour party was very keen on in the 1960s—cost about £20,000 a person. The idea that by building bridges, roads and canals we can spend our way out of the problem in a kind of latter-day new deal is totally out of date. Construction no longer involves hordes of lowly paid navvies sweating over picks and shovels. It involves massive amounts of machinery, much of it imported.

Previous experience of Government enterprise is not encouraging. The simple fact is that bureaucrats and politicians cannot run companies better than good managers and business men. No amount of Government projects or new town halls will replace a (healthy manufacturing sector. "But," no doubt say the Opposition, "what about America?" Is it not ironic that President Reagan, who is their whipping boy on everything else, is held up as a model of economic rectitude by the Labour party?

Apart from all the structural differences between the American economy and ours, even now, at the height of its deficit, it is still only a shade above ours at 3.1 per cent. of GDP, and its public spending is still only 37 per cent. of its GDP while ours is 47 per cent.

It is also conveniently forgotten that the United States has experienced a real reduction in wages and tax cuts. If there is a lesson to be learnt from America, it is exactly the opposite of that which some people are currently preaching.

Surely a better example for red-blooded Socialists is France. After all, a Socialist-Communist Government came to power in 1981, pledged to spend their way out of the recession. By 1983, inflation and unemployment had nearly doubled. The result was a spectacular U-turn and the imposition of policies which some have dubbed "Thatcherite."

Earlier this month the French Prime Minister, Mr. Fabius, told the press that tax cuts would take priority over more public spending in Left-wing Socialist France — straight from the Socialist horse's mouth. Therefore, it is clear that high public spending is not the answer to unemployment. Indeed, high public spending and joblessness have gone hand in hand for the past 15 years. The Leader of the Opposition knows that full well. He knows, as Mr. Mitterrand found out, that the realities of government are somewhat divergent from the insubstantial huff and puff of Opposition and speeches at Scargillite rallies. He knows that public spending does not create jobs. Otherwise, why did he not resign when the previous Labour Government cut public spending by more in a year than we have managed to do in six years?

It is no mistake that low-spending countries tend to have the lowest unemployment. Indeed, high spending is one of the real causes of a current world recession which is a major cause of job losses today.

I have the honour to represent a constituency which consists primarily of skilled industrial workers. I know that if they are to have jobs they must supply things which people want to buy. We have many successful firms which do just that. They do not do it because of Government spending. They succeed because they are well managed, because they design and make products people want to buy and because their work forces know that to strike would be to put a grin on the faces of our competitors in France, Germany and Japan.

I cannot see that more public spending will help those of my constituents who are in work or out of it. However, I can see that to raise tax thresholds might help them. I can see that to restore incentives and enterprise might help them. I can see that the spreading of wealth through denationalisation and the sale of council houses might help them. I can further see that a policy of putting more money in people's pockets but asking them to pay for what they consume will also help them.

We cannot reverse 30 or 40 years of decline and profligacy in a few years. There are no easy, magic solutions. Admitting that does not mean that one cares any less about unemployment. It means that we are not prepared to mislead the public and dishonestly and falsely raise the hopes of the unemployed by offering a mirage.

Surely the greatest irony of the debate is that in censuring the Government the Opposition are putting forward policies that will greatly exacerbate the problem, as they have done in the past. The country which forgets its history is doomed to re-live it.

8,23 pm

Mr. Harry Cohen (Leyton)

The hon. Member for Amber Valley (Mr. Oppenheim) is a real hard-line Thatcherite, bashing his head against the brick wall of the real world. He should go far under this regime.

Earlier this week I had positive proof that the Tories were desperate about the fall in the value of the pound. I found one outside the Chamber; it had obviously been thrown away by a Conservative, disgruntled at its fall in value. I can assure whoever lost it that it will go to an excellent cause—the miners' strike.

The miners' strike is linked with the current crisis caused by the fall in the pound and the consequent rise in interest rates. The Government are now so dependent on oil because of their fight against the miners that any discord in the international oil market sends the pound into a spin and a frenzy.

But the miners' strike is linked not only to that short-term crisis but to a much longer-term economic crisis in Britain. That crisis is a personal one for millions of people and their families—the crisis of unemployment.

The official figure of today's record unemployment is 3,340,958, but the reality is a lot worse. That is over 13 per cent. of the population. One person in seven is out of work. That is the figure for my constituency of Leyton. It may be a bit higher. Earlier this week, before the rise in interest rates, a CBI survey said that it was likely that an additional 5,000 people would be added to the unemployment list each month from now on. That is the real crisis.

For the Prime Minister to put on her Saatchi and Saatchi sympathy voice and describe that unemployment as disappointing when it is her Government who have increased it threefold and for her Back-Bench minions to gloat about such statements in today's debate is worthy of censure alone.

The miners' strike has also exposed one of the central lies that the Tory party used at the general election—its monetarist lie. It used that to justify its policy to cut social services. We have all heard the lie that we cannot afford to spend on the public services, to repair and build homes for our people, to provide decent pensions and proper schools. But we have afforded the £5 billion-plus that has been wasted on the miners' strike which the Chancellor of the Exchequer described as a worthwhile investment.

We have afforded a lot more. We have spent billions on the fortress Falklands policy, and money is still being spent. We could afford tax cuts for the rich. Indeed, the Chancellor wants to give more in tax cuts rather than invest for jobs. We intend to afford about £11,500 million for the Trident missile programme as well as other nuclear weapons. Only this last week there have been reports of getting the neutron bomb for the Army. We can afford all that and we can afford to waste our North sea oil resources in a desperate and expensive burnout to try to beat the miners. We are wasting all that money to finance the ever-growing dole queues.

All that is supposed to be a worthwhile investment. It is only such if it is put in the context of the real aims of the Government's economic strategy — to enhance and maintain their economic and political power here and abroad to keep the few, the rich and the owners of industry, in a dominant position, and the vast majority firmly in our place.

That latter job is done in the main by reductions in living standards, by worsening real pay and working conditions for those in work and the pay of those who are reliant on pensions and other benefits. It is done by cuts in the social wage and in public services which benefit people. Housing has been cut in real terms by 70 per cent. by the Government since 1979 and, according to their White Paper, they are planning another 4 per cent. reduction on top of that.

Above all, the Government have used the fear of unemployment as an economic weapon; indeed, as their main economic tool. The Government have deliberately used mass unemployment as part of their strategy. They have written off millions of men and women, whether old, young or middle aged, in their bid for power and to support their vested class interests. That is not in the interests of the British people.

To make their strategy work, they have to break all resistance to it. At present the miners form that resistance, so it is their turn to experience the Government's vicious vendetta. From the start we have heard the lies that the Government have used. For example, they said that they were not intervening in the strike. The Prime Minister planned the confrontation and has been its main protagonist. She appointed Mr. MacGregor, and he is her puppet. Last week she stepped in to stop a settlement. The Government's role in that must be plain to everyone.

The miners' strike is about unemployment. That is what fuels the miners' resistance. They are struggling to stop pit closures, to keep their jobs and to keep jobs for future generations. At the beginning of the dispute, the National Union of Mineworkers spoke about a hit list, and that was ridiculed. But the Prime Minister acknowledged its existence on television only last week when she said that she was demanding a 12 per cent. reduction in the industry. Therefore, the NUM was right, despite that vilification.

There is no other work for miners when the pits close. That is why they fight for their jobs and the industry. The miners are fighting for jobs, but the Government are fighting to get rid of jobs. Although miners have faced hardship and vilification for 11 months, 140,000 of them are still on strike. They have a fantastic network of support in communities throughout the country, including London.

The Government have nothing to offer the miners except pit closures and grinding unemployment. The Government's only approach has been to starve them and their families back to work. The Government are playing the numbers game. No doubt we shall see more of that again next week. That sort of victory, if the Government achieve it, would be shabby and shoddy. As it will only add more people to the dole queues, it will not be a victory for the British people.

The miners can produce plenty of cheap safe fuel for Britain and for people, such as pensioners, who would benefit from it. Many pensioners are suffering and dying from hypothermia this winter. The miners can produce fuel to rebuild our industry and create more employment all round. We should use our natural resources for the British people, not waste them. We should invest in jobs. Until that is done, resentment of and resistance to Government policies will continue to grow.

8.33 pm

Mr. William Powell (Corby)

The Government's policy during the past 11 months, as has been articulated plainly — at least, to my ears — has been that we should produce cheap coal. The argument between the National Coal Board and the National Union of Mineworkers is whether to have an energy policy that allows us to concentrate on cheap coal — that would benefit the people whom the hon. Member for Leyton (Mr. Cohen) identified — or to continue to produce coal more expensively than necessary.

We have had a wide-ranging debate this evening, and there have been many notable contributions. Two themes have run through the speeches. I shall deal with the first theme. With the notable exceptions of the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) and the hon. Member for Newcastle upon Tyne, North (Mr. Brown), it has been as though the world began in June 1979. It did not begin then.

Hours ago, I when I listened to the hon. Member for Sheffield, Central (Mr. Caborn) describing in bleak but undoubtedly accurate terms the plight of unemployed steelworkers, I felt bound to contemplate the reaction of unemployed steelworkers in my constituency. Their once great steelworks was identified for closure under the Labour Government and the decision to announce the closure was made by that Labour Government. Although it was plain to the workers that the great Stewart and Lloyds steelworks in Corby would close, not the slightest effort was made to provide for them after the day of the closure, when 13,000 people were to lose their jobs. Although the hon. Gentleman talked about the changes that have occurred in the steel industry, in Sheffield it is preposterous for him to blame it, as he has done, on my right hon, and hon. Friends.

Last year saw the conjunction of two factual events in the United Kingdom, which had not previously occurred in my lifetime, nor in the lifetime of a growing number of hon. Members. All my life I have been told that as a nation we should aspire to high growth and low inflation in the conduct of our economic policy. That is now perfectly self-evident to me. Last year, for the first time, we had a growth rate slightly higher than the average of our major competitors, and an inflation rate slightly lower. We achieved that for the first time, albeit only by a narrow margin, but at least we are coming near to our targets.

I expected from the Leader of the Opposition a different line of approach. I expected him to say, "Congratulations. You are getting into the target area. You have made that progress for the first time. The only censure that we can pass on you is that we are not convinced that your plans and intentions for consolidating that progress are sufficiently serious." If that had been the Opposition's line of approach, at least there would have been a respectable argument.

I shall now deal with the second theme. Not one Opposition Member urged the growth of our competitiveness in the markets. All hon. Members can describe the effects of unemployment. However, when one analyses how it has come about, it is clear that during the 1960s and 1970s, for a combination of reasons, we lost our competitiveness in world markets. British Leyland did not lose its position in the world when the pound rose to $2.40 or $2.20. It was on the rack long before that happened.

One after the other our once great industries have been destroyed because our policies have not ensured that they remained competitive. It does not matter how much we spend or what laws we pass; unless we have competitive industries, there will be no jobs in the future. I would have expected from the official Opposition an indictment of the Government's policies on improving competitiveness, and to have heard their ideas for fulfilling that task. I heard not a word.

