Commons Sitting of 21 March 1985

Preamble
The House met at half-past Two o'clock
PRAYERS
[MR. SPEAKER in the Chair]

PRIVATE BUSINESS
Mr. Speaker: As all the private Bills have blocking motions I shall, with the leave of the House, deal with them in a single group.
BIRMINGHAM CITY COUNCIL BILL (By Order)
FELIXSTOWE DOCK AND RAILWAY BILL (By Order)
GREATER LONDON COUNCIL (GENERAL POWERS) BILL (By Order)
LINCOLN CITY COUNCIL BILL (By Order)
YORKSHIRE WATER AUTHORITY BILL (By Order)
Orders for Second Reading read.
To be read a Second time upon Thursday 28 March.

Oral Answers to Questions
  NATIONAL FINANCE

    Value Added Tax
    Mr. Beithasked the Chancellor of the Exchequer what assessment he has made of the impact of value added tax on building alterations to village halls and community centres since its imposition in 1984.
    The Chief Secretary to the Treasury (Mr. Peter Rees): Information is not held in a form which would allow such an assessment to be made.
    Mr. Beith: Does that mean that the Chief Secretary does not realise that the village halls which are maintained by voluntary local effort, rather than those which are provided by local councils and are VAT exempt, are bearing this burden? As many were built before the war or soon after it and will need building alterations, would it not have been a better Budget if the Chancellor of the Exchequer had announced that he would stop raiding jumble sale proceeds and let village halls use their money to maintain their buildings by voluntary effort?
    Mr. Rees: Not only do some village halls benefit from the community programme, but direct grants from central Government to charities — I assume that the hon. Gentleman regards them, properly, as being charities—have increased to £180 million in 1983–84.
    968
    Counter-Inflation Policy
    3. Mr. Robert B. Jones asked the Chancellor of the Exchequer if he will make a statement about counter-inflation policy.
    The Chancellor of the Exchequer (Mr. Nigel Lawson): Since 1980 inflation has fallen from 20 per cent. to 5 per cent.—the lowest level since the 1960s. In my Budget statement I reaffirmed the Government's commitment to continue the drive against inflation through sound monetary policies.
    Mr. Jones: I congratulate my right hon. Friend on restating his commitment not only to maintain his drive against inflation but to reduce and eliminate it entirely. Does he agree that a counter-inflation policy is a counter-unemployment policy, and that there is ample evidence at home and abroad of the destructive effects on jobs of inflation?
    Mr. Lawson: My hon. Friend is right. It is a significant fact that successive Governments since the war have presided over higher levels of inflation and higher levels of unemployment at the same time. This Government have succeeded for the first time in getting the level of inflation down. That is a sound basis, coupled with the other measures that we have taken on the supply side, for dealing with the serious problem of unemployment.
    Dr. Marek: Does the Chancellor of the Exchequer agree that the measure of monetary growth is not the only factor which determines inflation? Does he accept that he should be able to devise a policy to reduce unemployment through a certain amount of capital spending which, incidentally, would have the beneficial effect of ensuring that our infrastructure does not rot to pieces?
    Mr. Lawson: I entirely reject the suggestion that our infrastructure is rotting to pieces. We are substantially increasing expenditure on roads, and on the sewers and water industry generally. If reducing unemployment were simply a matter of increasing Government spending, there would be no unemployment anywhere in the world today because there is nothing easier than for a Government to spend other people's money.
    Mr. Andrew MacKay: Would my right hon. Friend care to speculate on how much inflation would be fuelled if this afternoon the building societies foolishly and shortsightedly increased rates for mortgages?
    Mr. Lawson: An increase in mortgage rates—that is obviously entirely a matter for building societies and has nothing to do with the Government—would in the short run cause an increase in the retail prices index. Over the medium term it would not have any effect on inflation.
    Mr. Hattersley: Will the Chancellor expand on that answer a little? Will he tell us, because he must know, how much the retail prices index has already been increased by building society increases announced this year? How much will be added to it by the increase which we fear will happen today or tomorrow? Having given those figures, will he confirm that the increase in mortgage repayments endured by most householders this year will more than take up the amount which they might have received in tax reductions through his Budget?
    Mr. Lawson: It is an impertinence for the right hon. Gentleman to address the Government about the problem

    969
    of inflation. While he was in office—he was Secretary of State for Prices and Consumer Protection—inflation never came anywhere near as low as it is at present. It will stay low and get lower.
    Mr. Stern: Does my right hon. Friend agree that even after the Government's success in reducing the rate of inflation, the fact remains that at present levels of inflation a person who starts his career today and invests £1 would, on his retirement, receive a capital refund of less than 12½p? Does he therefore agree that bringing down the rate of inflation even further remains a primary aim of the Government?
    Mr. Lawson: I agree with my hon. Friend. Ensuring stable prices, or as near stable as we can possibly get, is the greatest social service that any Government can provide.

    Exchange Rate Policy (Report)
    Mr. Campbell-Savoursasked the Chancellor of the Exchequer when he expects to reply to the fifth report of the Treasury and Civil Service Committee on exchange rate policy.
    The Economic Secretary to the Treasury (Mr. Ian Stewart): I refer the hon. Gentleman to what my right hon. Friend the Chancellor said about the exchange rate in his Budget statement.
    Mr. Campbell-Savours: Why should the Government have intervened when the pound fell below $1·10?
    Mr. Stewart: Intervention in exchange markets was discussed in the G5 meeting, when it was decided that coordinated intervention by several Governments might be useful as and when conditions made that necessary.
    Mr. Maples: Does my hon. Friend agree that a period of sustained dollar weakness might cause just as many problems as the recent dollar strength? Might it not now be in our interest to participate fully in the exchange rate mechanism of the EMS?
    Mr. Stewart: I am not too sure about the relationship between the two parts of my hon. Friend's question. I do not believe that under present conditions it would be right for us to join the exchange rate mechanism of the EMS. With regard to the weakness of the dollar to which he has referred, it might be a little early to pass judgment on that phenomenon.

    Tax Bill
    Mr. Pikeasked the Chancellor of the Exchequer how much higher the total tax bill will be in real terms comparing 1985–86 to 1978–79.
    The Financial Secretary to the Treasury (Mr. John Moore): It is expected to be £27·6 billion higher at 1984–85 prices.
    Mr. Pike: Would the Government not have done better to use that money to get people back into real jobs and to deal with the infrastructure problem rather than have to face the ever-increasing burden of unemployment that results from Government policies?
    Mr. Moore: As my right hon. Friend said a few seconds ago, capital expenditure in this country is running at the record level of over £55 billion.
    Mr. Meadowcroft: In a written answer before the Budget the Minister said that a single person had to be earning £23,000 a year before he was paying less tax than in 1979. What is the figure for the same single person since the Budget?
    Mr. Moore: I should plainly need notice to give a detailed answer. If the hon. Gentleman had been with us during our debate last evening he would have heard me give illustrations of people on half, average, one and a half and twice average earnings, and how they are all substantially better off than they were five years ago.
    Mr. Nicholls: It it not misleading and useless to talk about increased tax burdens without considering the relationship of a person in work and his standard of living compared with the rate of inflation? Is it not about time for Opposition Members to stop bleating about a tax burden while calling for increased public expenditure?
    Mr. Moore: My hon. Friend is not only precisely right in all that he said, but he brings clearly to the House the recognition that inflation is a far greater scourge for those who have saved and those on limited incomes. The impact of inflation on their pockets has been greater than taxation.
    Dr. McDonald: How does the Financial Secretary square the claim by the Foreign Secretary when he was electioneering in Oxford in April 1979 that every Labour Government put taxes up and every Conservative Government get taxes down, with the fact that the tax burden has increased by £26 billion between 1978–79 and 1985–86, and that only half of that is due to oil revenues? The present Budget will increase the tax burden by £3·5 billion. Is this not another example of broken promises by the Tories?
    Mr. Moore: As I am sure those hon. Members who were present last night will remember, I pointed out that the taxes which have gone down — those on the employer—which are critical to the creation of jobs have to be taken into account, together with the ways in which the Government have radically reduced inflation by ensuring that honest taxation is preferable to the excessive borrowing levels of the last Labour Government.

    Savings Ratio
    Mr. Wainwrightasked the Chancellor of the Exchequer what he estimates to be the prevailing savings ratio for the current year; and whether he expects a higher ratio in 1985–86
    Mr. Ian Stewart: Figures so far available for 1984–5 show a personal saving ratio of around 10½ per cent.
    Mr. Wainwright: Will the Economic Secretary be good enough to answer the second part of my question: does he expect a higher ratio in 1985–86? If he does not, why is the Treasury so supine in the light of a declining savings ratio? Is he not aware that in the United States the public tend to save more when inflation is low? Will he reflect on the successful French experience of the last seven years of tax incentives for the public to invest in industrial shares?
    Mr. Stewart: I shall certainly answer the second part of the hon. Gentleman's question. I left it out in the interest of brevity. As is explained in paragraph 342 of part III of the Financial Statement and Budget Report, there

    971
    will possibly be a small increase in the savings ratio during the coming year but it is unlikely to have any very substantial effect. As for the relationship between the savings ratio in this country and that in the United States, whatever the hon. Gentleman may say, the ratio of savings in the United States is very much lower than it is in this country. In fact, in this country the savings ratio has been above these levels only when inflation has been very high. I am glad to say that inflation has now come down.
    Mr. Eggar: Does the lack of any change on the taxation of pensions in the Budget mean that my right hon. and hon. Friends are happy about the very high proportion of savings that are channelled through institutional means?
    Mr. Stewart: We believe that savings should be channelled through both institutional means and direct investment. Many of the measures that we have taken should encourage direct investment by private individuals.

    Budget
    Mr. Winnickasked the Chancellor of the Exchequer what representations he has received regarding his Budget statement.
    Mr. Moore: Several.
    Mr. Winnick: Is not unemployment likely to be higher this time next year than it is now? If so, does it not show how irrelevant is the Budget to the the situation that faces the country? Bearing in mind the increases that are due to take place in gas, electricity, mortgages, rates and prescription charges, why does the Minister not admit that after the Budget most people will be worse off rather than better off?
    Mr. Moore: The House might be more interested in the remarks of the director-general of the Confederation of British Industry, who suggested, when commenting on the Budget, that the Chancellor has got it right, that interest rates should fall because the Chancellor is getting a grip on inflation and on borrowing, and that this Budget ought to be good for growth and for jobs, which is the essence of the point that the hon. Gentleman is seeking to make. It is some kind of cheek for the Opposition to refer to gas and electricity prices, when during their last period in office gas and electricity prices increased by 2 per cent. every six weeks.
    Mr. George Gardiner: While accepting all that my hon. Friend said, has it yet been represented to him that the Chancellor's proposals regarding employers' national insurance contributions on higher income earners could have a penal effect on those very enterprising firms which pay out their profits in the form of salaries to owner-directors? Will my hon. Friend turn his attention to this point to see whether he and the Chancellor can avoid hitting some of those very firms which they are seeking to encourage?
    Mr. Moore: Some people have drawn our attention to that point, although not in quite those terms. However, there are far more, including the CBI, who have so far recognised the benefits and potential for those at the bottom end of the earnings scale, who may be given considerable opportunities by the recommended reconstruction of national insurance contributions.
    Mr. Bidwell: In reply to my hon. Friend the Member for Walsall, North (Mr. Winnick) the Minister said that he
    972
    had received several representations. That does not really tell us what the volume of representations has been. Is not the truth of the matter that they are coming in daily, and that although he has not yet reckoned them up they are obviously considerable?
    Mr. Moore: I thought, two days after the Budget, that it would be most convenient for the House if I simply indicated that several representations had been received. Of course, many more will be coming in. I could cite other comments that have been equally supportive of the Budget, such as the comment by the Institute of Directors [Interruption.] Those who have some recognition of the problem of trying to offer people work, which I thought was of some interest to Opposition Members, said that my right hon. Friend
    "has skilfully squeezed a wide range of employment and enterprise measures from a limited range of resources."
    Mr. Stokes: Is my hon. Friend aware that he should not listen too closely to everything that the hon. Member for Walsall, North (Mr. Winnick) says? Is he further aware that yesterday I spent a day in the west midlands visiting a very large factory and did not receive a single complaint about the Budget?
    Mr. Moore: I always listen with considerable care to my hon. Friend. I know that he will be reassured when I remind him that the hon. Member for Walsall, North (Mr. Winnick) was my losing opponent in the October 1974 election.
    Mr. Robert Sheldon: The Financial Secretary seems to expect a big reduction in unemployment as a result of the changes in national insurance contributions, but will he take into account the fact that they will cost only £450 million in a full year, whereas the reduction in the national insurance surcharge cost £900 million last year, and even more the year before? That did not do very much good for unemployment.
    Mr. Moore: The right hon. Gentleman should not underestimate the size of the reconstruction. It is a question not simply of the Government's overall contribution to the restructuring of national insurance contributions but of the redistributive effect of the £800 million odd that comes from the upper income limit. Some people are already criticising, but that makes a total of about £1·2 billion.
    Mr. John Mark Taylor: Have any representations been received from the building societies? If so, has my hon. Friend suggested that they might follow the example of the banks and lower their rates rather than increase them?
    Mr. Moore: As far as I know, my right hon. Friend the Chancellor of the Exchequer has not received any representations, but I shall certainly draw his attention to that point.
    Mr. Blair: If we accept the Financial Secretary's protestations that this is, indeed, a Budget for jobs, are we agreed that,, if by the time of the next Budget there has not been a significant reduction in unemployment this Budget will be accepted as a failure?
    Mr. Moore: I was not asked for my protestations. I was asked about what representations I had received. I referred to the representations of two of the major employers' organisations in the country. I could refer to others, such

    973
    as the Associaton of British Chambers of Commerce, which said that the Budget was a fair and competent package.

    Public Sector Borrowing Requirement
    Mr. Neil Hamiltonasked the Chancellor of the Exchequer if he will make a statement on the level of the public sector borrowing requirement for the coming year.
    Mr. Peter Rees: As my right hon. Friend the Chancellor of the Exchequer indicated in his Budget statement, we have set the PSBR at £7 billion, equivalent to 2 per cent. of GDP.
    Mr. Hamilton: Is my right hon. and learned Friend aware that that news has been greeted with some acclaim in the City, and that it is good news for industry in this country in general, and in particular for manufacturing industry? After all, it holds out the prospect of lower interest rates and a stabilising of the currency.
    Mr. Rees: I am grateful for those comments. The figures certainly signalled to the world outside that the Government are still on course and pursuing a sound financial policy that will be of considerable benefit to the economy.
    Mr. Wrigglesworth: In that case, might it not have been more accurate to describe the Budget as a Budget for the City rather than for jobs? If the PSBR target and the other figures in the Budget strategy represent a Budget for jobs, how is it that the impact of the Budget on the economy will not be deflationary?
    Mr. Rees: If the hon. Gentleman considers the growth record of the past four or five years and the prediction of growth for the coming year, he will realise that his strictures are wide of the mark.
    Mr. Hugh Brown: Will the Chief Secretary say how much of the forecast public expenditure for next year will be due to capital receipts from the sale of council houses, and does he now know what the Labour party policy is on that matter?
    Mr. Rees: Without notice, I am afraid that I cannot give the projected receipts.
    The hon. Gentleman asks me about Labour party policy. With notice, I derive my knowledge from the Labour manifesto, which states that Labour will:
    "End enforced council house sales, empower public landlords to repurchase homes sold under the Tories".

    Public Expenditure
    Mr. Maudeasked the Chancellor of the Exchequer what has been the real percentage increase in total public expenditure in each year from 1979; and what is the anticipated real level of public expenditure for the forthcoming five years.
    Mr. Peter Rees: In real terms the year-on-year percentage increases in the public expenditure planning total since 1979–80 have been 1·5, 2·7, 1·6, 1·6 and 3·2. This last figure, which relates to the year now ending, reflects coal strike costs, without which it would have been 1·2 per cent.
    Mr. Maude: Is my right hon. and learned Friend aware that there is widespread concern that the planning totals
    974
    have consistently been exceeded, that those totals were too high to begin with, and that it is essential to have some reduction in real terms if we are to have real tax cuts in future?
    Mr. Rees: I understand my hon. Friend's concern. Provided that we contain public expenditure within the planning totals, and on the basis that there will be growth in the economy, I hope that my right hon. Friend will have increased scope for making the tax cuts that my hon. Friends all want.
    Mr. Gordon Wilson: In view of the very small increases in public expenditure to which the Chief Secretary has referred, is he aware that in Scotland this year rates will rise by about 20 per cent. because of a drop in rate support grant authorised by his Department and also because of revaluation? If he is approached by the Secretary of State for Scotland for more money to ease the problems of domestic and commercial ratepayers, will he make more money available for that purpose?
    Mr. Rees: My right hon. Friend the Secretary of State for Scotland has made his position clear on that point. The hon. Gentleman is right to emphasise the fact that the increases are at least partly due to the domestic revaluation.
    Mr. Dorrell: In his concern to restrict the future growth of public expenditure, will my right hon. and learned Friend remember that important services such as health and education are, for the vast majority of the electors, provided exclusively out of the public sector, and that therefore it would be quite wrong artificially to hold down the level of those services because they happen to fall in the public, rather than the private, sector?
    Mr. Rees: I do not entirely accept my hon. Friend's analysis. He and the whole House will realise that there have been real increases in both programmes since we came to office.

    Value Added Tax
    Mr. Meadowcroftasked the Chancellor of the Exchequer if he will transfer the responsibility for value added tax from Her Majesty's Customs and Excise to the Inland Revenue.
    Mr. Moore: No, Sir. When VAT was introduced in 1972 Customs and Excise was responsible for managing purchase tax, one of the taxes replaced by VAT, and the decision to introduce VAT in the United Kingdom on a transaction basis, rather than an accounts basis, was finally decisive in favour of laying the administration of VAT to Customs and Excise rather than to the Inland Revenue.
    Mr. Meadowcroft: Will the hon. Gentleman acknowledge that, in relation to tax, businesses have to concern themselves with two very different types of Government Department, and that Customs and Excise is acknowledged to have far less knowledge of the workings of business and to be far less flexible in dealing with the real problems currently faced by businesses?
    Mr. Moore: I do not accept the hon. Gentleman's reservations. The taxes are very different in kind. The needs are different and so are the methods of collection. I am confident that Customs and Excise exercises its authority in this matter in a proper way.
    Mr. Stern: Does my hon. Friend agree that the suggestion implicit in the question would be a retrograde step, if only because the record of Customs and Excise on making its rules and regulations available to the public has recently been rather better than that of the Inland Revenue?
    Mr. Moore: I do not accept my hon. Friend's latter point, but I agree that the suggestion would be a retrograde step for the taxpayer, the country and the administration of the Revenue and Customs and Excise.

    Treasury Model Computer Programme
    Mr. Norman Atkinsonasked the Chancellor of the Exchequer if, in the light of recent experience, he will change the assumptions upon which the Treasury model computer programme is based in regard to lower wages and job creativity.
    Mr. Peter Rees: No, Sir.
    Mr. Atkinson: Does the Treasury understand that those who advise the Chancellor assume that the lowest paid in manufacturing industry produce the lowest unit labour costs, and that if wages in the public sector go down 10 per cent. in aggregate that will increase employment prospects by 10 per cent.? Will the Chief Secretary review those assumptions and come to some better understanding, if policy is to make sense?
    Mr. Rees: I assure the hon. Gentleman that we review the Treasury model's operations fairly regularly. If he is doubtful about the assumptions that are fed in, he is quite at liberty to feed in his own assumptions and have a go on the model himself.
    Sir Anthony Meyer: As full industrial employment in the old-fashioned sense is unlikely to return under Governments of whatever colour, if only because of technological change, and as it is better for people to have a part-time job than no job at all, should not the Government take pride in the fact that this is a Budget for part-time jobs?
    Mr. Rees: Whether part-time or full-time, we take pride in the fact that this is a Budget for jobs. A range of measures, many of which my right hon. and hon. Friends have drawn attention to, such as the restructuring of national insurance contributions, the raising of thresholds and improvements and additions to the youth training scheme and the community programme, all demonstrate that it is a Budget for full-time and part-time jobs.
    Mr. Skinner: Is the Chief Secretary aware that unemployment has gone up ever since the Treasury model was installed? Would it not be a good idea to get rid of this computer? Was it developed by Tycom—like the one which the Conservatives used but found they had to get rid of?
    Mr. Rees: I regret to say that I cannot tell the hon. Gentleman whether it is a Tycom model. However, the basic thrust of our policies depends on sound common sense and a grasp of basic economic principles. We do not need the refinements of the Treasury model to assist us there.
    Mr. Budgen: Does the Treasury model show that a high proportion of people who are paid large wages are employed by big firms? Will my right hon. and learned
    976
    Friend confirm that big firms have recently enjoyed a considerable increase in liquidity and profitability—as is shown by the high level of shares on the Stock Exchange—and that the change in the employers' contribution is unlikely to cause any increase in unemployment among rich people?
    Mr. Rees: My hon. Friend has perceptively summed up the matter, as is so often the case.

    Interest Rates
    Mr. Weetchasked the Chancellor of the Exchequer if he will make a statement on the recent rise in interest rates and their effect on industry.
    Mr. Ian Stewart: Without the rise in interest rates there would have been a risk of a return to inflationary conditions, threatening the prospects for industry and for continued growth.
    Mr. Weetch: Is the Economic Secretary aware that the minimum lending rate of 13·5 per cent. is a major constraint on British industry and commerce and stands four square in the way of any substantial industrial expansion? Does he agree that, with an inflation rate of 5 per cent. and a minimum lending rate of 13·5 per cent., real rates of interest in Britain are about the highest that they have ever been in the past 50 years? What are the prospects for interest rates coming down so that British industry might have a less crippling rate for the price of money?
    Mr. Stewart: I am glad to be able to say that interest rates are now lower than when the hon. Gentleman tabled his question. British industry has been doing very satisfactorily.
    "Interest rates should fall because he is keeping a grip on inflation and on borrowing."
    Those are the words of Sir Terence Beckett of the Confederation of British Industry.
    Mr. Phillip Oppenheim: Does my hon. Friend agree that the best way to keep interest rates low is to reduce the competition for scarce funds from the public sector and allow the private sector to create jobs by spending more money?
    Mr. Stewart: I have no doubt that my hon. Friend is correct to point out that the higher budget deficit which is involved in higher public expenditure places a strain on interest rates and therefore causes damage to the private sector.
    Mr. Haynes: Does the Minister not realise that the people sitting on the Treasury Bench are absolutely useless, except for the Lord Privy Seal and the Whip? Is he aware that his Government are hitting industries in my constituency in two ways, because a number of them are dependent upon contracts in the public sector, and at the same time he is banging up interest rates? They are still going to be laying people off, and yet they say that they are a Government who create jobs for people so that they can work. What is he going to say about that?
    Mr. Stewart: I am going to tell the hon. Gentleman that inflation destroys jobs and that the policy of this Government is to maintain monetary conditions which continue to bring down inflation.
    Mr. Beaumont-Dark: Does my hon. Friend agree that the Budget at least gives great encouragement to the banks

    977
    to lower their interest rates because of financial rectitude? Was he not disappointed by the timid approach of the banks in cutting interest rates by only 0·5 per cent.? Is it not time that the banks stopped making their money out of home industry and losing it overseas, and instead reduced their interest rates at home?
    Mr. Stewart: I was glad to see that the banks reduced their base rates, and that, of course, has now been validated in the markets. If and when conditions are such that monetary constraint can be maintained at lower levels of interest rates, that will be very welcome.
    Mr. Campbell-Savours: Is the Minister convinced that if interest rates were to be reduced by 1 per cent. that would have a detrimental effect on the dollar-sterling exchange rate?
    Mr. Stewart: The dollar-sterling exchange rate is influenced by many factors other than the level of sterling interest rates because it is measured against many other currencies as well. I believe that we should maintain short-term interest rates in this country at the level required to deliver the monetary conditions and the pressure against inflation, which is Government policy.
    Mr. Forth: Does my hon. Friend share my sense of mystery as to how Opposition Members can praise the United States approach to budget deficits as an explanation for growth but be unable to recognise that the United States economy can still flourish with the differential between money and the real interest rates of the United States economy?
    Mr. Stewart: There are many contradictions in the Opposition's interpretation of financial affairs in the United States. We must all recognise that the large deficits in the United States have caused problems for many other countries and may well cause problems for the United States as well.
    Mr. Wainwright: In view of the public uncertainty and concern about the Government's policies on interest rates, will the Economic Secretary elucidate the bald but very pregnant sentence in his right hon. Friend's Budget speech in which he said, without explanation, that he was increasing the provision in public expenditure figures for future years for debt interest?
    Mr. Stewart: I thought that that was very clearly expressed by my right hon. Friend. It was a realistic assessment in the light of current projections for interest rates. If interest rates turn out to be lower than we have projected, we shall all be very glad about the public expenditure consequences of that. But, since it is the prime purpose of our monetary policy to maintain monetary conditions to bring down inflation, we have to accept that that has a cost in interest rates as well.

    Budget (Income Tax)
    Mr. Kenneth Carlisleasked the Chancellor of the Exchequer how many taxpayers are no longer liable for income tax as a result of his recent Budget.
    Mr. Lawson: Some 800,000 people on low incomes, 100,000 of them widows, who would have paid tax if I had not raised personal allowances will pay no tax at all in 1985–86.
    Mr. Carlisle: That is an encouraging figure. The raising of tax thresholds by twice the rate of inflation,
    978
    combined with the reductions in national insurance contributions, will be of real help to those on low pay. Will my right hon. Friend now address himself with urgency to the further measures that are required to eliminate the poverty and unemployment traps?
    Mr. Lawson: Yes, indeed. It has been a constant objective of the Government, both under my predecessor as Chancellor and myself, to reduce the effect of these traps, and particularly the employment trap. Thresholds have now risen by more than 20 per cent. in real terms over what they were under Labour. My hon. Friend is right to direct attention to the restructuring of the national insurance contributions system, the first time that such restructuring has ever been done, and I believe that it will have a very helpful effect indeed where unemployment is at its most severe.
    Mr. Fisher: Is the Chancellor aware that tax thresholds have risen by 10 times more than child benefit has risen over the period? Is he aware that a rise in child benefit is the only way to help the 500,000 working families with children, whom tax thresholds do not help at all?
    Mr. Lawson: Tax thresholds help families with children, just as they help the single and those without children, whereas an increase in child benefit helps only those with children. It is a matter of judgment as to where the Government put their limited resources. I am confident that a reduction in taxation is the best way to help the economy grow and prosper.
    Mrs. Currie: Has my right hon. Friend noticed that 260,000 of those who will no longer be paying tax as a result of the Budget are over working age? Does he agree that, apart from a few well-paid pensioners, such as certain Opposition Members, the Chancellor and the Treasury should, on the whole, keep their sticky fingers off the pensions that people have worked so hard to provide for themselves?
    Mr. Lawson: I am not sure whether my hon. Friend is praising the extent to which tax reliefs have gone to the elderly or whether she regards what has been done as excessive. The elderly benefit from the changes in the Budget. It is extraordinary for the Opposition to maintain that the proposals in the Budget concerning national insurance were derived from the Labour party manifesto. Following what the Leader of the Opposition said about that, I looked into the matter and found that all that they said in their manifesto was that the upper earnings limit for employees should be abolished. That was the one thing that I conspicuously refrained from doing.
    Mr. Hattersley: Will the Chancellor now answer the question which he refused to answer half an hour ago? Will he confirm that if the mortgage rate is increased in the coming 24 hours, for most house owners the increase in mortgage repayments this year will more than exceed any reduction in their income tax?
    Mr. Lawson: That is a typically confused calculation—[HON. MEMBERS: "Answer."]—because the benefits in income tax terms will last for the entire year whereas the extra burden in mortgage interest will last for only so long as the mortgage interest rate is higher—which will be considerably less than a year.
    Mr. Yeo: Does my right hon. Friend agree that while it is advantageous for many thousands of people no longer

    979
    to be liable for tax, even more welcome is the fact that many people who were earning too small a sum to be liable for tax will benefit from the reduction in employees' national insurance contributions?
    Mr. Lawson: My hon. Friend is absolutely right. It also makes an important difference to the relationship between earnings in work and income out of work. That was an important aspect that we had to change for the better, and that is what the Budget has done.

    Budget (Job Creation)
    Mr. Fatchettasked the Chancellor of the Exchequer what estimate he has made of the effect of his Budget proposals on the level of unemployment.
    Mr. Lawson: The Budget proposals will substantially improve the prospects for jobs without taking any risks with inflation.
    Mr. Fatchett: Will the Chancellor predict the extent to which unemployment will fall before he presents his next Budget to the House?
    Mr. Lawson: It is most unwise to make predictions about the precise level of unemployment — [Interruption.]—because it depends on the behaviour of people — of trade unions, workers, employers and managers — throughout the economy. As the hon. Gentleman will know, the community programme enlargement alone will produce 100,000 more jobs.
    Mr. Spencer: Is my right hon. Friend aware that in one youth training scheme in Leicester for clerical trainees the success rate is 77 per cent. and that in another scheme for catering trainees it is 80 per cent.? Does he agree that more youth training places mean more employment?
    Mr. Lawson: My hon. Friend is right. The youth training scheme has been a conspicuous success. That is why we are proposing an extension of it, provided that employers are prepared to pay an adequate share of the bill, as I am sure they will be. Of course, nowhere has the youth training scheme been a greater success than in Leicester.

  PRIME MINISTER

    Engagements
    Mr. Budgenasked the Prime Minister if she will list her official engagements for Thursday 21 March.
    The Prime Minister (Mrs. Margaret Thatcher): This morning I presided at a meeting of the Cabinet and had meetings with ministerial colleagues and others. In addition to my duties in this House I shall be having further meetings later today.
    Mr. Budgen: Will my right hon. Friend take the opportunity today to make a speech about wages councils? Will she explain that it is unlikely that many people will take jobs at rates below the level that would be given to them by supplementary benefit? Will she further give the House and the country the leadership that we have come to expect from her? Will she explain that she is not in favour of a fudge and that she shares the preference of the Chancellor of the Exchequer for complete abolition?
    The Prime Minister: My hon. Friend has made the point very effectively himself. The consultative document
    980
    on wages councils will be out later today. I believe with my hon. Friend that, especially for young people, lower wages would mean more jobs. Those who are interested in solving unemployment will, I believe, follow that course of action.
    Mr. Kinnock: Is the Prime Minister aware that the 1 per cent. rise in mortgage rates announced this afternoon will cause very grave hardship to millions of home-buying families? Because of that, will the right hon. Lady support those building society chiefs who favour a system for setting mortgage rates which is more rational and more stable than the present system, which follows short-term market fluctuations?
    The Prime Minister: Yes of course I regret the 1 per cent. rise in mortgage rates, but I think that the building societies must be the best judge of the rates necessary to get in sufficient money to enable them to continue to meet the demand for mortgages.
    Mr. Kinnock: Does not even the Prime Minister, who heads this high mortgage Government— [Interruption.] That is absolutely true. The mortgage rate has never been in single figures since this Government came into power. Does not even the Prime Minister understand the immense anxieties of families with a mortgage of £20,000, whose rates of repayment have gone up by over £30 a month since last summer alone? Does she think it is right that families paying mortgages should be the victims of short-term speculation by big money speculators? If she does not, will she take steps to introduce a system that will mean that mortgage payers can enjoy greater stability and greater security in the price that they pay for their houses?
    The Prime Minister: Building societies can only lend money that has been lent to them. There are some 14 million or 15 million people who put their savings in building societies. They can choose where their savings go. The building societies have to pay a rate of interest that will attract the savings of 14 million-15 million people into building societies rather than elsewhere, otherwise there would not be money for mortgages. I am glad that the right hon. Gentleman is so concerned. I hope that he will also consider the need to keep down rates to counteract the increase in mortgages.
    Mr. Kinnock: The rise in mortgage repayments that has taken place under the right hon. Lady in just the last year is bigger than almost any rate that ordinary people who are buying their houses have to pay. If the right hon. Lady is so concerned, why does she not use the powers of the Government to help the building societies, because public money would then be literally as safe as houses and people could have a stable rate of payment for their mortgages?
    The Prime Minister: I repeat that the building societies have to attract the savings of the people. The people have the choice where to put their savings. It is important that the building societies have enough money to lend out on mortgage. If the right hon. Gentleman had his way, there would be far fewer owner-occupiers in any event.
    Mr. Thurnham: Will my right hon. Friend reassure pensioners that she is looking to local authorities to continue concessionary bus passes and to improve the efficiency of their local bus services?
    The Prime Minister: We have made provision for that in London, but outside London it will be up to local authorities to decide.
    Dr. Owen: Is it not extraordinary that the Chief of Defence Procurement cannot be shown the documents affecting a £200 million contract? Is it not extraordinary that he was a political adviser who was then illegally appointed to be a permanent civil servant? Is it not time that the Prime Minister withdrew that appointment and did not continue to compromise the integrity of the Civil Service in the way that she has done?
    The Prime Minister: The integrity of the Civil Service has not been compromised. I should have thought that the right hon. Gentleman would agree with many people who think that it is right that there should be more interchange between business and the Civil Service. It is often thought that that is one of the ways of increasing the knowledge of the Civil Service of business and how it works. As the right hon. Gentleman knows, permission has been given by the commissioners of the Civil Service for the appointment, which has now taken effect.
    Mr. Adley: Did my right hon. Friend hear the extraordinary comments of the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley), who sought to equate the cost of what he called fighting the miners with the amount of money available for tax reductions? Is it not clear that the right hon. Gentleman and the Labour party could not recognise a principle if they saw one? Presumably, on the right hon. Gentleman's thesis, in 1939 it would have been cheaper if we had merely sat on our hands instead of fighting Fascism.
    The Prime Minister: I do not know what view—[Interruption.] This Government could never have given in to violence and intimidation, even if the Opposition wanted us to do so.
    Mr. Heffer: On a point of order, Mr. Speaker.
    Mr. Speaker: Order. I shall take points of order later.
    Mr. Fisherasked the Prime Minister if she will list her official engagements for Thursday 21 March.
    The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.
    Mr. Fisher: Can the Prime Minister clarify the position of YTS and the entitlement to supplementary benefit in the light of the Budget? The Chancellor said that the cost of his YTS plans would be £125 million in 1986–87 and would in part be offset by savings in social security payments. How will those savings be made? Will the right hon. Lady make it clear that there is no intention during the lifetime of her Government or this Parliament to make YTS compulsory and so make savings in that way?
    The Prime Minister: There is no change in the arrangements for YTS. Clearly, those who are drawing amounts for YTS will not be drawing supplementary benefit. When the full YTS scheme is in place, I believe that it would be right to say to young people, "You have the choice of a job, education or training." Unemployment should not be an option. That can only be considered when that scheme is in place. I believe that the overwhelming majority of parents and people would agree with me. The hon. Gentleman may prefer unemployment for young people—we do not.
    Mr. George Gardinerasked the Prime Minister if she will list her official engagements for Thursday 21 March.
    The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.
    Mr. Gardiner: Now that the fears of all those in company pension schemes have been allayed by the Chancellor, will my right hon. Friend point out to those people that the only threat they face is from a Labour party committed to directing pension fund investments according to the whims of a Labour Government and not with a view to maximising the profits of the members of such funds?
    The Prime Minister: Yes, the fact that the threat has been made makes it more unlikely that the Opposition will ever be in a position to carry it out.
    Mr. Dormand: What effect will the Budget have on unemployment in the northern region, where unemployment has increased every month since the right hon. Lady's Government came into power, and where the unemployment rate is still the highest in the country outside Northern Ireland? What possible hope can there be for the north in this "do nothing" Budget? Will the right hon. Lady set up an inquiry into the special problems of the northern region?
    The Prime Minister: I hope that the north and the north-west will gain from changes in both the YTS and the community programme, which should provide more jobs, particularly for those who have been unemployed for a long time. Although unemployment is very high in the north, indeed it is the highest of all, the wages in that region are also comparatively high. They are the third highest in the country. The two might be related.
    Mr. Hayesasked the Prime Minister if she will list her official engagements for Thursday 21 March.
    The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.
    Mr. Hayes: Does my right hon. Friend agree that the country is faced with a tragic paradox: with, on the one hand, massive unemployment, and, on the other, a tremendous skill shortage? Therefore, will she use all her powers to urge the Manpower Services Commission to set up long-term training for young people, lasting for two years or more, to provide the skills that industry vitally needs?
    The Prime Minister: My hon. Friend is correct. In spite of unemployment and massive amounts spent on training, universities and polytechnics, there is a skill shortage. We hope that the measures announced this week, both the switch in the universities to more engineering and technology courses and the extra money for YTS, will result in training young people for some of the jobs that need higher skills. This is the biggest investment in the training of young people that has ever been made.
    Mr. Norman Atkinson: The Prime Minister has again reiterated that lower wages means more job creation. How many jobs does she estimate that the chairman of ICI, in taking a 65 per cent. wage increase, will have cost the work force at ICI?
    The Prime Minister: ICI has had, as the hon. Gentleman knows, a record year. I hope that he is pleased

    983
    that it is one of the outstanding companies in Britain. With regard to the link between wages and jobs, between 1974–1984, in the United States earnings were down by 10 per cent. and jobs were up by 21 per cent. In the United Kingdom over the same 10 years, earnings were up by 19 per cent. and jobs were down by 4 per cent. That would seem to show an effectively close link.
    Mrs. Roeasked the Prime Minister if she will list her official engagements for Thursday 21 March.
    The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.
    Mrs. Roe: Will my right hon. Friend take time today to study the situation in Hackney? Does she agree that if this Labour-controlled council fails to set a rate it will not be able to pay its 7,000 employees, and any claim that it is defending jobs will be seen to be sheer hypocrisy?
    The Prime Minister: I agree with my hon. Friend. If the council does not set a legal rate the consequences will fall on its staff and the electorate—both of whom the council will be punishing—and possibly on its future as well.

