The Economy

HC Deb 13 November 1985 vol 86 cc575-660

Mr. Speaker

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

A very long list of right hon. and hon. Gentlemen wish to take part in the last day of the debate on the Queen's Speech. May I again appeal for brief contributions so that not too many are disappointed?

4.11 pm

Mr. Roy Hattersley (Birmingham, Sparkbrook)

I beg to move, at the end of the Question, to add:

But humbly we regret that the Gracious Speech includes no proposals which can reasonably be expected to reduce the level of unemployment, revive manufacturing industry and utilise the full potential of the income temporarily gained from the exploitation of North Sea oil. Yesterday during his statement to the House the Chancellor of the Exchequer invited us to take advantage of today's debate to discuss the autumn statement. It was not an invitation which we needed or which he was entitled to make, but I propose to accept it. Of course, I begin with a re-examination of the central plank of yesterday's manifesto, the sale of British Gas to finance temporary tax cuts.

In reply to my question yesterday the Chancellor insisted that the sale of British Gas simply brought tax cuts forward. I have the quotation here lest he should choose to deny it today, as he denied it yesterday afternoon. What the Chancellor said could mean only that, on his own assessment, without the sale of British Gas there would be no tax cuts next year and probably none before a general election. The tax cuts are to be financed by the sale of British Gas. The Chancellor ought to know, as I believe the country knows, that a policy of selling assets to raise revenue is one which no respectable or responsible private company would contemplate for a moment.

I ask him again the questions that he failed to answer yesterday. After the sale, how would he propose to make up the losses in annual revenue previously obtained from those assets? When the sale has financed a couple of years of tax cuts, how does he suggest that those temporary tax cuts will be sustained? When I asked him that question yesterday he mumbled a generalisation about the sale of other assets. May I therefore ask him specifically if what he hinted at as the afternoon went on is true? Is it the Government's intention to sell into private ownership the water industry? [Interruption.]

If the Government claim that the water industry should be sold to a private monopoly and that that private monopoly should control the price, supply and quality of something as basic as the water, the Chancellor had better tell us now whether he agrees with those Members in the backwoods behind him who are urging that that should happen. He must know that if water is sold into the ownership of a private monopoly few restrictions will be placed upon it to protect the consumer, for that is the pattern of privatisation. It will be the pattern of privatisation of British Gas as it was the pattern of privatisation of British Telecom.

If obligations were placed on the new private monopoly the selling price would not be as great as the Government need and will demand. What will happen with gas and with water will be exactly the same as recently happened with British Telecom. Vast profits have been made but enormous price increases have been imposed in an area where British Telecom has a monopoly and can exploit consumers.

The Chancellor denied all this yesterday. I see him nodding because he intends to deny it again today. When he makes a forecast or offers statistics, I think of those famous words from Through the Looking-Glass: 'When I use a word,' Humpty Dumpty said in a rather scornful tone, 'it means just what I choose it to mean'", with which he fell off the wall. That view was expressed in less generous language by the Daily Telegraph today; it made the same point about the Chancellor's veracity in language which I would not dare to use. It described his statement as

a combination of dodgy accounting and electoral cynicism". Despite all the talk about expansion, growth and success, what we are to have over the next year or two years is an increase in consumption financed by temporary tax cuts paid for by the sale of British Gas. On his own figures, which again the Chancellor denied yesterday, there is a predicted growth over the next financial year in gross domestic product of £6.4 billion while consumption is to rise by rather more—£6.5 billion. At the same time imports will increase at twice the rate of exports and interest rates will be kept high by the Chancellor as an item of policy by which he can keep something like the present exchange rate. The net result must be a continuation of the damage to manufacturing industry which has characterised all that the Government have done for six years.

I know very well that the Chancellor and the Secretary of State for Trade and Industry derided the report by the House of Lords Select Committee on Overseas Trade, but Government policy and the Chancellor himself vindicate what that report said; it warned that if we are to avoid a major social and economic crisis attitudes towards trade and manufacturing have to be radically altered.

Let us look at the real state of manufacturing industry about which the Chancellor made some boast yesterday and about which the Prime Minister made equally unlikely claims a week ago today. The real facts of manufacturing industry are these. For four years in a row net investment in manufacturing has been negative. Total manufacturing investment is 20 per cent. lower than it was in 1979. Output is 6 per cent. lower than in 1979. The balance of manufactured trade has changed from a surplus of £5 billion in 1978 to a deficit of £4.7 billion.

The Government's attitude towards manufacturing trade has not changed at all despite the claims made by the Chancellor and the Prime Minister. All that has changed in the Chancellor's attitude towards manufacturing industry is his language. He no longer insults it as if he were a knight on the Tory Back Benches. He pretends that he is concerned about its welfare, but he and the House know that manufacturing industry remains crippled by high interest rates. The Confederation of British Industry was right to describe the autumn statement in one simple sentence: nothing in it for manufacturing industry except £250 million of extra costs". Month after month and year after year we have tried to convince the Chancellor of the Exchequer that while manufacturing industry and the construction industry founder, unemployment will remain at a level which should be unacceptable in a decent society.

Despite the central continuation of the Government's proposals and plans to which I have referred, and despite the continuing destruction of manufacturing industry, the hon. Member for Stockton, South (Mr. Wrigglesworth) told everybody who would listen to him yesterday that we are witnessing a U-turn. That is what the hon. Gentleman and other Social Democrats were intended to believe from the Chancellor's statement. The Chancellor assumed that they would be easily satisfied, but I suspect that he did not believe that they would be quite as rapturously satisfied as the hon. Member turned out to be.

Last year, during the debate on the autumn statement, the SDP fell in behind our demand for a £5 billion boost, to be spent in the public capital sector. This year the Government propose 10 per cent. of that amount to be spent on construction of one sort and another.

The change in the Government's position, as I shall demonstrate in a moment, is far more a matter of presentation than of substance. The truth is that the argument for public sector capital spending advocated by the Opposition, the CBI, the TUC, a large number of Conservative Back Benchers, and by some right hon. Members in the Cabinet has actually won the day. There is now a virtually unanimous consensus that the Government should be spending more on public sector capital. What the Government announced yesterday afternoon was very little indeed, said in order that they could not be accused of doing nothing.

The basic economic policy remains, and it involves a writing off of 3.5 million men and women who are unemployed. They have been written off because they are politically expendable. Although, no doubt, the wets in the Cabinet will seize on the announcement as a sop to their consciences, the minuscule increases in housing renovation and hospital building will finance virtually no jobs. I have it on the authority of the Prime Minister. [Interruption.] The hon. Member for Harlow (Mr. Hayes) may laugh at that authority. Some of his hon. Friends around him may take the Prime Minister more seriously than he does.

On 10 December, the Prime Minister told me that the cost per job through increasing infrastructure can vary from £35,000 to £55,000 a year. Let us take the position in the middle. Let us assume that the Prime Minister was right and that a job financed by investment in construction costs £45,000. If the Prime Minister was right, what the Government announced yesterday and what was heralded as a U-turn by the SDP will produce 11,000 new jobs. The infrastructure proposals, the capital works, will produce one new job for every 3,000 men and women unemployed.

If we are witnessing a U-turn, it is a U-turn of a very strange shape, and it should be described in a little honest detail. The Chancellor certainly will not do that. This year there has been some reflation. The Prime Minister has denounced reflation. She promised that there would be no reflation, but there has been reflation. It has come about not by intention but by incompetence.

Social security payments were increased by £1.2 billion above the original estimate as inflation is higher than anticipated because of the mismanagement of the exchange rate by the Chancellor in January.

Mrs. Elaine Kellett-Bowman (Lancaster)

Is the right hon. Gentleman saying that he begrudges the increase given to the pensioners and others?

Mr. Hattersley

I am saying that if we had been in power we would have paid them the full increase that they were promised, rather than a few measly coppers.

Several Hon. Members

rose—

Mr. Hattersley

No, I shall go on to list all the other reasons why we have had the reflation that the Prime Minister promised we would not have.

The payment has been larger than the Chancellor intended because inflation has been higher than he prophesied. Inflation has been higher than he prophesied because of the catastrophe that he caused for the exchange rate in January. But that is not the only reason.

The external financing limits on the nationalised industries were relaxed by £1 billion, largely because of the miners' strike, which, the House will recall, was regarded by the Chancellor as a sound investment for the nation.

Local authority spending was £1 billion more than the Government planned. Local authority spending is always more than the Government plan, because the Government never expect to hold it down to their planning figure. The planning figure is always devised artificially low in the hope that the local authorities can be intimidated. The local authorities never are intimidated, so the Government's local authority spending plan is always out of line.

The cost of EEC membership was £500 million more than anticipated. The extra cost of EEC membership was alone virtually as much as the combined extra funds being made available next year for house building and renovation and hospital building.

Mr. Jerry Hayes (Harlow)

rose—

Mr. Hattersley

I do not want the hon. Member for Harlow (Mr. Hayes) to be over-anxious. He will have to wait with patience until the end of this entire passage.

The Government are spending £5 billion more than they intended on programmes. They have exhausted the reserves entirely with five months left to go. The Government—the Chancellor will correct me if I am wrong—have established the precedent of talking to the House about the sums left in the reserve. That is something that Chancellors in the past have never felt they had to do. In addition, the Government have exceeded the PSBR target by £1 billion. All those things have added to this year's involuntary reflation, and that is not the only thing that has happened.

The policy of reflation—not the policy but the accident—which the Prime Minister promised would not happen while she was in Downing street has been supplemented by other factors. They are all factors of which the Government disapproved but over which they were unable to exercise any control. Wage increases have outstripped inflation. The American deficit has attracted British exports. The collapse of the pound, for which the Chancellor was responsible, temporarily helped those exports. Investment decisions have been brought forward to beat the Government's decision to phase out capital allowances. Those are the reasons why there has been a reflation this year, but none of them is likely to be repeated next year.

The Chancellor's intention is to hold next year's programmed spending below the level at which it stands this year. So those right hon. and hon. Members in his party who feel that he has abandoned the financial rectitude by which he has made his name can rest in peace. There has been no U-turn in the statement. There has been a sort of L-turn.

I will remind the Chancellor of what is meant by no U-turn. No U-turn means the continuing collapse of manufacturing industry, the continual deficit on our manufactured trade, the continual squandering of North sea oil revenues on unemployment rather than on jobs, and, above all, no U-turn means 3.5 million men and women still condemned to unemployment.

Mr. Hayes

It is always a great joy to see the right hon. Gentleman jumping through the hoop so well, but he has a nerve to stand there talking of honouring promises with the eloquence of Satan denouncing sin. After all, he was a member of a Government which actually robbed pensioners, by changing to the forecasting method, of over £1 billion. His Government also cut hospital expenditure by about one third. Is not the real reason why he is huffing and puffing at the Opposition Dispatch Box that his enthusiasm for putting his own economic policies before the electorate is the enthusiasm of a turkey looking forward to Christmas?

Mr. Hattersley

I am grateful for the opportunity to have a drink of water.

What I was talking about, and what the House will on all sides have to concentrate on sooner or later, is the level of unemployment which, as the hon. Member for Harlow ought to know, is a rather more serious matter than the intervention that he has just made. He will, I hope, know that Opposition Members and the country in general will not be fooled by the softening of the language of the Prime Minister and the Chancellor on these matters, but will be influenced only by a change of attitude and of policy.

The pathetic package presented yesterday by the Paymaster General will make no substantial difference to the level of unemployment. The first half of the statement simply repeated previously announced palliatives and cosmetics. Then we turn to the latest contrivances invented by Lord Young.

When Lord Young was appointed, we on the Opposition Benches said that his task was to obscure rather than to solve the problem. How right we were, as witness the evidence of yesterday's package from the Paymaster General. With unemployment running at 3.5 million, he promised us that we are to have an expansion of unemployment clubs at which the unemployed can come together to discuss their problems. The unemployed know what their problem is. Their problem is the Government, a Government who base their job creation programme on a mistake and a slander. Virtually every one of the proposals outlined by the Paymaster General yesterday was based on the slander that things have to be done to persuade the unemployed to go to work.

That is the reverse of the truth. The unemployed want to work. The unemployed do not want advice on how to go about the business of rehabilitating their attitudes towards work. They want jobs. Those jobs could be provided by a massive investment in roads, railways, sewers, new schools and hospitals and, above all, new housing.

Mr. Patrick Nicholls (Teignbridge)

The right hon. Gentleman is obviously returning to the theme of blaming unemployment on the Government. Does he perhaps recall a speech by his hon. Friend the Member for Paisley, South (Mr. Buchan) in 1978, in which he accurately predicted the figure for unemployment as it exists today, said that it was due to demographic factors and added that any attempt to blame that on a Conservative or a Labour Government would be wrong?

What has changed since then, apart from the fact that the right hon. Gentleman is now on the Opposition Benches and is clearly likely to stay there for some decades to come?

Mr. Hattersley

The hon. Gentleman is to be congratulated on his perception, for I am blaming 2 million unemployed on the Conservatives. I am delighted that, after all these years, he has begun to understand that point. I propose to deal with the demographic point when I turn to the false claims made by the Prime Minister and others about how many jobs have been created in this country. If the hon. Gentleman will contain himself in patience, I promise the House that I will deal with that point exactly. At the moment, I am telling him and the House what we believe and what the majority of people in the country believe, that the best way to reduce unemployment is by concentrating available resources on public sector capital investment which, as well as reducing unemployment, will do jobs which, in the national interest, are in desperate need of being done.

The Government's report, published only yesterday, said that we need to spend £20 billion on public sector housing repairs. Yesterday, we were promised £230 million. The difference between these two figures is wholly consistent with the Government's record on public and private housing.

Speaking in this debate last Wednesday, the Prime Minister said that Labour could not hold a candle to the Government's record on housing. I thought that it might be worth a small comparison to see whether the Prime Minister on this occasion had made a boast that she could substantiate. Let me tell the House the figures on which, according to the Prime Minister, the Conservative record is such that we cannot hold a candle to it.

Since 1979, public and private housing stock has increased by 1 million. In their five years in office, the Labour Government increased it by 1.5 million, an annual increase in housing stock 50 per cent. better than the Conservative record of which the Prime Minister boasted. I can use the Prime Minister's phrase from another debate: we did better every year than they did in any year.

Yesterday, the Chancellor could have begun to make amends for these six years of appalling levels of house construction. He could have provided money to build houses and to create jobs, but he did not choose to do so. No wonder the Paymaster General was shamefaced in his statement about unemployment, and no wonder he was confused during his performance on Newsnight on Monday, in which he claimed, as I understand even honest Ministers are required to claim, that the Government had achieved a growth rate of 3 per cent. It was pointed out to him that the real average growth since 1979 was 1.3 per cent. a year, to which the Paymaster General retorted, "You've chosen the period carefully". That was the lifetime of a whole Government.

Mr. Gerald Howarth (Cannock and Burntwood)

Before the right hon. Gentleman leaves the question of public sector capital expenditure, will he tell us, when the sewers have been rebuilt and the new hospitals finished, what happens to all the people who have been temporarily employed on all these social programmes? Secondly, will he tell the House where the funds are to come from? If from the taxpayer, will he tell the taxpayer by how much? If from borrowing, will he tell industry by how much its interest rates will have to rise to finance it?

Mr. Hattersley

Three points can be extracted from the hon. Gentleman's question. The first is on taxes, and I promise the House that I am coming to that. The second is on interest rates, and I promise the hon. Gentleman that we shall not maintain interest rates at uniquely high levels for a uniquely long period, which is the record of the present Chancellor. The third is what happens when we all have the decent house that we deserve, the roads are perfect and all the hospitals are in use. That is the process by which we generate some real growth. By investing in capital, one generates growth. By selling off capital, one does no more than promote the temporary consumer boom which is the object of the Chancellor's policy.

I do not wish, however, to over-estimate the Government's achievements. I have mentioned a 1.3 per cent. growth during the Government's lifetime. Without the gratuitous bonus of North sea oil, growth under this Government would have been barely 0.75 per cent. a year. Before the Chancellor begins to take credit for North sea oil, let me tell him that the only connection North sea oil revenues have with the Government's current economic policy is that the policy wastes and dissipates North sea oil by spending every penny on the cost of unemployment—larger numbers of benefits, lost tax revenue—instead of using that money to put Britain back to work.

Whenever we talk about putting Britain back to work, we are told by the Prime Minister, as we were told by the Chancellor yesterday, that there are in this country 675,000 new jobs which have been created as a result of Government policy. This is an attempt by the Government to switch the argument from unemployment to employment. For my part, it is a switch in which I am perfectly prepared to take part, because the assertion that this Government have created, or have caused to be created, 675,000 new jobs is simply not true.

Even within the rules by which the Prime Minister attempts to justify her contention, the figures are wrong.

Nearly 40,000 of those so-called new jobs are part-time—perhaps only a few hours a week. We know from the Government's own statistics that the fall in full-time jobs over the period is 100,000. We have 100,000 fewer full-time jobs than two years ago, and the 675,000 is therefore made up either of part-time jobs or the self-employed. I say "either" because none of us knows the figure for the self-employed. There is no statistical basis on which it is calculated. There is simply a guess made by the Government, and that guess increases every time they want to boast about how well they have done on job creation.

Even if we accept all this and believe—incredible though it may be—that 675,000 new jobs have been created by this Government, there are still 1 million fewer jobs in the economy than there were when they were elected. Do not let the hon. Member for Teignbridge (Mr. Nicholls) tell me that this is all due to demographic failure, to women coming back into the labour market and to a temporary bulge in the birth rate. There are now 1 million fewer jobs in the economy than in 1979, and that must be the result of economic policy.

Mr. Nicholls

The point that I put to the right hon. Gentleman a few moments ago is precisely the same as the one that I shall now put. I was saying that one of his own colleagues—a previous Labour Minister—accurately predicted the unemployment figures as they exist today. He said that it was due to demographic factors. The right hon. Gentleman must now tell us what has changed since then, other than the fact that it now suits him to say something entirely different.

Mr. Hattersley

Two questions immediately arise. If the hon. Gentleman, with his powers of perception and careful study of the speeches of Labour Ministers, knew that there would be an inevitable rise in unemployment, what were all those "Labour isn't working" posters about? Secondly, what is the demographic factor, the bulge in the birth rate and the pressure of women coming back to work that have lost 1 million jobs in the economy over the last six years? The hon. Gentleman should understand that that argument will not wash, and he does himself no service by copying the Prime Minister's peddling of this crude propaganda, because no one is any longer deceived by it. That is part of the Prime Minister's style, but it no longer deceives the country.

I promised to answer the question on taxes. Last Wednesday the Prime Minister claimed that Labour would increase the tax paid by school teachers, nurses and metal workers. She based her claim on a grotesque misquotation of what I had said. It was a misquotation so grotesque that it is only reasonable to assume that it was intentional. I cannot believe that the Earl of Stockton would demean himself by behaving in that way, but while I do not accuse the Prime Minister of telling a lie, I can at least tell the truth about the taxes for the three groups that she picked out.

She said that when Labour comes to power, school teachers, nurses and metal workers would on certain assumptions all be paying substantially increased rates of tax. That is simply not true. But we do not need to look into the crystal ball; we can examine the record for the three groups whom the Prime Minister chose to defend from high taxation.

Each of those three groups has been faced with the burdens of substantial increases in indirect taxation, but on direct taxation each has suffered very considerable tax increases over the past six years. On the Prime Minister's assumption, a school teacher now pays £9 a week more than when this Government were elected, a nurse £7 a week and a metal worker £8.50 a week.

Mr. Lawson

Proportionately.

Mr. Hattersley

As I heard what the Chancellor in his ignorance said, I should tell him that that is in real terms and is now proportionately more of their income than they paid in 1979.

When the Chancellor asks such a question without knowing the answer, I wonder whether the Tory tax promises have been broken because of intention or simple incompetence. The figures that I have just given are the reality of the Tory tax promises. Having won twice on the promise of tax cuts, they have increased the national annual tax bill by £29 billion. They are now desperate not to fight the next election without the least pretence of keeping their word. They will therefore sell off British Gas and, in the Chancellor's own words, will use the money, to bring tax cuts forward. They will do so without knowing what will happen in three years' time to sustain their policy, without knowing how to make up the lost income from capital revenue, and without caring what happens after polling day.

Mr. Gerald Howarth

rose—

Mr. Hattersley

I do not know whether I ought to give the Chancellor time to read the papers, but my final word is that in working this stratagem and in believing that a short-term bonanza can buy them votes, the Chancellor and the Government grieviously under-estimate the nature and character of the British people. The British people are more sensible than that, are less cynical than that and understand these matters better than the Government imagine. That is why they will certainly have no truck with yesterday's confidence trick.

4.47 pm

The Chancellor of the Exchequer (Mr. Nigel Lawson)

The right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) today offered us another vivid illustration of the effectiveness of market incentives. His articles in Punch, for which he is handsomely paid, are always so much better than the speech he has just given us free of charge. If the right hon. Gentleman had his way and imposed his punitive taxes on those he calls "the bloody rich" who earn more than £20,000 a year, he would deprive himself of the incentive to go on writing his Punch column. We would all be the losers.

It would not just be Punch columnists who would be driven to consider early retirement if they found themselves punished by the taxes proposed by the right hon. Gentleman, but I understand that he also has a remedy for that—he will make it not worth their while to retire either. Once the pensioners' savings have been handed over to his national investment bank, the prospect of retirement on secure income will look very uncertain indeed.

I do not like to reopen wounds that have barely healed, but when the right hon. Gentleman was standing for the leadership of "that great movement of theirs" he said in his personal manifesto: We must know the cost of our programme and be prepared to explain the way in which the bills will be paid". Quite so! We are still waiting for the answer. We listened to the right hon. Gentleman's speech, but we did not hear that answer once. We shall continue to ask for it.

By contrast, this is a Government who know their mind, a Government with a long-term strategy and the practical means of pushing it forward. The Gracious Speech admirably exemplified the strategy. The Government's aim is to follow the maximum of freedom within a framework of law and financial discipline. We believe in the freedom to earn and to spend, to set up businesses and to invest, to own the family home and a stake in one's firm and to trade at home and abroad.

These freedoms should be cherished in themselves, but they are also the foundations of prosperity. The Labour party thinks little of them. It subordinates them to the collectivist impulse. That is why after five years of Labour rule these freedoms needed strengthening and why the economy had lost much of its dynamic force.

The legislative programme in this Session has as its top priority the freedom of the individual to participate in wealth and enterprise. There is the legislation to expand the right to buy council homes. Some 870,000 houses and flats have already been sold to their tenants, and many more will follow as a result of the changes we intend to introduce.

The financial services Bill will mark a major step forward in the regulation of our liberalised financial markets, and the building societies Bill will increase competition to the benefit of individual savers and borrowers. The Bill to reform shop opening hours is another which will expand individual freedoms and at the same time contribute to economic wellbeing. All these measures, and many more, have one clear aim: to expand individual freedoms and make our country a freer and more prosperous place in which to live.

Mr. Eric S. Heffer (Liverpool, Walton)

Can the right hon. Gentleman explain to my unemployed constituents what freedom they have under this Government to earn and to spend?

Mr. Lawson

They have the same freedom as they have had under Governments of this country for many years, but I shall come in due course to unemployment. First, I wish to deal with privatisation because the right hon. Member for Sparkbrook dwelt at some length on the privatisation programme, which is central to the process that I have described. It is without precedent in this or any other country and it has been steadily gaining momentum. Right hon. and hon. Members on the Opposition Benches wish that privatisation would go away, and I understand their feelings. They recognise that it is a policy whose time has come. It is popular with the whole country and increasingly it is being emulated abroad—in Canada, Japan, Germany and even in Socialist France and Sweden. It is a policy whose economic rationale is not in doubt.

I could not be more pleased that the right hon. Member for Sparkbrook selected this aspect of our programme as the target for his attack both yesterday and today. In doing so, he displays all the flair of a General Cardigan leading the Light Brigade into the valley of death: identify the enemy's strongest point and then send in your most lightly armed troops. The best that the right hon. Member for Sparkbrook can do is to complain, as he did today, that the proceeds might be used to finance cuts in taxation—a curious example of trying to maintain that two rights make a wrong.

The privatisation programme will continue and accelerate because of the benefits it brings to the nation in the form of increased enterprise, increased efficiency and increased employee and individual shareholding. The decision to privatise British Gas stands on its merits. The fiscal judgment is quite another matter, and one that I shall justify to the House in my Budget speech next year. There can be no doubt about the outstanding success of privatisation so far.

We have transferred 20 per cent. of the state sector of industry that we inherited in 1979 into public ownership in its truest sense. All of those companies are doing well. In all of them the commitment to the future, the commitment to success, is stronger than ever before. The employees have demonstrated their commitment in no uncertain terms. Over a third of a million employees in nationalised industries have so far taken advantage of the opportunity to invest in their own company. And from British Aerospace, the first sale, onwards we have been attracting first-time investors to the stock exchange. The massive British Telecom issue alone acquired on flotation 2 million individual shareholders, of whom 1¾ million remain shareholders of BT. Half of them had never before in their lives held a share.

Opposition Members have now taken to saying that privatisation is all very well, but what will we do for an encore? That was the burden of the right hon. Member for Sparkbrook's speech today. He also dealt with this point yesterday. I hate to disappoint him but there is no possibility of the privatisation programme running out of steam. British Telecom has paved the way for British Gas, and British Gas will pave the way for other candidates. And so it goes on. I could remind the House that the current cost value of the assets of nationalised industries is still over £90 billion. But I will make a promise to the right hon. Gentleman. He asks me what I will do when the privatisation programme is complete. This is my promise. If he is still shadow Chancellor at the end of the next Parliament, which his question presupposes, I will tell him the answer then.

In the meanwhile, let me put an immediate question to him. Which privatised companies would a future Labour Government, if there were to be one, renationalise, and on what terms? Would they renationalise British Telecom, British Airways, British Aerospace, Britoil, the British Gas Corporation? Would the right hon. Member for Sparkbrook care to answer that question? I should be pleased to give way to him. [HON. MEMBERS: "Answer."] The right hon. Gentleman is coy, he is shy, he does not know what to say. But we shall continue to ask him the question so that he has time to think up an answer and tell us precisely which of those companies he would like to renationalise, and on what terms, because the nation and the House have a right to know.

The charge that privatisation does long-term damage to public finance is absurd. Privatisation reduces the need to borrow and thus the burden of debt interest. Moreover, members of the Opposition—right hon. Members in particular—appear to forget that private sector companies and their shareholders pay tax. As their performance improves, the more tax they will pay. It is equally absurd to argue that the Government's scope for cutting taxes depends upon privatisation receipts.

The route to a sustained reduction in tax rates lies, as I stated very clearly yesterday, in firm control of public spending against a background of continued economic growth. My statement yesterday demonstrated that we are maintaining, and shall continue to maintain, that firm control. We are clearly achieving steady economic growth.

As usual, however, the right hon. Member for Sparkbrook seeks to have it both ways. His own plans would involve a massive inflationary increase in spending and borrowing, yet he talks of fiscal irresponsibility at a time when the public sector borrowing requirement, even if there had been no privatisation proceeds at all, would this year be the lowest as a percentage of gross domestic product that it has been for 14 years—yes, lower even than in 1981–82 when the Opposition howled about the stringency of my predecessor's 1981 Budget. It is lower even than that.

Mr. Stuart Bell (Middlesbrough)

Will the right hon. Gentleman give way?