The general thrust of the Opposition's policies would lead to a further loss of competitiveness. Therefore, their policies are a recipe for disaster, not for the restoration of the economy.

Much has been said about demand, which has been increasing sharply. In 1983, cash demand increased by about £6 billion, but British industry was able to satisfy only £3 billion of that. The other £3 billion was satisfied by imports. If we are to compete in world markets and exclude those imports, we must either create a fortress Britain or beat the competition by making more reliable products at a better price than those made by our competitors. The brutal truth, if one takes the example of the motor car industry, is that many Opposition Members talk about the glories of that industry, but then go out and buy cars that are manufactured abroad. It is time that such nonsense was stopped.

As my right hon. Friends decide how to consolidate the priceless conjunction of events last year and to increase the foothold that we gained, they should concentrate on several factors. One of those—here I agree entirely with the right hon. Member for South Down (Mr. Powell)—is the price of energy and oil. The right hon. Gentleman said it far more clearly and eloquently than I could, but I must say that one of our primary national interests is to have the cheapest possible energy. Any policy that seeks a higher price for energy than we need to pay is positively insane. I commend to all hon. Members the right hon. Gentleman's analysis of energy prices. I hope, as he does, that it will become the subject of closer examination and debate. It is insane to try to prop up the price of oil when it would naturally fall. We have no interest in high oil prices.

I hope that my right hon. Friends will address two other matters as they develop their policies in the coming weeks and months. The first is the poverty trap. When I came to the House 18 months ago, I was the Conservative Member with the highest number of unemployed people in his constituency. Although the number has decreased, and will continue to do so, I still represent many thousands of unemployed people. It is noticeable that Britain has a system of tax thresholds and social insurance benefits which means that a family man must earn a substantial wage before he is better off in work than out of work. I have no doubt that hundreds of my constituents examine the equation whether it is worth their while to work when they are offered work.

We can do many things, but the most important is to tackle income tax thresholds and national insurance contributions. My right hon. Friend the Chancellor has talked about tax cuts in the context of raising thresholds. The Government have managed to raise thresholds during their period in office, but they have not done enough. My right hon. Friend the Chancellor would be the first to agree with that proposition. What my constituents want more than anything is an end to the system of income tax thresholds and social security benefits that makes it extremely unprofitable for them to work, unless they are to be paid a very large salary. It is an extremely serious problem. It is no good Opposition Members saying that the solution to poverty is substantially to increase social insurance benefits. That would only make the poverty trap worse—[Interruption.] I know that Opposition Members do not like what I am saying, but as I have to listen to them day after day, perhaps they would be courteous enough to listen to me.

Another matter on which my right hon. Friends should concentrate is that, during the years, the House has deliberately tried to increase the cost of employment. It has imposed taxes and laws that make it more expensive to employ people. If we had no unemployment that might be a sensible policy, but for years we have pursued policies that favour capital over labour, and we have made laws that price people out of jobs. If we are to reduce unemployment, we must have a bonfire with all those restrictions. The old Conservative slogan was, "Set the people free." There is no better way to set the people free than to loosen the bonds that make it difficult for employers to take on workers and that encourage them to move in the direction of capital investment. Last year's Budget was the first to take steps to redress that balance and to make it more sensible for people to employ labour than to employ capital unprofitably.

Although the great Corby steelworks is closed, steel tubes are still made there on two production lines. One was installed in the 1930s by Stewart and Lloyds, and the other — highly mechanised — was established in the mid-1970s, when money was available for investment in steel. It is still an extremely impressive sight. When I visited the plant I saw how well the new line worked. When I saw the old production line, it was obvious that many more men were working on it. I asked, "When will you install the new process here?" British Steel told me, "We will not do that because we cannot justify the investment. We would never get any return." In the 1970s, unprofitable and stupid capital investment was made at the expense of labour. That has been the story in many areas of the British economy. I urge my right hon. Friends to do everything possible to ensure that such nonsense and contradictions are finished for good.

8.49 pm

Mr. Stuart Bell (Middlesbrough)

It is a pleasure to follow the hon. Member for Corby (Mr. Powell). He may have thought that we were not listening to him, but we were, with great interest. We are not obliged to agree with what he said, but I congratulate him on the way in which he put his speech over. He mentioned high growth and low inflation. We have neither high growth nor low inflation. The growth that we have is due entirely to the pull back in the United States economy as a result of borrowed money. As for low inflation, the inflation rate will rise shortly because of the increase in bank rate and in mortgages.

The hon. Member for Corby and I came into the House together after the election on 9 June 1983. He may have been in the House, as I was, when the Chancellor of the Exchequer spoke in the debate on the Queen's Speech in 1983. If I may borrow a phrase used by the Chancellor of the Exchequer then, I too was in at the birth. He was talking about the birth of the medium-term financial strategy mark I. I was in at the birth of the medium-term financial strategy mark II. My right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) defined the medium-term financial strategy mark I. It was aimed at bringing down the rate of inflation and creating conditions for a sustainable growth in output and employment. Throughout the debate Conservative Members have congratulated themselves on the reduction in the rate of inflation. Few have referred to sustainable growth; few have referred to output and few have referred to the strides which the Government should have made on employment.

I ally myself briefly with the remarks of the right hon. Member for South Down (Mr. Powell). The policies of the Chancellor are under attack. Many of us would have expected to see him in the Chamber for longer than he has been here. I am grateful for the fact that he is here now. I hope that he will listen with care and attention to what I have to say.

It was the Chancellor himself who proudly proclaimed that he had been the architect of the medium-term financial strategy; that he had laid the foundation stone and had poured the concrete. In the debate on the Queen's Speech, he described that strategy as a framework for sound financial policy. What he really meant — he was too modest to say so—was that he would continue wringing inflation out of the economy at the cost of jobs. On Teesside we are still feeling the effects. In the 10 days between 1 January and 10 January we lost 1,000 jobs.

The Chancellor emphasised a theme referred to by the hon. Member for Corby — competition. He said that there would be competition where none had existed before; that it would encourage the development of a more flexible and responsive economy; and that it would improve the working of the markets. As we know, the markets have been the Chancellor's lodestone. He has come back to them more and more often during the first parliamentary year of his Chancellorship. It would be for the markets to be impressed by the reduction in the growth of money supply and the public sector borrowing requirement. Both, of course, are deflationary. Both detract from growth. Even the definition of money supply itself would be altered to accommodate the Chancellor's vision of the future. He announced that he had extended the medium-term financial strategy to embrace narrow as well as broad monetarist aggregates.

The weaknesses of the Chancellor's strategy were apparent even during the debates. As Napoleon once said, a chain is as stong as its weakest link. Curiously, but disastrously, the exchange rate would have no role to play in the new medium-term financial strategy. Exchange rate policy was Keynesian and the Chancellor of the Exchequer wanted nothing to do with Keynes or Keynesians. At the time the Chancellor was not aware that in her handbag the Prime Minister carried the Keynesian White Paper of 1944 on employment. The White Paper called for a high and stable level of employment, as my right hon. Friend the Member for Islwyn (Mr. Kinnock) pointed out earlier.

Those who live by the markets will fall by the markets, a fact which the Chancellor of the Exchequer has not grasped. Although he may wash his hands of the British economy, letting the markets take the strain, should they not share the Chancellor's confidence, and should they not believe in his policies, all this will rebound to his discredit. That is what we have seen over the last two or three weeks. We have seen what has happened when there is no policy on exchange rate. One unforeseen consequence of the Chancellor's failure to have an exchange rate policy is that the market has devised one for him — the pound is now oil-related and, therefore, subject to what is happening or not happening wherever OPEC Ministers happen to be.

The oil-related economy was mentioned by the hon. Member for Croydon, South (Sir W. Clark) in an interesting speech. I sought in vain to intervene during that speech. He referred consistently to the fact that the Labour Government borrowed money in 1974–75 and that the Conservative Government in 1979 began to pay it back. As I tried to tell him before, all Governments in the Western world, faced with a fourfold increase in the price of oil, borrowed money to sustain the standard of living of their people. We based our policy on repaying that money as North sea oil came on stream. It was the Conservative Government who fulfilled the policy laid down by the Labour Government in 1974–75.

The other unforeseen consequence, which has been referred to by my hon. Friend the Member for Workington (Mr. Campbell-Savours), is that if there is no policy for the exchange rate the market will create one. It created a second strand — that the exchange rate should be one dollar to the pound. Therefore, it will depress sterling still further. The Chancellor's knowledge of the market is abysmal. Everyone knows that the value of anything on the market is the price arrived at between a buyer and a seller acting independently. Therefore, in a free and open market — we can go back to Adam Smith on this — that is the value of that article.

It is useless for the Prime Minister to say to the nation on "Woman's Hour", in her best dulcet tones, that the pound is undervalued, or for the Chancellor to say that the market s are distorted. The right hon. Gentleman's failure to understand the markets and his blind faith in them is an abdication of responsibility. The way that he has washed his hands of responsibility and his monumental ignorance would make even Pontius Pilate blush.

The Prime Minister referred to those who had been able to buy their own council houses. She did not refer to those who, because of the hike in the mortgage rate, find that they are not able to pay for those houses. She did not refer to the people on council estates in Middlesbrough whose dwellings are not being improved because of the lack of improvement grants, or to the people desperately in need who will be deprived of housing because of Government cutbacks. Those people will not appreciate the Prime Minister's comments.

As I said earlier, 1,000 jobs have been lost on Teesside since the beginning of the year. What do we tell a small business man who has set up on borrowed money under the Tory Government and who now cannot pay back the interest, let alone the capital? Does he draw any comfort from the fact that General Electric is cash rich and is profiting from high interest rates? What about the importers who see the cost of their imports rising, not because there is an increase in the value of the merchandise but because the financial market has been allowed to run rampant because the Chancellor has said that there is no exchange policy? The Government have consistently turned their back on joining the European monetary system. We hear hints that possibly when conditions are right we shall be moving into it. Why are the Government reluctant to use the concerted intervention agreed with the other leading industrial nations in Washington last week? Perhaps the Chancellor will answer that.

Why should the British people, six years into a Thatcher Government, have their living standards cut? Why should their job prospects be diminished? Why should they feel the evil hand of insecurity stretching towards them? Why should they have to fret and worry about a future for their children?

The Chancellor has turned his back on the British people. His fixation with monetary targets and public spending restrictions, and his desire to reduce inflation at the expense of unemployment, has not worked — even by his standards. The high value of the dollar feeds inflation into the system, as do high interest rates. The consequence is that inflation cannot be kept down and unemployment will rise still further. The Chancellor's own policies, by his own standards, have failed. The markets have not let the Chancellor down. Neither OPEC nor the City of London has let the Chancellor down, rather it is his failure to annunciate a proper policy.

John Bunyan wrote "The Pilgrim's Progress." I looked that up, but I was thinking of "The Rake's Progress". In this instance, the rake is the Chancellor of the Exchequer. His policy has raked the progress of these islands. It has left behind it unemployment, insecurity, lower living standards, poorer health care and tougher social security regulations, and those who are in work have to work longer hours for less money. Union rights have been degraded and diluted. Civil liberties and civil rights have been eroded. That is all happening because of the rake and his progress.