    NATO (Equipment)
    Mr. Dalyellasked the Prime Minister on how many occasions since 1979 the United Kingdom has availed itself of the provisions of the North Atlantic Treaty Organisation's agreements with the United States of America for the supply or use of equipment outside the North Atlantic Treaty Organisation area.
    The Prime Minister: None, Sir. I know of no NATO arrangements of the kind suggested by the hon. Member.
    Mr. Dalyell: Why then, under this agreement, should Mrs. Jeane Kirkpatrick write in The Times on 4 March that precisely such an arrangement made it possible for us to get all the American intelligence that we wanted during the Falklands campaign? When did the right hon. Lady learn from American intelligence of the recall signals on 1 and 2 May from Argentina to the Belgrano? When did she know from American intelligence?
    The Prime Minister: The North Atlantic Treaty provides only for mutual defence in the North Atlantic area. Members of the Alliance consult on a wide range of issues inside and outside the treaty area that affect their common interests. Any arrangements made are on a bilateral basis—nothing to do with NATO.
    Mr. Heffer: On a point of order, Mr. Speaker. During Question Time the hon. Member for Christchurch (Mr. Adley)—incidentally, that is where I happened to be, with lots of other people, with the Royal Air Force during the war—suggested that Opposition Members would actually accept a policy of appeasement towards dictators and Facism. May I draw to his attention and the attention of the House—
    Mr. Speaker: Order. That is not a point for me. The hon. Gentleman must find other methods of drawing the matter to the attention of the House—
    Mr. Heffer rose—
    Mr. Speaker: Order. We have a particularly heavy day, with two statements, business questions and a long list of speakers who wish to take part in the Budget debate. If it is a point of order that I can answer, I shall do so, but the hon. Member for Liverpool, Walton (Mr. Heffer) must not try to reply to the hon. Member for Christchurch (Mr. Adley) through a point of order.
    Mr. Heffer: Is not the hon. Member for Christchurch misleading the House when he fails to tell hon. Members that it was the Anglo-German Friendship Society, supported by the Conservative party—
    Mr. Speaker: Order. This is an abuse. I must ask the hon. Gentleman to desist. Business questions.
    Mr. Heffer: Further to that point of order. Mr. Speaker.
    Mr. Speaker: Order. I gave the hon. Gentleman an opportunity to put a point of order to me, and he is now seeking to extend Question Time because he disagrees with what the hon. Member for Christchurch said.
    Mr. Heffer: No.
    Mr. Speaker: Order. That is what he is doing.
    Mr. Heffer: No.
    Mr. Speaker: Put a point of order to me, and I shall deal with it.
    Mr. Heffer: I am putting a point of order to you, Mr. Speaker, on the basis that it is your duty to protect the interests of Members of the House. I say that Opposition Members have been deliberately misrepresented because of the statement made by the hon. Member for Christchurch. I believe, in the interests of the House and of honesty, that he should withdraw that statement and learn a bit of history.
    Mr. Speaker: Order. Every day we hear things in the House that hon. Members disagree with.
    Mr. Heffer: It is a fact.
    Mr. Speaker: The hon. Gentleman must find other methods of raising the matter.
    Mr. Ryman: On a point of order, Mr. Speaker.
    Mr. Speaker: Well, Mr. Ryman.
    Mr. Ryman: Despite your disdain, Mr. Speaker, I have a genuine point of order, and it is this. Is it or is it not in order during Prime Minister's Question Time for sycophantic Tory Back Benchers to ask a supplementary question that is not within the Prime Minister's responsibility, but is simply for the purpose of making a cheap, partisan point?
    Mr. Speaker: I do not think that that is a matter for me, either.

Business of the House
3.33 pm
Mr. Neil Kinnock: Will the Leader of the House state the business for next week?
The Lord Privy Seal and Leader of the House of Commons (Mr. John Biffen): Yes, Sir. The business for next week will be as follows:
Monday 25 March—Conclusion of the debate on the Budget Statement. Motions relating to the National Health Service Charges Amendment Regulations. Motion on the Mineworkers' Pension Scheme (Limit on Contributions) Order.
Tuesday 26 March — Motion for the Easter Adjournment. Proceedings on the Consolidated Fund (No. 3) Bill.
Wednesday 27 March—Progress on remaining stages of the Local Government Bill (1st Allotted Day). Motion on the Rate Support Grant (Scotland) (No. 2) Order.
Thursday 28 March—Completion of remaining stages of the Local Government Bill (2nd Allotted Day). Motion on the Redundant Mineworkers and Concessionary Coal (Payments Schemes) (Amendment) Order.
Friday 29 March—Private Members' motions.
Monday 1 April—Consideration in Committee on the Interception of Communications Bill. It is expected that the Chairman of Ways and Means will name opposed private business for consideration at seven o'clock.
Mr. Kinnock: Why have not the Government been able to ensure that the debate on the increase in prescription charges is held in prime time? Is it because the Government are so ashamed of the measure that they want to minimise press reporting? What other conceivable reason could there be for having such an important and controversial debate after 11 o'clock on Monday evening?
In the light of the revelations in The Guardian today that the Home Office is pursuing a policy of deliberate delay by establishing long queues of people claiming a legal right to enter Britain from the Indian sub-continent, may I once again press the right hon. Gentleman to provide time for a debate on the report of the Commission for Racial Equality? I have raised this matter with him on several occasions.
On the motion on the Redundant Mineworkers and Concessionary Coal (Payments Schemes) (Amendment) Order next Thursday, will the right hon. Gentleman ensure that extra time is allocated because it is clear that a large number of right hon. and hon. Members will want to take part?
On a number of occasions I have asked the right hon. Gentleman to announce a debate on the star wars initiative. In the light of the controversy surrounding the Foreign Secretary's statement last Friday, and the subsequent statements by Herr Kohl and Herr Genscher this week, does not the right hon. Gentleman think that it is now high time that we had such a debate in the national interest?
Mr. Biffen: I realise that the motion on Monday evening on prescription charges is of real public interest. However, it is customary to have such a debate at that time of the evening. Certainly, the House has never resiled from recognising the importance of a topic, whatever the time of the day. However, I take note of the right hon. Gentleman's comments.
986
I accept at once that the right hon. Gentleman has already asked for a debate on the report of the Commission for Racial Equality, and we could pursue that through the usual channels.
The right hon. Gentleman requested that the debate on the Redundant Mineworkers and Concessionary Coal (Payments Schemes) (Amendment) Order scheduled for Thursday evening should go beyond what is now prescribed. Again, that is something that we could consider through the usual channels. I recognise that it is a matter of great interest to both sides of the House.
As the right hon. Gentleman knows, no time has been allocated for a specific debate on the star wars issue, but again we could consider that further.
Mr. Albert McQuarrie: Does my right hon. Friend remember that last Monday we had a debate on the European Community proposals for the 1985–86 CAP prices? Prior to that debate Mr. Speaker permitted a private notice question which restricted the time for the main debate. In addition, the last time that we debated the CAP was late at night. Does my right hon. Friend propose to give the House the opportunity of a full debate in prime time on the 1985–86 CAP price proposals?
Mr. Biffen: I have to give a direct and disappointing answer to my hon. Friend — no. He may wish to consider the scope offered to him by the debate on Tuesday on the Consolidated Fund Bill.
Mr. A. J. Beith: Does the Leader of the House recognise what wide and progressive policies have been endorsed in another place on such issues as reform of the Official Secrets Act and reform of the electoral system in local government? Will he bring those issues before this House with the guarantee that the Government will be as accommodating to progressive opinion here as they were in another place?
Mr. Biffen: I suppose that the other place has now become the refuge for liberalism, but it is a sad cry from the days of Lloyd George.
More specifically, I must tell the hon. Gentleman that no provision has been made next week for debates upon the topics he mentioned. Nor are such debates immediately foreseen in Government time. However, other occasions may be available to the House.
Several Hon. Members rose—
Mr. Speaker: The House well knows that I always try to give Back-Bench Members an opportunity to ask business questions, but today we have two statements and an important debate in which many right hon. and hon. Members wish to take part. I shall, therefore, allow business questions to continue until five minutes to 4 o'clock.
Sir Geoffrey Johnson Smith: My right hon. Friend will be aware of the considerable speculation about the future level of the British Broadcasting Corporation licence fee and, indeed, about the future of television and sound broadcasting. May we expect a statement from the Government soon and also a debate on these issues?
Mr. Biffen: I shall refer to my right hon. and learned Friend the Home Secretary my hon. Friend's anxiety that a statement should be made about the television licence in

987
the near future. I take note and take account of the interests of the House in how we next proceed to consider the matter of the televising of this place.
Mr. Max Madden: To revert to the question of immigration control raised by my right hon. Friend the leader of the Opposition, does the Leader of the House accept that the allegations made today that entry clearance procedures are being deliberately rigged, effectively setting up quotas for those entitled to come to this country, are extremely serious? Will he therefore ensure that the usual channels work extremely quickly to enable Home Office Ministers to come to the House to defend their actions of the past 18 months?
Mr. Biffen: I shall draw the attention of my right hon. and learned Friend the Home Secretary to the hon. Gentleman's point about the report in The Guardian today.
Mr. David Crouch: Is my right hon. Friend aware that the Unborn Children (Protection) Bill passed its Committee stage in the early hours of this morning after more than 30 hours of consideration in Committee, and now awaits further examination by the House on Report? Can my right hon. Friend assure me and the House that no exceptional measures will be taken to assist the progress of the Bill in view of the Government's declared neutrality on the issue?
Mr. Biffen: I am not sure that officially I yet know of these transactions. However, I should like to emphasise that on Second Reading the Government's position was one of neutrality, and there it stands.
Mr. Jeremy Corbyn: Does not the Leader of the House think that there should be an urgent debate about the position facing rate-capped authorities, and that the Secretary of State for the Environment, as he is apparently not prepared to talk to the representatives of rate-capped authorities, should explain to the House why the Government have selected the poorest inner city areas for vindictive action to destroy their services and damage the democracy that brought those services to them?
Mr. Biffen: The hon. Gentleman would be well advised to seek to make the speech that he has in mind during the debate on the Consolidated Fund Bill on Tuesday.
Mr. Tim Yeo: In view of the fact that the interests of thousands of children are now being severely damaged by the teachers' strike and that in consequence the esteem in which the teaching profession is held is declining, will my right hon. Friend consider giving an opportunity for debating the problem on the Floor of the House?
Mr. Biffen: My hon. Friend makes a pertinent point in the general public debate. I must say to him, as I said to the hon. Member for Islington, North (Mr. Corbyn), that the Consolidated Fund Bill provides precisely the circumstances for the contribution that he might seek to make.
Mr. Willie. W. Hamilton: The hon. Member for Canterbury (Mr. Crouch) raised a point which I support. Is the Leader of the House aware that in the Second Reading debate on the Unborn Children (Protection) Bill the Government made it clear that they wished to introduce their own comprehensive Bill to deal with the Warnock committee's recommendations? In the
988
light of that, will he give an assurance that on no account will the Government provide time to facilitate the passage of a private Member's Bill which would run counter to their own policies?
Mr. Biffen: I gave a clear answer to my hon. Friend the Member for Canterbury (Mr. Crouch). I cannot go beyond that.
Mr. Geoff Lawler: My right hon. Friend will remember writing to me kindly offering time for a debate on youth affairs. This being International Youth Year, can he offer a date for that debate?
Mr. Biffen: I regret to say that I cannot, but I shall continue to bear in mind the point that my hon. Friend has raised.
Ms. Clare Short: Is the right hon. Gentleman aware of the serious nature of the allegations made in the document leaked from the Home Office to The Guardian that the Minister of State, Home Office has been lying to the House and the country about the nature of Government immigration—
Mr. Speaker: Order. No Minister lies to the House.
Ms. Short: I wonder, Mr. Speaker, whether you have seen the document—
Mr. Speaker: Order. The hon. Lady must rephrase her question and withdraw that language.
Ms. Short: Deliberately misleading the House and the country—
Mr. Speaker: Order. That is just as bad. The hon. Lady has been here long enough to know that we do not use such words as "lying" and "deliberately misleading". I ask her to withdraw them and use a different phrase.
Ms. Short: The Minister is deliberately saying to the House and the country that the Government's immigration policy is other than it is. Secondly, the Government, according to the Home Office advice, have been deliberately breaching the European convention on human rights and operating illegally. In those circumstances, will the Leader of the House require the Home Secretary to make a statement to the House immediately on this serious matter?
Mr. Yeo: On a point of order, Mr. Speaker. I did not hear the hon. Lady withdraw her allegation that the Minister was telling a lie.
Mr. Speaker: I hope that the hon. Lady, by putting her question differently, was withdrawing that. I think that she did.
Mr. Dennis Skinner: Further to that point of order, Mr. Speaker—
Mr. Speaker: Order. I do not believe that the hon. Lady needs the help of the hon. Member for Bolsover (Mr. Skinner). He is being chivalrous, but will he please allow her to answer?
Mr. Skinner: Further to that point of order, Mr. Speaker.
Mr. Speaker: Order. I am on my feet.
Mr. Skinner: I will put it later.
Mr. Speaker: Order. I believe that the hon. Lady withdrew her comment.
Ms. Short: In accordance with the rules of the House, Mr. Speaker, I rephrased my comment.
Mr. Speaker: Order. I asked the hon. Lady to withdraw those words. It is simple for her to do that and put the question in another way. She put it in another way. I only wish her now to say that she withdrew those words. She can indicate by nodding.
Ms. Short: It is obvious that I withdrew the words, Mr. Speaker.
Mr. Biffen: If I may round off this cheerful exchange, I am sure that the hon. Lady asked her question in good faith that extended to all on the Treasury Bench. I shall of course add her name to those of Members who have requested that that point be taken by my right hon. and learned Friend the Home Secretary.
Mr. Skinner: On a point of order, Mr. Speaker. You will remember that yesterday, for about 20 minutes, we were subjected to the Chief Secretary to the Treasury refusing to withdraw a statement which was particular to the Opposition when it became—
Mr. Speaker: Order. I am anxious not to take time out of business questions because I have already limited them. I shall take the point of order afterwards. Unfortunately, it will then take time out of the debate.
Mr. Skinner: You have made a rod for your own back, Mr. Speaker.
Mr. Speaker: Order. The hon. Member must not threaten the Chair.
Mr. Skinner: I am not threatening, Mr. Speaker. I am just making a statement.
Mr. Peter Bruinvels: May I reinforce the request of my hon. Friend the Member for Wealden (Sir G. Johnson Smith) that we should have a speedy decision about what is happening concerning the BBC licence, bearing in mind that many of my hon. Friends do not wish to see it increased by much, if at all?
Secondly, will my right hon. Friend provide time for a debate on yet further union disputes in the newspaper industry, this time at The Sun?
Mr. Biffen: I take account of what my hon. Friend says about the television licence fee, but I can say no more than I have already said on that topic.
My hon. Friend might like to raise the question about industrial disputes in the newspaper industry during the debate on the recess motion.
Mr. John Maxton: Is the Leader of the House aware of the enormous anger and distress being caused in Scotland by the present rating revaluation? Is he aware that the anger is such that the rating of his party has now sunk to 19 per cent. in the latest opinion polls in Scotland? In view of that, is it not disgraceful that the only occasion when this House will be able to debate revaluation will be at midnight on Wednesday evening rather than in prime time? Ought not Scottish Members to be allowed to express the views of their constituents at a proper time?
Mr. Biffen: I have a genuine sympathy for the hon. Gentleman's point. All hon. Members would like subjects which have a direct constituency bearing to be dealt with in prime time rather than late in the evening. However,
990
that is not the only occasion next week when the hon. Gentleman can make the speech which he may be harbouring on this topic. He could make it on the Easter Adjournment debate or on the Consolidated Fund Bill next Tuesday. He could also make it on the motion of the hon. Member for Greenock and Port Glasgow (Dr. Godman) on Friday week.
Mr. Tony Baldry: Will my right hon. Friend give an undertaking that between the publication of the consultative document on the wages councils and any decision that is taken on them there will be a full debate in Government time and also that between the ending of consultations on the extension of the youth training scheme and the implementation of the two year youth training scheme there will be a full debate on the extension of YTS, again in Government time?
Mr. Biffen: I shall give the most serious consideration in due course to both proposals. Meanwhile, I should have thought that they could easily feature in any speech that is to be made this afternoon.
Mr. Kevin Barron: Since the Secretary of State for Defence is to attend the NATO nuclear planning meeting to be held next week in Luxembourg, could the Leader of the House ask the Secretary of State for Defence whether it would be possible for him to make a statement on that meeting as soon as he returns to this country?
Mr. Biffen: My right hon. Friend is literally at my left elbow and will have heard that question.
Mr. Alfred Dubs: Is the Leader of the House aware that his continued refusal or inability to find time for a debate on the Commission for Racial Equality's recent report on immigration procedures is seen by the country as political cowardice on the part of a Government who have so much to hide that they are unwilling to allow a free and open debate to take place on the subject?
Mr. Biffen: I am not sure whether the views of the country at large mirror the liberal conscience of the hon. Gentleman. As I said earlier, this matter could be considered through the usual channels.
Mr. Robert B. Jones: Is my right hon. Friend yet able to say when the promised debate on the Auld report will take place? He gave an undertaking that it would take place at an early date. Perhaps he could now fulfil that promise.
Mr. Biffen: I cannot be specific about that matter, but I assure my hon. Friend that the intention is to hold such a debate.
Mr. Sydney Bidwell: Because so many hon. Members have supported the request of my right hon. Friend the Leader of the Opposition for an early debate on the report of the Commission for Racial Equality, a debate upon it being long overdue, may I reinforce what my hon. Friends have said. Furthermore, a liberal conscience does not exist only among Opposition Members. The Race Relations Act 1976, which set up the commission, was supported by a considerable number of right hon. and hon. Members of the Conservative Party. Therefore, there is a nationwide basis for such a conscience and it proves that a debate is needed at the earliest possible opportunity.
Mr. Biffen: I note all that the hon. Gentleman says. He speaks with the authority of somebody who has been engaged in these debates over the decades. However, I had better leave the matter where is rested after I responded to the Leader of the Opposition.
Mr. John Home Robertson: It is not good enough for the Leader of the House to dismiss Scottish revaluation as a constituency matter. Is he not aware that the revaluation is causing acute alarm and distress to every householder and shopkeeper in each of the 72 Scottish constituencies? Will he accept that midnight on Wednesday is not an appropriate time for the Government to try to smuggle this business through the House?
Mr. Biffen: I would never be dismissive about anything Scottish. The hon. Gentleman made a trite observation. If an hon. Member has a Scottish constituency and Scottish rating is under consideration, it will have a very strong bearing upon constituency interests. I cannot add to the reply that I gave previously.
Mr. David Winnick: As there is a good deal of support in the House for the decision taken yesterday in the other place regarding section 2 of the Official Secrets Act, will the right hon. Gentleman reconsider the possibility of holding an early debate on that subject? Is it not true that when the Conservative party was in opposition the present Home Secretary, Attorney-General and many of the right hon. Gentleman's other Cabinet colleagues were very much in favour of repealing section 2?
Mr. Biffen: I do not think that section 2 exactly inspires a great clan of friendship in the House. The trouble was that when attempts were made to set it aside it was found that there were formidable difficulties. I take note of what the hon. Gentleman says, but as far as next week is concerned, he had better try to make his speech during the debate on the Consolidated Fund Bill.
Mr. John Ryman: What are the Government's intentions about the timetable for the Prosecution of Offences Bill, which sets up an independent prosecution service? Is the right hon. Gentleman aware that the management consultants report came out only very recently so that there has not been time to study it? Is he further aware that there is grave anxiety among many members of the staff of prosecuting solicitors up and down the country and in the Metropolitan police area that the report's implementation and the Bill's enactment may have far-reaching effects on their individual careers?
Mr. Biffen: I believe that the measure is currently before the other place, but I shall certainly draw the attention of my right hon. and learned Friend the Home Secretary to the hon. Gentleman's points.

Consolidated Fund (No. 3) Bill
Mr. Speaker: I have a short statement to make about arrangements for the debate on the motion for the Adjournment which will follow the passing of the Consolidated Fund Bill on Tuesday 26 March.
Members should submit their subjects to my office not later than 9 am on Monday 25 March. A list showing the subjects and times will be published later that day. Normally the time allotted will not exceed one and a half hours, but I propose to exercise a discretion to allow one or two debates to continue for rather longer, up to a maximum of three hours.
Where identical or similar subjects have been entered by different hon. Members whose names are drawn in the ballot, only the first name will appear on the list. As some debates may not last the full time allotted to them, it is the responsibility of hon. Members to keep in touch with the developments if they are not to miss their turn.
Mr. Dennis Skinner: On a point of order, Mr. Speaker.
Mr. Speaker: I will take it later, after the statements.

RAF (Basic Trainer Aircraft)
3.57 pm
The Secretary of State for Defence (Mr. Michael Heseltine): With permission, Mr. Speaker, I wish to make a statement on the selection of a new basic trainer aircraft for the Royal Air Force.
My right hon. Friend the Minister of State for Defence Procurement informed the House on 18 December 1984 that best and final offers were being invited from British Aerospace and Short Brothers to clarify and amplify certain aspects of their tenders for aircraft to meet the Royal Air Force's requirements in order to enable a final decision to be reached. It was subsequently agreed that Westland Helicopters Ltd. and Hunting Engineering Ltd. which has also submitted tenders in the first round could submit their own best and final offers. All four tenders have now been fully evaluated.
The prices quoted by Westlands and Huntings, although substantially reduced compared with their original offers, remain well in excess of the other two bids, thus confirming our earlier assessment that on cost as well as technical grounds the choice effectively lay between the PC9, proposed by British Aerospace in association with the Swiss firm, Pilatus, and the Tucano, proposed by Shorts in association with the Brazilian firm, Embraer. Procurement of either aircraft would provide much better value for money than the alternative option of refurbishing the Jet Provost fleet.
The choice between these two fine aircraft has proved to be evenly balanced. Both comfortably meet the minimum specification and either is capable of meeting the RAF's training needs very satisfactorily. Selection of either would boost jobs for British industry, both directly through the order for the RAF and indirectly through the export sales which the successful firm could be expected to win. In the end cost has been the decisive factor. Our policy is to reduce the cost of defence equipment through the maximum use of competition, thus providing better value for money for the taxpayer and stronger defences for the country within the resources available. Of the two best and final offers, Shorts' is the cheaper by a clear margin.
Subject to final completion of contractual negotiations, therefore, we shall be placing an order with Shorts for 130 Tucano aircraft. The contract will be on a firm price basis: that is to say, the price is fixed in cash terms, and any cost escalation or foreign exchange risks will be borne by Shorts.
Allowing for potential overseas sales, our decision should result in over 1,100 job opportunities in the United Kingdom, with over half of them in Northern Ireland. In addition, the American firm Garrett, which will be supplying the engine for the Tucano, has given offset undertakings which will bring further work to British industry. Shorts' partnership with Embraer in this venture should open up many commercial opportunities.
I should tell the House that the decision I have just announced is an important one in the context of our enhanced competition policy. The price of the contract is approximately £60 million or 35 per cent. less than that which my Department had originally envisaged in its forward costing process.
This is a good decision for the Royal Air Force, for British industry, for jobs and for the taxpayer.
Mr. Kevin McNamara: I congratulate the Secretary of State on showing his high regard for the RAF by choosing an aeroplane which has not flown, which the RAF does not want, and which has not even gone through the Boscombe Down evaluation with the Garrett engine. Had the interests of the RAF been paramount instead of the ideological attitude of the Prime Minister, who is seeking to make Shorts safe for privatisation, the PC9 would have been chosen.
What has been the reaction of the Swiss Government to the Secretary of State's decision, particularly given the knowledge that £96 million worth of potential sales of the Hawk have now been lost, as well as other potential military sales? What estimate has been made of the general sales potential for Hawk as a result of the loss of the marriage between the PC9 and the Hawk?
The Government are shortly to put on sale their shares in British Aerospace. It is likely that this decision will affect the value of those shares and the amount of money that the Government will receive. A penny off each share is equivalent to £1 million. If the Government make a similar disastrous decision about the European fighter aircraft before the shares go on sale, or if that decision is still in doubt at that time, the whole policy of selling the shares will be at risk and, with it, the Chancellor's policy. It seeems that by this decision the Secretary of State has shot the Chancellor in the foot, as well as himself.
I congratulate Shorts on getting the contract. Not only was the goal posts moved for it on occasions, but the conscience of the Minister of State for Defence Procurement was in the company's pocket because of the number of jobs that he lost for Northern Ireland's industry during his tenure there.
A major Government defence contract is going to Northern Ireland, and it will create new jobs there. How will the Secretary of State ensure that all sections of the community enjoy the benefits of the contract? Has Shorts given any undertaking to accelerate the implementation of its fair employment policies? On this contract, has it given undertakings about how many members of the minority community will be employed and, in particular, how many youngsters will be offered skilled apprenticeships? Is the offset agreement with Garrett as good as that offered by Pratt and Whitney, in particular with regard to the jobs that were at stake in Scotland?
The Government seem to be paying part of their debt to the Brazilian Government for their help during the Falklands campaign. Is this the final settlement, or do other debts remain to be paid? The Government have paid this debt at the expense of the finest air force in the world and the best pilots. It is a pity that the Government had to show their contempt for the RAF in this way, and their lack of trust in British industry's ability to design a plane that would meet the RAF's requirements. Once they had reached the decision to buy off the shelf, this disastrous decision was inevitable.
Mr. Heseltine: I shall not follow very closely the hon. Gentleman's line of approach. It bears no relationship to the way in which the Ministry of Defence goes about its evaluation processes. The hon. Gentleman's suggestions about the position of the Ministry of Defence are without foundation.
The RAF and my other advisers spent a great deal of time on the matter. While it is well known that the RAF

995
has a regard for the PC9, as I tried to make clear in my statement, it also fully recognises that the Tucano meets the specifications that it laid down.
When procurement decisions have to be made in the Ministry, for every winner there must be a loser. It is impossible for us to make a decision which benefits one company or one country without other companies and other countries feeling that they have missed out. Our primary responsibilities are to the defence of this country, the taxpayer and the national interest. We conducted a fair competition, and there was a clear winner. When such a clear winner emerges in terms of the cost to the taxpayer and the defence budget, it would not be right for us to take into account issues such as the hon. Gentleman has raised. That is my response to what the hon. Gentleman had to say.
Of course the Swiss Government will be disappointed, just as the Brazilian Government will be pleased. In different circumstances, the situation might have been reversed. That is not the first consideration that I have to bear in mind.
The hon. Gentleman will not expect me to comment on the arrangements for British Aerospace. That is a matter for the company rather than for me, and the same applies to Shorts in Northern Ireland. If the Opposition are concerned about the arrangements, they should address their questions either to the company or to the Secretary of State for Northern Ireland. It would be wrong for the Secretary of State for Defence to pursue issues such as the hon. Gentleman raised, and I do not believe that any Secretary of State for Defence would have done so.
Sir Antony Buck: Will my right hon. Friend confirm that the chosen aircraft fully meets the staff requirements put forward by the Minister of Defence, and tell us about the export potential of his decision? Could he say a final word about the beneficial effects that there will clearly be on the economy of Northern Ireland, which is so much in need of assistance?
Mr. Heseltine: All four aircraft in the later stages of the competition met the RAF's specifications, at least on paper. Some of them have not yet reached full development stage.
Export possibilities must, in essence, be matters of calculation. It is considered that the arrangement that Shorts has with Embraer, giving it exclusive rights in some territories and competitive rights in others, provides a significant export opportunity. It is up to the company to grasp the opportunities, but I am advised that as many as 200 aircraft might be in question.
Mr. Ken Maginnis: Is the Secretary of State aware that we welcome his announcement, which will be a great morale booster for the people of Northern Ireland and of great economic benefit to the whole community? I agree that the decision a just one, bearing in mind the cost and performance of the aircraft available for contract, in that the aircraft will fit the requirements of the RAF. Those who saw it perform at Farnborough before it was fitted with the upgraded engine know just how fine it is.
The decision is a just one also from the point of view of employment. The contract maximises the potential for new jobs in the United Kingdom. Finally, the decision is
996
a just one from the point of view of the taxpayer. It retains in competition with British Aerospace another firm which is highly skilled in airframe construction.
May I, however, utter a word of warning? It would be unjust and unworthy to suggest that the contract was awarded for political reasons. The contract was awarded to a firm with a highly skilled work force and very good labour relations, whose management, as it has proved by sales to the United States air force and by its relations with China, conducts the business in an efficient way.
Mr. Heseltine: I am grateful to the hon. Gentleman, but I should like to make it clear that the contract was awarded solely because Shorts, on commercial ingenuity and merit, won on price. That is what the competition was about. It is not for me to intrude into Northern Ireland politics, but the best thing that I can say for Shorts is that it won without any attempt to influence how the decision was taken, in terms of jobs or other political issues. If I had had to take such issues into account, I should have been as concerned for the levels of unemployment in Scotland, the north-east of England or anywhere else where there might have been opportunities for jobs. However, the competition was on price, and on that basis the Tucano wins, although I am the first to recognise that British Aerospace's offer of the PC9 is a very good aircraft, which would have created many jobs.
Mr. James Kilfedder: Is the right hon. Gentleman aware that this difficult and important decision will give great satisfaction to all sections of the hard-pressed and decent people of Northern Ireland, especially the dedicated workers and management of Short Brothers, who, by their tremendous efforts, are turning Shorts into one of the nation's success stories? As to the allegation of religious discrimination, the right hon. Gentleman can rest assured that Short Brothers is endeavouring to encourage Roman Catholics to take employment in the firm and that there is no religious discrimination.
Mr. Heseltine: I deeply regret the fact that the result of fair and honourable challenge means that the Opposition must search for underhand motives. Shorts is a first-class company which has won in a straight commercial battle. The whole House should get behind it and back it. That is the best way in which to help the country, including the economy of Northern Ireland.
Mr. Merlyn Rees: In view of what the Secretary of State said about Shorts being a good firm and getting the job because of what the defence staff said, does he agree that the Secretary of State for Northern Ireland was wise in 1976 to keep the firm in public ownership, to extend public ownership and to ensure that it did not become part of British Aerospace, with the result that it has never been privatised? That former Secretary of State is extremely pleased at the great praise that has been given to a publicly owned firm.
As skilled jobs are involved, will the Secretary of State confirm that some of the work is to move to the De Lorean site in west Belfast? As skills are necessary and not anyone can get a job there, will the right hon. Gentleman assure us that training will be given to young people in west Belfast to ensure they are able to get jobs?
Mr. Heseltine: The right hon. Gentleman will know that I do not have responsibility for how Shorts manages a contract such as this. If it is as good as the right hon.