Mr. Lawson

I would rather give way to the right hon. Member for Sparkbrook, but I will give way to his monkey.

Mr. Bell

I must ask the Chancellor to withdraw that remark.

Mr. Deputy Speaker (Mr. Harold Walker)

Although the expression was clearly discourteous, it is not an expression that I ought to require the Chancellor to withdraw. It has been used in a previous debate. Does the hon. Member wish to pursue his intervention?

Mr. Bell

The Chancellor referred to a public sector borrowing requirement of £8 billion. Is it not a fact that £1 billion of that £8 billion is due to the diminution in oil revenues? Is that diminution clue to the exchange rate for the dollar or because we have entered a period in which oil revenues will diminish?

Mr. Lawson

I did not wish to upset the hon. Gentleman as he knows I like him, but I thought it was appropriate and he would enjoy it if I used a remark that Mr. Aneurin Bevan used about Mr. Selwyn Lloyd. In answer to the question, the reduction in oil revenues is as a result of the exchange rate against the dollar being different from what was envisaged at the time of the Budget.

Rolling back the frontiers of the state sector of industry has meant increased opportunities for private ownership. In the same way, our policy of restraining public expenditure means increasing the freedom of working people to keep, spend, save and invest their own earnings.

My statement to the House yesterday demonstrates the Government's continued success in restraining the growth of public spending. I was able to announce that expenditure has been contained within the cash totals that we set ourselves last July; that spending will be held broadly constant in real terms over the next three years; and that as a proportion of national output it will continue to decline, as it has in each year since 1982–83.

I also draw the attention of the House to a new feature in the autumn statement—the charts, which show that those broad trends in public expenditure are not significantly altered even when privatisation proceeds are left out of account.

By the end of this financial year public spending will have been falling as a proportion of national output for three successive years. That is the longest consecutive decline since the 1950s. Yesterday's plans show that it is set to fall further over the next three years. That is already, I believe, making a major change to the performance of the British economy, creating room for enterprise and initiative. It will cause a still greater change in the years ahead.

The right hon. Member for Sparkbrook spoke about taxation. Certainly, proper restraint in public spending is central to the success of economic policy. It is central to the growth of enterprise, to the expansion of the wealth-creating sector and to the creation of lasting jobs; central to rising living standards and to the control of inflation; and central to reducing the burden of tax—on incomes, where it stifles initiative and risk-taking, and on employment, where it destroys jobs, directly and immediately.

The right hon. Member for Sparkbrook made his usual remarks about the growth of tax revenues since 1979. As I remarked in a sedentary intervention, and I am sorry that it was a sedentary intervention, Mr. Deputy Speaker, he seems to go on finding it astonishing that, as the economy grows and earnings rise, so do individuals' tax bills in money terms.

The reason for the difference between the two Governments is this. Under this Government, real take-home pay has risen for people at all points on the earnings scale. For a married man on average earnings, that means a real increase in take-home pay of some 13 per cent. since 1979, compared with only a half of 1 per cent. under Labour. And what of the lower paid, for whom the right hon. Gentleman professes such concern? Under Labour, at only half average earnings, a man's take-home pay rose a little more—by some 4 per cent. Under this Government it has risen by 12 per cent.—three times as much.

Mr. Hattersley

Is the Chancellor glad or sorry about the phenomenon that he has just described? He told the City of London, assembled for a banquet, that wages were rising too much.

Mr. Lawson

The important point is that our unit labour costs do not rise too much. That is the point that I have made time and again.

The Government's tax reductions have not been confined to income tax. We have abolished the national insurance surcharge—Labour's tax on jobs. Altogether, we have reduced taxes on employment from 14 per cent. to about 9 per cent. of total tax revenue.

It is no good for the right hon. Gentleman to imply, as he sought to do this afternoon, that taxes are higher under this Government than they would have been under a Labour Government. No one in his right mind would believe that. No one will believe that the Labour party would have cut the basic rate, increased thresholds by 20 per cent. in real terms or abolished the national insurance surcharge, which it introduced. No, it would have put up taxes. It would have had to, to finance its profligate and unsustainable spending plans. There is, of course, an alternative, or so Labour Members think. They could have tried to borrow their way out of trouble. They had plenty of experience of that in the disastrous years up to 1976.

If—heaven forbid!—I had set the PSBR this year at 9¼ per cent. of GDP, as the right hon. Member for Leeds, East (Mr. Healey) did in 1975–76, we would have had a PSBR this year of £33 billion. No wonder the Labour Government had to go cap in hand to the International Monetary Fund. The contrast between the 1970s and today could not be more marked. The benefits of our policies of encouraging enterprise, initiative and individual freedom are now very clear.

We were told that giving economic power back to the people—shareholder power, members' power within the trade unions—was a foolish gamble. Nothing could be further from the truth. For many years in this country we suffered from a hardening of the economic arteries. New business formation was slow; industrial relations were disastrous. The country could be, and regularly was, held to ransom by small groups of workers in positions of real or imagined industrial power. All that has changed.

The number of strikes in British industry during the first nine months of this year was the lowest since well before the war. The whole trade union movement is undergoing a sea change in attitudes. The legislative measures that we introduced have now shown their worth. The unions have been given back to their members, and the members are telling their trade union bosses that they want to work and want their companies to succeed.

The old "them and us" divisions within British industry, which bedevilled industrial relations for so long, are breaking down gradually. I have no doubt that the dramatic expansion of employee share ownership has been a major contributory factor. There are now around 1,000 all-employee share schemes in existence, involving around a million employees. There were just 30 such schemes when we took office in 1979. The initial value of shares distributed under all those schemes is now over £1 billion, and the number of employee shareholders continues to grow day by day.

Last year's Finance Act allowed companies, for the first time, to establish discretionary share option schemes. They have seen an even more explosive growth. I can now tell the House that, a mere 18 months after the legislation, the number of approved schemes has just passed the 1,000 mark.

Throughout the 1970s the Labour party talked and talked about industrial democracy, but it did nothing. We have acted to bring about the most direct and influential form of industrial democracy that there is. Perhaps that is slightly unfair on the right hon. Gentleman. Perhaps during its last term of office the Labour party was encouraging other forms of ownership—co-operatives, for example. Certainly the figures show that there were almost 300 co-operatives in the United Kingdom when Labour lost office. And the number now? More than 900. That growth in co-operatives, which I wholeheartedly welcome, is yet another aspect of the revival of the small business sector.

We have been suffering during the 1980s from the lack of new business formation in the 1970s. It will take a while before we can see the full effect of what has happened to encourage their growth, but we know that the benefits are on the way. Look at the growth of new businesses. Business start-ups outstripped failures by 36,500 last year. That is a net addition of 100 new businesses for every day of the year—a sharp acceleration in the rate of new business creation, which was already at a high level from 1980 to 1983.

The Government are assisting that process in every way they can, because it has been demonstrated throughout the world, particularly in the United States and Japan, that countries with a strong, small business sector are best able to adapt to changing economic circumstances and to maintain high levels of employment.

Mr. Michael Grylls (Surrey North-West)

Will my right hon. Friend give way?

Mr. Lawson

The business expansion scheme has made a particularly important contribution to the revitalisation of small businesses in the past three years.

The latest results we have for 1983–84, the first year of the scheme, show that 715 companies raised BES finance of more than £100 million, from about 20,000 investors. Although the following year's results are not yet complete, we already know of more than 500 companies that have again raised BES finance totalling more than £100 million. The final figures for 1984–85 will almost certainly show a substantial increase over 1983–84, the first year of the scheme. Much of this money is going to small-risk enterprises, as the scheme intended it should. Business expansion scheme money is only part of a huge growth of the venture capital industry during the past five years. In 1979 a mere £10 million of venture capital was invested in this country. Last year it was more than £300 million. This is true seed corn investment and the key to the jobs of tomorrow.

It is a great pity that the right hon. Member for Sparkbrook has not noticed this development. If he had, he might have saved himself the embarrassment that his proposal for a national investment bank has caused him. The right hon. Gentleman wishes to create a state-owned fund run by out-of-work bankers and union bosses, backed by money siphoned out of the pension funds—a political slush fund. He wishes to find investments which the rest of the financial community have failed to spot.

There are those who say that this is a return to the old game of trying to pick winners, but that is an unfair criticism of the right hon. Member because he has made it clear that: it's almost impossible for the Government to pick winners". The national investment bank would be in the business of picking losers. I have every confidence that it would find them, and lose the pensioners' money in the process.

Mr. Grylls

My right hon. Friend the Chancellor has rightly stressed the importance of the capital venture market and its growth in the successful creation of new firms. The business expansion scheme has been successful. Will my right hon. Friend consider whether people could take advantage of the BES to invest in their own companies? I know that that is a problem but consideration of the matter would fit in with the Government's other policies and such provision would be helpful and popular.

Mr. Lawson

I intend to look into that and other aspects of the BES in the light of the Peat Marwick report. If there are to be changes, I shall announce them in next year's Budget.

At the outset I stressed the twin themes of the Gracious Speech—maximum freedom within a framework of law and financial discipline. The results of that strategy are already impressive—steady growth of output and declining inflation. The right hon. Member for Sparkbrook has once again been through his list of selective statistics in an attempt to denigrate that success. The right hon. Gentleman spoke about the performance of manufacturing output and referred to the report of the House of Lords Select Committee on Overseas Trade. It is worth demonstrating the quality of the report's reasoning. I am not saying that all of its conclusions are wrong but on the whole it does not form a helpful contribution to the debate. In paragraph 72 the report states: But sustainable growth has not been possible and will not be possible without a favourable trade balance in manufactures". That is bad luck on the United States with a trade deficit on manufactures—no growth for the United States. It is even worse luck on the world because there is no way that the world can achieve a surplus in manufacturing.

Paragraph 87 of the report states:

The committee have received devastating evidence from the Association of British Chambers of Commerce (ABCC) on decline in our manufacturing industries … between 198C and 1983 they estimate that assets and capacity of manufacturing industry fell by 24 per cent". The figures given are for only one company, and they are wrong. The share of manufacturing in total output has fallen in the United Kingdom, but although some capacity has been lost in manufacturing, much new capacity has been created. There is no clear evidence to show a loss of capacity between 1980 and 1983. However, manufacturing investment last year and this year combined has risen in real terms by more than 25 per cent.

I agree that the share of total United Kingdom output of manufacturing has fallen, but that is nothing new—it has been a feature of the past 25 years. It is not peculiar to the United Kingdom. The same has happened in most other major industrial countries, such as Germany and the United States. What matters is manufacturing's future, which depends pre-eminently on its productivity and profitability. In terms of productivity, growth and profitability alike, manufacturing industry under the Government has done far better than it ever did under Labour. Total national output is well ahead of what it was when we first took office and has been growing for almost five years now at an average of 3 per cent. a year.

The right hon. Member for Sparkbrook also seems to be concerned about our investment performance. Despite the world recession, the level of total fixed investment in the United Kingdom in 1985 looks like turning out some 9 per cent. higher in real terms than when we first took office. How does that compare with the Labour Government? They just about managed to achieve an increase in fixed investment of 1 per cent. They are in no position to preach about capital investment.

What about the important matters that the right hon. Gentleman chooses not to discuss? The inflation rate next year is likely to be not merely better than that achieved by the previous Labour Government; it is likely to be little more than half the best figure they achieved in all of their years in office.

Of course, we all recognise that we cannot be satisfied with the way in which the economy is operating when we are faced with unemployment at its current level. Unemployment is a human and social problem of the first importance—to say nothing of the waste. But it is a cruel deception to say that by borrowing and spending more the Government could cut unemployment overnight. If that were true, there would be no unemployment in Europe or anywhere else today. There is nothing easier for a Government than to borrow and spend other people's money. The answer to the problem of unemployment lies in the firm pursuit of anti-inflationary policies, and continued strenuous and painstaking efforts to improve the flexibility of our markets, especially the labour market.

There are already signs of success. There are about 600,000 more people in work in the United Kingdom now than there were when we were returned to Office in June 1983. Opposition Members are always infuriated by this statistic. They try to claim that these jobs are not real jobs. They imply that self-employment, which has grown explosively in recent years, and women's jobs, are somehow less valuable to the community than other types of work. We reject that view. Our labour markets are responding to changing social patterns. Many married women want part-time employment outside the home. For many people, as they bring up children, that is just what they need to balance the family budget and allow them sufficient time at home. I see no reason to sneer at them for doing so.

Changes in employment behaviour are part of the increased flexibility we need if the economy is to continue to grow.

Mr. Hattersley

The Chancellor has got the script wrong. He should not say that there are 675,000 more jobs. He should say 675,000 new jobs. That is not true either, but that is the propaganda line that he should be taking.

Mr. Lawson

The right hon. Gentleman seems to have as much difficulty listening as he does understanding. I said that there are about 600,000 more people in work, and that is true.

Mr. Hattersley

We want more jobs.

Mr. Lawson

There are more people in work. Hansard will record that very clearly.

Unemployment has recently started to show welcome signs of a reduction. Last month's small fall was further encouraging evidence that the prospects for the second part of this Parliament are considerably better than for the first. The Government intend to maintain the same policy framework that has produced the impressive results for output, inflation, investment, balance of payments, productivity and employment that I have already described. That is the framework set out in the medium-term financial strategy, and in my Budget next year I shall again set out the guidelines for the medium-term financial strategy.

Many hon. Members are still anxious about the international financial scene. They see growing protectionism and the persistent problem of international debt as two clear risks to the generally favourable world scene. The Government are trying to resolve those problems. In the past two months there have been two significant developments. First, the group of five meeting, which I attended in New York on 22 September, produced the so-called Plaza agreement, which addressed itslf to the threat of protectionism. The United States Administration showed their concern about the high level of the dollar and their determination to act to correct it. A concrete and practical agreement was reached collectively to take the necessary action to secure adjustments in the exchange rates between the dollar and other major currencies.

The results of that meeting are there for all to see. Since 22 December the dollar has depreciated by 14 per cent. against the yen, by 8 per cent. against the deutschemark and by 3 per cent. against sterling. Further action will be needed, not least to reduce the huge fiscal deficit in the United States and to remove obstacles to the free operation of financial and other markets in Japan. The threat of protectionism has thus receded slightly. There has been a change of mood in the United States Congress and there must now be a far better chance that if protectionist legislation is proposed it will not be put into effect.

The Plaza agreement has shown the potential for increased co-operation among countries which follow the same economic strategy.

Mr. Anthony Beaumont-Dark (Birmingham, Selly Oak)

How can the Government hope to solve America's problems when America shows no willingness to solve its own problems? The United States had a $15 billion deficit in one month and now has a total deficit of $200 billion. The Americans want the rest of the world to solve their problems because they will not impose the financial stringency which my right hon. Friend the Chancellor considers to be the hallmark of Government policy. Why is it right for the Americans to continue spending while sterling and our interest rates are kept high to help them when they will not help themselves because they fear the consequences?

Mr. Lawson

I hope that my hon. Friend the Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) will be able to catch your eye, Mr. Deputy Speaker, and develop his arguments later in the debate. In all seriousness, the threat of protectionism is not just America's problem but the world's problem and it is right that we should combine to combat it.

The United States Treasury Secretary, Mr. Jim Baker, has launched an important new initiative to deal with the threat of international debt. He has proposed a new role for the World Bank and the regional development banks. Those banks would be provided with additional capital to support increased lending, but that lending would be linked to, and conditional upon, sound and realistic economic policies in the recipient countries. Her Majesty's Government fully support this initiative, which offers a sensible way forward for countries in the grip of severe financial difficulties. I believe that it makes good sense to develop the role of the World Bank in this way.

Let me make one thing clear. It cannot and should not be for Governments to determine the attitudes of commercial banks towards the prospects of debtor countries or to tell them what decisions they should take. Those decisions, the level of individual banks' exposure to particular borrowers and the management of the banks' portfolios, must remain theirs and theirs alone, within the proper constraints set by their supervisory authorities. Both those international developments will be welcomed by the House. They increase the chance that we shall continue to enjoy a combination of steady growth and falling inflation unknown in this country for a generation.

We are now close to the mid-point of this Parliament. Since the British people returned us to office with an increased majority at the last general election the Government have amply justified their confidence. Inflation has averaged 5½ per cent. per year, economic growth has been running at 3½ per cent. per year, and manufacturing output has risen by more than 3 per cent. per year.

The House will wish to know how I see the prospects for the second half of this Parliament. I am afraid that I have to disappoint the Opposition and say that the prospects are rather good. I hope that hon. Members can grit their teeth and get over that. Inflation is now firmly on a downward path and should be under 4 per cent. by the middle of next year. The CBI's latest survey reports that cost pressures on industry are the weakest for 20 years and the outlook for prices is the best since the 1960s. Inflation is firmly under control, and steady growth will persist. There is no sign of the long-heralded downturn on the horizon, provided that we continue to pursue cautious, sensible financial policies in combination with our other measures to encourage enterprise.

The measures that we shall be bringing before the House this Session represent a broadening and a deepening of the strategy that we have followed for the past six years. They will move us steadily and resolutely towards greater prosperity and a better society in which, within the law and within the overarching framework of financial discipline, each individual can exploit his or her talents to the full.

5.28 pm

Dr. David Owen (Plymouth, Devonport)

I beg to move, at the end of the Question, to add:

But humbly regret that the Gracious Speech contains no evidence that the Government seriously plans to tackle Britain's most fundamental problems; believes that further action is needed to stimulate manufacturing industry through a cut in interest rates and a more competitive exchange rate via sterling's entry into the exchange rate mechanism of the European Monetary System; and calls on the Government to seek a reduction in unemployment through selective capital investment, a fair and durable incomes strategy, lower employers' National Insurance contributions, and an expansion of the community programme and skill training. The amendment draws the attention of the House to the Government's failure to tackle the most fundamental problems in Britain.

On the first day of debate on the Gracious Speech, the Prime Minister devoted the latter part of her speech—that was the part that the newspapers highlighted—to law and order. In her speech the Prime Minister embarked on a course that I hope the Government will not pursue—I am glad that the Home Secretary did not pursue it in his speech—which appeared deeply to polarise the Government and the Labour party. The Prime Minister tries to paint the Conservative party as the party of the police and the Labour party as the anti-police party. There are enough genuine divisions in British politics without seeking to exacerbate a division over the police force.

The debate on crime revealed the seriousness of the position. The figures for violent crime, crime involving firearms and arson are all now at record levels. This betokens a sense of decline not just in the inner cities but in the values of this country, and that is causing much concern. The declining social scene revealed by the raw crime statistics must be placed beside a record of serious economic decline.

Had the House debated this Gracious Speech in 1950, Britain would have been the third richest country in the world, with an average standard of living exceeded only by the United States and Switzerland. We were then a relatively strong economic power. Britain is now 19th in the industrial league table and we are now in the third league of industrial nations. In 1985, six years into this Government, Italy has surpassed the average standard of living in Britain. On present trends, despite the Chancellor's optimism, it is likely that by the early 1990s Spain will have a higher average standard of living than Britain. In the next two to three years East Germany may surpass us.

That is the background of our economic decline—of Toxteth, Brixton, Handsworth and Tottenham. They are scenes of violence which when seen from abroad on TV are not totally dissimilar—though we may not like to face it—to some of the scenes of violence we have seen in South Africa. We must view the realities. The Chancellor may not like to hear it, but one of the characteristics of his period in office is his blithe disregard for the social consequences and the scarring of generations to come resulting from appalling unemployment.

A clear divide is beginning to emerge in British politics. It is certainly not a divide which cuts straight across the House, but cuts deeply into the Conservative party. It is personified by the Chancellor and the Prime Minister, who clearly believe that the next election can be won even with high levels of unemployment, and that the crucial thing is to address the aspirations and dreams of the predominantly Conservative electorate—those in work—for whom it is thought the most crucial thing is to cut the standard rate of income tax, give them a higher standard of living and create the sort of consumer boom at which the Conservative party is a past master.

Before we extol the merits of Lord Stockton, I should mention that I remember spending many years as a prospective candidate decrying the 13 wasted years of Tory misrule. Lord Stockton was then known by the rather different name of "Supermac". He could have taught even the Chancellor of the Exchequer a thing or two about how to manipulate the economy to produce a consumer boom prior to an election.

The Chancellor will not lecture us any more about the public sector borrowing requirement, and M3 will again be what it is for most people in this country—a motorway. The monetarist statistics to which we have had to listen and the lectures from the Prime Minister on the fiscal probity of this Government are a thing of the past. We are now beginning to see a relaxation of the fiscal stance in order to produce the same candy floss consumer boom that we experienced from Conservative Governments through the fifties and early sixties. The only problem then was that Reggie Maudling got his timing wrong.

Our criticism of the Chancellor of the Exchequer is not that he has relaxed his fiscal stance; we have been urging him to do that for many years. It is not that he has relaxed his public sector borrowing requirement; we have also been urging that for many years. What we criticise is that the direction of the relaxation is not towards resolving our deep-seated economic problems; it is not to use the assets from sales to build up other assets; it is not to use the proceeds from British Gas to try to rebuild the manufacturing sector which was savagely destroyed as a result of the exchange rate policy pursued by the Chancellor when he was Financial Secretary to the Treasury and by the then Chancellor in 1980–81.

The Government intend to use those assets to massage the electorate. The truth about the Chancellor's strategy, which is of course wholly identified with the Prime Minister, is not that it is an economic strategy—it is an electoral strategy. The Budget he is preparing will never again be called a Budget for jobs; it will be a Budget for votes. Towards the end of the year the rate of unemployment will probably move down slightly. That is possible, and I certainly hope that towards the end of 1986 and in early 1987 we will see a real fall in unemployment. I will rejoice if that is the case. However, if we are looking to the Government to mount a Serious attack on unemployment and to face the devastation that has occurred in our northern industrial towns; if we are looking to them to try to restore, revitalise and regenerate the inner cities or for hope for young school leavers that they will not spend three or four years without a job; or for investment in higher education and science and in the skilled training which is the only real asset we can build up for the next century, we will look in vain.

The Government are not seeking to restore the real strength of the economy or to prepare for the day when the oil revenues start to decline. That is the real indictment of the Chancellor and the Prime Minister. It is as if they do not wish to face the reality of economic decline. It is as if they do not want to use the fortunate circumstances of the present, when we still have quite substantial oil revenues. Looking at their policies for privatisation, one finds that it is not as if they are prepared to analyse the real purpose of privatisation.

We have yet to see the legislation which the Secretary of State for Energy is to produce. Will we see a real regulation which will try to protect the consumer from the monopoly power of British Gas? The Chancellor says yes. I hope that he is right. Will we see a freeing up and a creation as far as possible of competition? Of course, the trouble is that to do that would reduce the attractiveness of the sale of British Gas. There is a dilemma here and I hope the consumer interest and the competitive and strong economic interest triumphs. We will ask, "Where is that money going to be spent?" Is it going to be spent on improvements to the infrastructure that are still demanded by many of the outside critics of the Government, whether they be the CBI or British industry, or is it going to be spent, as the Chancellor hints and as Tory Back Benchers appear to want, on a reduction of the standard rate? There is even a division of opinion about whether or not it should be used to take more people out of taxation.

A deep and almost moral argument will go on in the country over the next couple of years. The Chancellor of the Exchequer and the Prime Minister have misjudged the views of even the traditional Conservative voter. The Chancellor will find in the south of England just as much as in the midlands and the north a sense of deep anxiety among the people about how we ought to be diverting our resources. Even those with a job who are reasonably well off will question the case that they should be made slightly better off while they see millions of their fellow citizens without a job. The Government have a particularly cynical and rather too market-oriented view of their fellow men and women if they believe that votes are going to be bought at the next election in quite the same cynical way as they were bought in the fifties and early sixties. [AN HON. MEMBER: "Bought by your party."]

Not many people would argue that votes were bought by the 1979 Government. They were lost by that Government, not bought. Whatever else was being done in 1979, votes were not being bought. The 1979 election defeat stemmed more than anything from the fact that "Labour was not working". That was the headline, and a very effective attack was made on that Government because unemployment was then over 1 million. Did anybody believe in 1979, even those Conservatives who voted for the Government, that unemployment would rise to 3.5 million—or 4 million if we take the true, adjusted figures? Not many people thought that. If many people had thought that that would be the consequence of voting for the Tories, they would have hesitated.

Perhaps it is perfectly open and reasonable to argue that the Chancellor and Prime Minister are right, that the people do not want to be warned of economic decline or to face Britain's real position in the world. Perhaps they do not want to face the realities of crime and drug addiction in our midst or the despair and disillusionment that exists in all too many families up and down the country. Perhaps the Government believe that votes can be bought and that all that is necessary is to generate again the candy floss society, putting the emphasis on private affluence and allowing public squalor to continue.

The Prime Minister has made a major political misjudgment. I shall relish the ensuing political argument, because I believe that it is about time that we said to the people, "Your responsibility is to forgo those tax cuts." Those who have work and who are reasonably prosperous should tell the Government, "We want you to invest for the future because we are worried that oil revenues will start to decrease in the early 1990s." I do not believe that oil revenues will decrease as quickly as some people expect, and there will still be substantial gas reserves. But people have become more conscious of the vulnerability of our economy in the medium and long term, and with it the standing of Britain in the European Community and the world. A growing body of Conservative voters will find the style of the Chancellor and the Prime Minister deeply unattractive, and we will relish the challenge of gaining their votes.

Mr. Tim Yeo (Suffolk, South)

Does the right hon. Gentleman recognise that British voters know that our economic problems and the causes of our decline are rooted in the excessive trade union power which the Government of which he was a member fully supported, and in the investment measures which his Government fully supported? Those matters must be resolved if we are to reverse our economic decline, and the fact that the Government have started to resolve those problems is reflected in our present high investment and the fact that growth is increasing while inflation is decreasing.

Dr. Owen

Great mistakes have been made in the economic management and government of the country through the 1950s, 1960s, 1970s and 1980s. If none of us has the capacity to learn from some of those mistakes, whichever Bench he or she sits on, heaven help Britain in the next century. I have certainly learnt from some of the mistakes which I helped to make, and I am not ashamed to say so. Furthermore, 64 per cent. of the members of the Social Democratic party were not previously members of any political party, Conservative, Labour or Liberal. It is a wholly new political force. When those members listen to some of the sterile debates in the House and outside, they wonder whether we will ever learn or whether we will ever think afresh and anew. Is the Chancellor prepared to learn from the experience of 1980 and 1981?

Mr. Lawson

Yes.

Dr. Owen

He says, "Yes," and I believe that he is right to say that inflation will be kept down. But what mechanism is he using to keep down inflation? The present high interest rates will devastate manufacturing industry even further. Another mechanism is the unrealistically high exchange rate. Apart from his prejudice towards the idea, he does not want Britain to join the EMS because he knows that the present rate is far too high. Britain needs a competitive exchange rate if its manufacturing industry is to prosper.

Mr. Lawson

Inflation would increase.

Dr. Owen

The Chancellor is right. If we reduce the exchange rate to a realistic level for our manufacturing industry, inflation will be affected. That is a great worry. We should not go into the EMS above about 72 to the basket of currencies; it is currently running at 79 and I would prefer it if we could go in lower. It would be much better to enter the EMS at a rate that we can hold and sustain. I believe, too, that a stable exchange rate would be of inestimable help to British industry. One way to reach a more realistic exchange rate would be to reduce our extraordinarily high interest rates. But the Chancellor will not do that because he is afraid that it might increase inflation. It appears that he is prepared to pay almost any price to keep inflation down.

