Economic Policy and Unemployment

HC Deb 12 February 1986 vol 91 cc969-1010

Mr. Speaker

Before I call the Opposition Front Bench spokesman, I announce that I have selected the amendment in the name of the Prime Minister.

4.28 pm

Mr. Roy Hattersley (Birmingham, Sparkbrook)

I beg to move, That this House condemns the callous and irresponsible economic policies pursued by the Chancellor of the Exchequer, which consistently promote higher unemployment through record real interest rates, constant cuts in public sector capital spending, the squandering of oil revenues and the destruction of the nation's manufacturing industry.

The Chancellor of the Exchequer should have come to speak in this debate. It is absurd that the most indiscreet Chancellor since the war should use the excuse of pre-Budget purdah as his reason for not doing so. The Chief Secretary to the Treasury and the Paymaster General and Minister for Employment, whatever their undoubted talents, are not directly and personally responsible for the policies which have trebled unemployment since the day the Tory party published the "Labour isn't working" poster.

The Chancellor is directly and personally responsible. He is the architect of the medium-term financial strategy. He is one of the few Cabinet Ministers who still believes in it. After the next election, I have no doubt that the two Ministers who will speak today will, when asked about their responsibility for the 3.4 million unemployed, merely answer that they were doing no more than carry out their superior's orders. It is the Chancellor's responsibility to speak. I, and I suspect many hon. Members on both sides of the House, resent the idea that he should duck out.

I wish to put a question about his direct responsibilities to the Paymaster General and Minister for Employment who will reply to the debate. Knowing, as he must, that the Government's reputation has been severely damaged over the past month by their dissembling and equivocation, does he think that the time has once again come to begin the publication of honest employment and unemployment statistics?

I shall explain what I mean, because, with little conviction, the right hon. and learned Gentleman is attempting to look puzzled. The total of registered unemployed has been constantly reduced over the past six years by statistical manipulation. Were we today debating the level of unemployed on the honest pre-1979 basis, the figure about which the Opposition complain would be 3.8 million and not 3.4 million. I shall quote on that subject from The Economist, a publication not noted for its unequivocal support of the Labour party. Ten days ago it stated: Adult unemployment has trebled under Mrs. Thatcher … Add in school leavers along with those removed by special employment measures and sleight of hand and make some allowance for dole fiddles and the true number of jobless could he nearly 4 million. Over the manipulation of the figures, the Government once again combine incompetence and subterfuge in equal measures. They manipulate the unemployment figures to keep down the total but still record the highest level of unemployment in our history.

Claims made about employment and new jobs are even more bogus. The Government boast that 252,000 new jobs have been generated since March 1983. They add, for good measure, the guess that about 400,000 self-employed jobs have also been created during that time.

The Bank of England, like The Economist not an organ noted for its uncritical support of Labour party policies, gives the lie to the claim that 252,000 new jobs have been created. In its December quarterly bulletin, the Bank of England claimed that the economy has not generated 250,000 full-time jobs. It has not even generated 10 per cent. of that number. The economy has generated over the same time 24,000 full-time jobs. That is 24,000 new full-time jobs between the general election and the middle of last year. That is the creation of new jobs at the rate of 890 full-time new jobs each month. At that rate, it will take until 1998 merely to find new jobs for the 130,000 extra men and women who were put out of work last month alone.

The Paymaster General and Minister for Employment (Mr. Kenneth Clarke)

The right hon. Gentleman is making a rather serious attack on the integrity of the Department of Employment's statistical service. He knows that the published figures are all produced by the same staff, or their successors, who serviced the Government of which he was a member, and that when changes are made to the figures, the basis upon which the change is made is always published in the Employment Gazette. It is easy to follow the change closely. As he must have prepared this attack with care, will he state which change in the figures he is attacking and what he says has not been publicly stated to make the basis of the change clear?

Mr. Hattersley

The Paymaster General—the second Minister in the Department—says that I am making a serious attack on the Government's statistical service. I am doing no such thing. I am making a serious attack on the integrity of the Chancellor of the Duchy of Lancaster. The Minister is correct: I have prepared the case carefully. I have given two examples and I shall give more if he wants. It was when the Chancellor of the Duchy of Lancaster 'was Secretary of State for Employment that on his instructions the two changes were instituted. The statistical service faithfully carried them out.

It was the Chancellor of the Duchy of Lancaster who said that the calculations should be made on claimants rather than those registering for work—reducing the total by 170,000. He said that men over 60 should not sign on—reducing the total by 107,000. I do not know why the Minister asked me that question if he thought that I did not know the answer. He must know the answer. He should, if he had the integrity with which I previously credited him, be ashamed to have to administer such a statistical manipulation.

I offer the Minister the suggestion that when he replies he should tell us how he feels about a Government who—I use the phrase again—not with standing the fact that they have manipulated the unemployment statistics, still record the highest unemployment level in our history, since we could, if the Government chose, begin to put Britain back to work. To achieve that objective, we need a Government who make the reduction of unemployment their highest priority.

The most frightening feature of last week's British Leyland fiasco is the confirmation that the only industrial strategy that the Government possess is to close and to sell. Their free market philosophy has now become such an obsession that they prefer American capitalism and redundancies to British enterprise and jobs. That same obsession has resulted in economic policies based on over-valued sterling and artificially high interest rates. They are two policies which make high unemployment inevitable and industrial collapse certain.

Real interest rates are now higher than at any time in our history. Sterling is valued at a level which subsidises imports and penalises exports. The country must know that. Industry tells it time after time, as it tells the Government, that their exchange rate and interest rate policy is bound to lead to higher and higher unemployment and further and further industrial collapse.

However, as the monthly unemployment figures are published, the Secretary of State for Employment, whoever he may be from time to time, always reacts in the same way. He expresses surprise and disappointment. He then goes on to reject all the policies which might bring down unemployment, basing his rejection on prejudice and ignorance.

I give the House the most recent example of that. On television on 4 February, Lord Young, the Secretary of State for Employment, wheeled out the old chestnut that the policy of public investment in the infrastructure, which everyone except the Cabinet believes is the right answer for this country, has failed abroad and would fail here. He said that public spending has failed to solve economic problems throughout the industrial world.

I shall give the Secretary of State for Employment the facts. I shall send him the figures later today. Between 1979 and 1984—the five most recent years for which figures are available—in America, France, Germany and Japan public expenditure increased faster than it did in Britain and so did gross domestic product. All those countries had a faster rate of growth than we did. All those countries had a slower rise in unemployment, and all except France had a better inflation record. If the Secretary of State correlates all those figures, he will see that there is an absolute relationship between Government capital expenditure and the health and welfare of those four major economies.

Mr. Richard Ryder (Mid-Norfolk)

When the right hon. Gentleman is dealing with public expenditure, perhaps he could answer one question. Last Sunday the Leader of the Opposition said that extra public expenditure under a possible Labour Government on education, housing and construction would be financed by raising taxes for those earning over £30,000 a year. Can the right hon. Gentleman tell us now how much extra revenue that would raise?

Mr. Hattersley

Yes. What is more, so did my right hon. Friend the Leader of the Opposition on television on Sunday. The figure he quoted was £3 billion, the amount which that uniquely lucky section of the population have obtained in tax concessions during the lifetime of this Government. They are the only people who have received the tax cuts about which the Government boasted and which they promised at the last election. The Leader of the Opposition said that it was unreasonable and unjust that only the richest 5 per cent. of the population should have enjoyed tax cuts under the Government and that it was right and necessary that they pay their fair contribution to the national welfare.

Mr. Patrick Nicholls (Teignbridge)

If the right hon. Gentleman cares to check the transcript, he will see that his right hon. Friend said that the entire Labour programme of reconstruction could be financed by tax increases for those earning over £30,000. Is the right hon. Gentleman now saying that it is not the £40 billion that we heard about before, or £20 billion or £10 billion but just £3 billion? Is that what he is saying?

Mr. Hattersley

It is neither what I am saying nor what my right hon. Friend said. In a moment I am prepared to tell the hon. Gentleman about some of the other areas from which money could and should come. I am pleased and proud to confirm that my right hon. Friend said that in a decent society one cannot allow the richest 5 per cent. to be the only beneficiaries from tax cuts that were promised to everybody.

I repeat that, in the countries which I have given as examples, higher levels of public expenditure have improved economic performance. Yet our Government stubbornly refuse even to consider reducing unemployment by increasing public sector capital investment. With 400,000 building workers on the dole it is absurd to argue that there is no shortage of demand. I do not advocate, nor have I ever advocated, indiscriminate reflation such as would come from generalised cuts in direct taxation. That would risk an unacceptable increase in inflation and added pressure on the balance of payments. We need directed reflation through capital spending on desperately needed houses, schools, hospitals and roads. The need is there; the manpower is there; the money is there; all that is lacking is the political will.