997
Gentleman and I believe it to be, the training of adequate recruits will be at the forefront of management's responsibility. I am sure that it is best left to it to make that disposition.
Sir Patrick Wall: Is my right hon. Friend prepared to deny that the PC9 is the aircraft that the RAF wanted? Is he aware that his decision will probably cost 2,000 jobs in England and Scotland and the loss of the Pratt and Whitney factory in Scotland? It has long been obvious that Shorts can cut its prices — being a nationalised firm, it does not have to bear the losses—whereas British Aerospace cannot.
Mr. Heseltine: I understand, as does the House, that when such difficult decisions are made people whose interests might be in another direction question what is done. This was a competition about price. All the entrants to that competition were acceptable to the RAF in that they met the specification which the RAF had laid down in advance. If someone puts in a specification about that which the competition is about, it is possible for a more attractive but more expensive option to be on the table. The judgment was on the original standards laid down by the air staff. As long as those standards are achieved it would be wrong to take account of standards over and above those considered necessary because, in those circumstances, anyone who lost the competition could say that he had been invited to participate on a false prospectus.
Mr. Paddy Ashdown: Is the right hon. Gentleman aware that many people believe that he has made the right decision and welcome the clarity of it? We hope that he will be able to make an equally clear decision in favour of a wholly British manufacture, the AST 404, in the near future. As price is the determinant, what was the price differential?
Mr. Heseltine: There is not a convention that we give a list of those who have failed to win a contract. The differential at the close of the competition was significant. There were later bids which did not change the fact that Shorts had won at the close of the competition, although they substantially narrowed the lead. I should have had to disallow the later bids anyway, because they were out of time.
Mr. Robin Maxwell-Hyslop: Will my right hon. Friend accept the congratulations of many of us on choosing the best aircraft for the United Kingdom? Thirty years after the end of the last war, will he take the opportunity to remind the House and the country that, in that war, Brazil was an ally which put 25,000 troops into Italy on our side and lost 90 per cent. of her merchant fleet in our cause, and that Switzerland has never done that?
Mr. Heseltine: As always, my hon. Friend has made a most valuable point. He is stretching the perspective that I bring to bear on these matters to an even wider historic dimension. If I had taken that wider issue rather than price, I should have reckoned a substantial opportunity for British industry in South America, especially Brazil. Shorts will be able to work well with Embraer. This will be the beginning of a considerable partnership to our advantage and theirs.
Mr. John Maxton: Is the Secretary of State aware that there will be considerable anger and dismay in Scotland and in the constituency of the right hon. Member for Ayr (Mr. Younger)—the Secretary of State for Scotland — over this decision? How many fights on jobs in the Cabinet does the Secretary of State for Scotland have to lose before he does the honourable thing and resigns? Can the right hon. Gentleman give us an estimate of how many jobs will be lost in Prestwick? What is the difference in terms of export orders between Short Brothers' aeroplane and that of British Aerospace?
Mr. Heseltine: Such an attack on my right hon. Friend the Secretary of State for Scotland is contemptible. The House understands that any responsible Minister with integrity does not reveal the arguments that he employs in Cabinet. In my experience, Scotland could not have a man who fights with more determination than does my right hon. Friend in the interests of his job. [HON. MEMBERS: "Yes, in the interests of his job."] In the interests of his job as Secretary of State for Scotland. My right hon. Friend would never be prepared to reveal the cases that he frequently wins in the Scottish interest; nor would he expect his colleagues to reveal arguments deployed when the decision has gone against the best Scottish interests. The aeroplanes were clearly evaluated. All were satisfactory to the RAF, and a judgment was made on price.
Sir Hector Monro: Perhaps my right hon. Friend will allow me to share in his warm tribute to my right hon. Friend the Secretary of State for Scotland. Nevertheless, there will be great disappointment in the Scottish aviation industry. Why does my right hon. Friend put so much store on cost, bearing in mind that the life of the aircraft is 20 or 30 years? Does he agree that, as evaluated at Boscombe Down, the PC9 is outstandingly the best training aircraft?
Mr. Heseltine: I am grateful to my hon. Friend for taking exactly the same view as I do about our right hon. Friend the Secretary of State for Scotland. Of course I understand, as all Ministers with my responsibility clearly understand, that when decisions have to be taken on major procurement issues there are massive constituency interests and that this can lead to disappointment. It is impossible to satisfy them all. One has to make a judgment about where the best interest of the nation as a whole lies. It is my responsibility to get the best possible value for money for the £8,000 million spent on defence equipment, 95 per cent., or thereabouts, of which is spent in this country. The more that I pursue value for money within the quality demands laid down by my advisers, the more successful the British economy will be, not only in satisfying our legitimate interests, but in exporting to the rest of the world.
Mr. William McKelvey: Is the Secretary of State for Defence convinced that the specifications of this aircraft meet all the criteria laid down by the RAF? Will he tell the House that there is no doubt at all in his mind, because there is some in mine, since the specifications have not been tested on all the aircraft? That is one of the problems with which the Secretary of State will have to deal. Will he take it from me that there will be great disappointment in Ayrshire and the whole of

999
Scotland and on Humberside at the loss of jobs that might have flowed from this contract in areas which suffer from very high unemployment? These matters will certainly not be taken lightly in those areas. Does he understand that the shop stewards and trade unionists who have persistently and consistently lobbied Parliament over the past 12 weeks, particularly those from British Aerospace, will be going home tonight very disappointed at having to tell their men that the contract has been lost purely on cost?
Mr. Heseltine: I repeat what I have already, I hope, made clear; that all the tenders evaluated towards the end of this competition met the air staff target. The hon. Member is well aware that the Garrett engine has not yet been fitted to the Tucano, and to that extent has not been proved through its final testing, but that is a common phenomenon in competitions for defence equipment. This country has bought Garrett engines in the HS 125 and the Jetstream and found them to be thoroughly satisfactory. The military advice that I have is that there is no likely reason why the Garrett engine will not be developed and will not prove perfectly satisfactory. I am fully aware that, as the hon. Gentleman said, people who have been lobbying me on the other side will be disappointed tonight, but that could not be a guiding principle. As I have been lobbied by every conceivable pressure group for months on end, there are bound to be people who are going to be disappointed tonight.
Mr. Jonathan Sayeed: Despite the hysterical outburst from the Opposition Front Bench, I am sure that my right hon. Friend's Department has taken a properly balanced decision. Does my right hon. Friend recognise, however, the very considerable disappointment that this will mean to my constituents in British Aerospace, and can he reassure me that an early decision will be announced on the EFA?
Mr. Heseltine: I realise, of course, that my hon. Friend's constituents will be disappointed that they have not won this commercial contract. With regard to the European fighter aircraft, I spent several hours yesterday with British Aerospace looking at its proposal for a national solution to the requirement that could develop in this context. It is my responsibility to discuss with my European colleagues whether a collaborative venture is possible for this very ambitious scheme. I assure my hon. Friend that in those negotiations one of the issues at the forefront of my mind will be the interests of British Aerospace.
Mr. Gordon Wilson: Does the Secretary of State not realise that his decision will be regarded in Scotland as an act of sabotage against the Scottish economy? Does he not realise that Scotland, in terms of population, has a very low share of the defence procurement? We get the bases and the danger, but never the jobs that go with defence procurement. Will he undertake, when he looks at his plans over the next year or so, to steer towards Scotland a fairer and larger share of the defence procurement so that we get the jobs to which we are entitled in the United Kingdom, if it is really united?
Mr. Heseltine: I am sure that the hon. Gentleman will join me in welcoming enthusiastically the substantial expenditure that I have just committed to Scotland for the development of Britain's independent nuclear deterrent, the Trident.
Lord James Douglas-Hamilton: Can my right hon. Friend tell the House exactly what was the technical advice of the Royal Air Force on the performance of the two aircraft? Will he bear in mind that associated aerospace industries in Scotland have a considerable interest in the development of the European fighter aircraft?
Mr. Heseltine: On the last point, I fully understand the interest of the Scottish as well as the rest of our aerospace industry in the European fighter. As to the advice of the RAF, it was quite clear that all the results that 1 had to evaluate came within the staff target laid down. After that, it was a trade-off between the additional cost of going for one solution as opposed to the cheaper cost of going for the other, compared with the different specifications, which were above what it considered to be necessary for the task that it had defined. It would be wrong for me to try to evaluate the precise way in which the RAF would try to quantify the judgment as to whether it would be right to pay the premium that was offered to us for the opportunity of going to the PC9. The RAF accepted that all the aircraft that I had to consider came within the specifications, and accepted also that it was a legitimate judgment whether we would save the money or go for a more expensive specification.
Mr. Speaker: Order. I shall allow questions to go on for a further 10 minutes, but then we must move on.
Mr. D. N. Campbell-Savours: Did more favourable regional assistance and higher grants in Ulster enable Shorts to submit a lower tender?
Mr. Heseltine: The positions of Shorts and British Aerospace would be identical in this matter, to the best of my knowledge, because grants would be available to those companies under the broad concept of either Northern Ireland policy or regional policy. There would be no specific grant associated with this particular project.
Rev. William McCrea: May I express my joy and the joy which many unemployed in Northern Ireland will experience at what amounts to a vote of confidence in Northern Ireland industry? Does the Minister agree that the awarding of this contract to Shorts will create jobs not only in Northern Ireland but in other parts of the United Kingdom, through the supplying of parts, and so on? Does he also agree that, in spite of a considerable reputation in aircraft manufacture and a wide interest in Shorts products by other air forces throughout the world, only 2 per cent. of the aircraft output of Shorts went to the Ministry of Defence in the United Kingdom? This contract will perhaps redress that situation and therefore ought to be welcomed by the whole House.
Mr. Heseltine: I cannot find the figure immediately, but I shall give it to my hon. Friend later, and I think he will find that the amount of Short's turnover that comes from the Ministry of Defence is very much higher than the figure that he gave. I should perhaps have stressed to the House that, while there are perhaps 600 to 700 jobs to be located in Northern Ireland, that is just over half, perhaps, of the job opportunities that might develop from this contract, and the rest of them will be spread throughout the rest of the country.
Mr. Roy Beggs: Is the Secretary of State aware that those who represent constituencies in Northern Ireland totally deplore the sentiments expressed

1001
by the hon. Member for Kingston upon Hull, North (Mr. McNamara)? We very much welcome the decision that has been made and the opportunity for Shorts to prove that it can compete, when given the opportunity, with any other company in the United Kingdom. Does the Secretary of State agree that the decision confirms the claims made by Shorts in the whole period leading up to this decision that the Tucano met the technical specifications and the requirements of the RAF and was the best value for money for the taxpayer? Does he agree also that the contract has been awarded to a company which has offered the best product at the most competitive price? Will the right hon. Gentleman encourage Shorts so far as possible to subcontract work to companies in Northern Ireland which have the competence to deal with such work?
Mr. Heseltine: I hope that the hon. Gentleman will agree that I have clearly shown that where companies in Northern Ireland are able to compete effectively and make the product that, in this case, the market requires I see every reason why they should attract the orders that they have won in fair competition. I therefore repeat my absolute certainty that Shorts can carry through this work and that, having won it, the firm deserves to get the contract.
I can now answer the question posed by the hon. Member for Mid-Ulster (Rev. William McCrea). Approximately 50 per cent. of British Aerospace turnover relates to Ministry of Defence business. The proportion for Shorts is less than half of that, and the majority of it is on missiles.
Mr. Michael Colvin: Bearing in mind the importance of the so-called two-way street — reciprocal sales and purchases between the United States and this country—which is out of balance in favour of the US by two to one, what offsets have been arranged for the purchase of the Garrett engines?
Mr. Heseltine: I am grateful to my hon. Friend for raising that point. One third of the Garrett engine will be manufactured at Rolls-Royce, the remainder in the US. It is the intention of Garretts, however, to see what further offset can be arranged, and discussions on that are under way.
Mr. Keith Best: Will my right hon. Friend confirm that the last best offer, the Hunting Firecracker, was fully considered by him? What reciprocal arms export sales has he managed to secure from Brazil as a result of this deal with Tucano, and what other export sales has he been able to secure as a result of it?
Mr. Heseltine: I assure my hon. Friend that the Hunting Firecracker offer was closely examined. It did not come within range in terms of price of the two to which I have referred most prominently. In terms of contracts overseas by way of offsets in this context, there are no specific contracts. However, there is an ongoing relationship with both countries concerned, though it is difficult to lay down a time in respect of which any arms negotiations shall take place.
Mr. Michael Marshall: Will my right hon. Friend accept that part of the disappointment about his announcement must inevitably turn on the reduced prospects of selling the whole range of training aircraft,
1002
including the Hawk and PC9, and that that must have an impact on prices over a whole range of aircraft in the long term? Having said that, and recognising that the deal has been done, may I ask him to say how widely avionics contracts will be placed in this country?
Mr. Heseltine: I appreciate the point that my hon. Friend makes. The avionics contracts will largely be placed in this country. I hope that he will understand if, in the circumstances, I do not get drawn into commenting on the strategy of British Aerospace.
Dr. Keith Hampson: Without challenging the choice of the airframe, in that Shorts was the cheapest, is it not illogical to choose a plane which is powered by an engine which has not been used in it, when the air staff requirement was met by that very plane with a different engine, which was the Pratt and Whitney? Would it not be more sensible to stick with Pratt and Whitney, which met all the requirements, which is better for training purposes, which does not need redesign work, so causing delays in the contract and which has been the subject of long-established subcontract work in this country, including in my constituency, and which is not easily done by this American company?
Mr. Heseltine: I appreciate the real interest of my hon. Friend. He will understand that my concern must be to secure a competitive environment for that which the Ministry of Defence wishes to procure. Interestingly enough, it was because the Ministry of Defence pointed out to Shorts that its earlier options would not provide an engine power sufficient to match that which was required that Shorts went back to Garrett and reconsidered the position. That enabled a competitive environment to come into existence. That competitive environment, the House will wish to remember, has secured economies of about 35 per cent., or nearly £60 million, over and above what we might otherwise have been able to achieve if the estimates of the planners in the Ministry of Defence had prevailed. This, therefore, is an immense enhancement to the value-for-money principle, which is at the centre of what we are trying to achieve.
Dr. Norman A. Godman: In answering a question put by the hon. Member for Dundee, East (Mr. Wilson), the right hon. Gentleman talked about Scotland's share of defence procurement orders. Is he aware that he could please enormously my constituents in Greenock and Port Glasgow if he were to place orders for the SKK24 conventional submarine with a certain shipyard on the lower Clyde?
Mr. Heseltine: I have no doubt that the hon. Gentleman is right and that I could please his constituents in that way. But I have a feeling that a number of hon. Members who represent other constituencies would feel rather aggrieved by such an arbitrary use of power in the Ministry of Defence.
Mr. Peter Bruinvels: As a Leicestershire hon. Member, may I ask my right hon. Friend to accept the disappointment that will be felt throughout the area over the fact that the Hunting Firecracker has not been successful in winning the contract? Will he consider that aircraft for other purposes? We offer good wishes to Shorts on being the best of the others that were competing.
Mr. Heseltine: I am grateful to my hon. Friend for the broad-minded approach that he adopts. My view is clear in that we are opening up competitive opportunities to the Ministry of Defence as widely as we can. It is up to the companies concerned to take advantage of that new freedom to compete.
Mr. A. Cecil Walker: The Secretary of State has mentioned price in the decision to give the order to Shorts. Will he accept that he will be getting an aircraft of exceptional quality, based on 50 years' experience by Shorts in the industry, during which time that company produced the wonderful and famous Stirling and Sunderland aircraft which contributed so greatly to our victory in the last war?
Mr. Heseltine: I appreciate that, but I must make it clear that I would have got a very fine plane had I chosen the British Aerospace solution. I was not making a judgment between one good and one indifferent candidate. I was faced with two desirable choices. It is simply that on the first criterion, that of cost, Shorts clearly won. From that moment on, the issue was whether there was a political reason why anyone should want to raise the question of overturning a decision which the market had dictated. There are no issues which would have justified some of the more partisan approaches that have been adopted by hon. Members representing certain parts of the country.
Mr. McNamara: It would be to the satisfaction of the House if the Secretary of State would inform us whether there were any regional differences in terms of grants for re-tooling or for buildings or matters of that nature. Perhaps he will write to interested hon. Members about that so that we may reach a decision on it.
The reasons that the right hon. Gentleman has given for his decision are absolutely amazing. We are dealing with a major contract worth £120 million and the Ministry of Defence, in placing it in Northern Ireland, is not in the least concerned about labour conditions and export potential. Is it suggested that the Secretary of State sat down in a little room with an ice pack on his head and judged two aircraft, one against the other, without any concept of the industrial, political and economic background to the case? In view of what was said earlier on other matters, I find that hard to believe.
Mr. Heseltine: The hon. Gentleman will have heard me say many times that a whole range of factors had to be considered. The issue was whether any of them was of such significance as to override the essential first consideration—value for money for the defence budget. The idea that if ever there were another Labour Government they would be applying the sort of criteria to which the hon. Member for Kingston upon Hull, North (Mr. McNamara) referred in every judgment that Governments are supposed to make would be a devastating indictment of the standards of high public accountability that people expect of this country.

Supplementary Benefit (Board and Lodging Payments)
4.39 pm
The Minister for Social Security (Mr. Tony Newton): With permission, Mr. Speaker, I should like to make a statement on proposed new arrangements for supplementary benefit payments towards board and lodging charges.
The House will recall that consultative proposals were referred to the Social Security Advisory Committee in November 1984. We are today laying before the House the committee's report, together with the Government's response to its recommendations. We are grateful to the committee for the constructive approach it has brought to its task, and have taken its views fully into account in framing the regulations which are also laid before the House today. Subject to the approval of Parliament, the new arrangements will come into operation on 29 April 1985.
The maximum weekly amount payable for ordinary board and lodging, which is at present set locally for each DHSS office and varies from £40 to £110, will be set for each area at one of six standard amounts ranging from £45 to £70 per week. For this purpose, DHSS local offices will be grouped, taking account of Department of Employment travel-to-work areas so as to reflect so far as possible established patterns of employment and job seeking.
Subject to these limits, there will be no restriction on access to board and lodging accommodation for people aged 26 or over, or for those of any age who come within defined categories such as those who are chronically sick or disabled, those who have a dependent child, and those who have been in the same accommodation while in employment. For unemployed claimants aged 25 or under, unless they are in an exempted category, each area will have a limit of two, four or eight weeks on the period for which board and lodging payments will be made.
Hostels—I know that this is a subject to which the House attaches importance—which have hitherto been subject to the normal board and lodging rules, will be treated as a separate category, reflecting the importance which the Government attach to them. They will have a higher limit—set at £70 a week nationally—than most ordinary board and lodging accommodation; and there will be no restrictions on the length of stay for hostels.
For residential care and nursing homes the Government intend to set new limits at a level which they believe will allow reasonable charges to be met in homes meeting the new registration arrangements under the Registered Homes Act 1984. At present, local limits vary from £51 to £215 per week for residential care homes and from £80 to £295 per week for nursing homes. The limits for residential care homes will be £110 a week for the elderly, £120 a week for the mentally ill and for drug and alcohol misusers, £140 a week for the mentally handicapped, and £170 a week for those who became physically disabled below pension age. A sum equivalent to the higher rate of attendance allowance—currently £28·60 a week—will be added to these limits for people in nursing homes. There will be an additional hospice category, with a limit of £198·60 a week.
In future, "topping-up" payments by local authorities towards the cost of younger people in residential care

1005
homes will not reduce the payment of supplementary benefit; but attendance allowance will be taken into account in full in assessing supplementary benefit entitlement for those in private and voluntary residential care and nursing homes. The rate of personal expenses allowances for people in these homes will be set at £8·50 a week — 30p a week higher than proposed in the consultative document.
Existing claimants will, of course, need a period to adjust to these changes. Those over pension age in residential care and nursing homes can continue for life to have their charges met at the level of payment in force when the new limits are introduced. Those under pension age in residential homes, hostels or boarded out by local authorities can continue for a year to have their charges met at their current levels. Those in ordinary board and lodging will have between four and 13 weeks to find alternative accommodation if their current accommodation is more expensive than the new limits.
The Government accept that, following the standstill on existing local limits in recent months, it would be appropriate to review the proposed new limits earlier than November 1986, as envisaged in the consultative document. They will therefore be reviewed within 12 months of coming into operation.
There can be no doubt that action is needed to control this form of social security expenditure, whose increase has gone far beyond what can be justified by sensible social priorities. We believe that our proposals, modified in the light of advice from the Social Security Advisory Committee, will enable real needs to be properly met while avoiding unacceptable waste and abuse. But we shall monitor carefully the effects of the changes, and be ready, if necessary, to make further changes.
Mr. Michael Meacher: Is the Minister aware that this statement makes a farce of the consultation process since it almost completely dismisses the overwhelming evidence put before him, severely criticising his proposals, in more than 500 submissions, four times more than the DHSS has ever received on any other issue? Is he aware that this is yet another case where the Government have themselves created the social casualties and are now punishing those casualties by withholding necessary expenditure, so that people forced into homelessness by Government housing cuts are now being forced to meet the cost of that homelessness themselves?
Is he aware that board and lodging payments have been rising, not because of increased charges, as he claims, since last year's rise in charges was the lowest for five years, but because of the huge increase in the number of claimants brought about by the Government's policies—by the more than doubling of youth unemployment, by the halving of housing investment and the drastic shortage of housing, by the failure to tackle homelessness and by the iniquitous rule restricting supplementary benefit single payments for furniture, which prevents claimants moving into unfurnished, cheaper accommodation.
On the specifics of the Minister's statement, is it not clear that these new board and lodging limits, starting even lower than proposed in the consultative document, are too low when in many cases they are actually below the market rates charged for board and lodging accommodation, so
1006
that more people will be forced on to the streets? Even if the £70 maximum limit is adopted for London, is he aware, for example, that Paddington DHSS office reassessed board and lodging costs in August last year at £110 per week in that area?
Is he aware that the two, four or eight-week rule to be used against unemployed single claimants under 25 is harsh and unfair discrimination against those genuinely seeking work when, under regulation 9 of the requirement regulations, the DHSS already has powers to stop young people and others taking holidays by the sea, if there is abuse? The next question is just as important. By what justification is he now extending these restrictions to those aged 18–25 in their home areas, which was never mentioned in the consultation document?
Regarding residential care, nursing homes and hostels, is it not obvious that his proposals for a single, nationally-fixed scale are far too rigid and unrealistic since they take no account of substantially differing capital and labour costs between different areas? Again, are these national limits not being fixed too low when they are only half the level of local limits currently existing in some places?
The Minister preens himself on the fact that the personal expenses allowance for pensioners in these homes is being set at 30p a week more than was proposed in the consultation document. Is he aware that what he is not saying is that that is still £1·80 a week less than they now receive? How does he justify pensioners having to take a cut of £1·80 a week in their allowances when two days ago the Chancellor gave away £155 million to the rich through capital gains tax concessions and another £50 million through the abolition of development land tax?
Is the Minister aware that the real answer to the whole problem is that it is not only better but in the long run much cheaper to allow councils and other socially responsible agencies to build and convert homes for rent rather than to pay commercial landlords what are often exorbitant rents for substandard and sometimes dangerous board and lodging accommodation? Until that is done, we strongly reject these harsh and discriminatory measures as yet another attack by the Government on the living standards of some of the poorest and most vulnerable members of our society.
Mr. Newton: On the so-called "farce of consultation", the hon. Gentleman has only to read the Government's response to recognise that we have responded in many ways to the suggestions of the Social Security Advisory Committee. If the hon. Gentleman wishes me to do so, I shall list at least eight ways in which we have significantly responded to the committee's suggestions. I completely reject the suggestion that the problem has arisen solely because of unemployment and the other aspects to which the hon. Gentleman referred — unhappy though those problems are. Our response to the committee sets out clearly the fact that the number of boarders who are 25 and under increased by 60 per cent. in 1982–83 and by an estimated further 51 per cent. in 1983–84 and, other things being equal, will increase by a further 52 per cent. in 1984–85. That is greater than any percentage increase in unemployment among that age group that the hon. Gentleman could possibly find.
On market rates and the policies of local authorities towards housing, I have no doubt that the operation of these regulations has been driving up what are seen as the market rates to the detriment of those who are paying their

1007
own bills, whether in board and lodging or in residential care and nursing homes. Equally, I have no doubt that the regulations have been creating an incentive for councils to place homeless people in the most expensive board and lodging accommodation rather than to exercise their proper responsibilities and powers under housing legislation. I believe that this measure will give councils a significant encouragement to act more responsibly.
We shall certainly not rule out further consideration of the suitable alternative furnished accommodation rule in the light of the reports that we expect from the inspectorate and from the Social Security Advisory Committee and the work of the social security review. The operation of the rule will be modified by the fact that this type of furnished accommodation will, by definition, not be available to those denied board and lodging payments under the new rules.
We have sought to judge the limits of two, four or eight weeks according to the nature of the areas to allow what we believe to be a reasonable time for the sort of job search which all of us are anxious to encourage. I believe that we have accurately judged the limits, but they can, of course, be examined if the need is shown.
On limits for residential care and nursing homes, we concluded, having studied the figures carefully, that at this stage there was no proper basis for drawing the type of distinction which the hon. Gentleman seeks to draw. The capital costs of nursing homes will not vary regionally but will vary according to other factors. We propose to commission further work on this subject with a view to refining the system if a need is shown, and we shall certainly keep a careful eye on it. At present, we think that the limits are correct.
The hon. Member for Oldham, West (Mr. Meacher) drew attention to the fact that the personal expenses allowance is lower than the rate currently paid in private and voluntary homes. I accept that, but I point out that it is higher than the rate paid to those in local authority homes. We are seeking to bring about a fairer situation.
Several Hon. Members rose—
Mr. Speaker: Order. I have an obligation to protect subsequent business. I have already said that a large number of right hon. and hon. Members seek to take part, so I shall allow questions on this statement to continue until 5.10 pm.
Mr. William Cash: Does my hon. Friend agree that it is essential to prevent the abuses in the system that have been developing during the past few years and at the same time ensure that those who will be affected by the announcement will suffer no unnecessary or unreasonable hardship?
Mr. Newton: That is why we have placed alongside these proposals what the Social Security Advisory Committee described as generous transitional arrangements.
Mr. Charles Kennedy: What was the nature of the representations received by the DHSS from Scottish Office Ministers, given the stress that they have recently placed on youth homelessness in Scotland? Is the Minister aware that his decision on the national limit for hostel provision will seriously discriminate against the large number of homeless Scots in London, and that the figure he suggests comes nowhere
67 1008
near the figures produced by those who work with the homeless, such as the Centrepoint service? Will the hon. Gentleman admit that the use of the travel-to-work designation areas, especially those in Scotland, is extremely dubious as they were greatly discredited in the regional aid survey that was carried through by the Government?
Mr. Newton: If evidence can be produced to show that the existing pattern of travel-to-work areas, which we have used loosely to group DHSS local office areas, is wrong in a particular case, we can examine that aspect. The hon. Gentleman will understand that it is not the custom to reveal interdepartmental discussion of this kind, but he may know from hearing some Opposition colleagues that my hon. Friend the Scottish Office Minister with particular responsibility for this matter was present with me at a meeting last week with Scottish Members of Parliament.
Sir Geoffrey Finsberg: Does my hon. Friend accept that the representations made to him about hostels and the security offered to elderly people over 65 who are now in this type of accommodation clearly demonstrate the rubbish coming from the hon. Member for Oldham, West (Mr. Meacher)? Does my hon. Friend accept that this measure proves that my hon. Friends have taken great care to listen to and accept good advice?
Mr. Newton: I think that I can content myself with an expression of gratitude to my hon. Friend.
Mr. Frank Field: Will the Minister give a categorical assurance that no one currently covered by board and lodging allowances will be made homeless because of these changes?
Mr. Newton: Clearly, I cannot give that kind of categorical assurance. I can say, however, that the transitional provisions which we have made, the alternative provision that exists within the social security system and the exemption categories which we have carefully worked out, modified and extended considerably because of the work of the Social Security Advisory Committee, enables me to be confident that we shall not experience the type of hardship that some of the more extravagant allegations suggested during the consultation period.
Sir Kenneth Lewis: Is my hon. Friend aware that many of us believe that the statement is long overdue? There have been far too many rackets in providing accommodation and accepting it involving landlords and those seeking accommodation. These measures might stabilise the market, because stating the prices and charges will mean that more people will know that they can build this accommodation and find people wishing to use it. Will my hon. Friend examine the matter in six months to ensure whether regional variations need protection?
Mr. Newton: Our formal response to the Social Security Advisory Committee's suggestions has made it clear that we shall commission further work and monitor the changes carefully in a number of ways. As I have said a number of times, if the need for further change is shown, we shall be ready to make that change.
Mr. Gerald Bermingham: Will the Minister confirm or, if he cannot do so, undertake to

1009
ensure that nothing in these regulations will in any way worsen the position of those spouses who have cause to leave the matrimonial home with or without their children because of a court order or the conduct of the other spouse?
Mr. Newton: In creating the new hostel category and giving it the highest level of the limits that we propose for other forms of board and lodging, we had in mind in part hostels for battered wives.
Mr. Gerrard Neale: Few hon. Members can feel no sympathy for those who are genuinely homeless, but no sympathy should be shown to those people, especially the young, who move from one area of high unemployment to another merely to receive higher benefit. I broadly welcome my hon. Friend's measures, particularly the differential benefits. Will my hon. Friend reconsider whether there should be an imposition on those wishing to move from one area of high unemployment to check that jobs are registered in the area to which they move? Will my hon. Friend confirm that he will carefully examine the whole range of proposals that he is introducing to ensure that the system is working? Will he consider this to be an interim step along with the other review of social security benefits?
Mr. Newton: I give my hon. Friend the assurance that we shall bear his suggestion in mind in considering any further refinement of the system and, as we have already said, we shall have in mind whether additional improvements can be made within the context of the review of social security.
Mr. Hugh Brown: What evidence does the Minister have of housing authorities in Scotland not fulfilling their obligations in providing accommodation? Does he not realise that, with housing cuts, cities such as Glasgow are desperately anxious to provide suitable accommodation, particularly for young people, and there will be great resentment about the exploitation of some limited abuses in some other parts of the country, which will be seen as an attack on young people?
Mr. Newton: I have already said that one of the problems with the system that we have been operating is the incentives for many local authorities to place people in expensive board and lodging accommodation rather than meeting their needs in other ways. One of the puzzles is the amount of empty council property that exists, and I am told that that is as true of Glasgow as elsewhere. It is necessary that councils should look more carefully at the alternative options for providing more effectively for the needs of this group. We should then not have the suggestions about homelessness that we have had from the hon. Member.
Mr. Roger Gale: Will my hon. Friend accept my thanks and those of many hon. Members who represent seaside constituencies for the steps that he has announced this afternoon to terminate the exploitation and abuse of the social services system and of young people? However, will he give an undertaking that the measures that he has announced this afternoon will not lead to a two, four or eight week shuffle of young people between unscrupulous hoteliers? Will he also take steps to ensure that the steps that he has announced will not lead to a plethora of sudden registration of seaside hotels as hostels?
Mr. Newton: The provisions for defining hostels should prevent the risk to which my hon. Friend has referred. I pay tribute to the work that he has done in exposing some of the worst abuses that have taken place. As to people moving around, young people would be able to re-qualify for further periods of board and lodging in another area, but that is part and parcel of the search for jobs, which we are not anxious to inhibit. It will not be possible for them to engage in successive periods of two, four or eight weeks in the same board and lodging area, where they will be disqualified for a further six months.
Mr. Archy Kirkwood: Has the Minister estimated how many hostels could close because of the restrictive limits that he has imposed, or of the cost that could accrue to his Department as a result of the limitations?
Mr. Newton: I have made it clear that our special provisions for hostels are intended to avoid any hostels closing, and we have their interests particularly in mind in what we propose.
Mr. Harry Greenway: I welcome my hon. Friend's announcement that payments will be made only to proprietors of residential and nursing homes that are up to standard. Is he aware that some are up to standard but require structural changes to come within the new guidelines? Will he take that into account in making any final decision about such establishments?
Mr. Newton: I cannot take that into account in making a final decision on these regulations, but if evidence that that is a significant problem is produced, we can look at that at the appropriate time.
Mr. Max Madden: What is being done to make furniture grants easier to obtain? What new money is being made available to local authorities to inspect these premises? Does the Minister not understand that local authorities are faced with great difficulties in meeting their obligations because of Government policies of rate capping, imposing penalties and making massive reductions in rate support grant?
Mr. Newton: Nevertheless, the fact remains that I am advised that some 50 local authorities already run registration schemes for houses in multiple occupation and a number of others are considering it. What some local authorities can do satisfactorily, other local authorities should be able to do.
Mr. Steve Norris: I accept the need for a review of the present system. However, will my hon. Friend bear in mind that there are areas, such as the city of Oxford, where there are genuine pressures as a result of accommodation for students and tourists, which produce a real level of cost of board and lodging above the limit that my hon. Friend has announced? In the past, that problem has been met by the discretion available to the local DHSS office. Does my hon. Friend have any plans to allow such discretion to continue at local offices where it is clear that there is a special case that drives up the real cost of board and lodging beyond the limit?
Mr. Newton: We do not have plans for discretion, which is how we got into the position of the absurdly wide range of limits. If my hon. Friend can produce evidence that makes us think that we should look at the limit for Oxford, I am willing to look at it. However, part of our

1011
thinking in this is that it is right for Ministers to set levels of supplementary benefit that it is reasonable to expect the taxpayer to meet. There will be some areas in which it is too expensive for people on supplementary benefit to live.
Mr. Allen McKay: Will the Minister consider some form of appeal? I have been in touch with the citizens advice bureaux in the Barnsley area, which are concerned that the limit will be inadequate there. At the moment, it is on an average of £60 and rising, and they can see problems. Is the hon. Gentleman willing to meet such people to discuss these problems, because the travel-to-work area in my constituency will cause many discrepancies?
Mr. Newton: I should want some experience of how the system is working before giving too many undertakings to meet delegations from all quarters. However, as I have already said to other hon. Members, if a case is made for looking at part of the provisions, we should be prepared to examine it.
Mrs. Edwina Currie: I welcome my hon. Friend's wise and careful statement. Does he agree that the rate of increase of expenditure on these payments has gone up 10 times in five years, and last year reached £570 million? How many hundreds of millions of pounds will it cost in 1985, and when may we expect to see an end to this wasteful and damaging haemorrhage of public money?
Mr. Newton: My hon. Friend is right to refer to the escalation of expenditure in this sector. Expenditure has risen from £100 million in 1980 to an estimated nearly £600 million last year. I cannot give my hon. Friend a figure for what the cost will be in 1985, given the changes that have already been made, the psychological change that has occurred as a result of the Government's announcement of their intentions, and the proposal that we are announcing today. As a rough estimate, we would expect benefit payments to be £70 million lower in 1985–86 than would otherwise have been the case.
Mr. Gordon Wilson: Does the Minister realise that, after this announcement, he will have on his conscience the fact that a number of people, perhaps a large number, will be driven to sleep rough, with all that that entails? Will he look at one of the reasons why there
1012
has been an upsurge in board and lodging accommodation demand? One reason concerns housing benefit deductions which make it difficult for some youngsters to stay with their parents. There is also the absence of, or difficulty in getting, the single payments for furnishings, which prevents younger people in particular, but sometimes families, from getting housing of their own from local authorities where housing exists.
Mr. Newton: We do not rule out some consideration about the rules on single payments for furniture, in the light of various current studies. The operation of the rule will be altered by the application of these regulations. As I hope that I have already made plain, I see no reason to believe that people need be made homeless by these provisions, in view of the transitional arrangements, the exemption provisions and the alternatives that exist for many of them. I am satisfied for the moment that we have our limits about right to meet the aims that we have set out.
Mr. Nicholas Brown: How will the Minister's statement affect worthwhile voluntary projects, such as the Stepping Stones project in Newcastle? They aim to provide a form of sheltered accommodation for the young homeless and provide standards and quality of accommodation for them that is well in excess of board and lodging that would be provided if they were cast into the private sector. However, they rely on his Department to pay some money to those who live in the project.
Mr. Newton: The hon. Gentleman will realise that I cannot make an off-the-cuff comment on a specific case, but from what he says it sounds as if that project would be likely to qualify as a hostel, in which case it will come within the hostel provisions.
Sir Ian Gilmour: May I give my hon. Friend the opportunity to correct one of his answers, which I do not think he meant? He said that it was too expensive for people on supplementary benefit to live in some parts of the country. I do not think that he meant that.
Mr. Newton: What I meant was that there may be parts of the country in which the costs of, for example, board and lodging accommodation are above those that we think it reasonable to meet out of the supplementary benefit system. I think that that is absolutely clear.

Orders of the Day
  WAYS AND MEANS
  Order read for resuming adjourned debate on Question [19 March].
  WAYS AND MEANS

    AMENDMENT OF THE LAW
    Motion made, and Question proposed.
    That it is expedient to amend the law with respect to the National Debt and public revenue and to make further provision in connection with finance; but this Resolution does not extend to the making of any amendment with respect to value added tax so as to provide—

    (a) for zero-rating or exempting any supply;

    (b) for refunding any amount of tax, otherwise than by a provision relating to the insolvency of a person to whom goods or services have been supplied;

    (c) for varying the rate of that tax otherwise than in relation to all supplies and importance; or

    (d) for any relief other than relief applying to goods of whatever description or services of whatever description. —[Mr. Lawson.]