The Chancellor is right to be worried about inflation. Anyone who believes that we can increase it lightly is wrong. But on the other side of the equation is our tremendous wasted capacity. I am referring not only to the 3.5 million people unemployed, but to our incapacity to rebuild our manufacturing industry, which is essential if our prosperity is to be guaranteed into the next century. Of course, we can and rightly do support other industries. I welcome the modest measures to help tourism and the service industries, but time and again the Government ask manufacturing industry to pay the heaviest price.

I would like employers' costs to decrease further, which is why the SDP advocates a reduction in the national insurance contribution. I do not like the fact that the employment measures—some of them desirable—announced by the Paymaster General yesterday must be financed by industry. Everything should be done to help to keep down unit costs and to keep Britain competitive—[Interruption.] The Chancellor may laugh, but one of the most worrying signs is the extent to which Britain is losing its competitive edge—something to which the CBI drew attention recently. It is no use comparing Britain now with the Britain of the past; if we compare ourselves with our Western competitors, we can see that we are losing our competitive edge.

I hope that the Chancellor will not repeat in 1986 the folly of 1980 and 1981: that to hold inflation down he will not saddle British industry with a long period of uncompetitive exchange rates and too high interest rates. If we have to pay the price of slightly increased inflation, I am prepared to pay it. The alliance will discuss the necessity for an incomes strategy to grapple with the problem. Private sector pay is increasing at about 8 per cent. a year—

Mr. Yeo

That is going back to the incomes policy of the 1960s.

Dr. Owen

No, it is not going back to the 1960s. We should try to learn from some of the mistakes of those incomes policies. We must try to retain competitive market pressure in the private sector, but, with an understanding to bargain within a certain range, competitive bargaining can be highly advantageous. That is what happens in many European countries. The "concertation" among unions, management and Governments in many western European countries has been beneficial in allowing them to expand, to reduce unemployment and to have a proper regard for the consequences of extremely high wages in some key sectors.

The key is to justify high wages through productivity. It is no use the Chancellor continuing without a sensible incomes strategy for the public sector. As grievances abound and unfairnesses multiply, we shall need an incomes strategy that embraces the public and private sectors. I do not wish to return to statutory controls; we know the difficulties and anomalies that they create. But to ignore the need for an incomes strategy, as the Government have tried to do in some areas, and then arbitrarily interfere in the sector which they most closely control—the public sector—is a recipe for division and for inefficiency. Market forces have not yet controlled the movement of wages from the private sector.

The Chancellor will ignore what I am saying, because he will not take risks with inflation, do anything serious about unemployment or markedly reduce interest rates. He is prepared to continue with our present high exchange rate. But I hope that he will realise from the comments that have been made on his announcement yesterday the unease that exists, not just in the City but in industry generally. His autumn statement was not received with great acclamation. "Creative accounting" is the nicest criticism used about it. I saw the description "dodgy" used in one newspaper that normally supports the Conservative party. We all know that the Chancellor is dodgy when quoting statistics and making predictions. He has an unparalleled record of failing to anticipate the facts, whether on unemployment, inflation or especially interest rates. He is wrong as frequently as he is right.

However, the Chancellor is right to claim credit for some things. As my right hon. Friend the Member for Glasgow, Hillhead (Mr. Jenkins) said yesterday, the economy is not altogether bleak and there are some good signs. But our underlying weaknesses, whether social or economic, are not being tackled. All the signs are that the Government are heading for a rather cynical election ploy. They believe that, if they can put more money into the pockets of their traditional voters, their dissatisfactions will disappear and the Conservative party will be returned, it hopes, for a third term of office. The Government underestimate their own supporters and the morality, altruism and generosity that still exist in the British people.

We now see Conservative wets, like the Secretary of State for Energy, adopting privatisation. It seems to be a necessary move in the struggle for the leadership of the Conservative party. The Secretary of State for Defence is privatising the dockyards against the recommendations of the Select Committee on Defence and the Public Accounts Committee. Such proposals are of little value to the real economy but everything of value to the dogmatism that seems to be a necessary part of aspirations to Tory leadership.

The Chancellor appears to have no such aspirations and, watching the Government Benches when he speaks with his usual rudeness to most of his hon. Friends, I know that there is no need for any of us to fear that he is a candidate for the leadership. However, we fear that his period of office will hasten the decline of the British economy and exacerbate the social tensions that already exist and to which the Government should be addressing themselves.

5.51 pm

Mr. Edward Heath (Old Bexley and Sidcup)

The Gracious Speech is a comprehensive survey of Government policy, but the way in which we debate it allows it to become compartmentalised. We take each aspect of it separately for a day. However, in his closing words, my right hon. Friend the Chancellor moved on to the international sphere, certainly in as far as it affected economic affairs. He pointed to two important developments in the past few months, both of them undertaken by Secretary of the Treasury Baker in the United States.

In the past two months, there have been four major developments—the two mentioned by my right hon. Friend, plus the arrangements for the summit which is to take place shortly and the movement of my right hon. Friends the Prime Minister and the Chancellor and the Government further away from dogma and into pragmatism. All four interlink. I have become more and more impressed by the fact that in the 1980s we see that all of these aspects are irretrievably interlocked and one cannot deal with any one of them without dealing with the others.

The summit is of vital importance economically because of the burden of defence expenditure on the United States and its allies, as well as on the Eastern bloc. For that reason alone, let alone the danger of the arms race, it is in the interests of both East and West to reach a solid agreement about the limitation of arms. Therefore, it is not enough to wish the President well when he has his dialogue with Mr. Gorbachev in Geneva. What is required is a firm decision at that summit, by both men, on the principles of the limitation of arms, on which they will then embark. That is absolutely essential in the interests of the West.

Having agreed on the principles, the President and Mr. Gorbachev should then delegate to advisers, trusted not only by themselves but by those also taking part in the negotiations, the working out of the detail of the agreement that they wish to reach. This happened in 1963 with the first test ban agreement, the first of the post-war agreements between the super powers, and the one in which Britain was involved, the succeeding agreements of the non-proliferation agreement, the agreement on no testing on the sea bed—when I was Prime Minister—and the first and second SALT agreements.

We shall never get an agreement on these intricate matters with 150 officials sitting around the table in Geneva. We shall get agreement only by the principals settling the basis and then detailing those who will work them out. In 1963, Averell Harriman represented the President. He was trusted in Moscow because he had been ambassador there during the war. Lord Hailsham was asked by the Prime Minister to represent him, and he was trusted by the Americans because he has an American mother. Mr. Gromyko was was asked by the Russians because there was nobody else, and he was always there. In 14 days, those three worked out the first test ban treaty, which was signed in Moscow. I went there with Lord Home. That is the importance of a summit and that is what should and, I hope, will happen on this occasion. However, I must confess that I have little confidence in it doing so.

That brings us to the international economic situation. Some 29 per cent. of the United States budget, and 13 per cent. of our budget, is devoted to defence. Even with a loyal ally, there is a difference. The burden is simply immense, and has led to the large American budget deficit that has already been mentioned. That requires high interest rates, which in turn produce an uncompetitive dollar height. That means that a vast trade deficit is accumulated. In addition, the developing world has to pay high interest rates, and the burden on it is already intolerable. Therefore, there is a direct connection between the military and political budget and the economic situation in the United States, with a high budget deficit, a high trade deficit, high interest rates and the impact not only on the developing countries but on us in Europe and the rest of the world.

What will happen about those factors? In the light of what I have said about the summit, I cannot see that there will be any basic change in those aspects of the United States economic situation. The economy is wavering there and we shall not see substantial growth in it. Therefore, we all face the problem of the difference between the President and the Congress and what can be done about the budget deficit. As long as that remains, there will be high United States interest rates.

Therefore, it was an important development when the Secretary of the Treasury called the five together to try to find a way to reduce the strength of the dollar. My hon. Friends would term this as devaluation, and therefore deplorable. However, we should welcome it if the United States decides that it can devalue the dollar. That is the only way to try to deal with its trading position. By dealing with that, one can deal with protectionism. When sterling went down at the beginning of the year from $1.30 to $1.05, did anybody condemn my right hon. Friend the Chancellor for devaluation? No, nobody did.

Mr. Yeo

The United States has the most massive trade deficit in world history. The British economy is running at a substantial trade surplus and that is why devaluation is appropriate for America but not for us.

Mr. Heath

To talk in terms of devaluation with floating currencies involves determining at what level we can effectively trade in sterling. We must have regard to that, just as the United States should be moving into a dollar position at which it can redress its trade balance. If we can achieve that for sterling, we shall be doing a good thing.

I come now to the nature of the summit to get agreement to deal with the economic affairs. There must be no attempt to link any arrangement about armaments with any other factor. In 1963 we did not do so and we did not do so in any of the succeeding negotiations. To attempt to link the Geneva armaments talks with freedom in the Soviet Union or with Afghanistan or Latin America is doomed to failure automatically. One can deal with such problems in other forums. The Helsinki agreement deals with human rights, and there has been a review conference on that recently. There is the United Nations for other problems, and regional arrangements for central America. Therefore, any attempt to have a general agreement on all of these spheres or to put armaments in the context of individual rights is dooming the conference to failure, which I hope will not happen.

The situation in the developing world is deteriorating rapidly, and is bound to affect us as an exporting country. Twenty three per cent. of the exports of the developing world are used solely in the repayment of debt and the payment of interest after all reconstruction. That is bound to lead to reduced imports, and a reduction in their standard of living, and those reduced imports will affect us as a manufacturing country.

For the first time in the first quarter of this year the flow of capital was reversed. Instead of capital going from the developed richer world to the developing countries, it went from the developing countries, the poor, back to the rich. That is continuing, and is a fatally damaging movement. What is more—this ties up with the concluding words of the Chancellor of the Exchequer—that movement ties up with the position in banking. Some people say that that movement will enable the banks, which are getting payment of interest and repayment of debt, to invest in other more profitable, more useful, more valuable and more interesting projects. However, that is not happening. The decisions are, rightly, left to the banks. The banks, having felt that they made mistakes in earlier years, are over-reacting and not putting that money into useful capital investment. Therefore, that represents a loss to the developing world, and to the trade of both developed and developing countries.

It is right to leave the decisions to the banking world, but I would not go so far as to say that nothing should be done to help commercial banks out of difficulties. I do not think that the Chancellor on principle can argue that that should never happen. The proper structuring of the debt burden can be done only if some burden is taken from the commercial banks, for which they must pay, by central banks, and if the international institutions take some burden from the central banks. The International Monetary Fund can do that with an issue of special drawing rights.

That is why the other initiative of Secretary of the Treasury Baker is so important. It is the proposal to provide $30 billion over three years to help the Third world in its indebtedness. That is a complete reversal of American policy, as the American Government openly admit. I sometimes wish that the Chancellor would follow the example of the Secretary of the Treasury. We can now urge other developed countries to follow his example. Thirty billion dollars will not be enough to deal with the position. In 1980 the Brandt Commission report recognised that $70 billion was required, and by now we must need nearly $100 billion if restructuring is to be successful and if we are to create the demand that we in the developed world want for our exports.

Many of the changes that the Chancellor announced in his statement yesterday are to be welcomed, particularly those which involve a change of attitude and approach. He is right to be proud of the achievements that he and his predecessor have brought about. His emphasis yesterday that he and the Government feel that they are getting nearer to 1973, 1972 and 1971 was impressive. They have every right to take pride in that because many of them took part at the time and helped in those achievements.

The Chancellor has nothing to report regarding manufacturing industry. Both investment and output is less than in 1979, and far less than in 1973, which is to be regretted. On unemployment, the contrast is between 580,000 and, to talk in round figures, 3,580,000. Although I welcome what the Chancellor has done, I cannot help comparing it with what is now widely acknowledged to be required. I agree with the Secretary of State for the Environment that what is needed cannot be done overnight. One can regret the speed at which it has happened, for example, in housing, but more can and should be done in that respect. Again, that elicits the cries of "Inflation!", or "Reflation means inflation!", which, by definition, is nonsense, or, "We can never borrow money or have debts". Even The Sun, well informed as it is, seems to take the view that we borrow nothing at present. The Chancellor should write to the editor and say that if he wants a knighthood he must recognise that there is a public sector borrowing requirement which is being satisfied, although it may not always be at the level that he wishes.

The question is one of balance, which is pragmatism. How much should we do in these spheres? We should be doing still more, and because of the amount of resources available, that will not lead to roaring inflation.

I now turn to one aspect of manufacturing which worries me. I do not see how the Chancellor's forecast of a fall in inflation to his projected level can occur by the middle of next year unless he keeps sterling high in dollar terms or makes it even higher. That will require interest rates to remain where they are or to become higher. They are high enough already. What is the consequence of that for industry? Every industrialist—not only the Confederation of British Industry as an organisation—says that he is doubtful whether his industry can possibly compete effectively for long with sterling at its present level. Immediately the shout goes up, "What would you have it at?" Industrialists will reply that they want it at £1.20 to the dollar, and lower for the mark, if the Chancellor likes to talk to them. The Lords Committee talked frankly to them—and the Government were a little unwise to react quite so quickly to an excellent report, particularly as it is on a theme on which they cannot produce answers, that is, the decline of the manufacturing sector. Sterling must be lower if we are to be effective in the export markets. As we are now in a pragmatic period, the Chancellor can handle that, and I hope that he will do so.

I now turn to manufactures and exports, and shall mention what the Secretary of State for Trade and Industry said yesterday about financing particular joint ventures. That is welcome, but it is inadequate and far too late. The five years' grace in payment, for example, does not compare with what is being offered by the United States, Japan and other members of the European Community. If there is an interest reduction, perhaps to 5 per cent., it will not compare with what is being offered by our competitors. One can point to innumerable cases, for example, to the Istanbul bridge. I was there when the whole affair occurred. Everyone was astonished that the British should blow their tops at not winning that tender. They said that the difference was $112 million, yet the British expected them to pay it so that the British could build the second Bosphorus bridge because they had built the first. That is unrealistic, and the gap is enormous.

Again, we have lost a contract for four conventional power stations in south-west China simply because our contractor put in the highest tender. It was 10 per cent. above the next highest, and 35 per cent. above the group which was put on the short list. That is what we must contend with, and manufacturers must know that they cannot compete unless they can get the same sort of financial arrangements as their competitors and unless our interest rates are brought down. That is basic to the manufacturing crisis. Wherever one goes in the world one finds the same problem. There is a contract for housing in Istanbul that is open to us, but unless we can provide a 15-year period of grace we shall have the utmost difficulty in winning that contract, although the Turks want the British there. They beg us to give the same terms as our competitors.

We are terribly slow in reacting to these situations because of the whole process of going through the Departments. I am not one who knocks Departments because I know their problems well, but we are terribly slow in dealing with such proposals compared with our competitors. We ask whether the project is suitable, and now we also ask whether it will fit in with a suitable economic policy of the country that is borrowing the sums. All that takes months. In the meantime, our competitors walk in and take the contracts. I was Secretary of State for Trade and Industry once, so I know the bureaucratic problems. If we are to achieve contracts, we must speed up the process and be prepared to do things which, in the old days of conventional dogma, seemed horrifying.

We might emphasise the importance of the free market. In Britain, Government can determine the free market through legislation and regulations, but we cannot impose our form of free market on the rest of the world. If the rest of the world likes to have a free market like that of the Belgians, in which there are no interest charges or repayments for 10 years and repayments are over 15 years, we cannot expect them to accept our form of free market. That is what the world is about today. There is a gap between Government, banking, and industry—the manufacturers and exporters.

I hope that the Chancellor of the Exchequer will not hesitate but will persevere in his efforts. The changes that are taking place are most acceptable, and there is room for a considerable number of further developments in the sphere in which he is moving. However, there are two dangers in using resources for a reduction in taxation. The first is that if that reduction goes to individuals, it will be used largely for the consumption of imports from abroad, which will damage the industrial base. That is a problem for the trade balance.

The second danger involves the freeing of the nationalised industries. When a nationalised industry is bought, a large amount of investment money is involved. That goes out in a reduction in taxation for the whole range of taxpayers and is used for consumption. That is the real point about freeing the nationalised industries and putting them on the market. The timing is important. It is also important whether the resources are used to reduce taxation, which will lead to increased consumption and an increase in imported goods, or whether they are spent on infrastructure—schools, hospitals and so on. That is the point on which we should concentrate.

Much has to be done if we are to rebuild industry. The emphasis is always on the individuals. That is good. They have a rough time in a semi-depression, such as that which we are experiencing, keeping themselves going for more than a year. They have a tough time. The Chancellor smiles, but individuals do have a tough time. In my constituency, members of firms which are going bankrupt ask me how they can be rescued. That is a problem, but it does not mean that people should not take risks.

Such people complain that the Government urge them to export goods and ask whether I can get them finance to do that. I ask what sort of finance they need and I might be told "I want money to pay for my air fare". I tell the person "I am sorry. You are not in a position to organise exports to Japan if you cannot even pay your own air fare."

We must be careful about small business men, but we must ask how Government and finance work with existing companies to ensure that they remain and expand. The Times today contained a report from the CBI saying that 12 of our major 72 firms are considering moving all their manufacturing from Britain because of conditions here. That is immensely damaging. I suggest that the Chancellor devotes his attention to creating a sound manufacturing base.

Even if oil does not run out as quickly as many predict, 1995 is only 10 years away. How long did it take Nuffield to build up his motor business from the cycle shop opposite Balliol in Oxford? How long did it take GEC to become established so that it could undertake real manufacturing exports? A tremendous job is involved. We are talking about only 10 or 15 years, so the job must be dealt with at once. I urge the Chancellor and his colleagues to tackle the problem. They should carry on with plans for individuals and employers, but they must tackle the manufacturing problem. Let us provide money for research. Let us provide an education system on the scale provided by the Americans and the Japanese which will give our manufacturers the engineers and scientists that they need. Let us back that up with a foreign service which has the resources to deal with trade overseas.

China was mentioned yesterday. We have just established our first consulate-general outside Peking in Shanghai. The Americans, Germans, French and Japanese already have consulates-general in all the major Chinese cities. This is our first. Our staff consists of three in a city of 12 million people. They can carry on because they have part-time wives. Two of the wives help out. The Chancellor of the Exchequer may laugh, but the Japanese consulate-general and business group in Shanghai comprises 510 people. That is the contrast.

We have made a mistake in cutting our foreign services, in cutting our consulates-general and overseas broadcasts and in cutting the numbers of foreign students. All those cuts seemed to be principled at the time and saved a little money, but they have cost us an immense amount in the last five years.

The Chancellor could help by organising a campaign to restore the manufacturing base and to give manufacturers the facilities that they need. If we did that, we should be looking forward to 1995 and afterwards.

Several Hon. Members

rose—

Mr. Deputy Speaker

Order. A large number of hon. Members wish to take part in the debate, so short speeches will help to avoid disappointments.

6.17 pm

Mr. Willie W. Hamilton (Fife, Central)

I hope that the Chancellor of the Exchequer will stop sneering when he hears speeches such as that made by the right hon. Member for Old Bexley and Sidcup (Mr. Heath). Much of the Government's trouble is that whenever a speech, either by the right hon. Member for Plymouth, Devonport (Dr. Owen) or the right hon. Member for Old Bexley and Sidcup, disagrees with the Government, the Chancellor sneers or laughs outright, as if all wisdom resided in the Government.

I have listened to the Chancellor and the Prime Minister over the last few years, and I would not dream of buying a second-hand car from either of them. Nobody believes a word that they say any more. In the six years that they have been in government, they have had the power to do exactly what they like, and yet 4 million people are unemployed. The figure is likely to be higher in two years, and yet the Government are embarking on a campaign to convince people that their Government have been an unmitigated success. They claim that everything is rosy and that people will not regret it if they vote for them a third time. People would be extremely stupid to be taken in a third time. Despite all that the Government have said, I guess that the unemployment figure two years from now, or whenever the next election comes, will be higher and the problem worse.

As a representative of Scotland, I know that regional policy is a dead duck. The Government do not believe in it because it runs counter to all their arguments about the law of the market. The Chancellor of the Exchequer talks about the magic of the market. He does not believe in regional policy or in intervention. Public sector housing is worse than it has been since 1919—since the end of the first world war.

Reports by Prince Philip and remarks by Prince Charles—members of a family that I greatly admire—have drawn attention to the problems that this Government have exacerbated, such as deteriorating housing and tension in our inner cities. Various experts—both political and non-political—estimate that to prevent our housing from deteriorating further we require additional expenditure of thousands of millions of pounds.

The Government, in their great statement yesterday, said that they would allocate another couple of hundred million pounds to housing. That will not even scratch the surface of the problem. Yet neither the Prime Minister nor the Chancellor can resist sneering at members of the royal family who draw attention to our housing problems and to the social and economic tensions in our inner cities—created by the Government's attitude to unemployment—where there is a feeling of injustice, unfairness and hopelessness. All that is a direct consequence of six years of the magic of the market.

The Prime Minister and the Chancellor have spoken of how important it is that everyone should obey the rule of law. No Government have been more guilty of breaking the law than this Tory Government. On no fewer than eight occasions during the past year or so, Ministers have disobeyed the law. Only last week the Secretary of State for Transport was hauled over the coals in the High Court because he interfered with a GLC decision on heavy lorries. The High Court told him to mind his own business. He was unlawfully trying to undo a legal decision taken by a council that the Government intend to abolish because it dares to go against their beliefs and convictions.

Year after year, private employers—many of them sitting on the Conservative Benches—disobey the law on minimum wages. The Government say, "Obey the law", but not to their friends. The other evening I watched a television programme about massive fraud in the City —that great citadel of Toryism. It involves not tens of pounds—the sort of sums involved in social security payments or income tax for which the Government are pursuing my constituents—but hundreds of millions of pounds. What are the Government doing about that? They are doing precisely nothing.

It is the same story with those firms disobeying the law by not filing their annual accounts and reports with Companies house. I refer not to tens of firms or hundreds or thousands of firms, but to hundreds of thousands of firms that are statutorily obliged to file their annual accounts and reports. The Government are doing precisely nothing about that either. They should not talk to us about law and order—they should put their own house in order from the City right down to the private firms that shovel money into the Tory party election fund.

The Prime Minister never ceases to lecture our people about law and order and crime. The Government have poured thousands of millions of pounds into the police force and the prison service during the past five years. No Conservative Member can deny that the Government have lectured nurses, teachers and others in highly responsible but low-paid jobs, saying the the country cannot afford to pay them a decent salary. The police have never been subject to that, and I say good luck to them. There is no shortage of money for law and order, the police force or the prison service.

What about the Falkland Islands? The Government have poured £2,000 million into those little islands 8,000 miles away, yet say that they cannot afford a few quid extra for our teachers. They cannot deceive the people. If they can find £2,000 million to pour into the Falkland Islands, they can find it for the teachers, the nurses and others who deserve it. It is a question of priorities and willpower.

The Prime Minister tells us that we cannot solve a problem by chucking money at it. Since 1979, she has done nothing else but chuck money at the police, the prison service and the armed forces, yet the level of crime today is 40 per cent. higher than when she began. I hazard a guess that in two years it will be even higher.

I challenge the Minister on three issues—law and order, housing and unemployment. Dare he assert that, as a result of the Government's new policies announced yesterday, unemployment and crime will be less and the housing problem nearer a solution two years from now? I bet my last halfpenny that the problems will be worse in 1987. No presentation by the Government will conceal that. The people have tumbled the deceit, the deception and double talk of a Government led by the most superficial woman ever to have been in Parliament. They will not be deluded a third time. The day of reckoning is coming, and the sooner the better.

6.27 pm

Mr. Julian Amery (Brighton, Pavilion)

I wish at the outset to congratulate my right hon. Friend the Chancellor on having continued to make the reduction of inflation his first priority. It is the only basis from which sustained growth can develop. I join others in congratulating him also on the remarkable correlation that he has achieved between our growth levels and the rate of inflation that we hope to achieve during the next few months.

That is a good prospect, but I see on the horizon a cloud a little larger than a man's hand. The real threat to the growth that we hope to achieve comes from the rise in our unit labour costs and general wage settlements. Earnings in our manufacturing industry during the past 12 months rose by 9.5 per cent., while those of our main competitors rose between only 2.5 and 4 per cent., with the exception of France, which is not the most efficient member of the class, where they rose by 6 per cent.

Our unit labour costs in manufacturing in the second quarter of last year rose by 6.8 per cent., and in July by 7.9 per cent., while our competitors endured rises of 2 per cent. or less. If we continue to carry that handicap, can British industry hope to compete either in the export market or against imports? If we cannot compete, can we avoid a serious setback in the last quarter of next year involving a check in growth, a rise in unemployment and, conceivably, even the renewal of rising inflation?

My right hon. Friend the Chancellor of the Exchequer saw all this clearly in his speech at the Café Royal the other day. He exhorted industrialists not to cut wages but to keep down the rise in wages to about the level of the competition that we face. Will his exhortations succeed? Will he even succeed in the public sector in achieving a lesser rise? It is interesting to remember that a 1 per cent. rise in public sector wage settlements costs about £400 million.

If the Chancellor cannot succeed by exhortation to persuade industry and the public sector to do as they should in economic terms, can he avoid bailing out industry and the economy by reducing interest rates and leaving it to the market to judge what the exchange rate should be? To bail out industry in that way is not right by sound economic principles, but can he avoid it? Can we avoid the reality where, if we do not intend to have a statutory incomes policy and if we leave it to market forces, the only alternative may be to reduce the exchange rate by reducing interest rates?

I can understand why my right hon. Friend has so far set his face against that. He sees in a strong currency protection against a renewal of inflation. In that he is right. He believes that high interest rates will hold up the currency and help to contain the money supply. That is true. He may also see in high interest rates and a high exchange rate a means of compelling industry to take a more realistic approach to wage settlements. But suppose it does not. Is there any alternative to contemplating what some might call a more realistic exchange rate for sterling? I am not saying that he has to act now, but much damage has been done in the past 18 to 12 months. Our costs have become very distorted compared with those of our competitors.

I hope that in all this the Chancellor will not be unduly influenced by the summit meeting of Finance Ministers or by any obligation to bring down the dollar. Of course, we have to avoid protectionist tendencies in the United States Congress, but no action taken by the reserve banks, unless carefully concerted, will have any influence. Will it even then? So far Germany and Japan have said that they are not obliged to bring down their interest rates. I am not sure how far the Federal Reserve Bank has moved. Anyway, are central bank resources adequate to influence markets in a world where the Euro market deposits alone total nearly $2.5 trillion dollars?

The first priority is not to check protectionist tendencies in the United States but to prevent a position where growth is checked here and unemployment goes up again. Of course, industry should do the job for itself. The crisis is not of the Government's making, but at the end of the day the buck stops with my right hon. Friend.

6.34 pm

Mr. Robert Sheldon (Ashton-under-Lyne)

Yes, the buck certainly stops with the Chancellor of the Exchequer. I was particularly grateful for the speech of the right hon. Member for Old Bexley and Sidcup (Mr. Heath). As he went on, we noted the discomfiture of the Chancellor of the Exchequer, who has been compelled to accept the first instalment of the pragmatism urged by the right hon. Gentleman over so many years. I was only sorry that the right hon. Member for South Down (Mr. Powell) was not here. We have in the House several interesting antagonisms which lend colour to our debates. It is a pity that the full colour was not shown on this occasion.

