Industry and Employment

HC Deb 12 November 1985 vol 86 cc465-534

Mr. Speaker

May I again make an appeal for brief contributions in the Queen's Speech debate? No fewer than 33 right hon. and hon. Members have shown their interest. I have no authority to limit speeches to 10 minutes between 6 o'clock and 8 o'clock or between 7 o'clock and 9 o'clock but I hope, as was the case yesterday, that voluntary restraint will be shown so that as many right hon. and hon. Members as possible may be called to make contributions to this important debate.

5.26 pm

Mr. John Smith (Monklands, East)

I beg to move, at the end of the Question, to add: But humbly regrets that the Gracious Speech proposes no change in policies which have caused record levels of unemployment, a growing and alarming deficit in Britain's balance of trade in manufactured goods, and a continuing erosion of Britain's industrial base, includes privatisation measures which will cause the forced sale at cheap prices of valuable national assets and increased unemployment, and seeks to remove the statutory protection afforded by Wages Councils in order to impose further cuts in the wages of the lowest paid. In the amendment we seek to draw attention to the facts about Britain's industry and economy, about the real nature of the Government's proposals in the Gracious Speech and about their real meaning and implication. I emphasise the need for reality because it seems that in many ways the Government have become totally disconnected from reality. The Chancellor's autumn statement has confirmed that provisional view.

A growing body of opinion in this country—including chambers of commerce, the Select Committee of another place and distinguished economists and correspondents—emphasises what the Opposition have been saying for many years: that there is a serious crisis facing this country, particularly its manufacturing industry. It agrees that there has been what can only be called a terrible retrenchment of manufacturing industry in this country since 1979. It confirms that there is a growing and appalling deficit in the balance of trade in manufactured goods and that as more time goes by we realise with frightening clarity the missed opportunity of North sea oil and the problems that are being opened up now that North sea oil is in the peak year of its production.

There is a curiosity in the Government's approach to manufacturing industry. No doubt we will hear this further when the Secretary of State replies. All Government statistics about the economy and particularly about industry start in 1981. We are always told that there has been an increase in output or investment or whatever the criteria are. The statistics all start at what the Government call the trough of the recession in 1981. Who do they think were the Government between 1979 and 1981 when massive damage was done to Britain's industry and about 20 per cent. of our manufacturing capacity was wiped out? They cannot try, by some statistical sleight of hand, to pretend that they were not the Government for the first two years of their period of office.

As one knows, it is very easy to show that figures are improving if one compares them with the lowest ever figures in our history. If one is taken to the bottom of the valley, it is relatively easy to make it look as though one is making steady progress up the hill. That is the substance of the Government's statistical manipulation. Manufacturing output is still 10 per cent. below the level at which it stood in 1979 when they took office. We have lost not only jobs but markets and industries and whole areas of economic endeavour.

It was therefore remarkable to hear the Prime Minister refer last night at the Mansion house to the renewal of this country's assets. What does she see as she travels around the country? Does she see a country that is being renewed? Through some curious prejudice, the Prime Minister never travels by rail. I understand that she has never been on a British Rail train since she became Prime Minister. When one travels around the country by rail one sees with startling clarity the devastated areas. If the Prime Minister and her colleagues made a few journeys by rail, they would see clearly, as those who have been away from this country for some time tell us, how awful the devastation is. Those hon. Members who represent industrial areas do not need to be told by visitors to this country what has happened to British industry.

Since 1979, output in Japan has increased by 20 per cent. It has increased by 10 per cent. in the United States, by 6 per cent. in France and by 4.3 per cent. in West Germany. In the United Kingdom is has increased by 3.9 per cent. However, we should look a little more carefully at the United Kingdom figures. Over half the rise in United Kingdom output is the direct result of higher North sea oil output. During that period, it increased from 1.8 per cent. to 4 per cent. of our gross domestic product.

Can the Government claim the credit for North sea oil? The Conservative party was not in office when investment was made in the North sea oilfields. That investment created the greatest windfall that any Government have inherited in the 20th century. Apart from oil, the increase in United Kingdom output has averaged 1.3 per cent.—a pitiful figure for a Government who have been in office since 1979. None of the countries that I have mentioned has the benefit of North sea oil. We compete with European countries which do not enjoy the benefit of Government revenues in terms of the balance of trade, the balance of payments and the employment that North sea oil has brought to this country.

Mr. Nigel Forman (Carshalton and Wallington)

Why does the right hon. and learned Gentleman insist upon the North sea oil argument? If he were applying the same logic to the American economy, would he exclude their grain exports?

Mr. Smith

North sea oil production and the revenues to be obtained from it happened in 1979. This will not last for ever. There has been grain production in the United States for a very long time and one expects it to remain for a very long time. The hon. Gentleman does not seem to have grasped the point that North sea oil is a temporary phenomenon—sadly so for this country.

Mr. Forman

What does the right hon. and learned Gentleman mean by "temporary"?

Mr. Smith

The hon. Gentleman should read what he has obviously not read: the evidence given by the Treasury and the Department of Energy to the House of Lords Select Committee on Overseas Trade, which shows that 1985 represents the peak of North sea oil revenues and that from now onwards oil revenues will diminish. The Government have grossly over-produced North sea oil. They have been pushing it out of the North sea as though it were going out of style. They need North sea oil revenues to pay for the unemployment that they have created. The devastating verdict of history upon this Government's economic management will he that they have used every penny piece of our North sea oil revenues to pay for the extra unemployment that they have created since 1979.

The figure can be easily calculated. Every person who is unemployed costs at least £6,000. The Government have to pay social security benefit to the unemployed and they lose income tax, national insurance contributions and value added tax. If only 2 million more people are unemployed—of course, more than 2 million extra people are now unemployed—the cost of their unemployment is £12 billion, which is roughly the amount of North sea oil revenues for the last year. That will not be the amount in the coming year, because of the difference in the relationship of sterling to the dollar. It can be proved beyond doubt that that is where the oil revenues have gone.

If somebody had stood on an election platform in 1979 and said that if a Conservative Government were elected, there would be 3.5 million people unemployed, he would have been booed off that platform for exaggerating. If he had stood on the same platform and said that a Conservative Government would use the North sea oil revenues not to make tax cuts or for public expenditure investment but exclusively for the unemployment that would be created in the years to come, he would also have been booed off the platform. But that is what has happened since 1979. It is the direct result of the Government's policies. Industry has wilted under the combination of high interest rates and high exchange rates. British industry has been placed in a monetarist straitjacket which makes our goods uncompetitive abroad and deters investment in this country.

The Government say that there has been a small increase in investment in manufacturing industry. This is because regional grants and capital allowances are coming to an end and many companies are rushing to get in their applications in time. Therefore, there will be a temporary upward blip in the figures. However, from 1987 onwards the incentives will have been removed and there will be a return to the downward trend.

The worst feature of running high interest rates and high exchange rates at the same time is that they reinforce each other in a vicious spiral. High interest rates, which are the result of the Government's monetarist policies, contribute to the high exchange rate by attracting funds from around the world, thus forcing up the value of sterling. The truth is that the Chancellor of the Exchequer runs financial policies that pay no attention to the needs of manufacturing industry. Day by day, more and more industrial managers are realising this and are saying so. In the meantime, there is a huge outflow of funds from this country to provide investment for the equipment of our competitors. We are providing them with resources so that their workers can have the equipment with which to beat us in our own markets and in Third world markets.

Nevertheless, we are told by Government representatives that to concentrate upon manufacturing industry is a mistake—that we need to concentrate on services. But do they not know, as witness after witness from British industry told the Select Committee on Overseas Trade of another place, that to a large extent the service sector is dependent upon manufacturing industry? Do they not know that only 20 per cent. of our services are internationally tradeable? I am not against services. This country should have as lively a service sector as possible, but we shall not solve unemployment or replace the wealth-creating capacity of our disappearing industries by imagining that this country can live off North sea oil revenues, an expanding service sector and a few profitable industrial centres.

In evidence to the Select Committee, Lord Weinstock said: what will the service industries be servicing when there is no hardware, when no wealth is actually being produced? We shall be servicing, presumably, the production of wealth by others. We shall supply the Changing of the Guard, we will supply the Beefeaters around the Tower of London. We will become a curiosity. I do not think that is what Britain is about; I think that is rubbish. I think all hon. Members would say, "Hear, hear," to Lord Weinstock.

Mr. John Mark Taylor (Solihull)

Is the right hon. and learned Gentleman referring to the Lord Weinstock who seems to be accruing cash within GEC and not investing it in manufacturing?

Mr. Smith

I am glad that the hon. Gentleman has drawn attention to the fact that the result of the Government's policies is that Lord Weinstock can make more money by not investing in manufacturing industry. I hope that the hon. Gentleman does not think that he has helped his Government by that intervention.

In the meantime, our trade deficit in manufactured goods increases relentlessly. From a very large surplus in 1980, we are heading in 1985 for a £5 billion deficit in the balance of trade in manufactured goods. The Government appear to be completely oblivious to this. In opening the debate on the Gracious Speech, the Prime Minister concentrated on the slight increase in manufactured exports. There was not a word about imports. How one can talk about trade without referring to exports and imports beggars belief.

Everyone who thinks seriously about this matter is worried about what will happen when North sea oil runs out and we have an appalling deficit in our balance of trade in manufactured goods. In evidence to the House of Lords Select Committee on Overseas Trade, Treasury officials answered that question, presumably with the authority of Ministers. The witnesses said that the gradual decline in North sea oil output would automatically bring about an adjustment in the economy which will compensate for the loss. As North sea oil output increased, the value of the pound would fall against the other currencies, thus making British goods and services more competitive overseas and improving our balance in non-fuel trade. The witnesses said that the services section would increase and sunrise industries would replace the so-called sunset industries. So we need not worry—the economy will change inevitably and almost automatically. There will be a compensating adjustment, so we can put our fears at rest.

The Government say, "The only people who are asking these questions are those who are seeking to be difficult." The problem with that rosy view of Britain's future is that the connection between North sea oil and the exchange rate is not as automatic as was assumed. Those who wonder about that should look at the evidence given to the Select Committee by the Bank of England. The problem is also that there is no automaticity about replacing so-called sunset industries with sunrise industries. Almost half our balance of trade deficit in manufactured goods is in the information technology industries which are supposed to be at the forefront of the sunrise sector. We cannot necessarily look for salvation there.

Above all, the complacent prophets do not understand that if the industrial base has been disastrously weakened and large parts of it have been destroyed, the capacity of manufacturing industry to respond to a favourable exchange rate and to create wealth on the scale required by the decline in oil will be in serious doubt. We may have all the favourable situations for an expansion in industry but, if there is no industry to expand, it will profit us little. To read the Gracious Speech is to read the words of a Government who seem to be completely unaware of that fact.

The Gracious Speech did not mention the unemployment problem. My hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott) will deal in detail with unemployment measures and the attempt through wages council legislation to force more people into part-time, low-paid jobs. The Government's campaign—it has been orchestrated throughout the whole establishment—to suggest that substantial numbers of the unemployed do not want to work or are not genuinely seeking work is contemptible. [Interruption.] I hear a mutter from an hon. Gentleman who has not yet identified himself. I do not know who said that, but I distinctly heard an hon. Member say, "It is true." That is typical of the Conservatives.

Those who have had the guts to identify themselves include Michael Edwardes. He said that he thought that many people were not willing to work. He has made more money out of not working during the last month or two than anyone else in Britain. He just sits there in job after job which he has taken over, collecting large golden handshakes. He put a fair number of people into unemployment while he was involved in managing British industry.

Best of all among those Conservatives who have identified themselves is the deputy chairman of the Conservative party—that "second among equals"—who told us in his celebrated speech that young people had to get off their butts. During the past two weeks, Labour Members, including my right hon. Friends the Leader of the Opposition and the Member for Birmingham, Sparkbrook (Mr. Hattersley), have been challenged to dissociate themselves from the remarks of various members of our party. I ask the Secretary of State for Trade and Industry to dissociate himself unequivocally from the remarks of the deputy chairman of the Conservative party. The Prime Minister and other Members of Cabinet have refused to do so.

This is a chance for the right hon. and learned Gentleman to dissociate himself from those remarks. If he does not, we shall know that all the Conservatives believe that, on the principle of collective responsibility, if on no other basis, young people should get off their butts and look for work. I hope that the right hon. and learned Gentleman will take advantage of this magnanimous opportunity to put the record straight—[Interruption.] The Secretary of State for Trade and Industry and the Paymaster General, who are both Queen's counsel, can probably give each other the advice they deserve. I shall see what the Secretary of State makes of that advice when he gets the opportunity.

The Secretary of State has just taken office. His move was unexpected. As lawyers would say, it was not "reasonably foreseeable" that there would be a chain of events that would end up with the right hon. and learned Gentleman occupying his present position. He is being as cheerful about it as he can. He is entitled to be cheerful because he was not demoted. As he well knows, he was promoted from the Home Office to Trade and Industry.

One of the first things the Secretary of State did on being promoted was express concern about regional development policy. He said that, as he came from a northern constituency, he knew the problems especially well, implying that there would be changes in regional development policy now that he was at the helm. There is plenty of room for change. The whole of regional development policy was being destroyed while the right hon. and learned Gentleman was at the Home Office doing damage in other directions. I hope that the right hon. and learned Gentleman will take the opportunity to announce a series of initiatives and will tell us that the Government's policy is to spread prosperity fairly, especially in his constituency.

I hope that the Secretary of State will say something about the steel industry. No other industry in Britain in recent years has been reduced so drastically and no work force has faced such penalties. There are no greater monuments to inactivity than the deserted steelworks. I hope that the right hon. and learned Gentleman will confirm the Government's policy of maintaining the five main steel-making plants. I am sorry that the Government gives them a guarantee for only three years. I do not know why the Government cannot give a longer guarantee. [Interruption.] The Government may think that it is unreasonable to give a guarantee for longer than three years. They may be taking account of the life of a Government. I do not think that it is too much to tell an industry that it is secure for the next three years.

Planning in the steel industry has been based on the assumption—this is clear in the rationale for the decision on the Gartcosh steelworks—that there will be no increase in demand for steel during the 1980s and 1990s. A flat projection has been put forward. If the Secretary of State agrees, let us have no more nonsense about there being no prospective revival of manufacturing industry. If the British Steel Corporation's assumptions are true, the Government's promises are false. I hope that the Secretary of State will meet that point head on and will think again about Gartcosh. He must know by now from the opinion that has welled up not only in the area directly affected but throughout Scotland—many Conservative Members who share his political views feel this way—that the proposed closure of Gartcosh is a dagger aimed at the heart of the future survival of the Ravenscraig steelworks.

The Government say that we must prove that the closure of Gartcosh will harm Ravenscraig. We say that we cannot take a cold rolling mill out of the middle of an integrated steel-making complex and expect it to be as healthy, vigorous and successful as it was before that surgical operation. One does not need a series of facts and figures to make that point—it is the simplest of points. Gartcosh is not a separate plant but an integral part of the complex. No one part of the country has suffered uniquely—steelworks in Wales, Shotton, Sheffield and the north-east have suffered because of the decline in the steel industry. The time has surely come for us to draw an EI Alamein line around those important industries and say that there will be no more retreats. This country must have a future as a manufacturing country, and without its basic industries it cannot do so.

Mr. Tony Favell (Stockport)

Is it not true that much of the decline in the steel industry has been brought about by the contraction of the motor car industry, and that a great deal of that contraction is due to the wrecking tactics of trade unions involved in that industry, orchestrated by the Labour party?

Mr. Smith

The hon. Gentleman seeks to blame everything in this country on the trade unions. That was the Government's tactic for a long time. Government apologists wondered whether they should say things were bad and the fault of the trade unions or quite good after all. We seem to be on the latter tack at the moment. I do not take the hon. Gentleman's intervention seriously, and I shall explain why when I deal with the motor car industry, which is another of our fundamental industries.

I hope that the Secretary of State will pay attention to the report of the Select Committee on Scottish Affairs when it reports. I do not know what the report will contain, but the Committee has taken a great deal of important evidence. I hope that it will be possible for him to take note of it and for us to discuss it in the House before any irrevocable decisions are taken. On that matter, as with some others, the Government should resolve to listen to representations. This is still a democratic country, at least in form. They should listen with care and attention, especially when a broad section of opinion speaks loudly, vigorously and with obvious sincerity and tells us that the Government are wrong. It does not need a major adjustment of Government policy to make a significant change in that direction. That is not the only matter upon which I believe the Government have been negligent.

As the hon. Gentleman reminded me, I shall deal with the motor car industry, with which we face a serious problem. I should like the Secretary of State to tell us what he will do about the continuing policy of General Motors (Vauxhall) to import cars on every conceivable occasion and import parts for those assembled in this country, so to a large extent the operations of General Motors (Vauxhall) are a mere screwdriver operation.

I am aware that the Secretary of State has voiced his complaints, because I understand that the emissaries sent from the Department of Trade and Industry to the company did not receive a happy reception. That company has decided that it will follow the policy of its own economic advantage. The Secretary of State knows perfectly well that if such a policy is allowed to continue we shall have no chance of stemming our balance of trade deficit.

I hope that the Secretary of State will make General Motors (Vauxhall) decide to keep some of the promises that it gave the trade unions in 1983—that it would increase production at Ellesmere Port to 35 cars a day. It is now only 24 a day. I hope that the Government will take some action.

I hope that the Government will bear in mind the fact that they are not powerless to deal with multinational companies. The Bedford vans which are supplied to the Ministry of Defence are an important contract for that company. I do not see why the Government should favour companies that follow policies inimical to our economic health by awarding them favourable contracts.

On the subject of trade, I hope that the Government will pay close attention to ensuring that British exporters are sufficiently backed in world competitive markets. I hope that some lessons have been learned from the Bosporus bridge affair. It is widely accepted by all those involved in the sad saga of that contract that if the Government had offered at the beginning of the process the assistance to British companies which they eventually offered at the end, the contract would have been secured. One does not need to say more than that to show that the matter needs to be reviewed.

The supply of vehicles to the Bangkok mass transit authority is another important contract for this country's vehicle industry. I read today in the Financial Times that there is a further difficulty about obtaining that contract. All sorts of problems may be involved.

I hope that the matter will be pressed vigorously by the Government. The knowledge that an important contract, which at the beginning amounted to 4,000 single and double decker buses to be supplied by British Leyland, had been in the air for a long time as the company pursued it, makes it hard to understand why the Prime Minister did not choose to visit Bangkok on her south-east Asia visit. If it were the French Government who were seeking the contract, the French President would have been there before any decision was made by the Government. I understand that the Minister of Trade visited Bangkok the week after the Cabinet had reached its adverse decision. It might have been a little more intelligent to go the week before. If I am wrong about that, I can be corrected, but I believe that I am correct when I say that the Prime Minister did not go to Thailand during her visit to southeast Asia.

Mr. Anthony Nelson (Chichester)

The right hon. and learned Gentleman may, like me, have read some press reports which suggested that the Prime Minister's recent intervention in the Ptarmigan deal was unhelpful. There is a view that in many major contracts abroad, whether public or private, the intervention of senior politicians does not help. That is an important point. What is the right hon. and learned Gentleman's view?

Mr. Smith

What struck me as odd about the Ptarmigan deal was the way in which the Prime Minister prostrated herself in an undignified fashion to obtain it. She left herself open to the result, which was an undignified rebuff.

The hon. Gentleman makes a serious point. We may have a Prime Minister who is not helpful in pursuing Britain's trade. If that is so, the most palatable member of the Government should be selected to be the emissary. If I were to ask the hon. Gentleman to select the most palatable member of the Government to do that, he would be in difficulty. I find it nearly impossible. If not in the Cabinet, there must be someone in the junior ranks who could do the job with reasonable success.

I hope that the Secretary of State will find some time to tell us what will happen in the negotiations for the renewal of the multi-fibre arrangement. Those of us who have taken part in the discussions in the House—it is almost a year since they started—about the renewal of the MFA have been staggered by the Government's laid-back approach. They have wound themselves up with great difficulty to ask for a renewal of the MFA.

The Secretary of State must know that the British attitude is crucial to the European attitude because the United Kingdom is in a pivotal position within the European Community between the unlimited free traders and those who believe that there must be some orderly marketing for textiles. I hope that the Secretary of State will take that point seriously, because there are 250,000 jobs in the British textile and clothing industries. That is a heavy responsibility for any Government to carry when taking part in international negotiations. I hope that we shall return to that subject. The Government's discharge of their responsibilties will be monitored with great care by the Opposition.

I have talked about what the Government have not done. Unfortunately, I must deal with some of the things that they propose to do, because one of their main themes is privatisation, especially that of the British gas industry. The Secretary of State for Energy told us some time ago that there were three reasons for the privatisation of British Gas. The first was that there should be an end to state intervention in the industry's affairs. Secondly, there should be an end to what was called "nominal public ownership", which was to be translated into what he called "real public ownership". Thirdly, there was to be an improvement in efficiency.

It was interesting to note that there was no reference to competition. That is often used by the Government usually incorrectly as justification for privatisation. Even the Secretary of State for Energy is aware that there cannot be any competition when we are dealing with a necessary monopoly that has a pipe system running throughout the country, such as the British gas industry. We have been told that we must privatise to stop state intervention, and that is a bit too much to accept.

Who has intervened more in the British gas industry and manipulated its finances more than the Government? Which Government forced the British Gas Corporation to increase its prices by 10 per cent. above the level of inflation for three years in succession? That was meddling in the affairs of the British Gas Corporation. We do not need to privatise to stop that happening. We need merely to enter into a self-denying ordinance not to continue those manipulations. As the Secretary of State is aware, it was a clever political game.

By the use of the gas levy, about £1 billion a year was extracted from the gas industry. It was a tax on the gas user and identified and known as a tax, but one for which in the normal way the permission of Parliament was not obtained. The Prime Minister is adept at leaving responsibility on the doorsteps of others, and the odium for the increase went to a public corporation which she dislikes intensely on ideological grounds. It was a smart but disreputable manoeuvre and one which is being perpetuated.

Can the Secretary of State tell us whether the gas levy will be maintained after the British Gas Corporation is privatised? What will be said about that when an offer of sale is made? He knows perfectly well that if he announces the continuation of the gas levy, that will have a considerable effect on the price. He knows also that if the gas levy is not maintained the money will have to be made up by taxation from some other source. We will listen with great care to what the Secretary of State says about that.