  Budget Resolutions and Economic Situation
  [Relevant documents: European Community Document No. 10277/84, Annual Economic Report 1984–85 and the Unnumbered document Annual Economic Report 1984–85 (final version as adopted by the Council).]
  5.10 pm
  The Secretary of State for Employment (Mr. Tom King): I welcome the decision to focus today's debate on the subject of employment and unemployment. The Budget makes the creation and tackling of unemployment a top priority. Following the announcements on Tuesday, I am now able to give the House the details of the proposals on which we have been working in recent months. They cover training, deregulation and employment.
  The essential precondition of all that work has been the maintenance of a sound economic policy, with public expenditure and inflation under firm control. The record is clear. Shortly, we shall be entering the fifth year of economic recovery, the most sustained period for 40 years. Investment and exports are at record levels. Manufacturing output rose by 3·5 per cent. in 1984, the biggest increase in any year since 1973. Inflation has been around 5 per cent. for over two years, something which we tend to take for granted now, but an achievement which, a few years ago, seemed impossible. In terms of employment, after years with hundreds of thousands of jobs being lost, now at last again more jobs are being created. Half a million more jobs have been created in the past two years, but that has not yet been enough to reduce unemployment.
  The first benefits of our strategy are coming through, but within that strategy there are several further steps which we can take, and have taken, both to encourage the creation of more jobs and to help those hardest hit by unemployment. I refer first to the youth training scheme. The first of the steps is the expansion of the YTS. Since 1979 we have instituted what is nothing short of a revolution in education and training, particularly for those
  1014
  in the vital 14 to 18 age group. We are now seeking to carry that revolution forward by offering two years' training for everyone leaving school at 16.
  The YTS was launched in 1983 as a successor to the old and much less satisfactory youth opportunities programme. Since then the YTS has provided up to a year of work-based training for over 700,000 young people. That in itself has been a tremendous achievement. It is almost as if in the past two years we had set up an entire new scheme of further education. That system has already proved its merits. It is popular with youngsters themselves and, most important of all, it has shown that it can get them into jobs. The latest indications are that nationally about 65 per cent. of the trainees are going straight into jobs and further education. In many areas, and in many individual schemes, the figure is more like 90 per cent.
  We now intend to build on that success by launching a major new initiative to develop and expand the scheme further. From April 1986 our aim is to offer a second year of training to 16-year-old school leavers and a one-year place to 17-year-old school leavers. As a result, for the first time ever all our young people leaving school at 16 will have the chance to get vocational qualifications. Once the new scheme is fully in operation, everyone under 18 will be able to have a job, education or training, so unemployment need not be an option for them.
  Mr. Mark Fisher: Will the Secretary of State clarify his statement? It is noticeable that he is using exactly the same words as the Prime Minister used when she replied to me this afternoon. Will the right hon. Gentleman make it clear that there will be no enforcement of the YTS and that if a young person chooses not to go on the YTS, and is not in a job or full-time education, he will still be entitled to supplementary benefit?
  Mr. King: I am grateful to the hon. Gentleman. If he tells me that I am using exactly the same words as my right hon. Friend the Prime Minister, that seems a wise step on my part.
  I heard the hon. Gentleman's interesting question. The point that he made was based on a fallacy. He observed that the figures quoted by my right hon. Friend the Chancellor of the Exchequer were net of savings on supplementary benefit. Obviously, we hope that a considerable number of young people will go on the YTS. We have made an estimate of up to 200,000 in the first year. If they do, inevitably there will be savings on supplementary benefit. For that reason, the hon. Gentleman should not believe that there is a sinister plot that conceals within the figures the fact that it ceases to be a voluntary scheme. That is not so. I should like to make that absolutely clear. My right hon. Friend the Prime Minister made it clear in her answer to the hon. Gentleman, and I think that the hon. Gentleman will accept that. I heard my right hon. Friend's answer, and have a note of it. She said that there would be no change in the arrangements for the YTS. In an intervention in the speech on Budget day by the Leader of the Opposition, my right hon. Friend the Chancellor made the same point:
  "Had I any new proposals to make on that front, they would have been contained in my speech." —[0fficial Report, 19 March 1985; Vol. 75, c. 807.]
  I make it clear that we have no proposals for changes in the arrangements for supplementary benefit. The scheme will continue on the voluntary basis about which

  1015
  the hon. Gentleman asked, but we are anxious to get the new scheme accepted. I say this in all seriousness to Opposition Members, many of whom have supported the YTS. I hope that they will recognise that in the proposals that my right hon. Friend the Chancellor announced in his Budget speech is something which many of us have been keen to see for a long time. It somewhat depresses me that the focus of interest among Opposition Members has been entirely on that point about benefit, when surely no one wants to see young people with no option but to take the dole. There has been little recognition of the real achievement and breakthrough, and of how important it is that a united voice goes out from the House that all of us want to see that opportunity for young people. I hope that we can get that spirit of support, because it will be a challenge to launch the scheme, not least because of the contribution that we are looking for from employers. I hope that the House will speak with one voice on the importance of the two-year YTS.
  Mr. John Prescott: I take the Secretary of State's assurance that there is no intention to change the regulations. However, will he assure the House that, as at present 1,000 people a month have their benefits cut by 40 per cent. for refusing to go on or for leaving the YTS, that principle will remain?
  Mr. King: The Prime Minister said in answer to the hon. Member for Stoke-on-Trent, Central (Mr. Fisher) that there would no change in the arrangements for the YTS. As the hon. Member for Kingston upon Hull, East (Mr. Prescott) knows, it is only for a short period that the benefit is affected. I am grateful for the opportunity to clarify that point. Having done so, I hope that we can focus on the positive approach to YTS and not on that particular aspect of it.
  It has been an ambition of myself and I know of many of my right hon. and hon. Friends to see the two-year YTS launched. I am delighted that it is possible. I pay tribute not only to the constructive discussions that I have been able to have with my right hon. Friend the Chancellor, but to the work of my noble Friend the Minister without Portfolio and the Minister of State in my Department, who is not able to be with me today. I have asked the Manpower Services Commission to begin discussions immediately with all those concerned, with the aim of launching the new scheme from April next year. I have asked it to make recommendations to me by the end of June this year.
  Employers will have a particularly important role to play in making a success of the new development, as they have had in the latest scheme. When we launched the original YTS, the Government met much the greatest share of the cost, although it was understood from the beginning that employers, too, would contribute. Since then it has become clear that employers have benefited substantially from the scheme, and I have been deeply impressed by their enthusiasm and commitment to it.
  We now wish to develop the scheme further in partnership with employers. The second year's training will provide even greater benefits for them because of its greater occupational relevance. Therefore, we shall be looking to them to make a substantial contribution to the costs of the new scheme. Provided that satisfactory arrangements can be made, the Government are prepared to make additional resources available, £125 million in 1986–87 and £300 million in 1987–88, in addition to the
  1016
  £800 million that we were already intending to spend on the YTS in each of those years. I have asked the MSC to begin immediate consultations on that basis.
  It is right that the Government should concentrate their resources for the under-18s on the extended YTS. To ensure the maximum encouragement to employers to participate in the scheme, we have decided that the young workers scheme will close for new applications on 31 March 1986. That will leave the way clear for the new training scheme when it is launched in April 1986.
  Of course, we must not view training in isolation, but as part of a process of preparation for life and work that begins at school. My right hon. Friend the Secretary of State for Education and Science has already done much to develop a school curriculum better geared to the needs of the future. We have also developed a technical and vocational educational initiative which is opening up a whole new range of practical and educational courses for schools. Many of my right hon. and hon. Friends and other hon. Members have seen the new approach to TVEI and I know that it has warm support.
  We believe that further progress is needed, and I can announce two important new measures today. First, we will reinforce TVEI and the similar initiatives in schools with a special programme of in-service teacher training, specifically aimed at supporting the new approach. I have authorised the MSC to spend £5 million in 1985–86 on getting the programme under way. I have advised the commission that it will receive a further £20 million for that purpose in 1986–87. These arrangements will enable the programme to make an effective start in advance of their being carried forward under alternative arrangements by my right hon. Friend the Secretary of State for Education and Science.
  Secondly, we need to ensure that the system of vocational qualifications is better able to cope with the demands of the technological change and the mobility of skills. I have therefore asked the MSC to carry out a comprehensive review of vocational qualifications with the aim of ensuring that we have a system which people can readily understand, which they can join at any stage, which is based on achieving recognised standards rather than time serving, which provides proper opportunities for people to progress to higher skills and which is really relevant to the world of industry and commerce. It is a key element in our proposal that the two-year YTS should give our young people an opportunity to gain such qualifications.
  Mr. Ian Wrigglesworth: I welcome the right hon. Gentleman's remarks, but I wonder whether the proposed consultations will take account of the quality of training in the YTS. I am sure the hon. Gentleman must be aware that grave anxiety has been expressed about that in some quarters. Will he ensure that the qualifications gained at the end of the course are worth something and, perhaps, lead to further qualifications?
  Mr. King: I am grateful to the hon. Gentleman. As he knows, we are devoting increased resources to trying to improve and upgrade the YTS. It has been a massive undertaking—something not always recognised by some of the critics, who choose to pick on the difficulties and problems. We have sought progressively to eliminate the worst aspects and to upgrade the scheme.
  It is important to recognise that it is not just an announcement of a two-year YTS. It is an intention to

  1017
  develop a new scheme which goes beyond the one-year YTS and genuinely provides young people with a vocational qualification at the end of the course. That is a vital additional component to making a real success of the YTS.
  We want to ensure that every young person is in education, has a job or is receiving training that will lead to qualifications. With the help of all parties in the House, employers and trade unions—and I pay tribute to the role of the unions in launching the scheme — I am confident that we can achieve exactly that objective.
  Training is not the only area that affects employment and where change is essential. Our approach has been to take every possible opportunity to encourage employers to take on people and to remove obstacles in the local market which prevent them from doing so. Therefore, I come next to the changes announced by my right hon. Friend the Chancellor to national insurance contributions. Of course, the most important announcement was the intention to reduce the cost to employers of taking on new employees. That is why the change that my right hon. Friend announced to the structure and level of national insurance contributions is such a central part of our approach. The reduction in the cost to employers of national insurance contributions for wages below the national average will make it easier and cheaper for them to offer more jobs, especially to the unskilled and the young, who are traditionally on the lowest wages.
  At the same time, the raising of the tax threshold by 10 per cent. and the reduction in national insurance contributions for employees on lower than average wages should make it easier and more worthwhile for those currently unemployed to take jobs that become available. It is an important measure. I do not think that the merit of the proposal has yet been fully recognised, but it will become increasingly apparent. I do not mind disclosing to the House that in the work carried out in my Department we identified this as the most helpful of all the measures that could lead to an improvement in the employment position. I was delighted that my right hon. Friend the Chancellor decided to make the proposal a central part of his Budget.
  There are other obstacles in the labour market which deter employers from taking on more people. I doubt that I am the only hon. Member who in recent years has had the frequent experience of meeting employers who have admitted, perhaps in private, that they could take on more employees but that for various reasons they were not prepared to do so. The reasons were many and varied. In many cases they used to be faced with problems of tax, the feeling among senior management and business owners that there was not sufficient incentive and encouragement, the concern of older owners that because of the problems of succession tax and inheritance there was not the incentive to provide for their families for the future.
  Those problems have been significantly alleviated by the actions of both the present and the former Chancellor of the Exchequer. However, there are still significant complaints about obstacles to employment. Two of the complaints that I most frequently come across relate to wages councils and the operation of the Employment Protection Acts. No Government can ignore those complaints if they care about unemployment. The Government's job is to strike a proper balance between
  1018
  protection for those in jobs and improving the opportunities for the minority without jobs. If the voice of the unemployed is to be heard, a new balance must be struck.
  That is why the Government believe that some changes in the regulations are now necessary. Wages councils lay down minimum rates of pay and detailed conditions for 2·75 million workers in 26 industries. The system was first introduced in 1909, since when economic conditions have changed dramatically, the welfare state has been established, real average pay is much higher and the hours worked are much lower. There is an extensive framework of legislation protecting the welfare, health and safety of individual employees. The changes in the circumstances have significantly altered the position in which wages councils now operate. Two out of every three of the employees whom they now cover work only part time. At present about 1 million of the workers covered earn minimum rates or just above them. Therefore, there is reason to suppose that the councils set wage levels which have a harmful effect on employment, especially those for young people for whom the councils sometimes set percentage minima above the going rates for other industries, and above the level for apprenticeships and the YTS.
  At the same time, employers complain that the councils' awards are complex and lengthy, and that in many cases they simply add to the red tape and bureaucracy of employing people. Many people argue strongly that the only way to tackle this fundamental problem is to abolish wages councils and that the councils harm job prospects for all the unemployed. Others say that the faults in the system could be dealt with by reform, that councils could be limited to setting a single hourly rate, that their ability to award retrospective wage rises could be stopped, or that young people could be taken out of the system.
  On either view, action is essential and urgent. I am therefore today issuing a consultative document on those two options — reform or abolition. I am asking for comments by the end of May so that we can move quickly to decisions on the next steps. The consultative document also deals with our obligations under international labour convention No. 26 on the fixing of minimum wages. The rules of the International Labour Organisation provide an opportunity for Governments to reconsider their positions on convention No. 26 every five years and, if they wish, to deratify the convention. The next period for reconsideration runs from June 1985 to June 1986. In the consultative document I propose, subject to the formal consultations required, to take the next opportunity to deratify convention No. 26. In my view, the convention is now restricting our flexibility in a crucial area of policy. If we are to help the unemployed, we must regain our freedom to take whatever action we think is necessary in the light of consultations.
  Mr. Prescott: That must be the most deplorable announcement that the House has heard for some time. The Government have now decided to attack really low wages, the average of which is approximately £63 a week. As the Secretary of State is determined to take the action because it will reduce wages and create jobs, will he tell the House why the Government did not renounce the agriculture wages board, which should have been done last year?
  Mr. King: That matter must be addressed to my right hon. Friend the Minister of Agriculture, Fisheries and Food, who is responsible for it. The hon. Gentleman will have a chance to debate all these matters, because I have issued a consultative document. We shall undoubtedly debate the matter again. Because there is clear evidence, and because it is important that we deal with the issue of employment, I am putting a consultative document to the country today.
  Sir William Clark: Will my right hon. Friend tell the House the sort of time scale that he is considering for the consultative document? How long will the consultations take, and when does he think we shall get some action on wages councils?
  Mr. King: I said that I was asking for comments by the end of May.
  Mr. Ron Leighton: As the Secretary of State launches into his consultations, does he notice that most of the most vociferous critics of wages councils have high salaries and are protected by good employment contracts? Is it not morally repugnant to see people on high salaries who want incentives for the rich thinking that the way to create economic expansion is to remove the institutional regulation for our poorest people? Is that not morally repugnant?
  Mr. King: I recognise the interest which the hon. Gentleman and his colleagues in the Select Committee are taking in this matter. He knows that there has been an extremely significant change in, for example, the groups covered by wages councils. When the councils were originally set up they covered manufacturing industries, but now they work more in the retail area. It is fair to draw attention to the point made earlier, that the whole welfare system and the floor that it provides makes the position different. A further overwhelming and significant difference is that two thirds of people covered by the councils are part-time workers. Therefore, the decision is right. [Interruption.] I am not trying to walk away from the issue. The House knows that I am issuing a consultative document today. I am sure that there will be ample opportunity for right hon. and hon. Members to raise the matter, and that we shall have ample time to discuss these issues. The issues are serious, and I make no apology for bringing them before the House in this way.
  Mr. Nicholas Budgen: Will my right hon. Friend point out that many Conservative Members and people in employers' organisations do not want wages councils abolished because they believe that there would be an extension of trade union activities in the industries formerly governed by wages councils? If the councils were abolished, might not many Opposition Members be pleased, because it would lead to an extension of trade union activity?
  Mr. King: I listened to what my hon. Friend said. I am aware that in the trade union movement there are divided views about the role and efficacy of wages councils. That may reinforce some of my hon. Friend's points. On the understanding that we shall have a healthy debate on the matter in the weeks ahead, I shall, with the permission of the House, now move on to the other area of complaint. Employment protection legislation, especially the unfair
  1020
  dismissal provisions, causes small employers anxieties about the difficulties of such procedures and makes them reluctant to take on more employees.
  Dr. Jeremy Bray rose—
  Mr. King: I apologise to the hon. Gentleman, but the House will recognise that I have given way frequently. I am aware of the time factor, as we have had three statements today, and many hon. Members wish to speak.
  We have already since 1979 taken some major steps to make the industrial tribunal system simpler for employers, but I accept that despite the changes the burden of this legislation can deter employers from recruiting more people. At the same time, I firmly believe that after a reasonable period of service people should be entitled to protection against arbitrary unfair dismissal. I make no apology for the fact that a Conservative Government introduced the specific proposals for protection against unfair dismissal, and I emphasise that, before Opposition Members get too excited in defence of the measure.
  I have, therefore, decided that the right step to take to achieve the right balance is to bring the law for large and small employers into line, and to raise the qualifying period for claims in all cases to two years. About a quarter of all unfair dismissal claims come from employees with less than two years service. Therefore, the change should significantly lighten the burden on employers, without removing the protection for longer serving employees.
  I have described the major steps that we are taking to improve training, and to remove the obstacles to the creation of new jobs. At a time of high unemployment we must also, however, provide direct and immediate assistance to those hardest hit by unemployment. I have spoken about the extension of the YTS, which, as well as reforming our training system, will provide new opportunities for one of the worst affected groups—the young unemployed.
  I come now to the Government's proposal to expand the community programme. That programme has proved successful in providing opportunities for the long-term unemployed. Many excellent projects of real benefit to local communities have been carried out. In addition, it has an encouraging record of helping people into permanent jobs. We now intend to make a major expansion of the programme, from 130,000 to 230,000 places by June next year. The programme will then be able to help some 300,000 long-term unemployed people per year.
  In addition to that expansion of the existing scheme, I am proposing three new approaches. It has so far been difficult for industry and commerce to play a major part in the programme. I believe that they could well make a real contribution to this work and that many companies would be ready and willing to do so. I have therefore invited the MSC to investigate immediately ways in which the private sector can be involved in the programme.
  The second approach that I wish to launch is that I want to see charities and voluntary organisations being able to play a much bigger part in helping the long-term unemployed. In the past, a number of them have been deterred by the community programme's rules. I have now asked the MSC to see how we can make it possible for them to employ the long-term unemployed in their valuable activities.
  I believe that many hon. Members will understand that that may be a valuable approach, which I hope can be a

  1021
  real benefit to the charities and voluntary organisations and to many long-term unemployed people who would like to play a part but who, due to the previous arrangements, have not been able to do so. I hope that I shall have the support of both sides of the House for this new approach.
  Thirdly, I am anxious to see how we can develop the voluntary projects programme. It has already helped some 55,000 unemployed people in the past year, including some of the most disadvantaged, to undertake useful voluntary work. I have therefore asked the MSC to consider ways in which it can provide further help for the long-term unemployed through that programme.
  To carry forward the expansion of the main community programme up to the figure that I mentioned of 300,000 people being helped per year, which will be the new figure when the new scheme is at its highest, and to make possible the further new initiatives that I have described, my right hon. Friend the Chancellor has agreed to increase my Department's programme by £140 million in the coming year and £460 million for 1986–87, in addition to the £592 million already set aside for the programme in the coming year.
  From April we shall also be expanding the enterprise allowance scheme by a quarter to help 62,500 unemployed people to set up business in 1985–86. My hon. Friend the Parliamentary Under-Secretary has already announced changes that we are making to the job-splitting scheme and the part-time job release scheme to make them more attractive to employers. We are continuing the full-time job release scheme. We are aiming to double to 250,000 places our provision for adult training in 1986–87. We shall include for the first time training for 50,000 people under the community programme. The open tech programme will be doubled by 1986–87 to provide distance learning for 50,000 people. We are also considering an experimental scheme of training loans to give people the chance to take retraining opportunities.
  As I listened to one or two speeches in the Budget debate, including those of the Leader of the Opposition and the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley), which implied that we were making no efforts to tackle some of the most difficult and intractable problems of unemployment, I wondered how many hon. Gentlemen realised that by 1986–87 we shall be spending more than £3 billion providing help for over 1 million people in the programmes that I have described.
  Those programmes represent a cost-effective use of available resources. I listened with interest yesterday to the right hon. Member for Sparkbrook talking about investment in infrastructure. I suppose that I have had an accelerated course of infrastructure. In the past two years I have been Secretary of State for the Environment, Secretary of State for Transport, and Secretary of State for Employment. I have had the chance to see the relative merits and cost-effectiveness of investment in sewers and the water industry, for which I was responsible, and, in terms of jobs, investment in housing, railways and roads.
  Whaever the economic argument, I am not someone who would argue against the proper place for a good level of investment in infrastructure. Figures for public and private sector investment in the coming year are extremely encouraging. However, if the criterion is employment, and the issue is the tackling of unemployment and the
  1022
  provision of more jobs, there is no question but that the measures that I have described are the most cost-effective way to tackle the problem.
  Measures on their own can never be an answer to the problems. They must always be part of a wider strategy. We have first to ensure that we maintain a sound and stable framework for the economy as a whole, because that is the foundation upon which all our other efforts to tackle unemployment depend.
  Within that strategy we have to take action to help the labour market work and to ensure the creation of more jobs by removing obstacles such as wages councils and the Employment Protection Acts, to which I have referred, which may deter employers from taking on more people, and by tackling the regulations which prevent people taking advantage of the available opportunities. At the same time, we must help people acquire the training and retraining which they need to find employment in a rapidly changing economy.
  We must develop practical, direct measures to help hard-hit groups among the unemployed cope with and adapt to change. The measures that I have described—the community programme and the enterprise allowance scheme — fit within that part of the strategy. Those measures take our policies several steps forward. They are part of a consistent, coherent and, I believe, essentially honest strategy that is based on economic reality — a strategy that takes account of the interests of all the people.
  It is vital that we take into account the interests of all people, whether they be employed or unemployed. It is vital that we all understand the realities of the employment position and the part that we all have to play. That is why I can now tell the House that I shall shortly be publishing a White Paper on employment. Against that background, the Budget marks a course that we must follow. I commend it to the House.
  5.47 pm
  Mr. John Prescott: Now we have the truth—a Budget for jobs, we are told. The Chancellor is going. I would go if I were the Chancellor. The Budget has nothing to do with full-time jobs. It is to do with part-time jobs paid for by different schemes and financed by the lowest paid in our community—those covered by wages councils. That is the reality of the Government's employment policy.
  The Secretary of State announced at the end of his speech that there will be a White Paper on employment. I do not know whether it will contain anything different from what he said, but I should like to remind him, as he reminded us, that it is the fifth year of economic recovery under this Government; that there are still more than 4 million unemployed. The measures announced in the Budget will not materially change the ever-increasing amount of unemployment arising directly out of the Government's policy.
  The truest thing said by the Secretary of State was that the unemployment problem would not be solved q the schemes he described. It is the Government's strategy that determines the level of employment. I do not wish to spend a great deal of time upon the very powerful points that were made by my right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) and by other hon. Members. I want to refer briefly to the straitjacket imposed by the Government's policy. The reality is that

  1023
  the Budget will increase the number of people on schemes. Very few full-time jobs will result from the measures announced in the Budget.
  If one compares the Chancellor of the Exchequer's speech last year with his Budget speech this year one notices that the rhetoric has increased. It was clear from what he said when introducing the 1984 Budget that the Government believed that it would inevitably lead to an increase in employment. However, unemployment has increased since then by 138,000, despite the promise of the Chancellor that his Budget would create new jobs. Today the Secretary of State for Employment referred to the magic figure of 1 million; all he meant was that he would be adding another 300,000 to the 700,000 people who are already on various schemes. That gives us the magic figure of 1 million people on some form of Government scheme.
  I am not against the various types of Government schemes. Because of the nature of the unemployment problem that we face, I believe that such schemes will have to form part of the attempts of all Governments to deal with unemployment. However, I dislike the quality of some of them. I must make the point that when the Prime Minister was Leader of the Opposition she carped constantly about the last Labour Government's introduction of such schemes because, she said, they did not create real jobs. On that analysis, the 300,000 jobs that the Government are creating by means of the Budget are not real jobs.
  If one considers the censure debates on the performance of the last Labour Government and all the debates leading up to the 1979 general election, one realises that this Government are not doing very well by their own criteria. The Secretary of State has announced that the wages councils will possibly be abolished. He has not gone so far as to say that they will be, but he has indicated to the international community that we shall possibly renege on our international obligations. Of the 94 countries that ratified the ILO treaty, ours will be the only one to renege upon its international obligations. We are announcing to the world that our unemployment problem requires us to attack those who are low paid by means of the abolition of the wages councils. That is the gravest indictment that can be laid upon any civilised Government who are trying to deal with the unemployment problem facing all developed countries.
  The Government have been unable to forecast the creation of real jobs by means of the fiscal changes that have been announced in the Budget. The Treasury says that if real wages are reduced by 1 per cent. real jobs can be increased by 100,000 or 200,000. The Treasury economic computer model often estimates the number of jobs that will be created by different policies. Did the Government obtain the estimates through the Treasury's economic model? Were they processed by means of the London Business School model? Various models are available. All of them give employment projections. It is peculiar that in a Budget that is supposed to be a Budget for jobs there is no such prediction. All we have been told is that 300,000 jobs will be created by means of various schemes.
  This Budget has not achieved the objectives set for it by the Government's monetary policies. I shall not discuss that matter because my hon. Friend the Member for Sedgefield (Mr. Blair) is to deal with it in winding up. Instead I shall concentrate my remarks upon the proposals relating to the wages councils that the Secretary of State
  1024
  for Employment outlined in his speech. However, it is clear that the Chancellor has ignored the various suggested alternatives. Nobody can say that there are no alternatives. TINA — there is no alternative — no longer remains supreme. A remarkable number of alternatives have been put forward by various Conservative Members, the trade unions, the Confederation of British Industry, bishops—even by the newspapers. All have a common objective: to reduce the mass unemployment that has been directly created by the Government's policies. Therefore, we cannot accept that there are no alternatives.
  This point was put very powerfully last night during the Budget debate by the right hon. Member for Cambridgeshire, South-East (Mr. Pym) who said:
  "it does not look like a Budget that has been conceived with the stimulation of employment on a substantial scale as its main objective." — [Official Report, 20 March 1985; Vol. 7.5, c. 901.]
  This was before the Secretary of State for Employment, or perhaps we should say unemployment, announced the measures to be taken as a result of this Budget. Since the Secretary of State's statement, it is even clearer that the Budget will not stimulate employment.
  Although the alternatives suggested by the Confederation of British Industry and the Trades Union Congress are starkly different, nevertheless they are clearly convinced that there are alternatives. Measures that are before the House now are designed to save public expenditure in one form or another, but the result will be a reduction in employment. The Transport Bill, which is in Committee, will reduce the level of subsidy for cheap fares leading to a loss of 50,000 jobs. The shipping industry has lost over 1,000 ships during the five years that this Government have been in power. We hear about the face that launched 1,000 ships. This Prime Minister has got a face that has sunk 1,000 ships and destroyed one of the most powerful merchant navies in the developed world. The result of that loss of ships is 30,000 unemployed seamen. By this Budget the Government are taking from seamen their tax allowance, and their wages have now been cut by £10 a week. The Government say that we have to compete with foreign ships employing Asian seamen who earn £40 a month. How can any seaman in this country compete against such a rate? My hon. Friend the Member for Wigan (Mr. Stott) asked earlier this week whether our coasts are to be reserved for our own coastal shipping. The Secretary of State for Transport said:
  "The policy of this Government is to press for the opening up of foreign cabotage trades to British vessels." — [Official Report, 18 March 1985; Vol. 75, c. 373.]
  Therefore, not only will the North sea be lost to British ships and to British workers; we are now in the process of losing the trade around our own coasts, something which every other country in Europe keeps to itself in the name of preserving their merchant fleets and, therefore, their jobs.
  In those two areas, therefore, the Government's policies have a direct and consequential effect upon employment. This Government lack an industrial policy. They believe that by reducing the public sector borrowing requirement and the level of inflation their monetary framework will lead to increased employment. Anybody who believes that in the sixth year of Tory Government we are in the middle of an economic recovery must be living in cloud-cuckoo-land. Therefore, the Budget has not achieved the targets set for it.

  1025
  In his 1984 Budget speech the Chancellor of the Exchequer said that the proposed tax reforms would create new jobs. We all know that the reality is that 12,000 jobs per month went down the drain. That is the success that is attached to that Budget. If we ignore the fiddling of the unemployment figures — which is what the youth training schemes are really about—[Interruption.] If the Secretary of State does not realise that one of the consequences of putting people on to youth training and community schemes is to reduce the unemployment figures he does not understand what is happening. After all, that is one of the consequences. What may be in doubt is whether he intends that as a matter of policy. However, I believe that he does intend it.
  Mr. Jim Lester: The hon. Gentleman is being less than fair to my right hon. Friend the Secretary of State. The Department of Employment's gazette publishes all the figures and shows the impact on the unemployment register. People can calculate the difference themselves. It is not a question of trying to hide anything, because all the information is there.
  Mr. Prescott: I am glad to have that confirmation. But when the Secretary of State comes to the Dispatch Box to give the unemployment figures, he talks not about the additional number of those on schemes, but simply about the registered level of unemployment. That is all that ever goes out on televison or in press statements. We know that that is the name of the game. Why do hon. Members think that only the registered unemployed appear in the figures? It is a fiddling of the figures.
  Mr. Tim Eggar: Will the hon. Gentleman give way?
  Mr. Prescott: I shall not give way. I should not have thought that that issue was in doubt. These Budget statements clearly show — [HON. MEMBERS: "Give way."] All right, let us see how fantastic the hon. Gentleman's intervention is.
  Mr. Eggar: Earlier, the hon. Gentleman quite reasonably said that he was in favour of the schemes, although he had some criticisms to make. However, he has now said that the schemes are all about fiddling the figures. That is a gross slur, and is very unfair to my right hon. Friend the Secretary of State. Will the hon. Gentleman care to withdraw or amend what he said?
  Mr. Prescott: I confirm that the schemes are about fiddling the unemployment figures and under-playing the real level of unemployment. [Interruption.] We can leave the electorate to decide what the truth is. But of course those schemes are about fiddling the figures. A comparison can be drawn between the squawks of Conservative Members when I tell them what has been happening to the figures and their reaction yesterday when the Chief Secretary accused my right hon. Friend the Member for Sparkbrook of something totally untrue, and would not withdraw it. There was not a word of protest from them then.
  Mr. Tom King: I think that the issue that has caused concern among my hon. Friends is a matter of some consequence. The hon. Gentleman began by making a helpful contribution. Unfortunately, we seem to have got into more difficult waters. Perhaps I can give him the
  1026
  opportunity to say that he supports the development of a two-year youth training scheme and that it is the Opposition's policy to support it. The remarks that he has just made could not have been more unhelpful in that respect.
  Mr. Prescott: I was going to come to that point—[Interruption.] One cannot prepare one's speech knowing what the interventions will be. But the Secretary of State knows, because I have said it before, that we stand for a two-year scheme. That was in our manifesto. We have constantly said that. There is no doubt about it, and the right hon. Gentleman knows it. I accept that there may be different motives. But the differences are not only between myself and the Secretary of State. They go wider than that even within the Chamber.
  I do not want to damage the principal provision of the youth training scheme. However, serious criticisms should be considered. The Budget seeks to continue the Government's policies, and after five years of them, unemployment stands at the highest level this century. It is at an historic level, and is higher even than it was in the 1930s. There has been a phenomenal increase in unemployment. The Prime Minister and her Ministers constantly say that unemployment increased under the Labour Government, as if it was anything like the same order of unemployment. Unemployment may have doubled under the Labour Government to 1·3 million, but this Government have trebled the level that they inherited, and the figure now stands at about 4 million. If the Secretary of State is shaking his head in disagreement, he cannot be counting the number of those in schemes, and that is the point that I was trying to make before.
  During five years of Labour Government the population increased by 1 million. However, we still left office with 250,000 more people in work than when we were elected to office. During five years of a Labour Government, 1·25 million more jobs were found, which means 250,000 a year. But more than 400,000 jobs have been lost in every year since this Government came to office. That has happened despite their claim of five years of economic growth.
  I hope that Ministers will not keep repeating these untruths—I am told that one cannot say that they are lies—when they come to the Dispatch Box. The facts are issued by the Department of Employment each year. As a result of the Government's policies, we have an industrial wasteland. Those who have visited the west midlands and the north in particular will understand the scale of the collapse. The Government keep talking about record investment, but there has not been record investment in manufacturing industry. There has been, instead, a massive decline in such investment. There has also been a massive decline in its earning potential. There has been a massive deficit in trade in the manufacturing industries. Many of the regions have suffered as a direct result of the Government's policies.
  There has also been a huge decline in full-time work and an increase in part-time work. It is part of the Government's argument that the increase in jobs is reflected in the fact that about 350,000 extra part-time jobs have been created. Those people are not recorded in the figures, because they are in part-time work. The development of part-time work is an increasingly worrying factor. I believe that it is part of the Government's policy

  1027
  to develop a low-paid, part-time labour force that will undermine the working and wage conditions of the rest of the work force.
  Let us consider the scale of the poverty that has resulted from the Government's policies. In preparation for the debate, I read a speech that was made on 1 November 1978 by the Prime Minister, who was then Leader of the Opposition. She said:
  "Whenever there is a Labour Government there will be poverty, because Labour concentrates far too little on wealth creation and far too much on redistributing what there is."—[Official Report, 1 November 1978; Vol. 957, c. 24.]
  Under this Government there has been a massive redistribution of wealth the other way. The number of those in poverty and dependent on supplementary benefit has trebled. The number of those in the poverty trap has also trebled. The Prime Minister had the nerve to talk about Labour Governments creating poverty, yet her policies, which were designed to reverse those trends, are creating poverty on a massive scale. Unemployment and low pay are major factors in the increase in poverty.
  Thus the Prime Minister has not achieved her aims. Any of the part-time jobs in Britain are covered by the wages councils. The Secretary of State may say that there are a lot of part-time workers and that they are on average wages, but he must know that that is not so. They get paid an hourly rate. We are talking about people who earn £1·50, £1·60 or £1·80 an hour. That is the sort of remuneration that they receive for their work. The new enemy—those who are holding us back from economic recovery — is apparently the waitress in the hotel or restaurant, the hairdresser, the hospital or school cleaner, the manual worker or the farm worker. On average, those people earn £60 or £70 a week, and all of them are covered by wages councils. Many of them are women and migrant labourers. Those people are the new often non-unionised enemy within. The Government are not only attacking those people through legislation but contemplating the possibility of renouncing their international obligations — the only Government to do so—in order to savage people in low-paid, high-poverty industries. That is the course upon which the Government have embarked.
  This is an opportunity for us to look at the differences between Governments. While on the subject of wages councils, it occurs to me that Parliament is a wages council. We were in the position of a wages council when we were informed yesterday that the Duke of Edinburgh was to receive £192,000 a year.
  Mrs. Edwina Currie: Cheap.
  Mr. Prescott: It is not cheap. That sum is equal to the average wage paid to 50 people in wages council industries.
  The Duke of Edinburgh tells us to talk not about the unemployed but about the employed. If he makes such comments, he is likely to hear responses from some in this House which would show that we are very concerned about the level of unemployment.
  I should like to quote from some Cabinet papers that have come into my hands. [HON. MEMBERS: "Oh."] I have some documents about wages councils that illustrate the difference in attitude between two Secretaries of State, the right hon. Member for Waveney (Mr. Prior) and the right hon. Member for Chingford (Mr. Tebbit). The present Secretary of State has nailed his colours to the Chingford mast. The right hon. Member for Waveney received the advice that if wages councils were abolished,
  1028
  "Young persons and part-timers (mainly married women who work part-time of necessity) probably account for about half the total number of employees covered by wages councils. They are amongst the lowest-paid in the workforce. The majority ale not trade unionists. A move to exclude them from minimum-level wage protection would be widely portrayed as an attack on those who are particularly vulnerable. Public sympathy would be readily enlisted on their behalf."
  That advice was given on 12 February 1981 to the right hon. Member for Waveney. He concluded by saying that
  "My conclusion is that the exclusion of young persons and part-time workers from the scope of wages councils would be unlikely to lead to more than very marginal increases in job opportunities for these categories, and that largely at the expense of full-time adult jobs. I am in no doubt that the serious political legislative difficulties of such a course would outweigh any conceivable benefits."
  The right hon. Member for Waveney obviously persuaded the Cabinet of his view. No doubt that incident contributed to his moving from that job.
  The next Secretary of State was that "semi-housetrained domestic polecat", the right hon. Member for Chingford. In July 1982, he obviously gave the Cabinet exactly the opposite advice. He believed that one could go ahead and abolish the wages councils. Presumably those recommendations, which originated in the think tank, are the ones that the Secretary of State has now brought before the House.
  There is also the case of the unfair dismissal provisions — another international obligation arising from the social charter in Europe. The right hon. Member for Waveney said in a confidential memo dated 17 July 1981:
  "My conclusion therefore is that there is insufficient justification to amend the employment legislation further in favour of the employers. Moreover, I believe that any attempt to do so would alienate large sections of the working population, trade unionists and others, and would therefore be politically damaging to the Government."
  I share the right hon. Gentleman's view. The right hon. Member for Chingford took a different view. He recommended to the Cabinet in a letter to the Prime Minister dated 20 December 1982 that not only unfair dismissal, but maternity provisions, redundancy payments and other matters should be considered as protection rights that could be taken away from the workers. He concluded that there was a case for the unfair dismissal legislation but that on industrial tribunals there should be a
  "radical recasting of the system".
  We are witnessing a major attack on the rights of people in work—rights embodied in the employment protection legislation. The situation adequately displays the real differences between the hard right of the Tory party now in control and those who would wish to change the party's present thinking.
  Another good example of that is the Chancellor's proposals for national insurance and tax changes. Those changes are welcome for low-paid people but are geared towards forcing wages down and encouraging employers to turn to the lower wage bands. The Government are encouraging the growth of part-time employment. In their press notice of 15 March they say that they intend to encourage part-time working, as the Secretary of State has confirmed, and that they will pay employers £840 in three instalments so that those employers can create two new part-time jobs. A new part-time labour concept is developing. [Interruption.] The period may be two years.
  Mr. Eggar: Will the hon. Gentleman give way?
  Mr. Prescott: The argument must be about real jobs, not part-time jobs. I recognise that the hon. Member for

  1029
  Enfield, North (Mr. Eggar) knows more about part-time than full-time work, but we are concerned about the development of full-time work and real jobs.
  I welcome the development of community schemes, although I assume that the Secretary of State is now reassessing the question whether people may make profit out of those schemes. That used not to be the case, but I would not set my face against it.
  I welcome any improvement in the redefinition of social need. However, I cannot accept that at the same time as the Secretary of State is increasing the number of places for the long-term unemployed—and the number of long-term unemployed now is greater than the total number of unemployed in 1979—the Government are making thousands of workers unemployed through the local authority cuts and the housing allocation programmes such as in Hull where 200 are to be made redundant in the housing department. While the Government are making people unemployed, the Secretary of State is stepping in with community schemes providing lick-of-paint jobs rather than the real building jobs that a housing programme would offer. That is the major cause of our disagreement with the approach of the Secretary of State to the creation of jobs.
  Mr. Max Madden: Does my hon. Friend agree that there is considerable concern about the extent of racial discrimination in the YTS? Is he confident that the Government will be more successful in ensuring that there is no unacceptable racial discrimination in the expanded community programme?
  Mr. Prescott: That is a matter of considerable concern. I have talked to YTS trainees. There are some very good schemes and some very poor ones. There have been complaints from Youthaid and other bodies about the 20 per cent. of trainees who leave the schemes. We should address ourselves to the criticisms of the schemes, and I am glad that the Select Committee is considering some of those aspects.
  The most crucial matter to those joining the schemes is the work that they will do when they leave. The training aspect is crucial. The extension of the scheme to two years is an important development. In adopting that policy, we are joining our European colleagues. The Opposition endorse and support the development. However, the quality of the scheme is important. We might be more convinced that the Government were extending the scheme solely to improve the quality of training if the same Secretary of State had not announced the closure of 29 skillcentres. We would have been more convinced by the Secretary of State's reasoning in saying that employers must pay their share of the schemes if the right hon. Member for Chingford had not abolished the levy schemes for 16 of the industrial training boards where apprenticeships have collapsed.
  On the one hand, the Government are destroying quality training. On the other, they are running in with schemes and begging the employers to find different ways of providing different types of training, not all of it of high quality. That is what the Opposition cannot accept. Ultimately, it is the type of jobs into which trainees go that matters. Our quibble about the scheme concerns safety
  1030
  cover and pay. If trainees were now paid the equivalent of what they were paid in 1978, they would receive much nearer £40 a week.
  It is interesting that the Secretary of State is anxious about the youngsters who are paid too much. I assume that he considers them to be a factor in the wage market in regard to wage councils and wants wages reduced there. The right hon. Gentleman wants to split jobs in wage council industries, and I do not suppose that full-time pay will be paid for half-time work, even with subsidy given by the Secretary of State. He is beginning to develop part-time work which is geared up to absorb people leaving YTS into low-paid dead-end jobs. That is the sum of the skill being acquired in these schemes. When increasing the input of YTS trainees, the Secretary of State will be under pressure not to allow the percentage going into jobs to fall. If he does nothing about expanding the economy and the real level of jobs, he must find more jobs for them.
  The Chancellor has said that there is resistance to work because benefits are too high or pay is too low. The Secretary of State is gearing the system up so that he can force those leaving YTS into part-time jobs in wage council industries. That is the type of work that many women now do merely to make some contribution to keep them out of the ever widening poverty that the Government's policies have put them into.
  The Budget was apparently designed to deal with jobs and was billed as a Budget for jobs. It cannot claim that. The mouse that the Secretary of State has produced goes no way to justifying that claim. The Budget was never intended to create jobs and to reduce poverty and injustice as a result. It is committed to increasing unemployment and worsening the employment conditions of those in work. It goes in the opposite direction of every other civilised European Government who give greater priority to employment and do not rat on their international obligations to maintain minimum standards.
  The Budget has been designed at a time of mass and growing poverty to make the rich richer by making the poor poorer, and to make the employee weaker and the employer stronger. The Budget is acclaimed on the financial markets as clever and sophisticated, but it has an obnoxious smell which will enter the nostrils of the civilised people of the country, who will expel it and the Government to make way for a new Labour Government who will reverse present policies and take us back to full employment and a fairer society.
  6.22 pm
  Sir Ian Gilmour: The hon. Member for Kingston upon Hull, East (Mr. Prescott) has been very combative and I shall endeavour to reintroduce an element of consensus to our proceedings.
  The hon. Member for Kingston upon Hull, East said that he was not against special schemes. I am strongly in favour of them and I should like to congratulate my right hon. Friend the Secretary of State on the wise things that he said about them this afternoon, especially YTS. My right hon. Friend has the advantage of being able to elaborate on the most welcome and praiseworthy parts of the Budget, and he did so wisely and encouragingly. In last year's debate on this day, I chided my right hon. Friend for describing the Budget as a Budget for jobs. This year, correspondingly, I congratulate him on studiously avoiding that phrase.