I tell the Chancellor of the Exchequer and his Government that this nation will be a better nation when the rake's progress is over, when he is no longer at No. 11, when his Government are no longer in power and when they are consigned to the oblivion which they all so richly deserve.

9.1 pm

Mr. Michael Knowles (Nottingham, East)

Many hon. Members have predicted that we shall never have full employment again. I do not believe that. Vast structural changes in society are taking place, but historically whenever there are changes in technology we have full employment again. That has happened before, and that is what is happening now.

The difficulty is that the attitudes of the old society are carried through to the new society. In Britain's industrial society the attitudes of the agricultural society did untold damage. That was true of all parts of that society. If I had more time, I could cite many instances. Perhaps the new shape of our society will mean a service rather than an industrial economy, but it will still provide jobs for all our people.

We must cut the size of government. I do not believe that we should keep it the same size; we should govern more efficiently. We need to cut down. I recommend the Chancellor to consider zero-based budgeting so that we do not just take last year's programmes and estimates and top up. Officials love that. We must examine the programme and ask whether we really need it. It is not a case of saying "That would be nice." We must ask "Do we really need it? If we do not, it has to go." That is the only way to get enough manoeuvring room to cut taxes.

Many hon. Members have spoken of the evils of unemployment. If one has not suffered the sheer terror for oneself and one's family one cannot really know what it means. Unemployment is terrifying. I suppose that I am not the only hon. Member who has suffered unemployment. It is not something that I shall forget. People say that there is a trade-off between employment and inflation. Unemployment affects an individual and his family. It is terrifying for them. Inflation erodes the moral basis of society because it is nothing more than the state stealing money from people's pockets.

An inflation rate of 27 per cent. was indefensible. So is 5 per cent. inflation. I shall not be satisfied until we bring it down to zero. Nothing else is acceptable because inflation undermines the fabric of society. That is the difference between unemployment and inflation. That must be made crystal clear. The Government's aim must be to destroy inflation and to squeeze it out of our economy and our country once and for all.

9.4 pm

Mr. Ian Wrigglesworth (Stockton, South)

When we have the highest real interest rates since the 1930s, the highest rate of unemployment since the 1930s, a trade balance of only £200 million and all the North sea oil is being exported, it is simply not good enough for the Prime Minister to seek to persuade us and the country that the Government do not deserve censure. The record levels of real interest rates will cause a further rise in unemployment on top of an already unacceptably high level. The official figure is given as just over 3 million, but we know that with the 500,000 who are on special employment schemes and those who have been taken off the employment register by the Government's measures, the unemployment figure is 4 million. Hon. Members who represent constituencies in the north-east, the north-west and other regions of the country know that that means that half the residents in street after street are unemployed, with a level of unemployment at 50 or 60 per cent. in many wards.

It is not good enough for the Prime Minister to seek to give a gloss that there is nothing wrong and that the Government's strategy is working. The Government have been in office for five years. When will we see an end to the present high levels of unemployment? They have been reached because the Government have been pursuing a restrictive fiscal policy and a restrictive monetary policy. The Government have been screwing down the economy so hard that it has not been able to expand in the way that other economies in the western world have expanded. If the Prime Minister and her colleagues would only examine the way in which our competitors in the world have been behaving in the last few years, they would see the key to the success which those competitors have achieved.

I agree very much with the Conservative Member who said that the failure of the Government has been their lack of competitiveness against industries overseas. The Government have done nothing to increase the competitiveness of British industry through their fiscal and monetary policies. I acknowledge that they have done something to make British industries face the realities of life, and I support what they have done in that regard. However, the Government have not provided the economic background against which industry can thrive and compete with our major competitors in Germany and Japan.

We want from the Government a rethink of the economic strategy that they have been pursuing. We want to see the Government pursuing a much less restrictive policy than hitherto so that expansion can get under way. We want to see our industries becoming more competitive and growth taking place at a faster rate than in the past in order to bring down unemployment.

If the Chancellor had not been so hung up on the monetary and borrowing targets that he set himself, the latest crisis which has given rise to the censure motion might never have occurred.

The Government have adopted an ambiguous attitude towards the exchange rate, the oil price and the oil depletion of the country, and they know that pay rates in the private sector are rising to a level that will make industries less competitive and our economy more vulnerable. The Chancellor has no policy on these matters. All he can do is offer exhortations to industry that rates of pay should come down.

We have made clear our belief that, if the Chancellor were to relax his borrowing strategy and his monetary strategy, it would be possible to start some growth in the economy so long as he maintains a right monetary policy to avoid inflation taking off again. If pay continues to increase in the private sector at current levels, the Chancellor and his Government will have to be prepared to act unless unemployment is to continue increasing. It is no good having an ambiguous exchange rate policy and an ambiguous policy on oil and on pay. That is a recipe for disaster.

I hope that the censure motion and the support expressed for it will give rise to some second thoughts by the Government on the policies that they have been pursuing for the last five years. Unless the Government have second thoughts, there is no hope of our reducing the 4 million figure over the next two or three years, and not only the Government but the whole country will rue the consequences.

9.9 pm

Mr. Roy Hattersley (Birmingham, Sparkbrook)

The conduct of Tory Back Benchers at the beginning of the debate did more to rehabilitate the reputation of football hooligans than anything that has happened for a long time. [HON. MEMBERS: "Where are they now?"] The football analogy is exact. Having realised from today's shameful unemployment figures that they had an impossible position to defend, they decided to disrupt the proceedings.

Nothing, however, can change the facts. Unemployment stands at the highest level in our history. Shamefully, all that the Prime Minister had to say about that was, "Don't blame me." That was not always her view of prime ministerial responsibility. Before she became Prime Minister she believed that Prime Ministers had the power to act and ought to do so. In April 1979 she said in Birmingham: There is nothing inevitable about rising unemployment". I did not hear her express that sentiment today. A month later, in Bolton, she added a stricture which everyone who heard her today will applaud. She said: The Government likes to blame every ill and error on world trends in the face of which they are powerless. Yet that was exactly her own claim today.

The Prime Minister was absolutely right when she said that she had never predicted that unemployment would fall. The Chancellor, however, has continually and consistently done so, in the general election campaign and most recently in Leicester at the end of last year. The Prime Minister did not repudiate her right hon. Friend at that time, and she simply hides behind his bogus forecasts now.

The Prime Minister's amendment asks the House to support what it describes as the Government's firm action to maintain the sound financial conditions and medium-term strategy". That is as near as it comes to mentioning the collapse of sterling, the consequent rise in interest rates to the highest level in our history, unemployment, which—

Mr. Alan Howarth (Stratford-on-Avon)

rose—

Mr. Hattersley

Having sacrificed a little of what is normally Opposition time, I am prepared to give way to some extent, but not in the middle of a sentence.

I was about to remind the House that, on the Government's own doctored figures, unemployment now stands at 3,341,000. If the figure had been calculated on the honest basis that was current until the Government decided to massage the statistics, it would now be 3,728,000.

Mr. Alan Howarth

The right hon. Gentleman seeks to lay the blame for the present high unemployment at the door of the Government, implying that the Labour party has policies which would dramatically reduce unemployment. Will he be good enough to tell the House with precision what those policies are? If the Labour party has no credible policies, or indeed no policies at all, in seeking to make a debating point the right hon. Gentleman is practising a cruel deception on the unemployed.

Mr. Hattersley

That is the last gross abuse of an intervention to which I shall give way, but I shall answer the hon. Gentleman's question directly. To start with, we would spend the £1.5 billion which the Chancellor proposes to give away in tax cuts on direct job creation by investment in the infrastructure. Not only would the Labour party do that. Half the Tories below the Gangway would do the same, and I am delighted to see some of them nodding assent.

I return to the Prime Minister's amendment, which refers to "firm action". I hope that the Chancellor will tell us to what "firm action" the amendment refers. For instance, was it the "firm action" characterised by the two weeks of indecision before 11 January? Was it the firm briefing given by the Treasury on 12 January saying that the Government would not intervene? Was it the firm briefing given by No. 10 Downing street saying that the Government would not intervene? Was it the firm way in which the Chancellor intervened to increase interest rates in three nervous instalments, two of which did not work? Perhaps "firm action" is even the firm way in which the Chancellor persists in confusing the markets about his impressions and therefore undermining confidence.

So that the right hon. Gentleman may at last remedy that error, I ask him again: will he concede that the policy of the free float of sterling has now been abandoned? We all know that that policy has been abandoned and that it will be in the interests of sterling stability for the Chancellor to say so, but he will not acknowledge that change in policy, because what is good for the economy requires a formal denial of Tory dogma. It requires the right hon. Gentleman to say in public that the whole free market philosophy has failed. The Government now intervene to determine the exchange rate and now manage domestic interest rates, invariably upwards—upwards on 11 January, 13 January and on 28 January to the highest level of real interest in this country's history.

I concede at once something which the Prime Minister certainly never conceded when she was in opposition—that uncertainty about oil prices and the frenetic behaviour of the markets puts great pressure on our economy. However, it is the Government's proclaimed policy to allow those frenetic markets, and those markets alone, to determine sterling's value. The Government cannot convincingly bleat about the behaviour of the market's irresponsibility, while insisting that the exchange rate should be determined by those irrational markets, and those irrational markets alone, especially when the Government have added to the uncertainty, first, by refusing to confirm that there is any exchange rate for which they will stand and fight, and, secondly, by encouraging the markets to believe that the Government positively welcome depreciation because the increased size of the fiscal adjustment that depreciation brings about will provide more room for the tax cuts which are politically so necessary to the Government and their supporters.

The self-inflicted wounds of the last month are wholly characteristic of the Chancellor's economic performance. For the past three weeks he has been running about like Corporal Jones in "Dad's Army", hysterically crying, "Don't panic, don't panic. There is nothing to worry about." The right hon. Gentleman has behaved like that throughout his stewardship.

In the medium-term financial strategy, this Chancellor and his predecessor set the Government targets which the Government have constantly failed to achieve. The money supply consistently exceeds the Chancellor's intention. Public expenditure has been off course for four of the last five years, and it is now higher than when the Conservative party came to office. In fact, the Chancellor constructs his own hurdles, trips over them, falls flat on his face and then complains bitterly when international opinion notices what happens. Having made those blunders, Their favourite … excuse is that their appalling record is all due to the oil crisis and the world-wide economic depression. I have taken those words from the 1979 Conservative manifesto.

Let us look at the Government's appalling record as described in our motion. We have the highest level of unemployment and the highest level of interest rates in British history and the worst deficit in manufacturing trade since the industrial revolution. We could have added to our motion the highest level of taxation and the highest level of company liquidations in British history. The Government's answer to those charges comes in three humiliating parts — first, it is not their fault; secondly, some things have gone well; and, thirdly, it will all come right in the end. Let us look at each of those excuses. Let us examine what has gone right as listed in the amendment, starting with "record output". That means that output is now rather higher than it was in 1979. Every Government since the war have increased output, except, that is, the first Thatcher Administration. In the past five years output has increased by 3 per cent. In the Labour Government's last five years it went up by 8 per cent. No doubt the Chancellor will tell us that the mining dispute is part of the reason for the current year's poor output. I think this part is right. That is why the Prime Minister should be assisting a solution to that dispute, rather than prolonging it for political reasons.