There are some serious questions to be asked about employees' rights and conditions, which are likely to be diminished. The notion that I find most offensive is that somehow state ownership of the British Gas Corporation is only nominal. There was an unseemly dispute between the Earl of Stockton and the Secretary of State for Energy about where the family silver was going. The noble Earl got it right, but in came the Secretary of State for Energy seeking to dissociate himself from the very man he introduced and applauded at the meeting at which the speech was made. Characteristically, it was a case of the Secretary of State for Energy appearing in two places simultaneously, urging on the Tory Reform Group and speedily dissociating himself from any remarks which might be to his political harm.

He said that the family silver would be handed back to the family, but what was our experience with British Telecom? In that case the family was regarded as international and there were special allocations of shares in the United States and Japan; 18.6 per cent. of the shareholding of British Telecom is now in the hands of overseas investors who made £180 million in one day as the shares traded up from 50p to 94p. No Government in history have handed to overseas investors £180 million in one day's operations.

Mr. Tony Baldry (Banbury)

It may interest the right hon. and learned Gentleman to know that exactly 39 years ago today, during the debate on the Loyal Address, Winston Churchill described as a preposterous fraud the intention of the then Labour Government to nationalise the gas industry. The surprise is not that we are privatising the gas industry but that it has actually taken us 39 years to denationalise it.

Mr. Smith

I am not sure that that intervention adds much to the debate, because the hon. Gentleman knows perfectly well that in the 39 years that have passed we have created a highly successful gas industry that is a credit to the nation. It is extremely well managed. It has been monitored by all sorts of bodies, such as the Monopolies Commission, and in comparison with other companies, both public and private, it has come out extremely well. It has carried out a massive transition from being a manufacturing industry to being a processing and distribution industry. It has laid pipelines from one end of this country to the other, supplies British industry at competitive prices and provides cheap fuel for the domestic user. The British gas industry has a proud record of success and it is deeply unpatriotic to attack it for the narrow ideological reasons given by the hon. Gentleman. When one scratches the so-called patriots on the Government Benches one finds that just below the Union Jack there is a hand outstretched to grab the quickest profits that can be found.

The Government are shamelessly raiding the public treasury. It is not good enough for them to talk about handing away the silver. The truth of the matter is that it is not nominal, but crucial to public finance. What will happen to our public finances if we give away the right to profits of £1 billion every year from the British Gas Corporation? That profit and the right to earn it will be sold with the shares. As my right hon. Friend the Shadow Chancellor said earlier, the profit will not be lost for just one, two or three years; that money will be lost in perpetuity to the public exchequer. In the waste of North sea oil and in the sale of assets, we are seeing a double blow to public financing.

It is not as if the money will be invested elsewhere in other income-producing assets, because it has been heavily signalled and is in the Gracious Speech that it is intended for tax cuts. That will build up a huge election fund for the Conservative party. That is why the British Gas Corporation, with assets of £16,000 million and profits of over £1,000 million, will be sold, for £8,000 million most likely, and if the sale is on the same scale as the sale of British Telecom, the payment to the bankers will be £300 million. It cost over £200 million to sell off British Telecom. The result of this seedy and shameful operation is that a major British asset will be handed over to who knows who. One does not know who will eventually buy it. Of course it will be said that it is going to the people, but it is going to only some of the people. All the people benefit from the profits of the British Gas Corporation.

This is an increasingly seedy and shameful Government. They are mishandling the economy, destroying our industry and leaving a terrible inheritance for their successors. If I have one reservation about helping the next Labour Government, it is the magnitude of the task they will face as a result of the depredations of this Government. Sooner or later we will need to plan for the long-term recovery of our industry. We will need to encourage investment in real jobs, and it will be necessary to start again the process of building up our investment, our research and development, and our education and training. The time cannot come soon enough.

6.8 pm

The Secretary of State for Trade and Industry (Mr. Leon Brittan)

We have heard a great deal from the right hon. and learned Member for Monklands, East (Mr. Smith) about the parlous state of our industry and commerce. We have also heard some flights of fancy about patriotism. My estimate is that the right hon. and learned Gentleman believes in approximately one quarter of what he has said. As ever, the Labour party seems to take enormous delight in running down the state of Britain. That relish might be forgiven if what was said gave a fair picture of the British economy. It does not. My right hon. Friend the Chancellor of the Exchequer described many aspects of what is actually happening in the country.

The right hon. and learned Gentleman tried to make out that the successes, which he says are comparatively recent and the nature of which he does not really deny, are based purely on earnings from North sea oil. He said that will disappear and, therefore, we can claim no credit for the achievements which, again, he does not really attempt to deny. He claims it is North sea oil alone which is preventing us from plunging into bankruptcy. That is simply not true. The profitability of non-North sea industrial and commercial companies, at a net real return on capital of 6.5 per cent., is at the highest level since 1978.

Manufacturing productivity has been growing at an average rate of 6 per cent. for nearly five years. We are not talking there about North sea oil. Total fixed investments last year stood at £55 billion—an all-time high. Of course, we are all perfectly well aware of and need no reminders or lectures about what happened during the recession. We are recovering from a low point, but in the British economy today the dramatic growth in investment is the most eloquent testimony to the confidence of British business men that the current growth in output is sustainable. Business investment rose 15.5 per cent. in real terms last year, to reach an all-time high.

An investment intention survey, carried out by the Department of Trade and Industry, forecast that business investment this year is expected to rise by a further 8 per cent. to reach a new record level. The right hon. and learned Gentleman produced all sorts of reasons for believing that will come to an end; that the past has to be ignored and the future discounted; but the present is reality and that reality is the investment that I have described. That completely belies the thesis that our current improvement depends first on North sea oil and that, as North sea oil revenues decline, our fortunes will decline in parallel.

North sea oil has indeed provided enormous benefits for the British economy, but it is absurd to give it the role that the right hon. and learned Gentleman has given it. It has not in any sense been wasted. It has brought new prosperity to many areas in Scotland and formed the basis of an offshore supplies industry which will continue to earn money for Britain overseas long after our domestic oil reserves have run out.

North sea oil has made a massive contribution to the balance of payments. It has provided money to the Treasury—[Interruption.] There is nothing wrong with that, as I am sure the right hon. and learned Gentleman found when he was in government. It is ludicrous to ignore the contribution of North sea oil to our economy and to our investment just because the new roads, hospitals and sewers that have been—and will be—built are not labelled "Built out of the proceeds of North sea oil." They could not have been built on anything like the present scale without it.

Of course the oil will not last for ever—it is a finite resource; that is obvious—but to go on to claim that the economy will be unable to readjust to declining oil production is simply unwarranted. Nor is any useful purpose served by exaggerating, as the right hon. and learned Gentleman does by implication, the speed at which oil revenues will decline.

We shall remain self-sufficient in oil until the mid to late 1990s. The rundown in the oil surplus will be gradual, giving the economy time to adjust. Moreover, as a result of North sea oil, we can look forward to a steady flow of earnings resulting from our investments abroad. Those investments will cushion the impact on our economy the decline of North sea oil and help us to adjust it. Yet it is those very investments that the Labour party says it is determined to destroy by forcing individuals and institutions to repatriate their savings so that they can be squandered on Socialist schemes.

We do not profess to forecast or propose to dictate from which sectors in the economy the main adjustments will come, but one thing is certain: when the non-oil economy arrives, it will not—it is absurd to pretend that it could—be a replica of what existed before North sea oil came on stream. The levels of investment in manufacturing industry that is taking place today makes it quite reasonable to be confident that the manufacturing sector will continue its marked recovery from recession and play a vital part in our economy in the future.

According to the right hon. and learned Gentleman, it is impossible for manufacturing industry to grow because the base has already been destroyed. That statement is completely belied by the figures showing what people in manufacturing industry have been prepared to invest this year and last year.

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

Does the Secretary of State agree that, if there is to be a marked improvement in the economy, that is exactly the reason for keeping Gartcosh open, so that it will be there to provide the necessary steel?

Mr. Brittan

I will come to Gartcosh in a few moments, if I may.

Dealing with the oil argument, I was going on to say that, for the reasons I have given, it is entirely reasonable to believe that manufacturing industry will continue its recovery, but at the same time services will undoubtedly form an increasing part of our economic activity. The resentment about services, such as the tourist industry, that we saw earlier in the afternoon is not only distasteful but economically illiterate. We would do well to accept that a pound of output or export from the service sector is no less useful or worthwhile than that earned from manufacturing.

The Opposition amendment refers to the level of unemployment. Nobody could dispute that it is far too high; but in this area, too, it is only the Opposition who stubbornly refuse to recognise the encouraging signs that are emerging. As has already been pointed out, in the past two and a half years the total number of people in work has increased by more than 600,000, and last year we created more jobs than the rest of the European Community put together. I believe that the measures contained in the Gracious Speech will improve the climate for job creation still further. I am not alone in my confidence.

Mr. David Winnick (Walsall, North)

Will the right hon. and learned Gentleman take this opportunity to dissociate himself from the remarks of Mr. Jeffrey Archer, the deputy chairman of the Tory party, who, in an interview about the young, said that they are quite unwilling to put in a day's work. I know what unemployment is like, and a lot of it is getting off your backside and finding a job"? Is the right hon. and learned Gentleman aware how offensive those remarks were to the hundreds of thousands of people who are denied the chance of working and who have no chance of finding a job?

Mr. Brittan

The hon. Gentleman knows perfectly well that Mr. Archer has himself commented on those remarks. If the hon. Gentleman is seriously interested in the questions of employment and unemployment which are concerning this House, his reference to remarks of that kind, and dwelling on them in the way that he has, must illustrate that he has reached rock bottom—[Interruption.]

Mr. John Smith

rose—

Mr. Brittan

The Opposition are manifestly becoming restive because I am pointing out some uncomfortable facts about the good news in the economy and the increase in the number of jobs.

I have to tell the right hon. and learned Member for Monklands, East and the Opposition that I am not alone in my confidence about British economic prospects. It is a confidence which is shared by investors the world over. Last year, inward investment into Britain was 86 per cent. up on the figure for the year before. It was the best year for inward investment since the Invest in Britain Bureau was created. Three hundred and twenty separate inward investment projects were confirmed, creating nearly 30,000 new jobs and safeguarding 19,000 others. Last year there were projects which, put together, represented capital expenditure of about £3 billion. Those are the serious points about what is happening in the economy.

Mr. John Smith

rose—

Mr. Brittan

That level of success is being maintained this year. These figures cannot be manipulated and are entirely dependent upon voluntary decisions taken by overseas investors. Whether the Opposition like it or not, they represent a massive vote of confidence in the future of the British economy and the Government's policies.

When I visited the United States a couple of weeks ago, I found that the only thing that worries potential investors about putting their money into Britain is the thought that one day there might be a Labour Government. Happily, I was able to reassure them that such an event was highly unlikely.

Mr. John Smith

Before the right hon. and learned Gentleman scurries away from Mr. Jeffrey Archer, is not Mr. Archer regarded as a fairly responsible official of the Conservative party, being the deputy chairman and having been appointed by the Prime Minister? Why cannot the Secretary of State give us a simple answer? Does he agree with the disgraceful remarks of the deputy chairman of the Conservative party? If he disagrees with them, can he not dissociate himself from them? Can he not do that simply, honestly and clearly?

Mr. Brittan

I regard it as a sign of the trivialisation of the debate by the Opposition—[Interruption.]—that the only point that has excited or interested them in a serious debate on the economy is a statement that Mr. Archer himself has explained very fully and frequently. The right hon. and learned Gentleman should learn that, if he wishes to be taken seriously as a spokesman for the Opposition, he will have to produce something a little more constructive than that. It is significant—the House will not have ignored the fact—that the Archer diversion was raised precisely at the unpalatable moment when the true facts about what is happening to the British economy were being given.

There has been considerable progress not only in industries coming to this country—those overseas choosing to come here in a climate which exists under a Conservative Government—but in those industries remaining in public ownership for which my Department is responsible.

Let me refer, first, to the British Steel Corporation. I want to deal more generally with the progress of the corporation, but the right hon. and learned Member for Monklands, East specifically raised Gartcosh. The idea that the Government are not prepared to listen is manifestly untrue, to his knowledge, because he and others of his right hon. and hon. Friends have been to see members of the Government who, I hope, gave them a courteous hearing. Trade union representatives have done the same. It is not sufficient to say that, because we have not been able to accept the points that were made, we are not ready to listen. That is not a fair point.

The right hon. and learned Gentleman talked about Gartcosh being a cold rolling mill which was an essential part of an integrated complex. He will be well aware that the information provided by the British Steel Corporation shows clearly and beyond peraventure that in many parts of the world there are plants doing what Gartcosh does which are much further away from the plant that they serve than Gartcosh is from Ravenscraig.

The assurances that were given in August about Ravenscraig stand, and they are to be taken seriously. I hope that the right hon. and learned Gentleman will accept that and will not be a party to the running down of confidence in Ravenscraig caused solely by claims about the connection between Gartcosh and Ravenscraig which cannot be substantiated.

Dr. Jeremy Bray (Motherwell, South)

Can the Secretary of State give an undertaking that the British Steel Corporation will provide answers to the detailed questions put to it by the Select Committee on Scottish Affairs on the specific point about the link between Gartcosh and Ravenscraig?

Mr. Brittan

I understand that the British Steel Corporation will provide more information. As the hon. Gentleman well knows, that must be a matter for the corporation.

I should like to say a word more broadly about the British Steel Corporation, because the future of the steel industry in Scotland, and at Ravenscraig in particular, is dependent upon the future progress of the corporation generally. Enormous progress has been made in turning BSC into a viable and profit-making company. In 1979-80 the British Steel Corporation lost over £1.75 billion, including over £1 billion of excess capacity written off.

Mr. Tom Clarke (Monklands, West)

rose—

Mr. Brittan

Those who are concerned about the steel industry should heed the figures. Five years later, in 1984–85, if the effects of the miners' strike and exceptional items are excluded, the British Steel Corporation would have made a profit of £40 million.

Mr. Foulkes

On a point of order, Mr. Deputy Speaker. When I intervened earlier, the Secretary of State said that he would deal with the point later. My hon. Friend the Member for Monklands, West (Mr. Clarke), who is the constituency Member of Parliament, has not been given an opportunity to ask an important question.

Mr. Deputy Speaker (Mr. Ernest Armstrong)

Order. The hon. Gentleman knows that whether a Member gives way is a matter for the hon. Member who is addressing the House.

Mr. Brittan

I was about to give way to the hon. Member for Monklands, West (Mr. Clarke).

Mr. Tom Clarke

I am grateful to the right hon. and learned Gentleman and to my hon. Friend the Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes).

The Secretary of State has referred to Gartcosh. Does he accept that he has so far failed to convince not just the overwhelming majority of the Scottish people but the overwhelming majority of the members of his own party in Scotland? Tomorrow the Minister of State will give evidence to the Select Committee on Scottish Affairs. In due course, that Committee will report to the House. Will the Secretary of State give an assurance that he will accept the findings of the Committee?

Mr. Brittan

The hon. Gentleman knows perfectly well that no Goverment have ever said in advance that they will accept the findings of a Select Committee, whatever it may say.

I came to the matter afresh and saw the decisions that were made in August on Ravenscraig. I felt that if I could be persuaded that the connection between Gartcosh and Ravenscraig is as Opposition Members have suggested, that would have to be taken seriously. I considered the matter carefully. I have not been persuaded that there is the link which the hon. Gentleman and others suggest. Those who insist on maintaining that it exists are doing a disservice to Ravenscraig and to the steel industry in Scotland and the United Kingdom generally.

The efforts of the steel industry in Britain, to which I wish to pay tribute, were reflected in the outcome of the European Steel Council at the end of last month in Luxembourg, an outcome which should bring cheer to the whole of the United Kingdom steel industry, public and private. I should like to thank my hon. Friend the Minister of State for his considerable role in achieving that result.

At that meeting, Ministers agreed a tough new regime of severely limiting state aid which should protect all United Kingdom producers against unfair competition from continental competitors. The new quota system represents a significant first step towards a free market in steel. It will be of particular benefit to the BSC. The British steel corporation has had to make use of extensive and uncertain ad hoc arrangements over the last two years to maintain its share of the United Kingdom market at a time when the United Kingdom economy was expanding faster than continental economies. That was unfair. The new quota system will give BSC an extra 360,000 tonnes of quota per year. That should consolidate the position that BSC has achieved following the acquisition of Alphasteel without the need for more ad hoc arrangements.

I should like to pay tribute to all in the industry who have made progress possible. In particular, I greatly admire and warmly applaud the determination of thousands of steel workers to overcome the most intolerable intimidation and abuse to keep the steel works going throughout the miners' strike.

Industry is not a homogeneous entity, nor are the problems the same or of equal gravity in different parts of the country. The right hon. and learned Member for Monklands, East was right in recalling what I said at the Conservative party conference about regional policy. It has a vital part to play in our overall economic strategy. It is now almost a year since the new system for administering regional aid was announced. The right hon. and learned Gentleman was right to anticipate that my concern for regional policy would be reflected in considering the impact of that new policy.

Often in the past, money was given to support projects which were highly capital intensive and produced few jobs. In a few cases those projects even resulted in an overall net loss of jobs, while others were certain to go ahead whether or not they received assistance. Clearly that could not be allowed to continue. Regional policy is about creating jobs in the regions. Under the new system it is targeted to ensure that it does just that.

It is still early days to assess the full effect of the changes, but there are some signs already. As a result of the changes, the west midlands was made into an assisted area for the first time. That provided a classic example of the sort of problem that had to be tackled—a highly urbanised area dependent on industrial centres which have declined. I am pleased to say that, to the middle of last month, 538 applications for selective assistance for the west midlands had been received. Of those, 156 have been approved and 147 are being considered. As a result, grants of over £17 million have been approved to assist projects involving a total investment of over £150 million, which will lead to nearly 12,000 jobs being created or safeguarded.

I should also like to mention one arm of our regional policy—the English Industrial Estates Corporation. Its work is an important component of regional policy. The demand for its factories has grown as we have emerged from recession. On the other hand, income from receipts is not expected to be as high as at one time seemed likely. [Interruption.] I hear a reference from the Opposition Front Bench to proposals for management buy-out. Those are still being considered, and I have no announcement to make about them today. We are increasing the public expenditure provision for the English Industrial Estates Corporation in 1986–87 to £19.3 million, an increase of over 20 per cent. on the previously announced figure in the public expenditure White Paper of this year.

Mr. Paddy Ashdown (Yeovil)

Is the Secretary of State aware of the great concern in the Medway towns as a result of the reduction of grants to the English Industrial Estates Corporation? Does he accept that the Government have a duty to carry through the full development project in the Medway towns? Will he undertake to make a statement on the matter in the near future? In particular, will he give an undertaking to the House that the grants to the English Industrial Estates Corporation will not be reduced to such an extent that it cannot carry through a proper development project in the Medway towns?

Mr. Brittan

I have said what the position is with regard to the public expenditure provision for the English Industrial Estates Corporation. There is an increase of over 20 per cent. for the coming financial year on the previously announced figure in the public expenditure White Paper. The hon. Gentleman will appreciate that what has been said about the Chatham project remains the Government's policy, but I have nothing to add to that.

I refer now to the privatisation measures that seem less than popular to the Opposition. Since taking office we have returned 12 major state-owned companies to the private sector. That has been done not out of reasons of dogma or ideology, but because of the belief, which has been borne out by results in almost every case, that privatisation results in greater efficiency and improved performance. I shall give but one example. In British Aerospace, turnover is up by 73 per cent. compared with the year before privatisation, and profits are up by more than 200 per cent.

However, privatisation has meant not just improved performance. In addition, one third of a million employees have taken the opportunity to become shareholders in the firms for which they work. By doing so, they have taken a stake in the future of those firms and shown a positive commitment to their success. It is for that reason that we are proceeding with privatisation.

There is one proposal in the Gracious Speech to which I should refer because it will be the main item of legislation for the Department of Trade and Industry in the coming Session. It is the proposal to establish a new regulatory framework for the financial services sector. The Bill will be based on the proposals in the White Paper published last January. The approach set out there is designed to enhance the efficiency and competitiveness of that vital sector of the economy while at the same time providing additional safeguards for investors.

So far I have concentrated on domestic matters, but I should like to refer briefly to international trade. It is a prime objective of the Government to seek to maintain and extend the opportunities open to British exporters in world markets. Our crucial opportunity for doing so will be the new round of multilateral trade negotiations in the general agreement on tariffs and trade. In recent years trade restrictions have multiplied and confidence that the rules of GATT will be adhered to has been weakened. It is essential that that process should be reversed. We shall strive, together with our Community partners, to revitalise GATT by negotiating reductions in trade barriers, improving the procedures for settling disputes and ensuring that the rules of the system are more widely observed.

I should like to refer to one other aspect of our trade policy, because I know that it is of particular concern to many hon. Members. Discussions with the financial community on soft loan facilities have been successfully concluded. I should like to announce today important changes in the scope and scale of the aid and trade provision—an instrument effective both in providing aid to developing countries and in helping British companies with overseas contracts. Since its inception, some £350 million of ATP grants have been used with export credits to help British companies with 96 projects, with resulting exports worth £1,700 million. Our intention is to make ATP even more effective in future.

First, with the full co-operation of the financial community, we are introducing a new soft loan facility. Banks will make long-term loans at low interest rates available to recipient countries for financing sound development projects agreed intergovernmentally. The Overseas Development Administration will provide ATP funds to the banks to cover the cost of softening such loans.

Secondly, we are increasing the total level of ATP support to enable British companies to double, by 1988–89, the business currently won annually with ATP. The current annual provision of £66 million is at present offered mainly in 25 per cent. grants securing exports of up to £250 million a year. The new loan facility will enable potential exports won to rise to some £500 million a year. The public expenditure costs of the new facility will usually be in the form of interest top ups to the banks spread over the life of the loans. ATP funds are being increased by £3 million, £10 million and £20 million over the next three years in line with the target of doubling the business won.

The introduction of the soft loan facility is in recognition of the preference of certain developing countries, notably China and Indonesia, for project-related financial packages to be provided in the form of single soft loans rather than in combinations of grants and export credits. The facility will be initially for five years and then reviewed. Initial discussion about a £100 million loan facility has taken place with the Chinese Government. Under such a facility, loans would be at 5 per cent. for 20 years, with a five-year grace period. We shall make suitable arrangements for loans with other developing countries where that would maximise the benefits.

These changes will put our companies on a footing similar to that of their competitors in other countries where the Governments already have the flexibility to provide soft loans. Within the Organisation for Economic Cooperation and Development we shall continue to seek more progress towards multilateral controls over these practices, which other countries have initiated. Our facility will be operated within our international obligations. Our major exporting companies have campaigned strongly for this facility, but the projects won will also benefit the thousands of small and medium-sized companies that act as suppliers and subcontractors. I look forward to a strong response from industry to these changes.