Creation of jobs by public sector investment is greeted by the Government with a single vacuous, ignorant question which the hon. Member for Mid-Norfolk (Mr. Ryder) reproduced accurately a moment ago—where is all the money coming from? That was the response of the Paymaster General to the proposals of the Select Committee on Employment for new special employment measures for the long-term unemployed.

Long-term unemployment—that is, men and women who have been out of work for a year or more—totals 1,352,000. There are more long-term unemployed today than the unemployment total when the Government were elected. Perhaps even worse, there are now almost three times as many long-term unemployed men and women as there were during the most deeply damaging period in the inter-war slump. In fact, we are in the deepest depression in our history.

What is the Paymaster General's response to the idea that a modest sum might be spent to reduce long-term unemployment, to alleviate the suffering and to end the hardship involved? In regard to the cost of creating a few jobs he said: It would be ironic if the cost caused greater damage to business and to the job market in other ways. If that flaccid comment means anything, it is a complaint about the cost of job creation. Let me tell the Paymaster General about the cost of unemployment. Every unemployed man or woman costs the country between £6,300 and £7,000 a year in unemployment, housing and other social security benefits and in lost taxes and national insurance payments.

Unemployment costs the country between £21.5 billion and £24 billion a year. The annual cost of increased unemployment since the Tory Government were elected in 1979 is £14 billion. That is more than the entire revenue from North sea oil. Yet in their perversity the Government choose to spend money on maintaining unemployment rather than on creating jobs. As a result of squandering North sea oil income, the Government have assisted in the destruction of the manufacturing base on which the country relies and which we will need more and more as the years go on.

Mr. Richard Holt (Langbaurgh)

rose—

Mr. Hattersley

I shall give way, but for the last time, as the time available for the debate has been reduced so much.

Mr. Holt

The right hon. Gentleman has made quite a play with statistics. He has just said that each unemployed person costs the country between £6,300 and £7,000. Two days ago the Evening Gazette in Middlesbrough quoted a figure of £5,800 that had been given by the right hon. Gentleman's parliamentary private secretary. Who is correct, the right hon. Gentleman or his PPS?

Mr. Hattersley

If it has to be between my PPS and me, I do not have much doubt about it, particularly since I do not have a PPS, which adds to the mystery. There are two possible sources of error. One is the Middlesbrough Evening Gazette and the other is the hon. Gentleman. All I can tell him is that the figures I quoted come from official statistics. The maximum cost of one man or woman unemployed is as high as £7,000 and may be as low as £6,300. Those figures are from the report of the House of Lords Select Committee on Overseas Trade. The hon. Gentleman must continue his argument with other people on other occasions.

Having reminded the House of the cost of unemployment and about the result of the destruction of our manufacturing base, may I remind the Chief Secretary of the vital importance of manufacturing industry to the country in the past and of its absolute necessity in future? North sea oil revenues stand between Britain and something very like literal bankruptcy. North sea oil contributes £11 billion to the revenue. The Chief Secretary will not even dare to speculate on what he would do were he £11 billion worse off. Without the £8 million surplus on the oil account, our balance of payments would be in chronic and serious deficit. Although oil provides only 6 per cent. of our national income, we have become wholly and totally dependent on it for economic security. Yet it is a wasting asset and the Government have made neither plans nor preparations for the day when the oil runs out.

Unless manufacturing industry is revived, we shall not be able to fill the balance of payments gap which oil will leave and which it now masks. The service industries cannot do it. Indeed, they do not even claim that they can do it. The time and resources provided by North sea oil should have been used to put Britain back to work and to reinvest in our manufacturing base. But the money has been squandered.

Notwithstanding that, weak-minded Tory Members such as the hon. Member for Mid-Norfolk have only one question to ask when we talk about creating jobs, which is, "Where will the money come from?" That is not even the right question. The right question is, "Where is the money going to?" The answer is clear—the Government's obsession with the City and the City's obsession with the money supply have now combined with the Chancellor's constant failure to hit even his monetary targets to provide a new sort of monetarism. The new one, like the old, has had a disastrous effect on our jobs, manufacturing industry and national resources.

The squandering of our national resources, the dissipation of North sea oil revenues, the flight of capital from Britain, and an exchange rate that does not sustain our domestic industry are the price we pay for the Chancellor's medium-term financial strategy. We now want a medium-term employment and industry strategy which makes the reduction of unemployment its first priority; creates the climate in which new manufacturing industry will flourish; invests in public sector capital; promotes education and training; and forges a partnership with the unions and industry. That strategy will not come, perhaps no strategy will come, from this divided and discredited Government. That strategy and the over-whelming primacy of reducing unemployment will come after the next election, from a Labour Government.

4.52 pm

The Chief Secretary to the Treasury (Mr. John MacGregor)

I beg to move, to leave out from "House" to the end of the Question, and to add instead thereof: notes that the Government's success in the battle against inflation has already brought with it nearly five years of soundly based economic growth and rising living standards; applauds the achievement of manufacturing industry in raising productivity to record levels; and welcomes the continuing rise in the number of people in work. I shall have something to say about all three of these elements.

The right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) made some footling fun about the fact that my right hon. Friend the Chancellor is not speaking in the debate. It is well known that, in the period shortly before a Budget, the Chancellor does not take part in debates.

I am beginning to wonder how serious the Opposition are about this debate. The only reason for having it is that the right hon. Member is discomfited by the fact that others of his colleagues have been making rather more appearances in the House than he has. Certainly, his colleagues have been plotting and doing their best to prevent him from appearing this afternoon—for what reason, I know not. His speech was heavy on charges, but light on alternative policies.

I happened to hear the right hon. Member on "Desert Island Discs", the one thing I envy him for, because it is an attractive programme. In it, he said that he wars basically a happy man and that even after he had had a dreadful failure, he surprised his staff by being happy the following day. I am afraid that his staff will be surprised tomorrow morning, because he has said nothing this afternoon that will give any comfort to the unemployed or lead anybody to believe that his party could deal with unemployment.

It is well known that Treasury Ministers have certain limitations when they take part in a debate when the Budget is only a month away. That is when my right hon. Friend the Chancellor of the Exchequer traditionally reviews the performance of the economy over the past year and unveils his economic forecast for the year ahead. Traditionally, too, therefore, this is the normal Budget period for Treasury Ministers, so the House will not be expecting me to lift the lid off the Budget box today or to attempt to predict the course of the economy over the coming year. It will, I am sure, understand that I must confine myself to economic performance and policy to date.

Nor will the House expect me to comment on hypothetical future movements in interest and exchange rates. However, the right hon. Member for Sparkbrook made much of the dangers when North sea oil runs out, and revenues diminish. When the events of the past three months come to be seen in perspective, perhaps their most striking feature will be the dramatic 40 per cent. fall in the price of oil. With all the dire prognostications of the right hon. Gentleman and others about our dependence on that oil and their warnings about what will happen when the oil runs out and its revenues diminish, one would have expected catastrophe to occur. That would certainly have happened given the state of our economy under his Government and the policies being pursued then.

The world perception of that economy was that our industrial competitiveness was constantly being eroded by inflation rates persistently much higher than all the other major industrial nations. Our industries were bloated by overmanning and crippled by restrictive practices that prevented our embracing modern technology and obtaining the benefits of the efficiency and high quality that they brought. [Interruption.] I am not surprised that the right hon. Member for Islwyn (Mr. Kinnock) does not want to listen. Other factors that contributed to our problems were restrictive practices that were shored up and perpetuated by Government legislation and intervention and an economy burdened by excessive Government spending, which led to ever increasing overseas debts. The right hon. Member for Sparkbrook made much of excessive Government spending today, but it did not lead to higher growth under his Government.

We had an economy in which, alas, the quality and reliability of too many British-made goods, and the failures to deliver on time because of strikes, had become sick overseas jokes. Such a dramatic fall in the oil price as that which we have been experiencing would at that time have led to crisis and another ignominious retreat to the International Monetary Fund.

Mr. Stuart Bell (Middlesbrough)

Does the Chief Secretary agree that part of the reason for the fall in the price of oil is the fact that the Government have no policy towards oil, just as they have no policy for industry? What are the Government's policies towards falling oil prices and production, and to industry? Where are their policies and strategies?

Mr. MacGregor

Oil prices have fallen because they have fallen on international markets. It is not the Government's intention to join OPEC, and we have made that clear. I note from recent letters between the hon. Member for Thurrock (Dr. McDonald) and my right hon. Friend the Chancellor that it is the Opposition's policy to sustain oil prices at artificially high rates.

Dr. Oonagh McDonald (Thurrock)

It appears that the Chancellor is incapable of reading letters sent to him. My letters were concerned with talks with OPEC and non-OPEC countries—"talks with" is quite different from joining. If the Minister looks carefully at the correspondence, he will find that the Chancellor's letter sent to me today is absolute rubbish.