Secondly, the Government talk about record investment. That is true, but only if they talk about gross investment, rather then net investment. Net investment has been lower in every year of Conservative government than it was in any year of the previous Labour Government. In machinery, construction and transport — job-creating sectors—investment is now negative. Such selective use of statistics hardly strengthens the Prime Minister's case, nor does the Prime Minister's pathetic insistence that she deserves credit for reduced inflation but none of the blame for rising unemployment. Honest people know that the two trends cannot be separated.

The Government's inflation record is the statistical success that the Prime Minister describes, but prices have been held down by depressing the economy, by the intentional creation of unemployment, by the abandonment of regional aid, by the assault on local authority spending, by the destruction of the public sector building programme, by first allowing exchange rates to rise absurdly to a point where they prejudiced exports and then allowing them to collapse to the point where it was necessary to impose a massive increase in interest rates to prevent a major sterling crisis.

Over the past five and a half years, whenever the Government have had to make a choice between the real economy of work and jobs and the theoretical world of the medium-term financial strategy, they have always chosen theory in preference to the needs of the real economy.

The Government have justified their choice, as the Chancellor did yesterday, by insisting that the policies which have increased unemployment by over 2 million will soon begin to bring unemployment down. I therefore ask the Chancellor a simple question: when will that begin to happen? When will his certainty that the pursuit of the magic numbers enshrined in the medium-term financial strategy begin to produce the result that he has promised? How, as that strategy has gone so wrong for so long, can he have the effrontery to ask the people of this country to believe that one day all the indications will change, all the auguries will be different and all the results will be as he pretends?

There are people in this country who are not prepared to wait for as long as the Chancellor demands. It is convenient and comfortable for him at lunch or dinner in London to say that soon, as long as we are patient, unemployment levels will decline, but for the men and women in the north of my constituency, where adult unemployment is now running at more than 50 per cent., it is not such a conveniently comforting assurance, when we do not know when and do not believe that, the promises will be kept. The assurance is not comforting, in particular because we know that there is an alternative, in terms of unemployment. That alternative involves two things. It involves, first, what the Prime Minister used to deride as bogus jobs, but now euphemistically calls the measures—the conscious, considerate and continuous attempt by the Government — to provide direct forms of employment.

Secondly, it involves the Government using what money is at their disposal for investment in projects which are desirable in themselves and will directly create jobs.

When we debated the topic some weeks ago, the Chancellor said that his criticisms of a call for more public investment were based on the insistence that public investment must in itself be worth while. I believe that it is worth while to end homelessness, to end overcrowding and to rebuild slums. I believe that it is worth while to improve the decaying roads of our great cities and to renew the sewers which are literally collapsing under those cities. I believe that it is worth while, as well as investing in those great capital projects, to employ extra men and women in our social services to provide those aspects of life which make ours a civilised, compassionate and decent society. As well as being worth while in terms of social objectives, such expenditure would have the net result of creating jobs.

The Chancellor still has to defend his stubborn persistence in saying that what money is available will be spent not on job creation but on the reduction of direct taxation. I share the view that there are people at the bottom of the income scale who should pay no tax at all. If he wanted to, the Chancellor could find the money to help them by a simple process of fiscal redistribution.

What has happened during the right hon. Gentleman's chancellorship and that of his predecessor? The major tax benefits have been given to the families living on £18,000 a year or more. I tell the Chancellor, and all those who want hope for the prospects for employment, that even within the parameters of his policy he could spend £1.5 billion on job creation and, via a little redistribution—offensive to the right hon. Gentleman philosophically, but right for the nation as a whole — take the members of the lower income groups out of tax.

Mr. Nigel Forman (Carshalton and Wallington)

Will the right hon. Gentleman be less coy this evening and tell us what he meant when he referred on 15 January, when we last debated unemployment, to the need for a massive boost in demand". — [Official Report, 15 January 1985; Vol. 71, c. 204.] Can the right hon. Gentleman give us some figures?

Mr. Hattersley

I did so at the time, but I will gladly do it again. I began by making a crucial moral point. [HON. MEMBERS: "Oh!"] There are 3,700,000 unemployed men and women who may consider that morality is involved in the situation. [HON. MEMBERS: "Hear, hear."] The moral point is that, according to the Chancellor's parameters as they were before the latest crisis, there was £1.5 billion to be disposed of. I said that I would prefer to use that money to increase the number of jobs rather than to reduce taxation.

I went further. The Chancellor was proposing to reduce the PSBR by £1.5 billion. I said that since our public borrowing was on a smaller scale than that of many of our successful competitors, I did not believe that making that cut—the Chancellor's choice—would be as likely to do the right thing by the economy as would using the money for the other puposes that I have described. I could not have been much more specific.

I believe that the specific question that I have asked the Chancellor — and which I shall continue to ask him between now and the next general election—will not be answered either in general or in specific terms. When are the right hon. Gentleman's policies for reducing unemployment likely to show any result? That is my question. We all know that he will not answer it because he cannot, for the simple reason that the Government propose to fight the next election with unemployment standing at or about 3 million. The new policy on unemployment is to wring hands, counterfeit concern and say that it is not the Prime Minister's fault.

I do not ask the Prime Minister to care about the hardship and suffering that the Government have caused. To do that would be to expect her to act entirely out of character. However, I ask her to accept the economic consequences of the level of unemployment which, in truth, is nearer 4 million than 3 million. I ask her to concentrate especially on one of the consequences—the dissipation of the oil revenues.

Last year, the Government's receipts from oil were about £10 billion. Without them, Britain would have been literally bankrupt. The Chancellor will speculate, as will the House, on what would have happened to the public sector borrowing requirement without the boon and uncovenanted benefit of oil. The House will consider what would have happened to the Chancellor's entire public spending programme had there not been oil revenues on which to rely. I hope he will remember that the cost of unemployment, in benefits paid and tax forgone, was somewhere between £15 billion and £17 billion last year. The whole North sea oil bonus is not so much swallowed up by the cost of unemployment as swallowed up by the cost of the extra unemployment that has been created since the right hon. Lady became Prime Minister.

If the Chancellor responds in his normal fashion—

Mr. Tony Marlow (Northampton, North)

Will the right hon. Gentleman give way?

Mr. Hattersley

Certainly not. The hon. Gentleman has been notably absent, apart from the shouting parts of our debate, and I do not propose to give way to him. I propose instead to ask the Chancellor to answer two specific questions. First, why does he persistently choose to use North sea oil revenue to pay the cost of unemployment rather than to create the new jobs that would reduce unemployment? Secondly, why is he so surprised, indeed affronted and offended, when he discovers that the international markets regard Great Britain as a one-commodity economy? He was not in his place when two of his hon. Friends said that that judgment was justified and went on, quite rightly, to explain that the significance of oil revenues is not their size as a proportion of national income but our total dependence on them for survival.

Instead of being used to create a buoyant manufacturing industry, the oil revenues have been used as an alternative to manufacturing industry and to compensate for the destruction of that industry which has been planned by the Government.

Mr. Marlowe

Will the right hon. Gentleman give way?

Mr. Hattersley

I think that the hon. Gentleman understands words of one syllable. No.

Under the Conservative Government, by an extraordinary paradox, instead of making us more prosperous, oil revenues have made us more vulnerable. They have made us more vulnerable because the Government have persisted in using them for the wrong things rather than to expand, increase and improve our manufacturing base. Until the Government go, the vulnerability will remain. It will be reflected time after time in the periodic crises such as we endured last autumn and which we have endured again this month. It will result, while the Chancellor remains in office, in panic reaction. Above all, it will result in a panic reaction that requires the Chancellor to take all of the alternatives that conform to his view about monetary aggregates, the public sector borrowing requirement and the demands of the medium-term financial strategy and therefore woefully, cynically and intentionally to neglect and deny the interests of the unemployed. That is why we censure him and the Government tonight.

9.35 pm

The Chancellor of the Exchequer (Mr. Nigel Lawson)

The debate was opened by the Leader of the Opposition with a speech—the only one of its type that I had ever heard from a Leader of the Opposition — which began with a rambling introduction and went straight into an inconsequential peroration with nothing in between. [Interruption.]

The right hon. Gentleman commented on recent events. He spoke of speculation in the foreign exchange markets and said that it had been exactly the same with the privatisation of British Telecom. He was saying that the 2 million people—2 million of our fellow countrymen, the vast majority of them small shareholders—who had bought British Telecom shares were speculators.

Mr. Kinnock

The Government are selling the country out.

Mr. Lawson

The only people who are selling the country out are the right hon. Gentleman and his hon. Friends. [Interruption.]

In the British Telecom share privatisation small shareholders were given a choice between vouchers for reductions on their telephone bills or a discount, in effect, if they were prepared to hold the shares for three years, and two thirds of them chose the discount and to hold the shares for three years, yet the Leader of the Opposition calls those people speculators. He does not have the first idea—[Interrruption.]

The development of share ownership in Britain by the people of the nation has been one of the most important political and social developments for a long time, building on our success in the encouragement of home ownership through the sale of council houses.

Mr. Harry Ewing (Falkirk, East)

The right hon. Gentleman has been talking about privatisation and members of the public buying shares. What is his answer to the now well known fact that with the exception of British Telecom, in all other privatisation measures, 86 per cent. of the people buying shares sold them within four weeks of purchase—

Mr. Lawson

indicated dissent.

Mr. Ewing

It is no good the right hon. Gentleman shaking his head in dissent. In the case of British Telecom, 40 per cent. of those buying shares sold them in the first week they held them.

Mr. Lawson

To regard the 2 million people who bought shares in British Telecom as an exception must be considered a most strange kind of exception. The hon. Gentleman's figures are wrong and the vast majority of employees in those companies bought and hold the shares.

The link between speculators and British Telecom is clear, at least in the mind of the Leader of the Opposition, because he said that the speculation that had taken place and the turmoil in the foreign exchange markets was all the fault of Mr. Alexander Graham Bell and the invention of the telephone. [Interruption.] That is what the right hon. Gentleman said and he said that the Government had to do something — presumably cut all the telephone wires. [HON. MEMBERS: "Get on".] The Government indeed had to do something, and they did. They acted, raised interest rates, and the market has turned. The right hon. Gentleman and Labour Members are squirming.

The Leader of the Opposition said that if the Labour Members were to come to office, they would reimpose exchange control. [Interruption.] That is what the right hon. Gentleman said and I think I see him nodding in assent. Obviously he has not read what the deputy leader of the Labour party said in The Sunday Times on 13 January. Putting forward his own bizarre programme for confiscating the assets of pension funds—which belong to millions of pensioners — the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) said: Re-introducing the system amounts to starting again from scratch and is literally impossible. So perhaps the two right hon. Members, one of them advocating the reintroduction of exchange controls, the other saying that it is literally impossible, ought to get together.