In the early days the Government stated that our problems stemmed from public expenditure and that control of the money supply would solve the problem of inflation. Those were the glorious days of early youth of the Government. We have had sterling M3 in double figures every year since then, but the Government continued with their dogma until a couple of months ago. Admittedly the dogma had started to get ragged at the edges but it still continued. At last within the past few months they have repented. I only wish that the academics who took up political positions would likewise repent. It is not for academics to take up a political stand and they too should admit their error.

The Government sought to run the economy on automatic pilot. The automatic pilot had a basic fault in that it was nonsense. Now the Government are running on the principle of the exchange rate. All Governments to a certain extent run the economy on the assumption of a certain exchange rate. What is different is that this Government have always proclaimed neutrality.

When the dollar-sterling exchange rate exceeded 2.40 they did nothing. When it fell to nearly parity with the dollar they realised finally that the nonsense had to stop. That was the turning point, the moment when truth broke in upon the convoluted theories which monetarism had become. So MO, M1 , M2, PS11, PS12, M3 and sterling M3 all collapsed and were replaced by the simple single standard of the exchange rate as the prime determinant of economic policy. That is to be between 80 and 81 against the old Smithsonian level. That is what determines the interest rates, the success or failure of manufacturing industry, the level of inflation and the Government's economic policy.

I have nothing against using the exchange rate as a prime determinant of economic policy. I welcome the move to realism, although I wish it had come earlier. What concerns me is that the exchange rate should be fixed in relation to the needs of industry rather than to the needs of the Government. The needs of the Government are to retain the one success they claim, reducing inflation. After all these years we are back to the pre-1967 position of defending the pound. We are enduring great economic and industrial privations just for that. For the Government, the important aim is a strong pound. A strong pound means that imports are cheap and the cost of living remains artificially low. It also has the important consequence that it is of benefit to the City of London and hence to the south-east, even though it causes great damage to the rest of the country.

As evidence I can cite no better organisation than the Manchester chamber of commerce and industry which describes the position as it is. It does not talk about money supply or any nonsense like that. It tells us what order books are like and about sales and output. It is to be commended for that purpose. Perhaps I should declare an interest: I am an ex-officio member of it. It says: The results of the latest quarterly survey of manufacturing industry indicate a significant fall in orders and deliveries for both home and export markets. That is very sad: The decline in exports has been especially sharp, and must be attributable to an overvalued exchange rate against key European currencies, such as the Deutschemark. It is therefore not surprising that the data highlight a substantial increase in the percentage of respondents requiring a lower exchange rate for improving business prospects. Measures are needed now if the disasters of 1979–81, characterised by high interest rates and an overvalued exchange rate, are not to be repeated … Over four years ago the Manchester Chamber warned that manufacturing industry, and the region's industrial base, was being eroded by the damaging effect of an overvalued exchange rate and high interest rates. That is not the message from the City of London, which has the enormous advantage of being close at hand and having people who understand Whitehall completely, know which Minister to go to, and how to put their points. It is the message of those who deal with the world as it is and face the commercial and industrial realities.

Mr. Grylls

I have been following the right hon. Gentleman's arguments about the exchange rate and its effect on industry and inflation, but will he recognise that for business the most damaging single thing is when inflation gets out of control? That destroys more businesses than any other measure. When the right hon. Gentleman says that inflation is important only for the Government, that is surely nonsense. It is crucial for the survival of British industry and commerce as a whole.

Mr. Sheldon

Nobody can doubt that inflation is important, but we are not talking about hyper-inflation. We are talking about those who represent commerce and industry in the regions, who have a proper understanding of what it means to them, and who understand that political factors are not their concern.

When Sir Terence Beckett talked about a bare-knuckle fight, and thought he was speaking for industry, he found that he was speaking also on behalf of those who were politically interested, and that some of their political interests even overrode their commercial and industrial interest. The Manchester Chamber of Commerce and Industry talks about things as they are, and that is its particular value.

The Chancellor of the Exchequer is selling off £5 billion worth of assets that belong to the people of Britain. Some of them are monopolies. The Chancellor will be transferring a public monopoly and creating to some extent a private monopoly over which he will have less control. Even more, he will be selling capital assets to spend in consumption. The Chancellor of the Exchequer asks what is wrong with consumption. The answer is nothing, as long as the money to buy that consumption is earned.

We are consuming at present the windfall of North sea oil. To that must now be added the regular consumption of our capital assets. It is only a quirk in our accounting arrangements that counts sales of Government property as negative public expenditure. So long as that was limited to small sales, such an eccentricity in our system of Government accounting did not much matter. It is an error to transfer capital to consumption in so profligate a way.

I can understand the ideology of privatisation, although I strongly oppose it. If the Government sold public assets but ensured that the proceeds went into investment, whether in the infrastructure or elsewhere, the charge of profligacy could be avoided. What they are doing allows of no defence. We are seeing the decline of ideology. Privatisation was seen at one time as the triumph of private enterprise over public enterprise. It fitted in with all the beliefs that owed their origin more to speeches at Tory party conferences than to reflection and consideration. The new version of privatisation means much more in terms of increasing consumption by means of tax reductions than removing the state from the ownership of public enterprise. But another matter that concerns me is the price at which those assets are being sold.

When the sales were counted in tens or maybe even hundreds of millions of pounds, the cost to the taxpayer and to the nation was limited if the price obtained was too low. When we are talking of thousands of millions of pounds, the matter becomes much more serious.

Every year the Treasury, through the Government broker, sells billions of pounds of Government stock. The price is finally pitched and stock is released in amounts to maximise the price eventually paid to the Treasury. As a Treasury Minister I visited the Government broker—as I suppose many other Treasury Ministers have in the past, and still do today—to satisfy myself that the sales of stock were being efficiently managed to produce the best deal for the taxpayer.

In the years from 1980 to 1984, the Government's annual sales of marketable securities were £12 billion, £4 billion, £4 billion, £11 billion and £11 billion. Those figures are not all that dissimilar to the sums of money now being raised by privatisation.

It is interesting to look at the 50 issues a year of Government and Government-guaranteed marketable securities, at £100 million or £200 million every week or so. We are now in the same league as that of the Government broker selling Government stock in having to sell off our national assets. It is no less important for the sales of Government assets to be managed so that the Government obtain the proper price, in just the same way as they try desperately to obtain the proper price for the securities that they sell on the open market.

What worries many who have at heart the proper control of public finance is the fact that the Government are in such a hurry to sell off so much in so short a time, and that they are not being nearly as scrupulous as they should be in those sales. We must call for a less hurried approach. If they have to sell, it should be done in tranches so that the price can be pitched at a level that is acceptable to the British public who do not share the Government's ideology. The control of public finance is a crucial matter and should be of importance to everybody in the Treasury and the Government.

My final point concerns the appointment of Lord Young as the Secretary of State for Employment. Problems always arise when a Minister is not a member of this House. There are democratic arguments as well as practical arguments concerning exposure to the views of elected members. I am principally concerned at the relative security that such a Minister has in facing the polite comments in the other place in contrast to the probing, searching and sometimes angry questions on unemployment which can be put by Members of this House, representing and expressing the views acquired by them in meeting their constituents. It is very easy for a Minister to impress the House of Lords. It is much harder to do the same in this Chamber.

I have always held that one of the reasons for the selection of Lord Home as Prime Minister, in preference to the far wider choice available in 1963, was that Lord Home would not have to face the pointed, direct and necessary criticisms that this House offers.

A Minister with such an important portfolio and responsibility, and who is directly concerned with unemployment, should be answerable to this House. It is no solution to offer this House a substitute, however able he may be, who informs the Secretary of State indirectly of the feelings of this House. Responsibility at one remove is not responsibility at all. The House should express itself collectively on matters such as this. It has done so in the past; it ought to do so again.

6.49 pm

Sir William Clark (Croydon, South)

It is always a pleasure to follow the right hon. Member for Ashton-under-Lyne (Mr. Sheldon). Perhaps I might return in a few moments to his point about privatisation.

I listened with interest to the speech of the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley). As far as I could gather, he was advocating the same policy for today's conditions as was advocated by his own Government who, I remind the House, ended with a bank rate of some 17 per cent. and a visit to the International Monetary Fund, with the IMF determining what our economic policy should be. It seems surprising that after all these years the right hon. Gentleman has not even learnt that lesson—nor indeed the right hon. Member for Plymouth, Devonport (Dr. Owen), who was a member of the same Government.

Most Conservative Members welcome the mention in the Queen's Speech of a reduction in taxation. The autumn statement, issued yesterday, will also be generally welcomed, though not by the prophets of gloom and doom. Opposition Members had great difficulty in attacking it. It seems that they relish only the bad news. The fact that the autumn statement showed how buoyant the economy was and what could happen with continued growth did not please them, so they picked on privatisation.

A Member of another Opposition party accused us of a U-turn. In his Budget statement of March this year, the Chancellor said that total Government expenditure for the next year would be £139 billion. In his autumn statement he said precisely that. So there has been no increase in public expenditure, although it is true that within the £139 billion there has been a reallocation of resources. I remind the House, however, that in that amount some £24 billion is allocated to capital projects. When the hon. Member for Fife, Central (Mr. Hamilton) spoke about the amount going to housing, he sneeringly said that only £220 million was to be allocated to the housing programme next year. That is nowhere near the truth. That amount is in addition to the £3 billion being spent on housing next year. So the housing allocation for next year is some £3.25 billion, very different from the £220 million that he mentioned.

We can take some comfort in the fact that the Chancellor pointed out—and it is quite obvious from the autumn statement—that we now have the lowest borrowing requirement since 1971–72, and that we shall have the lowest proportion of public expenditure for gross domestic product since 1972–73. My right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath) took pleasure in that, and I do not blame him. I was in the House at the same time as he was in 1971–72 and, 13 or 14 years later, we have just got back to that. I remind the House that in the meantime we have had quite a severe recession. We can take pride in having come out of that and in the fact that the economy is so buoyant at the moment.

My right hon. Friend the Member for Old Bexley and Sidcup also mentioned overseas aid. We ought to nail the lie on overseas aid. In this coming year £1,187 million of British taxpayers' money will go on overseas aid, in addition to investment by the private sector. The Government are accused of not meeting the United Nations target. Who determined the United Nations target? It was mainly those countries which receive aid. Obviously, they will pitch their demands or targets high.

Of course, the Third world needs more investment. Here the World Bank and the IMF could do a good job of work. One aspect of overseas investments to which not many Governments have paid sufficient attention is the security of those investments. If one has an investment overseas, there is very little one can do about it. If the overseas Government want to expropriate it, there are no sanctions that the investor can impose. What we could do, through the IMF and the World Bank, is to give an assurance to new investors in the Third world that if their assets or profits were confiscated the guarantee of the World Bank and the IMF would operate. This would give confidence for more investment. The Third world countries cannot continue merely to take cash and food from Western democracies. They must look at their own structures and their own environment to see how they can grow their own food. This is something to which we must pay attention.

On the question of taxation, there is a strong rumour that the Government have made up their minds to reduce the standard rate. I hope that the rumour is absolutely baseless. It is true that we have reduced the standard rate from 33p to 30p in the pound, a welcome reduction. If we were to reduce it from 30p to 29p, that would cost the Exchequer some £1,200 million. To reduce the standard rate by 1p is nothing, however. In order to mean anything, it must be a substantial reduction. A reduction of 5p would cost the Exchequer something in the order of £6 billion.

If the Chancellor has £6 billion over the next few years, would it be wise to reduce the standard rate from 30p to 25p, or would it be better to look at the thresholds? Indexing the thresholds for next year, a married man will start paying tax when he earns £70 a week. When one considers that the national average wage is well over £170 a week, it is ludicrous to start paying tax at £70 a week. If indeed we had £6 billion with which to relieve taxation over the next two years, it would surely be much better to increase the thresholds by some 30 per cent. That would bring a married man up to, say, £91 a week. It would be a definite help to the low paid. I hope that the Treasury Bench will take this message, that thresholds are extremely important and must be tackled.

Everyone welcomes the fact that for long-term unemployed persons there is to be a pilot scheme of an extra £20 a week, so that if a person who has been unemployed for a year or more takes a low-paid job he will be given an allowance of £20 a week for six months. But let us look at that. Suppose that a man has been unemployed for just over a year. He takes a low-paid job at £70 a week. With his £20 a week allowance, he is up to £90 a week and at that figure he is subjected to tax at 30 per cent. on the difference between £70 and £90. Of the £20, he has to pay £6 back. How stupid can we get? It would be much better to tackle the threshold so as to take such a person out of the tax bracket altogether. I would like to see the tax brackets much nearer the national average wage than they are at the moment.

The Government's privatisation proposals have been castigated by many Opposition Members and by some of my right hon. and hon. Friends too. It is all very well for people to say that assets such as British Rail, British Airways or the British Airports Authority belong to the general public, but it is absolute rubbish to tell our constituents that they have a share in such organisations. Such organisations are owned by the state.

If one looks at our record on privatization—the National Freight Corporation, Cable and Wireless and all the rest—one will see that the profitability of those organisations has gone up enormously. The National Freight Corporation was a loss leader year after year, but it is now extremely profitable, and that in itself is of advantage to the economy. The National Freight Corporation now pays dividends, whereas previously it did not know what dividends were. It also makes profits, and that increases the revenue to the Exchequer. That is a good thing.

There are still the siren voices of those who want to increase public expenditure, but the cold fact is that even next year we as a nation will be overspending by £8,000 million. Further increases in expenditure will mean that the Chancellor must tax, borrow or print more money. We have been down that road, and it is clear that all of them fuel inflation.

As in the past, the scourge of the economy is inflation, which erodes the wealth of any country or individual. I hope that the Chancellor will turn a deaf ear to the siren voices who want him to increase public expenditure. I am absolutely convinced that we must stick to the policy that we have had since 1979. That is the only direction in which success lies.

7.3 pm

Mr. Stan Thorne (Preston)

As well as the Queen's Speech, the debate now includes the two statements that were made yesterday. I and many Opposition Members are far from convinced that our economy, industry and employment will radically improve—if they improve at all—as a consequence of the plans announced yesterday by the Chancellor and the Paymaster General. Those statements contained no real economic initiatives from which real jobs will emerge. Unhappily, the same is true of the Gracious Speech.

We have record dole queues, and young people face a continuous dilemma, particularly on Merseyside where I live, and in the north-west generally. For example, my own son-in-law has not worked for six years. Like many others who live in that area, I am therefore well aware of the real problems that we face.

Economic planning to reduce unemployment is the major priority, but we shall not achieve that by the example to which I shall now refer. British Rail Engineering Ltd. employs 25,300 people, but over the past four years 11,200 BREL jobs have been lost. The management is presently planning to close the Swindon works in March 1986, which will mean 2,263 redundancies, and is now running down its Glasgow works, which will mean a further 1,171 redundancies.

The main line locomotive renewal programme for 1985 to 2009 envisages 1,000 units and an expenditure of £900 million, yet it is planned that Sweden's ASEA be invited to compete to supply electric and the United States be invited to compete to supply diesel. We should ensure that British Rail Engineering Ltd. produces the engines for the late 1990s and early 21st century. The skill clearly exists within the present workforce, and in my view there is no justification whatsoever for inviting those foreign tenders.

Not long ago, when I had a couple of hours to spare, I walked around the streets of Paris and took the trouble to count the number of motor cars made in Britain. I found three. The rest were made in France, Germany, Italy or Japan. It is clear that the open, free market exists in Britain, given the number of foreign vehicles that come in, but the same does not apply in other parts of Europe.

In my own constituency at present, 18,452 people are looking for work in the Preston travel-to-work area. In the north-west region, 16.3 per cent. of the work force are looking for a job. The Manchester chamber of commerce has referred to the over-valued exchange rate, high interest rates and a lack of confidence among the business community, and, as has already been mentioned, the ABCC report entitled "British Manufacturing Decline 1975–1984" refers to a balance of payments deficit on manufactures in 1984 of nearly £4 billion. That is for a country which was once described as the workshop of the world.

Do we improve industrial prospects by selling off public assets such as British Telecom, British Aerospace and British Gas? Do we really contemplate selling off the electricity industry, parts of British Rail and the profitable coal mines that exist in Britain? On the contrary, we must diminish the sale of such assets. Like other Opposition Members, I am opposed to the stripping of our public assets.

We should be seeking to restore Britain's crippled manufacturing base. Inner city squalor should be a main line of attack. Virtually every day the financial pages of the media refer to millions of pounds involved in takeover bids and to foreign money coming into Britain while British money seeks a more favourable profit overseas. I appreciate why shareowners seek the best profits, but they do not seem to have regard to what is best for Britain.

We recently celebrated Remembrance Sunday, when we remembered those who laid down their lives in the last war in order to protect Britain. It is clear that we should not expect the wealthy to consider the children of those who fell, because narrow self-interest dictates the policy of the wealthy and the policy of the Government.

Why cannot Britain's immense wealth be used to build decent homes, to extend the National Health Service, to improve the provisions for the disabled and the elderly and to ensure that educational opportunities are provided not just for the five-year-olds but for the 55-year-olds? Why have our industries not developed the drive to meet people's needs? Why has there been no major investment to overcome starvation and premature death in the Third world? All these activities, and many more, would create hundreds of thousands of jobs. Why are we not engaging in them? We have not done so in recent years because in Britain private profit is the motivating force.

Conservative Members probably attended church services last Sunday and had the temerity to participate in Christian worship, but I wonder how many of them considered the real message of Jesus Christ.

Mr. Robin Squire (Hornchurch)

Oh, come off it!

Mr. Thorne

I understand why the hon. Gentleman says, "Come off it." He will not look at the message that Jesus Christ gave, because it is the complete antithesis of the policies, ideology and philosophy of Conservative Members. I do not claim not to be a Christian, but it sticks in my craw when those who claim to be Christians reject in real life the teachings of Jesus Christ. They do so in the cause of private profit.

Regrettably, the Gracious Speech is virtually irrelevant to the crisis that faces 8 million British people and it underlines the need at the earliest opportunity to replace this Government with a Labour Government who are committed to democratic Socialism.

7.12 pm

Mr. Francis Pym (Cambridgeshire, South-East)

I am delighted to follow the hon. Member for Preston (Mr. Thorne), because I hope to touch on some of the points to which he referred.

I thought that the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) was in poor order this afternoon. He was a poor advocate for the Opposition's amendment. He was long on criticism and absolutely void on a constructive alternative. My right hon. Friend the Chancellor of the Exchequer gave a characteristically robust reply, although I noticed that he studiously avoided any reference to the autumn statement and the pragmatism that it so clearly and sensibly implied.

I welcome the Gracious Speech and, perhaps just as much, the three or four statements that have been made since then. They show that there is still plenty of life and energy left in this Government, which is just as well, because they have plenty of work still to do. I want to suggest to the House some additional strands which should be added to their strategy. Despite many advances in six years, many problems still remain, to which I shall turn later. I very much commend the Government for what they are trying to achieve in Northern Ireland. Although the House does not yet know the full details, I hope that success will attend their endeavours.

I have only two points of dissent with the Gracious Speech. The first relates to the time scale in which it is proposed to provide private funding for agricultural research. I support the principle of the industry providing some of this funding, but the speed with which the Government want the industry to do it means that a sensible transition cannot take place. Research may be damaged as a result. My second point of dissent relates to shop opening hours, but I shall not develop that argument tonight.

Since the Gracious Speech a year ago, there have been many gains, some of which were referred to this afternoon by my right hon. Friend the Chancellor of the Exchequer. There has been a healthy level of economic growth in the last year. There has even been some growth in manufacturing industry and in the number of people employed, and we have inflation under control. But, more important than all that, we have defeated the miners' strike. That is very much to the personal credit of the Prime Minister, among others. I support entirely the stand that she took on sanctions against South Africa and the arguments that she used on that issue.

None of these achievements has been lightly gained and none of them is lightly to be dismissed. However, other disturbing features of our economy and society exict alongside the achievements. They are not lightly to be dismissed, either. The first is the huge scale and duration of unemployment, about which I have been speaking for four or five years. As the expanded youth training scheme takes effect, there will be a reduction in the unemployment figures. I hope that the Government will not be tempted to treat this as in any sense a victory. The youth training scheme is absolutely right, because training is crucial to our recovery, but it does not represent solid new jobs. The fact is that, despite recent growth and six and half years of a sustained economic policy, there is, as yet, no sign that the creation of secure new employment on a sufficient scale is even on the horizon.

As for the inner city riots, I condemn their violence, as do all my hon. Friends, and, I believe, all hon. Members. I agree with the Government that unemployment was not the direct cause of the riots. No one factor was the direct cause. It is one thing to say that unemployment and related factors did not cause the riots, but quite another to say that those factors are irrelevant. Among the reasons are boredom—the boredom of having nothing to do and no money with which to do it—and a future which looks pretty bleak. I think that most of us take the view that if there were better homes in which to live and better prospects for jobs, riots would be much less likely.

An analysis of our economy is described in the report of the House of Lords Select Committee on Overseas Trade. I wish that Ministers had not reacted so hastily and in so hostile a fashion to that report. It contained well-informed and constructive criticism but also conclusions and recommendations that reinforced the Government's belief about the economy. It referred to the need for a change in the national attitude, to the vital importance of manufacturing and trade, to the need for this to be recognised in our education system and to the need for greater industrial competitiveness—all the things which the Government have been exhorting us to do for years.

The Select Committee report echoes what I and a number of my hon. Friends have been saying for some time: that manufacturing industry has suffered a major decline and that there has been a loss of competitiveness. Both these facts are a threat to our future. We have been giving serious warnings about that future, inspired by a passionate desire that our country should be prosperous in the long term. Urgent corrective action is essential if we are to remain true to our history and if we are to retain international influence.

By rubbishing the report, and by rubbishing the same analysis when made by me and by others, the Government give the impression not only of rejecting our remedies but of wishing to turn their back on the factual evidence upon which it is based. Even if the reality proves to be only half as bad as the report envisages or as I have expressed it on other occasions, the problems remain very great and they will not go away. They must he faced.

In my view, such a situation requires a mixture of consolidation and radicalism. I am glad that my right hon. Friend the Leader of the House is to reply, because he is portrayed as the captain of the consolidators. There is much to be consolidated: success in containing inflation, success in bringing responsibility to industrial relations, success in transferring state monopolies to private enterprise. But one cannot consolidate 3.5 million unemployed people; nor can one consolidate bad housing, or the decline in international competitiveness, or the breathing space that has been afforded us by North sea oil, especially when there is no sign of anything to replace it.

Consolidation is not an option. Events move forward and our responsibility is to anticipate those events and prepare for them. If that requires radical action, let there be radical action. It is not a question of the Government turning back or standing still. I do not suggest that the Government do either. The question is: in which direction should the Government move forward? I do not want to see the Government's approach abandoned. I want to see it broadened, and I am glad if that is what we are now beginning to get.

There are already some encouraging adjustments. We have seen the great demise of M3. I admire the Chancellor of the Exchequer for his daring in burying that idol of the monetarists' faith in the glare of the lights of the Mansion house. I do not think that even the deputy chairman of the Conservative party has thought of anything as brazen as that.

Following on from that is the looser fiscal stance, the less rigid finance policy that many of us have been advocating. The autumn statement showed that. My hon. Friend the Member for Croydon, South (Sir W. Clark) referred to the adherence to the public expenditure total of £139 billion, but it was clear yesterday that the Chancellor was talking about spending more money.

There is a great deal more enthusiasm for a regional policy, which I have long advocated. My right hon. and learned Friend the Secretary of State for Trade and Industry made that clear at the party conference, and in a recent speech the Paymaster General did the same. I hope that they will look at regional policy in the context of the completely different needs and requirements of the regions in decline and the regions where there is expansion.

An encouraging sign last summer was when my right hon. Friend the Prime Minister said that if current policies failed to create new jobs, new policies would be introduced. Those policies did not produce enough new jobs and new policies are now beginning to be introduced. That is extremely welcome, and I congratulate my right hon. Friends on that. However, I want to encourage them to go further, act more boldly and think beyond short-term policies to longer-term objectives.

The approach that I favour includes two basic elements. First, the Government must unswervingly maintain their commitment to industrial regeneration, greater competitiveness, increased modernisation and investment and the spirit of free enterprise. Secondly, they must offer more to the casualties of that process. They number more than 3.25 million when one includes their families. Many of them—not all—need better housing. There is certainly a need for better training, a better life and a lot more hope. Those are the basic elements in the approach, but I should like to see it go much further.

First, in view of the present levels of unemployment and the fact that more jobs will be lost if industry becomes more efficient, which it certainly needs to, the Government must take more direct action than they are at the moment to promote new employment. They should play a part in providing a proper industrial strategy and generate the finance to sustain it. By "industrial strategy" I do not mean the lowest common denominator of Government, management and unions. A fudge like that is worse than useless. I mean a partnership in which each party plays its proper role. The Government for their part must play a supportive and co-ordinating role, providing response to foreign competition. My right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath) produced a good example in the overseas contracts that he referred to. That form of partnership is practised extremely successfully by some of our overseas competitors, and I hope that my right hon. and learned Friend the new Secretary of State for Trade and Industry will provide it.

Secondly, I want to see a sustained programme of public works concentrating mainly on housing and the inner cities. That programme started modestly yesterday. I welcome it, and look forward to seeing it extended. That programme should address not only the quality of housing but mobility within the housing market, and should therefore tackle the thorny question of rent control, because mobility of labour will be very important for the revival of our economy.

Thirdly, I want to see more emphasis on research, not less. That has been one of our national success stories. It has kept us as world leaders in several areas. I want to maintain that. We are a nation of inventors, and the Government made a cut, which I believe is a strategic mistake. I am delighted that yesterday the Chancellor of the Exchequer restored £20 million to the research programme, but that does not make good the reductions that were previously made. Already there are reports that the brain drain has started again. I cannot think of anything more stupid for this country than to allow that to happen. I want to see an increase in the emphasis on research.

Fourthly, I should like to see a complete overhaul of the tax and benefit system. I know that the Government are working on that, but we do not yet know how far they intend to go. There needs to be a unified system to ensure a decent standard of living for everyone, and at the same time to provide a permanent incentive to work. Elsewhere I have advocated the basic income scheme. I shall not dwell on it tonight, but I want to draw a distinction between it and the national minimum wage favoured by the Labour party. It amazes me that the Labour party fails to appreciate the folly of the national minimum wage, which imposes on employers certain wage levels irrespective of conditions, therefore certainly giving rise to increased unemployment and a lack of competitiveness. The minimum income guarantee scheme is quite different.

Finally, we must tackle the future of our public services, particularly education and the National Health Service. We need to separate the economic objective from the social objective. The social objective is to improve standards of care, to improve the service. The economic objective is to provide that service and care as cost effectively as possible. If that can best be achieved through privatisation, as far as I am concerned, there is no argument whatsoever against it, provided that the social objective remains intact. Some time ago, I recommended that there should be a pilot scheme in one of the regions. I still think that there is some merit in that.

That balance between economic and social objectives, and the distinction between the two, is the central feature of the approach that I have been recommending to the House tonight. We must become more efficient economically and more competitive industrially, but that process has caused and will cause social hardship, which often applies to people in an arbitrary and unfair way. Therefore, we must alleviate that effect by promoting new employment, ensuring decent living standards and improving housing conditions, health care and education.

Whether it is too much to call such a broadened approach a "new deal" is a matter of opinion. I prefer that description to "new agenda", which my hon. Friend the Member for Aldershot (Mr. Critchley) used the other day. After all that has happened in the past six years, there is a need for a new deal. That stage has been reached in the life of the Government. I hope that the statements yesterday heralded the beginning of it. If they did, the Government must not pretend to be doing something different.