Mr. John Smith

The Opposition welcome the Government's acceptance of the request that has been made for a considerable time by leading British exporters for the introduction of soft loans. While I welcome the Government's conversion to that idea and putting British industry on the same footing as its competitors, why has it to be phased in over three years? The problem is here now. Why must there be a three-year delay?

Mr. Brittan

There will not be a three-year delay. The facility is to he available immediately. The three years to which I referred are the period in which public expenditure will increase. It is not surprising that it should build up over the years. If one introduces the measure tomorrow, it is not surprising that the amount that one spends will be less in the first year than in the second or third. There will be a build-up of projects. I am sorry if the right hon. and learned Gentleman misunderstood, but it was unnecessary for him to introduce a sour note because of his regret that this Government are introducing the measure.

Mr. Smith

It is not my intention to be sour. It was legitimate to say that the measure has been requested for some time. The Secretary of State should be grateful for the fact that I was willing immediately to recognise the advantage that would be gained by certain British exporters. I should like to clarify the point about the three years. We listen with care to what the Secretary of State says. If sufficient requests came in, would there be no cash limiting of any sort and no phasing in over the three years so that, if there were enough projects in the first year, the money would be made available to them?

Mr. Brittan

The right hon. and learned Gentleman is being unreasonable. There is no delay. The scheme is open immediately. To suggest that the amount of money available under it should be unlimited is to ask for something that is absurd. I am talking about doubling the amount that is currently available. The right hon. Gentleman really ought to recognise the magnitude of the change that is being made, rather than make remarks which, if initially not sour, certainly became so.

Mr. Richard Hickmet (Glanford and Scunthorpe)

I welcome the announcement on ATP, but may I ask my right hon. and learned Friend for an assurance that applications in relation to ATP-type funding will be reviewed speedily? How many Departments will be involved in the consideration of ATP?

Mr. Brittan

They will be looked at speedily, but, of course, there is a developmental aspect of it as well as an aspect that is important for British industry. It would be quite wrong not to look at both aspects. We will look at them as quickly as we possibly can. I look forward to a strong response from industry to these changes.

The Gracious Speech contains a series of measures designed to build on the achievements that we have already made and to encourage further the growth of the prosperity of British industry. The contrast with the proposals emanating from the Labour party could not be greater. A few weeks ago, the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) had the cheek to claim that the Labour party and industry somehow had a mutual interest and that Labour was prepared to listen to industry's needs. If nothing else, he deserves full marks for sheer brass neck.

The truth is that the Labour party's policies, in contrast to those in the Gracious Speech, would be catastrophic for industry in this country. Reckless spending policies, financed by economic irresponsibility, would soon push—[Interruption.] No, our policies are not reckless, because they are limited in amount. Hon. Members know that perfectly well. The right hon. and learned Gentleman has asked for a blank cheque. Reckless spending policies, financed by economic irresponsibility, would soon push inflation back to the crippling levels from which we have escaped. Penal taxation imposed on anyone earning over £20,000 a year would destroy incentives and drive our most talented managers and workers abroad. Repeal of the trade union legislation, for which the Opposition call, would return us to the bad old days when militant and unrepresentative union leaders called strikes at the drop of a hat, with little or no regard to their effect.

Those industries which we had freed from state control would be taken back into public ownership, forcing them to obey the dictates of politicians rather than their customers and the market, and depriving thousands of employees of their shares. Those industries which were allowed to remain in the private sector would be so encumbered with regulation and control that any sign of enterprise or initiative would be snuffed out.

The right hon. and learned Gentleman would certainly create jobs—jobs for hundreds of bureaucrats—but at the same time he would destroy thousands more by driving foreign investors away and choking our own domestic industry in a mass of red tape and controls. This Government's policies have helped to create an outlook for business which is described in the CBI's report of today as brighter than for many years. The proposals in the Gracious Speech will improve that prospect still further. I urge the House to reject the amendment.

6.42 pm

Mr. Roy Jenkins (Glasgow, Hillhead)

I sometimes thought that, when the right hon. and learned Gentleman did not seem wholly at home in the Home Office, it was perhaps because the Department did not suit him. However, his fluent lack of conviction is, I think, an art form which he can transfer from Department to Department.

Mr. Brittan

Really!

Mr. Jenkins

The right hon. and learned Gentleman must receive compliments more graciously. I congratulate him, however, on having overcome the vicissitudes of the summer and I wish him well in his new Department.

The Government are becoming an increasingly rum Government. To try and give them close support must be an increasingly disorientating experience for those of their supporters who endeavour to do so. For years they have been taught to worship at the shrine of monetary aggregates. Sometimes the icon changed. Sometimes it was sterling M3, sometimes MO, sometimes whatever it might be. Nevertheless, this was the shrine at which they worshipped. Two months ago, the Chancellor told us that it was all mumbo jumbo and that we must have entirely new forms of measurement.

The Prime Minister, having proclaimed herself for years the prophet of rolling back public expenditure, having re-nailed her colours to the mast at Blackpool by saying, "We will not reflate," then proceeds to regale the Lord Mayor of London with boasts of the Government's colossal programme of public expenditure. I am not surprised that more consistent economic thinkers such as Lord Stockton—[HON. MEMBERS: "Oh!"]—he has, in fact, been remarkably consistent over about 48 years—find it difficult to keep up with this whirligig. Presumably, it exemplifies the Prime Minister's expressed belief that what people dislike is not the policies but the presentation of them.

We are now told, therefore, that everything is set fair for the economy, that steady growth is assured and that private as well as public capital projects are bounding ahead. What is the reality? The picture is not entirely bleak. It would be silly to pretend that it was. The inflation prospect is good, even though the Chancellor slipped in rather quietly this afternoon the news that it will be 0.5 per cent. for this year above his budget target. On the whole, however, the prospect is good, at least until sterling, still so foolishly left isolated outside the European monetary system, takes the full force of the double decline of oil. By double decline, I mean the decline of world prices and the beginning of the run-out of our supplies.

There has been some modest growth for an unusual number of years in a row, but it has been modest and it has not brought back manufacturing output to anywhere near the 1979 level. All forecasts, with the exception of one private forecast, expect the rate of growth to tail off in 1986 and again in 1987. That is by no means a wholly bad picture, but there is another side to the equation.

First, there is really no sign at all of any significant reduction in unemployment without a major change in policy. I do not think that anybody, except perhaps the Chancellor and perhaps the Secretary of State, for all I know, really any longer seriously thinks the opposite. Unemployment has probably levelled out but at a totally unacceptable figure. Secondly, contrary to what the Secretary of State said, the post-oil surplus prospect—not merely the post-oil prospect, because the oil will take a long time to go, but the surplus, the big balance of payments surplus, which is beginning to decline quite quickly—still looks devastating.

In endeavouring to engage with this argument, the Secretary of State seemed to me to be confusing the balance of payments argument with other arguments. He said that oil is not the only thing in the country that is going well, and that other industries are making big profits. Perhaps they are, but the fact remains that our balance of payments is now overwhelmingly dependent on this highly temporary and massive oil surplus. Our manufacturing industry is shrunken and what remains is uncompetitive. The Secretary of State knows this perfectly well.

We have a manufacturing trade deficit of approximately £11 billion, all of which has built up in the past three to four years. This is containable by oil and by nothing else. Invisibles can take care of about £4 billion or £5 billion but they cannot do the whole job. As soon as oil goes into a neutral position we are in deep trouble. Should it go into a negative position, the situation would be catastrophic.

Mr. Ivan Lawrence (Burton)

What did the right hon. Gentleman achieve?

Mr. Jenkins

Were there deficits every year when I had responsibility? I recollect that I produced quite large balance of payments surpluses and enabled us, in different circumstances, to repay some Government debt. The hon. and learned Gentleman must make better interventions or he will give lawyers a bad name.

One would have thought that, in these circumstances, the Government might have taken seriously the report of the House of Lords Select Committee. By any standards it was a serious document, compiled by serious people of substance and great experience. Yet so hysterically do the Government resent criticism of any sort that the Chancellor of the Exchequer and the Secretary of State for Trade and Industry went into a paroxysm of denunciation of the report before it was even published.

Those two—the Chancellor and Secretary of State for Trade and Industry—in trying to rebuke for irresponsibility the members of that Select Committee, not to mention Lord Stockton and a number of right hon. and hon. Members, were like two cabin boys trying to quell a revolt of admirals.

On that burning deck the person for whom I felt sorry was Lt.-Commander Walker, the Secretary of State for Energy. He had been flirting a good deal with the admirals—though wishing to keep his lines open with the cabin boys as well—and it was extremely bad luck on him that when he introduced the most senior admiral to deliver a great benediction, under his chairmanship, he found that it was his own departmental policy—presumably about the only policy on which he agreed with the Government—that was under attack.

Even so, he would have been better advised not to deliver his statement of retraction the following morning. Apparently he had not said that it was selling the silver; it was transferring it from the bureaucrats to the people. However, that totally begged the question of what to do with the money, and on that issue the Government's behaviour has been odd indeed.

For years, the country has been crucified on the cross of the PSBR. The fiscal stance has been too tight for our recent circumstances and we should have loosened it significantly, particularly for capital projects. But the Government have firmly resisted that, although now they are in favour of creative accounting—that is the phrase—and they are prepared to use about £5 billion from capital sales to finance current spending—namely, personal tax cuts.

To sell off a chunk of capital assets and to use the proceeds for capital investment in the rest of the public sector might just be acceptable. However, that is not what is proposed, and what is proposed cannot be justified on any reputable theory of public finance; and when it is accompanied by a Minister using the oil—which might itself be regarded as a capital asset; certainly it is not renewable—almost entirely for current purposes, it amounts to improvident finance on a scale that makes the Prime Minister's old friend General Galtieri almost Gladstonian.

However the money is used, I am deeply sceptical about the management and consumer benefits that flow from turning public monopolies into private ones. I hold no brief for nationalisation—[Interruption.]—and on a simple view—

Mr. Baldry

Will the right hon. Gentleman kindly explain which policies of the Labour party—remembering that he was a member of that Cabinet of that party—he now supports? It seems that he was in favour of an incomes policy but not of nationalisation. In which Labour measures has he lost faith? Which policies has he renounced and to which is he keeping?

Mr. Jenkins

It is probably well known that I have never been in favour of any measure of nationalisation since at least the mid-1960s—[Interruption.] I suppose that I may have voted for some of them, but I did so with about as much enthusiasm as the present Prime Minister voted for policies of the right hon. Member for Old Bexley and Sidcup (Mr. Heath).

Mr. Brittan

Does the right hon. Gentlemen think it is credible, creditable or honourable for him to have been a member of a Government in 1974 who embarked on nationalisation measures, which he supported as one of its centre points, and now to say that he never believed in them?

Mr. Jenkins

I said that from the early 1960s I was, on the whole, disillusioned with nationalisation. It was perfectly well known to everybody at the time that there was resistance to such measures in the Government, and it is absolute nonsense for any theory of Cabinet Government—[Interruption.] I do not think the right hon. and learned Gentleman heard the point I was making. With what degree of conviction and enthusiasm does he think the present Prime Minister voted for the policies of the right hon. Member for Old Bexley and Sidcup, all of which she now denounces, as she does those of Lord Stockton, as being all part of the bad past?

Mr. Brittan

Will the right hon. Gentleman now answer my question?

Mr. Jenkins

The right hon. and learned Gentleman wants to turn everybody who does not agree with him into a wild dogmatist the other way. He must learn that there is some sense in having a non-dogmatic approach to some issues.

Although I have no faith in the denationalisation of public monopolies and turning them into private monopolies, I reject the simple view that, by doing that, there is automatically produced the splendid management performance that we want.

The Times report from Paris last Friday on the unfortunate Ptarmigan-Rita affair was interesting, because the outcome seemed neatly to illustrate—"confound" may be a better word—both the Prime Minister's dogmatism and her diplomacy. The report said that the French firm had simply appeared to have done its homework much better than the British and to have adapted more skilfully to American requirements. So much for the assumed automatic superiority of a privately owned firm over a nationalised one. It added that the crowning 'gaffe' of Mrs. Margaret Thatcher's personal intervention was all that was required to complete the series of British mistakes.

The Paymaster General (Mr. Kenneth Clarke)

Has the right hon. Gentleman yet made up his mind on the way in which he will vote on the privatisation of British Gas? Having given a brief description of certain matters about which he is sceptical, will he tell us whether he will believe in his vote this time, or is he in the midst of another 10 years of votes about which he is wholly sceptical?

Mr. Jenkins

I shall wait until the Bill is produced by the Secretary of State for Trade and Industry. That seems a sensible way to proceed.

Mr. Lawrence

rose—

Mr. Jenkins

The hon. and learned Member for Burton (Mr. Lawrence) is again looking for dogma. He is only at home when he can reach out for dogma to tell him that something is right or wrong, sensible or foolish. He has done that for years.

The Government's answer to the stark prospects of no reduction in unemployment and inadequate manufacturing performance to pay our way when the oil runs out is to get faster and further into the service industries. One evening last week, I listened to a Minister citing, as though it were on a tablet of gold, the fact that 86 per cent. of the employed population of New York is now in the service industries. That is hardly relevent. New York is renowned for its exuberance, even in the richest country in the world. It is absurd to say that New York carries the universal message that to turn Liverpool, Glasgow and Birmingham into little Manhattans would solve their problems.

The relative growth of service industries is inevitable and desirable in advanced economies. A return to full employment, which should be possible, will come about through highly efficient and labour-conscious industry. Around that core we can afford to run labour-intensive service industries, both public and private. That is miles away from saying that in Britain we have not moved far or fast enough away from manufacturing and towards services.

It is nonsense to decry the tourist industry, or any other industry, as second-rate. All industry is valuable. We must look at the overall picture to see whether the balance is right and whether we have moved fast enough. Britain has moved further towards services than have Japan or West Germany. We have moved faster and further than nearly any country except for the United States. It is fundamentally wrong that we have run down manufacturing uniquely and dangerously quickly, not that we have gone too far into services. Until the Government realise that central fact and become willing to listen to the House of Lords Select Committee, the Confederation of British Industry, Lord Stockton, the Opposition, the alliance, the right hon. Member for Old Bexley and Sidcup and the large chorus from other Conservative Members rather than their self-congratulatory voices, their approach will be fundamentally flawed.

7.3 pm

Sir Ian Gilmour (Chesham and Amersham)

The House has heard three good and contentious speeches, but I hope that I shall make one with which every hon. Member can safely agree. The right hon. and learned Member for Monklands, East (Mr. Smith) made an angry complaint about the Government's policy. However, his indignation prevented him from noticing that the policy he attacked is no longer quite there. There is a considerable element of reflation in the Government's policy. The right hon. Member for Glasgow, Hillhead (Mr. Jenkins) said that private forecasters agreed that growth would slow down in the next two years. That is true, but the policy has altered, so their projections are all out of date.

I warmly congratulate my right hon. Friend the Chancellor of the Exchequer on having the courage to change his fiscal policy. The right hon. and learned Member for Monklands, East attacked the Government's privatisation policy. I shall not enter the argument about silver, or even the one about the admirals—the right hon. Member for Hillhead was in naval mood this afternoon, first with rum and then with cabin boys—though I should say that in general I support privatisation. But I emphasise that the sale of existing assets does not provide resources to pay for newly produced goods and services. That is because the sale of assets does not change the net wealth of the private sector. Receipts from such sales do not withdraw purchasing power from the private sector as does, for example, the imposition of more taxation. The receipts change the structure of private wealth portfolios, but they make no significant difference to aggregate demand.

That means that increases in public expenditure and cuts in taxation, which we are promised, are straightforward reflationary measures. Contrary to what the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) said this afternoon, asset sales do not finance tax cuts. They are independent of them. The tax cuts which will apparently be made will contain a considerable element of reflation, and as such I warmly welcome them. However, I doubt whether they will be enough. Some of the reflation will go in the wrong direction. I agree with what my hon. Friend the Member for Milton Keynes (Mr. Benyon) said in this debate the other evening: that most reflation should be done differently and should not be in the form of tax cuts.

I do not understand why the Government say that they are not reflating when they plainly are. Presumably, they are saying one thing and doing another to gain confidence and to reassure the City. But the City is not as silly as that. Indeed, it is not silly at all. I doubt whether it will be fooled by the arbitrary and fairly absurd convention which my right hon. Friend the Member for Worthing (Mr. Higgins) and the Treasury and Civil Service Select Committee have often criticised, whereby asset sales are treated as negative expenditure which reduces the PSBR. I am sure that the City will realise that the Government are reflating. Asset sales reduce the PSBR, but they do not make its funding easier. Indeed, it is possible, in view of what has happened, that interest rates will increase rather than decrease.

We should also realise that there has been some reflation, even while my right hon. and learned Friend the Secretary of State for Trade and Industry was at the Exchequer. The eighth report of the Treasury and Civil Service Select Committee shows that, between 1981 and 1984, there was a significant fiscal expansion equivalent to at least 1 per cent. of gross national product. Although monetary policy has been tight in the sense that real interest rates have been high, it has been generous in that it has allowed a large increase in borrowing by the personal sector. Nevertheless, the reflation that we have enjoyed has certainly been insufficient to reduce unemployment or even, until recently, to stop it increasing.

My right hon. Friend the Chancellor said recently that British industry is healthier today than it was six years ago. Others have gone further and have painted a picture of boom-time Britain. That is rather surprising, because even with limited fiscal reflation there has been no recovery from the recession. I do not like to quote my speeches, but as I said during my speech on the Budget in 1984: The relevant definition of recovery … is whether the expansion is large enough to bring down unemployment. On that criterion, the recovery has not yet started."—[Official Report, 15 March 1985; Vol. 56, c. 536.] What I said then remains true. Since unemployment has still not turned down, we have not yet had a recovery.

The more that I examine the figures, the less I find grounds for satisfaction, let alone euphoria. However, in view of the admonition to speak briefly, I shall not weary the House with many statistics. Instead I shall quote from Sir Winston Churchill, who talked about the paradox of "unemployment amidst dearth." That paradox is with us again. Sir Winston Churchill said 60 years ago: The community lacks goods and a million and a quarter people lack work. It is certainly one of the highest functions of national finance and credit to bridge the gulf between the two. While that unemployment exists … no-one is entitled to plume himself on the financial credit policy which we have pursued. That is very true today when unemployment is more than double what it was then. Collectively it would seem that we have not learned any more about how to run a modern industrial economy during the past 60 years.

As a result of the reflation now in prospect, given a bit of luck, we should have a decent run for a short while, although I doubt whether it will be fast enough. If we could achieve a growth rate of 3.5 or 4 per cent. next year, unemployment would surely begin to fall steadily if not quickly. The current balance of payments might as a result move into deficit, but in a minor way we could follow the example of the Americans and attract enough foreign capital to prevent a sterling crisis. That would be a risky venture but it might work and it would certainly be politically attractive.

Yet on its own, such a policy would make no contribution to solving the fearsome strategic predicament we still face. This is apparent if one looks some years beyond 1986. Hon. Members should be grateful to the House of Lords Select Committee on Overseas Trade to which the right hon. Member for Hillhead referred. I was disappointed that the Secretary of State did not refer to that Committee this afternoon, but he had other things to talk about and one should not write other people's speeches for them. I hope that the Government will make a more considered response than either the Secretary of State for Trade and Industry or the Chancellor did before the report was published, or the Chancellor did at one of those City dinners.

The essential message of that report is starkly simple. Britain's trading performance has been strongly adverse—the report does not state this, but it is true—since the early 1950s. The conflict between full employment and inflation would have occurred to a far greater extent in the late 1970s had it not been for oil.

The rise in oil revenue should have made it possible to avoid that conflict. The bonanza should have been used to put British industry on a proper footing and to provide for its secure future. Unfortunately that has not happened and the underlying economic decline has continued. The production of oil is now at its peak and there will be problems, as the Lords Select Committee said. It is unfortunate that that report has come about five years after the moment when the appropriate strategy decisions could easily have been made.

The report states that, unless the deeply entrenched trends in trade change quite dramatically, the recession will get worse during the next decade, with unemployment rising to much higher levels. The Lords Committee does not believe that the necessary change in competitiveness will occur spontaneously, and I agree. The adverse trends became entrenched before the oil flowed and there is no reason to suppose that they will not survive the oil drying up. Indeed, they are likely to get worse.

The Chancellor is engaging in reflation. I greatly welcome that, despite its risks. There is no evidence, however, that the Chancellor has a strategic plan, and that is a cause of grave anxiety. The Chancellor is living from hand to mouth. He is now putting his hand to his mouth rather more often than he did before, which is welcome, but neither the Chancellor nor the nation can continue to do that for very long. The Lords report is right that market forces will not do the job on their own—the past six years have proved that if they have proved anything. There needs to be a national and international strategy to ensure that market forces work benevolently to help the country out of the economic decline and the crisis that it faces. The Chancellor and the Secretary of State for Trade and Industry are both able men and capable of devising such a strategy, but at present they are declining to do so. It is getting pretty late and I think that they ought to start now.

7.15 pm

Mr. Michael Cocks (Bristol, South)

In 1964 I contested the Gloucestershire, South constituency. To my numerous public meetings I took three diagrams. One illustrated the comparative decline of British coal and steel production since the war, a second showed the comparative decline of our gross national product and the third showed the comparative decline in the British share of the world export market. The decline that I tried to illustrate then has gone on since, remorselessly, and the effect on employment has been devastating.

Recent Confederation of British Industry figures show that our share of the world market for manufactures has dropped from some 16 per cent. in the early 1960s, when I was showing my diagrams, to less than 8 per cent. now. It is estimated that one percentage point drop represents some 250,000 jobs. The increase in import penetration is equally devastating. In 1970 it was some 16 per cent., and I understand that it has increased to some 28 per cent. Each percentage point of that increase represents a loss of 75,000 jobs.

We are all preoccupied with the problems of unemployment and industrial decline. Deep philosophical differences separate the two sides of the House on how those problems should be tackled, but we ought to be able to agree that if we bought more British goods there would be an immediate benefit. We have a large market. If we talk about import controls, we get into a morass of arguments about the general agreement on tariffs and trade and other obscure matters. Most of the political discussion that I have heard revolves ultimately around the amount of resources available and how they should he disbursed.