Mr. Hattersley

Even for the Chancellor that is a most corrupt distortion. [Interruption.] If he were to read the introduction and give an honest interpretation of it to the House he would acknowledge that what I am clearly saying is that exchange control is necessary and essential and that it has to be introduced in a new form.

Mr. Lawson

The right hon. Member for Sparkbrook said: Continuing existing exchange controls is a simple enough operation. Re-introducing the system"— that is what is at issue here— amounts to starting again from scratch and is literally impossible". Since the right hon. Gentleman the Leader of the Opposition had no alternative policy whatever to put forward he suggested that we might follow the advice of the Earl of Stockton, who in turn had suggested that we might follow the advice of the United States. Perhaps the right hon. Gentleman does not know what is the policy of the United States. Therefore I shall inform him. The policy of the United States — [Interruption.] the right hon. Gentleman will say whether this is what he is advocating — is strict monetary control. They are the most monetarist Government in the western world today because they are the only Government who believe that monetary control will do it all without worrying about the fiscal deficit. The United States is cutting public expenditure and taxation, and it has no Socialist party whatever. That is the policy of the United States and that is the policy the right hon. Gentleman is telling us that we should emulate. There is something in what the right hon. Gentleman says on this occasion.

The right hon. Member for Sparkbrook who wound up for the Opposition referred to unemployment — as did many hon. Members in all parties What comes first? Economic efficiency or social efficiency? This matter has been debated untold times but, believe me, without economic efficiency there cannot be social efficiency. The only way to overcome the unemployment problem is by making firms more efficient. It is simply not possible to reconstruct a company without shedding some labour. If anyone knows of an alternative way to do this, let him say so, because there is no alternative. The Opposition do not like that, but those are not my words. They are the words of Mr. Gonzalez, the Socialist Prime Minister of Spain in a major economic speech that he made last year. Such matters are well understood by every Government in the western world, whether they be Socialist, Conservative or Liberal. This was borne out very clearly at the meeting of the G5 which I attended in Washington, and the Socialist Finance Minister and Government of France endorse the policy that the only cure for unemployment is to improve the structure of the economy, remove the rigidities and make the labour market and other markets work better. Every single Government who are in office today in the western world acknowledge that fact. The expansion of demand that is suggested by the Opposition would be fatal.

The right hon. Gentleman asked me about the destruction of manufacturing industry. In fact, he went on about the destruction of manufacturing industry. That is grossly to underestimate and run down the achievement of manufacturing industry in a difficult world climate and in the wake of the worst world recession since the 1930s.

Manufacturing output has been growing steadily since the end of 1982 and the latest CBI survey says that that is likely to continue. Manufacturing investment has risen sharply in the past year. It is 15 per cent. up on the previous year. Again, the CBI expects that to continue. Manufacturing exports are up by more than 11 per cent. compared with a year earlier and there was a 40 per cent. increase in the export of manufactures to the United States in the first nine months of 1984 compared to the first nine months of 1983. Manufacturing productivity is up by 26 per cent. over the past four years. It is time that the Opposition acknowledged those achievements.

In contrast to those contributions we have had some excellent speeches from several of my hon. Friends. My hon. Friend the Member for Honiton (Sir P. Emery), in an outstanding contribution, referred in particular to the possibility of our joining the European monetary system. Indeed, that has been referred to in a number of other speeches. Of course, that is kept continually under review, as I have told the House on previous occasions.

A number of hon. Members believe — I am not talking about the right hon. Member for Plymouth, Devonport (Dr. Owen) who seems to think that the United States is a member of the European monetary system—that if we were to be within the European monetary system we would be able to get our hands on the reserves of other members of that system. The system does not work in quite that way. There is something called—this must be what is being referred to because it is the only part of the system that is relevant to this — the very short-term financing facility. That enables a country to borrow reserves from another member, provided that it is repaid within three months at the most. What is more, it is permissible to use that facility only if the country is having to use reserves right against the margin. The countries within the EMS have discovered that it is fatal to be right up against the margin because speculators have a one-way option. Therefore, all the intervention in the EMS is what is called intramarginal investment where no very short-term financing facility is available. I hope that that clarifies the matter for the leader of the Social Democratic party—

Mr. Steel

rose—

Mr. Lawson

—and for the leader of the Liberal party.

Mr. Steel

May we take it, then, that the Chancellor is disagreeing with the statement of the Governor of the Bank of England yesterday that it would have helped if we had been inside the system?

Mr. Lawson

That is a gross travesty of what the Governor of the Bank of England said. The right hon. Gentleman should read the full text.

My hon. Friend the Member for Elmet (Mr. Batiste) referred to the importance of small businesses. He is right. Indeed, the record has been encouraging. Over the last four years for which we have figures, 1980 to 1983 inclusive, the number of new businesses started in Britain exceeded the number of liquidations — net new businesses — by over 500 a week, every week of the year, every one of those years. Indeed, the trend has been rising in every region of the United Kingdom, and in 1984 the total number of new business registrations reached an all-time record of over 100,000.

My hon. Friend the Member for Corby (Mr. Powell) also made an excellent contribution and spoke more good sense about the causes and cures of unemployment than all the Members on the Opposition Benches put together.

It is incredible that the Opposition should have chosen to put down a motion of censure on the Government's handling of the economy based on a rise in interest rates this week. I agree there with the remarks of the right hon. Member for South Down (Mr. Powell). I apologise to him for the fact that I was unable to be in my place when he addressed the House.

The economy today displays a range of symptoms of good health which the Labour party could not have dreamt about when it was in office. It must be something of a record to have a motion of censure on the conduct of the economy when the share index is within 4 per cent. of its all-time high. I doubt whether that has ever happened before.

Inflation is low and has been around the 5 per cent. mark for most of the past two years. Despite the temporary increase in interest rates last July, inflation at the end of the year stood at much the level that I predicted in the Budget. Growth has been continuing at 3 per cent. a year. The recent increase in interest rates will not knock that growth on the head, any more than the increase in July did, and any more than the interest rate increases in the United States knocked American growth on the head.

Profitability in British business has made a remarkable recovery. [HON. MEMBERS: "What about the CBI?"] The CBI estimates that for companies operating outside the North sea, real pre-tax returns were 7.5 per cent. in 1984, which was the highest for many years. The CBI forecasts 9 per cent. for this year, which, if it is attained, will be the highest since the 1960s. Output is at an all-time high and rising, as are investment and exports. The living standards of those in work are also at an all-time high and rising. Employment is rising. [Interruption.]

Mr. Speaker

Order. The right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) accused Conservative Members of behaving like football hooligans. I hope that his Back Benchers will take his good advice.

Mr. Lawson

The Opposition are keen on adopting a high moral tone. The right hon. Member for Sparkbrook, who wrote in Punch the other day about his meeting with Miss Samantha Fox, said that we should adopt a moral approach.

The record on employment of the Labour Government was scarcely something to boast about. The number of people out of work doubled while they were in office. I do not blame them for that and I never have done. They did not wish it. To determine the level of unemployment is more than any Government can do. However, if the solutions were as easy as they pretend they are, would they not have tried them and succeeded then? Why did they not try them?

Mr. Geoffrey Robinson (Coventry, North West)

rose—

Mr. Lawson

If the answer to unemployment is more Government spending and borrowing, would not the numbers out of work have fallen when the Labour party was in office? When the Labour Government pushed up the PSBR to one tenth of national output and Government spending to a share of GDP higher than it had ever been before or has been since, that did not create jobs; it destroyed them.

Mr. Robinson

rose—

Mr. Lawson

As my hon. Friend the Member for Nottingham, East (Mr. Knowles) pointed out in an extremely good contribution, where was the morality in allowing inflation to rise to 26 per cent.? The rate of inflation, unlike the rate of unemployment, is a matter largely determined by Governments. The Labour Government's acceptance of high inflation brought misery to the many millions of elderly people who live on their savings. In a few brief years they destroyed the value of money which had been carefully put aside during a lifetime.

The motion complains about the high level of real interest rates. Obviously, the level fluctuates, but during the lifetime of the Government it has been 5 per cent. It was much less under the Labour Government. The level of real interest rates during the Labour Government's lifetime was minus 5 per cent. That was not because interest rates nominally were low, but because inflation was high. That high inflation robbed every saver in the country. We shall not reproduce that. They cheated savers, the elderly and pensioners. Those who paid the price in anguish and in humiliation were the defenceless in our society. The only ones who kept ahead were the members of the more powerful unions — the paymasters of the Labour party.

Mr. Hattersley

The Chancellor has six minutes left. Will he not answer questions about the prospects for unemployment and his plans to reduce it?

Mr. Lawson

I have said many times that the policies that we are pursuing are the best prospects to reduce unemployment. It is a problem throughout the western world.

My hon. Friend the Member for Horsham (Mr. Hordern) referred to my autumn statement. In it, I followed the convention that was established by my predecessor of announcing what leeway I then foresaw, on some purely conventional assumptions, for altering the burden of taxation in the Budget. That convention arose following pressure from the Treasury and Civil Service Select Committee which wished to examine the building blocks available to the Chancellor of the Exchequer in framing the following year's Budget. My predecessor adopted that practice because it was the wish of the House. My hon. Friend was right to say, in his excellent speech, that the convention has some drawbacks and inconveniences. The announcement of the fiscal adjustment either depresses or arouses expectations out of all proportion to what it merits, and the leeway that a Chancellor may believe he has in the autumn is a poor indicator of what he will have in the spring. It certainly does not commit him to a course of action, since that must be a matter for judgment at the appropriate time.

In November's autumn statement I said that, as matters then appeared, I should be in a position to lower the burden of taxation in the Budget. It is still too early for me to judge whether I shall be able to do so. But to put the matter beyond doubt, I should say this: our fiscal policy will determine whether tax cuts are possible; our wish to cut taxation will not be allowed to determine our fiscal policy. If to reduce taxation would in any way — I do not say that it would — put our economic strategy at risk, it would have to be ruled out. If to lower taxation might lead to defeat in the fight against inflation, tax cuts would have to be forgone for the time being. In the Budget I shall set the public sector borrowing requirement at a responsible level that will ensure the continuation of our policies. Then and only then, I shall decide whether I have the scope to reduce taxation, and, if so, by how much.

Whether or not I can cut taxation in this Budget, many Conservative Members believe that an economy that enjoys lower taxation will be more able to foster enterprise and, therefore, to grow and to provide jobs and prosperity. The clear lesson from many countries is that where taxation is lowest, economies tend to be the most dynamic and successful. The lesson from British history is that high Government spending and taxation produce, at best, sluggish growth and steadily increasing unemployment.