I think that people would welcome such a new deal and are ready for it, and I see enormous political advantage in it. It can be funded out of privatisation and would be seen as a reinvestment of national assets, which is understandable and acceptable to people. That use of those resources is preferable to tax cuts. I agreed with what my hon. Friend the Member for Croydon, South said about raising the threshold.

At any rate, such an approach is radical. It is in keeping with the Government's own committed objectives. It is also in keeping with historic Tory principles and practice. I think that it would appeal to the common sense and fairness of the British people and give a positive sense of direction and progress. I think that that is what people want, and the time for it is now.

7.29 pm

Mr. Eric S. Heffer (Liverpool, Walton)

The right hon. Member for Cambridgeshire, South-East (Mr. Pym) has clearly outlined the vision of the future of those in the Conservative party who have been described as the Centre Forwards or the wets. I describe them as those who seek to go back, within reason, to the middle-road policies of a previous Conservative Prime Minister, Lord Stockton. Not all the right hon. Gentleman's ideas appeal to me, but they are certainly a jolly sight better than anything I have heard from the Government Front Bench in the past few years.

It is not sufficient to return to Keynesian-type policies because of the character of the present deep, capitalist crisis which will not be easy to get out of. Keynesianism is not the answer. There are people, even in the Labour party, who believe that reverting to Keynesianism and straightforward interventionist policies can solve the problem. I do not agree, but such policies are better than anything suggested by those arguing for the straightforward monetarist policies that have led to our terrible crisis.

I agree with those who say that Thatcherism is not responsible for all of our faults. We live in a capitalist society and capitalism is responsible. Thatcherism is a form of capitalism that has made the crisis deeper and worse than it might have been. That is why we have higher levels of unemployment than the rest of Europe, the United States of America and other countries that are also suffering from the crisis of capitalism.

We must understand the nature of the crisis. It has occurred for many reasons, one of which cannot be avoided—we are living through a second industrial revolution. The first industrial revolution created all manner of problems. As a boy I sat at the feet of the old Socialist economists who explained to me that the solution to the problems of the industrial revolution created by capitalism was a planned Socialist economy. If such an economy was important during the first industrial revolution, my God, how much more important it is now during the second. The Government's policies are not the only reason for the crisis, although they have made it worse.

When I first came to the House we had a Labour Government. The docks in Liverpool, London, Bristol and Glasgow were working. They declined over a long period.

Mr. John Townend (Bridlington)

That was the dockers' fault.

Mr. Heffer

The hon. Gentleman does not understand what I am talking about. Perhaps he should leave the Chamber.

The docks declined for many reasons. We no longer had a great empire, patterns of trade changed and there were new technological developments inside the docks industry. Now, granaries in the Liverpool docks are worked by five or six people, when before they were worked by hundreds. This raises fundamental questions that I never hear asked when I come here. Indeed, no answers are even suggested. Keynesianism will not solve that. Thousands of workers could be put back to work immediately if there were programmes for house building, road building, rail building, and sewerage repair. All that is important and we need it, but, having got it, we would still be faced with technological advances and the fact that we do not have a proper distribution of wealth because production is for profit rather than for use.

It does not matter whether we talk of going into the European monetary system and about the snake. They all try to achieve a balance in the exising system, and it is the system that is wrong. We must consider building a new society. It would give us entirely different attitudes to employment, the distribution of wealth and public and private ownership. We must look at things differently. It is time that the country faced up to that.

Yesterday, the Paymaster General rubbished my hon. Friend the Member for Kingston-upon-Hull, East (Mr. Prescott) and quoted a pamphlet that my hon. Friend has written. The best part of the Paymaster General's speech were his quotations from that pamphlet—the rest can be forgotten. They were important quotations because they concerned planning resources and developing social ownership.

I could describe Liverpool's unemployment, but everybody knows about the crisis there and about poverty, misery and the horror of living in a society in which neither the old nor the young have any hope of employment. We cannot continue in that way, but change requires a fundamental approach.

My right hon. and hon. Friends should not be ashamed that, in our party's constitution, we have something called clause four and that we believe in Socialism. The Prime Minister believes in her principles of free enterprise and a capitalist system. She fights for those principles—rightly, as that is what she believes in. She does not care about what happens to people or about the fact that they become poor. She has no compassion for them. If she believes that, we should not be ashamed of believing that only Socialism is the answer to the country's problems—Socialist planning, Socialist ownership, democratic—

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

rose—

Mr. Heffer

I should just like to conclude.

I emphasise the word "democratic". I do not believe in the great bureaucratic system that exists in the Soviet Union and in eastern Europe. I do not want to see a lack of freedom because freedom is right. It consists not only of freedom of speech, which is essential, but the freedom to have a job and a decent home. Freedom has many sides and we must fight for it. Equally, we must fight for the freedom of thought and ideas and to express our views without being put into prison or a gulag for doing so. That is what democratic Socialism is all about and democratic Socialism is necessary if we are to begin to deal with the problems of unemployment in this country.

7.42 pm

Mr. John Townend (Bridlington)

The hon. Member for Liverpool, Walton (Mr. Heffer) said that I know nothing about the docks. I come from Hull and served on the city council there, was chairman of the finance committee and leader of the county council, and I saw my town destroyed by the dockers. With the advent of the EEC, we had every chance to take the trade that was coming from the west to the east and so become the Europort of Europe. Due to the bloody-mindedness of the Hull dockers, with their perpetual strikes and demarcation disputes, we lost that opportunity and the trade and investment went to Felixstowe, where the dockers hardly ever go on strike and there was no dead hand of the national dock labour board. After that, the hon. Member for Walton cannot tell me that I know nothing about the dockers who destroyed my city.

I strongly welcome the passage in the Gracious Speech which states:

Firm control of public expenditure will be maintained, with a view to diminishing its share of overall national output and facilitating further reductions in the burden of income tax. That statement gives the impression that the Government have at last got public expenditure under control. Although we continuously hear the Opposition talking about cuts in spending, we all know that there have been no overall cuts in total spending. Each year, departmental spending has risen remorselessly and the forecast given last January in the Government's expenditure plans for 1985–86 and 1987–88 has been exceeded by more than £2 billion in the current year. Since the Government came to power, expenditure in real terms has risen on average by 2 per cent. per annum. That increase in expenditure has been somewhat disguised by the Government's creative accounting—by which I mean the practice of showing asset sales and receipts from privatisation as a reduction in public spending. I shall not repeat the arguments showing that that is wrong, as they have been made often in reports from the Treasury Select Committee. I merely point out that this year, once again, Government spending has increased and the Government would not have been able to get their figures within the planning totals if they had not doubled the estimated receipts from privatisation.

I support the policy of privatisation for its own sake, but not as a basis for increasing Government spending or for reducing taxation. In the long term, that could prove to be a very dangerous policy. First, it allows the establishment of spending patterns which are long-term but which are met by income that is essentially nonrecurring. I was heartened to hear the Chancellor say that the present assets held in the public sector would enable asset sales, by my calculations, to go on for about 15 years, though I hardly believe that the Government intend to sell the lot.

Secondly, such a policy is dangerous because it puts off the day when cutting Government expenditure will be essential, due to the decline of oil revenues, if we are to avoid significant increases in taxation. As a traditional accountant, I should have liked to see a significant part of those resources used to pay off the national debt and thus reduce the burden of interest in future years to offset the reduction in North sea oil revenue.

Mr. Robert N. Wareing (Liverpool, West Derby)

The best way to reduce the national debt is to reduce it as a percentage of national wealth. The Government should be investing in British industry—not in Hong Kong, Taiwan and South Korea, like so many of their friends—to restore the British economy so that more wealth is created. The burden of the national debt would then decrease. It cannot be dealt with merely by taking sums of money out of the Exchequer or raiding the silver, as Lord Stockton called it, to bring down the actual figure of the national debt. It must be reduced as a percentage of national wealth. To do that we should be creating more national wealth, not more job losses.

Mr. Townend

With respect, I do not think that the hon. Gentleman knows what he is talking about. If part of the national debt is paid off, the national debt is automatically reduced as a proportion of the national wealth.

I accept that my right hon. Friend the Prime Minister and Ministers at the Treasury want to reduce public spending, but year after year they have been thwarted in their efforts by the big spending Departments and in particular by the inexorable rise in the cost of the DHSS. I therefore welcome the commitment in the Gracious Speech to bring in a Bill to reform social security, although I am not sure that it will result in significant savings to the Treasury. I warn Ministers that expenditure is likely to run out of control in one area if they are not careful. They are dealing with the board and lodging allowances for young people but not for older people. In tourist towns such as Bridlington, the conversion of hotels to old people's homes is mushrooming at a frightening rate.

One way to reduce the enormous cost of unemployment, which forms one of the major costs of the DHSS, is to reduce the increasing size of the black economy. I believe that the real unemployment level—people drawing benefit who actually want to work—is no more than 2 million and possibly even less.

Mr. Wareing

The hon. Gentleman does not know what he is talking about.

Mr. Townend

If the hon. Gentleman will listen to my argument, he will see why I come to that conclusion. More than 790,000 people are registered as unemployed in the south-east. Everyone accepts that the south-east is entirely different from the north, where my constituency is and where we have real unemployment. Of that total, 400,000 are in greater London. I believe that very few people in the south-east and certainly in greater London who are employable, prepared to travel and ready to accept any of the jobs available need be unemployed.

There are thousands of jobs available in central London, especially in the hotel, restaurant and tourist industries. My own daughter found a job within six hours. She walked off the street into a hamburger place and got a job. It was a menial job with anti-social hours and the pay was not high, but it was a job. Many employers in the tourist industry have had so much difficulty filling vacancies that they have brought in thousands of Filipinos, Spaniards, Greeks, Italians and French to man the hotels and restaurants. Some hotels are virtually 100 per cent. manned by Filipinos. There are 250,000 foreigners working in and around London, mainly in the tourist industry, doing jobs that our own people will not do.

Without doubt, many people registered as unemployed in the south-east are working in the black economy and drawing benefit as well, at considerable cost to the Treasury. This is borne out by the fact that more long-term unemployed are registered in the south of England than in the north. That is incredible. Everybody accepts that the north is far more depressed than the south of England. The only reason, of course, is that there are more long-term jobs in the black economy in the south.

Some people are unemployable because of their lack of motivation or the failure of our education system. Some prefer to live on benefit, subsidising it with part-time work. I regret to say that a growing number supplement their income from the proceeds of petty crime. The Government must address themselves to solving these problems. I welcome the move that I understand the Department is making in the more prosperous areas of the country to return to the practice whereby people who are claiming benefit will lose that benefit if they consistently refuse to take the jobs that are available.

Now that we have a guarantee of a two-year youth training scheme for every young person, benefit should be withdrawn from those under the age of 18. We should increase the incentive to work by reducing income tax. Ideally, that reduction should be financed by spending cuts, but it is so important that I am prepared to support partial financing from the proceeds of privatisation.

Because of the importance of taking people from the black economy back into the white economy, I strongly urge the Government to ensure that the vast majority of any funds available for reductions in tax should go towards progressively lifting the thresholds. Over the next few years, I should like to see a target of progressively taking out of tax everybody earning less than £150 a week.

I welcome the measures to create jobs by deregulation, particularly the proposals in the Gracious Speech to amend the regulations for wages councils. I understand that that change will take young people out of the jurisdiction of wages councils. As all hon. Members know, I have campaigned for many years in this House to have wages councils abolished, and I welcome this as a start. The Government have accepted the proposition that young people should be allowed to price themselves back into work. Why should people over 21 not be allowed to do the same? I find that strange. If deregulation is what we need to stimulate the labour market and open it up, then surely partial deregulation is not as good as full deregulation.

I welcome the radical tone of the Gracious Speech, particularly the privatisation proposals. I was saddened to see that Lord Stockton, a man who was one of my political heroes when I was a young Conservative chairman, a man who was leader of the party and who led the fight against Socialism, and who was strongly opposed to nationalisation, should in extreme old age be extolling the virtues of the public sector. To compare British Airways which has cost the taxpayer so much in recent years with the family silver is, to say the least, eccentric.

For too long, nationalisation has proved to be a dead hand on a large section of British industry. Privatisation is good for the customer, good for the workers and good for the shareholders. My own company recently benefited from the privatisation of British Telecom and the liberalisation that followed. We had an antiquated switchboard and telephones and we let it be known we were proposing to put in a modern system. The price came down and we got a much superior system for half the price and over 10 years we will save £10,000. That is the benefit of privatisation.

The other great advantage is that it enables former nationalised industries to obtain finance without affecting the public sector borrowing requirement. All those people who have been complaining about water authorities putting up the water rates would not need to complain about that if the water authorities were in the private sector and could obtain finance on the market.

There are always omissions that Back Benchers regret from any Gracious Speech, but I congratulate the Government on putting forward a radical policy. I shall support them in the months to come, but I shall continue to encourage them to make savings in public expenditure.

7.55 pm

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

The hon. Member for Bridlington (Mr. Townend) seemed fairly excited about the control of public expenditure which he said would facilitate further reductions in the burden of income tax, a matter that was referred to in the Queen's Speech. What about the burden of taxation generally? Everyone is carrying a much heavier burden than before because of the steady increase, year by year, in indirect taxation, such as the 100 per cent. increase in value added tax, which no one can avoid.

Reducing the burden of income tax is a monstrous con trick being played by the Chancellor. He knows well enough that 95 per cent. of taxpayers are paying more today than they were paying in 1979 when we left office. We should remember that not all taxpayers are income tax payers. A considerable amount of tax taken by the Treasury is not in the form of income tax. To expect ratepayers in north-east England who over many years have carried the burden of steady losses on Newcastle airport, a municipal airport of which we are extremely proud, to hand over this successful municipal enterprise to private enterprise is, to say the least, a piece of damn cheek in any language. That is what the Government are proposing in the Gracious Speech.

As we all know, the hon. Member for Bridlington is almost fanatical in his hatred of wages councils. Can the Leader of the House tell us just how wicked and depraved this Government can become? In the Queen's Speech they talk about removing the protection of wages councils from the lower paid in our society. In the main, such people do not enjoy the protection of trade unions, because only a few of them are organised. To suggest such a thing is like stealing from a charity collecting tin. That is about the level of morality of this Government.

I should like to say something about the so-called reform of social security. Why do the Government not come clean and admit that their real purpose is to rob Peter to pay Paul? In this case, Peter represents the poor and needy, and Paul represents those who are already doing very nicely, thank you. On Monday night the Evening Chronicle in Newcastle had a leading article entitled "Selling a service." The article said that when family income supplement was introduced the DHSS ran a campaign to make people aware of this new benefit. The city council in Newcastle carried out a survey which showed that fewer than 50 per cent. of the people eligible for family income supplement applied for it. Let us remember that those are people doing a full-time job, but whose earnings are such that they cannot subsist on them. That fact entitles them to claim family income supplement. The city council agreed that £14,000 of ratepayers' money will be spent publicising the rights of people to claim family income supplement.

The editor of the Evening Chronicle rightly complained that this should be a Government responsibility. There is something radically wrong when less than half the people entitled to a state benefit are claiming it. That will not be lost on the electors of Tyne Bridge on 5 December, when I am sure that they will give the Tory party in the area a bloody nose. I represented much of Tyne Bridge for 17 years. In one of its wards—Scotswood—more than 70 per cent. of people live on state benefits, including family income supplement.

If ever there was a clear issue of conscience, it is Sunday trading. Will the Leader of the House give an unequivocal undertaking that on the Second Reading of the Sunday trading Bill all hon. Members, including Ministers, will have free votes? It would be monstrous if Ministers were whipped into the Division Lobby to vote against their consciences. Some of my colleagues may disagree with me, but I believe that even Tory Ministers have consciences and the right to act according to their beliefs.

Although I have not yet seen the detailed proposals on police powers, I believe that we would all wish to support them, especially those relating to disorder, drug trafficking and the confiscation of the spoils of drug trafficking. But is it not about time that we had some return on the money that we spend on the police? Let no one forget that the Government must take credit for an enormous increase in expenditure on the police during the past six years. But it is about time that that increase led to better detection. If Joe Bloggs knows that he has a good chance of being apprehended as a result of his villainous activities, he would commit fewer crimes. Indeed, less crime would be committed generally. Burglaries cause a great deal of distress. I speak from the experience of having been burgled no fewer than five times, but the police apprehended the villain in only one case. The Metropolitan police caught the man who burgled my flat in London, but I have regained none of the property that he stole.

Those who know my background of 30 years' employment in the gas industry, private and public, will not be surprised by my following remarks. It is extremely difficult to understand how a Government who are committed to free enterprise and to competition can seriously create a private monopoly in a key energy industry such as gas. I see no evil in a public monopoly that is responsible and answerable to the public through Parliament. But a private monopoly is a horse of a very different colour. It would be accountable only to a few major shareholders. We shall lose safeguards such as the general directives that Ministers can make on behalf of taxpayers. Those major shareholders will be able to make demands of a democratically elected Government to the point of causing policy changes, which would be a negation of democracy. That cannot be right on anyone's terms.

Greater efficiency cannot be part of the Government's case, because the British Gas Corporation has, on any test, surpassed the Government's efficiency targets. The cost to the taxpayer will be astronomical. The corporation is worth about £16 billion, but Treasury-inspired media reports estimate a take of about £8 billion on flotation. Therefore, Joe Public will immediately lose £8,000 million. To add insult to injury, Joe will be asked to pay the City vultures about £300 million to sell him short by £8 billion. But worse is to come. At present, Joe Public looks forward to the Government raking in £1,000 million every year from the British Gas Corporation. That will be gone for ever. We must be in the unique position where Joe Public is being compelled by the Government to pay a group of muggers to inflict grievous bodily harm on him. It can only be described as organised corruption on a massive scale, or at least as economic vandalism.

Last year, the public monopoly spent more than £1,100 million on new and replacement investment, much of which was spent on British goods and services. One of the first acts of the privatised British Telecom was to place major orders for equipment with foreign firms. What guarantee do we have that a privatised British Gas Corporation will not follow the same path?

I suspect that, as in the case of other privatised industries, the financial institutions will corner the lion's share of the industry on flotation or shortly afterwards. But £8,000 million is a massive amount for the markets to find. If many small shareholders are encouraged to buy, there will immediately be a shortage of capital for job-creating investment and a big strain on bank and building society savings. That could lead to an increase in interest rates, mortgage rates and prices, and a consequent increase in unemployment. One side effect of privatisation will be to give the "haves" more and to take from the "have nots".

I have heard it said that employees of the BGC are anxiously awaiting the flotation for their share of the loot—the employees' shares. That may be so, but another consequence for employees will be massive job losses. The closure of gas showrooms has a snowballing effect which could result in the loss of more than 30,000 jobs. A private BGC will have no reason to wish to provide the excellent cover of showroom service at present provided by the nationalised industry, and cross-subsidisation of loss-making showrooms by the profitable ones will be no part of its concern. What about the future of the gas industry employees? The Gas Acts 1948 and 1972 provided for continuing pensions provision. However, if the example of British Telecom, British Airways and the transport employers on pensions is anything to go by, unless there is statutory provision, we cannot be certain that index-linking will continue for present pensioners, while future pensions policy will be anybody's guess.

The high standards of safety and service established during the past 35 years by the publicly owned gas industry will be put seriously at risk. I am not just crying foul. We have the evidence of British Telecom, which is now charging for emergency repairs of exchange facilities outside normal working hours. If a private gas company adopted a similar policy, would a customer telephone the emergency service during the night or at a weekend to be charged at premium rates? I think not. Such a matter must give the House cause for concern.

There is not much family silver among the people whom I represent, so I shall not weary the House by paraphrasing what was said by the Earl of Stockton, although I do not share the opinion of the hon. Member for Bridlington that Lord Stockton is an eccentric old man. Let me put it into working class parlance. This proposal is as daft as selling all the furniture to take the family to Malta for a two weeks' holiday. Why not do the sensible thing, and drop the measure before it is too late?

Several Hon. Members

rose—

Mr. Deputy Speaker (Sir Paul Dean)

Order. I renew Mr. Speaker's appeal for brief contributions. Six right hon. and hon. Members still hope to speak before the winding up speeches, which are expected to begin at about 9.10.

8.10 pm

Mr. Geoffrey Rippon (Hexham)

From your position of eminence, Mr. Deputy Speaker, you will have noticed the increase in rising damp on the Front Bench. This is not a cause for alarm. It is a cause of great satisfaction that views that were heretical a few years ago are now acceptable. I particularly welcome the fact that what I used to call motorway madness—M1, M2 and M3—has been abandoned. Little MO has taken the stage, but will be allowed to remain there only as long as she performs satisfactorily.

Over the past few months we have seen an abandonment of bad monetarism, the rigid, statistical inflexible monetarism that has done the country no good. It is a good thing to see that go. I am also happy that it is now recognised that the provision of roads, houses and hospitals creates real wealth and real jobs, and it is no longer "wet" to recommend that this should be done.

There has been no U-turn,—the Gardarene swine did not have to make a U-turn, only a change of direction. We have had the change of direction to which the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) referred—an L-turn. I hope that the Government will continue in the right direction. They can improve the situation in a number of ways. First, we need lower interest rates and hon. Member after hon. Member has explained how the CBI and everyone else knows that high interest rates have fuelled inflation, harmed British industry and done enormous damage by creating the Third world debt crisis. I have said time and again that it is all right being a Mafia loan shark if one has enforcers, but one cannot break the leg of the president of Brazil. Instead, one has to lend him more money and give him a tip for not defaulting. I was glad to hear the Chancellor say that he did not expect commercial banks to go on pouring money down the drain.

Secondly, I hope that the Government will make the progress, to which my right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath) referred, towards a new stability in monetary policy, beginning with the necessary first step of joining the exchange rate mechanism of the European monetary system. We must see the free floating, which has not worked, replaced by the old managed floating or crawling peg. We should bear in mind the old Chinese proverb that the snake in the bamboo is still a wriggling animal. We can have much flexibility while avoiding some of the difficulties that have arisen in recent years.

Thirdly, as hon. Member after hon. Member has said, we must resist the temptation to use capital receipts to finance current consumption rather than putting them into reinvestment. There has been much talk about the family silver. If one is lucky enough to have some and can sell it, it is important to realise that one can only sell it once and that one must spend the proceeds wisely. It is foolish to spend them on a holiday to Malta, but it may be sensible to use them to repair the roof.

There are encouraging signs in the Government's policy. It is no longer possible to divide the Conservative party into wets and dries. That distinction has becomed blurred. We have been told that we must now be radicals or consolidators. I hope that there is a possibility of preferring consensus to confrontation, and of not differing too often on too many matters. I hope that it will not upset them, but I share the views of those of my hon. Friends who recently wrote a pamphlet called, "No Turning Back".

If there is a dividing line, I am on the side of the radicals. That is not surprising as I am rather pleased that I myself produced a pamphlet in 1969, which I somewhat pretentiously called "Right Angle—Philosophy for the Radical Right". That was thought heretical at the time. The great thing in politics is not to be right at the wrong time. At that time I was thought extremely Right-wing by those of my colleagues who subsequently served with me in Cabinet. They teased me and called me "Monday Club Rippon". I advocated not only tax cuts and tax reform but the denationalisation of the steel industry, the telephones, the air line corporations and other services. Therefore, I very much welcome the proposed privatisation measures in the Queen's Speech.

I believe in a free market, choice and competition, but I do not believe in the old 19th century concept of each man for himself and the devil take the hindmost. There must be safeguards for both public and individual rights and if we are concerned with the defence of freedom in all its aspects, we must be prepared to ensure that there is fair competition whether in regard to Sunday trading or any other trading.

I hope that we shall have a free vote on Sunday trading, as the hon. Member for Newcastle upon Tyne, North (Mr. Brown) said. There must be a fair balance between the conflicting interests on the basis that trying to achieve consensus is better than seeking confrontation. In a civilised society, one cannot have an unregulated free-for-all.

I welcome in particular the declaration in the Queen's Speech: Measures will be introduced to establish a new regulatory framework for the financial services sector, which will enhance its efficiency and competitiveness whilst providing greater safeguards for the interests of investors". That may be relevant in the light of some of the exchanges that we had earlier this afternoon. When, in that pamphlet in 1969, I wrote of the dangers of a society that had become merger mad, I did not foresee the disorder that would exist today or that I would have to declare a personal interest. I shall do so. I am chairman of a public company, Britannia Arrow Holdings. It is now the target of a hostile bid, about which I shall not speak.

I hope that the Government will pay attention to the whole series of speeches, not just the one a week or so ago, by Mr. David Walker of the Bank of England. He drew attention to the way in which the long-term economic and business interests are being undermined by short-term considerations—what he called last year the "shortening focus". When one looks at what is going on in the City today, one has to ask oneself, "Who is minding the shop while the casino games are being played?" The late respected Patrick Hutber rightly foresaw the damage that could be done to an economy dominated by

appalling young men pushing about pieces of paper. Mr. Walker has challenged us to consider how far official attitudes to mergers and acquisition activities remain apt in the present fast-changing environment. Ministers have said that they want self-regulation within the statutory framework. That subtle theme has been used in the face of what the chairman of the stock exchange called the biggest revolution ever to hit a great capital market. We have to act decisively before next year's so-called big bang and we shall be on fairly dangerous and difficult ground when we deal with this legislation. I fancy that the debate will range beyond what the Government have in mind.

For example, we have to review the question whether Whitehall, the Bank of England or some other body will have to sort out the market distortions that have been created. It may be thought that the regulatory processes of the Bank of England are, in the circumstances of today, too secretive and uncertain to be regarded as satisfactory. We may have to consider whether we need something along the lines of the Securities Exchange Commission in the United States. In some respects our regulatory processes are stricter than those of the United States, and in others they are not. We must try to marry the two, and ensure that we have something better than we have today.

I have been impressed in the United States by the boards of independent directors who have the sole responsibility of protecting the interests of the shareholders and of ensuring that the financial services are properly run. In the United States, as here, there is growing recognition that action is essential before an outraged public demands excessively punitive regulations against the coterie of corporate raiders and speculators playing Monopoly, sometimes with junk bonds, at the expense of companies, their shareholders and employees, and the nation.

The consequences of next year's big bang in the City and its effect on the national economy may turn out to be the most important matter that we must consider this Session.

8.20 pm

Mr. A. E. P. Duffy (Sheffield, Attercliffe)

Yesterday, the Chancellor of the Exchequer presented to the House the Government's outline public expenditure plans, and made it clear that the Government's priorities were now running in the direction of tax cuts and privatisation. Indeed, the second is partly to finance the first, and I suggest that that objective is pursued with crossed fingers.

I wish to show how the Government' s intentions show little accord with the needs of south Yorkshire and, indeed, with the needs of the Yorkshire and Humberside regions, both of which need improved infrastructure, the regeneration of traditional industry and the cultivation of new industry to stem the drift from north to south.

Yorkshire and Humberside is one of the great traditional manufacturing regions. Shipping, steel, heavy and light engineering, coal, textiles and clothing all helped to forge the industrial reputation of our country, and they are now at risk. Those industries still form the backbone of the region's economic structure, but are now deemed to be unfashionable smoke-stack industries, and apparently unsuitable for the economic and environmental needs of a modern, fully developed Western industrial society.