  1031
  With unemployment in mind, some of my right hon. and hon. Friends and both Opposition parties have criticised the Budget for not expanding the economy and for not increasing borrowing. That criticism understates what is happening. The Government's financial deficit is a much more significant figure than the PSBR, which is distorted by sales of assets and other matters. Table 6.5 of the Red Book shows that that financial deficit is estimated to be £13·9 billion for 1984–85 and that it is forecast to be £9·8 billion for next year. The difference of £4·1 billion is miles larger than any imaginable cost of the miners' strike and therefore represents an unmistakable tightening of the fiscal stance.
  Some of my hon. Friends might say that the forecast of the deficit or of the PSBR always turns out wrong anyway, so what is £2 billion or £3 billion between friends? I am inclined to agree, but wish that the £2 billion or £3 billion had been in the expansionary rather than the contractionary direction. I am also inclined to agree with what Professor Desai said in The Guardian recently — that the chief purpose of setting a precise figure for the PSBR seems to be to see by how much that figure has been overrun one year later. It is wrong that the Government should set such store by the PSBR when the Chancellor's predecessor, my right hon. and learned Friend the Foreign Secretary, described it as a fickle and delusive statistic. Nevertheless, the Government set great store by it, so presumably the considerable tightening of the fiscal stance is intended and is meant to be significant. In that event, the tightening seems to be an extraordinary confession of failure that, after six years of this policy, the supply side of the economy is so weak that a cut has to be made to avoid inflation.
  The tightening is also a mistake. The Budget is billed as a Budget for jobs—as was last year's—but we are not likely to get a great budget for jobs by cutting demand. My right hon. and learned Friend the Chief Secretary to the Treasury said yesterday that there is no evidence of a lack of demand. What an extraordinary claim. What matters for real output and real jobs is real demand, and there is plenty of evidence that there is a lack of that. One might ask what my right hon. and learned Friend would regard as evidence of lack of demand. Does he not regard the fact that taxes have increased from 40 per cent. to 45 per cent. of gross national product from 1979 to 1983 or that there are 3 million or 4 million unemployed as evidence of lack of demand? How many millions do there have to be before the number shows lack of demand?
  At the same time, there are only 150,000 vacancies. If we multiply that by three, as we are told we should by my right hon. Friend's Department, we still get to only 450,000—a small fraction of the number out of work. Earlier this year, the Confederation of British Industry asked firms whether they were working at full capacity and 54 per cent. said that they were not. It seems to me that the evidence of lack of demand is overwhelming. If we really want a budget for jobs, we must increase demand and improve supply.
  I strongly welcome the employment measures in the Budget, but I do not believe that they go far enough. Some key ingredients are missing in the strategy for jobs. There seems to be no viable strategy for tackling unemployment in the medium term, for example. The necessary and sufficient condition for getting unemployment down is that real output should rise substantially faster than it has in the past few years. On previous figures, it seems that a
  1032
  reduction of only 1 per cent. in the level of unemployment —some 250,000 jobs—would require sustained growth of output of at least 3·5 per cent. per year. Indeed, it would probably have to be 4 per cent. or more, year in, year out. On the Chancellor's own figures, the chances of that happening are negligible.
  The projections for growth at table 2.4 in the Red Book are 3·5 per cent. for 1985–86—that is very good—but 2 per cent. for the following three years. Those rates of growth cannot possibly reduce unemployment; they cannot even hold it at the same level. They are bound to generate increased unemployment.
  I am not suggesting that the requisite rates of growth can be achieved by tax and expenditure policies alone, however cleverly they may be designed. Fiscal expansion is of course necessary, but by itself it would soon run the economy up against the three major constraints that it has suffered from for a long time: inadequate productive capacity, our inability to pay for imports on the scale required by much faster growth, and the renewed onset of inflation at unacceptable rates.
  I am no crude expansionist. The possibility of achieving sustained growth turns on the relaxation of these constraints. I know that my right hon. Friend has these in mind. Only then will fiscal expansion be feasible and a faster growth rate sustainable.
  The essence of a growth strategy — which is necessary if we are to get unemployment down—must therefore consist of interrelated measures to improve the competitiveness of British industry combined with an international initiative to encourage our trading partners to pursue compatible policies.
  The recent fall in the sterling rate of exchange coupled with expansion of output in the United States should have been getting us off to an excellent start. British exports have been doing well and rising at a very satisfactory rate since the summer. In the past three months the volume of non-oil exports was 10 per cent. up on the previous year and the value of non-oil exports was up by no less than 19 per cent. It is a great pity that these favourable factors have not been exploited to achieve a higher rate of growth, but as things are we should have quite a good year this year, although the underlying constraints on a sustained high rate of growth are still there.
  Charts 3 and 4 of the Red Book, which show our declining share of world exports and the ever-growing import penetration ratio of manufactures into this country, are deeply alarming, as I am sure my right hon. Friend would agree.
  It is therefore vital that the breathing space which we are now afforded be used to strengthen the competitive position of industry when the constraints are most likely to present themselves again in an acute form—that is, in 1986 and subsequent years. The Government should give much higher priority to giving direct assistance to industry by fiscal and other means.
  Unless we are prepared to accept a further devaluation, or several further devaluations, the most promising course of action is to achieve now a national agreement to limit incomes and prices. That would simultaneously improve the competitiveness of British industry and insulate the recovery from inflation. The choice, of course, is not between having an incomes policy and and not having one; it is between having a bad incomes policy and having a good one. At present we have an incomes policy based on

  1033
  three elements: high unemployment, discrimination against the Government's own employees, and a great deal of tireless ministerial exhortation.
  Monetarism was meant to make all this unnecessary, but unfortunately it has not quite worked out like that. Indeed, as Professor Phelps Brown put it a shade ironically a year or so ago:
  "Monetarists urge trade unionists to make monetarism work."
  Not surprisingly, they are not wildly enthusiastic about doing that.
  If, instead of an unsatisfactory incomes policy based upon exhortation and discrimination against a background of rising unemployment, we had an incomes policy based on negotiated consent as part of a deal which included substantial growth in employment, we should be likely to be much better off.
  Incomes policies have acquired a bad reputation in this country because they have always been introduced in the past at times of national crisis as part of restrictive packages. They have also invariably borne the seeds of their own destruction by simultaneously interfering with differentials. It would be an entirely different matter to introduce an incomes policy at the beginning of a real recovery and as an indispensable part of the strategy to achieve it.
  Mr. Budgen: Will my right hon. Friend explain how any incomes policy, particularly a long-standing one, can avoid interfering with differentials?
  Sir Ian Gilmour: I could if I wanted to go into detail. These have often been put forward. In particular, one of the main features of the last Labour Government's incomes policy was to interfere with differentials. But I do not think that my hon. Friend is right in saying that it is an integral feature of incomes policies.
  Anyone who sniffs at the suggestion of a rise in output fast enough to reduce unemployment by hundreds of thousands over the next four years and a national consensus comprising the strict limitation of money incomes and prices should reflect very earnestly on the likely consequences of continuing without any strategy at all to deal with the alarming situation that confronts us. Unless the expansion accelerates, real unemployment will not fall but will continue to rise. Unless agreement is reached on incomes, inflation too may well rise again.
  Mr. Dennis Skinner: I have listened to these arguments about incomes policies both in the House and before I became a Member. There have been about seven since the end of the war. I have no doubt that the right hon. Gentleman supported most of those ideas because they came from the same consensus as that to which he has been addressing himself in the past few minutes. I am not against his attacking the Government as he did in the early part of his speech, but I hope that he realises—for God's sake, he is supposed to be a clever man—that this Government have an incomes policy and have always had one. It is based upon having a reservoir of unemployment in order to try to depress the wages of the workers. The fact is that, despite all efforts, the business men, whom he probably favours, managed to get a 20 per cent. increase.
  Sir Ian Gilmour: I do not blame the hon. Gentleman for not listening to me, but I specifically made the point that the Government had an incomes policy. I understood the hon. Gentleman to say that I had missed it out.
  Mr. Skinner: I said it was the business men who made it.
  Sir Ian Gilmour: It may well be. All I am saying is that the difference is not between having an incomes policy and not having one but between having a bad one and having a better one.
  The Chancellor has stuck to his policy of cuts in income tax, although at a much lower level than was previously trailed. Everyone likes having his taxes cut, but I think that it is generally agreed that these tax cuts are just about the worst way of relieving poverty and the poverty trap and the worst way of creating jobs. To relieve poverty and the poverty trap the Chancellor should have made a substantial increase in child benefit, and to create jobs he should have spent money on increasing public investment. Instead he has chosen the worst possible option.
  The basic error of this Budget is that it is more of the same. And more of the same policies leads to more of the same results. The Budget confirms that what the Chancellor has called the "British experiment" is nothing of the kind. An experiment is a test of whether something works. The reaffirmation in this Budget of a six-year-old strategy which is still manifestly failing to achieve its objectives makes it plain that such a test is not being applied.
  Changes are needed, but, alas, they have not been made. That is the fundamental error. That is why, despite the Chancellor's brilliant presentation and conciseness, this Budget, like last year's, is a disappointment. It fails to deal with Britain's fundamental problems and therefore represents yet another missed opportunity.
  6.40 pm
  Mr. James Callaghan: The right hon. Member for Chesham and Amersham (Sir I. Gilmour) congratulated the Chancellor on the "brilliance" of his presentation. When replying to yesterday's debate, the Financial Secretary to the Treasury congratulated his right hon. Friend the Member for Cambridgeshire, South-East (Mr. Pym) on the "brilliance" of his presentation. That must be a new code word in the Conservative party. In other words, if Conservative Members cannot agree on anything else, they can at least agree that a case—a totally inaccurate one, a case flying in the face of all logic and reason—can be presented in a brilliant manner. I assure my hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott) that he, too, presented his case in a brilliant manner. What is more, I agreed with it.
  I can well understand why the Prime Minister found the right hon. Members for Chesham and Amersham and for Cambridgeshire, South-East tiresome. They present their facts and criticism to the House in a totally dispassionate way, not only disagreeing but giving the reasons why they disagree. In a Government who require of Ministers that they be not only passionate acolytes of the Prime Minister but also cheer-leaders, it must have been extremely distasteful to have had those grains of sand irritating in the Cabinet. I have no doubt that they were expelled for the greater unity of the Cabinet. Their expulsion was,

  1035
  however, for the greater interest of the House, for we have enjoyed the contributions that have been made in successive Budget debates by former members of the Cabinet who found themselves unable to agree with the policies being followed.
  It would be tedious of me to repeat the arguments that have been put eloquently today and yesterday by my hon. Friends; tedious also because this is an utterly forgettable Budget. Indeed, it was forgotten this afternoon until the right hon. Member for Chesham and Amersham brought us back to the need to discuss the real problem, that of unemployment and how to match the nation's unused resources of manpower with the human needs that are unmet.
  The test of the failure or success of the Budget must be whether the Chancellor has made as a centrepiece the paradox, as it has been described, of the question that is in desperate need of answering but which the Government have failed to answer. The question is how we are to match the vast unused resources of manpower in Britain with the unmet needs which have been referred to time and again and which speak for themselves. One need only talk to one's constituents on a Saturday morning to hear about, for example, their desperate need for council housing. In recent years the housing lists have increased by 150,000.
  I mention that because it has been pointed out time and again by hon. Members on both sides of the House that the construction industry does not employ imported material to any great extent. Here is a human need that is unmet, with human resources available to meet it. That should have been the centrepiece of the Budget, and my hon. Friend the Member for Kingston upon Hull, East brought us back to that central issue.
  Like others, I fully support the training scheme that the Secretary of State for Employment has introduced and I trust that every effort will be made to make it work. However, as the right hon. Member for Chesham and Amersham pointed out, it is not correct to talk of this as a Budget for jobs. It may be a Budget for increased training, and that is to be welcomed, and it may even be a Budget for the rehabilitation, if that were possible, of the Chancellor's credibility and reputation—I do not believe that it has succeeded on that account—but it is not a Budget for jobs. It does little harm and precious little good.
  Being a Budget for training, the Government have still to answer the major question of where the jobs are to come from when the training period is over. In other words, when the youngsters have their qualifications, having undergone their training — we have spoken time and again of the need for training—where will they find jobs?
  What is the view even of the Government's friends? Sir John Hoskyns wrote a powerful series of articles in The Times—he was the Government's chief think tank adviser—admitting that the policies of the Government in the medium term had failed, and he thought that they were not likely to succeed. It is not good enough simply for Ministers to come to the House and say that they have met great success. In his peroration, the Secretary of State said today that investment had gone up, that growth had increased and that new jobs had been created. All of those aspects depend on the point at which one starts.
  After six and a half years, the Conservatives are still way behind the position reached by the Labour Government in 1979, before we left office. That is true in
  1036
  many respects. I will cite a few. The Government seem now just about to be catching up in terms of growth compared with the position in 1979. Investment in manufacturing is now lower than it was then; unemployment is far higher; and our balance of payments has deteriorated to the point where, without oil, the country would be in an impossible position.
  I do not know what the value of sterling would be were it not for oil. No doubt exports are increasing, but that is because of the value of sterling against the dollar, and there is no doubt that our competitive position has declined seriously in the past few years.
  How are we to reverse the trend? First, until the Government admit that that is the position, we shall not begin to reverse it, yet they are still endeavouring to persuade the country that the situation is not serious and that we are improving. Any dispassionate examination of our position reveals not only that the long-term decline has not been reversed by the Government but that it has continued to deteriorate under Conservative rule. I take no pleasure in saying that, but it is necessary to correct some of the untruths—
  Mr. Prescott: Lies?
  Mr. Callaghan: No, I do not want to start what we had from the Chief Secretary yesterday and a debate lasting 29 minutes on that issue. It is necessary to correct some untruths that are spoken.
  One of the consequences of the serious decline in our economic position is the impact on our social benefits structure. We are trying to carry a first-rate social benefits system on the back of a second-class economy, and we cannot do it. Nor can we avoid the problem because it affects hon. Members on both sides of the House.
  After all, when, after the next general election, my right hon. and hon. Friends form the next Government, they will have to face that serious problem. [Interruption.] There is a good chance that we shall regain power. Indeed, present Tory policies and attitudes are giving the Labour party the opportunity of having our biggest majority since 1945. I only hope that we shall take advantage of it, but that will be a problem to us. We shall have the chance of gaining a large majority at the next election because the people are beginning to understand what is happening.
  The nation's social benefits system is operating from hand to mouth. The people working it are living from hand to mouth and the citizens who should be benefiting from it are also living from hand to mouth. The continuation of present Government policies will mean that the resources will simply not be available to meet the needs of the elderly, the sick and the poor at their present levels. A crisis is looming in our social benefits structure.
  That is why, no doubt, the Secretary of State for Social Services is casting round for ways to push the crisis back as far as he can. But it will come upon us unless the Government find ways and means of escaping from the present dilemma in which they find themselves. They are training, but the jobs, at the end of the period of training, are not in view.
  The Government's utter reliance on market forces to solve our national problems has failed and will continue to fail. Hon. Members were greatly impressed yesterday by the speech of the right hon. Member for Cambridgeshire, South-East. He said that he had failed to discern a coherent strategy in the Government's policies.

  1037
  The right hon. Member for Chesham and Amersham said the same today. I agree with them. Does it not follow that a Government who believe that the blind operation of market forces, acting in aggressive competition, will provide the growth, the prosperity and the employment that we seek are by definition unable to produce the coherent national strategy that the right hon. Member for Cambridgeshire, South-East was asking for yesterday? If they had such a strategy that would indeed contradict their basic approach.
  The right hon. Gentleman asked why, when conditions for growth had been supposedly created—"supposedly" was his word, not mine—the output of manufacturing industry is lower than it was six years ago. Modesty forbids me from reminding the House who was in power six years ago. The right hon. Gentleman also asked why an increase in company profits had been accompanied by a decline in investment, which is now, I may add, lower than it was six years ago. That was a rhetorical question. The right hon. Gentleman knows the answer well. In one way he gave the answer in another part of his speech. It is that the Government are artificially restricting demand. Demand is what is needed. Because it is restricted artificially costs per unit increase inevitably. That makes us less competitive, not more. As the right hon. Gentleman said, demand should be stimulated through increased public sector investment. It is the Government who are keeping unemployment higher than it need be. In the judgment of many of us, the Government could increase demand without incurring the penalties of higher inflation that they so much fear.
  The need for a coherent strategy is felt not just in the overall management of the economy. I should like to take four examples that strike me particularly in vital sectors of our industry and national life—energy, agriculture, and, in the newer areas, our inadequate thrust in biotechnology applications and high density technology in information technology.
  Energy and agriculture are vital to the nation, as everyone must agree. Yet in agriculture there is more and more uncertainty. The common agricultural policy has been an obvious failure. Probably it would be a good thing if the Government could summon up the courage to abandon it completely and go back to a system of national deficiency payments. We should examine the prospects for abandoning the common agricultural policy. Cereal stocks are high and there is a danger of livestock producers being flooded out by cereal growers who in their turn will produce an excess of foodstuffs. There should be a clear policy, and we do not have one. There is more uncertainty in agriculture today than there has been for many years.
  Then there is the hesitation in regard to energy. The supply division between coal, gas, nuclear energy and oil has been abandoned. I see no sign of it now. The right hon. Member for Guildford (Mr. Howell) will correct me if I am wrong, but it seems to me that the pattern that was once fixed has been departed from. We are producing too much oil, much more than was anticipated during the time when I presided over the Cabinet. We then intended to produce sufficient to meet our needs and to leave the reserves in the ground so that they could be used by later generations. We thought that that made sense. Now, at a time when there is serious overproduction, our production of oil is far
  1038
  higher than was originally intended. That in itself must depress oil prices in the world as a whole, with consequences for the structure of the market.
  There should be new statements of policy by the Government on both energy and agriculture. I do not care whether the Government produce Green Papers or White Papers, so long as we have a statement of policy that can be debated. In that way we could get a clear idea of where we are going. For heaven's sake, let us get away from the belief that market forces will provide a solution. They never solved the problem in agriculture and they will not solve it in energy. Let us get away from the belief that the Government can abdicate from their responsibility in some matters because they believe that market forces will solve the problems for them.
  The Government want to move to a new high technology society. There is no doubt that progress is being made in the application of biotechnology to industrial and agricultural processes. We have some first-rate people working on that. They are well up to the standard of the rest of the world, but by comparison we are lagging behind Japan and America. I welcome the statement in the Budget that the sums to be devoted to technology training are to be increased by £40 million over three years, but that does not begin to match the effort that is being made by the Japanese or by the Americans. We know from the available figures that Japan is devoting twice the resources that we are to technology training. The Americans are devoting 50 per cent. more of their resources than we are. The provision of £40 million over three years is not enough to meet the needs.
  We are also wrong in our approach to research. The Japanese are restructuring their research by placing more emphasis on basic scientific research as well as keeping up with applied technology. On the other hand, we seem to be shifting our resources away from basic research. Indeed, the resources being devoted to basic research that is vital to the country have been curtailed over the past four or five years. I shall not dwell on this except to say that Government rhetoric is not matched by their performance. Britain will be a laggard in high technology. I quote these illustrations to point out the deficiencies of our reliance on market forces and our inability to construct a national strategy or even to thrust policy in the direction in which it should be going.
  My hon. Friend the Member for Kingston upon Hull, East told us about what is happening on bus deregulation and on shipping. That made me think again that this country is passing through a phase where a number of bright young men are rediscovering all the fallacies that we abandoned 40 years ago; they are palming them off on the Government and on the people as though they were newly minted wisdom.
  I now have more time for reading and the other day I was reading a work of J. M. Keynes, not "The General Theory of Employment, Interest and Money" because I never got far with that, but "Essays In Persuasion". I ask hon. Members on both sides of the House whether the quotation that I am about to make at least awakens some echoes in their minds. Let me quote what Keynes said in 1931:
  "The Government's programme is as foolish as it is wrong. Not only is purchasing power to be curtailed, but road-building, housing and the like are to be retrenched. Local authorities are to follow suit … What are we releasing resources for today? To stand at street corners and draw the dole? When we already have a great amount of unemployment and unused resources of

  1039
  every description, economy is only useful from the national point of view in so far as it diminishes our consumption of imported goods. For the rest its fruits are entirely wasted in unemployment, business losses and reduced savings."
  Pretty well everything in that short paragraph is being argued about once more in 1985.
  On the Government's half-stated intention to abolish wages councils for the low paid, we have not heard that they intend to put anything in their place. They have already abandoned the fair wages clause, which was a mistake. It is unpleasant to think that the Government believe that the solution to our problems is to impoverish the lower paid even more and to suggest that they should be reliant upon family income supplement if they are not earning sufficient in wages. I believe that I shall bitterly offend the Secretary of State for Employment — no doubt he will mutter something—when I say that the Government's economic policy during the past six years can be summed up in one sentence: tax cuts for the rich and pay cuts for the poor.
  The poor have the weakest bargaining power of all. They tend to be non-unionised. Some of them are from ethnic groups. The Government have weakened the unions and their power to represent those people. I admit that the wages councils have had a mixed history. They have not done the job as well as they should have. All hon. Members—Front Benchers as much as Back Benchers—have a responsibility to protect the weakest in our society in employment. The Government will not fulfil that duty if they abandon the wages councils. [interruption.] That is my view. I hope that we shall all—I hope that we are joined by Conservative Members—fight this tooth and nail.
  The labour movement has often considered the idea of a minimum wage. Because of the impact on differentials, interference with voluntary collective bargaining, and so on—I have heard all the arguments adduced over many years we have not adopted that idea. The Trades Union Congress is not opposed in principle to wages councils. After hearing what was said yesterday, last night I looked up what the TUC said in 1982. The TUC said:
  "The general council have never been opposed in principle to the concept of a statutory national minimum wage … they said that they would reconsider the question of a statutory minimum wage in the light of progress on the TUC target."
  The workers will not get that target. The Government's actions require us all to make up our minds. The time has come for the TUC, and the labour movement in particular, to declare in favour of a national statutory minimum wage system and to campaign for it. If the wages councils go because of Government action, only in that way will we be able to protect the weakest and least organised in our society.
  A minimum wage, like every other system, has its disadvantages, although I dispute the argument which is often put that it will mean the loss of wages. We shall, no doubt, hear that argument during our debates on this matter. As far as I know, there is little evidence in countries with a national statutory minimum wage — France, Canada and the United States—to show that it means a loss of jobs. It means that many small employers have to invest more, modernise and bring themselves up to date.
  Mr. Budgen: Can the right hon. Gentleman explain approximately how much above the level of supplementary benefit he thinks a national minimum wage should be fixed?
  Mr. Callaghan: I cannot. I have not gone into it in such detail. No doubt, as the argument develops, we shall all have views on this matter. I would object strongly if it were suggested that we could get rid of the wages councils and then allow the least unionised, the poorest and the weakest members of our society to rely on family income supplementary benefit, and so on.
  The system will have to be phased in. There is a similar system already for health. We must accommodate part-time workers. I could not see the point made by the Secretary of State for Employment that we have too many part-time workers. That is a case for saying that hon. Members must have greater responsibilities to those workers, because they are least able to bargain. They cannot organise or be organised easily.
  The time has come for us to make up our minds that, even with its deficiencies, a national minimum wage, phased in so that part-time workers can be accommodated within it, should be a matter not only for discussion but for campaigning by the trade union movement, the labour movement and many others. Their consciences will be outraged if they feel that the statutory protection that the low paid have had for 70 or 80 years will be removed and nothing will be put in its place by the Government. I would regard that as a disgrace. I hope that my colleagues will support this idea and will pursue it.
  7.5 pm
  Mr. Julian Critchley: What, after all, is a Budget? It is an annual ritual; an infertile mating dance in which Stravinsky has replaced Vivaldi as our springtime composer.
  What are my impressions of the Budget? It should please the Government Whips, but they are essentially simple men. Clearly, the wets and whingers will not be appeased. We had hoped for something more relevant and robust. On the other hand, the Thatcherites, so-called, cannot hide their anguish. The cry has gone up that the counter-revolution has been betrayed, which is the theme of the leader writers of The Times and the Daily Telegraph.
  It is not for me to intrude upon so public a display of grief. After all, it should be a matter of no little satisfaction to discover, at last, that Thatcherism is no longer infectious. Even so, I do not look forward to a period of harmony on economic policy among those who sit on our Benches — far from it. The Chancellor may have postponed the advent of the brave new world until safely after the next election, but the differences between Amersham and Croydon will remain. We shall still be able to distinguish between Sir William Gilmour and Sir Ian Clark.
  As for the Budget itself, it is much more interesting for what it left out than for what it put in. Faced with an army of letter writers with special interests to defend, the Chancellor, who in the past was plainly a man of substance, has become a man of straw. A trained economist, to whom the arcane notions of the money supply were an open book, and who could discuss financial matters on equal terms with Sir Alfred Sherman, he has been routed by "Disgusted, Tunbridge Wells". No one has so flattered only to deceive since the Duke of York left Britain for the Low Countries.
  Whatever the rights and wrongs of the extension of VAT to newspapers, books and children's shoes, or of the taxation of pensions—I have no enthusiasm for any of them, save perhaps for the extension of VAT to

  1041
  newspapers whose owners' names begin with the letter "M"—the Chancellor got the message, namely, that in politics it is important to be loved, even by one's own supporters.
  From 1979 to 1983, and for as long as the Government's targets remained the great institutions, and especially the great working-class institutions like the trade unions, all went well, but an attack mounted against the privileges of the middle class is a different matter. We have stumbled, if only upon our own supporters.
  The victors of this Budget are the lobbyists, the exponents of single-issue politics, the pressure groups and our constituents with a gleam in their eyes. It is not for me to look them in the mouth. So many gift horses are a welcome reinforcement in what has been a long-running and uphill task to curb the zeal of the ardent ones in our great party. The victims of the Budget remain the unemployed. The Chancellor's measures are unlikely to do much more than stabilise unemployment in the short term, while any slowdown in the economy next year will see a further rise.
  An overwhelming majority of our people see unemployment rather than inflation as the main problem facing this country, and the same majority favour higher spending to reductions in taxes. Another opportunity, alas has been missed, but at least some of the shine has come off the ideology.
  7.10 pm
  Mr. Ken Weetch: I find it difficult to follow the speech of the hon. Member for Aldershot (Mr. Critchley). All I can hope to do is to make my contribution as short as his.
  This Budget has been received with little enthusiasm in any quarter. The only comment that I have read, which is a consensus of all that has been written and said, is that we must be thankful that the Budget was not a lot worse. The nation is wasting its economic substance in heavy unemployment, and most people agree that something bold and imaginative was needed to come to grips with the basic problems. There was no change in the Chancellor's strategy, even though that strategy has proved to be totally ineffective.
  I read in the newspapers that the Chancellor is excessively orthodox. I find nothing orthodox in his economics, but I can find a good deal that is perverse. His strategy is of aiming to impose stringent limits and to reduce public expenditure at a time when we are in the teeth of a serious business recession. There is no orthodox economic sense in that, and there never has been. All this is happening at a time when we have considerable under-used industrial capacity, 3·5 million people out of work and a strong balance of payments. All that put together is an economic proposition which I find incredible.
  I shall first make a number of general comments about the Budget, but the bulk of my remarks will relate to the area that I know best, East Anglia. The strategy is wrong because it is excessively cautious in the face of the quite daunting problems facing the British economy. Any Budget—and I have listened to 12 in this Chamber—has to do two things. It has to make short and medium-term changes, but, more important, it has to make a contribution to the long-term restructuring of the economy. The long-term problems that we have to face
  1042
  arise from the fact that our economy is in a long-term decline. It has been so for the best part of 100 years. There has been a long-term decline in the management and cost-efficiency of the economy. We have become perceptibly less efficient than our main economic competitors.
  The Chancellor has made little attempt to make any inroads into solving the problem. If it were not for the revenue and the industrial production of the oil industry, the economy would be in a worse mess. The problem that we have to solve is to develop other industries and services ready for the time when oil production becomes a less important component of our industrial framework. The Chancellor has not made any start in this at all.
  I have never believed that massive reflation through printing paper money and creating credit in the short term is any answer either. It has already been said in the debate that the infrastructure of British industry is in no shape to respond to such a move. It would be like trying to get more steam out of an old engine, and it would not work. We should be making a start with a gradual reflation, which should be well thought out, planned and selected. Again the Chancellor has made no start on that.
  East Anglia is one of the areas which have great potential for growth. Its population is growing at a faster rate than that of any other area. It has geographical proximity to the EEC and there is great promise for industrial and commercial expansion. However, this potential is being wasted by policies which are wrongly conceived. East Anglia has had a bad deal from this Budget and from preceding ones for the following reasons.
  In the first place, East Anglia is an area of low pay. Although that has improved slightly in recent years, the position still leaves much to be desired. I shall quote one sentence from the East Anglian Consultative Council report on the last financial year. It says:
  "Men in East Anglia need to work more hours per week than their counterparts elsewhere for earnings that are 94 per cent. of the national average."
  The threat to abolish the wages councils will make the position in East Anglia much worse.
  Secondly, in so far as they have lower incomes, the move from direct to indirect taxation has hit people with low pay proportionately harder than anybody else.
  Several Hon. Members rose—
  Mr. Deputy Speaker (Sir Paul Dean): Mr. Julian Amery.
  Mr. Weetch: I was giving way to my hon. Friend the Member for Islington, North (Mr. Corbyn).
  Mr. Jeremy Corbyn: As East Anglia is a low-wage economy, has this been reflected in the last few years on the rate of unemployment? Does my hon. Friend believe the Government's argument that lower wages create jobs?
  Mr. Weetch: I am sorry that I created all that excitement.
  There has been no perceptible improvement in the number unemployed in East Anglia, which directly contradicts the proposition that low wages and more jobs go together. It simply is not true.
  When in 1979, the rate of VAT went from 8 to 15 per cent., people on low wages in East Anglia bore the brunt. If it is part of the Government's strategy to move from