The right hon. Member for Sparkbrook mentioned the coal strike. During the past 10 months and more, the Government have given their full backing to the National Coal Board in resisting the wholly unacceptable demands of Mr. Scargill. The issues have been whether the management of the Coal Board should be allowed to manage the industry, and Mr. Scargill's demand that the taxpayer should pour ever larger subsidies into preserving uneconomic pits at the cost of thousands of jobs in other industries. We shall not do that. It is a striking tribute to the strength of our economy that we have been able to endure the strike for as long as nearly 11 months—we shall endure it indefinitely if need be — with so little damage to the economy. We all know why the debate has been called. It has been called because the right hon. Gentleman had a date with Mr. Alfonsin, the president of Argentina, today. He was so embarrassed that he had to find some excuse to cancel that. That would have been too much.

This debate has nothing to do with the economy; it has nothing to do with jobs; it has nothing to do with the prosperity of the country. The motion should be rejected by the whole House.

Question put, That the amendment be made:—

The House divided: Ayes 395, Noes 222.

Division No. 85]	[10.00 pm
AYES
Adley, Robert	Clarke, Rt Hon K. (Rushcliffe)
Aitken, Jonathan	Clegg, Sir Walter
Alexander, Richard	Cockeram, Eric
Alison, Rt Hon Michael	Colvin, Michael
Amery, Rt Hon Julian	Conway, Derek
Amess, David	Coombs, Simon
Ancram, Michael	Cope, John
Arnold, Tom	Cormack, Patrick
Ashby, David	Corrie, John
Aspinwall, Jack	Couchman, James
Atkins, Rt Hon Sir H.	Cranborne, Viscount
Atkins, Robert (South Ribble)	Critchley, Julian
Atkinson, David (B'm'th E)	Crouch, David
Baker, Rt Hon K. (Mole Vall'y)	Currie, Mrs Edwina
Baker, Nicholas (N Dorset)	Dickens, Geoffrey
Baldry, Tony	Dicks, Terry
Banks, Robert (Harrogate)	Dorrell, Stephen
Batiste, Spencer	Douglas-Hamilton, Lord J.
Beaumont-Dark, Anthony	Dover, Den
Beggs, Roy	du Cann, Rt Hon Sir Edward
Bellingham, Henry	Dunn, Robert
Bendall, Vivian	Durant, Tony
Benyon, William	Dykes, Hugh
Best, Keith	Edwards, Rt Hon N. (P'broke)
Bevan, David Gilroy	Eggar, Tim
Biffen, Rt Hon John	Emery, Sir Peter
Biggs-Davison, Sir John	Evennett, David
Blackburn, John	Eyre, Sir Reginald
Blaker, Rt Hon Sir Peter	Fairbairn, Nicholas
Body, Richard	Fallon, Michael
Bonsor, Sir Nicholas	Farr, Sir John
Bottomley, Peter	Favell, Anthony
Bottomley, Mrs Virginia	Fenner, Mrs Peggy
Bowden, A. (Brighton K'to'n)	Finsberg, Sir Geoffrey
Bowden, Gerald (Dulwich)	Fletcher, Alexander
Boyson, Dr Rhodes	Fookes, Miss Janet
Braine, Rt Hon Sir Bernard	Forman, Nigel
Brandon-Bravo, Martin	Forsyth, Michael (Stirling)
Bright, Graham	Forsythe, Clifford (S Antrim)
Brinton, Tim	Forth, Eric
Brittan, Rt Hon Leon	Fowler, Rt Hon Norman
Brooke, Hon Peter	Fox, Marcus
Brown, M. (Brigg & Cl'thpes)	Franks, Cecil
Browne, John	Fraser, Peter (Angus East)
Bruinvels, Peter	Freeman, Roger
Bryan, Sir Paul	Fry, Peter
Buck, Sir Antony	Gale, Roger
Budgen, Nick	Galley, Roy
Bulmer, Esmond	Gardiner, George (Reigate)
Burt, Alistair	Gardner, Sir Edward (Fylde)
Butcher, John	Garel-Jones, Tristan
Butler, Hon Adam	Gilmour, Rt Hon Sir Ian
Butterfill, John	Glyn, Dr Alan
Carlisle, John (N Luton)	Goodhart, Sir Philip
Carlisle, Kenneth (Lincoln)	Goodlad, Alastair
Carlisle, Rt Hon M. (W'ton S)	Gorst, John
Carttiss, Michael	Gow, Ian
Cash, William	Gower, Sir Raymond
Chalker, Mrs Lynda	Grant, Sir Anthony
Channon, Rt Hon Paul	Greenway, Harry
Chapman, Sydney	Gregory, Conal
Chope, Christopher	Griffiths, E. (B'y St Edm'ds)
Churchill, W. S.	Griffiths, Peter (Portsm'th N)
Clark, Hon A. (Plym'th S'n)	Grist, Ian
Clark, Dr Michael (Rochford)	Ground, Patrick
Clark, Sir W. (Croydon S)	Grylls, Michael

Gummer, John Selwyn	McCurley, Mrs Anna
Hamilton, Hon A. (Epsom)	McCusker, Harold
Hamilton, Neil (Tatton)	Macfarlane, Neil
Hampson, Dr Keith	MacGregor, John
Hanley, Jeremy	MacKay, Andrew (Berkshire)
Hannam, John	MacKay, John (Argyll & Bute)
Hargreaves, Kenneth	Maclean, David John
Harris, David	McNair-Wilson, P. (New F'st)
Harvey, Robert	McQuarrie, Albert
Haselhurst, Alan	Madel, David
Havers, Rt Hon Sir Michael	Maginnis, Ken
Hawkins, C. (High Peak)	Major, John
Hawkins, Sir Paul (SW N'folk)	Malins, Humfrey
Hawksley, Warren	Malone, Gerald
Hayes. J.	Maples, John
Hayhoe, Barney	Marland, Paul
Hayward, Robert	Marlow, Antony
Heathcoat-Amory, David	Marshall, Michael (Arundel)
Heddle, John	Mates, Michael
Henderson, Barry	Mather, Carol
Heseltine, Rt Hon Michael	Maude, Hon Francis
Hickmet, Richard	Mawhinney, Dr Brian
Hicks, Robert	Maxwell-Hyslop, Robin
Higgins, Rt Hon Terence L.	Mayhew, Sir Patrick
Hill, James	Mellor, David
Hind, Kenneth	Merchant, Piers
Hirst, Michael	Meyer, Sir Anthony
Hogg, Hon Douglas (Gr'th'm)	Miller, Hal (B'grove)
Holland, Sir Philip (Gedling)	Mills, Iain (Meriden)
Holt, Richard	Mills, Sir Peter (West Devon)
Hordern, Peter	Miscampbell, Norman
Howard, Michael	Mitchell, David (NW Hants)
Howarth, Alan (Stratf'd-on-A)	Moate, Roger
Howarth, Gerald (Cannock)	Molyneaux, Rt Hon James
Howe, Rt Hon Sir Geoffrey	Monro, Sir Hector
Howell, Rt Hon D. (G'ldford)	Montgomery, Sir Fergus
Howell, Ralph (N Norfolk)	Moore, John
Hubbard-Miles, Peter	Morris, M. (N'hampton, S)
Hunt, David (Wirral)	Morrison, Hon C. (Devizes)
Hunt, John (Ravensbourne)	Morrison, Hon P. (Chester)
Hunter, Andrew	Moynihan, Hon C.
Hurd, Rt Hon Douglas	Mudd, David
Irving, Charles	Murphy, Christopher
Jackson, Robert	Neale, Gerrard
Jenkin, Rt Hon Patrick	Needham, Richard
Jessel, Toby	Nelson, Anthony
Johnson Smith, Sir Geoffrey	Neubert, Michael
Jones, Gwilym (Cardiff N)	Newton, Tony
Jones, Robert (W Herts)	Nicholls, Patrick
Jopling, Rt Hon Michael	Nicholson, J.
Joseph, Rt Hon Sir Keith	Norris, Steven
Kellett-Bowman, Mrs Elaine	Onslow, Cranley
Kershaw, Sir Anthony	Oppenheim, Phillip
Key, Robert	Oppenheim, Rt Hon Mrs S.
Kilfedder, James A.	Osborn, Sir John
King, Roger (B'ham N'field)	Ottaway, Richard
King, Rt Hon Tom	Page, Sir John (Harrow W)
Knight, Gregory (Derby N)	Page, Richard (Herts SW)
Knight, Mrs Jill (Edgbaston)	Paisley, Rev Ian
Knowles, Michael	Parkinson, Rt Hon Cecil
Knox, David	Parris, Matthew
Lamont, Norman	Patten, Christopher (Bath)
Latham, Michael	Patten, John (Oxford)
Lawler, Geoffrey	Pattie, Geoffrey
Lawrence, Ivan	Pawsey, James
Lawson, Rt Hon Nigel	Peacock, Mrs Elizabeth
Lee, John (Pendle)	Percival, Rt Hon Sir Ian
Leigh, Edward (Gainsbor'gh)	Pollock, Alexander
Lennox-Boyd, Hon Mark	Porter, Barry
Lester, Jim	Portillo, Michael
Lewis, Sir Kenneth (Stamf'd)	Powell, Rt Hon J. E. (S Down)
Lightbown, David	Powell, William (Corby)
Lilley, Peter	Powley, John
Lloyd, Ian (Havant)	Prentice, Rt Hon Reg
Lloyd, Peter, (Fareham)	Price, Sir David
Lord, Michael	Proctor, K. Harvey
Luce, Richard	Pym, Rt Hon Francis
Lyell, Nicholas	Raffan, Keith
McCrea, Rev William	Raison, Rt Hon Timothy
McCrindle, Robert	Rathbone, Tim