Mr. MacGregor

That is absolutely not right, and the House will be able to judge when it sees both letters.

Mr. Hattersley

The right hon. Gentleman has made a silly allegation about OPEC. I have the correspondence in front of me. Does he want to withdraw the allegation now or read the letters and withdraw later?

Mr. MacGregor

I have the correspondence in front of me, too. The hon. Lady was clearly arguing for her concern that we should set out an economic strategy in the light of declining oil prices. She was clearly arguing for concern about that fall in oil prices. Perhaps she will confirm whether she wishes to intervene in the current levels of oil prices.

Dr. McDonald

As the right hon. Gentleman has both invited me, and made an absurd allegation, I shall correct him, as I have both the letters in front of me. I do not find any reference in them to joining OPEC. For example, the last paragraph of my letter of 31 January says: The Government cannot continue to act in splendid isolation. Untrammelled market forces will damage Britain and the world's economy. You should seize the opportunity of splits in OPEC to open up talks first with OPEC and then with non-OPEC producers on a gradual and controlled fall in oil prices which would also stabilise the exchange rate. There is nothing there about joining OPEC. It is extremely worrying that we have a Chancellor who is capable neither of reading nor of understanding plain correspondence.

Mr. MacGregor

I am delighted to hear confirmation that the hon. Lady also agrees that we should not join OPEC. It is interesting, in that context, that she is still talking about artificially higher oil prices.

Dr. McDonald

rose—

Mr. MacGregor

I will not give way, because this is a short debate and I must get on.

The hon. Lady is talking about a gradual and slow fall in oil prices. The plain fact is that, with the dramatic fall in oil prices which we have seen over recent weeks, there has nevertheless been only a relatively modest adjustment in our exhange rate. The hon. Lady has asked for a gradual and slow fall, so she has been asking for oil prices to be maintained at a higher level. It is extremely interesting, as I have said, that, with the dramatic fall in oil prices, which will have many benefits to our economy, there has been only a relatively modest adjustment in our exchange rate. The fact that that has been so in large part demonstrates the underlying strength of our economy today. It is in stark contrast to the events of 1976 and subsequent years and the then international perception of the state of our economy.

The right hon. Member for Sparkbrook has talked about the destruction of our manufacturing base.

Mr. Jack Straw (Blackburn)

rose—

Mr. MacGregor

I must move on, because there is a great deal I want to talk about.

It is recognised that we suffered a heavy shake-out in our industries between 1979 and 1981 as we tackled the problems we inherited, to which I have already referred, and at a time of major world recession caused primarily by the second oil shock. What matters is the progress we have made since then. It reveals a picture very different from the statistics which the Leader of the Opposition used the other clay. Having weathered that major world recession, our economy has been growing steadily for the past four and a half years. No stop-go here. It has been the longest period of sustained growth for many years. That is very much in manufacturing industry's interests. When figures for 1985 as a whole are published, they will show that we have grown not only faster than all other Community countries but faster than the United States too. Investment has increased at 4 per cent. a year and is now standing at an all-time high.

Mr. Straw

rose—

Mr. MacGregor

Clearly, the hon. Gentleman does not want to hear.

In the past five years, manufacturing productivity has been rising by a historically powerful 6 per cent. a year on average. Industrial rates of return are the highest for two decades—three times higher than in 1975. The current account of the balance of payments has been in surplus for six successive years and non-oil exports rose by almost 8 per cent. in 1985 to reach record levels for the second year running. That is rebuilding the industrial base which had declined in the 1970s.

Mr. Hattersley

rose—

Mr. MacGregor

We have a short debate and I am sure that the right hon. Gentleman wants others to get in.

Underlying all that improvement, and of overriding importance, has been our considerable success in slashing the rate of inflation from an average of over 15 per cent., under the Government of which the right hon. Member for Sparkbrook was a member, to a third of that figure, on average, since the 1983 election. I am not surprised that the right hon. Gentleman did not refer to inflation at all, although it is of great importance to all manufacturing industry and to rebuilding the industrial base.

All the vague policies which the right hon. Gentleman talked about would undoubtedly have increased the rate of inflation considerably. It is noticeable that the highest rate of inflation recorded since the 1983 election is still lower than any rate achieved when the Labour party was last in power. It is that record on inflation which provides a much more stable base for industry to look ahead with confidence. Living standards have reflected that performance, rising by 13 per cent. in real terms since 1979 for a married man with two children on average earnings, compared with a paltry growth of 0.;5 per cent. between 1974 and 1979.

I shall tackle a little further the right hon. Member for Sparkbrook's charge on manufacturing performance and productivity in recent years. Manufacturing output under the Labour Government declined by 3 per cent. I have already made the case for the problems of the recession in 1981 —we are now talking about a four-year period. Manufacturing output has increased under the Government by 10 per cent. Manufacturing investment under the right hon. Gentleman's Government increased by 6 per cent. Since 1981 it has increased by 19 per cent. and it is on a rising trend.

It is true that the trend on manufacturing imports is more comparable—43 per cent. under the right hon. Gentleman's Government and 48 per cent. since 1981. That tendency for manufacturing imports to increase is shared by all western industrialised countries. It reflects many factors—not least the adjustment which has had to be made to our balance of payments as a result of the increased production of North sea oil. But fundamental to it must be the fact that consumers in the exercise of their own free choice frequently opt for foreign products, for a whole variety of reasons including quality, design, innovation and so on as weld as price; and that companies, after scouring the market, choose foreign capital goods very frequently for their investment in order themselves to remain competitive or even to survive, for the same reasons.

The answer to that must simply be for British firms to improve the attractiveness of their products in the market place on all those counts. In other words, it is the customer who chooses. I note that, in the many reams of words containing Labour party pronouncements on general policy in the past year, there is much about Government intervention and planning, national investment banks and huge increases in Government spending—all the old tried and failed remedies. There has not been a word about the customer and the key fact that products sell only if they best meet his needs. [Interruption.] I am sorry, there has been one reference in a recent speech.

I believe that our underlying improvement is perhaps best shown in the fact that manufacturing productivity has been growing at three times the rate which the economy displayed under the Opposition. It is important to look at that rate of improvement of productivity. I shall look at that aspect because it is vital, to understanding not only the present difficulties of unemployment but how they will be tackled in the future.

The reason is not hard to find. During the 1970s, in public and private sector alike, we had huge overmanning in terms of units of production in relation to most other western countries, and management either did not dare or was prevented from tackling it. That was clearly unsustainable. Unit labour costs doubled in the second half of the 1970s, so our competitiveness declined. It is little wonder that the rates of return in manufacturing industry were abysmally low and falling against our competitors. Thus, much of the rise in unemployment which we have seen during the 1980s, far from being the consequence of this Government's economic policies, reflects the inability or failure, for whatever reason, of some industries—I am certainly not casting all the blame on them—to tackle those problems in the past, and the refusal of the previous Labour Government to assist them in the task.

Anyone who has visited industrial companies on any scale in the last few years will have seen for himself countless examples of how these problems are now being tackled. Technology is being embraced enthusiastically and we are becoming efficient again. It is happening in the public sector too. In 1979 the British Steel Corporation produced only 131 tonnes of crude steel per employee, 94 tonnes less than West Germany and 170 tonnes less than Italy. In 1984, with a work force one third of the size, they were producing 243 tonnes of steel per employee, closing the gap between them and Italy by more than half and within 10 tonnes of West Germany. At British Airways between 1978–79 and 1984–85, the labour force also fell by a third while productivity rose by a dramatic 57 per cent. In the coal industry during the last couple of months, the record production rate has been broken five times. Projected sales are likely to approach pre-strike levels in the current financial year, yet the industry now has 24 fewer pits and 33,000 fewer men than at the end of the strike. That impressive improvement in productivity—which has been needed across British industry—with with manpower down by nearly a fifth, has been achieved without any compulsory redundancies.

Now, pretty well bringing up the end of the line, much-needed change is coming to that last bastion of old-fashioned practices, Fleet street. Everyone knows that overmanning, demarcation disputes and resistance to technological change in the national newspaper industry have been an acknowledged scandal for years. Now that the move to Wapping has taken place, Bernard Levin, in a "now at last it can be exposed" article in The Times last week, revealed it all. To cite just one example that he gave—in New York and Sydney it takes six men to work the same printing press that in London, until News International's move to Wapping, used three times that number. That was not creating real employment or keeping up jobs—it was keeping men on a payroll for doing nothing, resisting change, creating gross inefficiencies and losses and eventually destroying firms. It was possible that, as a consequence, work would go abroad.