In previous recessions, Sheffield and the towns around it fared better than other parts of Yorkshire and Humberside. The last five years, however, have seen the reversal of that position, largely due to the steady erosion of the United Kingdom cutlery industry in the 1970s, and the savage decline in the steel and engineering industries subsequently. For the first time, Sheffield and south Yorkshire face a major long-term problem of remedying structural decline in their basic industries of steel, engineering and coal mining. The economy of south Yorkshire is possibly in worse shape than any other part of the United Kingdom, and that of the rest of Yorkshire and Humberside is not much better.

A delegation from the Yorkshire regional Trades Union Congress briefed Yorkshire Labour Members a week ago in the House on the manner in which the economic decline of their region was affecting its members. Since the Tory Government came to power, 18,500 mining jobs have been lost, the public services have been decimated, and 13,000 jobs at the west and south Yorkshire county councils are at risk from abolition. The Transport Act 1985 has been the cause of reduced rural transport services, and the water industry is gearing up for privatisation proposals. The youth training scheme has been masking the real educational needs of the region, and in any event mode B schemes are being reduced. The operational fire services were being reduced by 17.5 per cent. and 20 per cent. in west and south Yorkshire respectively.

Yorkshire and Humberside face the major social problems of high levels of unemployment, land dereliction, obsolete buildings and poor grade housing stock. The senior trade union officers argue that the region urgently requires major manufacturing and infrastructure investment. They see no evidence of the record job creation, to which the Government lay claim.

In a report published last week, the Yorkshire and Humberside county councils association shows that much of the region's fixed capital stock is in need of renewal. Particular problems are found in housing, water supply, sewage disposal, river pollution, coastal protection and the road network. The association wishes to underline the need for more regional public expenditure, and the beneficial effects that that would have on the one in eight of Yorkshire's 300,000 unemployed who are from the construction industry.

Last week the association of Yorkshire and Humberside chambers of commerce called for the region's traditional manufacturing base to be encouraged and redeveloped, and not allowed to deteriorate slowly in the vague hope that the vacuum will be filled by services and tourism. As Lord Weinstock remarked to the House of Lords Overseas Trade Select Committee during its recent inquiry into manufacturing trade, What will the service industry be servicing when there is no hardware, when no wealth is actually being produced? That raises the all important question of business confidence, which is the prerequisite of investment decisions, which in turn lead to output and jobs.

That recent report shows how concerned large sections of industry are, not only about the present state of the economy, but particularly about the prospects for the rest of the decade. We even have the Institute of Directors calling unashamedly for reflation.

That, taken together with the views of the chambers of commerce, the county councils association and the regional TUC in Yorkshire and Humberside—there are no more representative, more credible, weightier authorities in the region than those bodies—all of which have been made known only during the past week, suggests that the Government's policy of reviving business confidence simply by opting out of the economy has failed lamentably.

Apart from the development of the petroleum, petrochemical and oil-based industries on Humberside in the 1960s, Yorkshire and Humberside as a whole has not attracted new technologies.

Mr. Michael Brown (Brigg and Cleethorpes)

The institutions to which the hon. Gentleman referred are weighty and well-respected, but how does he square his analysis of the position with the fact that the unemployment figure for Scunthorpe, which, like his constituency, went through terrible times in the early 1980s, is 1,000 lower today than a year ago?

Mr. Duffy

The hon. Gentleman does not say what the unemployment figure is today, and how it compares with the level of employment six years ago when the Government came to office. It is that which has moved all those representative bodies, at least two of which speak for him as well as for me, to publish those reports last week. If the hon. Gentleman has not already done so, I recommend that he looks at their contents.

Apart from the development of the industries that I mentioned in the 1960s, there have been no new technologies in the regions. There have been some homegrown developments, particularly in the Leeds area, and Harrogate has attracted scientific research and development, but the conclusion that Yorkshire and Humberside have done less well than Scotland, London and the southeast is inescapable.

South Yorkshire has an extremely low level of employment in computing and microprocessor related activities. In 1981, the latest date for official figures, those industries accounted for only 1,055 jobs or 0.2 per cent. of total employment. That is well below the national average of 1 per cent., or the national high of 1.6 per cent. in the south-east.

The South Yorkshire county council has tried in several ways to stimulate growth, but it is constrained by limited finance. The county's employment promotion and development budget of £2 million compares with Government aid totalling £298 million, available under the support for innovation programme in the current financial year.

The south-east, the most prosperous region, with the highest proportion of high tech industry, received £25.1 million—almost 10 times the assistance of £2.7 million offered to Yorkshire companies.

The problems of the older industrial areas such as Yorkshire and Humberside are clearly primarily economic. In the absence of active policies to promote regeneration—precisely the policies called for by Government Members today—their relative position is likely to worsen. Yesterday's autumn statement is not enough.

The drift to two nations in economic terms will continue unless the fundamental economic problems of the northern industrial districts are tackled. That calls for an open acknowledgement by the Government that they recognise the crisis that faces regions such as Yorkshire and Humberside and that they are prepared to do something fundamental about it.

According to the association of Yorkshire and Humberside chambers of commerce business confidence requires a serious, open, declared commitment to sustained expansion at a stable but realistic exchange rate, not a grudging, hidden, one-off, pre-election tax cut partly financed by sales of assets and higher nationalised industry prices accompanied by an unsustainably high exchange rate.

8.32 pm

Mr. John Browne (Winchester)

I rise to congratulate the Government and to ask them one question. However, before I ask the question I stress the Government's economic achievements. We have today both high growth and low inflation, which has eluded all Governments since the war. It has eluded all past Prime Ministers and Chancellors of the Exchequer, and it is the envy of most democratic countries. Growth is 3 per cent. and inflation next year will be heading for 3.25 per cent. For the first time since the 1960s the differential between the inflation rate and the growth rate is less than 1 per cent. That is a great achievement.

When one considers the circumstances, that achievement is all the more admirable. The Government have faced a world recession, which in some respects is worse than that of 1929, and terrible labour relations. We all remember the winter of discontent and the problems of restrictive practices. The ambience is different. Old industries operated at vast losses. Today even the larger industries run at considerable profit. The growth in new companies is huge, particularly in high tech and service industries.

The lack of enterprise which was typical in 1979 has changed. The enterprise spirit is on the way. It is here. Attitudes are different from those which persisted in 1979. We should be thankful for that outstanding achievement. If Opposition Members were truthful, they would admit that they wish that they could announce the same type of achievements as were announced by the Chancellor yesterday and today.

Real growth is tough, but it allows for healthy increased Government spending by taking less of a share of the national wealth. It takes less of the national cake, leaving more in the wealth creators' hands and so allows for lower tax rates which again increase the enterprise spirit. The fall in North sea oil revenues is taken into account. People ask what will happen when the North sea oil revenues fall. The Chancellor's calculations include that eventuality and allow for increased spending on infrastructure.

Many people say that the Government have changed. I do not believe that. The Government's aims have not changed one jot. They are still out to beat inflation, as they were in 1979. Of course they have changed their spending. The reason is that there is more money to spend. We have real growth and therefore the Government can change their spending habits while not losing sight of their goal.

As the right hon. Member for Plymouth, Devonport (Dr. Owen) said, we slipped from being number three to number 19 in the league of industrial nations in our decline. To change from that stagnation and inflation to growth and lower inflation has a serious price. The price is unemployment, that terrible scourge. Terrible and dreadful though unemployment is, we all knew in our heart of hearts that the massive overmanning—about 5 million people in jobs that did not exist—cost money rather than made money. We knew that massive unemployment would result from reversing the enormous investment in unprofitable and unproductive businesses.

That transition has been dreadfully hard and tough. I know that unemployment levels are dreadful and high, but they could have been worse without the Government's constructive measures.

We have resisted competition for years and we now have to compete. Suddenly in 1979 we were faced with the prospect of going down the tube and becoming a Third world country or facing competition and trying to retain our status as a developed country in the modern technological world. To do that we had to face the competition of hard-working, low-wage economies.

Cutting wages was never a political alternative. We had to push for the technological revolution. In doing that we had to accept the new services and high tech industries. We had to move out of manufacturing into the new industries of today and tomorrow.

The right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) was right to say that we must not deceive people about unemployment. I was interested in the way that he talked about that. He seemed to fear deception. Neither Government nor employers create genuine, profitable jobs—only customers can create them.

Some people urge massive Government spending to create jobs. They are calling for investment in unprofitable companies and projects. They are urging higher taxes and higher interest rates which will result in higher inflation and lower growth. Those remedies have been tried by Governments of both parties. We have seen the disasters and we know that they do not work. Such remedies are mere electoral bribes—borrow more, tax more and spend it on projects that might win votes. The result is national decline. At long last, we have a Government who are showing us the way to success. Why do Opposition Members laugh and scorn? Why do they not back the Government and admit that they wish that they were in a position to announce such achievements?

My right hon. Friend the Chancellor has said that we must not take a risk with inflation. If there were to be an untoward drop in interest rates, that could lower the level of sterling and cause a rise in inflation. With that in mind, on 30 October I asked my right hon. Friend the Prime Minister whether, with the low levels of sterling then, which became even lower—[Interruption.] Opposition Members might not agree, but if we had entered the European monetary system at those lower levels, would we not be in a better position today? We could accept lower interest rates without having the kick-on effect of a lower exchange rate and, therefore, higher inflation.

I realise that entering the European monetary system would have enormous political effects. However, high interest rates also have enormous political effects. Should not my right hon. Friend the Chancellor, despite political implications, consider the growing demand to enter the European monetary system? That would allow us to have much more flexible interest rates. It is silly to remain the one country without a currency in a major currency block. There is talk of Britain being a petrocurrency, but that, is nonsense. Oil is a small amount of our national revenue—about 6 per cent. for oil and gas together.

I congratulate my right hon. Friend the Chancellor on his proposals. Government policies are arresting our economic decline and putting us on the threshold of real growth.

8.42 pm

Mr. David Winnick (Walsall, North)

I must first emphasise that, yet again, the Queen's Speech offers no prospect of a reduction in unemployment. Indeed, most forecasters believe that the high level of unemployment will continue for some time. We must concern ourselves with the present level—more than 40 per cent. of those unemployed have been out of work for a year or more.

In the area covered by the West Midlands county council, the figure for those out of work for one year or more is 50 per cent. and many have been unemployed for over three years. Perhaps the hon. Member for Winchester (Mr. Browne) should bear that in mind. It is understandable that those made redundant in their fifties give up any hope of finding a job. Unfortunately, that is also becoming true for those made redundant in their forties.

It was deeply offensive to hear the new deputy chairman of the Tory party, Mr. Jeffrey Archer, say that the unemployed should get off their backsides and find work. We tried yesterday to get the Secretary of State for Trade and Industry to dissociate himself from those offensive remarks, but he did not wish to do so. My local newspaper, The Express and Star, in an article headlined "Hundreds in job rush", said that hundreds of work-hungry people besieged a Wolverhampton jobcentre last month after hearing of jobs being offered by a local tyre factory. Men and women began queuing at 2 am. Should they be told to get off their backsides? The jobcentre manager said that there were several thousand applications, and that jobs were going fast. One of those who queued for a job was a 57-year-old man, who stood shivering through a chilly night for more than five hours. He said that he did not mind that because I thought they might give me a job if I came early. That man had been out of work for some years. I wonder what sort of lecture he requires from the deputy chairman of the Tory party.

Mr. Archer claimed that he knew what unemployment was like, and gave an example of when he had debts of £400,000. What he said in that notorious interview must have been embarrassing for Ministers. However, in truth, what he said was probably what a number of Ministers and Conservative Members believe. The difference is that Mr. Archer decided to blurt it out. He is not a Member of the House and is not subject to the electorate. I believe that he reflected the feelings of a number of Conservatives. I should not be at all surprised if he said what the Prime Minister privately believes.

However, the Secretary of State for Energy does not believe that. In his speech to the Tory Reform Group during the party conference, he said that voters who had accepted Tory arguments about unemployment in 1983 would not accept the same excuse a second time. How right he was. Indeed, the hon. Member for Staffordshire, Moorlands (Mr. Knox) made that very point when he spoke last night.

The Times, in its leader, said that the Secretary of State for Energy must decide whether, following his extraordinarily clear assault on the heart of Government policy, he could in decent self-respect continue to sit in the Cabinet. The right hon. Gentleman has answered that question. Although he does not agree with the main thrust of Government economic policy, he has no wish to offer his resignation. He likes being in the Cabinet.

Between June 1979 and June this year, there has been a 30 per cent. drop in the number of people employed in manufacturing industry in the west midlands. That shows what has happened in the region since the Government took office—factory closures, massive redundancies, large-scale unemployment, the accompanying poverty and hardship and so on. The region has been devastated, and it is inevitable and right that there should be such harsh criticism of the Government from the people there.

What is true of the west midlands generally is true of the Black Country and certainly of the area that I represent. When I was elected in 1979, unemployment in the Walsall travel-to-work area was just 5.1 per cent.—the figure for the west midlands as a whole. It is now 17 per cent., and has been around that for three or four years. Those made redundant find it so difficult to obtain work. Having reached a certain age, they conclude that their chance of ever working again, without a real change in economic policy, is very remote. They can look forward only to receiving the old-age pension and continuing to live in poverty.

In addition to all that, having penalised so many people because of their economic policies and made so many redundant, the Government follow other policies that make it difficult for those people and their families to manage.

Mr. James Hamilton (Motherwell, North)

In fairness to the Secretary of State for the Environment, he wanted £600 million more to renovate houses. Does my hon. Friend agree that it is iniquitous that some Conservative Members are getting as much as £20,000 worth of grant to renovate old houses, which they sell? Is that not a travesty of justice?

Mr. Winnick

That is an interesting comment. I am reminded that the first time I heard of the Chancellor of the Exchequer was in 1966 when he managed to get a council mortgage for what was then a very large sum of money for a property in Lord North street; it was not the sort of property that Labour Members live in.

Ministers have tried to rubbish the report of the Lords Select Committee on Overseas Trade, but it spells out clearly the bleak future for Britain when oil runs out unless there is a change of economic policy. Ministers and Back Benchers like the hon. Member for Winchester have been telling us about how things are changing for the better. We should perhaps note that yesterday the CBI brought out a report entitled "Managing for Success" which said: Manufacturers are especially concerned about government policy—60 per cent. of all the interviews subscribed to the view that the 'government had written off manufacturing'. Some of these stated quite openly that in view of this, one of their strategic goals was to get out of manufacturing in the UK. In the same report the CBI states that seven of our most successful companies are planning to pull out of manufacturing in Britain because of Government policy. That is hardly what one would describe as optimism on the management side of industry about the policies being pursued by the Government.

My hon. Friends and I have always criticised Government economic policies We have spoken about mass unemployment. Our job is to convince the country that there is an alternative. We did not unfortunately succeed last time. An increasing number of people who gave the Tories the benefit of the doubt two years ago because of various factors, including the Falklands, will not be willing I believe to give them the benefit of the doubt at the next election. There is a growing wish among the people, including many in employment, for a change of economic policy. They do not believe that we should have permanent mass unemployment.

Our job as an Opposition is to persuade our fellow citizens that there is an alternative and to see to it that a Labour Government are elected so that the disaster that has befallen the country in the last six years can be wiped out. That is the best prospect for Britain—a Labour Government with a working majority.

8.52 pm

Mr. Terence Higgins (Worthing)

Her Majesty's Gracious Speech contained two main themes—law and order and a series of measures related to the economy. I welcome the passage in the Gracious Speech which says: Measures will be introduced to strengthen the powers of the police". In particular, I welcome the proposal that we should take power to confiscate the proceeds of drug trafficking and to penalise the handling of such proceeds. Such a measure is long overdue.

A great deal of extra resources will be needed if we are to win the battle against drug trafficking. We still have a chance of avoiding the tragic position that has developed in the United States if we get sufficient co-ordination between the police, the Home Office, Customs and Excise, the Department of Health and Social Security and the Foreign Office, all of whom will necessarily be involved in the most important social battle we face. Therefore, I welcome the proposal just announced to increase the number of Customs and Excise officials concerned with that problem, although still further resources will be necessary. Certainly the Bill which is envisaged on penalties is greatly to be welcomed.

I want to concentrate on the economic aspects of the Queen's Speech, to some extent because of the statement made yesterday by the Chancellor and his speech today. I welcome the improvement in presentation in the document which reflects the recommendation of the Select Committee on the Treasury and Civil Service. That is a considerable advance.

Obviously the Select Committee will wish to take evidence from officials and Ministers on the autumn statement before we have a debate which I hope will take place as soon as we have been able to make our report. I regret that the Chancellor has decided not to publish a fiscal adjustment. It makes it more difficult for the House to have a coherent and sensible debate. Although the Chancellor argued that the announcement last year had an effect on speculation in the exchange rate, that was also due to a considerable extent to statements made by Ministers about cutting taxes. We are still getting such statements, but the cuts are not quantified. That does not help the debate which will ensue on the autumn statement.

I am also worried because revenue forecasts have been suppressed. The Chancellor, whom I am glad to see in his place, has repeated time and time again that finance must determine expenditure rather than the other way about. How are we to judge the expenditure plans in the autumn statement if we are not given an idea of what the revenue is? No doubt we will wish to pursue that point with him.

I support the way in which the Government are pursuing the privatisation policy. It will improve efficiency and it is right to encourage wider share ownership. It will be necessary to make sure that the antimonopoly legislation is adequate to deal with the setting up of many more private monopolies. In the exchange earlier today in the House it was made clear that the Secretary of State for Trade and Industry will review competition policy. That matter is more urgent than he suggested, given the changes which are taking place in the major monopolies in the public sector which are to be transferred to the private sector.

That brings me to the accounting convention for asset sales. Although I am strongly in favour of the policy, it is important that the financial consequences should not be allowed to conceal the effects on the economy. I find it strange that the Government should continue to regard the proceeds of asset sales as a reduction in public expenditure and borrowing. The Select Committee has made it clear that it regards it as a means of financing the borrowing requirement itself. If that adjustment is made—the Chancellor says it is possible to make it—the emphasis is different.

In the autumn statement the Chancellor has published a figure for public expenditure both with asset sales proceeds and without. He does not make a corresponding adjustment for the public sector borrowing requirement, which should be done if one regards the asset sales proceeds in the way that the Select Committee has suggested. If that adjustment is made, the overall impact of the measures which the Chancellor is taking is different. That being so, it is inevitable that any Government, whatever they do and even if they do nothing in the light of a given economic situation, are endorsing reflation of the economy, deflation or trying to leave it where it is. We must not be afraid of expressing a view; otherwise the position will become very confused.

The presentation of the Government's policies gives great cause for concern to all those outside who will be taking business decisions. For several years we have not succeeded in cutting or controlling public expenditure adequately. That is clear from the reports of the Select Committee. But we have had the worst of both worlds, because we have been saying that we have been cutting expenditure when we have not, without pointing out the advantages of the increased public expenditure that has taken place. I am glad that the point has penetrated to the Front Bench, and that we are now getting recognition of the benefits which may flow from public expenditure on sensible projects. To that extent we have benefited by our presentation.

My fear is that in the future we shall not stress that we have been flexible in our approach and that, as a result, we shall continue to be blamed for matters which were never the case and will not be the case in the future. That being so, there are real presentational problems with which I hope the Chancellor of the Exchequer will be able to deal adequately. In the context of reflation, deflation and so on, that is extremely important in relation to international monetary affairs, as was stressed by the Chancellor and by my right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath).

It may well be that, as a result of the very difficult international monetary problems, a situation will arise in which there is a world recession created by a hard landing for the dollar or by some other conjunction of events in the United States. If that is so, it will be necessary for the Chancellor of the Exchequer, for other EEC countries and for the Japanese to take offsetting action. Therefore, if we stigmatise reflation in the way that I have described, we shall be inhibited in taking such action, and that will be very dangerous for us.

The Chancellor referred to the great increase in intervention in exchange markets, which I welcome, but it is limited in what it can achieve. If we are to achieve real progress in this area, there will have to be more international co-ordination of economic policies. In the difficult situation that I have just described, it may mean having to take measures to adjust the pattern that the Chancellor would otherwise have followed in the normal course of events.

It is not a question of tax cuts on the one hand or infrastructure expenditure on the other. Some tax cuts may be good or they may be bad. Some infrastructure expenditure may be good or it may be bad. We need to hit the right balance. I welcome the fact that in his statement yesterday and in his speech today the Chancellor adopted a more flexible approach, but I wish that he would make that more explicit; otherwise, we shall not get the credit for what is rightly being done.

I believe that the measures taken by the Chancellor will help to reduce unemployment, but I must recall the shakeout of labour three or four years ago, when many people became redundant as a result of the world recession, the Clegg pay settlements and so on. At that time many companies cut their labour force by 30 per cent. and found that they could produce just as much with a much smaller labour force. In reality, those jobs did not exist, and the problem now is that we must create that many new jobs. It will inevitably mean a long, hard journey, but the Chancellor's statement yesterday is of assistance in that respect. I hope that, in the light of the further analysis of the Chancellor's remarks by the Select Committee, we shall be able to make even greater improvements.

9.3 pm

Mr. Michael Portillo (Enfield, Southgate)

My right hon. Friend the Member for Worthing (Mr. Higgins) has been generous in keeping his remarks so short, and I am sorry that I have to begin by disagreeing with him on one point. I welcome the fact that on this occasion the Chancellor of the Exchequer has not published a fiscal adjustment, because the fiscal adjustment has been given an importance which it did not merit, and that led to all sorts of speculation. I have had the opportunity previously of making that point in the House.

I welcome the commitment in the Gracious Speech, in rather specific terms, to reductions in income tax. I equally welcome the Chancellor's commitment, not only through the Gracious Speech but through the autumn statement, to the continuing containment of inflation, which is so important. For all the time that the Government have been in office, fiscal and monetary policies have worked together to reduce the rate of inflation, but I wonder whether recently there has not been something of a contest between monetary policy on the one hand and fiscal policy on the other. I wonder whether, like two great stags, they have not locked antlers and done battle on this occasion and whether it is not fiscal policy that has come off, not dead in the end, but at least limping. I say that because the PSBR this year will be £1 billion higher than we thought and it is conceivable that it will turn out higher still.

It is also conceivable that my right hon. Friend the Chancellor will be influenced in his Budget judgment by the importance of tax cuts. Of course, while it would not be right to add asset sales to the PSBR to arrive at a new figure for borrowing, nevertheless the stance of the PSBR is somewhat looser than is indicated by the pure £8 billion published in the autumn statement. That is why I wonder whether fiscal policy at this stage is not limping.

If it is, I can perfectly understand why, because there are certain arguments for saying that there is a weaker case nowadays for a tight fiscal stance than there was before. In particular, the theory that a very large amount of Government borrowing tends to crowd out borrowing by the industrial sector is far less convincing than it used to be in today's internationalised money markets to which companies find it easy to turn for finance. The other thing is that a low PSBR used to be considered essential for the achievement of low interest rates, but if under our monetary policy we shall have high interest rates anyway, there is some reason for saying that one can borrow rather more because the interest rates make it very easy to finance a slightly higher PSBR.

Then again, there is the rather tempting example of President Reagan whose policies have provided a supply-side stimulus. Although Thatcherism and Reaganomics are very often considered the same thing, they are approached from different angles in that President Reagan has addressed the question of tax cuts without much regard to the effect on deficits, whereas here we have addressed the matter of deficits without cutting taxes as much as we would otherwise have liked.

I am, therefore, a little concerned that we are defending the inflationary position through monetary policy alone and less through fiscal policy than previously. It seems to be a rather thin red line. It seems to me that the present monetary position must be right because that is indicated by both the exchange rate and the downward path of inflation itself, but the problem is that the exchange rate can change very rapidly, and inflation is more an indicator that yesterday's monetary conditions were right than that today's are right.

In the very few minutes remaining, perhaps I may turn to what may happen in the next Budget. Here is where I fear I must disagree with my hon. Friend the Member for Croydon, South (Sir W. Clark) when I say that I would like to see any tax cuts made on the standard rate and not on the thresholds. If we look at international comparisons, what sticks out like a sore thumb about this country is the point at which people begin to pay tax at 30 per cent.

The threshold itself is not out of line with the rest of the EEC and is a great deal higher than in a certain number of other countries. The important point is that the single man here is paying 30 per cent. tax when he earns just over £2,000 a year. The equivalent figures for France are £8,000, for the United States £22,000 and for Japan £31,000. In those countries the single man would pay tax at 30 per cent. only at those very much higher levels. Our starting rate of tax in this country is the highest of any country bar one, the Republic of Ireland, which is 35 per cent.

If we believe, as Conservative Members do, that cutting taxes can have an incentive effect, we must be concerned about cutting the marginal rate. What is important to us is how much of any extra pound earned a person can keep for himself. If we tackle the thresholds, we are not attacking that problem—another very important problem, but not that one. While it is also true that raising the thresholds relieves people from the poverty and unemployment traps, a large number of those people are brought back into those traps by the end of the year through the effect of inflation, whereas, if we reduce the standard rate of tax, we are reducing the effect of the traps for everybody who is in them.

I do not think that privatisation and tax cuts are as closely linked as the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) would imply, nor are they as far apart as my right hon. Friend the Chancellor has suggested. There are very good reasons for privatising companies that have nothing to do with cutting taxes. On the other hand, the proceeds from the sale of those assets can be extremely helpful in producing tax cuts. That is a reasonable policy to follow. After all, the assets were acquired for the public sector by the spending of taxpayers' money and have been sustained through years of loss making by the spending of more taxpayers' money. Since the nationalised industries were brought into being, the rate of return to the taxpayer has, on average, been zero.

I do not regard the tax cuts that would result from this as temporary. We now see that the way ahead is through growth, so that in the future we can produce tax revenues as great as those of the past, but at lower rates of tax.

9.10 pm

Mr. Peter Shore (Bethnal Green and Stepney)

We are concluding what I suspect will be the last debate on the Gracious Speech that the House will hold in the relative privacy of the Press Gallery and sound radio. Last Thursday the Lord Privy Seal hinted that in his reply tonight he would say something about televising our debates.

What really matters is the conversion some months ago of the Prime Minister—she who must be obeyed—to the belief that she, her Ministers and the Conservative party would benefit from still greater exposure to the television cameras. Those who listened to our six-day debate may find that an extraordinary belief. In any event, it will be for the House itself to decide.

If the House does say yes to television, I for one will welcome the opportunity of exposing our affairs without editorial bias and proprietorial prejudice, direct and untarnished to the gaze and judgment of the nation. We shall welcome that because under fair rules, policy presented, debated, probed and opposed without intermediaries directly before our own people is the best possible antidote to the sleek and glib public relations presentation of policy upon which the Government now place their hope of survival.

The Prime Minister and Chancellor can plunder the record and carefully select supportive statistics to raise morale. They can speak of the economy as a dream come true. But given the glum faces behind the Prime Minister last Wednesday and again during the Chancellor's speech today, I can only conclude that "Exercise Economic Hype" will simply not work. It will work still less when the television cameras are in place.

There was not much pleasure for the Chancellor in the speeches that we have heard today. I heard all but two—I have notes on those that I missed—of the 19 speeches that were made. It is fair to say that only one was overwhelmingly in favour of the Chancellor's general economic strategy, and not surprisingly that was delivered by the Chancellor himself. However, he had some considerable support from the hon. Member for Winchester (Mr. Browne), who I understand has had to leave us. That hon. Gentleman is one of the more impressionable hon. Members of this House, particularly when the Government Front Bench is giving a clear lead.