Rees, Rt Hon Peter (Dover)	Sumberg, David
Renton, Tim	Tapsell, Sir Peter
Rhodes James, Robert	Taylor, Rt Hon John David
Rhys Williams, Sir Brandon	Taylor, John (Solihull)
Ridley, Rt Hon Nicholas	Taylor, Teddy (S'end E)
Ridsdale, Sir Julian	Tebbit, Rt Hon Norman
Rifkind, Malcolm	Terlezki, Stefan
Rippon, Rt Hon Geoffrey	Thatcher, Rt Hon Mrs M.
Roberts, Wyn (Conwy)	Thomas, Rt Hon Peter
Robinson, Mark (N'port W)	Thompson, Donald (Calder V)
Robinson, P. (Belfast E)	Thompson, Patrick (N'ich N)
Roe, Mrs Marion	Thorne, Neil (Ilford S)
Ross, Wm. (Londonderry)	Thornton, Malcolm
Rossi, Sir Hugh	Thurnham, Peter
Rost, Peter	Townend, John (Bridlington)
Rowe, Andrew	Townsend, Cyril D. (B'heath)
Rumbold, Mrs Angela	Tracey, Richard
Ryder, Richard	Trippier, David
Sackville, Hon Thomas	Trotter, Neville
Sainsbury, Hon Timothy	Twinn, Dr Ian
St. John-Stevas, Rt Hon N.	van Straubenzee, Sir W.
Sayeed, Jonathan	Vaughan, Sir Gerard
Scott, Nicholas	Viggers, Peter
Shaw, Giles (Pudsey)	Waddington, David
Shaw, Sir Michael (Scarb')	Wakeham, Rt Hon John
Shelton, William (Streatham)	Waldegrave, Hon William
Shepherd, Colin (Hereford)	Walden, George
Shepherd, Richard (Aldridge)	Walker, Cecil (Belfast N)
Shersby, Michael	Walker, Bill (T'side N)
Silvester, Fred	Walker, Rt Hon P. (W'cester)
Sims, Roger	Waller, Gary
Skeet, T. H. H.	Walters, Dennis
Smith, Sir Dudley (Warwick)	Ward, John
Smith, Tim (Beaconsfield)	Wardle, C. (Bexhill)
Smyth, Rev W. M. (Belfast S)	Warren, Kenneth
Soames, Hon Nicholas	Watson, John
Speed, Keith	Watts, John
Speller, Tony	Wells, Bowen (Hertford)
Spence, John	Wells, Sir John (Maidstone)
Spencer, Derek	Wheeler, John
Spicer, Jim (W Dorset)	Whitfield, John
Spicer, Michael (S Worcs)	Whitney, Raymond
Squire, Robin	Wiggin, Jerry
Stanbrook, Ivor	Wilkinson, John
Stanley, John	Wolfson, Mark
Steen, Anthony	Wood, Timothy
Stern, Michael	Woodcock, Michael
Stevens, Lewis (Nuneaton)	Yeo, Tim
Stevens, Martin (Fulham)	Young, Sir George (Acton)
Stewart, Allan (Eastwood)	Younger, Rt Hon George
Stewart, Andrew (Sherwood)
Stewart, Ian (N Hertf'dshire)	Tellers for the Ayes:
Stokes, John	Mr. Robert Boscawen and
Stradling Thomas, J.	Mr. Ian Lang
NOES
Abse, Leo	Brown, Hugh D. (Provan)
Adams, Allen (Paisley N)	Brown, N. (N'c'tle-u-Tyne E)
Alton, David	Brown, R. (N'c'tle-u-Tyne N)
Anderson, Donald	Brown, Ron (E'burgh, Leith)
Archer, Rt Hon Peter	Bruce, Malcolm
Ashdown, Paddy	Buchan, Norman
Ashley, Rt Hon Jack	Caborn, Richard
Ashton, Joe	Callaghan, Jim (Heyw'd & M)
Atkinson, N. (Tottenham)	Campbell, Ian
Bagier, Gordon A. T.	Campbell-Savours, Dale
Banks, Tony (Newham NW)	Canavan, Dennis
Barnett, Guy	Carlile, Alexander (Montg'y)
Barron, Kevin	Carter-Jones, Lewis
Beckett, Mrs Margaret	Cartwright, John
Bell, Stuart	Clark, Dr David (S Shields)
Benn, Tony	Clarke, Thomas
Bennett, A. (Dent'n & Red'sh)	Clay, Robert
Bermingham, Gerald	Clwyd, Mrs Ann
Bidwell, Sydney	Cocks, Rt Hon M. (Bristol S.)
Blair, Anthony	Cohen, Harry
Boothroyd, Miss Betty	Coleman, Donald
Boyes, Roland	Conlan, Bernard
Bray, Dr Jeremy	Cook, Frank (Stockton North)
Brown, Gordon (D'f'mline E)	Cook, Robin F. (Livingston)

Corbett, Robin	Lewis, Terence (Worsley)
Corbyn, Jeremy	Litherland, Robert
Cowans, Harry	Lloyd, Tony (Stretford)
Cox, Thomas (Tooting)	Lofthouse, Geoffrey
Craigen, J. M.	Loyden, Edward
Crowther, Stan	McCartney, Hugh
Cunliffe, Lawrence	McDonald, Dr Oonagh
Cunningham, Dr John	McGuire, Michael
Dalyell, Tam	McKelvey, William
Davies, Rt Hon Denzil (L'lli)	Mackenzie, Rt Hon Gregor
Davies, Ronald (Caerphilly)	Maclennan, Robert
Davis, Terry (B'ham, H'ge H'l)	McNamara, Kevin
Deakins, Eric	McTaggart, Robert
Dewar, Donald	Madden, Max
Dixon, Donald	Marek, Dr John
Dobson, Frank	Marshall, David (Shettleston)
Dormand, Jack	Martin, Michael
Douglas, Dick	Mason, Rt Hon Roy
Dubs, Alfred	Maxton, John
Duffy, A. E. P.	Maynard, Miss Joan
Dunwoody, Hon Mrs G.	Meacher, Michael
Eadie, Alex	Meadowcroft, Michael
Eastham, Ken	Michie, William
Edwards, Bob (Wh'mpt'n SE)	Mikardo, Ian
Ellis, Raymond	Millan, Rt Hon Bruce
Evans, John (St. Helens N)	Miller, Dr M. S. (E Kilbride)
Ewing, Harry	Morris, Rt Hon A. (W'shawe)
Fatchett, Derek	Morris, Rt Hon J. (Aberavon)
Faulds, Andrew	Nellist, David
Field, Frank (Birkenhead)	Oakes, Rt Hon Gordon
Fields, T. (L'pool Broad Gn)	O'Brien, William
Fisher, Mark	O'Neill, Martin
Flannery, Martin	Orme, Rt Hon Stanley
Foot, Rt Hon Michael	Owen, Rt Hon Dr David
Forrester, John	Park, George
Foster, Derek	Parry, Robert
Foulkes, George	Patchett, Terry
Fraser, J. (Norwood)	Pavitt, Laurie
Freeson, Rt Hon Reginald	Pendry, Tom
Freud, Clement	Penhaligon, David
Garrett, W. E.	Pike, Peter
George, Bruce	Powell, Raymond (Ogmore)
Gilbert, Rt Hon Dr John	Prescott, John
Godman, Dr Norman	Radice, Giles
Golding, John	Randall, Stuart
Gould, Bryan	Redmond, M.
Hamilton, James (M'well N)	Rees, Rt Hon M. (Leeds S)
Hamilton, W. W. (Central Fife)	Richardson, Ms Jo
Hancock, Mr. Michael	Roberts, Allan (Bootle)
Hardy, Peter	Roberts, Ernest (Hackney N)
Harman, Ms Harriet	Robertson, George
Harrison, Rt Hon Walter	Robinson, G. (Coventry NW)
Hart, Rt Hon Dame Judith	Rogers, Allan
Hattersley, Rt Hon Roy	Rooker, J. W.
Haynes, Frank	Ross, Stephen (Isle of Wight)
Healey, Rt Hon Denis	Rowlands, Ted
Heffer, Eric S.	Ryman, John
Hogg, N. (C'nauld & Kilsyth)	Sedgemore, Brian
Home Robertson, John	Sheerman, Barry
Howells, Geraint	Sheldon, Rt Hon R.
Hoyle, Douglas	Shore, Rt Hon Peter
Hughes, Dr. Mark (Durham)	Short, Ms Clare (Ladywood)
Hughes, Robert (Aberdeen N)	Short, Mrs R.(W'hampt'n NE)
Hughes, Roy (Newport East)	Silkin, Rt Hon J.
Hughes, Sean (Knowsley S)	Skinner, Dennis
Hughes, Simon (Southwark)	Smith, C.(Isl'ton S & F'bury)
Janner, Hon Greville	Smith, Rt Hon J. (M'kl'ds E)
John, Brynmor	Snape, Peter
Johnston, Russell	Soley, Clive
Jones, Barry (Alyn & Deeside)	Spearing, Nigel
Kaufman, Rt Hon Gerald	Steel, Rt Hon David
Kennedy, Charles	Stewart, Rt Hon D. (W Isles)
Kilroy-Silk, Robert	Stott, Roger
Kinnock, Rt Hon Neil	Strang, Gavin
Kirkwood, Archy	Straw, Jack
Lambie, David	Thomas, Dafydd (Merioneth)
Lamond, James	Thompson, J. (Wansbeck)
Leadbitter, Ted	Thome, Stan (Preston)
Leighton, Ronald	Tinn, James
Lewis, Ron (Carlisle)	Torney, Tom

Wainwright, R.	Wilson, Gordon
Wallace, James	Winnick, David
Wardell, Gareth (Gower)	Woodall, Alec
Wareing, Robert	Wrigglesworth, Ian
Weetch, Ken	Young, David (Bolton SE)
Welsh, Michael
White, James	Tellers for the Noes:
Wigley, Dafydd	Mr. John McWilliam and
Williams, Rt Hon A.	Mr. Austin Mitchell.

Question accordingly agreed to.

Main Question, as amended, put:—

The House divided: Ayes 392, Noes 221.

Division No. 86]	[10.16 pm
AYES
Adley, Robert	Clark, Hon A. (Plym'th S'n)
Aitken, Jonathan	Clark, Dr Michael (Rochford)
Alexander, Richard	Clark, Sir W. (Croydon S)
Alison, Rt Hon Michael	Clarke, Rt Hon K. (Rushcliffe)
Amery, Rt Hon Julian	Clegg, Sir Walter
Amess, David	Cockeram, Eric
Ancram, Michael	Colvin, Michael
Arnold, Tom	Conway, Derek
Ashby, David	Coombs, Simon
Aspinwall, Jack	Cope, John
Atkins, Rt Hon Sir H.	Cormack, Patrick
Atkins, Robert (South Ribble)	Corrie, John
Atkinson, David (B'm'th E)	Couchman, James
Baker, Rt Hon K. (Mole Vall'y)	Cranborne, Viscount
Baker, Nicholas (N Dorset)	Critchley, Julian
Baldry, Tony	Crouch, David
Banks, Robert (Harrogate)	Currie, Mrs Edwina
Batiste, Spencer	Dickens, Geoffrey
Beaumont-Dark, Anthony	Dicks, Terry
Beggs, Roy	Dorrell, Stephen
Bellingham, Henry	Douglas-Hamilton, Lord J.
Bendall, Vivian	Dover, Den
Benyon, William	du Cann, Rt Hon Sir Edward
Best, Keith	Dunn, Robert
Bevan, David Gilroy	Durant, Tony
Biffen, Rt Hon John	Dykes, Hugh
Biggs-Davison, Sir John	Edwards, Rt Hon N. (P'broke)
Blackburn, John	Eggar, Tim
Blaker, Rt Hon Sir Peter	Emery, Sir Peter
Body, Richard	Evennett, David
Bonsor, Sir Nicholas	Eyre, Sir Reginald
Bottomley, Peter	Fairbairn, Nicholas
Bottomley, Mrs Virginia	Fallon, Michael
Bowden, A. (Brighton K'to'n)	Farr, Sir John
Bowden, Gerald (Dulwich)	Favell, Anthony
Boyson, Dr Rhodes	Fenner, Mrs Peggy
Braine, Rt Hon Sir Bernard	Finsberg, Sir Geoffrey
Brandon-Bravo, Martin	Fletcher, Alexander
Bright, Graham	Fookes, Miss Janet
Brinton, Tim	Forman, Nigel
Brittan, Rt Hon Leon	Forsyth, Michael (Stirling)
Brooke, Hon Peter	Forsythe, Clifford (S Antrim)
Brown, M. (Brigg & Cl'thpes)	Forth, Eric
Browne, John	Fowler, Rt Hon Norman
Bruinvels, Peter	Fox, Marcus
Bryan, Sir Paul	Franks, Cecil
Buck, Sir Antony	Fraser, Peter (Angus East)
Budgen, Nick	Freeman, Roger
Bulmer, Esmond	Fry, Peter
Burt, Alistair	Gale, Roger
Butcher, John	Galley, Roy
Butler, Hon Adam	Gardiner, George (Reigate)
Butterfill, John	Gardner, Sir Edward (Fylde)
Carlisle, John (N Luton)	Garel-Jones, Tristan
Carlisle, Kenneth (Lincoln)	Gilmour, Rt Hon Sir Ian
Carlisle, Rt Hon M. (W'ton S)	Glyn, Dr Alan
Carttiss, Michael	Goodhart, Sir Philip
Cash, William	Goodlad, Alastair
Chalker, Mrs Lynda	Gorst, John
Channon, Rt Hon Paul	Gow, Ian
Chapman, Sydney	Gower, Sir Raymond
Chope, Christopher	Grant, Sir Anthony
Churchill, W. S.	Greenway, Harry