Mr. Dennis Skinner (Bolsover)

The Minister has revealed a catalogue of industries where the sacking of staff has apparently resulted in greater efficiency. He did not mention the enormous cost of paying dole to those former employees or the cost of any redundancy pay, if they were lucky enough to get it.

Why has that message not got through to No. 10 Downing street? The cost of running No. 10 under a Labour Prime Minister was £1.2 million, while the latest figure is £3.8 million. Why has there been no rationalisation at No. 10, where expenditure has risen by more than 200 per cent.?

Mr. MacGregor

That demonstrates the pointlessness of giving way.

Roger Eglin, writing in the same newspaper issue in The Sunday Times, put it well. He said: in a free, competitive society technology is irresistible. Someone will introduce it, even if you resist. Technology does mean that jobs go. The fact that this is only in the short-term and that on the evidence of the American newspaper industry more jobs, and better prosperity, are created in the long-term is not much comfort for those on the receiving end. I understand that. He continued: The inevitability of this change is essentially the most basic reason for co-operating with technology. That gets it right—[Interruption.] These changes have taken place during the past few weeks.

Of course it is painful in the short-term, of course it sometimes creates short-term unemployment—but these sweeping moves to higher productivity and to accepting new technologies that require many fewer people to work them undoubtedly strengthen our economy and must, in the long run, be right for jobs. The Opposition clearly do not understand that.

The same goes for the need for industrial restructuring, of which the west midlands is now the classic example. It has had to take place on a shorter time scale than we would have wished if only it had been tackled earlier. On both those issues, the speed and the scale of adjustment has had to sharpen because the task was shirked earlier, so the effect on individuals has been greater. In my judgment, it had to be faced. Of course it means higher current unemployment, but the fact that we are facing these problems should not be the cause for the criticism of which the Opposition are making so much today. The criticism is that we, as a nation, did not tackle them in good time before.

It is because of the underlying strength of the economy to which I referred and because we are facing up to modernisation that the overseas perception of our economy is so positively different today. That is why the OECD, in its latest economic survey, was able to comment: the recovery … has now continued for longer than any other post war recovery … profitability has recovered. Both investments and exports have been strong. Employment has picked up rapidly since 1983. The economy has survived a 1 year miners' strike without any major disruption to output elsewhere. And the balance of payments has remained in surplus. Thus in many respects the economic performance has been good. That is the background. We are building the strength of the economy for the future—something on which jobs will depend.

The right hon. Member for Sparkbrook referred to employment measures, and I wish to deal with them. I shall leave aside the question of public sector capital spending, because we are shortly to have a debate on our White Paper on Government expenditure, and I can deal adequately with that question then.

Mr. Hattersley

The right hon. Gentleman owes it to the House to explain why, virtually alone among all the bodies commenting on these matters, the Government reject the concept of public investment to reduce unemployment. It is no good his talking about industries where the number of jobs will be reduced. He should be telling us why, for example, the Government will not increase housebuilding and put building employees back to work. What is the reason for that?

Mr. MacGregor

I shall deal with those matters during our public expenditure debate, when I will have time to do so in detail. We have, in fact, expanded road programmes with capital investment up by 20 per cent. in real terms since 1979. This year's public expenditure White Paper increased the housing renovation programme over last year. [HON. MEMBERS: "Answer."] I do not want to take too long. These matters will best be dealt with in a full day's debate on the public expenditure White Paper, when I shall happily tackle the right hon. Gentleman on these matters.

The right hon. Gentleman made much of his cost of employment approach. Even accepting his figures, which I do not, that sort of extrapolation is absurd. Is he suggesting that unemployment will fall to zero almost overnight, or even in the comparatively near future? That was what he implied, and that is what will be needed to make sense of his figures. However, he knows that that will not happen. After all, he said in his speech to the London Business School last month: The need to encourage manufacturing has to be put into its proper perspective. I do not for a moment claim that it will directly have a massive effect on the level of unemployment. He has tried to imply differently today.

If it were so easy, where were the tax cuts under the last Labour Government, who, on the right hon. Gentleman's analysis, also wasted large sums of money on unemployment? Why, by his simply remedy, did not unemployment come down rather than double under his Government? Of course, income tax rates also rose.

Much more seriously, the right hon. Gentleman is engaged in the biggest conjuring trick of all time. He cannot bandy about those figures without saying how the real jobs will miraculously be conjured up. How will he set about creating gainful employment for all those people in the market place, without Government subsidy, on which his remedy would depend?

The truth is that a great surge in spending is in the right hon. Gentleman's mind, as he has made clear, because that is his way of getting more jobs. The consequent surge in interest rates and inflation, and the devastating effect of that on the real productive industries of the economy, seem not to be in his mind. He takes no account of the many existing jobs that would be destroyed in his attempt to square the circle.

I had intended to comment at some length on the policies we have been pursuing on employment, training and job creation measures. However, I shall leave that to my right hon. and learned Friend the Paymaster General, whose responsibility it is.

One of the right hon. Gentleman's proposals is clearly absurd. As it is an Opposition Supply day debate, it is not unreasonable to ask how the Opposition's economic policies measure up to the present position, and what they would do about employment. I carefully noted what he put forward as his policies—they were all words and strategy, with absolutely nothing specific.

I shall start with privatisation. It is only fair to give the right hon. Gentleman an opportunity to clarify the Opposition's position, since my right hon. Friend the Chancellor asked him a number of questions the last time that we debated the economy. In particular, he asked which of the privatised companies would be taken back into public ownership, and on what terms. The right hon. Gentleman responded with deafening silence and not a little squirming embarrassment.

Of course, we had an answer in part from the right hon. Gentleman the Leader of the Opposition who has now left the Chamber. He said, first, on the radio a few weekends ago: the use of budgets for re-nationalisation are going to have to take their place in a pretty long queue. So far so good, although I note that a number of his colleagues have already been putting in the knife on that proposition.

The right hon. Gentleman went on to say that, where industries were taken back into public ownership, shares would be bought back from the institutions at the original selling price. As the right hon. Member for Sparkbrook knows, the vast majority of institutional funds are held on behalf of pensioners and small investors who have invested their lifetime savings in life policies. Perhaps he has forgotten to tell his right hon. Friend the Leader of the Opposition, because the policies that his right hon. Friend announced would amount to a severe attack on the pensions and savings of millions of people. I hope that he will come clean and tell those millions of pensioners and potential pensioners which industries he proposes to take into public ownership, and when. No wonder the right hon. Gentleman is squirming with embarrassment.

Secondly, what will the terms be? It is the savings of those people that are at stake. It would be invidious to pick them out for that cruel and inequitable treatment. The right hon. Gentleman is slow to get on his feet on that point.

However, I have some sympathy with the right hon. Gentleman. Every time that he develops a plausible sounding policy, his right hon. Friend the Leader of the Opposition takes it apart for him shortly afterwards. The Leader of the Opposition was up to his tricks again at the weekend. I am sure that the right hon. Member for Sparkbrook was glued to his screen on Sunday lunchtime to discover what his taxation strategy was. Gone are the plans to increase taxation on the "bloody rich", whom the right hon. Gentleman has defined as families earning more than £20,000 a year. It appears now that there are two commitments, with which the right hon. Gentleman will find it exceedingly difficult to live.

According to the television interview given by the Leader of the Opposition, there will be swingeing increases on the 4 or 5 per cent. of the population who earn more than £30,000 a year. That has also been said this afternoon. Taxation would be up to almost 100 per cent. There was the clearest of hints that there would be no increase in the basic rate. Can the right hon. Gentleman confirm that there will be no increase in the basic rate?

Mr. Hattersley

Of course.

Mr. MacGregor

The right hon. Gentleman says, "Of course." That leaves a gaping hole in the taxation strategy. While we have heard much about broad approaches—we have heard about them again this afternoon—there has been deafening silence on some economic policies. The Opposition's public spending commitments are much more specific. It is difficult to keep track of each one, but we are doing our best. We are costing them as fast as we can. I notice how nervous the hon. Member for Thurrock is becoming. We are costing them even at the risk of overheating our calculators. The figure is enormous. Leaving out one-off promises and pledges on renationalisation, and considering only the cost of continuing commitments, the total amounts to £24 billion.

If the sad day ever dawns when the right hon. Gentleman sits on the Government Benches, he will be forced to trim, but that is the extent of the bribe that he is currently offering to the British people. How does the right hon. Gentleman propose to finance that massive increase in spending?

Mr. Ron Leighton (Newham, North-East)

Too long.

Mr. MacGregor

No wonder the hon. Member for Newham, North-East (Mr. Leighton) does not want to listen either.

Mr. Ian Gow (Eastbourne)

Will my right hon. Friend give way?

Mr. MacGregor

I am sorry; will my hon. Friend allow me to finish?