I recently drove behind a man with a sticker in his back window saying: Say No to Ratecapping". There is nothing wrong with that, but he was driving a French car. Had he bought a Metro or a Maestro with some 95 per cent. British content, he would have given someone in Britain two months' work, saved the Exchequer about £1,000 in benefit payments and enabled it to receive income from tax and insurance contributions. The balance of payments would also have been eased and resources would have been generated to put into the kitty for the Government to dispose of.

The Trades Union Congress estimates that it costs some £11,000 to have somebody out of work. That represents an appalling waste of resources. How are we to encourage people to buy British manufactures? General exhortations are no good—I know that from my previous incarnation. We have to deal with specific cases. Can we not agree on some scale of approximate work equivalent for various purchases, even if it is only for a couple of hours, so that when people spend their money they have some idea what contribution they are making to the unemployment problem by buying British goods?

Suggestions such as this have previously led to a lot of nit-picking. I should not be at all surprised if I am reminded that the Maestro has an imported gearbox. Such virtually irrelevant arguments get me down. We usually get acrimonious attacks on trade unions as well. We had a good visual aid of that from the Member for Stockport (Mr. Favell) who introduced a note about activities of unions in the motor industry. I was reminded of young Conservatives in the 1950s who used to jump up and down at the back of meetings squeaking, "Groundnuts."

I am sick of hearing ill-judged, uninformed and prejudiced remarks about working people. If one wants to look for blame, much of it goes to middle management. I am told that there are now production and management systems available that could go a long way towards revolutionising British industry and helping to meet Japanese and other foreign competition.

I shall omit a section of my speech about the secondary education syllabus, in deference to you, Mr. Speaker, but the House will suffer it another time.

If we buy British on every possible occasion, individuals can contribute directly to the well-being of the nation and the solution of our appalling problems.

There is a specific problem that I believe needs urgent Government attention and action. In and around the Bristol area, some 2,000 are employed by Allied-Lyons, which is the subject of an unusual takeover bid by Elders under the direction of the Australian entrepreneur, John Elliott. The world-famous wine firm of Harveys, the largest sherry company in the world, is in my constituency. It employs 450 in Bristol and generates substantial exports and income to the Exchequer through various taxes.

As the Member for that constituency, I received a letter from John Elliott, the Australian who is masterminding the takeover. The letter is dated 9 October and reads: We respect and appreciate the standard and traditions of companies such as John Harvey, and have every intention of their identity and reputation, which has been built up over several generations prior to their acquisition by Allied-Lyons, being preserved. Imagine my surprise when in the Financial Times of 2 November there was a report of an interview given by Geoffrey Kent, the chairman of the Imperial Group. At the end of the shareholders' meeting he said that several weeks ago the group had had talks with Elders about joining the consortium to take part in the takeover or, alternatively, buying various bits of it when it was butchered. The group was particularly interested in the wine and spirits, off-licences and restaurants.

The bid is summed up in words of a letter that I have received from the branch secretary of a large section of Allied-Lyons at Clevedon, near Bristol, which employs about 500. The secretary of the Bakers, Food and Allied Workers Union says: As you may imagine, the prospect of being sold off to whom we know not, is the cause of some grave concern to all employees of Hale-Trent Cakes. We are writing to seek your support and assistance in resisting this bid which would appear to be nothing more than asset stripping. The Elders literature concentrates on the Allied-Lyons shareholders. It says nothing about the 60,000 employees, who are presumably expendable if necessary. Even the offer of equity shares to public house managers turns out on inspection to be a pig in a poke, because the brewery will do the valuation.

I believe that the bid is against the national interest for a number of reasons. Apart from employing 60,000, Allied is a heavy investor in the United Kingdom and last year its capital expenditure was about £150 million. The pieces which were sold off will probably be bought by existing competitors and if the process is repeated it could soon approach a monopoly. Allied is in international competition with north American and continental groups and carving it up will damage its ability to compete. The heavily geared Elders operation would leave the business carrying a heavy debt. That is a burden that will inhibit further investment and lead to a minimum tax return from the ex-Allied companies for some time.

There are long-standing rules of company law that prevent a company from providing finance to acquire its own shares and it is not possible to tell whether the proposed action breaches those rules. Much of the matter is shrouded in mystery and Mr. Elliott should come clean about it.

We are told that this activity is a prelude to a political career in Australia for Mr. Elliott. It is grotesque that British workers and British industry should be jeopardised and asked to act as a finishing school for his aspirations.

The Government claim that they believe in competition. I ask Ministers to consider that Australian legislation protects Australian businesses' insular position and that the Australian Foreign Investment Review Board precludes counter-attack. That means that Mr. Elliott can come out from his Australian stockade, like some latter-day Kerry Packer, immune to retaliation and pick off companies around the world, if he can manage it, knowing that, in effect, he is safe in his own castle.

The bid, which is backed by foreign banks, is the first in Britain on such a scale. It can be financed only by asset stripping and the consequent destruction of many types of jobs and industries. Regrettably, this sort of bid, which involves loading business with excessive debts, is already prevalent in the United States. The Government should refer the bid to the Monopolies and Mergers Commission and consider urgently how to deal with the problem. They must surely realise the dire consequences that swathes of British industries will suffer if this sort of depredation becomes commonplace and takes off. I ask the Government to be as robust in protecting United Kingdom jobs and industries as some of our partners in the EEC are in protecting jobs and industries within their borders.

7.26 pm

Mr. Kenneth Warren (Hastings and Rye)

It is an honour to be called after the right hon. Member for Bristol, South (Mr. Cocks), who renders such service to the House. It was always a pleasure to know that he was dealing with the Opposition's affairs. Now he leaves the Labour party "coxless" and up the creek without a paddle, as has so often been the case.

I shall contribute to the debate by taking up early-day motion 29 and making a short speech. It was a delight to hear my right hon. Friend the Secretary of State for Trade and Industry announce that soft loans would be made available, something that the Select Committee on Trade and Industry commended to the House months ago. I hope that the loans will be implemented swiftly and will be examined continually to ensure that they are relevant to the scale of demand in China and Indonesia, for example, and in other parts of the world where our competitors—not only customers—make the terms and conditions for the sale of goods, especially manufactured goods.

I know that my right hon. Friend the Secretary of State has been exercised somewhat by the report from another place on overseas trade. It follows a report which did not exercise his predecessor so much, unfortunately. That was produced by the Select Committee on Trade and Industry and was directed to the problems surrounding the import and export of manufactured goods from and to other nations in the Common Market.

The report on overseas trade from another place extrapolates that which many of us said in this place over a year ago. I do not disagree with the report, but we must pay attention to the way in which Britain's competitive manufacturing base is being eroded. If we are having success in service industries, that is very good, but we must ensure that that success is complemented by equal competitiveness in manufactured goods. There have been so many occasions when we have believed that we can substitute when there has been no substitute for jobs that have been lost by those who have given their lives to them. These employees have often served long apprenticeships and have experienced long periods of training for particular jobs of work within areas of our economy where we should be competitive and where, for reasons which are debatable, we are not as competitive as we should be.

The problem is not a recent one and it cannot be assigned to a certain Government or a certain party. The problem has been with us throughout the century. At the beginning of the century we were at the top of the league of success in world exports of manufactured goods. We were followed by the United States, France and Italy, and Japan was not even mentionable. We are now faced with problems that are entirely our own despite a high level of competence and a base of manufacturing capability that should be able to respond competitively to world market opportunities.

I say to my right hon. and learned Friend the Secretary of State, who addressed himself surprisingly quickly to the report on overseas trade from another place, that we are not faced with a party political problem and that we must not talk down our manufacturing industry. I declare an interest as an industrialist and an engineer. I am conscious of the ability of the British people to succeed and we must chalk up our achievements. At the same time, it is wrong to give the impression that we do not have problems. I am aware that productivity has increased and that tremendous advances are being made in electronics and biotechnology, but there are many areas, such as the steel industry, where encouragement from the Government at a critical time, such as the present, could turn markets in our favour, especially in the EEC, as decontrol comes into being at the beginning of the next calendar year.

As times change and industries evolve, we should examine the results that we get from contributing to various industries. In Hastings and Rye we have many employment difficulties although we have a very good farming industry and an excellent fishing industry. In general terms, the Government subsidise agriculture in this country to the tune of £3 billion when the gross domestic product achieved by that industry is about £7 billion. Manufacturing industry, which produces 10 times that output for the benefit of this country, receives only about £1 billion in support from the Department of Trade and Industry. The ratios are not sensible. That is in no way to denigrate the tremendous efforts and productivity of British farmers, but we should surely put our money on the horses that provide maximum employment and revenue for this country.

Two industries cause me especial concern. The first is often debated in the House and is a difficult subject. I do not pretend to be an authority on the textile industry, but in the past five years that industry has gone from a deficit of about £50 million to a deficit of about £1 billion and has lost 150,000 jobs. Those two sides of the equation must be taken together. I am not saying that we could have protected the people involved because in the end the customers have the right to make the decisions, but we cannot afford to neglect a situation in which dominance in a particular home market can be eroded by Government failure to consider ways of stimulating and thus protecting the industry.

At the other end of the spectrum, in information technology, we now have a deficit of £1 billion per year. That is not common sense in the country that invented the computer. Having spent about 25 years in the computer industry, I am conscious of the high standards of science and technology that can be provided. The right hon. Member for Chesterfield (Mr. Benn) will recall times when he was involved in promoting that industry. The deficit of £1 billion reflects about 25,000 jobs that ought to be in this country. Strangely enough, that is also the total number of vacancies in the industry. We are not equating what Government can do with what is needed in this country in terms of the supply of people who can bring to these industries and therefore to their country output that will counteract the enormous inflow now taking place but which we do not really need at all.

The percentage net imports of electronic products is a problem in the United Kingdom but not in the rest of the Common Market. In the past four years the percentage has risen from about 17 per cent. of our needs to about 30 per cent. of our needs while the level in the rest of the Common Market has remained roughly the same. We are tending to import equipment that we should be able to produce from our own resources as a result of investment in our education system.

The Confederation of British Industry has produced a report which I understand is to be debated at its forthcoming conference in Harrogate. That report refers to all kinds of good and bad things in the British economy. It refers to the strong base of large companies, the strong international customer base, the fact that English is recognised as the major business language and the energy benefits already debated today. It also refers, however, to our poor investment record and the failure of our education and training systems to meet the needs of modern business. In my constituency I was horrified to find that in one of the principal comprehensive schools teachers acknowledge that business studies are taught in terms of jobs that are no longer available because the school does not have the equipment to relate its teaching to the jobs that are now available. I also came across an A-level language teacher who did not even have a blackboard.

Responsibility for investment concerns the whole of Government. It is not just the responsibility of industry. Industry is suffering severely from problems caused by high interest rates. This is clearly shown in a recent report by the Federation of British Electrotechnical and Allied Manufacturers Associations dealing with research and development in small and medium-sized firms. I recently asked my right hon. Friend the Prime Minister whether she was aware of the growing concern in the scientific community about the erosion of our science base. This is not just important at university level but concerns the way in which the industries themselves are responding, as the report shows.

The federation received responses from 116 companies, 67 of which indulged in no research whatever although they were involved in the electronics and electromechanical industries at the sharp end of technology. Those which invested in research did so out of revenue because they could not afford to use borrowed money. Only when gross profits were between 25 per cent. and 40 per cent. on the product sold were the companies prepared to borrow money. That creates an uncompetitive situation. The Government must realise that high interest rates are stopping people investing and thus creating the seed corn fields of the future. I have said this many times before but I say it once again. I often wonder whether speeches in the House of Commons are ever actually heard.

7.37 pm

Mr. John Silkin (Lewisham, Deptford)

The hon. Member for Hastings and Rye (Mr. Warren) rightly stressed the need for investment in industry and I hope to follow him on that in a moment.

The Gracious Speech states: my Government will do all in their power to encourage the growth of new jobs. That is the sole evidence that the Government are aware that there is an unemployment problem. Even then, the Gracious Speech talks about the growth of new jobs but makes no mention of measures to prevent the destruction of existing jobs.

Like all hon. Members, I look with anguish at the unemployment figures in my constitueny. Total registered unemployment in Deptford—this understates the real position—is 8,000 or nearly 21 per cent. That is more than 7.5 per cent. higher than it was at this time last year—so much for the new jobs that the Government talk about. Registered unemployment has been appallingly high since the last election in that area—four miles from the Palace of Westminster and from the very centre of our country. I accept that my constituency has special problems and that its unemployment figures exceed those in the rest of the country, but in the United Kingdom as a whole unemployment now stands at more than 13 per cent.

In May 1979, when the Prime Minister was busy castigating Labour for not working, the average rate of unemployment was under 5 per cent. In the intervening years there has been a galloping decline in manufacturing, as though there were an inescapable link between the growth of unmployment and the decline of manufacturing industry. The Chancellor says that we should not worry, that there is real evidence of recovery and that everything in the garden is lovely—allowing, of course, for seasonal adjustment. The chairman of the Conservative party would add, "And subject also to the usual bicycle ride on the part of the unemployed."

If people are to get on their bikes, it is a fair test to discover whether the bike industry is leading the recovery of which the Chancellor speaks. Britain's largest bike business is Raleigh. Five years ago it was making a 4 per cent. profit on sales. That figure is still with us, but today it is a 4 per cent. loss, and the Tube Investments Group, of which Raleigh is a part, has cut its total jobs in Britain from 50,000 five years ago to 23,000 today. Today, the Conservative party chairman's father might have to go abroad to get his bicycle, let alone to find work.

The Chancellor's claim that investment is recovering rings hollow when one looks at the figures. During the recess the Central Statistical Office published its annual blue book showing what has been happening to the real level of manufacturing investment. Even allowing for depreciation of plant and equipment and for industry's growing preference for leasing rather than buying equipment outright, the evidence still is that net manufacturing investment has in real terms been negative for four consecutive years.

British manufacturing industry is still spending so little on new plant and equipment that it is failing even to replace the proportion that is wearing out, let alone to reequip and modernise so that it can keep up with our competitors. Four consecutive years of negative net investment is even worse than in the depths of the 1930s recession, when real net investment was negative for three consecutive years. That is critical evidence of Britain's continuing weakness.

Investment is the key to modernisation, the introduction of new technology and new products. Our weakness in all the non-price areas of design, quality, service and delivery dates is losing British firms their market share at home and abroad—and all these flow from lack of investment.

The CBI has just produced some alarming figures on British competitiveness, but being priced out of markets because of rising costs pales into insignificance compared with these non-price considerations. That is the reality behind Britain's appalling trade deficit in manufactured products. Without the revenues from North sea oil, the situation would be desperate. Whatever the Secretary of State may say, and however much the Chancellor may sing an optimistic song, the oil revenues are now passing their peak and are beginning to decline. Henceforth, it will be harder and harder for the Chancellor to disguise the truth about Britain's predicament.

The kindest thing that can be said about this Government is that they are not trying deliberately to destroy our industry and our people's livelihoods. That is coming about not through some well rehearsed plan but out of sheer incompetence. The ship of state is not being steered by the compass or even by dead reckoning—the Government appear to be relying on Halley's comet. Yet if we are to have a chance of survival, it is planning—and imaginative planning at that—that we require.

Three things should be set in motion immediately. First, we must reverse the squeeze on public spending and industrial investment. Secondly. we must increase total spending in the economy to give firms a reason to expand production and to create jobs. Thirdly, we must protect and maintain the core industries on which the survival of our country depends. A nation that has allowed its steel, coal, shipbuilding, shipping and heavy engineering industries to decline is as defenceless in peace as it would be in time of war.

The place to start is with a programme of house building, road building and renewal of our sewerage systems, to put the construction and civil engineering industries back to work. We need Government action to encourage manufacturing industry to invest. Boosting total spending in the economy is critical, but direct pressure on big business through planning agreements could help to steer industrial investment and the jobs it creates to the areas where those jobs are most needed. Clearly, there would be no point in stimulating spending if that merely allowed imports to be sucked in and to create jobs abroad rather than at home. Therefore, we must be prepared to control the growth in manufactured imports to the level that we can afford.

We can put together a coherent package that would change Britain's course from cutback and decline to modernisation and expansion if we have the imagination and courage. Nothing less will meet the crisis that we face. Unfortunately for our country, the Gracious Speech well demonstrates that the present Government have neither the capacity nor the will to achieve it.

7.46 pm

Mr. Charles Morrison (Devizes)

Explicitly or implicitly, I shall refer to some of the points made by the right hon. Member for Lewisham, Deptford (Mr. Silkin), but I hope that he will forgive me if I do not refer to them now, simply because time is short.

In the last few days we have heard the most remarkable outpouring of optimism from the Prime Minister, the Chancellor of the Exchequer and my right hon. and learned Friend the Secretary of State for Trade and Industry. Indeed, it was welcome to hear the Prime Minister last night enumerate what was being done in terms of public expenditure, just as it was welcome to hear the Chancellor and my right hon. and learned Friend the Paymaster General today describe how they were setting about some measure of mild reflation.

Nevertheless, I hope that that optimism remains laced with realism. If it does not, it could lead to complacency, and only too often in the past we have seen what happens to Governments who become complacent.

Much has been done by this Government, but there is still infinitely more to do. No one should detract from their achievements and successes, but in politics as achievements are chalked up, other problems appear and develop on the blind side. Unless they are aware, alert and prepared to evolve policy to take account of those problems, the Government will be remembered for their inability to cope with them rather than for their earlier successes.

Problems there are in plenty. We have been debating them since last Wednesday, and today we are debating the problems that are in the very capable hands of my right hon. and learned Friend the Secretary of State for Trade and Industry and my right hon. Friend the Secretary of State for Employment, ably abetted by the Paymaster General. They are also aided by tidal waves of advice from many directions. I do not intend to hold back, but shall try to reinforce some of that advice.

The two factors most relevant to this debate are that since 1978–79 unemployment has risen by 8 percentage points—from 5 per cent. to 13 per cent.—and that since 1983 the balance of trade in manufactured goods has moved into deficit. To some extent those two factors are connected. In the last six years manufacturing industry has lost a quarter of its work force.

When considering manufacturing, we now have the benefit of the recent comprehensive and detailed report of the House of Lords Select Committee on Overseas Trade. That report was provided with an immediate imprimatur by the Chancellor of the Exchequer, who said of it: The Government … wholly rejects the mixture of special pleading dressed up as analysis and assertion masquerading as evidence which leads the Committee to its doom-laden conclusion. We equally reject its principal remedy—that British manufacturing industry should he protected by a cocoon of subsidies. With that recommendation from the Chancellor of the Exchequer, a mass of people, who might otherwise have disregarded it, rushed off to read, learn and digest what was contained in the report. But those who have read it have discovered that it contains no special pleading and that if there is a principal remedy it has little to do with a cocoon of subsidies.

I cannot understand why the Government are so much on the defensive about the report. It seems to be a constructive and helpful contribution. Furthermore, it is not commenting upon just the last six years. As my right hon. Friend the Member for Chesham and Amersham (Sir I. Gilmour) pointed out, it comments upon what has been happening during the last 30 years. The report could be misconceived, but when the Association of British Chambers of Commerce considers that both the Chancellor of the Exchequer and the Secretary of State for Trade and Industry were rash and unwise to 'rubbish' the Lord's findings", and also points out that Britain is unique amongst the major industrial nations in not having by 1984 regained her pre-recession level of manufacturing production", and when the exalted Anglophile New York Times writer, Mr. R. W. Apple, Junior, after eight and a half years in London, writes: Six years after Prime Minister Margaret Thatcher took office, proud old Britain … remains a nation in decline'", we should sit up and take note. It is always more important for a Government to pay attention to the judgment of others about what is happening and about what they are doing than to their own.

It is true that manufacturing production has decreased as a proportion of gross domestic product in many, if not most, of the developed countries, but in none has it declined in absolute terms, except in the United Kingdom, despite recent improvements. I find it positively frightening that United Kingdom manufacturing production was still lower, by 4.3 per cent., in 1984 than it was in 1975, whereas in Japan it was plus 61.4 per cent., in the United States plus 41.6 per cent., in West Germany plus 16 per cent., in Italy plus 22.1 per cent. and in the Netherlands plus 22.7 per cent.

My fear is not mollified by the growth in oil output. As has already been emphasised several times today, it is ephemeral. Nor am I mollified by soothing Treasury theories, to which reference has already been made by the right hon. and learned Member for Monklands, East (Mr. Smith), about the assumed effect on the value of the pound, and therefore exports, once oil declines in importance, for that is far too hypothetical for comfort. In any case, the theory will be nonsense unless manufacturing capacity is built up now.

Nor do I place overmuch faith in invisible exports saving our skins, for I concur with the chairman of the British Invisible Exports Council who told the House of Lords Select Committee that his organisation did not see this growth of [invisible surpluses] as being to a major extent a substitute for decline in general industrial activity. Let us do all in our power to develop the benefits and successes of our invisible trade, of banking, insurance, shipping and tourism. What my right hon. and learned Friend the Secretary of State for Trade and Industry said today was welcome, but we still must have a thriving and expanding industrial sector if we are to maintain our standard of living, our National Health Service, our education system—all facets and foundations of our national existence.

What is to be done? The Government alone cannot supply the answers. The House of Lords Select Committee emphasised that point. The Government alone cannot change national attitudes, but they can give a lead; nor alone can Government be responsible for changes in the education system, for the level of wage settlements, and therefore competitiveness, or for the quality, design and delivery of goods on time. However, the Government have a part to play. As the report says, they can take the initiative in formulating a national industrial policy which makes for faster growth in manufacturing. What is more, the Government can and must look at and learn from the experience of our leading competitors. Why is West Germany's surplus on trade in manufactured goods so enormous? Is it simply because, according to a National Institute study, labour productivity, at least in some comparable firms, is 63 per cent. higher than it is in the United Kingdom? Or is it partly due to the extent and type of support for industry that is given in West Germany? In 1981 it totalled no fewer than 113 billion deutschmarks. That is not an inconsiderable sum for an allegedly free market Government. But there are just as many lessons to be learnt from the French, the Italians, the Japanese and the United States. None of them operates a free market. All of them rig it, to the advantage of their country, their industry and their levels of employment; so we, too, must be a little less purist in our attitude to industry.

The Government should have as their objective that never again should a witness before a parliamentary Committee say, as did Sir Hector Laing to the Select Committee of the House of Lords: The present Government has in effect made a virtue of not having a vision of the future of British industry, and a positive policy of distancing the State from the industrial sector. Instead, the Government should react to what he said thereafter:

I think the Government should acknowledge that the nation does have an industrial problem in which it has a serious policy interest. A clear indication that the Government is ready to give a strong lead by, for example, launching an industrial priorities exercise, could prove very effective. Lastly, apart from raising the threshold, it seems to me to be totally inappropriate to make any across-the-board cuts in income tax, at least for the time being. Not only would it draw in imports, but it would mean that less money would be available for research and development—squeezed all too much already—for export promotion, for action that the Confederation of British Industry says is required now to stop further decay in Britain's infrastructure, and also for overseas aid and, thereby, the creation of new markets.