  1043
  direct taxation to an increased base of VAT at 15 per cent., I am against that strategy, because it harms the poor more than the rich. It is wrong in principle.
  In addition to the change in the centre of gravity in taxation, there are such measures as the increase in prescription charges by tenfold over the same period and, through the Government's tampering with the borrowing requirement, the increase in gas prices by more than was necessary, and other such moves. This is not called taxation in a formal way, but in its practical effect that is what it is. The essential principle to grasp is that it hits people on low wages more than anyone else. If we believe, as I do, in the virtues of progressive taxation, it had better be said here and now. That is why I put it on the record.
  I welcome the adjustments that have been made in the Budget, as far as they go. They are a help. I am referring to the changes in both tax thresholds and national insurance contributions. However, the adjustments have led to other problems. Those at the other end of the scale will lead to real difficulties.
  Let me give the House an example. The port of Ipswich is important for the prosperity of south-east Anglia, but the changes will be costly. It will cost us between £80,000 and £100,000 more to run that port this year, with the changes, than it did last year. Felixstowe, similarly, will be affected. Industry in East Anglia has given the measures, for the most part, the thumbs down because the changes make only marginal adjustments.
  The Confederation of British Industry has been mentioned several times. Mr. Michael James, chairman of the eastern region of the CBI, said:
  "The new initiative for YT is only a palliative."
  What I suspect as I go up and down East Anglia looking at industry is that there is a prevailing feeling that the measures might mean cosmetic changes to the unemployment statistics, but that they will not provide any foundation so that young people can find a job after their two-year period on the YTS.
  Every day when I go into the centre of Ipswich I see many young people hanging about the bus station. They are there in large numbers. They are full of energy and want to do some work. There is not very much work. When I ask them about the YTS and the scheme before it, I receive two answers more frequently than the rest. First, they believe that they have been taken for a ride as cheap labour. Secondly, they have no confidence whatever that after the period of industrial and commercial experience is over they will get a real job with any future in it.
  Not much has been said about the increased duty on petrol. In East Anglia we regard petrol going up in price as inevitable as the plague was in the middle ages. However, East Anglia is an area in which public transport has undergone an almost continuous collapse in the past five years. The motor car is more important in East Anglia than elsewhere because there are more motor cars per family than in any other region. The increase will cost people a good deal of money. Both the changes—the increase in the duty on petrol and in vehicle excise duty—will have a serious effect in a rural area where public transport is very bad. That will increase social problems and the cost structure of the area.
  This Budget is a disappointment. My right hon. Friend the Member for Cardiff, South and Penarth (Mr. Callaghan) said that it was instantly forgettable. He was absolutely right. I do not know whether the Chancellor is treading water so that he can have more of a
  1044
  swashbuckling attempt next year, but certainly this Budget has been a disappointment in the House and outside it, especially in eastern England.
  7.24 pm
  Mr. Julian Amery: I would not presume to try to compete with the hon. Member for Ipswich (Mr. Weetch) on the particular problems of East Anglia. However, as the volume of our trade with Europe increases all the time, as against the trade that we used to have with other parts of the world, based on Liverpool and so on, it seems that the future of East Anglia is likely to be improved. Whatever else may be said about the common agricultural policy, I should have thought that it very much favoured, the great cereal producers of East Anglia. However, I must leave that matter in the hon. Gentleman's hands.
  The hon. Gentleman talked about the Government's economic strategy. It has to be seen against the international and domestic background. The international background is dominated by the American scene. People argue and disagree about whether the American growth will continue. I am inclined to think that it will. It is not just the high interest rates that have attracted foreign money into the United States and domestic investment on a vast scale, but the return on capital, healthy industrial relations and, above all, the commitment of the Federal Reserve to make sure that inflation does not take off again. Both Americans and foreigners feel that if they put their money in America it will be safe.
  I would not presume to overcriticise the deficit financing. After all, a great part of it is spent on defending Europe and European interests overseas. There are tactical advantages that are not open to us in this country. If an Administration incurs a deficit, the legislature is a little reluctant to press for extra expenditure, whereas if there is not a deficit the field is wide open, as it is over here. That is one of the problems that my right hon. Friend the Chancellor will be conscious of.
  I do not believe that the American economy is drawing money away from this country. Our interest rates are higher than those in America. It is not a serious problem. Plenty of money is available here for any worthwhile project in which people want to invest. Nevertheless, there are dangers in the present situation. There could be a revival of protectionism in the United States. The banking system could be affected by the overhang of foreign and even domestic debts. Therefore, I think that we would be wise to use the time of general world recovery—sometimes we talk here as if there were a crisis, but things have been going much better than they have been for some years—to try to break down the barriers to trade and payments that still exist in the European Community.
  In 1931, after the great crisis that affected not only the United States but the world, we came out of it through Empire preference and the creation of the sterling area. We cannot do that again. However, we could make the European Community a better trade and payments area than it is today. I urge my right hon. Friends to make that a matter of urgency. I do not know whether it involves joining the EMS. It would be easier to do these things now while things are relatively good than it would be if we ran into rough weather.
  One might not think it from what has been said in the debate, but the overall picture of the British prospect is pretty good. Growth, at 3½ per cent., is well above the

  1045
  average over the past 20 years. Living standards for those at work and on pensions have either gone up or remained in keeping with inflation. Profits and investments have been good and exports have been boosted by the weak pound. Our domestic manufacturers have benefited from what one might call tariff protection as a result of the weakness of the pound. Above all, inflation has been kept more or less under control. I say "more or less" because 25 years ago we would have been shaken rigid at the idea of inflation at 5 or 6 per cent. It is not a bad picture. But world markets do not quite appreciate that.
  What was the reason behind the fall in the pound? We exaggerate the argument that other countries see sterling as a petro currency. I believe that, despite the end of the coal industry strike, they are still suspicious of our industrial relations. Our unit labour costs remain a great deal higher than those of our competitors, despite our relatively lower wage levels, much higher indeed than those of any of our competitors.
  Above all, there is the fear that we might embark upon a reflationary policy. That is not surprising because Opposition Members have pressed for reflation, and so too have a number of my right hon. and hon. Friends. My right hon. Friends the Members for Old Bexley and Sidcup (Mr. Heath) and for Cambridgeshire, South-East (Mr. Pym) have both urged increases in public expenditure. My right hon. Friend the Member for Cambridgeshire, South-East said that the Government's bogeyman was borrowing. I do not agree, and I hope that the Government do not agree. The real bogeyman is inflation, which could lead to a collapse of the currency. I am not dramatising that. It has been evidenced during the past few weeks. We have seen what the markets can do to sterling when they suspect possible reflation.
  My right hon. Friend the Chancellor was right to be cautious in the light of what has happened during the past few weeks, which was possibly sparked off by imprudent speculation by my right hon. Friend in November that he could do better than he has in fact done. Of course, what the House decides must not be determined by market forces, but they must be taken into account.
  Criticism of the Budget has fastened mainly on inadequate provision for the creation of jobs. Unemployment appears to fall into two categories. Last year 1·75 million registered unemployed people found new employment within a year, and more than half of them within six months. I appreciate that it is painful to be out of work, even if some people have received redundancy payments. There are domestic upheavals such as moving home and transferring children from one school to another. However, that should not cause despair. In the United States, people readily accept such changes. Although we do not hear much about it, there has been tremendously heavy unemployment in the United States, with the transfer of resources from declining to growing industries.
  Unemployment in the United Kingdom is higher than it is in most European countries largely because our overmanning in industry has been worse than theirs. It is part of the cost of modernisation, but the country should bear that burden cheerfully. I should certainly support a move to improve conditions for people transferring jobs.
  It is generally agreed that hard-core unemployment stands at about 1·2 million, which is not a great deal more than Lord Beveridge egarded as the norm. However, I do
  1046
  not think that we regard it as the norm. Although unemployment is unacceptable, we must accept that there has been a technical revolution and that unemployment will be with us for a long time. The problem is how to deal with it. Mr. Scargill's recipe was to keep alive uneconomic industries. I do not think that the House would accept that. We could, of course, create jobs as President Reagan has done. We could increase the intake into the Armed Forces or the defence industries. We could make a contribution in such industries as construction, although I am not sure how practical that would be. Training is important. But I feel a little disquiet about the ideas put forward by the Leader of the Opposition about the right of youngsters from 16 years of age to live at the expense of the taxpayer. There is room for subsidies—they were available in Lancashire with the running down of the cotton industry. The National Coal Board has tried to start new industries where it is closing pits.
  The right hon. Member for Birmingham, Sparkbrook, (Mr. Hattersley), my father's old seat, asked for a £5 billion injection into the economy, to be raised by taxes and borrowing. My right hon. Friend the Member for Old Bexley and Sidcup put forward a similar proposal. Hon. Members may have read an interesting book called "Poor Britain", which shows that, although most of those surveyed would be prepared to pay 1p in the pound to relieve poverty or unemployment, they were not prepared to pay 5p in the pound.
  The impact on world markets and sterling of any major reflation at this stage would be not far short of catastrophic. It is only by creating new wealth that we can beat unemployment, overcome the hard-core, long-term unemployment and alleviate the poverty that still affects one in every seven or eight people. What can the Government do? The answer is, not much. They could cut taxes or they could encourage interest rates to fall. Those are the only two instruments available to them other than direct investment, which has been singularly unsuccessful in the past.
  President Reagan appears to have had considerable success by cutting taxation dramatically, balancing that by slashing domestic expenditure—except on defence—and tightening the screw on credit to the Federal Reserve Bank to ensure that the result of his actions was not inflation.
  However, there is a difference between the UK and the USA. I hope that I shall not be out of order if I reveal a confidence. I happened to lunch with my right hon. Friend the Chancellor and I noticed that he was being unusually abstemious. I asked him, "Are you trying to lose weight?" He replied, "No; I am trying not to put it on." That is exactly what he is trying to do with public expenditure. No one has been keener than my right hon. Friends the Prime Minister and the Chancellor to cut public expenditure, but they have not been able to do so. Therefore, they are trying not to increase it. That is not difficult to understand in view of the increased pressure of wages, and other inflationary pressures.
  The right hon. Member for Cardiff, South and Penarth (Mr. Callaghan) made an extremely important speech, and I agree with him on a critical point. The truth is that this Government, like previous Governments, are boxed in by the framework of Government expenditure that is heavier than our producers can bear. Of our population, one third are resting or retired, one third are learning and the whole burden falls on the one third who are working.

  1047
  I suspect—I do not want to be dogmatic about this—that the social services structure built by Beveridge, health by Willink and Aneurin Bevan, education by Butler and the nationalised industries by the Attlee Government, all of which have been amended and added to, were conceived 40 years ago in a different, much poorer Britain, although it was more optimistic about its chances of prosperity. As I think the right hon. Member for Cardiff, South and Penarth pointed out to his Front Bench, the only way to solve the problem is by a radical rethink about the structures of Government expenditure.
  I welcome the idea of Green Papers on taxation and social services, both of which have been promised to us. However, I would not underrate the difficulties of the task. Those institutions, created more than 40 years ago, like the monasteries of the middle ages, are almost as worried about their own survival as the services that they provide. The vested interests that they represent will not easily be challenged. It will be a Herculean work of education to get public opinion to face up to the changes that may be necessary. We have witnessed that with university grants. We witness it in the United States over Mr. Donald Reagan's proposals for taxation.
  I shall now address myself more particularly to the Government Front Bench. Obviously the Tapers and the Tadpoles will say, "Why bother? The position is not too bad. You have 3·5 per cent. growth, the Opposition are divided and the British people are not all that keen on getting rich. Why don't you settle for a quiet life?" The Tapers and the Tadpoles may be right. If so, Britain will decline in the world league, not only relatively but absolutely. Will the British people be content with that? I suspect that we are approaching Shakespeare's
  "tide in the affairs of men",
  and that if we do not advance we shall decline.
  The Government are encamped on a high plateau. Behind them they have the victory over Galtieri, Scargill and inflation. They have reasonable growth. My right hon. Friend the Prime Minister is in complete command of her team, as the right hon. Member for Cardiff, South and Penarth said. She has a substantial majority, a mandate to do what she likes and three years left to run. However, it is always dangerous to linger on the heights, as any mountaineer will know. The weather may break; night comes on; danger and death attend upon delay. Now is the time, if ever, to liberate the wealth-creating forces in the British economy. The process needs to be started now. The subjects that we must face must be debated in the House and up and down the country before we can even begin to legislate. I warn my Front Bench that it is later than they think.
  7.43 pm
  Mr. Donald Stewart: The right hon. Member for Brighton, Pavilion (Mr. Amery) gave a much rosier account of the economy than I would, but in the interests of time I shall merely place a question mark over his claims. I contest his thesis that one way out of our difficulties is to become more enmeshed in the European Community. He also said that because of the invention of robots there would be a lot of unemployment for a long time. I certainly agree, as would every hon. Member, that the invention of robots has had an impact on jobs, but we should not necessarily accept such a pessimistic outlook. We would have unemployment on such a level only if all amenities and the infrastructure had been completed and
  1048
  we needed only to work on care and maintenance. The country is a long way from that, and we should not accept unemployment as being a hard and fast development about which we can do nothing.
  The Budget was much vaunted as the Budget for jobs, but that claim has been largely, if not completely, discredited. The Government's main strategy to reduce unemployment is to keep unemployment running at a high level. That may sound like a conundrum, but it is easily explained. By keeping unemployment high, the Government can rely on wage restraints to operate and, thus, hope that people will accept low-paid jobs. It is similar to operating an incomes policy, except that the Government are using the market forces to do their dirty work. It is as simple as that.
  We are already used to low pay in Scotland. The Low Pay Unit, in a study of the problem throughout the United Kingdom in 1981, found that Scotland had a disproportionately high share of Britain's low-paid workers. In the United Kingdom as a whole, 16·9 per cent. of people were found to have earned less than £100 a week., but in Scotland the proportion was 18.6 per cent. Moreover, the Scots had to work longer hours. On the other hand, the south of England was found to be the least affected by low pay. I stress that these figures are not from the Scottish Nationalist party, but from the Low Pay Unit.
  According to the Government's monetarist theories, unemployment is caused by workers pricing themselves out of jobs through excessive wage claims. If that were true, we would expect areas with the worst incidence of low pay also to experience the lowest incidence of unemployment. Unfortunately for the Government, the complete opposite is true, which blows a hole right through their precious theory. Scotland has the worst incidence of low pay and unemployment, whereas the south-east has the least low pay and the least unemployment. I should like to hear either the Chancellor of the Exchequer or the Minister explain that one away.
  Despite the fact that the evidence is against the Chancellor on that, he is determined to abolish the wages councils. He says that wages councils destroy jobs. That is rich coming from someone whose Government have destroyed more jobs than any Government in living memory. There has been a form of minimum wage legislation since 1909, and wages councils go back a long way. They have given protection from exploitation to workers in various sections of industry and agriculture who could not rely on organised trade unions to negotiate on their behalf.
  During the past few years, however, the Government have run down the service that the wages councils have been able to give. Because of cuts in finance and staffing, councils have not been able to carry out their task effectively. It is not that the need for their services has lessened. In a clamp-down in the west of Scotland a couple of years ago when 566 establishments were visited by wages inspectors, 47 per cent. were found to be underpaying their employees.
  The Government do not seem to be bothered about such matters. Despite the overwhelming evidence of contravention of the wages regulations, they are determined to phase out the wages councils. Today the Secretary of State announced that he would either reform or abolish the councils. That is an ominous declaration about their future. It is clear that the Government are on the side of exploitation and sweated labour.

  1049
  That brings me to the youth training scheme. While genuine and adequate training apprenticeships are to be desired, a large question mark hangs over the schemes operated by the Government. Young people want real jobs, not something to keep them off the street for a year or two, for which they get peanuts.
  Although the Chancellor has not indulged in large tax give aways in this Budget—his style was somewhat cramped by the effects on the PSBR of the coal strike—he said that he hoped to give way £3·5 billion in tax cuts over the next two or three years. That approach is all wrong. The wealth from oil revenues has been frittered away by this Government, just as it was by Labour. Scotland's wealth and future prosperity are being poured down the drain before our eyes on tax cuts, Trident, fortress Falklands and perhaps shortly even on some useless Channel tunnel.
  That last development may end up as a blessing in disguise for Scotland, because one of the predictions of the Highland prophet, the Brahan seer, was that Scotland would be a free nation again when horseless carriages could travel from England to France. Most of his prophesies have come true, and perhaps that is a warning to me not to be so opposed to the Channel tunnel if it is likely to have such a desirable end.
  I should like to say something about the whisky industry in Scotland. I welcome the Chancellor's decision to impose only a small increase in duty this year. That is useful, but I stress that it is not sufficient to solve the serious problems which the industry is experiencing. In 1981 the industry employed directly about 24,000 people in Scotland and about another 5,000 jobs relied upon the industry. The past four years have witnessed closure after closure. In February 1983, DCL, the largest company, closed 11 of its 45 malt distilleries, with the loss of 530 jobs. In the summer of 1984 the company had to lay off another 800 workers for two months of the summer. In January this year it closed another 10 distilleries and made a further 180 people redundant. In four years about 4,000 jobs have been lost through closures, redundancy and natural wastage.
  Mr. Amery: I hope that the right hon. Gentleman will not think it discourteous if, on the strength of what he has said, I leave the Chamber before he finishes his speech to give some support to the industry about which he is speaking.
  Mr. Stewart: I should find that entirely excusable.
  I shall tell the Chancellor of three measures which he could introduce to help the whisky industry. In last year's Budget he abolished stock relief. That cost the industry an estimated £50 million. He should reconsider that and take action to mitigate the losses suffered by the industry. He should introduce an extension of the deferment period for the payment of duty. That would put the whisky industry on an equal footing with the other spirit manufacturers. To help the industry work out a long-term marketing and sales strategy, he should give assurances that increases in duty over the next two or three years will be less than the rate of inflation. That would help to create a climate of stability in which the industry could plan for recovery.
  I was pleased that the hon. Member for Kingston upon Hull, East (Mr. Prescott) mentioned the Merchant Navy. The Government's neglect of what is happening to the
  1050
  Merchant Navy in terms of employment and trade is disgraceful. It is above all disgraceful in an aspect which I should have thought would have appealed to this Government — national defence. They even had to charter foreign vessels during the Falklands war.
  During the last war, 25 per cent. of merchant seamen were lost at sea. That was a greater proportion than the numbers of men lost in what we call the fighting services. The Government have seen the Merchant Navy virtually shrinking away and disappearing. If the Chancellor were to restore the allowance on foreign-going earnings, that would help to arrest that decline. The effect of removing the allowance is that merchant seamen want increased wages. The Prime Minister says that that is the cause of their lack of competitiveness, and the position will be made much worse.
  On my constituency's behalf, I wish to protest against the petrol and vehicle excise duty increases. There is not one mile of railway in my constituency. It must be one of the few in the United Kingdom in that situation. We depend upon motor cars and lorries for all transport. Such an increase percolates through the economy. It will be added to food and everything that is used in the area. Like the hon. Member for Ipswich (Mr. Weetch), I feel that that is a drastic increase to the cost of living in our area.
  The Government cannot say that this is a good Budget for Scotland. For the reasons that I have outlined, my party will oppose the vast majority of the measures which the Chancellor has outlined.
  7.54 pm
  Mr. Gerald Malone: It is always a pleasure to speak after the right hon. Member for Western Isles (Mr. Stewart), particularly on this occasion because he has explained something of a conundrum that I have been trying to understand for some time. I understand that his party has, to some extent, had to disband its research facilities in Edinburgh. I was fascinated to learn that they seem to have been replaced by reliance upon the Brahan seer. It is an interesting point, which doubtless all my colleagues will bear in mind. It perhaps means that I shall face Scottish Nationalist opponents in the next election with greater trepidation than in the last one.
  The first priority for Scotland, the Scottish people and Scottish industry and business was that nothing should be done in the Budget which might risk increasing interest rates. Representations have been consistently made to me in my constituency that that is the greatest problem that business faces. At a time when the level of interest rates is dictated largely by external factors it would have been unfortunate if we had had a Budget that had encouraged an increase in interest rates. I am glad to see that following the Budget there is a sign that interest rates are on the decline. I shall not suggest that yesterday's decline in interest rates was directly caused by my right hon. Friend's Budget. It had more to do with the state of the American economy.
  If we had had an expansionary Budget of the kind called for by the Opposition and some of my right hon. and hon. Friends, interest rates would have been on the increase for internal, economic reasons.
  Hon. Members who believe that we can increase the public sector borrowing requirement with scant regard to the market's response fail to understand the mechanism and that the market is sensitive to what my right hon.

  1051
  Friend does in his Budget. Interest rates would have increased if the Budget had been as expansionary as some right hon. and hon. Members have suggested.
  With regard to slightly more localised issues, the right hon. Member for Western Isles mentioned the increase in duty on whisky. I congratulate my right hon. Friend on restricting that increase. I am sure that all Scottish Members are aware of the difficulties faced by the Scotch whisky industry for a wide variety of reasons. I am sure that Scottish Members are grateful that my right hon. Friend has recognised that the industry is a special case and has restricted the increase in excise duty on whisky in response to the representations that have been made to him. It would be mean-minded of Scottish Members not to take that point into account.
  Oil taxation affects my constituency to a somewhat greater extent. I was somewhat surprised to hear in my right hon. Friend's Budget statement a dismissal of the fact that incremental oil developments in the North sea were to be ignored for taxation purposes. My right hon. Friend announced in his Budget statement last year that it was a matter that he considered to have some priority and about which he would consult the industry during the course of the year. I understand that those consultations have taken place. I was somewhat surprised to discover that to some extent they had been ignored in my right hon. Friend's Budget statement. I noticed also that he said very carefully that he did not intend to bring forward proposals at this stage. It is on that point that I should like to make some observations.
  The announcement in last year's Budget was welcomed. We are reaching the stage in the North sea where the development of new fields is going on, we hope, in parallel with incremental investment to develop existing fields a stage further than they are being developed at the moment. The problem about incremental development is that, while it is important for the production of North sea oil, under the present taxation arrangements it is not at all an attractive investment. Indeed, it is estimated by the oil industry that the rate of tax that will apply to new oilfields after the taxation changes in 1983 will be within a range of 35 to 50 per cent., but for new investment in incremental developments the rate of tax is still about 80 per cent. If incremental development in oilfields is being ignored or put on one side simply because of the rate of taxation, that is regrettable. During the course of our deliberations on the Budget, either during the debate on these resolutions or at a later stage, I hope that we can find out why my right hon. Friend did not consider it to be appropriate to make any changes in taxation in order to encourage incremental developments of that kind.
  Incremental developments would have two results. First, they would probably be highly capital intensive in terms of the investment that they would generate. It would also mean that there was an increased overall tax take from the North sea. It is estimated by the industry that there would be a substantial increase — of about 1 million barrels—if incremental development took place. That must be in the interests of the overall revenue that is collected from the North sea. It must also be in the interests of the industries that supply the North sea industry. Now that the stage has been reached where more and more of the investment that goes into the North sea is provided by British companies, and where they do more of the work, it would be regrettable if we passed over an
  1052
  opportunity that many of the oil companies believe is there to exploit, simply because the taxation level is unacceptable when an investment decision has to be taken.
  I urge my right hon. Friend to make clear what the words "at this stage" mean. Do they mean that my right hon. Friend is prepared to look at the taxation of incremental developments on an ongoing basis? I hope that he will be able to make the position clear for the oil companies. My fear is that the window for making investment of that kind in the existing oilfields may be narrow. During their rundown there may come a time when their incremental development will no longer be effective. That argument has been put to me with some force by those who are engaged in producing North sea oil. I hope that my right hon. Friend will make a full rebuttal of the case that was amply and properly put to him by the United Kingdom Offshore Operators Association for considering a tax relief of this kind. This is very important for my constituency where there is an increasing amount of onshore investment. It is also increasingly important for the offshore industry as a whole, not only as it exploits the North sea but as it develops the technological base that it needs if it is successfully to exploit other offshore opportunities in foreign waters. It is an opportunity that must not be given up simply because there may have been an inaccurate assessment of the position.
  I turn finally to an encouraging aspect of the Budget statement. I have always thought that one of the cornerstones of the philosophy of a Conservative party and a Conservative Government must be to encourage a share-owning democracy. I believe that the Budget statement has gone one slight step further towards that aim. The change in the regulations that will allow shares owned by employees to be disposed of after a five-year instead of a seven-year period is a step in the right direction. However, I suggest to my right hon. Friend that it is only a very small step. Should not the Government consider more radical steps to encourage what is becoming an increasingly encouraging trend? Those who purchased shares under these schemes used to dispose of them very quickly indeed. However, a new pattern of ownership has developed as privatisation has taken place. I believe that employees now hold on to their shares for a far longer period, and they should be encouraged to do so. Indeed, employee share ownership is one of the first and most important steps that we can take if we are to move not only towards a property-owning democracy but beyond that towards a share-owning democracy. I would encourage my right hon. Friend to be a little bolder and to consider proposals that would achieve that aim.
  I believe that this is a sound Budget. For reasons well outwith these shores, it is a Budget that has not been so radical or reforming as I am sure my right hon. Friend and many Conservative Members would have liked. However, Conservative Members are very grateful that it will secure the firm foundations which have been laid by this Government since 1979 for the continued and solid growth that has taken place over an unparalleled period in this country's economy. To have sacrificed that great benefit would have been irresponsible. On that basis it is certainly a Budget which deserves our support.
  8.6 pm
  Mr. Ian Wrigglesworth: I agree with the hon. Member for Aberdeen, South (Mr. Malone) that it is disappointing that the Budget is not more radical

  1053
  and reforming, although I may not want to see the same radical changes and reforms as the hon. Member would have liked the Budget to include. However, I agree with him about the need for more radical changes over share ownership. I look forward to hearing about the kinds of proposals which in due course he will press upon his right hon. Friends. I am sure that the general thrust of his plea for more employee share ownership will be supported by the alliance.
  First, let me comment on the main proposals in the speech of the Secretary of State for Employment. I shall then deal with the proposals contained in the Budget. I begin by repeating an intervention that I made during the Secretary of State's speech. We very much welcome the expansion of the youth training scheme to two years and the introduction of a certificate at the end of the course which can be used when trying to obtain other qualifications and employment — if there is any available.
  If I may emphasise what I said during my intervention, we hope that the Government will turn their attention to improving both the quality and the amount of training within the scheme. There is considerable evidence of dissatisfaction among many of the young people on the scheme and among many participating employers and others who are associated with it. I hope that the Government will recognise that fact and that with some vigour they will seek to ensure that the money spent on the scheme and the work done under it lead to proper and worthwhile training for young people and to a qualification that means something to educational and other institutions and to potential employers.
  I welcome the expansion of the community programme. Both of these proposals were advocated by the alliance. We believe that the expansion of this programme will have a beneficial impact on unemployment. It will provide people with work, which is very much needed.
  Ms. Clare Short: Is the view of the hon. Gentleman's party on the community programme that it is desirable to have temporary schemes which create low-paid, marginal jobs rather than permanent jobs in the public sector? Which of those objectives would he prefer? Is the hon. Gentleman aware of the proposal by the directors of social services that they should be subsidised to employ permanent people to look after the old, the sick and the frail? Would he prefer that option?
  Mr. Wrigglesworth: As the hon. Lady knows, at the last general election we advocated a scheme for taking more people into the personal social services to do necessary jobs, but the community programme provides worthwhile employment for many people. We know about the defects, and about the sceptism of many people, but in current circumstances the scheme should be supported in principle and hopefully, in practice, improved.
  There were other aspects of the Secretary of State's comments which were not so acceptable, including, in particular, the proposal possibly to abolish the wages councils and to change the unfair dismissal proposals. We should be happy to look at any proposed reforms of the way in which the wages councils operate, but we believe that the Secretary of State and his colleagues have got the
  1054
  whole thrust of their policy in that area quite wrong. Indeed, I very much agree with the remarks of hon. Members on both sides of the House who have criticised the Government for attacking that end of the labour market. That is not where the major problems in our economy lie. Incidentally, before concluding my speech, I hope to come to some of the supply side things which the Government should be doing to increase employment. However, we do not believe that the Government should adopt such a policy as a priority, and we are sceptical about whether they are likely to bring forward proposals which will have a major impact on employment.
  I turn to the general Budget strategy. I found the whole Budget very depressing, but it is even more depressing to hear Conservative Members and Ministers talking about the sustained recovery that is taking place, about the economy as though it was booming along, with a very low level of unemployment, and about our capacity being used to the fullest extent. This is not a Budget for jobs, but is, rather, a deflationary Budget, which will take further demand out of the economy. It is worse than it might appear on the plain, straightforward PSBR figures, because the Contingency Reserve is also being increased by £2 billion. In effect, the Government are reducing the PSBR to £5 billion. We need a 4 to 4·5 per cent. growth if there is to be a real improvement in the economy and if there is to be any impact on unemployment. That leads us to the certain conclusion that by this time next year we shall have once again seen a further increase in the number of those unemployed.
  That is the main reason why I find the Budget profoundly depressing, but I find it depressing in another way. Indeed, an increasing number of people feel the same way about the Government's whole strategy. There is a black cloud hanging over the British economy. I refer to the diminishing supply of North sea oil and to the fact that the British people are worried about what will happen to their economy. If the international markets have pushed the value of the pound down so that it is almost on a par with the dollar, goodness knows what they will do if we do not have—as we will not have—the impact of North sea oil on our economy.
  When one looks around the regions where manufacturing industry used to thrive, and when one sees the failure of the new technologies to match the growth taking place in Japan, America and other parts of the world, one becomes profoundly depressed about what will happen when the benefits of North sea oil run out. Of course, that will not happen until after the next general election. Indeed, this may well have been a Budget for the next general election, holdings things down now in order to come forward in a subsequent Budget, and perhaps in another Budget after that, with rather more rosy proposals than the Chancellor of the Exchequer was prepared to put forward this time. In the longer term, the damage to our industry will have a devastating impact on our economy unless the Government's strategy is changed.
  This Budget must be given very low marks when it comes to helping those who have been hit hardest by the depression of the past three of four years. Its spending and taxation priorities are not the priorities that could most cost-effectively increase the number of jobs available, or help those suffering the greatest hardship. To spend £1,600 million on increasing the tax thresholds is not the most effective way of increasing employment. To spend that amount of money on increasing the tax thresholds is

  1055
  not the best way of targeting resources on those who are suffering the greatest hardship. We believe that the best way of doing that is to increase the rate of benefit to the long-term unemployed to the same level as the long-term supplementary benefit rate.
  We also believe that the best way of helping those families who are suffering the greatest hardship and those on low pay is to increase substantially and to restructure family income supplement. Those are ways of cost-effectively achieving the targets of helping those suffering the greatest hardship and of getting people back to work. Unfortunately, the Government chose not to do that, and so we cannot support the Budget.
  For some time Ministers and Conservative supporters have perpetuated myths. In the past few days another bit of Government propaganda has emerged. It is that, together with the so-called enormous growth in the economy, there has been a tremendous growth in employment. We hear figures trotted out of the number of people who have obtained jobs over the last year, but do the Government not understand — because surely the people do — that the important figure is that for the number of unemployed, whose idleness is damaging both to them and to the economy? Do the Government not realise that they cannot excuse themselves by saying that the number of people available for work has grown and that, therefore, they have not been able to provide them with jobs?
  Those who are available on the job market are those who are the means of potential economic activity. If the Government pursued the right policies they could expand the economy and reduce the real unemployment figures. To argue that by increasing the number of people in work one has succeeded is to ignore the facts, and particularly the facts affecting those on the dole.
  The other major lie which the Government have pursued and persuaded people about in recent times is that any expansion of the economy is bound to lead to inflation. They throw around references to the French experiment and to the policies of the Mitterrand Government who came to power in 1982, and seek to associate those policies with the proposals of the right hon. Members for Old Bexley and Sidcup (Mr. Heath), and for Chesham and Amersham (Sir I. Gilmour) or with those of the alliance. They seek to associate those policies with any proposals for an expansion of the British economy. What a farce. In 1982 the Mitterrand Government expanded expenditure by 25 per cent., made an immediate dash towards a 35-hour week and introduced a massive programme of nationalisation, so I am not surprised that that did not work. That was pie in the sky and is miles away from what we, and some of the Chancellor of the Exchequer's Back-Bench colleagues, have been advocating. Our proposals do not bear any resemblance to what happened in France. We must nail some of those lies to the effect that any expansion is bound to lead to inflation.
  Unlike the Government and the Labour Opposition, we have proposed — and as pay increases continue the Government will find it necessary to accept this—that a coherent anti-inflation package should accompany the expansion which we believe to be necessary and possible. The House will know, from the proposals that we have published, what the package consists of. First, we must maintain firm control over monetary policy and, in order to contend with the higher levels of interest rates that that
  1056
  will imply, introduce an industrial credit scheme to form the basis of a two-tier interest rate system to help to protect industry and investment.
  To assist that policy it would be necessary, secondly, to join the exchange rate mechanism of the European monetary system. If the Government had done so in the past few months, they could have done so on much better terms than are likely to be possible at present or in the near future. I hope that Ministers will seek to begin negotiations with the Council of Ministers with the aim of joining. If they had already done so, they would, because of the existence of that discipline upon our policies, have had the confidence of the markets, a more stable exchange rate and more stable interest rates than we have recently had.
  As the Chancellor implicitly acknowledged in his Budget speech, some of our interest rate difficulties are the result of the Government's own uncertainty about their policy on exchange rates — the Government's own incompetence. However, there is no doubt in my mind, in that of the governor of the Bank of England, or in that of the CBI and many other commentators that we would have had a more stable exchange rate and interest rates if we had joined the exchange rate mechanism of the EMF.
  The third element of our package would be an incomes strategy. That has also been advocated by the right hon. Member for Chesham and Amersham. I am sorry that the right hon. Member for Cardiff, South and Penarth (Mr. Callaghan), after his experiences over the past two decades as Prime Minister and Chancellor, made no reference to the need for an incomes strategy. Recent history shows that that is necessary. One needs a back-up policy to help to ensure that the results of expanding the economy are not frittered away in extra pay increases and imports so that an immediate brake has to be applied to any further expansion.
  What is the Government's policy on pay? They exhort firms to reduce pay settlements from the present level of 8 per cent. in the private sector. What do the Government have to say about the 4 per cent. increase in unit labour costs which the Chancellor mentioned in his speech? What do the Government propose to do about that? It will make our industry less and less competitive in world markets in the forthcoming year. What is the Chancellor's strategy for dealing with such pay increases and for dealing with the increasing head of steam that is building up in the public sector as a result of the Government's unfair policies towards public sector workers? We do not know. Neither the Government nor the Opposition have any policy to deal with the acceleration in pay increases that might follow an expansion of the economy.
  I welcome the changes made to help bio-technology and information technology. However, the Government's support for the new technologies through direct investment and grants is chicken-feed in comparison with what our major competitors — Japan, America and also some European countries—are doing. We need more support, and a clear strategy to help to support the new technologies. However, we must also make our existing and older industries more competitive. I wish that Ministers would spend a little more time on the development of existing products, on research in that field, and on the whole area of design. It is wrong to think that the future of our manufacturing industry will depend entirely on the new technologies. Like Sweden and Italy, we must learn that we could gain export markets by dint of imagination and innovation in design. We should

  1057
  consider household products. Our kitchen equipment market has been overtaken in a devastating fashion by imports from Germany and other European countries. That has happened partly, or largely, because of the design work done on old products, for which there will be a continuing demand.
  I also hope that the Government will do more to encourage industrial investment. The introduction of the industrial credit scheme could help to encourage industries, as the capital allowances are phased out, to invest more in new equipment and new plant so that we can achieve the higher rates of productivity and competitiveness which we so desperately need.
  8.26 pm
  Mr. Charles Morrison: Early in his speech, the hon. Member for Stockton, South (Mr. Wrigglesworth) said that the Budget strategy was depressing and deflationary. He certainly made it sound depressing and deflationary, and what worries me is that I have a nasty feeling that he may be proved right. However, I start by saying that it is as pleasant to be able to express gratitude to my right hon. Friend for not including in his Budget some of the more hair-raising ideas floating around in recent months as it is to be able to congratulate him on what he has included.
  I know that some commentators believe that if my right hon. Friend had introduced radical tax reforms such as widening the scope of VAT and changing tax regimes on pension arrangements he would have given himself more room for manoeuvre to act on unemployment. However, as I believe that he has more room for manoeuvre than he has allowed himself in any case, I am relieved that he has forborne from radical tax reform.
  On the other hand, the Budget contains a plethora of measures that are welcome. Foremost amongst them are the extension of the youth training scheme and the enlargement of the community programme. I am somewhat concerned about one aspect of the expansion of the youth training scheme. According to the Chancellor's proposals, referred to by my right hon. Friend today, it seems that employers will have to bear a considerable extra cost imposition. It may well be that they will be able to bear it but we shall have to watch events carefully. I hope that the MSC will be successful in its negotiations with employers on that point.
  In the longer term, I imagine that the changes in national insurance contribution may have a most beneficial effect on real jobs, and that further ahead—presumably in the next Parliament — the application of the conclusions to be drawn from the Green Paper on personal taxation should bring great benefit and make much better sense of our tax and social security system. There is nothing new in the world; we travelled along this track in the early 1970s. The Government could refer to what was said and thought at that time instead of covering all that ground again.
  I share the doubts expressed about the proposals to abolish the wages councils. I am prepared to accept that some reform may be necessary, but I do not believe that the abolition of wages councils will create more jobs. More jobs will be created only through greater demand. On the other hand, I believe that the abolition of the wages councils could have the effect not only of reducing the
  1058
  wages of the lowest paid but also of creating much doubt, worry and fear in the minds of those whose wages are now covered by wages councils. That subject must be approached with the greatest possible care.
  None the less, the Budget contains several enticing crumbs and a few more succulent morsels, but I fear that they are not enough to create a cake adequate to make the country feel more prosperous, more optimistic or more content, although my right hon. Friend the Secretary of State for Employment said that we are now entering the fifth year of economic recovery. In certain respects that might be so, but the economic situation still gives rise to the greatest concern.
  My right hon. Friend the Chancellor tries continually to reassure us by quoting figures for economic growth, investment and low inflation. For the latter at least, the Government can continue to take credit, but behind the bald figures matters are nothing like so rosy. Output has grown, but for two years after 1979 gross domestic product fell. Even in 1984, the index of output stood at only 105·9 as compared with 103 in 1979. If oil and gas are excluded, the comparison is more odious — 103·1 in 1979 and 103·9 in 1984.
  Investment has increased since the low in 1981, but table 3·9 of the Red Book forecasts that the increase in investment will now tail off, when it should continue to grow if our infrastructure is to be improved and our industrial competitiveness is to compare favourably, or more favourably, with that of other countries. Furthermore, Government capital spending is still about 40 per cent. below what it was 11 years ago.
  There are more people in employment than in 1979, and there are proportionately more in work than in any comparable country, but there are nevertheless 3·25 million unemployed—2 million more than in 1979 and 150,000 more than at the time of last year's Budget for jobs. Nor can it be a matter of anything but the greatest concern that, in 1984, the year almost of greatest benefit from oil, our current balance of trade showed a surplus of only £51 million whereas there was a non-oil visible deficit of well over £11 billion, as the hon. Member for Stockport, South (Mr. Wrigglesworth) noted.
  In my judgment the situation is not rosy and the Government must think again. Perhaps the first thing that they should do is to see things as they are rather than as they like to believe they are. Secondly, they must break out of what my right hon. Friend the Member for Cambridgeshire, South-East (Mr. Pym) yesterday referred to as their self-imposed straitjacket. For that, the City might have to take a little of the blame. Nothing will detract from my admiration for what the City does for the country, most notably for our balance of payments, but it does a disservice by putting the fear of God into the Chancellor about what would happen if he expanded his borrowing requirement when, as my right hon. Friend the Member for Cambridgeshire, South-East, said, there is no evidence that anything will be wrecked by an increase in the public sector borrowing requirement.
  On Tuesday, my right hon. Friend the Chancellor said:
  "The great mistake of post-war demand management, which still has some devotees today, was to react to rising unemployment by injecting more money into the system, whether through the Budget or through the banks. So far from halting the upward trend of unemployment, this simply generated runaway inflation."— [Official Report, 19 March 1985; Vol. 75, c. 789.]