If there were such a crippling tax on higher incomes, it is unlikely that any but a few would continue to see the point in earning more than £30,000 a year, so the yield would come tumbling down. Even on the absurd assumption that everyone above that level continued to earn those sums—working for the Government in effect—the yield would be far short of what the Leader of the Opposition and the right hon. Gentleman believe. It would be only a minuscule proportion of the total extra public spending to which they are committed.

The right hon. Gentleman has just told us that there would be no increase in basic rate, so where would the money come from? If he chose to finance the programme through value added tax, he would need an increase of 26 percentage points, taking the rate to 41 per cent. The effect on pensioners and those on low incomes would be colossal and the effect on inflation would be likewise. Yet it was the right hon. Gentleman who said: in terms of promoting employment opportunities throughout the country …nothing is more important than containing inflation."—[Official Report, 7 February 1978; Vol. 943, c. 1271.] How does he square that policy? How will he create the money to finance his public spending plans? What impact would that have on jobs? No wonder the right hon. Gentleman, in his manifesto for the Labour party leadership, analysed his party's catastrophic failure at the previous general election in the following terms: We failed because we made promises which many of our potential supporters believed we could not keep.

Our record compared with that of the right hon. Gentleman's party, our respective policies and the credibility of our policies give me every confidence in asking the House to reject the Opposition's motion and to support the Government's amendment. I note the total silence on the Opposition Benches.

5.24 pm

Mr. David Penhaligon (Truro)

I accept the Chief Secretary's argument about productivity and efficiency. There is no future for the nation in overmanning or maintaining inefficient and out-of-date working methods. It often strikes me how regularly the Labour party appears to argue for the continuance of those trends, but I am sure that the House recognises that there is no future in that approach.

The Chief Secretary's speech was interesting and I give him credit for defending the Government's position with some vigour. However, his speech revolved round a selective use of statistics. It is no good telling us how marvellous the improvement has been since 1981 when the Government have been in charge of the economy since 1979. Statistics can be useful, but their usefulness depends on where one starts from. The Government cannot defend their record merely on the basis of what has happened since 1981.

Even on the Government's criteria, I do not believe that the position is anything like as good as they would have us believe. I give the Minister and the Cabinet some credit. The Government have constantly alluded to their fight against inflation. That has been a regular theme during the past six years. But progress has not been as impressive as the Government would have us believe. The United Kingdom inflation rate is about 5.7 per cent. The figures of our major competitors are less, with one exception. The United States has an inflation rate of 3.8 per cent., Switzerland has 3.2 per cent., Japan 1.8 per cent., Holland 0.9 per cent., West Germany 1.3 per cent. and even S[...]cialist France has a lower rate, at 4.7 per cent. Our only significant industrial competitor with a higher level of inflation is Italy at 8.6 per cent.

The depreciation of the pound that has occurred worsens those statistics, even though it may assist others. On the major index on which the Government wish to be judged, progress is significant, but is nothing like as strong as the Minister would have us believe. The cause of that is shown by statistics on earnings that come easily to hand.

The weakness of the approach of the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) was that he did not mention earnings from one end of his speech to the other. We are all aware of the impact of earnings. Average earnings in Britain are rising by about 8.6 per cent. Among our competitors, they are rising by 3.1 per cent. in the United States, 3 per cent. in Switzerland, 3.8 per cent. in Japan, 1.9 per cent. in Holland, 3.2 per cent. in West Germany and 6 per cent. in France. Those increases are significantly less than that in Britain.

The Chief Secretary knows that the reality is worse than the figure of 8.6 per cent. Pay settlements in the manufacturing sector, which must succeed in competing against countries wishing to sell to us and against other industries wishing to sell abroad, are higher than the average figure. That is compensated in part by the vigorous way in which the Government have kept down pay settlements in the Government sector—a broad and general definition. Pay settlements in the manufacturing sector, where they count most, have been higher.

In broad-sweep terms, the Government will not be able to hold their position during the next three, four and five years. Their argument about teachers and the erosion of their pay relative to people with similar responsibilities and skills in the manufacturing sector cannot be sustained. One wilts at the thought that a 10 per cent. rise for Government employees would cost about £4 billion, which I suspect would exceed the extra tax that the right hon. Member for Sparkbrook hopes to get from those earning over £30,000 a year.

Pressure is welling up and the next Government will have to deal with it. I doubt whether even this Government, with all their determination, will succeed in keeping the lid on that pressure until the next general election. If they do succeed, a good few Conservative Members will be looking for alternative employment after the election, as the anger of their constituents is expressed in the only way available to them.

So far, I have examined two criteria and both suggest that the position is worse than the Government claim.

Mr. Tony Baldry (Banbury)

Is not the reality that teachers' pay has kept up with inflation, but has not kept up with pay awards elsewhere in industry? As a nation, we are still pricing ourselves out of jobs by paying ourselves more than we earn. That is the pressure which is making us less competitive. What would the alliance do about that?

Mr. Penhaligon

I will not duck that issue. Our solution is not an easy one, but we believe that it would work. I do not disagree with the hon. Gentleman's analysis. He confirms that teachers, who are important to our economy, are in a worse position than those with similar skills in the manufacturing sector. I do not wish to argue about teachers' pay today. I mention it merely as an illustration of the pressure—sometimes venom—that is building up. We used to be told that if we controlled the money supply everything would fall neatly into place. That was the message that the Conservatives gave to the British people in 1979 and that message got them elected.

The narrow definition of money, M1, is increasing in this country at the astronomical rate of 17.;4 per cent. The broad definition is increasing at a rate of 13.6 per cent. On the narrow definition, we have a higher increase in money supply than any country with which we are roughly comparable. On the broad definition, our rate of increase is second only to that of Australia.

If the Minister who is to reply can find time to answer only one question, I hope that it will be the one that I am about to ask. Do the Government still believe that controlling the money supply will solve the inflationary pressures in our society? If so, do they believe that current difficulties have been caused because they have not succeeded in controlling the money supply? Or do they believe that the money supply does not control those matters? It must be one or the other. Whichever it is, one must ask what controls these difficulties if the money supply does not.

On the three-month money market, United Kingdom interest rates are just over 13 per cent. Rates in other countries are 7.5 per cent. in the United States, 4 per cent. in Switzerland, 6 per cent. in Japan, 5 per cent. in Holland, 4.5 per cent. in West Germany, and 9 per cent. in France. Again, Italy is the only country with a higher rate.

The Government's policy in the past couple of months has been to increase interest rates even more, to defend the pound because of the reduction in oil prices. That has worked to an extent, though the increase has been a shade less than I thought that the Government would introduce. The strategy since 1979 has been high interest rates and high exchange rates, with oil taking the strain. That has led to 3.4 million unemployed. The only OECD country with a higher rate of unemployment is Holland, and unemployment is falling there, but is still increasing here.

How can we manage to get unemployment on to a downward trend while maintaining and increasing our manufacturing sector? It is not a simple task, and the only alternative to the Government's policy is a form of pay strategy. It is easy for the Labour Opposition to be irresponsible and to pretend that such a strategy is not the pill which must be swallowed if we wish to do something about unemployment.

The alliance believes firmly that without some form of pay strategy, which will reduce settlements in the manufacturing sector, no sustainable reduction in unemployment can be achieved. Indeed, without something being done about pay settlements, on a three-year or four-year basis, we shall see a further escalation of the current tragedy.

The alliance may lose support because of its policy, but we shall be explaining honestly between now and the next election how a restrictive pay strategy, including elements such as profit-sharing, represents the only real alternative to the Government's approach. I accept that the Government will not introduce such a strategy and that their mandate was not to do that.

Mr. Tony Lloyd (Stretford)

The hon. Gentleman spoke earlier about teachers and other groups and referred to a potential explosion. What would the Liberal party do about that problem? Would it rat on its promises to teachers?

Mr. Penhaligon

No. We believe that the incoming Government will have to make an adjustment—an expensive and painful adjustment—for many people in the Government sector to give them a little justice in their lives. It will not be as much as they desire, but we recognise that it will have to be done and when we put forward our Budget, hon. Members will see how that is incorporated.

Mr. Tony Marlow (Northampton, North)

How much will it cost?

Mr. Penhaligon

I said that a 10 per cent. increase across the board would cost £14 billion. We could leave out the forces, the police and the fire service, but 10 per cent. across the board would be a very large sum and I am not trying to duck that question.

Mr. Michael Forsyth (Stirling)

rose—

Mr. John Powley (Norwich, South)

rose—

Mr. Penhaligon

I have given way quite a lot already. This is a short debate and we ought to get on. I have a feeling that we shall be having many such debates in the next few months when we can explore the matters.

The alliance believes that there is a role for investment, even within the current strategy, in a number of infrastructure projects that could help to relieve unemployment. We agree with the Chief Secretary that the room for flexibility is limited. Given that my party's determination is not to continue asset sales after the election, when we are in government our room for manoeuvre will be even less. However, the Government could afford to run the public sector borrowing requirement at a higher rate and to invest to save jobs.