The Opposition speeches properly reflected our growing concern, anxiety and anger about the state of unemployment and the collapse of manufacturing industry. Speeches from Conservative Members were also interesting, because though they varied in emphasis they picked up the theme of real concern about where we are going as a country. I refer particularly to the speech of the right hon. Member for Old Bexley and Sidcup (Mr. Heath) and that of the right hon. Member for Cambridgeshire, South-East (Mr. Pym), with his call for a new agenda.

Those leading speeches expressed deep anxiety about the general direction of our present economic policy. However, I shall treasure most the words of the right hon. and learned Member for Hexham (Mr. Rippon). He defended the Chancellor of the Exchequer against any accusation of having made a U-turn. He said that there was no question of the Government having made a U-turn. After all, the Gadarene swine did not make a U-turn either. They simply went over the edge of the cliff. That was memorable indeed.

Mr. Rippon

I do not like to be misquoted. I said that there was no need for a U-turn because the Gadarene swine only had to make a change of direction. That is what has happened.

Mr. Shore

I am entirely happy with the right hon. and learned Gentleman's explanation.

Three major facts testify to the continued failure of the Government's economic strategy. The first is the scourge of nationwide unemployment, which shows no sign of abating. Unemployment in October of this year—I am looking at the Department of Employment's own handout—stood at 3,175,000. This figure is 81,000 higher than it was when we debated the Gracious Speech a year ago. As we all know, this figure would be much higher but for the statistical adjustments that were made two years ago and the exclusion of at least 300,000 temporary jobs, not real jobs, that the Government are directly financing. Therefore, despite all the spurious optimism of the speeches that we heard both yesterday and today, the fact is, as the autumn statement revealed, that the unemployment assumption that the Government had to make for national insurance purposes in the autumn statement stands at 3 million for the next three years.

Secondly, linked to unemployment is the continuing and disastrous decline of British manufacturing industry. I agree very much with what has been said about this by so many right hon. and hon. Members. On Wednesday of last week the Prime Minister was quite brazen when she spoke about British industry having exported more manufactured goods last year than ever before in our history. She boasted: Manufacturing investment was up last year by more than 14 per cent."—[Official Report, 6 November 1985; Vol. 86, c. 21.] Yet she knows very well that manufactured imports continue to flood in and that our manufacturing trade deficit is running at well over £4 billion a year. The Prime Minister also knows that, despite the two-year short-term but time-limited boost that the phasing out of capital allowances has provided, manufacturing investment is 18 per cent. lower than it was in 1979.

The third basic fact about the failure of the Government's economic strategy is that today we are viable only through the accelerated run-down of our North sea oil supplies. Last year our net exports were £7 billion. This year the figure is likely to be £8 billion. Britain is exporting more oil than Saudi Arabia, but we do not possess the Saudi Arabian reserves. Such exports cannot, therefore, continue.

I well understand the Government's irritation with the House of Lords Select Committee on Overseas Trade. They did not conceal their irritation. Apart from the mass of damning evidence that was presented by leading British manufacturing firms, the Select Committee looked ahead to 1990, only five years away. On very reasonable assumptions it looked to the falling off of our North sea oil export surplus to something like self-sufficiency by 1990 and the accompanying growth of a current account deficit of over £13,000 million a year. It issued a warning, which is worth repeating: Unless the climate is changed so that the manufacturing base is enlarged and steps are taken to ensure that import penetration is combated and that manufactured exports are stimulated, as the oil revenues diminish the country will experience adverse effects which will worsen with time. These will include:

1. (i) a contraction of manufacturing to the point where the successful continuation of much of manufacturing activity is put at risk;
2. (ii) an irreplaceable loss of GDP;
3. (iii) an adverse balance of payments of such proportions that severely deflationary measures will be needed;
4. (iv) lower tax revenue for public spending on welfare, defence and other areas;
5. (v) higher unemployment, with little prospect of reducing it; and
6. (vi) the economy stagnating and inflation rising, driven up by a falling exchange rate."

The Committee concluded with the words:

These prospects constitute a grave threat to the standard of living of the British people. Failure to recognise these dangers now could have a devastating effect on the future economic and political stability of the nation. The situation in which we find ourselves is not self-correcting: things will not come right of their own accord. Against that prospect the Queen's Speech proposals and the ministerial elaborations upon them are a monumental irrelevance. The Government are complacently presiding over an accelerating and historic decline of the British economy. That decline is temporarily concealed by the incontinent plundering of North sea oil and by the massive sale of national assets, as was announced yesterday. I say "temporarily" because by 1990 the game will be up.

Perhaps the most depressing fact in the Gracious Speech is the Government's inability to learn from their own experience. It is true that the Chancellor of the Exchequer has eaten his words about the money supply. The control of M3 was his and the Prime Minister's own sovereign remedy for the nation's ills, and those who recall the devastating impact of 17 per cent. base rates and the pound at $2.40 will know the price that the nation paid in collapsing industries and in lost jobs, for their monumental folly, from 1979 to 1981. As Mr. Peter Jay, who helped to instruct the right hon. Lady in the mysteries of monetarism in the pre-1979 period, is reported to have said:

It was like showing Genghis Khan a map of the world. Not only have we had not a single word of regret from either the Prime Minister or the Chancellor of the Exchequer for having misled themselves and inflicted such damage upon the British economy, but they are still firmly wedded to the doctrines of high interest rates and an artificial exchange rate that goes with that. Of course, there have been increases in productivity, but increases have also taken place in the economies of our major competitors. The net effect is that British industry is at least 19 per cent. less competitive internationally than it was six years ago—[Interruption.] That is the truth.

Mr. Barry Sheerman (Huddersfield)

They are squirming.

Mr. Shore

I am quoting from the IMF relative normalised labour costs index, which is normally accepted as the measure of international competitiveness. I am comparing the second quarter of 1979 with the second quarter of 1985, which is the latest date available.

What is the Government's remedy? It is very simple. First, it is to ease slightly the rigours of public expenditure cuts and then to cut taxes, both financed by capital receipts from the accelerated sale of publicly owned assets. That will do little to stimulate the economy, but, as the right hon. Member for Old Bexley and Sidcup said, it will certainly accelerate the menacing flood of imports of consumer and other goods.

Secondly, it is part of the Government's strategy to cut wages. The Government have already announced their intention to reduce the scope of our already emasculated wages councils. Of course, labour costs matter. Nobody would deny that. However, competitiveness also involves quality of management, excellence of design, product innovation through research and development, fiscal, monetary and exchange rate policies. In all those areas, Government policies have directly damaged, not assisted, competitiveness. To put the whole onus of competitiveness on wages is a recipe for industrial divisiveness, lowering the living standards of the least well off and maintaining the present army of the unemployed.

Nowhere has the impact of Government economic policy been more harshly felt than in the inner cities. To make matters worse, there has been a massive switch of resources of Government finance away from the inner cities. Eight years ago, when unemployment was only one third of what it is today, the Labour Government designated, out of the 364 local authority districts in England, just 14 as areas of exceptional deprivation and need, for which additional resources had to be found. Those 14 authorities were grouped into what we described as seven partnership areas—Birmingham, Liverpool, Manchester—Salford, Newcastle—Gateshead, and, in London, the three further areas of Lambeth, Hackney and Islington and the five dockland boroughs. We used three instruments of policy to assist them—the rate support grant, which was based on the assessment of needs, the housing investment programmes, which came directly under ministerial control, and the refurbished urban programme.

What has happened since? In real terms—[Interruption.] The House should listen. I do not think that the magnitude of what has happened has sunk in. In real terms, the urban programme in those partnership areas has increased from about £150 million in 1979 to about £200 million last year, in constant prices—an increase of £50 million. However, the rate support grant has been reduced in constant prices by no less than about £720 million a year in 14 inner city districts alone. In the same period and in the same 14 districts the housing investment programmes have been cut by over £270 million, in real terms. Therefore, the 14 areas of the greatest deprivation in our inner, cities have been savaged in just six years to the tune of £900 million a year.

We have, indeed, an inner city crisis. Of course, there is social tension in those areas. Of course, there is vandalism and graffiti. Of course, there is more petty theft and housebreaking. Of course, there are aggravated racial tensions when black and white unemployed are competing for a wholly inadequate supply of jobs and housing.

When old people in the inner cities are afraid to go out after dark, when women are mugged in the street and assaulted, even in their homes, when Asian families are abused and attacked and their homes are even set on fire in the dead of night, we do not need to be told by the Prime Minister or anyone else of the need for law and order. That is essential.

Strong, sensitive and even-handed policing is only one ingredient of an effective inner city policy. Last Wednesday, the Prime Minister addressed herself to inner city problems. She said: Of course, there are very severe social problems in the inner city areas—problems of family breakdown, of racial tension, of drug abuse, of youth unemployment, of bad housing. In so far as money can help, those problems are taken into account in public expenditure". In so far as money can help? The Prime Minister obviously believes that there is a connection between public expenditure and social problems in what she called the areas affected by riots".—[Official Report, 6 November 1985; Vol. 86, c. 25.] It is unique to the Prime Minister that, having deprived the most blighted of our inner cities of some £900 million a year, she apparently believes that the less spent on inner cities, the less likely those areas are to be affected by disturbance and riot. That is a flight from reality bordering on the insane.

The most sensible statement on this issue was made by Lord Scarman in 1981, following his examination of the first wave of urban riots in Britain. He said:

The social conditions in Brixton—many of which are to be found in other inner city areas—do not provide an excuse for disorder. They cannot justify attacks on the police in the streets, arson or riot … At the same time the disorders in Brixton cannot be fully understood unless they are seen in the context of complex political, social and economic factors. In analysing communal disturbances such as those in Brixton and elsewhere, to ignore the existence of these factors is to put the nation in peril. It is interesting to recall the words of the Prime Minister when in opposition. At the 1977 Tory party conference she said: I do not intend to sit on the sidelines wringing my hands while London, Glasgow, Manchester, Birmingham and the rest of our cities go the way of New York. The truth is that they are going the way of New York. Once again, there is nothing in the Gracious Speech or the Chancellor's autumn statement to show that the Government have the faintest glimmer of an understanding of the problems.

No amount of public relations or improvement in the presentation of policy will conceal the stark reality of national decline, ever-increasing division and social strain. The tiny sum of £250 million to be allocated to the housing programme was announced yesterday at the same time as the publication of a new and serious estimate of the need for £19 billion expenditure on refurbishing the public sector housing stock. That epitomises the tokenism and gimmickry of the Government's policy. For all those reasons, we shall vote for our amendment.

Mr. Harry Ewing (Falkirk, East)

On a point of order, Mr. Speaker. As only four members of the Cabinet are present, may I suggest that the sitting be suspended to allow more of them to come in to support the Government's case?

Mr. Speaker

I call the Lord Privy Seal.

9.34 pm

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

We are now in the closing moments of the debate on the Loyal Address. This is Parliament's central debate of the Session. It began a week ago with speeches from my hon. Friends the Members for Birmingham, Hall Green (Sir R. Eyre) and for Aberdeen, South (Mr. Malone).

As the debate has proceeded—[HON. MEMBERS: "Where are they?"]

Mr. Speaker

Order. This is very unseemly behaviour. I call the Lord Privy Seal.

Mr. Ewing

On a point of order, Mr. Speaker.

Mr. Speaker

Order. I have heard the hon. Gentleman's point of order.

Several Hon. Members

They are not here.

Mr. Biffen

As the debate has proceeded, it has blended into a national debate, and never more so than today, when the affairs of the economy have been under scrutiny. It is nevertheless symbolic of the unifying character of the Chamber that what sets out as a matter of constituency representation becomes part of that wider debate. It is well worth making that point, given that the Queen's Speech is redolent of ceremony and tradition. [Interruption.] There is a convention—

Mr. Speaker

Order. There is a convention, as the Lord Privy Seal said, that every right hon. and hon. Member is given a fair hearing.

Mr. Biffen

There is a convention that I spend at least part of this speech considering the work of the Chamber in the coming Session. I should therefore like to say something about our procedures, about the work of Select Committees and about the televising of Parliament.

The House recognises the valuable work of the Procedure Committee under the chairmanship of my hon. Friend the Member for Honiton (Sir P. Emery) Last Session, the Committee produced a report on public Bill procedure. Its major recommendation concerns the creation of a legislative Business Committee with considerable powers over the timetabling of Bills likely to require more than 25 hours in Standing Committee. The importance of those suggestions needs no underlining.

The House will wish to consider in due course whether it would seek to reform our public Bill procedures, taking account of these proposals. For their part, the Government, in consultation with the usual channels, will be arranging a debate reasonably soon, probably after the Christmas recess.

A second procedural matter was raised obliquely by the right hon. Member for South Down (Mr. Powell) last Thursday and concerns the availability of time for highly contentious legislation introduced by a private Member. The matter was underlined by the ingenious motion tabled last summer by my hon. Friend the Member for Brighton, Kemptown (Mr. Bowden). This is a highly sensitive topic. Any alteration by the House in the Standing Orders or conventions governing the use of private Members' time, I judge, should follow after a report from the Procedure Committee.

I understand that the Procedure Committee will be considering the use of time on the Floor of the House and thus giving some attention in the coming Session to this topic. We shall await any recommendations it may make with great interest. Meanwhile, much as I admired the ingenuity of my hon. Friend the Member for Kemptown, I feel that his motion put at risk the somewhat delicate balance of time and tactics that is the feature of private Members' business. I feel that we should allow the conventions of the status quo to stand until the House has had a chance to vote on any changes which might be recommended by the Procedure Committee.

I should therefore tell the House that I would advise hon. Members to vote against a motion similar to that proposed by my hon. Friend the Member for Kemptown if it were introduced again in the context of any private Member's Bill.

Since 1979, the Committees has produced a total of 275 reports, many of which have received parliamentary and notably media attention. Much of the effectiveness of Select Committees is due to the continuing and unsung labours of my right hon. Friend the Member for Worthing (Mr. Higgins) as Chairman of the Liaison Committee. I hope that that good relationship will continue.

I have promised to say something about the possible televising of this Chamber. I have already told the Leader of the Opposition that the debate will take place later this month. Such a decision belongs to the House, uninfluenced by the Treasury Bench, but it might be helpful if I make it clear that the forthcoming debate will be to decide whether there should be an experiment in televising the proceedings of this House and, if so, to establish a Select Committee on how such an experiment might be conducted. That would broadly follow the form of previous debates on this matter. Whatever our views, I am sure that the House is united in underlining the importance of that decision.

Mr. Heffer

Will this be a one-day or a two-day debate? That is a matter of great importance to the House and we want to discuss it in some depth before we take a decision.

Mr. Biffen

I take note of that point, but it is a matter which might be more appropriately raised on tomorrow's business statement.

My right hon. Friend the Member for Cambridgeshire, South-East (Mr. Pym) reminded the House earlier this afternoon, in a speech which was generously supportive of the Government's position, that we had a formidable load of legislation ahead of us. That is undoubtedly true, as there are in prospect upwards of 30 Bills which will be at the centre of a constructive legislative programme which will further enhance the Government's position in debates in this House and elsewhere.

It has been forecast that the Session will centre on fierce controversy about law and order. I judge that many of those comments, in particular those made outside the House, were made in the context of the public order Bill. I was delighted that the hon. Member for Newcastle upon Tyne, North (Mr. Brown) gave his support to that measure and I believe that support will be accorded generally throughout the House.

Mr. Sheerman

On a point of order, Mr. Speaker. The Leader of the House seems to have lost the economy.

Mr. Speaker

That is not a point of order. The Leader of the House has only just started his speech.

Mr. Biffen

I hope that the hon. Member for Huddersfield (Mr. Sheerman) will exercise a modicum of patience. I was dealing with a point raised by one of his hon. Friends and I judge that to be a courtesy. Of course I will return to the economy, but I am winding up a debate which has gone on for the past week.

I should like to say a little more about Home Office affairs before moving to the economy. Although the hon. Member for Huddersfield and others would like to suggest some atavistic mood on the Government Benches, my right hon. Friend the Home Secretary made it clear that the genesis of the public order Bill long predates the riots in Brixton, Handsworth and Tottenham, so there can be no question of any reaction by the Government in that context. There is, of course, great public interest in that matter and the House is entitled to reflect on the reason for that interest. I believe that the domestic condition of the Labour party is as much a factor as anything else. There was a time when those in the Labour movement who led the great urban city parties were part of the solid dependable elements of Socialism. One thinks of George Lansbury, a spokesman for Christian Socialism, of Clement Attlee and of Herbert Morrison.

Mr. Heffer

rose—

Mr. Biffen

I appreciate Labour Members' distaste for this argument, but they are going to hear it. Those names have now been replaced by those of Bernie Grant, Paul Boateng, Ted Knight and Derek Hatton—names as much a disgrace to the Leader of the Opposition as they are to the Government. It is their existence which puts a question mark over debates on law and order. It is legitimate to observe that in society and politics today there are radical forces determined to challenge established values and those who have the authority to uphold them.

Mr. Frank Cook (Stockton, North)

rose—

Mr. Biffen

I shall not give way. By popular request, I am going on to the economy. We may leave the militant wing of the Labour party to carry out its scorpion role on the Labour Front Bench and those behind it. What I wish to suggest to the House is far more significant than the Hattons and the Boatengs—the public judgment made on economic management and the social values that it expresses.

The main characteristic of the Queen's Speech is that it consolidates and takes forward the main strands of policy that have been evident since 1979—strands of policy designed to strike a balance between the liberal traditions of individual enterprise and freedom and the collective traditions of the state accepting a protective role in defence, domestic order and social welfare. The successful striking of that balance is the act which will secure consensus in public affairs without which Government in a consultative democracy cannot proceed. [Interruption.] I know that the very word "consensus" is embarrassing to the Labour party, floundering in search of a new sense of direction as years in opposition take it further and further from the realities of the political situation. We have sought to rebuild a consensus which, by 1979, had been shattered by high inflation and the intemperate use of trade union power.

Since 1979, we have sought constructive development in three vital areas. The first, as my right hon. Friend the Member for Brighton, Pavilion (Mr. Amery) has said, is the reduction of inflation. Under the Labour Government, inflation reached a peak of 26 per cent. in 1975. They now wish to dismiss and cast aside that record, hoping that it will fade from public memory, but it is there to haunt them and an indicator of what will come again if their unreconstructed policies are ever put into effect.

Today, the rate of inflation is just below 6 per cent. and, as my right hon. Friend the Chancellor said in his autumn statement, it is expected to fall below 4 per cent. in 1986. Central to that, of course, are responsible levels of public spending, as my hon. Friend the Member for Croydon, South (Sir W. Clark) emphasised. I was also delighted to have the endorsement of the right hon. Member for Sparkbrook that the autumn statement shows no significant relaxation in control of total public spending.

Secondly, we have sought a more equitable balance in the mixed economy by encouraging private ownership in the sense of home ownership and wider share ownership. Since 1979, 800,000 public sector tenants have become owner-occupiers. Do Labour Members deplore that or is some sense of revisionism leading them to revise their stance? Assets of £6,500 million covering 400,000 employees have been transferred to private ownership since 1979.

Earlier today, the right hon. Member for Sparkbrook was invited to itemise all those assets that would be taken back into public ownership by a Labour Government. In a fit of modesty, presumably intended to express a desire for silence on the Benches behind him—a desire not fulfilled on this occasion—the right hon. Gentleman said absolutely nothing. That debate will be taken forward in the new housing Bill, designed further to facilitate home ownership and in the Gas Bill, affecting major assets and 90,000 employees.

In that context, I take at once the very thoughtful speech of the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) about the importance of well-judged flotation. This is, however, an argument about employee ownership, the wider casting of share ownership and the total ambivalence of the Labour party in these matters.

Thirdly, we must examine and reform the great corporate institutions which decisively influence our economy. That task was begun in the last Parliament with trade union reform. We do not know quite where the Labour party stands on that either. We do not know whether there will be a root and branch repeal or whether the matter is being kept to one side in the hope that the sheer relentless course of events and boredom might bring them to office. Heaven knows, it will never be their ideas or their policies. They are concealed behind the growing pragmatism which characterises the Leader of the Opposition.

This Queen's Speech promises major changes in areas which, although possibly less controversial than trade union reform, are nonetheless important. I have particularly in mind the financial services Bill and I should like to underline the remarks made by my right hon. and learned Friend the Member for Hexham (Mr. Rippon) about the great importance of this legislation and its far-reaching significance. The three areas I have identified are central to the political authority of this Government, an authority that is being enhanced as Parliament proceeds. That development will be incomplete without a tangible recovery in employment. I should like the House to consider that theme, because it will feature in our debates, whatever the merits of the legislative programme. The House has a right to judge the situation.

The hon. Member for Fife, Central (Mr. Hamilton) asserted that unemployment will be worse two years hence than it is now. I do not know whether that view is shared by the Opposition Front Bench or whether its occupants are taking their cue from the right hon. Member for Sparkbrook, who has decided that silence may not be golden, but it is the best that one can contrive at this stage of the Queen's Speech. [Laughter.]

Mr. Allan Rogers (Rhondda)

What is funny about people on the dole?

Mr. Biffen

There is nothing funny about people on the dole. It is only those hon. Members who try to ensure that a speech on the topic is not heard who lend the debate a so-called spurious humour.

The level of recorded unemployment has levelled off over the last five months. Of course, that is but a modest contribution, but it is certainly a most welcome change and is in contrast to the seemingly relentless rise over the last few years. I invite Opposition Members to take encouragement, hope and optimism from the fact that we now have what seems to be an alteration in the pattern of unemployment, a levelling off after a period of increase.

Secondly, the number of jobs has risen by 600,000 since the spring of 1983 and that development is welcome. Then there is the matter of unfilled vacancies. They now stand in the latest month at the highest figure since March 1980, and show an increase of 18 per cent. over the last 18 months. In all these matters I am not resting my case on absolute figures, because unemployment figures do not have a precise exactitude. [Interruption.] The trend at least is a matter for serious consideration and the fact that Opposition Members squirm and shout means they do not welcome good news. They know that the one card they hold to their chest and hope to play to win the next election will be snatched away if there is a tangible and perceived recovery in employment.

I regard all of this as a question of knowing. These signs are harbingers of modest hope and they do not permit any of the harsh rhetoric of certainty. Politics with hope is perfectly legitimate and we are perfectly entitled to take satisfaction from the fact that there are now signs of a recovery, and in the hope and belief that the other policies will supplement—

Mr. Ewing

Will the right hon. Gentleman give way?

Mr. Biffen

The hon. Gentleman sought to impede the beginning of my speech and I am now going through to the peroration. I would gladly give way to him on any other evening, but not tonight, Josephine.

The House will shortly have the opportunity to pass judgment on the Queen's Speech. The Treasury Bench seeks the support of the House and the endorsement of the public for a policy which has three major objectives.

The first and central objective is the lowering of the rate of inflation, partnered by an improvement in total employment. Those are not only economic goals, but social imperatives. Stable prices are the precondition for equity and justice in a society. Furthermore, there is now tangible evidence that inflation can be contained and reduced while employment within the economy begins to rise. Of course, these are early days to judge the extent and nature of the recovery in employment. Even so, the increase of 600,000 jobs during the past two and a half years should be welcomed.

Secondly, the Gracious Speech commends to the House and the nation the belief that ownership should be widely spread. We shall debate this—I shall repeat it many times, because it is central to the public debate—in the context of taxation, knowing that taxation supremely concentrates resources and their use in the hands of politicians and officials at the expense of the individual. I should tell the right hon. Member for Plymouth, Devonport (Dr. Owen) that the present level of taxation bears especially heavily on many working-class people who earn below average wages. In 1938, they would not have been touched by the income tax structure. In no way do I regard it as an immoral crusade to try to rectify the matter.

However, in this Session of Parliament, the issues of ownership will be most keenly contested in the arguments over the Gas Bill. We look forward to that debate so that the public may then judge on the merits between state-financed monopoly and private shareholding with an emphasis on employee ownership. If Opposition Members find the concept of employee ownership so distasteful, let them make that clear in the many debates that we shall have on this issue. The issue will be extrapolated into questions such as who stands for concentration, who stands for central control, who stands for the encroaching authority of Whitehall and the politicians and who, at the end of the day, believes in employees having an interest in their firms?

Thirdly, as the Chancellor of the Exchequer mentioned in his autumn statement, the Government are committed to a level of public spending consistent with our economic performance. The Tory party is not hostile to the positive and protective role of the state and the honest financing of such responsibilities. The autumn statement points to increased spending on public sector housing renovation, science, hospitals, roads and overseas aid. That substantial increase in public spending properly sets out the Government's priority commitments. Furthermore, the planned increases in public capital spending should be set alongside a substantial increase in private sector capital spending, and, more especially, in manufacturing industry.

The autumn statement repudiates those who have parodied the Government's policies as negatively Victorian. However, as the right hon. Member for Sparkbrook will agree, there is this difference between the two sides of the House on this topic: the autumn statement is the result of a discipline on total spending—a discipline that the right hon. Gentleman kindly reinforced in his remarks this afternoon. It is the product thereafter of a choice of priorities.

Furthermore, the figures are related to an expected growth in national resources able to bear the burden. Those economic judgments and disciplines will keep us from the humiliating recourse to the International Monetary Fund experienced by Britain in 1976. That will always haunt Labour Members, for there is nothing more humiliating than to have to ask the IMF for its imprimatur for the policies which they knew in their hearts they would have to carry out but with which they did not have the kidney to confront their supporters.

As this debate has proceeded, it has become clear that the Labour Benches have a nostalgia for the past. The dreamland is the so-called Wilson Socialism of 1966–70. It has the memories of growing public expenditure, economic planning and the centralised control of prices and incomes. It was the Labour party that existed before the right hon. Member for Chesterfield (Mr. Benn) frightened the life out of the revisionists after 1970. The Leader of the Opposition is yearning to return to such a Wilson era. Thus, the emerging pragmatist would make rendezvous with Labour's master pragmatist. There he will find waiting for him the right hon. Member for Devonport. However, we have an alternative to such a barren reunion and that alternative is in the Queen's Speech, for which we shall vote.

Question put, That the amendment be made:—

The House divided: Ayes 223, Noes 351.

Division No. 3]	[10 pm
AYES
Abse, Leo	Bray, Dr Jeremy
Adams, Allen (Paisley N)	Brown, Gordon (D'f'mline E)
Alton, David	Brown, Hugh D. (Provan)
Archer, Rt Hon Peter	Brown, N. (N'c'tle-u-Tyne E)
Ashley, Rt Hon Jack	Brown, R. (N'c'tle-u-Tyne N)
Ashton, Joe	Brown, Ron (E'burgh, Leith)
Atkinson, N. (Tottenham)	Bruce, Malcolm
Bagier, Gordon A. T.	Buchan, Norman
Barnett, Guy	Caborn, Richard
Barron, Kevin	Callaghan, Rt Hon J.
Beckett, Mrs Margaret	Callaghan, Jim (Heyw'd & M)
Beggs, Roy	Campbell-Savours, Dale
Beith, A. J.	Canavan, Dennis
Bell, Stuart	Carlile, Alexander (Montg'y)
Benn, Tony	Carter-Jones, Lewis
Bennett, A. (Dent'n & Red'sh)	Cartwright, John
Bermingham, Gerald	Clark, Dr David (S Shields)
Bidwell, Sydney	Clarke, Thomas
Blair, Anthony	Clay, Robert
Boothroyd, Miss Betty	Clwyd, Mrs Ann
Boyes, Roland	Cocks, Rt Hon M. (Bristol S.)