Furthermore, it would be politically misconceived at a time when, albeit wrongly, people believe that public services are being cut just when they are in great need of improvement and when the vast majority of people want them to be extended. In any case, I believe that to cut income tax now would be to send out the wrong signals to the British people.

The state of the nation may be much improved, but nothing should be done to imply that we can relax. If my constituents and my own constituency Conservative association are anything to go by, there is a conviction throughout the country that, for the time being, every spare penny should be aimed directly at reducing unemployment.

7.58 pm

Mr. Ron Leighton (Newham, North-East)

It is a great pleasure to follow the wise and constructive remarks of the hon. Member for Devizes (Mr. Morrison). The Government's attitude towards unemployment has undergone a number of changes. Six years ago they criticised the Labour Government and said that Labour was not working, although unemployment had then been falling for two years. Their 1979 election manifesto promised more genuine, new jobs. The Gracious Speech, on 15 May 1979, stated: My Government will give priority in economic policy … and create a climate in which commerce and industry can flourish … and increased employment in all parts of the United Kingdom."—[Official Report, 15 May 1979; Vol. 967, c. 48.] That was the prospectus when the monetarist experiment began. The opposite has happened.

There began immediately a dramatic, remorseless, unremitting and continual increase in the number of men and women without work, and now that number is higher than Britain has ever known. Then the Government's attitude changed. They said that the increase in unemployment was temporary—even a sign that Government policies were working, that a leaner, fitter Thatcherite economy would take off and produce jobs, but that it would take just a little time for the policies to work.

As the years went by, a number of optimistic statements were made, especially by such people as the present Chancellor—that unemployment had peaked and had reached a plateau and would now fall. It is now clear that all that was moonshine, that they did not know what they were talking about, that they were wrong, that monetarism was an utter failure and that the Government's policies had inflicted a disaster on Britain unparalleled in peacetime. They have completely destroyed large parts of British industry. As a result, between June 1979 and June 1983, 1,700,000 manufacturing jobs were lost. That unnecessary carnage and man-made disaster is the main cause of the present plague of unemployment.

Manufacturing output now is less than it was in 1979. We have gone backwards. This manufacturing disaster is not just the main cause of unemployment; it is the main reason why the Government feel that they can no longer afford the welfare state or finance the public services which our people need and which would create more jobs.

Confronted with the remorseless increase in the numbers out of work in each of the past six years, the Government's attitude changed again. Instead of repeating that the solution was around the corner, the Government, seeing that the solution was not going to come and that their policies had failed, gave up and washed their hands of the problem and, in a volte-face, declared, "Unemployment has nothing to do with us. We are only the Government." Of course, that is not what the Conservative party said at election time, but that is the new doctrine. Bankrupt of ideas, the Government say, "We can do nothing. Do not blame us; blame the unemployed."

In recent weeks, a gloss has been put on this. In the run-up to the next election, the presentation of this matter has been put in the hands of that great philosopher, original thinker and story-teller, Jeffrey Archer. His remedy and solution to the problem is to assure us that it does not exist—that the problem is an illusion. Leading a chorus, including Sir Michael Edwardes, Mr. Archer has callously defined the problem out of existence, mocking, belittling and making fun of the jobless. He has made the brilliant discovery, and assured the rest of the population, that the unemployed are not really unemployed at all—they are work-shy, malingerers, spongers, living happily on state benefits, or fraudulently working in the black economy. That is the new line being sedulously peddled.

Lord Young has joined in. We cannot question him in this House, but we can read his speeches. He referred to the annual labour force survey which found that 940,000 claiming benefit had not sought work in the previous week. We are expected to make the heroic assumption that they are not really unemployed. That is ludicrous.

Mr. Peter Lilley (St. Albans)

Will the hon. Gentleman give way?

Mr. Leighton

I ask the hon. Gentleman to forgive me. I shall not give way because we do not have much time.

If people live in depressed areas and are out of work for six months, one year or two years, is it any wonder that they become discouraged? However often they cycle around on their bikes, they learn that the jobs are not there. Those workers are being realistic. Older people, with few or redundant skills, fear that they will never get a job. The survey found that, if they were asked, "Have you looked for work in the previous month?", another 400,000 people would have to be added to the figures.

The most important finding of the survey is the confirmation of the vast number of hidden unemployed—those who are jobless and looking for work but who do not appear in the official figures because they cannot claim benefit. About 850,000—almost another 1 million—should be added to the figures. There are also the men over 60 who no longer have to register to claim benefit; there are those who have retired early because there is no work; and there are another 600,000 on special employment measures. Instead of, as mendacious, weasel-worded Conservative propagandists pretend, the official figures overstating the tragedy, waste and misery of unemployment, they grossly under-estimate the dimension and gravity of the evil that has been inflicted on us.

Mr. Lilley

rose—

Mr. Leighton

Any truthful and realistic measurement would give us a figure of about 5 million unemployed. It is a disgrace that the Government seek to obscure and distort the truth.

Another myth that the Government are stooping to spread is that the unemployed are not really unemployed because they are all hard at work in the black economy. Lord Young is again to the fore, declaring: By far the greatest number of long-term unemployed live in the south-east alongside employers who say they cannot get people. He says that the number of vacancies in the south-east is the highest in Britain. We are invited to believe that those people are not really working or looking for work but are engaged in the black economy. That is sheer confusion. Surely he must know that the explanation is perfectly straightforward—that there are more people living in the south-east. About a third of the United Kingdom's population and work force live there, yet only one fifth of those who have been out of work for more than one year. In other words, there is a larger percentage of the population and a smaller percentage of the long-term unemployed—the opposite of what Lord Young was trying to suggest.

There is more. Why are there vacancies in the southeast? That is explained in the October issue of Employment Gazette, published by Lord Young's Department. More than half the vacancies—a higher proportion than elsewhere—are due to skill shortages. There is just no one with the skills to do those jobs. This approach is an insult to every one of the unemployed. Surely the first thing the Government owe them is the truth.

We come to the much trumpeted 600,000 new jobs that have allegedly been created. What are the facts about the Government's record? Between December 1979 and March 1983 2,125,000 jobs were destroyed. Between March 1983 and June 1985, although the employment figures continued to rise, there was an increase of 260,000 employees. The latest tally is that there are 1,865,000 fewer people employed than when the Conservative party came to office.

How is it possible for there to be a modest increase in the number of employees without this reducing unemployment? Is this not a paradox? The explanation is that virtually all those employees are part-time. If they do just a couple of hours' work, they count as one unit. Many of those people are doing second jobs and therefore are counted twice. The 1984 labour force survey revealed that 450,000 people had second jobs and 250,000 had self-employed second jobs. The survey showed that this practice was growing. It accounts for a large part of the increase.

Another explanation of the seeming paradox is that these part-time jobs are taken by the hidden unemployed, many of them women. The Government have fallen victim to their own trick of excluding those people genuinely seeking work but who cannot claim benefits. They may exclude them but they still exist, demonstrating again that the Government woefully underestimate the extent of Britain's unemployment.

In addition, married women who are taking these part-time jobs are overwhelmingly the wives of employed husbands—not unemployed husbands—so the growth in the number of part-time female jobs has not helped the unemployed. In an attempt to reach the propagandist figure of 600,000, the Government have to refer to the classification "employed labour force" which includes the self-employed on whom the Government have no firm figures. They can only guess, and they make the huge assumption that since 1981 there has been an unprecedented increase of 393,000. There is no hard evidence for that. Instead, the Government make optimistic assumptions and projections which automatically add thousands to their weekly figures of the employed labour force. If these people really exist, does anyone else know about them? For example, will the Inland Revenue and national insurance branch confirm their existence from their records? Today, I tabled a written question to the Chancellor on this matter. I look forward to receiving some corroboration.

The Government insist that many of the unemployed are not really without work but are up to their necks in the black economy. Sir Michael Edwardes has taken the estimate of the size of the black economy, deduced that 2 million people might be involved, assumed that all of them are allegedly unemployed, and simply cut the jobless figure by 2 million. If the Government succeeded in making the whole of the country believe that myth, they would solve much of their problem. The truth is that all the evidence, the studies and empirical research have shown that employed people are more likely to be involved in the black economy than those who are unemployed. It is primarily employed people who are moonlighting. Some of them may sit on the Tory Benches.

The evidence shows that to participate in the black economy people need tools, materials, transport and a network of contacts. In other words, it is not the unemployed who are benefiting from the black economy, but those who are doing well already and who are moonlighting in addition.

For the future the headline figure for unemployment each month should now appear to go down because of the Government's special employment measures—an extra 100,000 people on the community programme and two years of YTS. What cannot be denied, whether by Jeffrey Archer, Sir Michael Edwardes or Lord Young, is that the Government have presided over a staggering increase in mass, multi-million, chronic long-term unemployment with all the waste, misery, heartache, despair and social breakdown that that brings.

For that, after six years, the Government stand condemned. We have unused capacity, unused abilities, unused people and unused capital available. We have enormous unsatisfied public and private needs. Is it beyond the wit and intelligence of man to put those together? That is the challenge before us. We eliminated unemployment in the years between 1939 and 1945 to produce weapons of war. Why can we not do the same to produce the necessities of peace? Things will never be well in Britain until we do. Things can never be well while the unemployed are shut out by our society.

To achieve a sense of one nation, one society, one community and a sense of cohesion, of national solidarity and of commonwealth for all our citizens, all must share, all must benefit, all must work and unemployment must be diminished. As this Government have not managed matters better after six years, it is time that they made way for a Government who will.

8.12 pm

Mr. Alistair Burt (Bury, North)

During last year's debate on the Gracious Speech I tried to draw the attention of the House to the problems of a northern industrial constituency where the pain of unemployment was evident, not so much through the pages of the newspapers as on my doorstep. I feel that it is time to address the problem once again, this time from the point of view of trade and industry which are the cornerstones upon which employment in my constituency depends.

The first point to make clear is that there has been a change of attitude by the Government over the past 12 months. We can refer to the speech made last night by my right hon. Friend the Prime Minister and to that made by my right hon. and learned Friend the Secretary of State in Blackpool recently, when he clearly and unmistakably put his finger on the problem of the divide between north and south. For the first time, perhaps, a member of the Government made it clear that he was not afraid to address the regional problems of changes in industry. Perhaps for too long the Government have tried not to address those problems. They thought that, in some way, if they mentioned the problems caused by the changes in industry which produced unemployment, by implication unemployment would be laid at their door. That was not my right hon. and learned Friend's attitude. The Government are not responsible for unemployment, but it is their responsibility to deal with the unemployment caused by the inevitable changes in this country's trade and industry.

For the two years before this change in attitude, colleagues in the north of England sometimes thought that they were crying in the wilderness about the problems of the north of England. I feel that that has changed. We now think that the Front Bench have heard something of what we have said.

My constituents have always been open to argument and persuasion. There is no doubt that my constituency has seen changes in its industry. When my father first came to Bury as a general practitioner just after the war he could tell when it was Bury holiday week because it was the first time in the year that he could see the town. At other times, smoke from all the chimneys would cover the town. Now, the clean air legislation and fewer chimneys have ensured the Bury's beauties can be seen all the time.

The people of Bury have recognised, therefore, as decade has followed decade, the inevitable changes in their industries. It was noticeable that the CBI's recent statement to the Select Committee of another place mentioned that Britain's manufacturing decline was not a sudden event but the product of several decades.

Because the people of my constituency are not fools, they are unlikely to be swayed by many of the Opposition arguments. They remember Labour's unemployment record—never leaving office with unemployment lower than it was when they began. They see the futility of high-spending policies that rely on money that cannot be produced and that must eventually hit them hard in their pockets or in their jobs. They have a long memory. They remember the country's near-bankruptcy, when it went to the IMF, in the years 1974 to 1979. They remember the large public sector cuts and the winter of discontent. Matters may have been difficult and bad in my constituency from time to time, but they are never so bad that my constituents would be tempted by the arguments advanced by the Opposition.

Over the past 12 months, Bury has seen some changes. We became an assisted area once again last November. That has resulted in a payment of £120,000 through regional selective assistance. We are also a textile closure area. I have a list of all the firms in Bury that have benefited over the past year from that scheme. Some £500,000 has been directed to Bury. It has resulted in about £3 million of investment. Those are the types of schemes that create jobs, which the Government have been bad at making much of. but they exist and are genuine. They mean jobs.

Bury, Ramsbottom and Tottington have turned the corner. There is now a need to talk up the area. It is easy to talk somewhere down. Private investment is returning to Bury. The amount of private investment coming in is plain to see when I visit industries in the town. The town centre of my constituency is a busy, bustling shopping centre on a Saturday morning. People are possibly attracted by the free parking policies of the Conservative-controlled council, something that is rare in greater Manchester. It brings in people from miles around. The retail and services sectors have compensated for the manufacturing decline.

The town has learned a hard lesson over the past two years. Management and work force realise that no longer are there two sides in industry. If this Administration's period of office since 1979 has done anything, it has spelled out to industry that management and work force must co-operate and work together. "Us" and "them" should now only mean "us" as British and "them" as foreign competition. For boardroom and workbenches the consequences of not co-operating are dire. That has been realised by all the better firms in my area.

The town's work force has responded sometimes by going for years with no wage increases and at other times low wage increases in manufacturing industries suffering difficulties. The work force has realised that it must play its part. Industries that survive can achieve much by management and work force coming together and realising that they have common problems.

That change is unlikely to have been achieved without the problems and difficulties that have been suffered since 1979, without industry coming to grips with the decline that has been occurring for several decades, as mentioned by the CBI in its evidence to the Select Committee of another place. The decline was not sudden. It has been coming for a long time. If they are asked carefully, most of our constituents know that. They are not, therefore, fooled by claims that the decline has been brought about by Conservative policies followed since 1979.

It would be unfair if I did not respond to the balance of the debate, which has been about our anxiety for British manufacturing. The retail and services sectors in my town have picked up immeasurably. Even so, by no stretch of the imagination will Bury become the pizza and hamburger capital of the north of England. It must always depend on certain elements of the manufacturing sector, and it is time to ensure that the Front Bench realises that the cries of manufacturing industry are not cries of "Wolf' but cries about views that are passionately held. The Government must listen to those cries.

My argument is that perhaps the economy is rather stronger than the Front Bench is prepared to recognise, and some options that may be open to the Government to help employment are not as risky as they think. There is no doubt that the fight against inflation must continue. Few industries, and only a few people on the shop floor, feel any different. However, it is necessary to review some of our policies and in bringing public spending from the darkness into the light we are finding the virtue of spending money on projects that really matter rather than wasting it.

There is certainly further work to do in manufacturing. The British Chamber of Commerce report entitled, "British Manufacture in Decline 1975–1984" showed only too clearly what has happened in recent years. The most recent Manchester chamber of commerce and industry survey showed, sadly, a decline in orders in the last quarter after an encouraging 12 months. Almost anybody one speaks to in manufacturing industry will mention the problems of unstable exchange rates and high interest rates. It is important for the Government to realise that they must take those factors into consideration. Despite the good things happening in the economy, those are two basics that they must address. They have addressed many things with confidence and certainty and produced many good things. To address those two things will be of great assistance and will improve no end the credibility of the Government in my constituency.

The textile industry is looking for a firm stance by Government on the multi-fibre arrangement. The paper industry is looking for a firm stance on energy prices. All industries are seeking to ensure that Government play no part in increasing any of their basic costs and therefore ruining their competitiveness. In the past 12 months the record on that has been good. I thank the Government for that, but the pressure must be kept up.

Some years ago the noble Lord Wilson of Rievaulx, on one of his many television programmes, urged people to keep a small check list of prices behind the clock. Perhaps he had to sell the clock or more likely the right hon. Member for Cardiff, South and Penarth (Mr. Callaghan) sold the clock to cover the debts that the noble Lord had left. I should like the Secretary of State for Trade and Industry to keep a small check list for industry behind his clock. He should see in his dreams a ball sitting on a football pitch about 10 yards out from the goalmouth. In his dreams he should rush towards it and, if he keeps his check list in mind, he will ensure that he is kicking the ball in the right direction and not hoofing it backwards towards his own goal.

First, my right hon. and learned Friend should ensure that costs to industry are continually reduced and that the Government play no part in putting up costs. Secondly. he should recognise that the future of high-tech is as much in the traditional manufacturing industries as in the high-tech industries themselves. He should be alert to the need for manufacturing industries to invest in capital projects in high tech. Not all the people who wish to have capital investment are covered by the Sullom Voe complex. Capital investment is needed by manufacturing industry to retain jobs and the use of high tech in traditional manufacturing industries has been of tremendous benefit in my own constituency.

Thirdly, my right hon. and learned Friend should ensure that the Government's current commitment to the improvement of the infrastructure continues through improvements in roads, railways, and communications. That is the lifeblood of future industry. Fourthly, and perhaps most important, he should accept the word of industry about unfair foreign competition rather more readily than his Department does at the moment. All too often there is a long period of checking to see whether the allegations made by domestic industry are true, and by the time that is done the boat has gone and unfair foreign competition has triumphed.

I was pleased at what my right hon. and learned Friend said today about making sure we were as competitive as our foreign rivals. It is essential that he makes sure that his Department is aware of that. We cannot afford to slip up too often. He mentioned changes in the aid and trade provision programme. Some of these problems have hit my own constituency in recent years and a significant change in the Government's attitude to that would be warmly welcomed. Fifthly, he must encourage a better attitude in education towards manufacturing industry. For too long industry and trade have been looked upon as dirty, and something that clever people were not supposed to go into. Schools and universities have not emphasised trade and industry as much as they should have done, and progress towards ensuring a change in that attitude is essential.

Lastly, my right hon. and learned Friend must ensure that industry has a real partnership with Government. Having an industrial strategy need not mean massive Government intervention. The Government should recognise that some of the most successful economies in the western world are in countries where, although free enterprise has been given a full rein, Government have kept a close check on what has gone on. They have not intervened as such, but Government and industry together have had a strategy and a vision for the future. There is no reason why we should not do that.

I should like to return to a comment I made at the start of my speech. Speaking at Blackpool the Secretary of State said that his priority was to see the great regional divide in our country narrowed as quickly as possible. He was not afraid to say what many people have thought for some time but have shied away from saying. It was a refreshing and bold statement and he knows full well he will get support from the Tory Benches as he puts into practice what he has preached so well. At last, we in the north know we have not been forgotten. The visit of his predecessor to the north of England at the start of the summer to see the new industry that was coming from the old, and the new challenges that the region was facing was a good step on the road to the Government's rehabilitation of the north of England.

If the Secretary of State can show himself as a robust defender of British industry, a fighter for fair competition in Europe and the wider world, a responsive listener about the concern of manufacturing industry, and an active partner in the common problems that beset manufacturing industry and the Government, he will have earned the thanks and support of Bury and us all.

8.26 pm

Mr. Tony Benn (Chesterfield)

I should like to talk about the problems we would face if we tried to restore full employment in Britain. It has not been touched on by any Government speaker because the restoration of full employment has never even been a Government objective. [An hon. Member: "Rubbish."] It is not a Government objective and no Minister has ever spoken about the restoration of full employment. The problem of unemployment is a wide one and goes well beyond an economic debate. There is the tragedy of young people in Liverpool who have not worked since they left school and have no prospect of work, and the women who are doing part-time low-paid jobs and who will be affected for the worse by the change in Sunday trading.

Unemployment has an impact on the amount of money available for the public services and on the amount of money available for local government. There is also the effect of unemployment on the ethnic communities. But there is another aspect of unemployment and that is the cost. It is very simply costed, because the Government spend £7.5 billion a year on unemployment pay. The loss of taxation and national insurance as a result of 4 million unemployed is another £12.5 billion. That is £20 billion basic, but then there is a loss of production by the people who are unemployed.

If we take it as a reasonable assumption that people in work could have at least 80 per cent. of their production matched by those out of work, we are talking about another £52 billion of production if we had full employment. With so much suffering and so much cost, why have this Government abandoned the objective of full employment?

When I first came into the House 35 years ago this month, the idea of maintaining full employment was a consensus point. Harold Macmillan has now appeared in the House of Lords commenting again, but of course all Conservative leaders—Churchill, Eden, right through to the noble Lord—accepted that the maintenance of full employment was one of the central points of policy. It is fair to say that the policies pursued by the consensus Governments that followed one another did not succeed. That is why I do not listen with enthusiasm to Harold Macmillan while others do.

That was the objective and now that objective has been dropped. The fact that it has been dropped is not an accident. I have never accepted the idea of what is sometimes called Thatcherism. I do not believe that it is about monetarism, and I do not believe that political decisions are taken by going into a room with a cold towel round one's head and looking at a calculator to find out what the PSBR will be. After looking at the experience of the consensus years, the Government decided that they needed the dole to discipline the work force. That is what it is about.

The hon. Member for Bury, North (Mr. Burt) said how happy people are and that they are all at one. What has happened is that the fear of unemployment has given management a power that it has not had since the 1920s or Victorian times.

Unemployment performs vital economic functions. It keeps wages down. If a worker goes to his employer and says, "I cannot live on the money," the employer will say that there are 4 million people on the dole who will be happy to do the job. For the same reason, unemployment weakens the unions. It undermines the public services, which are costly. The Government do not want to finance them. Unemployment justifies rate capping and, of course, it boosts profits. If wages are kept down, marvellous profit figures can be produced, and it is the profit figures that make the Cabinet confident, because they do not intend to go back to full employment and do not believe in doing so.

To restore full employment, it would be necessary, with 4 million unemployed and a five-year Parliament, to create 1 million new jobs a year. That is what it would take to get back to what was the consensus of all parties in Parliament for 40 years.

I take up the point made by my hon. Friend the Member for Newham, North-East (Mr. Leighton). Twice in my lifetime we have created 1 million new jobs a year, all funded by public expenditure. The first time was from 1938 to 1942. It was public expenditure on rearmament at the end of the 1930s that gave us 1 million new jobs a year. That was when the PSBR was 27 per cent. of the national output—10 times what it is today. If people are taken off the dole, put into armaments factories and taxed on their earnings, the project finances itself. It was done by very strong central direction and by public expenditure.