If the Chancellor of the Exchequer concludes, as I suspect that he will, that there is some room for tax cuts this year, if not as much as he was hoping for four or five months ago, that money must be directed to the lower paid and to job creation. The alliance and many Conservative Members believe that if the Government have a little money, it should be given to the lower paid, who have been worst affected by income tax changes under this Government, or to job creation. I hope that the Chief Secretary will tell the Chancellor of the Exchequer that that view is shared by many Conservative Members, particularly those representing areas where unemployment has reached the tragic level of 25 per cent. which exists in some parts of my county.

We shall support the Opposition's motion and we shall vote against the Government's amendment. Unfortunately, the motion does not say what the Opposition would do to tackle the problems. It is strong on diagnosis and weak on content. The Minister cannot say that the Liberal party has not acknowledged that a difficult pill has to be swallowed if we are to return the 3.4 million unemployed to work.

5.41 pm

Mr. Francis Pym (Cambridgeshire, South-East)

The only point that I would concede to the Opposition this afternoon is their choice of subject. Government economic policy and the level of unemployment is one of the most important issues facing our country today. I find the Opposition's attitude to unemployment acceptable in terms of their concern about the experience of it and their dislike of it, but totally unimpressive in terms of solutions. They have offered us no solutions of any kind today.

I have some sympathy with the views of the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) on the cost of unemployment. In July 1985 I had considerable correspondence with my right hon. Friend the Chancellor of the Exchequer on this aspect on behalf of my Conservative Centre Forward colleagues. I cannot say that we achieved a meeting of minds.

This afternoon my right hon. Friend the Chief Secretary made some very important comments about the cost of unemployment, and it is one aspect that we cannot dismiss. The huge cost of leaving all these human resources idle is very great and must be taken into account. This afternoon I urge my right hon. Friends on the Treasury Bench to adopt an altogether more far-reaching, comprehensive and imaginative strategy to tackle the gigantic problem of unemployment.

My right hon. Friends have expressed their worry and anxiety about unemployment, but I do not think that their actions have yet matched their rhetoric. They have not acknowledged the magnitude of the problem, nor recognised its nature. To understand the unfairness of unemployment and the denial of freedom which it represents; to understand that it is individual people and not the nation as a whole that suffers it—after all, more than 80 per cent. of us are doing all right thank you very much; to understand the scale and the value of the human resources that are being wasted by unemployment—to understand all this is to create the motivation and inspiration to take commensurate action.

I differ from almost all of my hon. Friends and from politicians of all parties in my assessment of the future of employment and the effect that the technological revolution will have. I find that my views are very close to a great many in industry and commerce. None of us can peer into the future and predict events with any accuracy, but we can use our experience to detect trends, see new opportunities emerging, and warn of the dangers ahead.

Even if my assessment of rising unemployment as a result of present policies is only half right, that does not mean that there is nothing we can do to alleviate the problem or take an entirely fresh look at the future of work. What I am clear about, and have been for several years, is that the present situation is unacceptable. We can do more about it.

I see the technological revolution as a marvellous opportunity and unlike anything that has happened before. Unlike the industrial revolution, it can actually take the drudgery out of work. It can make possible a very different kind of life. The social changes it will bring are almost too enormous to grasp, but grasped they must be, and prepared for.

I shall come later to the measures that I would like to see taken at once—indeed, measures that I should have liked to have seen taken several years ago. Those measures can be taken appropriately only in the context of a longterm overall strategy that deals with the real heart and nature of the problem, which is that the number of man-hours needed to produce what we can sell and what we need is reducing at an accelerating rate.

In the past century, the average number of man-hours per annum in manufacturing industry has declined from 154,000 for a working lifetime to 88,000. In the past 15 years the fall in average man-hours has been 10 per cent. In those same 15 years economic growth has been 22 per cent., and there has been a sustained rise in service industries, yet total employment has dropped by 10 per cent.

My right hon. Friends on the Government Front Bench ask us to accept that an adherence to their economic policy will somehow put everyone back to work in due course. There have been many gains in terms of inflation, productivity and improvements in industrial relations legislation, for example, but in terms of curing unemployment the policy has not worked. My right hon. Friend the Chancellor of the Exchequer's last Budget was entitled a Budget for jobs. Look what happened. In military language, the intelligence and appreciation have been inadequate.

Before coming to the United Kingdom dimension of a problem that is worldwide, I shall remind the House of the international background. None of us can go it alone now. We are all interdependent, so international co-operation is essential. Unfortunately, there is too little of it at present. Domestic political pressures bear so heavily on Governments—all Governments—that international co-operation is not accorded the top priority that it should have.

The mutual problems that the world faces today are serious enough to contain at least the seeds of a possible collapse of the monetary system. These problems include the scale of indebtedness and the huge interest payments that they attract, the United States deficit, the instability of exchange rates, the threat of protectionism, and the lack of co-ordinated trade policies. Our Government are trying to tackle all these problems, and so are others, but the will to co-operate does not yet exist widely enough or strongly enough to produce the required results. I think the truth of this may emerge in due course.

One local example is the sluggishness of the development of the European Community. The most obvious area for a concerted initiative is unemployment. but it has not happened so far.

The limits imposed upon nation states by this lack of effective international co-operation, and the opportunities missed as a result of it, are considerable. I urge the Government to redouble their efforts in this direction. I know my right hon. Friend the Foreign Secretary is making them, and I urge my right hon. Friend the Prime Minister to do so, too, with her standing and authority within the international community.

I come now to the strategy that I would like to see pursued. It is essentially long term, because there are no quick or easy answers, the causes of unemployment being far too deep-seated for that, but some elements of the strategy would have a beneficial effect in the near term, and amongst these I would include the first element, which is the commitment to growth and the creation of wealth, which is the commitment of Her Majesty's Government.

There is no doubt that there are some favourable and hopeful aspects of our economy, and we have a restoration of a growth path, but what is needed is a gradual but sustained increase in demand—not in consumption, but in exports. The vital need is to regenerate our manufacturing industry and improve our competitiveness. That is the only way to secure the share of world markets that we need, and to achieve higher growth without inflation and a balance of payments problem. Competitiveness is the key word, and that means more investment in productive industry and a deliberate policy of cutting industrial costs.

In practice, competitiveness means shedding more labour and installing more technology, and in that sense it exacerbates unemployment. However, growth and wealth creation are indispensable for any recovery from unemployment.

The second element of the strategy is a more positive industrial policy. The Government spurn any thought of this as some sort of heresy. To them, the phrase "industrial policy" means some sort of sacrilege and an approach to the dreaded consensus. If that were to mean beer and sandwiches at No. 10, I agree that it would be the ultimate abusurdity, but I do not mean that.

The role that I see for the Government is not an interfering one, and certainly not an operational one. I see them as having a supportive and co-ordinating role. In the world at large, nothing remotely like a free market exists. All Governments dole out subsidies to all sorts of industries, with the result that there is not genuine competition. It is only my right hon. and hon. Friends on the Government Front Bench who can provide a response to unfair foreign competition.

I suspect that if a firm and sensible relationship existed between the Government and industry, we could have secured the recent United States defence contract that went to France. The French Government were deeply involved in the task of obtaining that order from the outset. There is a clear lesson for us there.

The third element is an altogether more substantial and sophisticated regional policy. National statistics are a bad guide to the differing needs of different regions and I consider them to be positively misleading. I shall divide the regions into two categories for the sake of brevity, but the variations between them are more subtle than that and need consideration on their own merits. The simple division is the one between declining regions and expanding regions, in which needs are very different.

In the declining regions, there is a need to revive and stimulate new activity to the maximum possible extent, and the Government have taken many measures to that end. The most recent measure is the inner-city programme, but there have been numerous others. I support and endorse all these programmes. However, my view remains that the Government would have been wiser to listen to the warnings that some of us were giving a few years ago and to act more positively at an earlier stage.

Money is not the only criterion. Indeed, it is perhaps not even mainly a question of money. Organisation and imagination are required. We have not measured up to the deprivation that has been experienced in the declining regions. We have justified it to ourselves, but I do not think that we have acted with understanding or with the action that is required in the light of the experience of those who live in the regions concerned. I hope that we shall stop doing too little too late and get ahead of the problems.

The needs of the expanding regions are entirely different from the regions which are in decline. The expansion is coming in the south and in East Anglia because of the dominance of the European market. Huge opportunities exist in these regions and as a nation I do not think that we are thinking hard enough about taking full advantage of them. In these regions expansion raises many difficulties and Cambridgeshire is an example. In Cambridgeshire, we have what is called the Cambridge phenomenon, which means that the expansion of the technologically based industries—the process has been continuing for more than 50 years—has reached the point at which the limits of the capacity of the local infrastructure have been reached. No such limits existed in earlier times because the extra infrastructure could be constructed immediately. No such limits existed when, for example, Liverpool was building itself into the great city that it was and is. There, as elsewhere, every opportunity was grasped and building went ahead.