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

Strang, Gavin	Wareing, Robert
Straw, Jack	Weetch, Ken
Taylor, Rt Hon John David	Welsh, Michael
Thomas, Dafydd (Merioneth)	White, James
Thomas, Dr R. (Carmarthen)	Williams, Rt Hon A.
Thompson, J. (Wansbeck)	Wilson, Gordon
Thorne, Stan (Preston)	Winnick, David
Tinn, James	Woodall, Alec
Torney, Tom	Wrigglesworth, Ian
Wainwright, R.
Walker, Cecil (Belfast N)	Tellers for the Ayes:
Wallace, James	Mr. Ron Davies and
Wardell, Gareth (Gower)	Mr. Mark Fisher

NOES
Adley, Robert	Cope, John
Aitken, Jonathan	Cormack, Patrick
Alison, Rt Hon Michael	Corrie, John
Amery, Rt Hon Julian	Couchman, James
Amess, David	Cranborne, Viscount
Ancram, Michael	Critchley, Julian
Arnold, Tom	Crouch, David
Ashby, David	Currie, Mrs Edwina
Aspinwall, Jack	Dickens, Geoffrey
Atkins, Rt Hon Sir H.	Dicks, Terry
Atkinson, David (B'm'th E)	Dorrell, Stephen
Baker, Rt Hon K. (Mole Vall'y)	Douglas-Hamilton, Lord J.
Baker, Nicholas (Dorset N)	Dover, Den
Baldry, Tony	du Cann, Rt Hon Sir Edward
Banks, Robert (Harrogate)	Dunn, Robert
Batiste, Spencer	Durant, Tony
Beaumont-Dark, Anthony	Dykes, Hugh
Bellingham, Henry	Edwards, Rt Hon N. (P'broke)
Bendall, Vivian	Eggar, Tim
Benyon, William	Emery, Sir Peter
Best, Keith	Evennett, David
Bevan, David Gilroy	Eyre, Sir Reginald
Biffen, Rt Hon John	Fairbairn, Nicholas
Blackburn, John	Fallon, Michael
Blaker, Rt Hon Sir Peter	Farr, Sir John
Body, Richard	Favell, Anthony
Bonsor, Sir Nicholas	Fenner, Mrs Peggy
Bottomley, Peter	Finsberg, Sir Geoffrey
Bottomley, Mrs Virginia	Fletcher, Alexander
Bowden, A. (Brighton K'to'n)	Fookes, Miss Janet
Bowden, Gerald (Dulwich)	Forman, Nigel
Boyson, Dr Rhodes	Forsyth, Michael (Stirling)
Braine, Rt Hon Sir Bernard	Forth, Eric
Brandon-Bravo, Martin	Fowler, Rt Hon Norman
Brinton, Tim	Fox, Marcus
Brittan, Rt Hon Leon	Franks, Cecil
Brooke, Hon Peter	Fraser, Peter (Angus East)
Brown, M. (Brigg & Cl'thpes)	Freeman, Roger
Browne, John	Fry, Peter
Bruinvels, Peter	Gale, Roger
Bryan, Sir Paul	Galley, Roy
Buchanan-Smith, Rt Hon A.	Gardiner, George (Reigate)
Buck, Sir Antony	Gardner, Sir Edward (Fylde)
Budgen, Nick	Garel-Jones, Tristan
Bulmer, Esmond	Gilmour, Rt Hon Sir Ian
Burt, Alistair	Glyn, Dr Alan
Butcher, John	Goodhart, Sir Philip
Butler, Hon Adam	Goodlad, Alastair
Butterfill, John	Gorst, John
Carlisle, John (N Luton)	Gow, Ian
Carlisle, Kenneth (Lincoln)	Gower, Sir Raymond
Carlisle, Rt Hon M. (W'ton S)	Greenway, Harry
Carttiss, Michael	Gregory, Conal
Cash, William	Griffiths, Sir Eldon
Channon, Rt Hon Paul	Griffiths, Peter (Portsm'th N)
Chapman, Sydney	Grist, Ian
Chope, Christopher	Ground, Patrick
Churchill, W. S.	Grylls, Michael
Clark, Hon A. (Plym'th S'n)	Hamilton, Hon A. (Epsom)
Clark, Dr Michael (Rochford)	Hampson, Dr Keith
Clark, Sir W. (Croydon S)	Hanley, Jeremy
Clarke, Rt Hon K. (Rushcliffe)	Hannam, John
Colvin, Michael	Harris, David
Conway, Derek	Haselhurst, Alan
Coombs, Simon	Hawkins, C. (High Peak)

Hawkins, Sir Paul (SW N'folk)	Maxwell-Hyslop, Robin
Hawksley, Warren	Mayhew, Sir Patrick
Hayes, J.	Mellor, David
Hayhoe, Rt Hon Barney	Merchant, Piers
Hayward, Robert	Meyer, Sir Anthony
Heath, Rt Hon Edward	Miller, Hal (B'grove)
Heathcoat-Amory, David	Mills, Iain (Meriden)
Henderson, Barry	Miscampbell, Norman
Hickmet, Richard	Mitchell, David (NW Hants)
Hicks, Robert	Moate, Roger
Higgins, Rt Hon Terence L.	Monro, Sir Hector
Hill, James	Montgomery, Sir Fergus
Hind, Kenneth	Moore, John
Hirst, Michael	Morrison, Hon C. (Devizes)
Hogg, Hon Douglas (Gr'th'm)	Morrison, Hon P. (Chester)
Holland, Sir Philip (Gedling)	Moynihan, Hon C.
Holland, Stuart (Vauxhall)	Mudd, David
Hordern, Sir Peter	Murphy, Christopher
Howard, Michael	Neale, Gerrard
Howarth, Alan (Stratf'd-on-A)	Needham, Richard
Howarth, Gerald (Cannock)	Neubert, Michael
Howell, Rt Hon D. (G'ldford)	Newton, Tony
Howell, Ralph (N Norfolk)	Nicholls, Patrick
Hubbard-Miles, Peter	Norris, Steven
Hunter, Andrew	Onslow, Cranley
Irving, Charles	Oppenheim, Phillip
Jackson, Robert	Oppenheim, Rt Hon Mrs S.
Jenkin, Rt Hon Patrick	Osborn, Sir John
Jessel, Toby	Ottaway, Richard
Johnson Smith, Sir Geoffrey	Page, Sir John (Harrow W)
Jones, Gwilym (Cardiff N)	Page, Richard (Herts SW)
Jones, Robert (W Herts)	Parkinson, Rt Hon Cecil
Jopling, Rt Hon Michael	Parris, Matthew
Joseph, Rt Hon Sir Keith	Patten, Christopher (Bath)
Kellett-Bowman, Mrs Elaine	Patten, J. (Oxf W & Abdgn)
Kershaw, Sir Anthony	Pawsey, James
Key, Robert	Peacock, Mrs Elizabeth
King, Roger (B'ham N'field)	Pollock, Alexander
King, Rt Hon Tom	Porter, Barry
Knight, Greg (Derby N)	Portillo, Michael
Knight, Dame Jill (Edgbaston)	Powell, William (Corby)
Knowles, Michael	Powley, John
Knox, David	Prentice, Rt Hon Reg
Lamont, Norman	Price, Sir David
Lang, Ian	Prior, Rt Hon James
Latham, Michael	Proctor, K. Harvey
Lawler, Geoffrey	Pym, Rt Hon Francis
Lawrence, Ivan	Raffan, Keith
Lawson, Rt Hon Nigel	Rathbone, Tim
Leigh, Edward (Gainsbor'gh)	Rees, Rt Hon Peter (Dover)
Lennox-Boyd, Hon Mark	Renton, Tim
Lester, Jim	Rhodes James, Robert
Lewis, Sir Kenneth (Stamf'd)	Rhys Williams, Sir Brandon
Lightbown, David	Ridley, Rt Hon Nicholas
Lilley, Peter	Ridsdale, Sir Julian
Lloyd, Ian (Havant)	Rippon, Rt Hon Geoffrey
Lloyd, Peter, (Fareham)	Roberts, Wyn (Conwy)
Lord, Michael	Roe, Mrs Marion
Luce, Richard	Rossi, Sir Hugh
Lyell, Nicholas	Rowe, Andrew
McCrindle, Robert	Rumbold, Mrs Angela
McCurley, Mrs Anna	Ryder, Richard
Macfarlane, Neil	Sackville, Hon Thomas
MacGregor, Rt Hon John	Sainsbury, Hon Timothy
MacKay, Andrew (Berkshire)	Sayeed, Jonathan
MacKay, John (Argyll & Bute)	Shaw, Giles (Pudsey)
Maclean, David John	Shaw, Sir Michael (Scarb')
McNair-Wilson, P. (New F'st)	Shelton, William (Streatham)
McQuarrie, Albert	Shepherd, Colin (Hereford)
Madel, David	Shepherd, Richard (Aldridge)
Major, John	Shersby, Michael
Malins, Humfrey	Silvester, Fred
Malone, Gerald	Sims, Roger
Maples, John	Skeet, T. H. H.
Marland, Paul	Smith, Tim (Beaconsfield)
Marlow, Antony	Soames, Hon Nicholas
Marshall, Michael (Arundel)	Speed, Keith
Mates, Michael	Spence, John
Maude, Hon Francis	Spencer, Derek
Mawhinney, Dr Brian	Spicer, Jim (W Dorset)

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

Question accordingly negatived.

Amendment proposed, pursuant to Standing Order No. 35 (Calling of amendments at end of debate), at the end of the Question to add: But humbly regret that the Gracious Speech contains no evidence that the Government seriously plans to tackle Britain's most fundamental problems; believes that further action is needed to stimulate manufacturing industry through a cut in interest rates and a more competitive exchange rate via sterling's entry into the exchange rate mechanism of the European Monetary System; and calls on the Government to seek a reduction in unemployment through selective capital investment, a fair and durable incomes strategy, lower employers' National Insurance contributions, and an expansion of the community programme and skill training.—[Mr. Cartwright.]

Question put, That the amendment be made:—

The House divided: Ayes 33, Noes 350.

Division No. 4]	[10.15 pm
AYES
Alton, David	Owen, Rt Hon Dr David
Beggs, Roy	Penhaligon, David
Beith, A. J.	Powell, Rt Hon J. E. (S Down)
Bruce, Malcolm	Robinson, P. (Belfast E)
Carlile, Alexander (Montg'y)	Ross, Stephen (Isle of Wight)
Forsythe, Clifford (S Antrim)	Ross, Wm. (Londonderry)
Freud, Clement	Smith, Cyril (Rochdale)
Hancock, Mr. Michael	Smyth, Rev W. M. (Belfast S)
Howells, Geraint	Steel, Rt Hon David
Hughes, Simon (Southwark)	Taylor, Rt Hon John David
Jenkins, Rt Hon Roy (Hillh'd)	Wainwright, R.
Johnston, Sir Russell	Walker, Cecil (Belfast N)
Kennedy, Charles	Wallace, James
Livsey, Richard	Wrigglesworth, Ian
McCusker, Harold
Maclennan, Robert	Tellers for the Ayes:
Maginnis, Ken	Mr. John Cartwright and
Meadowcroft, Michael	Mr. Archy Kirkwood.
Molyneaux, Rt Hon James

NOES
Adley, Robert	Amery, Rt Hon Julian
Aitken, Jonathan	Amess, David
Alison, Rt Hon Michael	Ancram, Michael

Arnold, Tom	Eyre, Sir Reginald
Ashby, David	Fairbairn, Nicholas
Aspinwall, Jack	Fallon, Michael
Atkins, Rt Hon Sir H.	Farr, Sir John
Atkinson, David (B'm'th E)	Favell, Anthony
Baker, Rt Hon K. (Mole Vall'y)	Fenner, Mrs Peggy
Baker, Nicholas (N Dorset)	Finsberg, Sir Geoffrey
Baldry, Tony	Fletcher, Alexander
Banks, Robert (Harrogate)	Fookes, Miss Janet
Batiste, Spencer	Forman, Nigel
Beaumont-Dark, Anthony	Forsyth, Michael (Stirling)
Bellingham, Henry	Forth, Eric
Bendall, Vivian	Fowler, Rt Hon Norman
Benyon, William	Fox, Marcus
Best, Keith	Franks, Cecil
Bevan, David Gilroy	Fraser, Peter (Angus East)
Biffen, Rt Hon John	Freeman, Roger
Blackburn, John	Fry, Peter
Blaker, Rt Hon Sir Peter	Gale, Roger
Body, Richard	Galley, Roy
Bonsor, Sir Nicholas	Gardiner, George (Reigate)
Bottomley, Peter	Gardner, Sir Edward (Fylde)
Bottomley, Mrs Virginia	Garel-Jones, Tristan
Bowden, A. (Brighton K'to'n)	Gilmour, Rt Hon Sir Ian
Bowden, Gerald (Dulwich)	Glyn, Dr Alan
Boyson, Dr Rhodes	Goodhart, Sir Philip
Braine, Rt Hon Sir Bernard	Goodlad, Alastair
Brandon-Bravo, Martin	Gorst, John
Brinton, Tim	Gow, Ian
Brittan, Rt Hon Leon	Gower, Sir Raymond
Brooke, Hon Peter	Greenway, Harry
Brown, M. (Brigg & Cl'thpes)	Gregory, Conal
Browne, John	Griffiths, Sir Eldon
Bruinvels, Peter	Griffiths, Peter (Portsm'th N)
Bryan, Sir Paul	Grist, Ian
Buchanan-Smith, Rt Hon A.	Ground, Patrick
Buck, Sir Antony	Grylls, Michael
Budgen, Nick	Hamilton, Hon A. (Epsom)
Bulmer, Esmond	Hampson, Dr Keith
Burt, Alistair	Hanley, Jeremy
Butcher, John	Hannam, John
Butler, Hon Adam	Harris, David
Butterfill, John	Haselhurst, Alan
Carlisle, John (N Luton)	Hawkins, C. (High Peak)
Carlisle, Kenneth (Lincoln)	Hawkins, Sir Paul (SW N'folk)
Carlisle, Rt Hon M. (W'ton S)	Hawksley, Warren
Carttiss, Michael	Hayes, J.
Cash, William	Hayhoe, Rt Hon Barney
Channon, Rt Hon Paul	Hayward, Robert
Chapman, Sydney	Heath, Rt Hon Edward
Chope, Christopher	Heathcoat-Amory, David
Churchill, W. S.	Henderson, Barry
Clark, Hon A. (Plym'th S'n)	Hickmet, Richard
Clark, Dr Michael (Rochford)	Hicks, Robert
Clark, Sir W. (Croydon S)	Higgins, Rt Hon Terence L.
Clarke, Rt Hon K. (Rushcliffe)	Hill, James
Colvin, Michael	Hind, Kenneth
Conway, Derek	Hirst, Michael
Coombs, Simon	Hogg, Hon Douglas (Gr'th'm)
Cope, John	Holt, Richard
Cormack, Patrick	Hordern, Sir Peter
Corrie, John	Howard, Michael
Couchman, James	Howarth, Alan (Stratf'd-on-A)
Cranborne, Viscount	Howarth, Gerald (Cannock)
Critchley, Julian	Howell, Rt Hon D. (G'ldford)
Crouch, David	Howell, Ralph (N Norfolk)
Currie, Mrs Edwina	Hubbard-Miles, Peter
Dickens, Geoffrey	Hunter, Andrew
Dicks, Terry	Irving, Charles
Dorrell, Stephen	Jackson, Robert
Douglas-Hamilton, Lord J.	Jenkin, Rt Hon Patrick
Dover, Den	Jessel, Toby
du Cann, Rt Hon Sir Edward	Johnson Smith, Sir Geoffrey
Dunn, Robert	Jones, Gwilym (Cardiff N)
Durant, Tony	Jones, Robert (W Herts)
Dykes, Hugh	Jopling, Rt Hon Michael
Edwards, Rt Hon N. (P'broke)	Joseph, Rt Hon Sir Keith
Eggar, Tim	Kellett-Bowman, Mrs Elaine
Emery, Sir Peter	Kershaw, Sir Anthony
Evennett, David	Key, Robert

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

Walden, George	Wiggin, Jerry
Walker, Bill (T'side N)	Wilkinson, John
Walker, Rt Hon P. (W'cester)	Winterton, Mrs Ann
Wall, Sir Patrick	Winterton, Nicholas
Waller, Gary	Wolfson, Mark
Walters, Dennis	Wood, Timothy
Ward, John	Woodcock, Michael
Wardle, C. (Bexhill)	Yeo, Tim
Warren, Kenneth	Young, Sir George (Acton)
Watson, John	Younger, Rt Hon George
Watts, John
Wells, Sir John (Maidstone)	Tellers for the Noes:
Whitfield, John	Mr. Carol Mather and
Whitney, Raymond	Mr. Robert Boscawen.

Question accordingly negatived.

Main Question put:—

The House divided: Ayes 329, Noes 25.

Division No. 5]	[10.30 pm
AYES
Adley, Robert	Clarke, Rt Hon K. (Rushcliffe)
Aitken, Jonathan	Conway, Derek
Alison, Rt Hon Michael	Coombs, Simon
Amess, David	Cope, John
Ancram, Michael	Cormack, Patrick
Arnold, Tom	Corrie, John
Ashby, David	Couchman, James
Aspinwall, Jack	Cranborne, Viscount
Atkins, Rt Hon Sir H.	Crouch, David
Atkinson, David (B'm'th E)	Currie, Mrs Edwina
Baker, Rt Hon K. (Mole Vall'y)	Dickens, Geoffrey
Baker, Nicholas (N Dorset)	Dicks, Terry
Baldry, Tony	Dorrell, Stephen
Banks, Robert (Harrogate)	Douglas-Hamilton, Lord J.
Batiste, Spencer	Dover, Den
Beaumont-Dark, Anthony	du Cann, Rt Hon Sir Edward
Bellingham, Henry	Dunn, Robert
Bendall, Vivian	Durant, Tony
Benyon, William	Dykes, Hugh
Best, Keith	Edwards, Rt Hon N. (P'broke)
Bevan, David Gilroy	Eggar, Tim
Biffen, Rt Hon John	Emery, Sir Peter
Blackburn, John	Evennett, David
Blaker, Rt Hon Sir Peter	Eyre, Sir Reginald
Body, Richard	Fairbairn, Nicholas
Bonsor, Sir Nicholas	Fallon, Michael
Bottomley, Peter	Farr, Sir John
Bottomley, Mrs Virginia	Favell, Anthony
Bowden, A. (Brighton K'to'n)	Fenner, Mrs Peggy
Bowden, Gerald (Dulwich)	Finsberg, Sir Geoffrey
Boyson, Dr Rhodes	Fookes, Miss Janet
Braine, Rt Hon Sir Bernard	Forman, Nigel
Brandon-Bravo, Martin	Forsyth, Michael (Stirling)
Brinton, Tim	Forth, Eric
Brittan, Rt Hon Leon	Fowler, Rt Hon Norman
Brooke, Hon Peter	Fox, Marcus
Brown, M. (Brigg & Cl'thpes)	Franks, Cecil
Browne, John	Fraser, Peter (Angus East)
Bruinvels, Peter	Freeman, Roger
Buchanan-Smith, Rt Hon A.	Fry, Peter
Buck, Sir Antony	Gale, Roger
Budgen, Nick	Galley, Roy
Bulmer, Esmond	Gardiner, George (Reigate)
Burt, Alistair	Gardner, Sir Edward (Fylde)
Butcher, John	Garel-Jones, Tristan
Butler, Hon Adam	Glyn, Dr Alan
Butterfill, John	Goodhart, Sir Philip
Carlisle, John (N Luton)	Goodlad, Alastair
Carlisle, Kenneth (Lincoln)	Gorst, John
Carlisle, Rt Hon M. (W'ton S)	Gow, Ian
Cash, William	Gower, Sir Raymond
Channon, Rt Hon Paul	Greenway, Harry
Chapman, Sydney	Gregory, Conal
Chope, Christopher	Griffiths, Sir Eldon
Churchill, W. S.	Griffiths, Peter (Portsm'th N)
Clark, Hon A. (Plym'th S'n)	Grist, Ian
Clark, Dr Michael (Rochford)	Ground, Patrick
Clark, Sir W. (Croydon S)	Grylls, Michael

Hamilton, Hon A. (Epsom)	McQuarrie, Albert
Hampson, Dr Keith	Madel, David
Hanley, Jeremy	Major, John
Hannam, John	Malins, Humfrey
Harris, David	Malone, Gerald
Haselhurst, Alan	Marland, Paul
Hawkins, C. (High Peak)	Marlow, Antony
Hawkins, Sir Paul (SW N'folk)	Marshall, Michael (Arundel)
Hawksley, Warren	Maude, Hon Francis
Hayes, J.	Mawhinney, Dr Brian
Hayhoe, Rt Hon Barney	Maxwell-Hyslop, Robin
Hayward, Robert	Mayhew, Sir Patrick
Heath, Rt Hon Edward	Mellor, David
Henderson, Barry	Merchant, Piers
Hickmet, Richard	Meyer, Sir Anthony
Hicks, Robert	Miller, Hal (B'grove)
Higgins, Rt Hon Terence L.	Mills, Iain (Meriden)
Hill, James	Miscampbell, Norman
Hind, Kenneth	Mitchell, David (NW Hants)
Hirst, Michael	Moate, Roger
Hogg, Hon Douglas (Gr'th'm)	Monro, Sir Hector
Holt, Richard	Montgomery, Sir Fergus
Hordern, Sir Peter	Moore, John
Howard, Michael	Morrison, Hon P. (Chester)
Howarth, Alan (Stratf'd-on-A)	Moynihan, Hon C.
Howarth, Gerald (Cannock)	Mudd, David
Howell, Rt Hon D. (G'ldford)	Murphy, Christopher
Howell, Ralph (N Norfolk)	Neale, Gerrard
Hubbard-Miles, Peter	Needham, Richard
Hunter, Andrew	Neubert, Michael
Irving, Charles	Newton, Tony
Jackson, Robert	Nicholls, Patrick
Jenkin, Rt Hon Patrick	Norris, Steven
Jessel, Toby	Oppenheim, Phillip
Jones, Gwilym (Cardiff N)	Osborn, Sir John
Jones, Robert (W Herts)	Ottaway, Richard
Jopling, Rt Hon Michael	Page, Sir John (Harrow W)
Joseph, Rt Hon Sir Keith	Page, Richard (Herts SW)
Kellett-Bowman, Mrs Elaine	Parkinson, Rt Hon Cecil
Kershaw, Sir Anthony	Parris, Matthew
Key, Robert	Patten, Christopher (Bath)
King, Roger (B'ham N'field)	Patten, J. (Oxf W & Abdgn)
King, Rt Hon Tom	Pawsey, James
Knight, Greg (Derby N)	Peacock, Mrs Elizabeth
Knight, Dame Jill (Edgbaston)	Pollock, Alexander
Knowles, Michael	Porter, Barry
Knox, David	Portillo, Michael
Lamont, Norman	Powell, William (Corby)
Lang, Ian	Powley, John
Latham, Michael	Prentice, Rt Hon Reg
Lawler, Geoffrey	Price, Sir David
Lawrence, Ivan	Proctor, K. Harvey
Lawson, Rt Hon Nigel	Pym, Rt Hon Francis
Lennox-Boyd, Hon Mark	Raffan, Keith
Lester, Jim	Rathbone, Tim
Lewis, Sir Kenneth (Stamf'd)	Renton, Tim
Lightbown, David	Rhys Williams, Sir Brandon
Lilley, Peter	Ridley, Rt Hon Nicholas
Lloyd, Ian (Havant)	Ridsdale, Sir Julian
Lloyd, Peter, (Fareham)	Rippon, Rt Hon Geoffrey
Lord, Michael	Roberts, Wyn (Conwy)
Luce, Richard	Roe, Mrs Marion
Lyell, Nicholas	Rossi, Sir Hugh
McCurley, Mrs Anna	Rowe, Andrew
Macfarlane, Neil	Rumbold, Mrs Angela
MacGregor, Rt Hon John	Ryder, Richard
MacKay, Andrew (Berkshire)	Sackville, Hon Thomas
MacKay, John (Argyll & Bute)	Sainsbury, Hon Timothy
Maclean, David John	Sayeed, Jonathan
McNair-Wilson, P. (New F'st)	Shaw, Sir Michael (Scarb')

Shelton, William (Streatham)	Townsend, Cyril D. (B'heath)
Shepherd, Colin (Hereford)	Tracey, Richard
Shepherd, Richard (Aldridge)	Trippier, David
Silvester, Fred	Trotter, Neville
Sims, Roger	Twinn, Dr Ian
Skeet, T. H. H.	van Straubenzee, Sir W.
Smith, Tim (Beaconsfield)	Vaughan, Sir Gerard
Soames, Hon Nicholas	Viggers, Peter
Speed, Keith	Waddington, David
Spencer, Derek	Wakeham, Rt Hon John
Spicer, Jim (W Dorset)	Waldegrave, Hon William
Squire, Robin	Walden, George
Stanbrook, Ivor	Walker, Bill (T'side N)
Stanley, John	Walker, Rt Hon P. (W'cester)
Steen, Anthony	Waller, Gary
Stern, Michael	Walters, Dennis
Stevens, Lewis (Nuneaton)	Ward, John
Stevens, Martin (Fulham)	Wardle, C. (Bexhill)
Stewart, Allan (Eastwood)	Warren, Kenneth
Stewart, Andrew (Sherwood)	Watson, John
Stewart, Ian (N Hertf'dshire)	Watts, John
Stokes, John	Wells, Sir John (Maidstone)
Stradling Thomas, Sir John	Whitfield, John
Sumberg, David	Whitney, Raymond
Tapsell, Sir Peter	Wiggin, Jerry
Taylor, John (Solihull)	Wilkinson, John
Taylor, Teddy (S'end E)	Winterton, Mrs Ann
Tebbit, Rt Hon Norman	Winterton, Nicholas
Temple-Morris, Peter	Wolfson, Mark
Terlezki, Stefan	Wood, Timothy
Thatcher, Rt Hon Mrs M.	Woodcock, Michael
Thomas, Rt Hon Peter	Yeo, Tim
Thompson, Donald (Calder V)	Young, Sir George (Acton)
Thompson, Patrick (N'ich N)	Younger, Rt Hon George
Thorne, Neil (Ilford S)
Thornton, Malcolm	Tellers for the Ayes:
Thurnham, Peter	Mr. Carol Mather and
Townend, John (Bridlington)	Mr. Robert Boscawen.

NOES
Beggs, Roy	Penhaligon, David
Beith, A. J.	Powell, Rt Hon J. E. (S Down)
Bruce, Malcolm	Robinson, P. (Belfast E)
Carlile, Alexander (Montg'y)	Skinner, Dennis
Freud, Clement	Smith, Cyril (Rochdale)
Howells, Geraint	Smyth, Rev W. M. (Belfast S)
Hughes, Simon (Southwark)	Steel, Rt Hon David
Johnston, Sir Russell	Stewart, Rt Hon D. (W Isles)
Kennedy, Charles	Taylor, Rt Hon John David
Kirkwood, Archy	Walker, Cecil (Belfast N)
Livsey, Richard
McCusker, Harold	Te
Maginnis, Ken	Mr. WillianRossand
Molyneaux, Rt Hon James	Mr. Clifford Forsythe.
Nicholson, J.

Question accordingly agreed to.

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

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