  1059
  I do not think my right hon. Friend remembers his modern history very well. Quite apart from anything else, he disregarded oil price increases. If he believed what he said in that paragraph, it is not in the least surprising that he adopts his policies.
  Nobody is asking my right hon. Friend to throw money at the problem or to use it as confetti. If, sometimes in the past, demand has been raised too high, that is no reason now to keep it too low. If, for the current year, it is possible to overshoot the PSBR without disaster by £3 billion, mostly to cope with the consequences of a destructive series of events in the shape of the miners' strike, it is perfectly possible to have a PSBR of a similar £10·5 billion to be used for constructive purposes. After all, it is not the banks that put up interest rates, but the Chancellor. In any case, we know that interest rates are influenced far more by those in the United States and oil prices.
  Someone infinitely greater than me recently asked how it was possible to have production unless one borrowed to produce. He who borrows can end up heading a great publishing house or some such. He who does not borrow will be lucky if he ends up with a corner shop. Indeed, he might have to find another job. The Government should have a little more courage, a little more faith and a little more confidence. If they demonstrate those characteristics, I have no doubt that the country will respond.
  Let us have something approaching a U-turn. In industry, commerce or any other walk of life, if one set of policies fail they are ditched in the interests of the owners, the self-employed, shareholders and employees. Why therefore should the same not be so in politics? Is it fear of being laughed at by the media? It might be frightfully brave to continue to head for the rocks, but I do not think it very wise.
  We should now have some changes in direction. We should remember a few more of the lessons of the past 100 years of our national history and that of the Tory party. In the end, we shall have and must have a larger programme of infrastructure investment because it is needed for the health of our economy. Why not now when there is so much slack in the economy? In the end, we must have a major housing improvement programme as, if we do not, much of our housing will deteriorate beyond the point at which it is repairable. So why not now? Possibly most important of all, as and when required, the Government must give more help to industry to enable it to compete at home and to develop new export opportunities.
  To take another point from the hon. Member for Stockton, South, even if economic arguments have to be forgotten, we must for political reasons join the European monetary system. We almost missed the bus on the European Community and are in danger of doing so with the EMS. Like it or not, it is within the European Community that our destiny, hopes and future must lie. If we do not do those things, I fear for the future of our economy, for employment, for our balance of payments and for the social fabric of the country.
  8.37 pm
  Mr. Ron Leighton: It is a great pleasure to speak after the hon. Member for Devizes (Mr. Morrison). I only wish that he would bring more pressure to bear on the hon. Member for City of Chester (Mr. Morrison), the Minister of State, Department of Employment.
  1060
  This is the sixth Conservative Budget for jobs. The first thing that struck me about it was the revelation of the prodigious multi-billion pound cost of the miners' strike —the cost of making war on our own people, styled as the enemy within—and what the Chancellor called a worthwhile investment. Paying that bill left no resources for anything else. That is why we have a timid, cautious non-Budget which will do nothing to boost industry and nothing for employment.
  Last year's Budget was unveiled as a Budget for jobs and now, 12 months later, 150,000 more people are unemployed, interest rates are five percentage points higher and mass chronic long-term unemployment continues to grow. How many more of these mendaciously described Budgets for jobs can the unemployed take? The Chancellor's only contribution has been to strike at employment protection, making it easier to dismiss workers unfairly. That is a mean, contemptible and unnecessary sop to the hard Right. There is no evidence to suggest that those rights which were introduced by the right hon. Member for Old Bexley and Sidcup (Mr. Heath) have deterred recruitment. On the contrary, they improved disciplinary procedures in industry and thereby improved industrial relations.
  No one can assert that one year is not more than sufficient to assess the performance of an employee, and setting the clock back in this way, giving employers power to sack unfairly, will not create a single new job. It is a disgraceful reversion to Victorian values.
  This is really a Budget for low pay. That is the theme that runs through it. Despite that, we all know that across the economy unemployment has grown much more rapidly for the low-paid groups than for the higher paid. In Hansard of 21 February, the game is given away. My hon. Friend the Member for Dunfermline, East (Mr. Brown) put it rather well. He asked the Chancellor of the Exchequer why employment was continuing to rise and he got the reply:
  "Unemployment is still rising because the majority of pay settlements are still too high."
  Yet my hon. Friend the Member for Walthamstow (Mr. Deakins) asked the Secretary of State for Employment
  "why the reduction in real earnings in the motor vehicle industry relative to the economy generally in recent years has not led to an increase in employment in that industry."
  The reply was:
  "The cost of labour is an important determinant of employment, but it is not the only one. Other elements such as productivity, international competition and the design and reliability of the final product also play a part."—[Official Report, 21 February 1985; Vol. 73, c. 516 and 563.]
  The truth was blurted out there that there are other reasons—for example, cutting public expenditure in a recession, engineering an increase in interest rates. The high exchange rate over these years has destroyed British industry and our competitiveness. The exchange rate is far more important for our competitiveness than marginal movements in wages. These and the lack of investment are the things that have caused unemployment.
  Let us look at wages councils. The far Right pressure groups wanting what they euphemistically call "more flexibility" have turned their attack on wages councils. These councils cover the most vulnerable, the weakest, the lowest paid of our people. Apparently, for the rich to work harder they need more incentives; the poor have to have lower pay.

  1061
  I notice that the most vociferous critics of the wages councils all have very high salaries. They all enjoy very good employment contracts; and from that privileged position they all attack the weakest and the poorest. I find that morally repugnant because there is not a classical free market in wages. Wages, earnings and pay are not decided by the laws of supply and demand. The laws of supply and demand do not decide the pay of Members of Parliament, politicians, civil servants, the Armed Forces, the generals, the admirals, and the judiciary; and throughout industry we have collective bargaining. It is only the people at the bottom of the heap, who have no institutional machinery except the wages councils, who are to be hit. It is thought that if only we hit those at the bottom we shall catapult the country into some sort of economic recovery. I find that a morally reprehensible point of view.
  However, there is no basis for this in fact. I put down a parliamentary question which was answered on 15 January this year. I was told that wages council rates 10 years ago, in 1974, were 73 per cent. of all industries and services. By 1984 they had gone down to 65 per cent. So there is no truth in the idea that wages councils are forcing up wages or are inflationary. It is all very well to have opinions and prejudices. Opinions are two a penny. We want the facts.
  The Department of Employment commissioned a group of Cambridge economists and researchers to look into the question of wages councils. The report has not been published and I demand that the report be published so that we can see what that committee said. Let me quote a sentence from its conclusions:
  "There can be no strong presumption that the retail wages councils have had an important independent employment effect."
  Those are the facts; that is the truth.
  Inquirers asked why firms had cut back on labour or reduced hours and they were told that the reason was a decline in trading positions. Firms were asked in what circumstances they would employ more staff. They replied, if there was an increase in sales and an increase in profits and if they had an increased share of the market or an expansion of business. They did not say it was because of wages councils. There is no point in trying to make a scapegoat of wages councils. If small firms are asked what is the cause of their problems, they say it is VAT or rates. They do not mention wages councils.
  Nor is there any logical reason for young people to be excluded from wages councils. It would be against the whole spirit of the legislation. If adults need protection, why do not young people? They are the weakest and most vulnerable of all. Any increase in employment of young people brought about by a fall in their wages relative to adults, especially in wages council industries where they do similar work, would be largely at the expense of adults, who would be displaced. If employers were induced to employ more young people because of their low pay, the same inducement could lead to their dismissal on reaching adult age.
  I should like to ask the Minister about the Auld report, with which he will be very familiar. The Auld committee was set up by the Home Office to look into the hours of shops and it was recommended that the hours should be relaxed. The committee was not asked to look at wages councils, but in the area it looked into this stuck out a mile. The committee said:
  1062
  "Shopworkers need their protection in this respect as much as ever, in fact more so now when jobs are harder to find."
  It said that it had been struck by how poorly paid many retail workers were, and said:
  "We set great store by the preservation of the role of Wages Councils in fixing statutory minimum weekly rates, holidays and holiday pay for the retail trade."
  It also said:
  "Although it is not directly within our terms of reference, we strongly urge the retention for retail workers of the machinery of the Wages Councils for the fixing of satisfactory wages and premium rates."
  It asked that their orders be properly enforced and wanted an adequately staffed wages council inspectorate.
  That is the recent report of the committee set up by the Home Office. That is its recommendation and I should like to hear tonight that the Government will accept the recommendation of that reputable committee, not that of the various loony ideological think tanks which sometimes put forward their prejudices. We want the facts, not people's prejudices.
  The Select Committee on Employment has been conducting an inquiry into this and we had evidence from the CBI. Perhaps the Minister would like to know what the CBI said to the Select Committee:
  "There was little enthusiasm for the suggestion that all young workers should be excluded from coverage by wages councils."
  In the appendix the CBI said:
  "The question is whether youth pay and particularly the rates paid to young workers in the wages council sector have had an especially detrimental effect. In general, this does not appear to be the case."
  So there is no rational or reasonable case at all.
  I have pressed the Government for an extension of the community programme, as did the Select Committee last year. I am pleased to see this proposed, but I do not want the Government to spoil this for a ha'p'orth of tar. I want an upgraded scheme with more full-time jobs and an increase in the average payment of £63. The Government must obtain the approval and support of the trade unions, particularly those in local government. I wish the scheme well. But even with the numbers mentioned, the increase will represent only one in six of the long-term unemployed.
  With the Select Committee, I have urged an extension and improvement of the youth training scheme and, therefore, I welcome the two-year scheme. However, the Government must be careful not to get it wrong. After all, the motives of many in the Government are suspect. People feel that it is a device to reduce the unemployment figures cosmetically, to keep youngsters off the streets and to reduce youth wages.
  At present, the YTS is like a curate's egg. The latest reports of the Select Committee showed that one third of the schemes were unsatisfactory, that 56 per cent. of trainees left before the end of the scheme, and that one fifth—an extremely high number—of trainees left the scheme before the end.
  We want proper arrangements made for the training of our young. Britain's record in this sphere is abysmal, we are way behind our competitors, and time is running out. Training the young must receive priority, but the first principle of any scheme is that it must be voluntary. There must be no compulsion. Any compulsion would kill the scheme stone dead.
  That means that the Secretary of State must not succumb to the blandishments or pressures of his colleagues—we heard the Prime Minister on the subject

  1063
  today—and we want to end the meagre benefits that are available to the young who prefer to seek work. There must be no what might be termed compulsion through empty pockets. The scheme's success depends on its attractiveness and quality so that people want to join it.
  Some hon. Members would pefer another form of compulsion. They want to remove young people from the ambit of wages councils and make youth earnings so low that there is no alternative to the YTS; in other words, to deny work to youngsters, so forcing them on to the YTS as the only option. If that were to happen, the YTS would be seen as a form of forced cheap labour. That would destroy the prospects of the nation having a decent training scheme for its young. We need major investment in the younger generation. We must devote the necessary resources to that task. Nothing could be more important for the future of the nation.
  Is that what the Government intend? They originally said that they would spent £1 billion in the first year of the YTS. In the event, that was not spent. What do they propose to spend in the second year? The second year must be more ambitious, with more and better quality training, more training specifically related to jobs and higher allowances so that the scheme is attractive and is not seen as a second rate form of cheap labour.
  How much, then, do the Government propose to spend on the scheme now? If they proposed to spend £1 billion in the first year, how much do they intend to spend on an improved second year scheme? When I saw the figures I was so astonished that I thought there had been a misprint. I read that, instead of £1 billion plus being spent in the second year, the Government intended spending a derisory £125 million in 1986–87 and £300 million in 1987–88. That is hopelessly inadequate, and one is bound to ask whether the Government are taking the matter seriously.
  I spent two hours yesterday taking evidence in relation to the YTS from the CBI. The representatives of that organisation are shocked over what is proposed and it is clear that they remain worried, and that is why I remind the Government that the YTS is also voluntary for the employers. There is no reason why employers should not contribute to the scheme. After all, trainees work and contribute added value. Account should be taken of that.
  That is also why trainees should have an adequate allowance. But for the Government to think that they can get off scot free and have a second year of the YTS for nothing—to have two years for less than they proposed to spend in the first year—is fatuous and asinine and casts doubt on their motives.
  Do the Government want simply to massage the unemployment statistics, or are they serious about training the younger generation, our most precious possession? If they are serious, they will accept that if they could spend billions of pounds fighting the miners and more billions in the Falkland Islands, similar sums can be spent on our youngsters. That is what they must do and what I shall press for. We want a proper, high quality scheme with real training, adequate allowances and the prospect of a job at the end of training. The country needs and should settle for nothing less.
  8.55 pm
  Mrs. Edwina Currie: I wish at the outset to extend a warm welcome to all the efforts that are being made to improve the training of young people and the retraining of older people. It is tragic that so many
  1064
  youngsters should have been leaving school virtually unemployable when in many parts of the country—for example, in my constituency—there is a shortage of skills.
  Schools and industry have drifted much too far apart and, as a former teacher, that makes me uneasy. It is an odd situation when young people who cannot get jobs at the age of 16 can join a good youth training course, such as that run by Rolls-Royce in Derby, and a year later 70 per cent. of them are first-class and welcome employees. That is probably an indictment of our schools system, and the efforts announced by my right hon. Friend this afternoon to improve the awareness of teaching staff about the needs of employers are appropriate and valuable.
  One crucial problem concerns the rigidities and costs of employment, which have changed the patterns of employment under our noses without anybody having planned it. It is also an odd situation that when Mrs. Average takes her son for a job interview, not the lad but the mother gets the job these days. In the year to September 1984, 153,000 net new jobs were created, and 152,000 of them went to ladies working part-time. There is nothing wrong with that, but it is obvious that in many parts of the country the jobs are there and that the work force, to acquire them, will have to be more flexible, more skilled, more competent and cheaper.
  It is sad to reflect that in many parts of the country the worker is, in far too many cases, not worthy of his hire and, as a result, he does not get hired. Thus, I support the end of wages councils. So long as we have a supplementary benefit system, there is, in economic terms, a minimum wage below which at least full-time wages cannot fall.
  As for long-term unemployment, I welcome all the proposals in regard to the community programme. An imaginative set of measures has been set out today and I am particularly pleased to see, in view of my interest in health and social services, the proposals to help charities and voluntary organisations and the voluntary projects programme—a sensitive and valuable idea.
  The Budget will also be welcome in the east midlands. It is clear, for example, that we have put far behind us the Socialist policies about which we have heard today from Opposition Members, many of whom have been talking absolute humbug. When in power, they imposed a tax on jobs which was called the selective employment tax. We have got rid of that. They had another tax on jobs called the national insurance surcharge, and we have got rid of that. That had price controls. The first time that I came to the House I was sitting in the Strangers' Gallery 19 years ago in 1966, and I heard Mr. Frank Cousins putting forward part V of the then Prices and Incomes Bill. I remember thinking then, "What an absolute shambles, and what a way to run a country; there has to be a better way."
  The Labour Government also had an incomes policy. We have heard about an incomes policy this afternoon. One or two of my right hon. and hon. Friends are in favour of one. An incomes policy of the kind that we saw under Governments of all colours destroyed initiative, diverted effort into perks and into avoidance, and drove our best people overseas, including many of the people with whom I was at college in those years. Those were our best people, in the sense that they were the creators of employment. They have taken their ability to create employment elsewhere.

  1065
  We also heard from the hon. Member for Stockton, South (Mr. Wrigglesworth) about the alliance's income strategy. He did not actually say what the strategy of the alliance would be. As I understand it, at least part of it is to tax any pay rises over and above a certain level associated with inflation. The only country in the world that I know of which has a programme like that is Hungary, which I do not think is a model of economic probity. The only modern politician suggesting that, apart of course from the odds and sods in the alliance, is Senator Gary Hart of the United States, and we all know what happened to him.
  The results of the Socialist policies in the five years of the Labour Government were miserable rates of growth of under 2 per cent., awful productivity with ¾ per cent. improvement, and a rapid rise in unemployment to the tune of it doubling within months. The last Chancellor who gave a forecast of what unemployment would be was the Labour Chancellor in 1975. He was desperately wrong and it has never been done since.
  We had a level of inflation of over 20 per cent. I was a teacher when the Houghton award was given in 1974. We thought that we were doing well. We got a pay rise of 30 per cent. The following year inflation was 28 per cent. and we discovered we had been paid in paper money. Raising taxes to pay for the sort of pay rise that was then awarded throughout the public sector simply took money from companies in the private sector and put other people's work in jeopardy. How much better it is to approach the whole problem by saying to employers, "We will take less tax from you. We will give you fewer allowances and grants and let you decide how to invest the money. You can decide how to employ staff and pay them. You know better than Whitehall. You share the investment in the training scheme." It is about time we said that to employers. If they expect the benefits they should share the cost in a much more direct way than by taxing them and handing them back the benefits, as we have tended to do so far.
  Whether or not this is a Budget for jobs we will find out. I think that it is. As has been said by the Opposition, it is certainly a Budget for the low-paid worker. I suppose that there is one sense in which it is a Budget for the little man. Given the comments that the Chancellor made about the importance of the family and getting the wife back into the kitchen, I guess that it is a Budget for the little woman as well.
  We have 8½ million people earning less than £130 a week. The assistance that is being given to the individual and to his employer through changes in the income tax threshold, by raising thresholds by twice the level of inflation, and by changing the rules on national insurance contributions will be immensely useful. I am delighted that at last the Treasury has recognised that national insurance contributions are a tax. They are a nasty, regressive form of tax on the lowest paid. As a result, they are a deterrent to work, because so many people become better off at the margin by not working and making that a rational choice for themselves and their families.
  I commented at Question Time this afternoon that some 260,000 people who are over working age will be taken out of tax. I had better make it clear that I welcome that. It is a good thing that pensioners should not have to pay tax on their hard-earned personal pension. Of the 800,000
  1066
  people who will be helped by the tax rules, just over 500,000 will be of working age. That shows how difficult it is to change the rules to assist those who are at work.
  Many of those who work and pay tax will still be paying national insurance contributions. The calculations show how hard it is to remove the poverty trap. If a man earns £80 per week, he will pay 5 per cent. in national insurance contributions in future and, taking benefits into account, he will achieve a net receipt of £95·33. If he gets a better job and earns £91 per week, he will pay 9 per cent. in national insurance contributions and he will be worse off because he will end up with a net receipt of £93·45. He will be almost £2 worse off by going for a job that brings in £11 per week more.
  My right hon. Friend wants to shift the burden to the higher paid, but I am not sure that he was thinking of the £91 per week man as being higher paid. Perhaps we cannot eradicate the poverty trap. Perhaps all that we can do is shift it around. It seems to me completely wrong that a man cannot improve his position in life by working harder. I do not feel that we will have fulfilled all our Tory pledges until we have put that matter right.
  What these measures should do is to shift attention to employing more men at lower wages instead of having people on overtime at time and a half and double time. At the end of 1984 the overtime worked in manufacturing industry — we have heard a lot about manufacturing industry today — was working out at over 12 million hours per month and was rising fast, with an average of 9 hours per man per week. That is equivalent to 300,000 extra jobs in manufacturing. I hope that some of the changes in the Budget will encourage the creation of those new jobs.
  Altogether, nearly £1·25 billion in a full year will be spent on improving the employment prospects and initiatives for those on less that £130 a week. I should have thought that if the Labour party was really the party of the poor and the downtrodden, as its members claim, it would welcome the Budget.
  I welcome the comments yesterday of my right hon. Friend the Chancellor about how the system discriminates against the family. It is surely an anomaly that a married man with a working wife gets two and a half times the single man's tax allowance, but a married man with a non-working wife gets only one and half times the single man's tax allowance. I shall watch with interest a change in the system such as the proposal at which my right hon. Friend was hinting yesterday that they should both have allowances of the same amount so that the married man with the non-working wife does not lose out.
  There is one particular problem. If the Chancellor proposes to adopt the ideas of the Institute for Fiscal Studies—which would cost about £3 billion a year—although 2 million people would come out of tax, about 2 million ladies who currently are not paying tax will have to pay it in future, and they will not like it. We have a long way to go before it pays women to stay at home. I therefore welcome the Green Paper, which will look at the interaction of the tax and benefits system. It might well be better to look at the way in which the French tackled this problem in the post-war years and the ways in which we might better use the £4·25 billion of child benefit, perhaps making it payable only to women who stay at home with small children.
  We heard much from the hon. Member for Kingston upon Hull, East (Mr. Prescott) about real jobs, and, no

  1067
  doubt, we shall hear more from the hon. Member for Sedgefield (Mr. Blair). Three thousand coal miners in my constituency have real jobs. Much more could have been done in the Budget had it not been for the miners' strike. Right at the beginning of the strike, a year ago South Derbyshire miners took a vote and 83·5 per cent. voted to go to work. They have worked throughout. They have just voted to lift the overtime ban, and I am pleased to hear that. Yesterday, they refused to ballot on the 50p levy for dismissed miners. The general secretary of the NUM in south Derbyshire said that his men would murder him if any such suggestion were implemented in south Derbyshire. He said that the notion would be to pay these people who "threatened and abused" his workers. He said that, as far as south Derbyshire was concerned, they could "stuff it". That strike was expensive, destructive and pointless. All it did was slow down our growth to 2·5 per cent., which would have looked very nice during the Labour years.
  Labour Members supported that strike, and the docks strike and the train strike. They support the teachers' strike and every strike going. We have yet to hear Labour Members say in the House, "There is a strike on, and we disapprove. We think that they should go back to work." Labour Members are more interested in disruption and disaffection than in the growth and development of our industry and country. All that that approach will do is to advertise to our customers all around the world British industry's unreliability. The result is that we lose customers, trade and jobs for ever. In that context, therefore, the measures of my right hon. Friends on the Front Bench are wise, workmanlike and worth while, and I am glad to support them.
  9.8 pm
  Mr. Martin J. O'Neill: I suppose that after 12 minutes of listening to the hon. Member for Derbyshire, South (Mrs. Currie), we have had our £5 worth of her. That was probably quite expensive at the time. We heard a unique speech from the hon. Lady, because she was the only Government Member to have been in any way supportive of the Government's policies. One can only hope that the hon. Lady's loyalty will be rewarded by a job in the Whip's Office, so that we may be denied for some time the privilege of listening to any more of her interventions.
  I am sponsored by the National Graphical Association, so I wish to refer to the imposition of VAT on advertising in periodicals and journals. This is an unfortunate and unnecessary piece of taxation which is made no more palatable by the fact that it will not be imposed on books and the cover price of journals and newspapers.
  The idea that journals and periodicals should be treated in the same way as radio and television is based on a misunderstanding of the economics of the media, which is likely to endanger many of the free sheets and to cause an increase in the price of newspapers. It is likely to result in a 3 per cent. decline in the volume of advertising, according to studies carried out by Price Waterhouse. It will have serious consequences for the print industry because free sheets have been a means whereby excess capacity and expensive new equipment has been taken up. Firms have invested in the new technology and have been encouraged by the printing unions to do so outside London. The provincial presses will be put into jeopardy, and many of the proposals for improvements in industrial
  1068
  relations could be jeopardised by this paltry taxation. Such is the poverty of the Government's thinking that their capability to raise taxation leads them to seek £50 million by a measure of this nature.
  The disproportionate burden of this new form of VAT will be imposed on small advertisers, people who make use of classified advertisements and wish to get rid of equipment and so on. Such advertisements allow the poorest people the opportunity to sell things through the press. As charities are not in a position to claim VAT back, they will have to carry the burden right the way through. About £2·5 million a year is spent on advertising by the charities such as Oxfam and War on Want to bring to the attention of the public the significance of their case. Such an imposition on them, at a time when the Government are providing assistance in other forms to the charities, through the community programme—a move that we welcome—means that the Government are giving with one hand and taking away with the other. This tax is unnecessary and unwelcome. The amount of money that it will collect will be out of all proportion to the dissatisfaction that it will cause to the community.
  9.12 pm
  Mr. Tony Blair: It is with some diffidence that I wind up this debate, given the high quality of the speeches that have been made. In particular, I am glad to welcome back my right hon. Friend the Member for Cardiff, South and Penarth (Mr. Callaghan), who was in excellent form. It must be comforting for the Government to appreciate that, although they have the less than total support of the right hon. Members for Chesham and Amersham (Sir I. Gilmour), for Cambridgeshire, South-East (Mr. Pym) and for Old Bexley and Sidcup (Mr. Heath) and of the hon. Members for Devizes (Mr. Morrison) and for Aldershot (Mr. Critchley), they at least have the unstinting admiration of the hon. Member for Derbyshire, South (Mrs. Currie).
  This Budget is significant only in its utter insignificance. To call it a "Budget for jobs" is to add the insult of a lie to the injury of mass unemployment. If it marks anything, it marks an end of pretence by the Government that they can fulfil their responsibility to the unemployed, and a consolidation of their strategy to disclaim responsibility for the unemployed. We have not a Budget of solutions but a Budget rich in excuses.
  From now on, we shall be told two things ad nauseam by the Government. First, as the Chancellor put it in a broadcast in October last year, we shall be told that unemployment is not an economic but a social or human problem. In other words, the Government have nothing to offer the unemployed but their condolences. Secondly, Government strategy will, to an ever increasing extent, blame unemployment on the unemployed. Those in work will be congratulated, those out of work will be told that the fault is theirs for failing to take advantage of the new enterprise culture that the Government have visited on us and for their greed in asking for high wages. In other words, masochism will be elevated into a principle of public policy.
  Central to that strategy is the lie frequently touted by the Government— we heard it again today—that the Government have done all that they can. We used to be told that unemployment would fall when recovery arrived. Looking back to the speeches that were made before the Government came to power in 1979, one sees that the

  1069
  Conservative party's constant refrain was that the Labour Government caused high unemployment, and its policies would reduce it. Now the Government realise that in fact unemployment will not come down and that it will not be substantially less at the end of their period of power than it is now. However, that has resulted in the Government not changing their policies but changing their definition of "recovery". I should like to examine in a little detail exactly what substance there is in the claim that the British economy has recovered.
  The Chancellor said that his speech set out the economic background to the Budget. It did not. It set out the economic performance of Britain in 1984 in the abstract. I should like to set Britain's economic performance in its proper context. The Chancellor laid great stress on output, investment and exports, and in particular he emphasised all those things in relation to manufacturing industry. It is true that in all those areas there was substantial improvement in 1984, but now let us consider the entirety of the Government's period of office — not just 1984, not just 1981 to 1985, as the Government are fond of doing, but the years 1979 to 1984 as a totality, in other words including the 'period 1979 to 1981, which is fact, and excluding the year 1985, which is forecast. When that is done and the figures for 1984 are put relative to the total years of the Government's period of office, particularly when the extent and depth of the recession in the late part of 1979 to 1981 is considered, a rather different picture emerges. It is right that output is up 2½ per cent. in 1984, but due to what happened in 1980 and 1981, average output under the Government is actually less than 1 per cent. per year. Let me put it another way. If output had continued at the level that it was at from 1974 to 1979, it would be some 6 per cent. higher today. In fact, the output for 1984 is average trend growth in a fully employed economy, and is wholly inadequate to deal with the depth of the recession that we were plunged into in 1980 and 1981.
  Let us take investment. Total investment this year is up 6½ per cent. which, by itself, is attractive. Let us put it in context. In fact, 1984 is the first time that total investment has even achieved its 1979 level. It only now begins to compensate for the fall in investment of 5 per cent. in 1980 and of 8½ per cent. in 1981. Indeed, I have taken the most favourable assumption on investment because the truth about the 6½ per cent. figure is that to a large extent it is made up of firms using the changes in capital allowances to bring up their investment. If one looks at the Government's own forecast for total investment, one sees that it drops to 2 per cent. next year and to 1 per cent. in the first half of 1986.
  Mrs. Currie: Will the hon. Gentleman give way?
  Mr. Blair: I shall give way in a moment, but I should like to finish this part of my speech.
  Let us consider non-oil exports. They are up 9 per cent., says the Chancellor, but during 1984 the sterling index depreciated by some 10 per cent. There is no secret of competitiveness here. There is no magic cure that has been worked by the Government upon the economy to achieve that. Let us consider the opportunities. In the United States there has been an expansion of industrial production of about 15 per cent. in some 18 months, yet Germany, Italy and France all did better on exports to the United States
  1070
  than ourselves in that period. Of course, what picture of exports would be accurate without recording the non-oil trade deficit reached in 1983 for the first time? In 1984 it will be £4 billion, and in 1985 the Government forecast that it will actually rise.
  Mrs. Currie: I have listened to the hon. Gentleman with great interest. Does he admit that business investment last year rose by 12 per cent. to an all-time high, as did investment in the construction and service industries? Will he tell the House during which year in the last Labour Government growth in the economy as a whole reached 2·5 per cent., which it did last year despite the miners' strike?
  Mr. Blair: With great respect, the hon. Lady does not understand the point that I am making. It is not enough to look only at this year—we must look at the entirety of the Government's term of office. It is meaningless to say that recovery is happening now unless it is set in the context of what took place in the first years of this Government's term of office. That becomes even plainer when studying manufacturing industry.
  Let us set the Chancellor's Budget claim in context. He said that manufacturing output was up by 3·5 per cent.—so it is, but it is still 9 per cent. below its level when they took office. He said that exports were up 10 per cent. Yet the Budget statement itself shows that the growth of manufacturing exports is no more than the world growth in manufactures for the entire year—and that with the current trade deficit. We have been told that investment in manufacturing industry is up 13 per cent.—yet it is still 30 per cent. below its 1979 level.
  Even if we take 1984 in isolation, we must compare the output of this country with the average output of OECD countries. Their average this year was 4 per cent. to 5 per cent. compared with 2·5 per cent. for the United Kingdom. Even making allowances for the miners' strike, industrial production in the United Kingdom is the lowest of any OECD country. This is supposed to be the year of recovery. The truth is that over six years, measured by any sensible standard of success, this Government have failed.
  All this has taken place at the same time as North sea oil has come on stream. Conservative Members do not like to hear too much about North sea oil or the waste of the revenue from it. By 1988–89, this Government will have received about £74 billion to £76 billion. This year alone, revenue is expected to be about £12 billion, and probably £13·5 billion next year. Let us suppose that that bonanza to the Government's revenue was not available—what would the private sector borrowing requirement be then? The truth is that we could never have managed without massive tax increases. We have had the revenue from North sea oil over and above what other countries have had, and viewed in that light the scale of the Government's failure is even greater.
  When historians look back at this period of Government, they will do so with amazement and anger. How could a country be given such a windfall during recession, at a time when traditional industries were changing structurally and at a time when the world was coming to terms with the demands and advances of new technology, and used that windfall not to build growth, not to invest in new technology, not to finance industrial development, but to squander on the dole queues? I do not think that there are words adequate to describe the