There are constraints to such development nowadays, and environmental and planning constraints are two examples. These constraints attract the support of virtually everyone. Let us realise the straitjacket to enterprise that these constraints impose. The local authorities of Cambridgeshire are working hard to ascertain how and where to extend development. They are doing the best that they can, but, in addition to all the local considerations that are being given to these issues throughout the country, there needs to be regional and national consideration. We should be working to an intellectually coherent pattern, and I do not think that that exists currently.

At present, we have a mis-match of resources between the declining and expanding regions and we must have a policy that is designed to correct it over a period. That means that it must encompass the mobility of labour. There are many reasons why labour is far more immobile today than it was in the 1930s. Indeed, there are far too many reasons to mention. It must be in our national interest to make it easier for people to move if they wish to do so, especially from the declining to the expanding regions.

Mr. Marlow

Does my right hon. Friend subscribe to the view that we should boost private sector rented accommodation?

Mr. Pym

Yes, I do. It will be necessary to do that. It was easier for people to move from one area to another in the 1930s because they were able to rent a room or a flat. I accept that they could be turned out very quickly., but there was scope to move that does not exist now, Another part of the problem that must be considered is the cost of moving and the difficulty that people have in meeting it. I do not see anyone in the Government or elsewhere thinking about these issues. We need to ensure that we consider them and introduce a programme that begins to tackle them.

Mr. Holt

My right hon. Friend has said that no one is thinking about the problems associated with mobility. May I draw his attention to the Northern Echo of last Saturday. If he reads it, he will see that my initiative of a job link between that newspaper and the Buxton Press has resulted in yet another person finding a job, leaving the dole in the north and travelling to the prosperous south along the lines that my right hon Friend has set out. Unfortunately, the Government are just not interested.

Mr. Pym

I am grateful to my hon. Friend for his intervention. He has corrected me, and quite rightly. The point is that no one is thinking of these problems nationally. I accept that there is concern regionally, but there is no collecting of views and no co-ordinating of them. There is no input from the centre as far as I can see. The fourth element is a larger programme of public works than we have now that concentrates on capital expenditure, especially housing. I do not accept that this need be inflationary. I know that some of my hon. Friends think that the slightest increase in anything will be inflationary. We know from our experience from the Falkland Islands and the miners' strike that that is not true. We must remember the enormous spare capacity that 3 million to 4 million unemployed represents. The least that we can do is provide activity for a few of the millions of individuals who are affected by unemployment, who need better housing, a better life and some hope.

Mr. Michael Fallon (Darlington)

I find some difficulty in squaring my right hon. Friend's belief that we should channel more capital spending, presumably into public housing in the so-called declining regions, rather than taking legislative steps to improve the supply of private rented accommodation in the expanding regions to which he has referred. I agree with almost everything else that he has said.

Mr. Pym

My hon. Friend may disagree with me about that and may consider that any public investment is not right. I do not share that view. I think that there is scope for the development of both private and public sectors.

The four elements of the strategy that I submitted to the House would have, in my view, a valuable effect on unemployment in the short term, although I would not exaggerate it, and would certainly have a valuable effect in the long term. Other elements must be added if the strategy is to be complete and effective. I shall mention them only briefly now, but they are all important.

On education, there is an obvious need for training and retraining for industry and commerce and for the raising of education standards generally. The worst indictment of our education and training programmes is that we are already short of skilled labour before a major recovery has occurred. That is an indispensable resource which we can and must expand if we are ever to achieve the adequate growth that I am sure the House wants.

There is also the long term issue of preparing our children for a life which, for many of them, will mean more leisure than any previous generation has known. If they are not prepared for it, they will be unable to enjoy it. What a waste that would be. I regard higher education and research as crucially important to our future, and I should like our policy to be reversed. We need to capitalise on our successes and to develop our universities and research centres into something that is even better than what we have now. The present policy of starving them and squeezing them is short sighted. We are the best inventors in the world, and we have some claim to be the best educators in the world. We must remain at the top of that league.

As the House knows, I believe that there should be a much more radical and far-reaching reform of the social welfare system. I spoke recently about this, so I shall mention only the two most basic needs of the new system. First, there must be a permanent incentive to work—that is, an end to the poverty trap and an end to the "Why work?" syndrome. Secondly, poverty must be prevented, so far as that can be achieved. I put forward my views in the House about a month ago. I have also made them known outside Parliament.

Mr. Ralph Howell (Norfolk, North)

My right hon. Friend has referred to putting an end to the poverty trap and to the "Why work?" syndrome, but he referred earlier in his speech to the need to spend more public money. However, we are creating unemployment. We are taxing people so heavily at the lower end of the scale that many of them are giving up work because they are better off if they draw unemployment benefit.

Mr. Pym

It is precisely that absurdity that it is so important to end. I put forward my views to the House on another occasion about how that might be achieved. The ending of the poverty trap and, so far as is possible, the prevention of poverty are essential ingredients in any strategy to deal with unemployment.

There is also the important question of the distribution of employment. The Government have a job sharing scheme and they are absolutely right to encourage it, but this whole new subject deserves much deeper study. I should like the public to be more involved in the discussions about a shorter working week, early voluntary retirement and sabbaticals on a weekly, daily or monthly basis. Of course that would affect incomes. That is part of the problem. But I do not believe that the British people will ever feel comfortable if most of us are occupied all our lives and doing all right while a substantial minority are having a pretty miserable and unsatisfying life. We need to redefine the word "employment". We also need to redefine unemployment and even work itself. Such an open debate and discussion can only help people to understand what is happening and will happen in our society.

Finally, I shall mention a point that some hon. Members may feel is too marginal to mention, but which I feel is important. I dislike intensely the tendency towards centralisation. I should like there to be a revival of provincialism. We need to revive and nurture the feelings of local pride as well as the feelings of patriotism. They go together. They are complementary. Everybody understands that many major decisions have to be taken nationally, but let all the decisions that can be taken locally be taken locally. That is a basic conservative principle. It enriches the tapestry of the nation and it is in accord with people's aspirations. In its own limited way I believe that it would help people, especially in the declining regions, in their battle against unemployment and the deprivation that that implies.

Mr. Derek Foster (Bishop Auckland)

How will the right hon. Gentleman be voting tonight?

Mr. Pym

I shall be voting in support of my Government. I am urging my right hon. Friends to go a great deal further than they have gone so far. The Opposition have suggested nothing for which anybody could conceivably vote.

This strategy would cost money. I said on an earlier occasion in this House that it should be paid for out of the proceeds of privatisation. To use those proceeds in this way would not only be understood by everyone; it would be very acceptable to everyone as a reinvestment of national assets to help the unemployed. It would also mean an increase in the public sector borrowing requirement but, as I have said before, I do not accept that that need be inflationary. The money must be spent on productive investment, not on consumption. This strategy also means that I do not believe that a cut in personal tax rates is the right or the best use of available resources in the coming Budget.

Mr. Michael Forsyth

Will my right hon. Friend give way?

Mr. Pym

I hope that my hon. Friend will forgive me if I do not do so. I have come almost to the end of my speech.

However, it is right—and I hope that my right hon. Friend the Chancellor of the Exchequer will do this—to adjust tax allowances and to raise tax thresholds so that at the lower end of the scale some benefit is achieved.

I apologise for keeping the House for so long. I regard the present unemployment problem and the future of employment as one of the greatest challenges of our time. That challenge can be met only by a strategy that is comprehensive, coherent and complete. That is what I have sought to outline today to the House.

6.6 pm

Mr. Sean Hughes (Knowsley, South)

I agree with the right hon. Member for Cambridgeshire, South-East (Mr. Pym) that unemployment is one of the greatest problems that affects us today.

Last weekend the word appeared to go out from the Government that their economic policies have a humane face to them, after all. However, there is no evidence to back up that assertion. I listened to those speeches with the same incredulity as I listened to the speeches of Conservative Members who say that the Opposition have no monopoly of conscience. However, for sheer effrontery the speech last November of the chairman of the Conservative party takes some heating. In his Disraeli lecture he said: I know that at the front of that campaign for a return to traditional values of decency and order will be the Conservative Party. Does he indeed? After seven years of this Government's policies, a Government of which he, more than most, is the epitome, it is those values that are most at risk. Time after time in speech after speech we have listened to the litany of the misery arising from mass unemployment, but apparently the Government have been unmoved. Even the Church of England is dismissed as dangerously Marxist when it has the temerity to point out what is happening in some of our deprived areas.