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

Raffan, Keith	Stradling Thomas, J.
Raison, Rt Hon Timothy	Sumberg, David
Rathbone, Tim	Tapsell, Sir Peter
Rees, Rt Hon Peter (Dover)	Taylor, Rt Hon John David
Renton, Tim	Taylor, John (Solihull)
Rhodes James, Robert	Taylor, Teddy (S'end E)
Rhys Williams, Sir Brandon	Tebbit, Rt Hon Norman
Ridley, Rt Hon Nicholas	Terlezki, Stefan
Ridsdale, Sir Julian	Thatcher, Rt Hon Mrs M.
Rifkind, Malcolm	Thomas, Rt Hon Peter
Rippon, Rt Hon Geoffrey	Thompson, Donald (Calder V)
Roberts, Wyn (Conwy)	Thompson, Patrick (N'ich N)
Robinson, Mark (N'port W)	Thorne, Neil (Ilford S)
Roe, Mrs Marion	Thornton, Malcolm
Ross, Wm. (Londonderry)	Thurnham, Peter
Rossi, Sir Hugh	Townend, John (Bridlington)
Rost, Peter	Townsend, Cyril D. (B'heath)
Rowe, Andrew	Tracey, Richard
Rumbold, Mrs Angela	Trippier, David
Ryder, Richard	Trotter, Neville
Sackville, Hon Thomas	Twinn, Dr Ian
Sainsbury, Hon Timothy	van Straubenzee, Sir W.
St. John-Stevas, Rt Hon N.	Vaughan, Sir Gerard
Sayeed, Jonathan	Viggers, Peter
Scott, Nicholas	Waddington, David
Shaw, Giles (Pudsey)	Wakeham, Rt Hon John
Shaw, Sir Michael (Scarb')	Waldegrave, Hon William
Shelton, William (Streatham)	Walden, George
Shepherd, Colin (Hereford)	Walker, Cecil (Belfast N)
Shepherd, Richard (Aldridge)	Walker, Bill (T'side N)
Shersby, Michael	Walker, Rt Hon P. (W'cester)
Silvester, Fred	Waller, Gary
Sims, Roger	Walters, Dennis
Skeet, T. H. H.	Ward, John
Smith, Sir Dudley (Warwick)	Wardle, C. (Bexhill)
Smith, Tim (Beaconsfield)	Warren, Kenneth
Smyth, Rev W. M. (Belfast S)	Watson, John
Soames, Hon Nicholas	Watts, John
Speed, Keith	Wells, Bowen (Hertford)
Speller, Tony	Wells, Sir John (Maidstone)
Spence, John	Wheeler, John
Spencer, Derek	Whitfield, John
Spicer, Jim (W Dorset)	Whitney, Raymond
Spicer, Michael (S Worcs)	Wiggin, Jerry
Squire, Robin	Wilkinson, John
Stanbrook, Ivor	Wolfson, Mark
Stanley, John	Wood, Timothy
Steen, Anthony	Woodcock, Michael
Stern, Michael	Yeo, Tim
Stevens, Lewis (Nuneaton)	Young, Sir George (Acton)
Stevens, Martin (Fulham)	Younger, Rt Hon George
Stewart, Allan (Eastwood)
Stewart, Andrew (Sherwood)	Tellers for the Ayes:
Stewart, Ian (N Hertf'dshire)	Mr. Robert Boscawen and
Stokes, John	Mr. Ian Lang,
NOES
Abse, Leo	Brown, Gordon (D'f'mline E)
Adams, Allen (Paisley N)	Brown, Hugh D. (Provan)
Alton, David	Brown, N. (N'c'tle-u-Tyne E)
Anderson, Donald	Brown, R. (N'c'tle-u-Tyne N)
Archer, Rt Hon Peter	Brown, Ron (E'burgh, Leith)
Ashdown, Paddy	Bruce, Malcolm
Ashley, Rt Hon Jack	Buchan, Norman
Ashton, Joe	Caborn, Richard
Atkinson, N. (Tottenham)	Callaghan, Jim (Heyw'd & M)
Bagier, Gordon A. T.	Campbell, Ian
Banks, Tony (Newham NW)	Campbell-Savours, Dale
Barnett, Guy	Canavan, Dennis
Barron, Kevin	Carlile, Alexander (Montg'y)
Beckett, Mrs Margaret	Carter-Jones, Lewis
Bell, Stuart	Cartwright, John
Benn, Tony	Clark, Dr David (S Shields)
Bennett, A. (Dent'n & Red'sh)	Clarke, Thomas
Bermingham, Gerald	Clay, Robert
Bidwell, Sydney	Clwyd, Mrs Ann
Blair, Anthony	Cocks, Rt Hon M. (Bristol S.)
Boothroyd, Miss Betty	Cohen, Harry
Boyes, Roland	Coleman, Donald
Bray, Dr Jeremy	Conlan, Bernard

Cook, Frank (Stockton North)	Hughes, Roy (Newport East)
Cook, Robin F. (Livingston)	Hughes, Sean (Knowsley S)
Corbett, Robin	Hughes, Simon (Southwark)
Corbyn, Jeremy	Janner, Hon Greville
Cowans, Harry	John, Brynmor
Cox, Thomas (Tooting)	Johnston, Russell
Craigen, J. M.	Jones, Barry (Alyn & Deeside)
Crowther, Stan	Kaufman, Rt Hon Gerald
Cunliffe, Lawrence	Kennedy, Charles
Cunningham, Dr John	Kilroy-Silk, Robert
Dalyell, Tam	Kinnock, Rt Hon Neil
Davies, Rt Hon Denzil (L'lli)	Kirkwood, Archy
Davies, Ronald (Caerphilly)	Lambie, David
Davis, Terry (B'ham, H'ge H'l)	Lamond, James
Deakins, Eric	Leadbitter, Ted
Dewar, Donald	Leighton, Ronald
Dixon, Donald	Lewis, Ron (Carlisle)
Dobson, Frank	Lewis, Terence (Worsley)
Dormand, Jack	Litherland, Robert
Douglas, Dick	Lloyd, Tony (Stretford)
Dubs, Alfred	Lofthouse, Geoffrey
Duffy, A. E. P.	Loyden, Edward
Dunwoody, Hon Mrs G.	McCartney, Hugh
Eadie, Alex	McDonald, Dr Oonagh
Eastham, Ken	McGuire, Michael
Edwards, Bob (W'h'mpt'n SE)	McKelvey, William
Ellis, Raymond	Mackenzie, Rt Hon Gregor
Evans, John (St. Helens N)	Maclennan, Robert
Ewing, Harry	McNamara, Kevin
Fatchett, Derek	McTaggart, Robert
Faulds, Andrew	Madden, Max
Field, Frank (Birkenhead)	Marek, Dr John
Fields, T. (L'pool Broad Gn)	Marshall, David (Shettleston)
Fisher, Mark	Martin, Michael
Flannery, Martin	Mason, Rt Hon Roy
Foot, Rt Hon Michael	Maxton, John
Forrester, John	Maynard, Miss Joan
Foster, Derek	Meacher, Michael
Foulkes, George	Meadowcroft, Michael
Fraser, J. (Norwood)	Michie, William
Freeson, Rt Hon Reginald	Mikardo, Ian
Freud, Clement	Millan, Rt Hon Bruce
Garrett, W. E.	Miller, Dr M. S. (E Kilbride)
George, Bruce	Morris, Rt Hon A. (W'shawe)
Gilbert, Rt Hon Dr John	Morris, Rt Hon J. (Aberavon)
Godman, Dr Norman	Nellist, David
Golding, John	Oakes, Rt Hon Gordon
Gould, Bryan	O'Brien, William
Hamilton, James (M'well N)	O'Neill, Martin
Hamilton, W. W. (Central Fife)	Orme, Rt Hon Stanley
Hancock, Mr. Michael	Owen, Rt Hon Dr David
Hardy, Peter	Park, George
Harman, Ms Harriet	Parry, Robert
Harrison, Rt Hon Walter	Patchett, Terry
Hart, Rt Hon Dame Judith	Pavitt, Laurie
Hattersley, Rt Hon Roy	Pendry, Tom
Haynes, Frank	Penhaligon, David
Healey, Rt Hon Denis	Pike, Peter
Heffer, Eric S.	Powell, Raymond (Ogmore)
Hogg, N. (C'nauld & Kilsyth)	Prescott, John
Home Robertson, John	Radice, Giles
Howells, Geraint	Randall, Stuart
Hoyle, Douglas	Redmond, M.
Hughes, Dr. Mark (Durham)	Rees, Rt Hon M. (Leeds S)
Hughes, Robert (Aberdeen N)	Richardson, Ms Jo

Roberts, Allan (Bootle)	Straw, Jack
Roberts, Ernest (Hackney N)	Thomas, Dafydd (Merioneth)
Robertson, George	Thompson, J. (Wansbeck)
Robinson, G. (Coventry NW)	Thorne, Stan (Preston)
Rogers, Allan	Tinn, James
Rooker, J. W.	Torney, Tom
Ross, Stephen (Isle of Wight)	Wainwright, R.
Rowlands, Ted	Wallace, James
Ryman, John	Wardell, 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 R.(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)	Woodall, Alec
Smith, Rt Hon J. (M'kl'ds E)	Wrigglesworth, Ian
Snape, Peter	Young, David (Bolton SE)
Soley, Clive
Spearing, Nigel	Tellers for the Noes:
Steel, Rt Hon David	Mr. John McWilliam and
Stewart, Rt Hon D. (W Isles)	Mr. Austin Mitchell.
Strang, Gavin

Question accordingly agreed to.

Resolved, That this House supports Her Majesty's Government in its firm action to maintain the sound financial conditions and medium-term strategy which have brought about the lowest level of inflation since the 1960s, nearly four years of sustained economic growth, record output, sound exports, record investment and record living standards, and which provide the best long-term prospects for a fundamental improvement in the performance of the British economy and for the creation of new jobs.