  1071
  Government's failure. That is the true economic background of the Budget. Measured against that, we must decide whether the Budget is a Budget for jobs.
  My hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott) dealt with the community programmes and the YTS. The two main items that are supposed to bring about the supply side revolution in the British economy—the national insurance contribution changes and the tax allowances—must be set in context. For the purposes of argument, let us assume in the Government's favour that those two measures could, in principle, have the effect that the Government claim.
  The net effect of national insurance contributions on employers' costs is £80 million. The total net effect of national insurance contributions would be £450 million. That is half, or less than half, of what was taken off last year in national insurance surcharge contributions. It was a good idea to do that, but unemployment rose during that year. The idea, therefore, that a measure that equals about half the benefit of those national insurance contributions will bring about a great revival in jobs in British industry is risible.
  According to Treasury figures, tax allowances above the rate of inflation give about £2·32 a month to a single person and about £3·58 a month to a married couple on basic rates. The 1 per cent. rise in mortage rates in January and again today put £10 on repayments on a £10,000 mortgage and £20 on a £20,000 mortgage. In other words, these tax allowances have not nearly compensated for the rise in building society rates.
  The notion, therefore, that as a result of these changes the economy will take off and the recession will end is laughable. That cannot possibly happen and, with respect, I do not believe that the Government think that it will happen. That is the economic background of an economy which is nowhere near coming out of recession and of a Budget which cannot honestly be called a Budget for jobs.
  Why have the Government got themselves into this state? They are a victim of their own obsessions. It is often said that the Government are radicals, but in truth they are reactionaries. It is just that the life experience of most of us does not go back long enough to remember the time when such views were prevalent. My right hon. Friend the Member for Cardiff, South and Penarth said that the Government were applying the remedies of the 1930s. I wonder whether they are not in fact the shibboleths of the 1830s. Their belief in the sanctity and wisdom of market forces would gladden the heart of a 19th century Liberal, never mind someone of the 1930s.
  The folly of their faith in the sanctity of markets in the modern world is best illustrated by the exchange rate crisis. One week the Prime Minister told us, and the press was briefed, that the market would decide the rate of exchange, and that there was no doubt about her resolution and steadfastness in that matter. The market did decide. But then, of course, there had to be a humiliating about-turn and intervention on a massive scale to restore the Government's credibility because of their initial position that market forces would operate. The outcome of this fiasco was a £1 billion extra load on the costs of industry's borrowing, and the highest real rate of interest in the Government's history. Yet they are a monetarist Government who told us that monetarist policies would reduce interest rates. Six years later interest rates are the highest that they have ever been.
  1072
  We are in the same position with the question of investment versus tax cuts. I do not doubt that tax cuts may have an impact on jobs, although mainly through boosting consumption a la Ronald Reagan. The supply side argument to tax cuts seems to be extraordinarily remote. If I understand it rightly, it is that tax cuts replace wage demands, which ease the pressure on employer's unit costs so that with the extra money they can either recruit more employees or become more competitive and, thus, the economy is lifted out of recession. The assumptions behind that are questionable, if not bizarre.
  In any event, the evidence shows that any effect of those tax cuts, or of even greater tax cuts than are in the Budget, is minimal. It is especially absurd that we should consider tax cuts as the engine of recovery, when a perfectly good means of attempting the process of recovery exists, that is, by investing in programmes of construction and in manufacturing industry. That would have a major and direct impact on jobs. As the right hon. Member for Chesham and Amersham said, the notion that, with 3·5 million unemployed, there is no shortage of demand in the economy is ridiculous. Infrastructre work, for example, can and must be done. If it is not done now it will have to be done later. We impose, in effect, a tax upon future generations by not doing it now. Delay in repair makes the remedy more expensive. Infrastructure work improves the efficiency of industry. The case on the grounds of necessity is overwhelming. The job creation impact is direct and immediate.
  But there is not simply the case of the infrastructure. There is Government funding in other ways. Let us take what has happened — some of my hon. Friends who represent Scottish constituencies will be aware of this—to the Scottish Development Agency. It has brought together the electronics industry in Scotland. That is not dogma. It is common sense. The agency marries the community's resources for the benefit of the community. It is the Government enabling people by providing expertise and resources to release ideas and initiative within the community and build the economy. There is no magic in that. It rests upon ordinary human common sense. The Government reject that because it offends against the divine rule of the market.
  Mr. Gerald Malone: Perhaps therefore the hon. Gentleman will congratulate the Government on supporting the SDA and encouraging its role.
  Mr. Blair: It gives me great pleasure to congratulate them on that, but why do they not learn lessons from that? The lessons to be learnt are that the state and the Government have a role in the economy.
  Allied to the myth of market infallibility is the equally absurd obsession with public spending. People treat public spending as if it were all the same. There is no idea of why we want public spending and what it should be used for. Let us look at where that obsession led the Government. It has often been said about the Budget that the Chancellor was boxed in by the market. He was not. He was boxed in by his own talisman—the PSBR. He has solemnly to assure us that the PSBR must keep to its stated target in 1985 or dire consequences will follow. He says that in a year when he sacrificed the talisman to the defeat of the miners' strike.
  The point about the miners' strike in this context is not whether the Government were right or wrong to do what

  1073
  they did. We will disagree about that, and I do not have the time to persuade Conservative Members. If it were a sufficient priority to raise the money to defeat the miners, why is it a lesser priority to defeat unemployment? That is the issue.
  Our economy could easily accommodate a more relaxed fiscal stance provided that the money was used to finance expansion. Our financial balance, as measured by the OECD, is tighter than Japan's and Germany's—countries whose economic growth will outstrip ours in 1985. The trick is not to set illusory targets based upon mistaken dogmas but to allow balance. The Government's great fault is that they are absolutists. They are attached to the money supply or the PSBR with the fever of medieval schoolmen with their metwands. When the Government fail to attain the targets they are surprised that they leave around them not confidence but confusion. That is the background to the Budget.
  We are left with a mixture of empty compassion and exhortations to people to price themselves into work. The Government say that that will be aided by measures designed to reduce the protection that people have against exploitation. In place of the jobs which are being cut from manufacturing, the aim will be to push into work in low-paid, no-tech jobs those who to the Government will represent a token reduction in the unemployment figures. It is a policy of the most contemptuous cynicism. It is difficult adequately to describe the hypocrisy of those who advocate solutions for others that they would never dream of accepting for themselves.
  The tragedy is that unless we alter the economic agenda that the Government have set we will not deal with the problems that the country faces. What are those problems? They are the structural changes in our traditional industries, the impact of new technology and how we integrate the new technologies into our traditional industries. I was appalled to see that the trade deficit, for example, in information technology is now some £2·3 billion. In electronics and electrical engineering, it is about £8·3 billion.
  How do we maintain adequate research and development? How do we ensure that the training of people in these new disciplines is adequate? Above all, how do we deal with demographic change and mass unemployment? These are tremendous problems. They are too important to be left to the whim of market forces. We need a Government policy not of abdication but of action. We need the partnership of Government, industry and people in order to provide resources and enable the ideas and initiative of people to prosper. I believe that it was the right hon. Member for Brighton, Pavilion (Mr. Amery) who said that there are resources within the community that are not liberated. The crime of this Government is that they do not liberate the resources of the community.
  People refer to the immorality of unemployment. What about the waste of unemployment: the waste of the vitality and energy of our young people? This is a Government of waste and, above all, of inefficiency in the use of resources, personified by a Prime Minister who enjoys exercising power and who wields power like an ancient despot but who refuses to use power creatively for the benefit of the people in the community. The Prime Minister is concerned more with demonstrations of autocratic behaviour than with dealing with these real
  1074
  problems. Where is the determination to combat mass unemployment? Where is the conviction that poverty must be eradicated? Where is the courage to recognise that we shall not solve the problems of the present by gazing resolutely into the past?
  The challenges that we face are considerable. We can and should face them as a community, not as individuals in competition with each other in the race for survival. If we do not begin to tackle mass unemployment the casualty will be not merely those who are unemployed but, I fear, democracy itself. This Budget has been hailed by the Chancellor as a Budget for jobs. So were all the others. We can attach no more credibility to this Government now than we did then. We shall not truly begin to make a start on rolling back mass unemployment and creating jobs in industry for our people until this Government have gone.
  9.37 pm
  The Minister of State, Treasury (Mr. Barney Hayhoe): I begin by welcoming the participation of the hon. Member for Sedgefield (Mr. Blair) in our debate. I believe that it is the first time he has spoken from the Opposition Front Bench in a Budget debate. We shall look forward to many more contributions from him during the proceedings upstairs on the Finance Bill.
  There have been many distinguished contributions and contributors to our debate today. I recall what was said by the right hon. Member for Cardiff, South and Penarth (Mr. Callaghan)—that the "buzz" word is presentation and that one should be congratulating hon. Members on presentation. It would be churlish of me not to congratulate all the Privy Councillors on both sides of the House who spoke from the Back Benches on the very adequate presentations that they made, but if one were to choose a man of the debate there is no doubt in my mind that on a free vote of the House the award would go to a parliamentary gem of wit and brilliance from my hon. Friend the Member for Aldershot (Mr. Critchley). Those hon. Members who were privileged to be in the House will remember his contribution, I suspect, rather longer than many of the others, including my own.
  Budget debates tend to highlight the differences between the parties. Therefore, I was particularly pleased that a consistent theme throughout nearly all of the speeches today and, indeed, throughout the Budget debate has been support for the Government's proposal to extend the youth training scheme. The two-year scheme, with a recognised qualification at the end, is an extremely important development. This was recognised by the hon. Member for Stockton, South (Mr. Wrigglesworth), who spoke on behalf of the alliance. I assure him' that the quality of the training element within the extended scheme is of considerable importance. Attention will be paid to it by my right hon. Friend and his colleagues at the Department of Employmemt.
  I was also particularly glad that the hon. Member for Kingston upon Hull, East (Mr. Prescott) positively endorsed these plans. However, I was a little sorry that his political spleen forced him into questioning our motives and that he should talk of fiddlng the figures. It is important that the message should go out from the House that all hon. Members support this endeavour to extend, deepen and improve our youth training scheme, and I am delighted that they have done so in our debate today.
  The restructuring of the national insurance system has been given a more guarded welcome. When the Leader of

  1075
  the Opposition rose immediately after my right hon. Friend the Chancellor of the Exchequer had introduced the Budget, he claimed paternity for the idea and said that it was in the 1983 Labour manifesto. But having checked the manifesto, we now realise that it was not there at all. The only thing stated there was that the upper earnings limit should be removed for employees. But I do not quarrel too much with the Leader of the Opposition. I have always been told that that is the hardest speech that the Leader of the Opposition ever has to make, because he is expected to rise just after the Chancellor of the Exchequer has sat down and to make an impromptu speech on the Opposition's view of the Budget. In those circumstances, he is allowed some poetic licence.
  But there can be no doubt that restructuring brings considerable benefit to the lower paid. Indeed, I was sorry that the right hon. Member for Cardiff, South and Penarth (Mr. Callaghan) spoke of the Government's policy as being—I think that I got his words right—to impoverish the lower paid. That description cannot be applied in any way to the restructuring of national insurance contributions. Indeed, I shall give some figures shortly.
  Some Opposition Members have criticised the new steps at £55 and £90 and have claimed that they widen the poverty trap. Of course, it is true that the big poverty trap, where there is a high marginal rate of tax under the existing system, will be reduced and replaced by smaller traps that are less severe further up. The hon. Member for Great Grimsby (Mr. Mitchell) suggested that the lower earnings limit should be turned into a threshold like the one we have for income tax. But that would be enormously expensive, and would cost about £6·5 billion to tackle both employer and employee contributions at present contribution rates, and with a starting point of £35·50.
  It has also been suggested that we should increase the lower earnings limit to £50. But that is a very odd solution to propose, because it would replace the present "cliff edge" of £3·71 for employers and £3·20 for employees with an even bigger one of £5·23 and £4·50 respectively. It is open to the same criticism as hon. Members have made of the Government's proposals. It would reduce contributions for about 1 million employees earning between £35·50 and £50 a week, and they would be better off. But they would be faced with a far greater disincentive than at present to increase their earnings. Moreover, it would remove about 1 million people from entitlement to national insurance benefits and would leave them to rely on the means-tested safety net.
  Last night, the hon. Member for Great Grimsby suggested that we should give new jobs a national insurance holiday. I take it that he meant—
  Mr. John Evans: The Minister is supposed to be answering today's debate, not yesterday's.
  Mr. Hayhoe: These points were raised, but were not dealt with last night. I think that they were referred to again during the debate, and it is useful to respond to them.
  The idea is to exempt for one or two years workers taken off the unemployment register. There could be real difficulties at the end of one or two years. The employers might seek to avoid paying the extra 10·45 per cent. by replacing that worker with another fresh from the unemployment register, who would also qualify for the holiday. There are real difficulties in the idea of a restructuring based upon a holiday from paying national insurance contributions.
  1076
  Last night, the hon. Member for Denton and Reddish (Mr. Bennett) talked about the problem of piece-rate workers manipulating—[Interruption.] I want to deal with this point in connection with the points made by the hon. Member for Thurrock (Dr. McDonald). We have replaced the sharp graduation at £35·50 by two smaller steps. The Opposition seem to dismiss as irrelavent the fact that those under the new limits will have significantly higher take-home pay. They will be better off. With the changes in the tax thresholds, a single person earning just under £90 a week will be almost £3 a week better off. For a family where the husband is on average earnings and the wife earns, say, £50 a week, there will be an improvement of nearly £5 a week. A young married couple both in employment and both earning just under £90 a week will benefit, with the changes in tax and the restructuring of national insurance, to the tune of £6·50 a week.
  The right hon. Member for Cardiff, South and Penarth suggested that those measures, which give a significant cash advantage in real terms to the lower paid, amount to a policy of impoverishing them. If my tax was reduced by such an amount, I would not mind being impoverished myself.
  Mr. James Callaghan: The hon. Gentleman should get his quotation right. What I said was very simple and clear. I said that the Government's policy as a whole appeared to be that of tax cuts for the rich and wage cuts for the poor. I stand by that.
  Mr. Hayhoe: The effect of raising income tax thresholds is to give the largest advantage in percentage terms to the lowest paid. When one adds the national insurance restructuring, the improvement for the lower paid is very significant indeed. To describe that as a policy of tax cuts for the rich and lower wages for the poor is an absurd invention.
  All that the Opposition have proposed in connection with national insurance contributions is to abolish the upper earnings limit, as I understand it, for employees as well as employers. The Government's action involves a massive redistribution of £800 million towards improving the cost-benefit position of employing the lower paid and will lead, by any standards, to future improvements in job opportunities for that group.
  If the upper earnings limit were also abolished for the employees, there would be additional taxation for those earning £13,700 a year or more. The amount of tax that they pay on their incomes above that level would be increased by 9 per cent. For a very large number of people working in industry and commerce and earning between £15,000 and £20,000 a year, that would be a severe disincentive. I hope that people in that salary band will realise that the Opposition have made it abundantly clear that they would want such people, as well as those on even higher incomes, to pay more tax.
  As I am responsible in the Treasury for indirect taxes I should like to say something about my right hon. Friend's promise to propose legislation this year to implement the recommendations of the first and second volumes of the Keith report on VAT. I hope that they receive general support. The House is traditionally the guardian of the British people against the depredations of the tax collector. The details of our proposals will be examined with great care by the House. The Government aim that the revenue authority should be given the powers necessary to do the

  1077
  job that Parliament has assigned to it—no more, no less. Many of my hon. Friends have been worried about the proposed limitations on appeals to independent VAT tribunals, especially when the taxpayer feels that he has a reasonable excuse for failing to comply with the law. I recognise the importance of this matter and assure the House that full account is being taken of those representations.
  In considering the proposals, I am sure that the House will bear in mind the sizeable amount of money involved. The average outstanding arrears on VAT are £1·2 billion. We hope to halve that figure by 1988–89 as a result of implementing the Keith recommendations. Speeding up the collection of that revenue will have a material effect on Budget making in the next three years. Those who deliberately delay payment of their VAT are getting an interest-free loan from the Revenue. That is unfair to taxpayers who pay their tax on time and to competitive traders who have to get their loans commercially and pay interest on them. I hope that Lord Keith's report, which was designed as a balanced package and should be seen as a whole, will be agreed to.
  Sir William Clark: The whole House accepts that those who deliberately hold back payments of VAT should be penalised. May I take it from what my hon. Friend has said that there will be a right of appeal if a taxpayer is fined? According to the present clauses, there is none.
  Mr. Hayhoe: I hope that my hon. Friend will read with great care what I said in which the words "reasonable excuse" appear. He will see what I said about the representations that are now being received. The clauses have yet to be tabled in the Finance Bill. The recommendations of the Keith committee have already been the subject of enormous public consultation since they were published in 1983. As my hon. Friend knows, the draft clauses were published in the autumn of last year. It is now for the House to examine the clauses which the Government will table. I assure my hon. Friend that account is being taken of those representations in amending the draft clauses which have previously been circulated.
  I should like to say something about the relief of goods temporarily imported for process or repair. Since the withdrawal of postponed accounting for import VAT, my Treasury colleagues and I have received many representations from all parts of the House about the burden of financing import VAT on the full value of goods temporarily imported for repair. It was argued that this burden is often out of all proportion to the value of the processes and could place the United Kingdom company concerned at a disadvantage compared with our competitors overseas. This was certainly not what my right hon. Friend intended in withdrawing postponed accounting last year.
  We have therefore undertaken an urgent review and concluded that there should be relief for goods imported temporarily for repair, or for processing which does not change their identity, and reexported, providing ownership is not transferred. The processors concerned are exporters of their services and the relief will enable them to regain competitiveness in their markets, to the benefit of the United Kingdom economy and of the workers in those firms and companies.
  1078
  As an additional relief, re-importers of goods temporarily exported for process or repair will pay import VAT only on the cost of process or repair carried out abroad.
  Mr. Eggar: I particularly thank my hon. Friend for that concession. It is very welcome, as he knows, particularly to Johnson Matthey, which is involved in processing precious metals.
  Mr. Hayhoe: From the number of representations and letters which I have had from hon. Members on both sides of the House I know that this is an important concession which will be welcomed, particularly by the firms and workers in the companies concerned.
  Without getting too deeply involved in the very broad context of the arguments about public expenditure and tax cuts, in the whole of the Budget debate—which I am sure my right hon. Friend the Chancellor will be addressing when he winds up on Monday—there really is no consensus, as the hon. Member for Sedgfield suggested in a television broadcast in which I was participating on Tuesday night, on the relative merits of tax cuts and public expenditure. Time and again in this debate hon. Members on both sides of the House have suggested that we solve our problems by greater public expenditure.
  I can only say to them and to those people who have said that there is a shortage of demand within the economy that paragraph 3·21 of the Red Book tells a very different story. It shows import volumes, excluding oil, up by 10·5 per cent. last year and the import of manufactured goods up by the same amount. Hon. Members in all parts of the House have been making the point that we now have a deficit on our trade in manufactures. In fact, last year, as I have said, imports were up by over 10 per cent. and there was a 5 per cent. growth in domestic demand, which means that there was greater import penetration.
  It is not lack of demand that is leading to the situation in which nearly half the cars in this country are imported. The demand is there. The problem is that British manufacturers are not producing goods of the right quality, at the right price or at the right time. As an engineer before I became a Member of the House, I look at the British engineering industry and remember its dominance and the number of products of which we were great exporters to the rest of the world. It is not a question of Government public expenditure; it is a question of all concerned with those industries — management, workers, designers, salesmen and everyone else—having failed to meet the challenge. As a result, jobs have been lost, but I am delighted to see that in many parts of the British economy, as a result of restructuring, of new investment, of getting rid of overmanning and of a better attitude among the trade unions, we are now becoming more competitive. We shall then be in a better position to produce goods that our own people and people abroad want to buy.
  Opposition Members bemoan higher interest and mortgage rates, yet they call for increased borrowing, which would make matters worse. They search out statistical comparisons to try to prove that taxation is higher now than it was in 1979. At the same time, they demand increased spending, which would inevitably mean higher taxes or higher borrowing, or a mixture of both. They regurgitate the words and promises that they

  1079
  swallowed after their self-admitted failure to convince the electorate in 1983, and as with any other regurgitation it is unattractive.
  It being Ten o'clock, the debate stood adjourned.
  Debate to be resumed on Monday 25 March.

  International Famine
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Archie Hamilton.]
  10 pm
  Mr. Tom Clarke: I am grateful for this opportunity to raise the question of international famine. I begin by reminding the House that 30 million people in Africa are facing immediate starvation. They are already desperately hungry. This famine is, without doubt, the worst crisis to reach the hearts and minds of the British people, and it has led to a flood of donations to the various aid agencies.
  The Government say that they have spent £90 million so far this year on famine relief, but that is one tenth of 1 per cent. of their total budget. Far from increasing their overseas aid, the Government are cutting back. In 1979, we spent £939 million, but by this year that sum has fallen in real terms by 18 per cent. and it is due to fall by a further 2 per cent. next year.
  This runs directly counter to public opinion. A recent survey commissioned by Oxfam showed that 76 per cent. of those interviewed thought that the Government should spend the same amount or more, while only 18 per cent. thought that they should spend less. A few days ago a petition containing more than 750,000 signatures was presented to 10 Downing street by seven aid agencies. It called, as I do tonight, for more emergency aid, the immediate release of EEC surpluses and more money for the type of long-term development work that can avert future famine.
  At present, most Government aid is used for industrial development—for building dams and airports and other prestigious projects — whereas the crisis facing Africa demands a more urgent approach. Aid should be used to reafforest denuded land, find water in drought areas and improve subsistence agriculture, not to provide more power stations for capital cities.
  Another challenge for the British Government is to speed up the present lumbering bureaucracy that makes EEC food aid so slow to reach famine victims. It was only after the public started screaming that Europe's bulging grain store split a little of its surplus in the direction of starving Africa. The public again showed imagination and compassion when they generously gave about £40 million to Ethiopia, compared with £26 million from the Government. If we are not careful, Ethiopia might be the beginning rather than the end, for it happened in spite of all the warnings that were given, not least in this House.
  Great problems are building up elsewhere. The United Nations has strongly urged us to apply our thoughts to the Sudan. We are told that, unless food aid improves enormously, 4·5 million people will suffer from malnutrition by June of this year, and that country was once British. Indeed, India, with its own major problems, was at one stage committed to give more in aid than the whole of the EEC put together to that part of the world.
  We have benefited greatly from the wealth of the British Empire and it is not unreasonable that we should give something in return for the fruits of past colonialism. The crises in Ethiopia and in the Sudan were predictable and were predicted. We knew of the drought; we knew that the rains had failed and we knew of several harvest failures as well. Yet, if we are being honest with ourselves, we should admit that our response was appalling.

  1081
  The aid agencies told us of the problems in plenty of time, if we had wanted to deal with them. Are we to assume that our embassies and high commissions did not tell us? What would have happened if that television crew had not been in the right place at the right time? What would have happened if the public imagination had not been stirred by people like Michael Burke and Richard Kershaw? The crisis was not in Ethiopia alone but was widely spread throughout Africa and beyond, as it is today.
  The quality of aid is important, especially viewed in the context of future development. The last available figures for 1983 suggest that United Kingdom aid to Africa amounted to £200 million, but of that only £27 million went to agriculture and natural resources. The rest went to industry, power stations and so on. Of course, much of that was important but much of it was simply prestigious. We could have done more with £74 million than simply build a power station in Khartoum.
  We can see a global pattern emerging in the Government's contribution to the OECD. Of our aid programme, 13 per cent. goes to agriculture and related issues compared with 27 per cent. from the United States and 33 per cent. from Switzerland. Certainly there has been much talk and wagging of heads culminating in the recent pledging conference in Geneva. What was the outcome of that conference? I congratulate the Minister on giving more money, but let him not congratulate himself. If he had persuaded the Foreign Office and the Treasury to give even half the new amount five or six months earlier, considerable heartache would have been prevented. What is being given is too little and too late. It is pragmatism in place of a strategy. It is public relations instead of a planned approach. As a development policy for the future it is not good enough.
  The British Government have provided development aid to Ethiopia via their contributions to multilateral agencies, notably the World Bank and the EC. It would be misleading to say that those contributions are sufficient. Ethiopia, one of the poorest countries on earth, receives lower per capita external investment than any country in the Third world. The chronic under-resourcing of that country does much to increase its vulnerability to drought.
  The obvious weakness in coordinating international efforts adds to the difficulties. Indeed, the problem of refugees in the Sudan, with people coming from Ethiopia, Chad and other countries, makes it clear not only that we require much real coordination between developed countries but that we need an effective early warning system as well.
  As well as asking the Minister to clarify what took place at the Geneva conference, I should like to put some specific questions to him. I invite him again to respond to the question put by my hon. Friend the Member for Vauxhall (Mr. Holland) on Monday about the International Fund for Agricultural Development. Will he accept that emergencies will continue to arise in Africa unless IFAD and other agencies doing similar work can get the funds that they need to support and promote small scale domestic food production? Directing British aid to famine relief without supporting IFAD is storing up trouble for the future.
  What matters did the Minister raise this week with the Ethiopian Foreign Minister? Was the extra money offered
  1082
  at Geneva made possible by cuts in other aspects of the aid budget, or is it coming from the contingency fund? If so, how much is left in that fund?
  Is the Minister satisfied with Britain's contribution to the 21 African countries most in need of food aid? How can he be satisfied, when the United Kingdom gave 35,000 tonnes of grain compared with 109,000 tonnes from Australia, 200,000 tonnes from Canada, 2·4 million tonnes from the United States, 133,000 tonnes from the Netherlands, 56,000 tonnes from Italy, 33,000 tonnes from Sweden and greater amounts from Germany and France? Is the hon. Gentleman pleased with our contribution of grain to the Royal Red Cross in Ethiopia, when compared with 40,000 tonnes from the United States, 17,000 tonnes from Bulgaria, 25,000 tonnes from Canada and 10,000 tonnes from Sweden, the United Kingdom gave a meagre 6,500 tonnes? How can the hon. Gentleman be satisfied with that?
  It is not enough simply to relieve the symptoms of poverty after disaster has struck; there is a need for a long-term development programme. We must tackle the problems of agriculture, health and social development to deal effectively with the underlying causes of poverty. I accept that many intractable problems are rooted in the lack of political will on the part of some Third-world Governments who pay mere lip service to the basic needs of the great mass of their people. It is impossible to ignore the negative response — some might say, despite the whole Brandt exercise, the indifference — of most developed countries to the structural inequalities between North and South. The absence of political will to deal with the structural causes of poverty by Governments of the North and South is all too obvious in the growing food crisis. The number of hungry people has roughly doubled during the past decade, so that today more than 500 million people—one eighth of humanity—are suffering chronic malnutrition.
  The debt crisis represents an intolerable burden on the poor. Mr. Clausen, the chairman of the World Bank, recently explained the problem. He said that developing countries took on high levels of borrowing in the 1970s when Western banks were keen to lend out the increased oil revenues on deposit. After 1980, as Mr. Clausen put it, the Third world was doubly hit—interest rates went up sharply and, at the same time, commodity prices fell dramatically, leaving them less to pay. All this had a devastating effect on the lives of the poor.
  At the very least, I would urge that new solutions to the debt crisis should be explored to take the burden off the poor, to encourage long-term sustainable development and to give priority to local food self-sufficiency. We should be strongly urging the IMF to accept the need for changes in IMF conditionality to achieve these objectives and end enforced austerity measures that serve to aggravate hunger and poverty.
  I ask the House to recognise, too, that, on top of all their other problems—world recession, interest rates, commodity prices, higher costs for manufactured goods —Third-world countries have seen their financial and development aid fall. In 1983, the share of British national income allocated to aid dropped to almost the lowest level for 20 years. Bilateral aid—despite a noticeable increase in public awareness—has fallen this year in real terms. As I have said earlier in relation to the Oxfam poll, this trend runs directly counter to public opinion.

  1083
  Time after time, the Government have said that they subscribe to the United Nations target of 0·7 per cent. of GNP for overseas aid. So far, Britain is only haf way there and may be moving backwards. The Chancellor's Budget should have at least set a timetable for reaching that target, but he did not say a word on the subject. The greatest challenge is to use this aid to help effectively the wretched of this earth to become free from disease and starvation.
  I have expressed concern about the emphasis on the growth of United Kingdom aid and trade provisions, which are a central feature of Government policy. In this, as in so many other matters, they are out of step with the thinking of the British public. The Oxfam opinion poll showed that only 14 per cent. of the respondents thought that the main purpose of British aid should be to help to obtain export orders for British goods from developing countries. British goods are important to those who produce trucks at Bathgate or agricultural equipment in the midlands, but local alternatives should be encouraged. People are concerned that the Government should ensure that bilateral and multilateral aid is allocated and development criteria are not under ideological considerations. If any priority is given, it should be to Governments who have demonstrated their commitment to social development and the needs of the poor. On that basis, the Government's record on aid to Nicaragua hardly stand up to examination. Britain gave far more bilateral aid a decade ago to the Samosa dictatorship, which left its people in abject poverty. That has shown in the Government's memoranda to the OECD. On page 4, it says:
  "a greater focus of aid resources on those sectors where it is felt there was a need for assistance, where local policies seemed likely to be supported of aid efforts".
  Most people would describe that as a fair view, but it is not one that is being followed in that part of the world.
  The inconsistencies in United Kingdom policies towards central America are evident in the fact that Costa Rica, with a GNP that is 1·5 times greater than that of Nicaragua, receives almost 40 times more United Kingdom aid per person than Nicaragua, whereas Nicaragua, with an acknowledged good record of spending development aid, according to Baroness Young, received bilateral aid from Britain of only £64,000 in 1983 and even less last year. Neighbouring Honduras received over 100 times more.
  Similarly, the people of Kampuchea are being frozen out, despite the urgent need for humanitarian and development aid. Given the Government's rhetoric on East-West relations, they should worry that this could fuel a self-fulfilling prophecy of dependency on pro-Soviet countries. There are parallel dangers in aid to Namibia, and I invite the Minister to respond on that point.
  It is one of the ironies of our time, in view of technological advances, that there should be such poverty amidst plenty in our universe. It is the will that matters. A country such as ours, which sent £1,800 million of arms equipment to the Third world countries last year, can produce a better aid policy in its own right and as an example to others. International famine and world poverty offer a greater threat to peace than any other factor; and time is not on our side.
  10.18 pm
  The Minister for Overseas Development (Mr. Timothy Raison): The hon. Member for Monklands,
  1084
  West (Mr. Clarke) chose the subject of international famine, which is one of the greatest concern. I shall concentrate on that rather than following him into the paths of Latin American aid and development. Whatever one thinks about the politics of Nicaragua, the level of income per capita is well above the low level of the countries to which we give grant-aid. On that score alone, it does not qualify strongly for assistance from the United Kingdom.
  It is right that the hon. Gentleman should have brought the subject before us. It is a little time since we last debated it, and the terrible famine persists. As the House knows, there is a debate tomorrow that is likely to go over some of the ground that we have covered this evening. I agree with the hon. Gentleman that the British public still clearly feel deeply involved with, and concerned about, events that are happening in Africa, above all.
  I should like to give the House a brief summary of what the Government have been doing to meet the immediate food crisis in Africa, where the situation is so serious. Before doing so, I want to assess briefly the causes of the famine, and something of how the present crisis has arisen. Obviously, the immediate cause is the succession of droughts which have struck in some parts of eastern and western Africa. I emphasise the succession of droughts, because in most of these areas drought is the recognised occupational risk for farmers and herders, and they take steps to insure against it. They can usually get by if the rains fail once, twice or even three times in a row, but beyond that all their resources are used up and there is nothing for it but to seek relief. One main lesson for all of us is the need not only to improve the early warning system run by the FAO but to see it supplemented by more efficient field observations on the ground.
  However, behind the weather lie other factors which have made the risks much worse. The first of these is the growth of population. Kenya, for instance, had 2 million people at the turn of the century and now has 20 million—and this figure might again double by the end of the century. Yet already people are moving into the drier lands where the rain fails more often than not. Bush and Tree are cleared for cultivation and firewood, and the fragile balance of nature is seriously unsettled.
  Then there is the preoccupation of many African Governments with procuring cheap food for the towns. This has led to insufficient reward for the peasant farmers—often amounting to near-exploitation—and increasing calls for food aid.
  In Ethiopia, for instance, farmers in surplus areas are not allowed to sell their grain freely in deficit areas like Tigre or Wollo. So the farmers produce less and the supply in the needy areas also shrinks. These things are within the capacity of each Government to tackle.
  I should like to refer to the short-term factors, but before I do so I shall take up one or two points from the hon. Gentleman's speech. One is that he said that only £27 million of our aid to Africa went to agriculture last year. That is not true. That figure does not include either our programme aid, much of which is used on agriculture requirements, or our technical co-operation. Counting those in, the share of natural resources expenditure is broadly one third of our bilateral aid to Africa. It is important to remember that a road project, for instance, can be of real value in the development of agriculture in those countries.
  With regard to IFAD, I told the House at Question time on Monday this week that I very much hoped that we

  1085
  would be able to achieve a replenishment, and I gave the figure of $600 million as the sort of figure at which we were aiming. Incidentally, in doing so I apparently completely satisfied the Opposition Front Bench spokesman on the subject.
  I now refer to the short-term factors. When famine strikes, as it has done, only one human response is possible, and that has been given in generous measure by both the British people and the Government. It is perhaps worth reminding the House that in the two years up to last October, when the television films moved people so greatly, the Government had committed over £15 million, through all the available channels, specifically to relieve famine conditions in Ethiopia. So the idea that we had done nothing before October's television films is untrue. When the full scale of the tragedy became apparent we stepped up our aid, and we have since committed another £34 million for use in Ethiopia. In the Sudan we have committed over £14 million for use since last October, but that is not the whole story. As the hon. Gentleman acknowledged, in the financial year that is about to end we have committed over £100 million to the relief of suffering and famine in the whole of Africa.
  Almost half of all that is going through our membership of the European Community, which, as hon. Members will know, has launched a very large emergency programme. This programme gives effect to the commitment made at Dublin in early December that the Community and member states would provide 1·2 million tonnes of grain to famine-affected countries in Africa this year. A good deal of work has been done by the Commission in mobilising the first part of this programme — around £50 million is now in the hands of local Commission delegations and international and voluntary agencies, a further £50 million is shortly to be distributed, and the first 175,000 tonnes of cereals from the Community's 1985 programme have been committed. Commitments for 1985 by the Community and member states have reached the target set at Dublin for the worst affected countries, and stand at 1·5 million tonnes for all drought-affected African countries. But I entirely accept that the need now—as I told the vice-chairman of the Commission, Senor Natali, a few days ago—is to press on with delivery.
  As for our intentions, as the hon. Gentleman acknowledged, I told the United Nations conference in Geneva that for the 12 months beginning in April the Government propose to provide a minimum of £30 million as a bilateral allocation for the victims of catastrophe in Africa, whether they be drought victims, refugees or others suffering from disaster. This will come from our aid budget for next year. Part of it will be drawn from the Contingency Reserve—there is no doubt that we shall have to use that reserve—and part will come from our food aid allocation. We expect to spend at least another £30 million as our share of Community action, which altogether will mean a minimum of £60 million. As I said in Geneva, if more is necessary we shall do all that we can to find it.
  In the meantime, millions of men, women and children remain at risk in Ethiopia, the Sudan and elsewhere. I share fully the concern that has been expressed about the problems of supply and logistics that have left such large
  1086
  numbers at risk. Others may be getting enough food, but remain without proper shelter. I have seen these things on the ground.
  I should like to pay tribute to the dedication of relief workers of many different nationalities, including the countries concerned. They are working as hard as those who have come from overseas. I am sure that the House would wish me to pay a special tribute to the work of the Royal Air Force in delivering supplies to remote corners of Ethiopia by means of its Hercules aircraft. We are considering how long the team should remain there. Whatever happens, we will not withdraw it without giving at least a month's notice. The RAF has set a real example in efficiency and also in the spirit in which it has appproached the operation, which has been quite outstanding.
  The hon. Gentleman referred to the conference that I attended in Geneva last week. It was designed to draw attention to the needs of the affected African countries. There is no doubt that it succeeded in that purpose. One hundred countries sent delegations, including a large number of Ministers. President Nyerere, speaking for the Organisation of African Unity, set the tone early when he spoke with great realism of African Administrations' shortcomings in forecasting and dealing with the emergencies on the scale now before us. He recognised that African agricultural production is not meeting the need.
  During the conference all donor countries made statements about the aid which they expect to make available to Africa in 1985. It will be difficult and will take some time to sort out all the details, but we have a provisional idea of the picture of cereals food aid, which is the essence of the matter, of which 6·9 million tonnes have been requested by the African Governments. Much of that is for balance of payments aid rather than direct relief aid. Those needs and harvest prospects require close scrutiny. Against that, 5·5 million tonnes have been firmly pledged by donors. Another 945,000 tonnes have been provisionally pledged, making a total of 6·445 million tonnes, leaving an apparent gap of about 450,000 tonnes.
  Particularly important are the needs of the worst affected countries. A provisional analysis shows that well over 1 million tonnes of food aid is already in sight for both Ethiopia and the Sudan. About 300,000 tonnes must still be found for each of them and for the five most affected countries of the Western Sahel. Taken together, that is a gap of just under 900,000 tonnes. However, we expect further allocations to be translated from pledges into commitments.
  That picture is not without certain encouragement. The quantities of food aid pledged are truly massive. However, we cannot be complacent—and in particular we cannot be complacent about the great problem of ensuring that the food is delivered on time. When I was in the Sudan I was struck by that more than by anything else. The food need there is all too evident, but it is crucial to get as much as we can to the Sudan before the rains come, we hope, in June. When I returned from the Sudan I pledged another 30,000 tonnes of food aid from the United Kingdom. I made it clear that I attached great priority to getting it there as quickly as possible.
  In June, we shall know whether the rains will fall and what the prospects are for the next harvest. That will be a crucial moment. In the meantime, as I told Commissioner Natali, it is crucial that all countries in the

  1087
  European Community translate the substantial pledges into actual food on the ground. Until it is actually reaching the sad people who occupy these countries, I do not think that any of us should sit back and rest.
  Question put and agreed to.
  Adjourned accordingly at half-past Ten o'clock.