I do not need to stress to the House that rearmament was not done by private expenditure. Granny did not buy a Bren gun, mother did not have a tank, and father did not buy a Spitfire with an A registration. It was all done by the Government. People say that Government cannot create jobs. Of course they can, if they wish to do so.

The second example was from 1945 to 1948, when we brought 3 million service men out of the armed forces and put them back to work. It was the biggest example of defence conversion that there has ever been. Compared with it, the problems of defence conversion that an incoming Labour Government would face would be simple. In Bristol, my old constituency, the Bristol Aeroplane Company, as it used to be, stopped sending out trucks with Blenheim bombers and a few months later it was producing prefabricated houses. That was done by having a central control over the economy. The powers were there and the objective was clear. The powers were used. If we want to restore full employment, it will not be done by tinkering about with the PSBR.

I did not hear the whole of the speech of the right hon. Member for Glasgow, Hillhead (Mr. Jenkins), but anyone who thinks that joining the European monetary system and going back to an incomes policy will get us back to full employment is absolutely wrong, because those actions are simply tinkering on the margin. If we want to get back to full employment—the objective that we should set ourselves in Britain, for a range of social, political and economic reasons—we shall have to do more than that. We must re-equip and re-establish British manufacturing industry by direct methods. It is no good speaking about industry as if it is an optional extra, assuming that if it loses it can be closed down, as if manufacturing is like white side-walled tyres—one has it if one can afford it. We have got to have industry.

One of the reasons why the Japanese are so successful is that they look ahead for 10 or 20 years. Any sensible planning of a modern society would include the planning of investment in high technology industries and in the maintenance of what are now called the smokestack industries, mainly to justify closing them.

Next, we would have to refurbish and develop the infrastructure. I am often amazed when I see industrialists whose whole market depends on public expenditure calling for cuts in public expenditure. Hon. Members will know the old joke in the construction industry that sewage is their bread and butter. When sewers are renewed and when bridges are built, there are jobs for the construction industry, and we need a modern infrastructure, but that would involve public expenditure.

Next, we would have to expand the public services. If it is said that now that we have the microchip there is no demand, I could take any Member of this House, as other hon. Members could, to hundreds of houses where there are old people. In the modern jargon, they are now called the psycho-geriatrics. They are simply a bit old and confused. They need homes to live in; they need 24-hours-a-day care. To meet their needs would create jobs. We need day centres. We need creches so that women can be released to go to work or to college. No one can persuade me that Britain is not full of things that need to be done. Just as rearmament brought us back to full employment, so the expansion of the public services can bring us back to full employment.

If technology allows us to achieve the necessary national output without seven days a week of backbreaking work, let us have earlier retirement and a shorter working week. Let us raise the school-leaving age, and enable adults to go in and out of education. If we wish to do those things, we shall have to plan our trade, for if we reflate the economy when we have not a manufacturing base we shall be flooded, not with imports of the raw materials or engineering products which will be needed, but with consumer products.

If people had to wait a little longer for a Honda but could get a hip operation a bit sooner, what would be wrong with that? That is the sort of priority we would have to set. Unemployment is a form of import control. An unemployed person cannot afford a Japanese video, French wine or American tobacco. The Government have import controls, but they apply only to the unemployed, the low-paid and the people living on supplementary benefits.

We would have to stop the export of capital. Since the Government came to power, for every family of four, £4,300 has left Britain. The Chancellor of the Exchequer says that we must tighten our belts because that is the way to solve the problem. But if a worker tightens his belt, the employer sends the money to South Africa, where the wages are lower still, because Botha's police will not allow the unions to organise. The export of capital could not continue if we wished to solve the unemployment problem.

We would also have to ease the arms burden. I have already mentioned Japan, but people do not often talk openly of the fact that the Japanese spend only 1 per cent. of a much bigger national income on defence. We spend 6 per cent. Why are the shops in Britain full of Japanese videos, cameras and motor cycles? It is because that is what the Japanese produce. Our Government's hopes are based on tourism and selling battlefield communications systems to the Americans. We have abandoned the serious intent of being a major manufacturing nation. That policy would have to change.

The Secretary of State for Defence comes to every household every week and takes £24 off a family of four to finance the defence burden.

We would have to deal with the treaty of Rome. We could not solve any of the problems under a constitution which makes it illegal to intervene with market forces.

We would have to have a major expansion of public responsibility and control over our economy.

I do not believe that anything less than the measures I have outlined would bring us anywhere near to the achievement of full employment. The Government do not want it. The wets could not get it, although they tried. The SDP-Liberal alliance thinks that if we squeeze the wages in Whitehall, join the European monetary system and have a federal Europe, full employment will come automatically.

The Mitterrand dash for growth came a cropper because he did not really deal with the power structure. His economy zoomed up and fell flat. Mitterrand's policy failed because, apart from anything else, he could not escape from the treaty of Rome. The treaty of Rome and the way in which it operated brought down the French economy.

To achieve full employment, we need fundamental changes in our policy and in our thinking. If this House is to be a forum for the nation, one of its functions is to tell the people outside that we cannot have full employment simply by tinkering with the economy. If we want full employment again, we have to set the objective and take the powers to bring it about. We must have the courage to implement it. That is what the choice will be when the general election comes. It will not be much influenced by whether there are a few tax cuts, purchased by selling off public assets. The choice will be a basic one. I have a feeling that, after their experience with this Government, the British people will be ready to take it.

8.39 pm

Mr. David Knox (Staffordshire, Moorlands)

Because of the shortage of time, I hope that the right hon. Member for Chesterfield (Mr. Benn) does not mind if I do not take up the points he made, tempting as that is. He may be surprised to hear that I am concerned about a return to full employment, but my route to that objective would be different from the one he has been talking about.

My right hon. and learned Friend the Secretary of State for Trade and Industry and my right hon. Friend the Chancellor of the Exchequer both painted a bullish picture of the British economy when they spoke earlier. That may have impressed the City and some of the national press. I doubt if they impressed many others, particularly those living in the north and those engaged in manufacturing industry, far less those who are unemployed.

It is very difficult to accept that the economy is prospering when over 3 million are out of work. It will continue to be difficult to accept that all is going well until such time as unemployment starts to fall, falls substantially and looks like continuing to fall. I see no sign of that at present.

As an economic problem, unemployment involves a scandalous waste of resources, lost production and lost national wealth. As a social problem, unemployment is divisive and undoubtedly contributes to social unrest. That is why unemployment is the principal problem facing the Government in the current Session of Parliament, as it has been for several years. Against that problem the proposed legislative measures of the Gracious Speech pale into insignificance.

For 30 years immediately following the war, we had full employment. Over the last 11 years, under both Labour and Conservative Governments, we have seen unemployment rise from under 500,000 to its present unacceptable level. Some choose to blame the policies that were pursued in the 30 years immediately after the war. Others try to heap all the blame on the Government headed by the Earl of Stockton, even though it is 22 years since he ceased to be Prime Minister. I think both those are absurd propositions. It is much more likely that the increase in unemployment in the last 11 years has been because of the policies pursued during those years. In a word, the increase in unemployment since 1974 has come about because of the lack of economic stability abroad and because of the pursuit of monetarist policies at home, with their consequent demand deflationary effects.

If we are to make any impact on the level of unemployment—that should be our highest national objective—we must try to stabilise the international economic environment in which we operate as far as that is possible and we must raise the level of demand in our domestic economy. I regret that there is no mention of either in the Gracious Speech.

In the first 25 years after the war we had relative stability in exchange rates under the terms of the Bretton Woods agreement. It provided the countries of the world with a stable international economic order in which their economies could expand. It was particularly beneficial to a country like Britain which has to export a high proportion of its national income to pay for necessary raw materials and foodstuffs. In the early 1970s unfortunately, Bretton Woods broke down, with disastrous results.

In recent years currencies have fluctuated violently. We have seen the value of the pound rising and falling by terrifying amounts over comparatively short periods, with consequential disruption to our domestic economy. At one moment that has made our exports much too dear; at another it has made them too cheap. Again and again when I have visited manufacturing firms in my constituency I have been told of the damage that has been done to their trade by constant changes in the value of the pound.

Although high exchange rates can be damaging to manufacturing industry, it is the constant changes in the exchange rate that do most damage. That may not be perceived by the Treasury as a problem. It may not be perceived by the City of London as a problem, because money can be made in the City from currency fluctuations, but it is a problem for those whose primary functions are to design, manufacture and sell products and who rarely have an interest in high finance. The present position is therefore very unsatisfactory.

I do not believe that it is possible to negotiate a new Bretton Woods now. It should be an objective in the long term but this country can do something to help itself immediately, and that is, to join the exchange rate mechanism of the European monetary system. That would provide us with much greater stability for 60 per cent. of our trade than we enjoy now. Once we were full members of the European monetary system we could start to play a part through the European community in trying to negotiate with the United States and Japan an even wider area of international stability. Such stability can only be in the interests of this country. I hope, therefore, that the omission of any reference to the EMS in the Gracious Speech does not mean that another year will be allowed to pass before we join the exchange rate mechanism.

Full membership of the EMS would not in itself result in a return to full employment although it would help. A substantial increase in the level of demand in the British domestic economy would be required to take up the slack and bring people back into jobs. Without an increase in demand there can be no significant increase in employment. Without an increase in demand, the work that my right hon. and noble Friend the Secretary of State for Employment and my right hon. and learned Friend the Paymaster General are doing will have little or no effect on the level of employment. The jobs that their policies create will merely replace jobs that disappear elsewhere. If the public, individually or collectively, do not have the means to buy more goods and services, there will be no demand for more goods and services and consequently no demand for extra labour to produce them.

Nor will demand rise automatically. The Government and only the Government can do anything about the general level of demand in the economy. They can raise demand by reducing taxation whilst not decreasing public expenditure, or by increasing public expenditure whilst not increasing taxation, or by a mixture of the two. Put more simply, the Government can increase demand by increasing the public sector borrowing requirement. It is nonsense to suggest that that would be inflationary, for there is plenty of spare capacity in the economy.

Now that my right hon. Friend the Chancellor of the Exchequer has discarded that symbol of monetarism, M3, I hope that his next step will be to discard the medium-term financial strategy. If that is asking too much, perhaps he could take a more relaxed attitude towards it. If he does not, there can be no hope of a significant reduction in unemployment. We need reduced taxation to encourage increased private consumption and we need increased Government expenditure, particularly capital expenditure. While it would be foolish to embark on an immediately massive reflation, we should be aiming at a growth rate of 5 to 6 per cent. a year, generated by expansionist Government economic policies. Unless we get something of that order we shall not make a real impact on unemployment.

There is urgency about taking such action for balance of payments reasons. In the years ahead North sea oil will have a diminishing effect on the balance of payments. The longer we leave off the necessary expansion of the economy to reduce unemployment the more risky it becomes in balance of payments terms. So for every reason urgent action is required.

There is one final point that I should like to make. I made it in the debate on the Gracious Speech in 1983 and again in the debate on the Gracious Speech last year. At the last general election, the electorate gave the Government the benefit of the doubt over unemployment. They were not satisfied with the Government's performance, but they did not believe that either of the other two parties would do any better. At the next general election, if unemployment is not falling, there is a great danger that the British people will conclude that the Government have had their chance and that the time has come to give one of the other parties a chance, even if they are not totally convinced that that other party can do any better. I would regret that as much as any of my right hon. and hon. Friends.

8.50 pm

Mr. Dick Douglas (Dunfermline, West)

I do not propose to comment generally on the speech of the hon. Member for Staffordshire, Moorlands (Mr. Knox) because time is short. His opposition to the Government's policy made it difficult to see why he should vote against our amendment.

We are having an artificial debate because we have had the Chancellor's autumn statement and tomorrow it is proposed that we debate the economy, as if a debate on industry and employment was remote and detached from a debate on the economy, and as if macro-economic policy was remote and distant from micro-economic policy.

I come from a constituency with a varied industrial base. I should like to refer to the mining industry. Last year, when we were in the middle of the mining dispute, there was harsh and brutal management in the Scottish coalfields. The managers dismissed more than 200 Scottish miners because of their activities in the dispute. Fortunately, there has been a change in personnel in the National Coal Board in Scotland and there have been moves to re-engage some of the miners who were branded as criminals by the then director. I would not place too much on the hope, but I hope that the process is accelerated and that all the 200 miners dismissed during the dispute return to work. The harshness of industrial management as exhibited by the coal board at that time should not be perpetuated into the future. I take the point made by my right hon. Friend the Member for Chesterfield (Mr. Benn). It is not right for the Government to use unemployment and harsh industrial techniques as threats against the labour force.

Several hon. Members have referred to the importance of oil in the economy. I shall try to set my remarks in the context of the Government's view of oil. The Brown Book of 1985 gave the following figures. The total disposals of United Kingdom continental shelf oil in 1984 amounted to 125 million tonnes and 45.4 million tonnes were delivered to United Kingdom refineries, constituting 60 per cent. of the total delivery of United Kingdom refineries. A total of 24.2 million tonnes of foreign crude was imported during the year, compared with exports of United Kingdom continental shelf crude of 77 million tonnes.

Oil has been used not so that we get a balanced fuel or energy policy but simply to provide Government revenues and, of course, to bolster the balance of payments. There is no other reason for our producing oil in such excessive amounts. The Government have abandoned any thought of a depletion policy.

Let us examine other economies with no domestic production of oil such as West Germany and Japan and how they took the shocks of 1974 and 1979. There was an impact on their balance of payments, but their strategy was different from that pursued by Governments of both political colours in this country. The Labour Government borrowed against potential oil production. The Conservative Government have used oil to bolster the balance of payments. However, West Germany and Japan did not narrow their industrial manufacturing base but broadened and deepened it. If anyone has doubts about that, he should read the report of the Select Committee on Overseas Trade in another place, which said succinctly in paragraph 23: The ten countries with which the United Kingdom had either the largest surpluses or the largest deficits in 1984 are shcwn in Table 2.7. Generally speaking, with one or two exceptions, surpluses have been achieved with less developed countries and deficits incurred in more developed countries. It is perhaps worth noting that the worst trade balances in manufactures are with West Germany, Japan and Italy, and that the worst of all is with West Germany. West Germany is a nation without the benefit of oil.

I do not wholly share some of the views expressed by Opposition Members. I do not think that there will be a dramatic turn-round in production. The Government's figures are reasonably secure. There will be a small slack, but the problem is like a drug addict coming out of his addiction. How should we tackle it in balance of payments and exchange terms? We must also consider what is happening to other aspects of the international oil market.

We are in a farcical position. The production of Norway and ourselves has exceeded that of the Saudis, and on occasion ours has been more than that of the Saudis. If we move to cheap oil, nations such as Germany and Japan, having secured their industrial base, will get the benefit. If oil becomes cheaper, production in the North sea will be adversely affected, as well as Government revenues. We are in a Catch 22 situation. That would be extremely damaging particularly because we have adopted a policy of letting our manufacturing industry go. We could not recover overnight.

If we had used the revenues from North sea oil to enhance our productive capacity in future, one area of prime concern would have been the allocation of resources to research and development expenditure in the United Kingdom. Have we done that? There is no evidence of it whatsoever. I quote from the presidential address made to the British Association in August of this year by Sir Hans Kornberg: During the year 1983/84 the five Research Councils spent just over £480 million and the UGC £551 million. If one assumes that roughly one-third of the UGC's expenditure was for the support of research, the total expenditure for research from the DES was roughly £664 million. That is DES research expenditure which should be financing industrial innovation in the future. We did that for education-based research. But what did we spend on research and development for the Ministry of Defence? We spent £2,000 million on defence-related research and development. That is twisting and tilting the economy in terms of our expenditure in a fashion that I believe to be wrong and, in the long run, harmful to our economy.

I turn briefly to the way in which Governments deal with Select Committee reports. We have heard the disparaging remarks made by Government Ministers about the report of a Select Committee of the House of Lords. I represent a constituency which has a large number of people employed in dockyards and I am wondering how Conservative Members will vote when the Bill which has been announced today is given a Second Reading.

Two Committees looked at the proposals relating to dockyards, the Public Accounts Committee and the Select Committee on Defence. They were not filled with Labour Back Benchers, of an extreme Left-wing persuasion or otherwise, but were dominated by Conservatives. Both Committees argued that the Government had failed to prove their case in relation to their objective of commercialisation for the dockyards. Did the Government halt? A wise and prudent manger, faced with this searching examination, would have cried, "Halt. I may have got it wrong", but not the Secretary of State for Defence. He goes on and imperils both industrial relations in the dockyards and the capability of those dockyards, which have served the Navy well for a long time.

These policies should be opposed by a prudent House of Commons willing to evaluate the arguments. The trouble with this Government, however, is that they are not persuaded by arguments. If I were to ask the Secretary of State why he is going ahead with this foolhardy policy on the dockyards, he would say that he is doing it from a doctrinaire approach. It is not something that he can prove in terms of savings, employment, service to the Navy or strategic importance. It is something that he considers desirable and so it has to be conceded and we must go on with it. I hope that Conservative Members will weigh these points about the dockyards extremely carefully.

Last night I switched on the television in time to hear the Prime Minister speaking at the Mansion house. From the way that she was dressed, I thought for a minute that we had Flora Robson in colour, but it was not so. She talked about jobs being important and about creating employment because it conferred a feeling of belonging. She accepts that argument, as would everyone in the House, but she does not accept the obverse.

The most important point about having some 3 million to 4 million unemployed is the feeling of alienation that it engenders. I ask Conservative Members to acknowledge that the cost of being unemployed is a feeling of not belonging, a feeling of alienation, of being apart. Neither this Government nor any other has the right to concentrate attention on tax cuts which will benefit the 85 per cent. in employment and forget the 15 per cent. who are alienated by unemployment.

If Conservative Members who have made so many critical speeches of the Government really examined our amendment, they would have the courage of their convictions and vote for it.

9.2 pm

Mr. John Stokes (Halesowen and Stourbridge)

Hon. Members will recall last Wednesday's brilliant autumn weather when the Queen opened Parliament in such splendour. Shortly afterwards, in the debate, I noted that the hon. Member for Falkirk, West (Mr. Canavan), after making some fairly unpleasing remarks about having to go to the House of Lords to hear the Gracious Speech, said that we on the Government side of the House knew nothing of real people—people, he said, outside the House. Immediately after the Gracious Speech, I went outside the House and joined the vast and friendly throng in the street. Just in front of me was a very rough-looking man. As the Queen passed in her coach, he gave out such a cheer that it almost burst my eardrums. That, I believe, was the voice of the real people in this country, which is so different from the figment of the hon. Gentleman's imagination. In spite of our differences, we must never forget the essential, underlying unity of this kingdom.

I welcome many of the proposals in the Gracious Speech. I am sorry that once again there appears to be too many Bills clogging our time and over-emphasising our law-making capacity, to the detriment of our duty to check the Executive and ensure as far as possible that the Government govern well and spend taxpayers' money wisely.

The Government have a difficult political choice in deciding whether to continue with their necessary reforms —such as more privatising, which which I thoroughly agree—or to rein back on some of those measures for fear of giving the public indigestion. The British people will be led but not driven.

In the main, the public still support the chief planks of the Government's programme, particularly on subjects such as law and order, defence and making the trade unions more democratic. However, the Government have proposed other measures—such as the new Sunday trading laws—which, I fear, may not be so popular.

There is great public concern about law and order following the appalling riots in our cities; and the public order legislation will be widely welcomed. The most vulnerable people in society—the old and infirm, children and young women—need the most protection. People expect severe sentences for all crimes of violence, such as assault, rape and mugging, as well as rioting, arson and throwing petrol bombs. They also expect the laws of England to be applied impartially to black, brown and white people. They expect the police to have all the necessary equipment to deal with riots.

In respect of all those matters, the nation is facing a moral crisis. Yesterday the Lord Chancellor said that this country was falling into moral decay and he warned that that could lead to anarchy and tyranny. There are also dreadful statistics for divorces, broken marriages and one-parent families.

I sometimes wish that the Government would give more of a moral lead. The protection of the family, for instance, is vital for the stability of society. I hope that the Government will come down firmly against embryo research.

In am not a fanatic about Sunday trading. We cannot make people good by Act of Parliament. In countries where churchgoing is greater than it is here—for example, in Scotland or France—there has been Sunday trading for many years. I realise also the anomalies in the present laws which should be put right.

Nevertheless, I do not want Sunday to be as any other day. There is enough irreligion now not to give it any further encouragement. Nor do I want the Government to appear money-grubbing and wholly commercial in their attitude to the matter. Unless the new laws are strictly limited in their effect, I shall not be able to support them. The Government should support churchgoing and certainly not do anything to make it more difficult. Also, I should be sorry to see a head-on clash with the churches on this issue.

I welcome the broadening of the powers of the building societies, setting them out in an appropriate framework. They will benefit from being able to offer more services and compete more equally with other retail institutions. Consumers will benefit from the wider range of services which they will be able to give.

I also welcome the laws proposed against the drug traffic and drug-taking, which is such an appalling menace to society and particularly to our young people.

This debate is mainly about industry and employment. As I represent a constituency in the west midlands, which used to be the heart of the nation's industrial effort, I have seen great decline and rising unemployment in the last few years. However, the picture is not as black as some Opposition Members have painted it. For instance, there is a vast improvement in labour relations, no doubt following the defeat of Scargillism last year. Industrialists and people on the shop floor in my area seldom complain. Few of them have alternative policies to suggest to those at present being pursued.

Unfortunately, the Government still give the impression of not being as interested in manufacturing industry as they should be. Many people believe that industry is not recruiting the best men and that salaries are woefully low compared with those paid in the City of London and the professions. The Government must take greater care to explain their policies more fully in words that ordinary people can easily understand. Too often, the Government lose their case by default. For instance, people believe that there have been cuts in public expenditure, when in some cases it has been increased.

The steady reduction in the inflation rate is widely welcomed in my constituency, especially among pensioners. Unemployment is levelling out and will probably go down. There is a welcome increase in job vacancies and new jobs being created. I welcome the vigour shown by my right hon. and noble Friend Lord Young in his new post and the new initiatives to deal with unemployment. I am especially pleased that the armed forces will do more training. They are probably the best trainers in the country.

The Queen's Speech does not mention immigration— a subject rarely debated in the House. We should be honest and realise that immigrants and the minority English communities in areas of high immigration wonder what the future will be for the next generation when immigrants will form perhaps one third of the total population. That serious matter must be considered now so that immigrants and English people can have confidence in their future.

The Gracious Speech sounded a confident note on foreign affairs. For the first time for many years there is a slight possibility that some form of arms control, if not disarmament, will be possible among the great powers.

On my visits abroad last year, I found that Britain and our Prime Minister were deeply respected. Our embassies do a splendid job in many capital cities and especially on the commercial side where great help is given to British business men. I hope that there will be no reduction in the Foreign Office Vote or in the overseas service of the BBC.

In general, I do not believe that the picture in Britain is anything like as black as it has been painted by the Opposition. People abroad still look up enormously to this country, to our form of government, our tolerance, our way of life, our traditions and to so much for which we should be thankful. We should remember that and count our blessings. The Government must remain steady on their course. If they do so, they will deserve the support of all people of good will.

9.14 pm

Mr. Stan Crowther (Rotherham)

Listening to the statistics trotted out by the Secretary of State for Trade and Industry and the Chancellor of the Exchequer to prove that some great recovery is taking place, I was irresistibly reminded of the famous phrase quoted by a previous Conservative Prime Minister: lies, damned lies and statistics. I am sure that the Ministers were not telling lies, but they were manipulating statistics to prove the existence of a non-existent recovery.

I was pleased that my right hon. and learned Friend the Member for Monklands, East (Mr. Smith) emphasised the importance of the steel industry. Steelmaking is the best barometer of manufacturing industry. All manufacturers use steel—as a raw material, as machinery or as both. If, as the Government say, there is a marvellous recovery, why did a representative of the British Steel Corporation tell the Select Committee on Trade and Industry as recently as June—we were told this last year and the year before—that the corporation can foresee no increase in the demand for steel in Britain? That is why the corporation wishes to close more plants after those they have already announced. Tinsley park works in Sheffield will close in three weeks' time, causing hundreds more of my constituents to lose their jobs. If there is a recovery, why is there no foreseeable increase in the demand for steel? That simple question must be answered.

We are talking about the new high-productivity, slimline steel industry—an industry that has lost at least 120,000 jobs during the past five years, an industry in which all the alleged overmanning has been ruthlessly cut out and in which all the so-called excess capacity has already been closed. The corporation is saying that, despite the high productivity and the fact that the industry has become competitive, there will be no increase in demand. Do Ministers know what they are talking about? Do they know what is happening in British industry? Only a couple of weeks ago at Question Time, the Minister of State assured me that rumours about closures and redundancies in my constituency were "pure speculation". However, while he was telling me that, the BSC was busily announcing another substantial batch of redundancies at the Rotherham works. It is his job to know what is happening and my job to try to find out, but he certainly did not know that. Do Ministers really believe what they are telling us about a recovery? They should visit south Yorkshire to see the devastation for themselves. Let them visit the industrial wastelands, the desolate empty factories, the shut-down mills and melting shops in what used to be the biggest centre of steelmaking and heavy engineering in the world. It is heart-breaking to see that.

I wish that Ministers would explain to my constituents, who are being made redundant in their hundreds every month, why they are losing their jobs when we are having such a marvellous recovery. They are entitled to such an explanation. I wish they would explain to the youngsters leaving school this year why they have no hope of obtaining proper jobs.

Several hon. Members have mentioned small businesses, whose development I strongly support. I was involved in that area before I entered the House. But it would take many small businesses to create the 20,000 jobs that we need in Rotherham today, not in five or 10 years' time—[Interruption.] Ministers should do something about it instead of sitting on the Front Bench laughing and chortling. It is a serious matter in my constituency.

The overriding need today is to get our wealth-creating manufacturing industry back on its feet in our great industrial regions. Those areas created the foundations of our national prosperity and, given half a chance, they would do so again.

9.20 pm

Mr. John Prescott (Kingston upon Hull, East)

I apologise to hon. Members if I was not here for part of the debate, although I have attended the greater part of it.

The debate has reflected what is apparently the new tone in the unemployment debate—public expenditure is now "in". After the Prime Minister's speech last night, it appears that public expenditure can create jobs and is actually planned to achieve that objective. A good example of that principle was revealed in the Paymaster General's speech, which presented a number of proposals specifically designed to reduce the level of unemployment and to provide more employment measures although they are not what the Opposition would call real jobs.

Following the exchanges in the House earlier this evening, I examined the autumn statement, which I see claims: from the employment measures, the trend in unemployment should continue to be more favourable than over the last two years. As I suggested earlier, the autumn statement says that 100,000 on community schemes and possibly 100,000 on YTS will reduce unemployment by perhaps 250,000. That is a fiddling of the figures to show that, by election time, the unemployment figures have gone down.

I welcome, and will not knock, the fact that the Government are convinced that more public expenditure can reduce unemployment. That is the heart of the argument and the alternative put forward by the Opposition. Hon. Members have tonight proposed several choices which the Government could pursue to create more employment. Both sides of the House have agreed that, while we may be critical of relying on tourism to provide jobs—I welcome jobs wherever they come from —we should not encourage tourism at the expense of our manufacturing base, which continues to decline.

It is not satisfactory for Ministers to talk about record levels of investment when it is the level of investment in manufacturing that is important. The important area is that of manufacture and the creation of wealth. A study of investment in manufacturing reveals that there is a long way to go before either output or investment figures reach the 1979 level. The Secretary of State for Trade and Industry should be made aware of that and I address his attention to it.

The right hon. Member for Chesham and Amersham (Sir I. Gilmour) made a sound and important point about growth. We cannot continue to rely on growth alone to create full employment. In the past two decades, each increase in growth has produced fewer and fewer jobs. Growth now has a negative effect upon jobs. We simply cannot rely on growth to provide full employment. A mixture of public and private investment is crucial if the Government want to reduce unemployment.

I welcome the Paymaster General to his first debate on employment in his new capacity, but I strongly deplore the fact that the Secretary of State for Employment should be in another place—[Interruption.] are hon. Members telling me that he is observing?—particularly as he is the architect of most of the current policies, which involve low pay, part-time work, and an awful lot of low-quality training in manpower schemes. The Secretary of State for Employment is more responsible for Government policy than the Paymaster General and he should answer for the Government.

Mr. Baldry

rose—

Mr. Prescott

I have not time to give way.

I hope that the Secretary of State will not lecture us about democracy in the trade unions. Before he does that he should seek election himself, be elected and come to the House.

Nevertheless, I welcome the Paymaster General, who has, in all his jobs so far, been the best man rather than the groom. I believe that he is concerned about facts and about the argument. As the debate about unemployment is about to take place, will he agree the basic common facts so that the debate may be about truth and the facts rather than a contest on the issue? That has often been the case in the House and elsewhere, when the monthly unemployment figures are announced.

I have been to the Library to discover the real level of unemployment. We know that 3.27 million people are registered as unemployed, but that is the Government's first fiddle. On the basis of the Labour Government's criteria, about 3.6 million people would be registered as unemployed. I am sure that we can agree on the figures produced by the Library calculated on the basis of the labour force survey. If we add to the total the number of unemployed males aged 60 to 64, the number of unemployed non-claimants, those who have temporarily stopped work and the effects of special employment and training schemes, the total comes to 4.75 million looking for work. If we add to that figure the 250,000 that the Minister is fiddling today, unemployment stands at 5 million on the basis of the Government's own figures and the labour force survey. I do not want to argue about that —[Interruption.] Provided that we can accept the Library's figures, based on the labour force survey, unemployment runs at 4.75 million. I am quite prepared to accept 3 million, which is higher than we had in the 1930s. At least we can agree on the number of people looking for work on the Department's figures.

Mr. David Maclean (Penrith and The Border)

Will the hon. Gentleman give way?

Mr. Prescott

I cannot—I do not have the time.

I hope that the Paymaster General also agrees that unemployment in Britain has been higher than in Europe. The OECD figures show that. If I had the time, I could refer to the relevant tables. Britain's unemployment average has always been the average of European OECD countries—until 1979. As for the percentage increase in unemployment in Britain, the Library, using OECD figures says: Had the United Kingdom unemployment rate worsened at the same rate as the OECD average, the current unemployment rate would be approximately 1 million lower than it actually is. Can we agree, therefore, that our unemployment is higher than in our competitor countries in Europe? The evidence is clear.

Previous Secretaries of State have often said that our working population represents a larger proportion of the total than in the rest of Europe. It has always been so. Since 1979, however, that proportion has fallen more than the average in Europe. It is therefore not correct for the Government to claim that they have been successful. Indeed, the deterioration has been accelerated by the Government's policies.

The Opposition argue that most of the changes have been brought about by the Government's policies. An OECD report compares the public expenditure pattern in Britain with that in European OECD countries. The cuts in transport, hospitals and roads have been much deeper here than in Europe. That is given as one reason why unemployment here is higher. We should agree, therefore, that Government policy has reduced inflation and consequently thrown many more people out of work. For every 1 per cent. fall in inflation, three quarters of a million people have been thrown on the dole. The price of the Government's anti-inflation policy has been mass unemployment.

The charge against the Government is that they have deliberately brought about mass unemployment by choosing to pursue monetary economic policies. Unemployment is therefore higher than elsewhere, it results from Government policy and it is a deliberate part of policy.

A committee of experts in the International Labour Organisation has produced a white paper calling on all ILO countries to agree that full employment must be a major aspect of Government policy. The Government are refusing to ratify that recommendation. The committee of experts has examined the Government's policy and it says: the Committee … is bound to stress that, even in an economic strategy which regards (stable prices and competitiveness) as the ultimate aim, an active employment policy must, in the terms of the Convention … be pursued as a major goal. The experts said:

the Government's present policy had not been able to give satisfactory results in this respect; the Conference considered that it was the Government which had the primary responsibility in this area". Even the experts from other countries who have examined Britain's economic policy have agreed that mass unemployment has arisen directly from the Government's policy and their consequent decisions, for whatever reason. It is directly induced mass unemployment, which begs the question whether the Government deliberately intend to achieve that end.

If the committee of experts in the ILO was looking for comfort from the Queen's Speech, all it can see is further notice that the Government intend to abrogate their international obligations and conventions. They see the abrogating of the Truck Acts and wages council legislation. Britain is the only country among 92 to seek to solve its unemployment by attacking the low paid in wages council industries. That is the reality of the Queen's Speech and what the Government are now saying is the solution to unemployment.

When we look at the Truck Acts and the reform of the wages councils, which will be opposed bitterly by the Opposition, we need to understand precisely what the Government are about to do, and why. We must begin to understand the relevance of mass unemployment from their point of view and the way that they are out to discipline the labour market and workers, particularly in low-paid jobs.

By abolishing the Truck Acts and reforming the wages councils, the Government are introducing a 19th-century solution. They are returning to Victorian values, to the sweated industries of Britain in the 19th century. They wish to remove current protections and reintroduce the 1880s to the 1980s. I can justify that assertion by analysing some of the proposed changes. What do the Government intend to do by reforming the Truck Acts and abrogating our international obligations? They apparently desire to make sure that everybody can be paid by cheque instead of cash. If that is to be the case, it removes choice from the individual.

The Government are always talking about choice and the individual, but he will no longer be able to exercise his preference to be paid in cash rather than by cheque. The individual will now have to pay £40 or £60 a year in bank charges, which is a large sum for someone who is not earning much money each week. [Laughter.] Conservative Members laugh, but that is the reality. There is also the problem that bank opening times are not convenient for many workers.

Why should the individual not have the right to choose whether he is paid in cash or by cheque? The Conservative party lectures us about individuals and their rights but Britain is the only country to take this course. Britain is also the only country to remove protection from the employee for deductions. What will that mean? Does it mean that the employer will have the right—unless it is written into the contract that he does not —to make deductions for disciplinary offences, tool charges, light and heat? That is what used to happen in the 19th century. By removing these controls one invites the employer, who already feels he has the whip hand, to impose adverse conditions on workers.

What is threatened by the reform of the wages councils? The Government are threatening to remove protection for young people under 21. That will affect half a million of our youngsters who are on low wages, such as my son, who was an apprentice hairdresser. He was receiving only £23 a week. It would have affected me in the days when I was commis chef and worked under wages council regulations. I know the conditions of wages councils because I had to live under them. Not many Conservative Members could tell us about that.

Mr. Warren

I could.

Mr. Prescott

The hon. Gentleman will probably agree with what I am going to say, and I hope that he will vote against the Government's proposals for wages councils. If we remove the young people from their protection and fix a single rate of pay, nothing will be done for holiday provision—indeed, holiday protection will be reduced. Nothing will be done about the rate differentials, so there will be a single rate.

All these conditions are currently protected by the wages councils. The Government's proposals seem to be designed to make conditions even more deplorable and to shift the balance even more in favour of the employer at the place of work. This will happen in areas where workers are at their weakest. We have an obligation under the ILO to ensure that workers who are in the weakest position are not subjected to the sort of legislation that the Government propose.

The Minister talks about the reform of the wages councils and I predict that the Government intend to channel our youngsters into wages council industries. That will enable them to ease the rate of unemployment among those who have completed YTS courses. I understand that about 50 per cent. of those who leave the courses are unable to obtain jobs. The Government intend that they should skivvy in kitchens, wait in hotels or work in shops. That sort of job is being set up for our youngsters. [HON. MEMBERS: "Disgraceful."] Perhaps I should tell Conservative Members that the right hon. member for Waveney (Mr. Prior) made a similar statement in a Cabinet paper in 1981 when he was Secretary of State for Employment. I am only repeating the words of the right hon. Gentleman.

The Government plan to replace the women who are working in kitchens, hotels and shops for £50 or £60 a week with youngsters who have completed YTS schemes. Their intention is to pay them about £40 a week. That will reduce unemployment because many women work part time and cannot register as unemployed. Secondly, it will take more youngsters off YTS schemes. Youngsters will undertake the work that is currently performed by women but at lower rates of pay and this will produce an overall downward shift in wage levels. The Opposition believe that that is the Government's aim. They wish to reduce the wage levels of the lowest paid.

Where is the evidence that lower rates of pay produce more employment opportunities? The Government have often made that claim but the evidence that is available seems to refute it. Over the past five years, wages have fallen the most in areas of employment that are low paid. The gap between the low-paid and the highest paid has grown considerably over that period. At the same time, unemployment has increased faster among the low-paid.

We know that the Government have examined wage levels in the clothing industry. The evidence produced by the Department of Employment, which reflected the position of garment workers, was examined by the Cambridge department of applied economics, which claimed that the Department had used incorrect figures. It stated that some of the Department's key assumptions were false and that its analysis was inadequate. It stated that, if the Department had used the correct figures, its study would have revealed that the rise in male minimum rates produced a small fall in employment, while the larger rise in female minimum rates increased employment by a greater percentage. The Government produced a fiddled piece of research, like their fiddled unemployment figures.

The fiddle does not end there. The Chancellor of the Exchequer said, as did the right hon. and learned Member for Rushcliffe (Mr. Clarke) when he was appointed Paymaster General, that a 1 per cent. fall in wages would lead to 150,000 more jobs. Where is the evidence for that? That controversial claim was analysed by Warwick university's economic model group and it found that the increase in jobs would be about 15,000 instead of 150,000. It found that outcome difficult to understand, so it examined the model further. It concluded: The estimates that we obtain reveal a much smaller employment response than that predicted by the Chancellor. I suppose that 15,000 is much less than 150,000. It continued: Part of this difference is attributable to revisions in the Treasury model". Even the Treasury model was got at to produce the figure of 150,000. It is clear that there are fiddles in every figure that the Government produce. We know that that is so but —[Interruption.] Conservative Members may choose to shout, but I do not hear any substantial rejection of the Warwick study.

The Government's real purpose is to strengthen the power of the employer at the place of work, to attack those on low incomes and to encourage employers not to pay basic wages.

The Silentnight dispute had been going on for 20 weeks when the Under-Secretary of State for Employment made a deplorable speech in the House; it was even attacked by the Lancashire Evening Telegraph—a Tory paper—on the grounds that the Minister had sided with the employer. I ask the Paymaster General in all seriousness to get the papers from ACAS and look at them, because there is a role for Government in arbitration in these matters.

The Government's whole policy is designed to reduce low wage rates and to attack the lowest paid by removing protections from them. That is what the Queen's Speech is about. As for the Government's promised 600,000 jobs, 400,000 of those jobs are part-time. The Secretary of State talks about the European analysis. In this country, full-time jobs are being replaced by part-time jobs at a rate unparalleled anywhere else in Europe. The Government have embarked on a part-time low-paid economy. I have analysed the figures for the increase in full-time job equivalents of which the Secretary of State talks. It will take him 70 years to get back to the level of employment that he inherited from the Labour Government in 1979.

Let there be no mistake: we know what the Government are doing. Unemployment in this country is higher and deeper than it is anywhere else. It is deliberate Government policy to impose burdens on those least able to bear them. We shall do everything that we can to oppose that policy in the coming Session.

9.41 pm

The Paymaster General (Mr. Kenneth Clarke)

I begin by noting a remarkable event which took place in today's debate. The right hon. Member for Bristol, South (Mr. Cocks) broke 11 years of silence to intervene in the debate. I was elected at the same time as the right hon. Gentleman, although I have not as yet had the pleasure of listening to him often. I congratulate the right hon. Gentleman and assure him that the Elders IXL takeover bid for Allied-Lyons is currently being examined by Ministers and the points that he made will be carefully considered.

The hon. Member for Kingston upon Hull, East (Mr. Prescott) wound up for the Opposition. Before plunging into the general, I will deal with one particular. I have taken on board his point about the Silentnight dispute and will look into it. As he knows, both parties to that dispute have the right of access to ACAS and I believe that ACAS officials have already been involved. I will consider what the hon. Gentleman has said. Clearly, everyone wishes the dispute to be resolved to the satisfaction of the firm and its employees.

With regard to the Gracious Speech, the hon. Member for Kingston upon Hull, East touched on the one measure that will concern us both most particularly in this Session when he attacked our proposals—in the opinion of many they are fairly modest proposals—to reform the wages councils and repeal the Truck Acts. I was amazed at the vehemence of the hon. Gentleman's opposition to those proposals. He talked about a return to Victorian values but I have never heard a more passionate and conservative—with a small "c"—defence of Edwardian England than the hon. Gentleman's comments.

That legislation was designed for entirely different economic and social conditions albeit by a good reforming Government—the Asquith Government of 1908. With regard to wage levels, both measures applied to conditions well before the modern welfare state and to a time when sweated labour conditions were more universal and a greater fear than they are today. We must consider the modern implications of retaining old legislation in all its details.

My credulity was strained to the limit by the hon. Gentleman's passionate defence of the Truck Acts and his root and branch opposition to the idea of payment by cheque in England in 1985 as a dangerous innovation. That appears to be based on his belief that someone without a bank account cannot cash a cheque. When the legislation comes forward, we can explain that to him and perhaps eliminate an argument about inhibiting personal choice.

We shall obviously address ourselves to the arguments about wages councils when the legislation is reached, but the number of wages councils have over the years been steadily reduced by successive Governments. The ones that remain raise the wages bill of some employers and reduce their competitiveness in the market. As the hon. Gentleman will know, many employers within the wages councils trades are to a large extent not affected directly on most issues, as many of them pay well above wages councils rates.

The main effects that we are seeking to reform are those resulting from the fact that some wages councils raise fringe benefits over and beyond basic rates and overtime rates and particularly from the artificial raising of the wages of younger employees. In our opinion, that sometimes raises the cost of employing younger people above the value that they can add to the business of a prospective employer, and that costs jobs.

Mr. Ashdown

rose—

Mr. Clarke

I have only a short time left. I know that the hon. Gentleman was unlucky and was not called, but I have no time to give way to him.

Within the wages councils trades, the rates of pay for younger workers in relation to rates of pay for adult workers are higher than is the norm in this country—much higher than the norm in some other equivalent economies abroad—which is why we are directing ourselves to the reforms that we have in hand.

Most of the debate was devoted to the wider issues of industry and employment. The background to the debate —which I have no time to repeat, and which I do not think I need repeat after the statement by the Chancellor, the speech of my right hon. and learned Friend the Secretary of State for Trade and Industry and my own statement—is that in what I hope is not an over-exciting way the Government are presenting encouraging economic news. We have encouraging employment figures. A number of new jobs are being created, and the number of vacancies now being notified to jobcentres is, as always, only a proportion of the total number of vacancies in the economy. The package of measures that I announced earlier today will, I hope, give more encouragement to all those involved in the vital search for jobs which concerns so many of the long-term unemployed.

Like my hon. Friend the Member for Staffordshire, Moorlands (Mr. Knox), I still reach the conclusion that employment and unemployment remain the key political and social issues. I believe that what the Government have presented today is a substantial step towards relieving that social problem.

The hon. Member for Kingston upon Hull, East revealed that for obvious reasons his major concern, and that of many of his hon. Friends, is to minimise the exent of the improvement and, if it were possible, to make the problem of unemployment even worse. I was disappointed when he began with the enticing appeal, "Let us agree on the facts and let us get down to a sensible argument chat helps the country." He then raced into his usual diatribe about fiddled figures. He held up a list of figures from the Library, which I suspect were right, but his interpretation of them led him on to the ever-mounting heights of 4 million to 5 million total unemployed.

We have the total of registered unemployed which the hon. Gentleman accurately quoted. That total is inflated by the hon. Gentleman and his vehement colleagues by adding the 870,000 not receiving benefit but who are seeking work. But they take no account of the 940,000 revealed by the recent labour survey who are receiving benefit but not actively looking for work. These figures are incontrovertible, but only by adding them together does one produce the figures complained about.

Even worse, the hon. Gentleman adds to his total of unemployed those on the youth training scheme when he purports to be in favour of people being encouraged to go into good quality training and in favour of the objects of the scheme. Now that training is becoming a permanent part of the preparation for work, there is no reason at all why trainees, any more than sixth formers, people in further education or others involved directly in preparation for work, should be counted as unemployed.

There is no reason blithely to take those who are working on the community programme, or who are engaged upon special measures and taking part in paid work which will improve their employment prospects, and add them to the total of those who are unwillingly idle.

It is relevant to point out that no previous Government have added those who are engaged on special measures to the unemployment figures. They are people with jobs. They are getting work experience and they are being paid for it. There is clear agreement on the figures. I cannot see the slightest point in endeavouring to add every footnote that can be found and to define people as unemployed when plainly they are not. The Government are prepared to accept that it is their duty to create conditions in which more jobs can be generated and the true figure of unemployment reduced.

The hon. Member for Kingston upon Hull, East passed up the opportunity—which was seized, rather recklessly and wildly, by his right hon. Friend the Member for Chesterfield (Mr. Benn)—to try to explain what the Opposition's response would be if they were returned to Government. The occasion of this debate upon the Gracious Speech would have been a suitable occasion to do so. They cue was given by my right hon. and learned Friend the Secretary of State for Trade and Industry. He said that on his recent visit to America one of the major fears that was expressed by prospective investors in this country was the possibility of the return to power of a Labour Government.

Mr. Prescott

That is not true.

Mr. Clarke

If that is not true, the hon. Gentleman should have done something to allay those fears. Outside this House he as taken the opportunity to present his proposals. They are set out in a Labour party document of which he is the author. He has done so as the Opposition Front Bench spokesman on this subject. Its title is "Planning for Full Employment". I very much doubt whether the policies contained in "Planning for Full Employment" would hold very much attraction for prospective inward investors into this country. In the preface to the document the hon. Gentleman baldly states: Only by a planned interventionist policy, working towards socialist objectives, can we hope to achieve a fundamental redistribution of power, wealth and jobs. No doubt the hon. Gentleman believes, together with his right hon. Friend the Member for Chesterfield, that when he tried a Socialist solution it was the treaty of Rome which prevented Mr. Mitterrand from achieving a redistribution of power and creating jobs.

How will "Planning for Full Employment" or, to take the syntax literally, the redistribution of jobs, be carried out? First, the hon. Gentleman advocates, presumably as the official policy of the Opposition, more nationalisation. He says: Expansion of the public sector and its ownership is crucial in making industry more accountable. Has he discussed that with his right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) who seems to express a different opinion on certain occasions? And would he discuss it with the right hon. Member for Glasgow, Hillhead (Mr. Jenkins), who on previous occasions seemed to have difficulty in deciding how to vote on these issues? There will also be an extension of trade union control over industry.

Mr. Prescott

The right hon. and learned Gentleman is referring to just little bits of the document.

Mr. Clarke

I had trouble like this when the hon. Member for Oldham, West (Mr. Meacher) spoke about social services. When a document is produced by a Front Bench spokesman for the Labour party, I expect him to believe, as the author of that document, in what he says. The hon. Gentleman advocates: Labour's industrial democracy policy should give workers greater control over their own activity by extending collective bargaining from purely general issues and as images into the management and organisation of production". The relationship between wages and jobs is entirely missed out. The repeal of all the Government's anti-trade union legislation is described in and promised by this document. A workers' rights Act is proposed. The document refers to almost everything except giving workers the right to ballot or any voice in the activities of their union. The hon. Member for Kingston upon Hull, East, in his diatribes about our policies and our encouraging progress, was putting forward policies that would not only frighten the pants off American or other overseas investors but drive up the unemployment level in Britain as the Labour party sought to extend greater control over the economy.

Despite the fact that the hon. Member for Yeovil (Mr. Ashdown) was not lucky enough to catch your eye, Mr. Speaker, there were contributions from the alliance, especially the right hon. Member for Hillhead. He had the opportunity to set out his reaction to the policies of the Government whom we are defending. His extraordinary speech came to no particular conclusion after his sudden confession that, for 10 years as a Labour party member, he had been a disillusioned supporter of nationalisation. He seemed surprised when we reminded him that he had voted repeatedly for it during that time. I recall that the Bill to nationalise shipbuilding was carried by one vote. Presumably it was carried by the right hon. Member for Hillhead who did not believe in what he was voting for. That puts him in a difficult position on the privatisation proposals in the Gracious Speech.

What is the position of the right hon. Member for Hillhead and, presumably, his colleagues? Now that principle has returned and they are solemnly in the centre of British politics and know what they are doing, which way will they vote? The right hon. Gentleman does not know. He said that he was going to wait for the Bill. I have never heard a greater compliment paid to the draftsmen of parliamentary documents. The policy appears reasonably clear to me. Its merits and demerits have been argued. The right hon. Member for Hillhead has gone into the opportunism of third-party politics and has made a confession of a somewhat discreditable past.

The main issue in the debate has been the balance between services and manufacturing. We have been pressed most cogently on that point by my hon. Friends the Members for Devizes (Mr. Morrison), for Bury, North (Mr. Burt), for Moorlands and for Halesowen and Stourbridge (Mr. Stokes) and by my right hon. Friend the Member for Chesham and Amersham (Sir I. Gilmour). I should make our position clear. In answering the House of Lords Select Committee, no Government Member is in any way seeking to dismiss or denigrate the contribution of manufacturing industry.

I do not understand how anyone can conjure anything that has been said to deny the value to an economy of a strong and competitive manufacturing industry. The shift between the proportion of people employed in service industries and the proportion of people employed in manufacturing has been a continuing trend in Britain for many years, as it has been in every equivalent developed economy. It is plainly likely to happen for a variety of reasons. It is worth pointing out, before people get shattered about our position that in 1983 manufacturing output as a proportion of GDP was exactly the same in Britain as in the United States. That is a comparison not with the state of New York, which is an extreme example, but with the whole of the United States, which is the wealthiest economy in the western world. The proportion of services as a percentage of GDP provided in the United States is as great as that provided here. The proportion of people employed in service industries in the United States is higher than the proportion employed in Britain.

When we attack the Select Committee's report, we are not dismissing the difficulties of manufacturing industry. However, the evidence chosen by that Committee was highly selective. Since the trough of the recession, manufacturing output has increased by 11 per cent., manufacturing investment by 39 per cent. and manufacturing productivity by 31 per cent. and the value of manufacturing exports is at record levels. The House of Lords Select Committee proposed solutions which no one had really supported—subsidies for manufacturing industry, an inside track, preferential treatment for taxation and grants, compared with services. Those authors would say that. We believe that manufacturing and the rest of the economy—

Question put, That the amendment be made:—

The House divided: Ayes 218, Noes 354.

Division No.2]	[10 pm
AYES
Abse, Leo	Evans, John (St. Helens N)
Adams, Allen (Paisley N)	Ewing, Harry
Alton, David	Fatchett, Derek
Archer, Rt Hon Peter	Faulds, Andrew
Ashdown, Paddy	Field, Frank (Birkenhead)
Ashley, Rt Hon Jack	Fields, T. (L'pool Broad Gn)
Ashton, Joe	Fisher, Mark
Atkinson, N. (Tottenham)	Flannery, Martin
Bagier, Gordon A. T.	Foot, Rt Hon Michael
Banks, Tony (Newham NW)	Forrester, John
Barnett, Guy	Forsythe, Clifford (S Antrim)
Barron, Kevin	Foster, Derek
Beckett, Mrs Margaret	Foulkes, George
Beggs, Roy	Fraser, J. (Norwood)
Beith, A. J.	Freeson, Rt Hon Reginald
Bell, Stuart	Freud, Clement
Benn, Tony	Garrett, W. E.
Bennett, A. (Dent'n & Red'sh)	George, Bruce
Bermingham, Gerald	Gilbert, Rt Hon Dr John
Bidwell, Sydney	Godman, Dr Norman
Blair, Anthony	Gould, Bryan
Boothroyd, Miss Betty	Gourlay, Harry
Boyes, Roland	Hamilton, James (M'well N)
Bray, Dr Jeremy	Hamilton, W. W. (Central Fife)
Brown, Gordon (D'f'mline E)	Hancock, Mr. Michael
Brown, Hugh D. (Provan)	Harman, Ms Harriet
Brown, N. (N'c'tle-u-Tyne E)	Harrison, Rt Hon Walter
Brown, R. (N'c'tle-u-Tyne N)	Healey, Rt Hon Denis
Bruce, Malcolm	Heffer, Eric S.
Buchan, Norman	Hogg, N. (C'nauld & Kilsyth)
Caborn, Richard	Howell, Rt Hon D. (S'heath)
Callaghan, Rt Hon J.	Howells, Geraint
Callaghan, Jim (Heyw'd & M)	Hoyle, Douglas
Campbell-Savours, Dale	Hughes, Dr. Mark (Durham)
Canavan, Dennis	Hughes, Robert (Aberdeen N)
Carter-Jones, Lewis	Hughes, Roy (Newport East)
Cartwright, John	Hughes, Sean (Knowsley S)
Clark, Dr David (S Shields)	Hughes, Simon (Southwark)
Clarke, Thomas	Janner, Hon Greville
Clay, Robert	Jenkins, Rt Hon Roy (Hillh'd)
Clwyd, Mrs Ann	John, Brynmor
Cocks, Rt Hon M. (Bristol S.)	Johnston, Sir Russell
Cohen, Harry	Jones, Barry (Alyn & Deeside)
Coleman, Donald	Kaufman, Rt Hon Gerald
Conlan, Bernard	Kennedy, Charles
Cook, Frank (Stockton North)	Kilroy-Silk, Robert
Cook, Robin F. (Livingston)	Kinnock, Rt Hon Neil
Corbett, Robin	Kirkwood, Archy
Corbyn, Jeremy	Lambie, David
Cox, Thomas (Tooting)	Lamond, James
Craigen, J. M.	Leadbitter, Ted
Crowther, Stan	Leighton, Ronald
Cunliffe, Lawrence	Lewis, Ron (Carlisle)
Cunningham, Dr John	Lewis, Terence (Worsley)
Dalyell, Tam	Litherland, Robert
Davies, Rt Hon Denzil (L'lli)	Livsey, Richard
Davies, Ronald (Caerphilly)	Lofthouse, Geoffrey
Davis, Terry (B'ham, H'ge H'I)	Loyden, Edward
Dewar, Donald	McCartney, Hugh
Dixon, Donald	McCusker, Harold
Dobson, Frank	McDonald, Dr Oonagh
Dormand, Jack	McGuire, Michael
Douglas, Dick	McKay, Allen (Penistone)
Dubs, Alfred	McKelvey, William
Duffy, A. E. P.	MacKenzie, Rt Hon Gregor
Dunwoody, Hon Mrs G.	Maclennan, Robert
Eadie, Alex	McNamara, Kevin
Eastham, Ken	McTaggart, Robert
Edwards, Bob (W'h'mpt'n SE)	Madden, Max
Ellis, Raymond	Maginnis, Ken

Marek, Dr John	Sheerman, Barry
Marshall, David (Shettleston)	Sheldon, Rt Hon R.
Martin, Michael	Shore, Rt Hon Peter
Maxton, John	Short, Ms Clare (Ladywood)
Maynard, Miss Joan	Silkin, Rt Hon J.
Meacher, Michael	Skinner, Dennis
Meadowcroft, Michael	Smith, C.(Isl'ton S & F'bury)
Michie, William	Smith, Rt Hon J. (M'kl'ds E)
Mikardo, Ian	Smyth, Rev W. M. (Belfast S)
Millan, Rt Hon Bruce	Snape, Peter
Miller, Dr M. S. (E Kilbride)	Soley, Clive
Morris, Rt Hon A. (W'shawe)	Spearing, Nigel
Morris, Rt Hon J. (Aberavon)	Stewart, Rt Hon D. (W Isles)
Nicholson, J.	Stott, Roger
Oakes, Rt Hon Gordon	Strang, Gavin
O'Brien, William	Straw, Jack
O'Neill, Martin	Taylor, Rt Hon John David
Park, George	Thomas, Dafydd (Merioneth)
Parry, Robert	Thomas, Dr R. (Carmarthen)
Patchett, Terry	Thompson, J. (Wansbeck)
Pavitt, Laurie	Thorne, Stan (Preston)
Pendry, Tom	Tinn, James
Penhaligon, David	Torney, Tom
Pike, Peter	Wainwright, R.
Powell, Rt Hon J. E. (S Down)	Walker, Cecil (Belfast N)
Powell, Raymond (Ogmore)	Wallace, James
Prescott, John	Wardell, Gareth (Gower)
Radice, Giles	Wareing, Robert
Randall, Stuart	Weetch, Ken
Rees, Rt Hon M. (Leeds S)	Welsh, Michael
Richardson, Ms Jo	White, James
Roberts, Allan (Bootle)	Wigley, Dafydd
Roberts, Ernest (Hackney N)	Williams, Rt Hon A.
Robinson, G. (Coventry NW)	Wilson, Gordon
Rogers, Allan	Winnick, David
Rooker, J. W.	Woodall, Alec
Ross, Ernest (Dundee W)	Wrigglesworth, Ian
Ross, Stephen (Isle of Wight)
Ross, Wm. (Londonderry)	Tellers for the Ayes:
Rowlands, Ted	Mr. John McWilliam and
Ryman, John	Mr. Frank Haynes.

NOES
Adley, Robert	Brown, M. (Brigg & CI'thpes)
Aitken, Jonathan	Browne, John
Alexander, Richard	Bruinvels, Peter
Alison, Rt Hon Michael	Bryan, Sir Paul
Amery, Rt Hon Julian	Buchanan-Smith, Rt Hon A.
Amess, David	Buck, Sir Antony
Ancram, Michael	Budgen, Nick
Arnold, Tom	Bulmer, Esmond
Ashby, David	Burt, Alistair
Aspinwall, Jack	Butcher, John
Atkins, Rt Hon Sir H.	Butler, Hon Adam
Atkinson, David (B'm'th E)	Butterfill, John
Baker, Rt Hon K. (Mole Vall'y)	Carlisle, John (Luton N)
Baldry, Tony	Carlisle, Kenneth (Lincoln)
Banks, Robert (Harrogate)	Carttiss, Michael
Batiste, Spencer	Cash, William
Beaumont-Dark, Anthony	Chalker, Mrs Lynda
Bellingham, Henry	Channon, Rt Hon Paul
Bendall, Vivian	Chapman, Sydney
Benyon, William	Chope, Christopher
Best, Keith	Churchill, W. S.
Bevan, David Gilroy	Clark, Hon A. (Plym'th S'n)
Biffen, Rt Hon John	Clark, Dr Michael (Rochford)
Blackburn, John	Clark, Sir W. (Croydon S)
Blaker, Rt Hon Sir Peter	Clarke, Rt Hon K. (Rushcliffe)
Body, Richard	Clegg, Sir Walter
Bonsor, Sir Nicholas	Cockeram, Eric
Bottomley, Peter	Colvin, Michael
Bottomley, Mrs Virginia	Conway, Derek
Bowden, A. (Brighton K'to'n)	Coombs, Simon
Bowden, Gerald (Dulwich)	Cope, John
Boyson, Dr Rhodes	Cormack, Patrick
Braine, Rt Hon Sir Bernard	Corrie, John
Brandon-Bravo, Martin	Couchman, James
Brinton, Tim	Cranborne, Viscount
Brittan, Rt Hon Leon	Critchley, Julian
Brooke, Hon Peter	Crouch, David

Currie, Mrs Edwina	Holland, Sir Philip (Gedling)
Dickens, Geoffrey	Holt, Richard
Dicks, Terry	Hordern, Sir Peter
Dorrell, Stephen	Howard, Michael
Douglas-Hamilton, Lord J.	Howarth, Alan (Stratf'd-on-A)
Dover, Den	Howarth, Gerald (Cannock)
du Cann, Rt Hon Sir Edward	Howell, Rt Hon D. (G'ldford)
Dunn, Robert	Hubbard-Miles, Peter
Durant, Tony	Hunt, David (Wirral)
Dykes, Hugh	Hunter, Andrew
Eggar, Tim	Irving, Charles
Emery, Sir Peter	Jackson, Robert
Evennett, David	Jenkin, Rt Hon Patrick
Eyre, Sir Reginald	Jessel, Toby
Fairbairn, Nicholas	Johnson Smith, Sir Geoffrey
Fallon, Michael	Jones, Gwilym (Cardiff N)
Farr, Sir John	Jones, Robert (Herts W)
Favell, Anthony	Joseph, Rt Hon Sir Keith
Finsberg, Sir Geoffrey	Kellett-Bowman, Mrs Elaine
Fletcher, Alexander	Kershaw, Sir Anthony
Fookes, Miss Janet	Key, Robert
Forman, Nigel	King, Roger (B'ham N'field)
Forsyth, Michael (Stirling)	Knight, Greg (Derby N)
Forth, Eric	Knight, Dame Jill (Edgbaston)
Fowler, Rt Hon Norman	Knowles, Michael
Fox, Marcus	Knox, David
Franks, Cecil	Lamont, Norman
Fraser, Peter (Angus East)	Lang, Ian
Freeman, Roger	Latham, Michael
Fry, Peter	Lawler, Geoffrey
Gale, Roger	Lawrence, Ivan
Galley, Roy	Lawson, Rt Hon Nigel
Gardiner, George (Reigate)	Leigh, Edward (Gainsbor'gh)
Gardner, Sir Edward (Fylde)	Lennox-Boyd, Hon Mark
Garel-Jones, Tristan	Lester, Jim
Gilmour, Rt Hon Sir Ian	Lewis, Sir Kenneth (Stamf'd)
Glyn, Dr Alan	Lightbown, David
Goodhart, Sir Philip	Lilley, Peter
Goodlad, Alastair	Lloyd, Ian (Havant)
Gorst, John	Lloyd, Peter, (Fareham)
Gow, Ian	Lord, Michael
Gower, Sir Raymond	Luce, Richard
Greenway, Harry	Lyell, Nicholas
Gregory, Conal	McCrindle, Robert
Griffiths, Sir Eldon	McCurley, Mrs Anna
Griffiths, Peter (Portsm'th N)	Macfarlane, Neil
Grist, Ian	MacGregor, Rt Hon John
Ground, Patrick	MacKay, Andrew (Berkshire)
Grylls, Michael	MacKay, John (Argyll & Bute)
Gummer, Rt Hon John S	Maclean, David John
Hamilton, Hon A. (Epsom)	McNair-Wilson, P. (New F'st)
Hampson, Dr Keith	McQuarrie, Albert
Hannam, John	Madel, David
Harris, David	Major, John
Harvey, Robert	Malins, Humfrey
Haselhurst, Alan	Malone, Gerald
Hawkins, C. (High Peak)	Maples, John
Hawkins, Sir Paul (N'folk SW)	Marland, Paul
Hawksley, Warren	Marlow, Antony
Hayes, J.	Marshall, Michael (Arundel)
Hayhoe, Rt Hon Barney	Mates, Michael
Hayward, Robert	Maude, Hon Francis
Heath, Rt Hon Edward	Mawhinney, Dr Brian
Heathcoat-Amory, David	Maxwell-Hyslop, Robin
Heddle, John	Mayhew, Sir Patrick
Henderson, Barry	Mellor, David
Hickmet, Richard	Merchant, Piers
Hicks, Robert	Meyer, Sir Anthony
Higgins, Rt Hon Terence L.	Miller, Hal (B'grove)
Hill, James	Mills, Iain (Meriden)
Hind, Kenneth	Miscampbell, Norman
Hirst, Michael	Mitchell, David (NW Hants)
Hogg, Hon Douglas (Gr'th'm)	Moate, Roger

Monro, Sir Hector	Speller, Tony
Montgomery, Sir Fergus	Spence, John
Moore, John	Spencer, Derek
Morrison, Hon C. (Devizes)	Spicer, Jim (W Dorset)
Morrison, Hon P. (Chester)	Spicer, Michael (Worcs S)
Moynihan, Hon C.	Squire, Robin
Mudd, David	Stanbrook, Ivor
Murphy, Christopher	Stanley, John
Neale, Gerrard	Steen, Anthony
Needham, Richard	Stern, Michael
Neubert, Michael	Stevens, Lewis (Nuneaton)
Newton, Tony	Stevens, Martin (Fulham)
Nicholls, Patrick	Stewart, Allan (Eastwood)
Norris, Steven	Stewart, Andrew (Sherwood)
Onslow, Cranley	Stewart, Ian (N Hertf'dshire)
Oppenheim, Phillip	Stokes, John
Oppenheim, Rt Hon Mrs S.	Stradling Thomas, Sir John
Osborn, Sir John	Sumberg, David
Ottaway, Richard	Tapsell, Sir Peter
Page, Sir John (Harrow W)	Taylor, John (Solihull)
Page, Richard (Herts SW)	Taylor, Teddy (S'end E)
Parkinson, Rt Hon Cecil	Tebbit, Rt Hon Norman
Parris, Matthew	Temple-Morris, Peter
Patten, Christopher (Bath)	Terlezki, Stefan
Patten, J. (Oxf W & Abdgn)	Thomas, Rt Hon Peter
Pawsey, James	Thompson, Donald (Calder V)
Peacock, Mrs Elizabeth	Thompson, Patrick (N'ich N)
Pollock, Alexander	Thorne, Neil (Ilford S)
Porter, Barry	Thornton, Malcolm
Portillo, Michael	Thurnham, Peter
Powell, William (Corby)	Townend, John (Bridlington)
Powley, John	Townsend, Cyril D. (B'heath)
Prentice, Rt Hon Reg	Tracey, Richard
Prior, Rt Hon James	Trippier, David
Proctor, K. Harvey	Trotter, Neville
Pym, Rt Hon Francis	Twinn, Dr Ian
Raffan, Keith	van Straubenzee, Sir W.
Rathbone, Tim	Vaughan, Sir Gerard
Rees, Rt Hon Peter (Dover)	Waddington, David
Renton, Tim	Wakeham, Rt Hon John
Rhodes James, Robert	Waldegrave, Hon William
Rhys Williams, Sir Brandon	Walden, George
Ridley, Rt Hon Nicholas	Walker, Bill (T'side N)
Ridsdale, Sir Julian	Walker, Rt Hon P. (W'cester)
Rifkind, Malcolm	Wall, Sir Patrick
Rippon, Rt Hon Geoffrey	Waller, Gary
Roberts, Wyn (Conwy)	Walters, Dennis
Roe, Mrs Marion	Ward, John
Rossi, Sir Hugh	Wardle, C. (Bexhill)
Rost, Peter	Warren, Kenneth
Rowe, Andrew	Watson, John
Rumbold, Mrs Angela	Watts, John
Ryder, Richard	Wells, Sir John (Maidstone)
Sackville, Hon Thomas	Whitfield, John
Sainsbury, Hon Timothy	Whitney, Raymond
St. John-Stevas, Rt Hon N.	Wiggin, Jerry
Sayeed, Jonathan	Wilkinson, John
Shaw, Giles (Pudsey)	Winterton, Mrs Ann
Shaw, Sir Michael (Scarb')	Winterton, Nicholas
Shelton, William (Streatham)	Wolfson, Mark
Shepherd, Colin (Hereford)	Wood, Timothy
Shepherd, Richard (Aldridge)	Woodcock, Michael
Shersby, Michael	Yeo, Tim
Silvester, Fred	Young, Sir George (Acton)
Sims, Roger	Younger, Rt Hon George
Skeet, T. H. H.
Smith, Tim (Beaconsfield)	Tellers for the Noes:
Soames, Hon Nicholas	Mr. Carol Mather and
Speed, Keith	Mr. Robert Boscawen.

Question accordingly negatived.

Debate to be resumed tomorrow.