Whole regions of this country have been turned into industrial deserts. A generation of young people has been written off. Youth unemployment in my borough is over 50 per cent. Adult unemployment is 25 per cent. On the main industrial estate, Huyton, in my constituency, the 6,800 jobs that existed in 1978 have been reduced to 3,000. My borough council has a five-year plan to create jobs. It has projected 630 new jobs over a five-year period that began in 1984. Just one closure, such as the Plessey closure last summer, can wipe out the whole of that projected five-year gain.

The harsh unpalatable truth, therefore, is that in areas such as mine the resources simply do not exist to generate a recovery on their own. With a few noble exceptions, private industry has failed spectacularly to help us to solve the problem. Without Government assistance there will never be a recovery in these areas and the quality of life will continue to collapse. In such areas the Government are therefore destroying the very values that they have the impertinence to claim as their own.

I shall not go as far as to say, "So much for caring capitalism", but I have come across an even more outrageous use of the English language. In his essay "The Moral Dimension", published by the Institute of Economic Affairs in 1978, the present Chancellor of the Exchequer wrote: Capitalism is essentially based on voluntarism—the idea of voluntary co-operation and voluntary exchange. I can tell the Chancellor and his colleagues that there is nothing voluntary about the 100,000 jobs lost on Merseyside since 1979, or the 4,500 jobs lost in the borough of Knowsley between 1982 and 1985.

Our motion condemns the callous, irresponsible economic policies pursued by the Government. Those policies deserve condemnation, not merely for inhumanity and callousness, although, God knows, that would be condemnation enough, but also as being wasteful, inefficient and profligate. The single greatest waste is of human skill, talent, intellect and endeavour which is spelt out in the monthly unemployment figures. The Government have forced whole communities to become dependent on the state, yet in the debate on the Address in 1978 the Prime Minister, then the Leader of the Opposition, declared that it was a disgrace and a reflection of four years of Labour Government that 5 million people … have to have recourse to social security." —[Official Report, 1 November 1978; Vol. 957, c. 24.] Today, as a direct result of this Government's economic policies, that figure is 7.6 million. Far from feeling that that is a disgrace, the Government parade that figure as proof of their commitment to the welfare state.

As we have frequently pointed out, that has been happening while the country has been enjoying the one-off bonanza of North sea oil. The Government and their supporters tell us that we have no right to isolate this one national resource, even if it is so finite and temporary. That is a bit of a cheek because in the debate on the Address in November 1977 the right hon. Lady was at it again. She said that one way of judging how badly the Labour Government had done was to imagine what the position would be without the prospect of North Sea oil … They have neither policy nor strategy. They are running industry into decline, hoping that North Sea oil will rescue them … I do not think that North Sea oil will be used to strengthen industry."—[Official Report, 3 November 977; Vol. 938, c. 23–24.] Those words should be judged against the sums received from North sea oil revenues. In 1976–77 the country received £81 million, and today it receives £11 billion, every penny piece of which has been wasted on keeping people unemployed while, to rephrase the Prime Minister's words of eight and a half years ago, this Government have been running industry, not so much into a decline, as to widespread destruction and disappearance.

I referred to the Disraeli lecture of the Conservative party chairman and I shall conclude with his words. A price, he intoned, has to be paid for freedom. He continued: Not just eternal vigilance but the acceptance of responsibility—not least responsibility for the consequences of one's own action. If he and his colleagues are honest with themselves, they will recognise that it is time they accepted responsibility for the sheer misery which their economic policies have inflicted on so many people in deprived regions.

6.13 pm

Mr. Esmond Bulmer (Wyre Forest)

I shall concentrate my remarks on the ability of manufacturing industry to generate jobs. Those who work in industry will understand the close correlation between confidence and willingness to invest. Perhaps industry looks to Government most to provide a consistent approach. My right hon. Friend the Chancellor of the Exchequer and his predecessor have recognised that, and their Budget statements and speeches have made priorities absolutely clear: to control inflation, improve competitiveness and increase incentives. That is the only solid foundation for jobs. Today inflation is largely under control, and we have increased competitiveness, fewer strikes than at any time since the war, and an economy showing creditable growth for the fifth successive year.

Today's intemperate motion suggests that the Labour party has learnt little from its experience in the 1970s—or has it? Those of us who watched Brian Walden invite the right hon. Member for Islwyn (Mr. Kinnock) into a new world where a new deal might be offered got the flavour of his temptation to ditch clause four and all that element of the Labour inheritance. However, the shadow of the hon. Member for Bolsover (Mr. Skinner) and other hon. Members made him back away from that. He showed considerable interst in what Roosevelt achieved. If the right hon. Gentleman visits America, I hope that he will contrast the ability of the American economy to generate jobs with that of our economy. Some 19 million extra jobs were created in America between 1974 and 1984, whereas we lost 1 million jobs as a direct consequence of pay not keeping pace with inflation. However, that may not be the lesson that he seeks there.

There is one element of a new deal which the Labour party could deliver to industrial confidence. In the United States when Governments change, the ground rules are not dramatically changed. If the Labour party accepts, as some of its spokesmen do, that industrial confidence is part of sustaining jobs, at least we can all hold on to that. It would offer some hope for the future, if the Labour party ever formed another Government.

Equally, evidence regarding the Labour party's senior spokesmen suggests that much hard-won ground will be surrendered. Inflation will recur, trade union privilege will be restored, and industry's discretion to invest where its interests lie will be severely distorted. As a result, confidence will drain away.

If companies and their employees recognise that Government policy is stable, non-inflationary growth is more likely to be achieved. We have evidence of that before us, and my right hon. Friend the Chancellor is to be congratulated. One area of uncertainty where he does not have the control that he would wish is over exchange rates.

The variation in exchange rates is a matter of life and death to some companies. One such company in my constituency wrote: In recent weeks the pound has reached a level against European currencies that gives my company, and many others like us, a chance to compete with European manufacturers on equal terms. What is desperately needed now is for the Government to take the opportunity to enter the ERM and subsequently to accept the discipline that this will impose on its economic policy. I do not exaggerate in saying that my own company would be employing at least 50 more people than it is today, i.e. an 11 per cent. increase in our workforce, if this action had been taken when a suitable opportunity arose previously at the beginning of 1985. Furthermore, we would have been investing far more in new product and process development, new capital investment, and in employee training; all matters of vital importance to our company's and to the country's future. I am sure that my right hon. Friends in the Government understand only too clearly what is being said, and that they will follow that with action when the opportunity occurs.

The Opposition motion refers to the destruction of the nation's manufacturing industry as if 1979 were some sort of miracle year, and Conservative Chancellors were uniquely responsible for the shake-out that followed the second oil shock, the winter of discontent and a long period of over-manning. Let us not pretend that we do not still have serious problems. Many of them are deep-seated and some go back a long way. The anti-industry culture probably goes back to the excesses of the industrial revolution. We have not had the change in attitude in our senior universities that we would like. I do not think that I am alone in wanting those universities to have a school for business studies at the same level as Harvard and Stanford.

We still have a predominance of talent in the City at the expense of manufacturing industry, and the rewards are disproportionate. We lack a home market large enough to provide a base from which to compete internationally. There is an imbalance in too many areas in the power of the retailer against the manufacturer. We have a trade union movement that still finds it more comfortable to look backward rather than forward and a Civil Service that has not been sufficiently schooled in the real world to carry out efficiently the tasks given to it by politicians, who too often lack the relevant experience to compensate for this weakness.

Let us not pretend that these problems will be solved overnight.

Mr. John Prescott (Kingston upon Hull, East)

What about management?

Mr. Bulmer

I shall not argue that there is no scope for improvement, but I think that it has improved.

Mr. Prescott

As in the unions.

Mr. Bulmer

Let us not pretend that, whatever the Government, manufacturing industry will rapidly create the number of jobs that have been lost to modern technology. In 1974, the carpet industry in my constituency was employing 1,500 people; now, it employs under 500 people. Many hon. Members will see that happening in their constituencies. The print industry is only the most recent example. We can expect that the problems facing agriculture and, later, banking will lead to many more job losses.

My right hon. Friend the Chancellor is right to promote small business and self-employment, to finance training on an unprecedented scale and to make it cheaper to employ the young and unskilled. After all, that was the thrust of his last Budget. None of those aims can be described as callous and irresponsible.

I hope that my right hon. Friend the Chancellor will return in his next Budget to the theme of encouraging the long-term competitiveness of industry, and the means of fostering research and development and encouraging higher investment. There is no doubt that the loss of capital allowances is acting on some companies in a way which, I suspect, was not intended. It would undoubtedly be helpful if my right hon. Friend could see his way clear to introduce a 25 per cent. straight line depreciation.

I join my right hon. Friend the Member for Cambridgeshire, South-East (Mr. Pym) in wishing to see more evidence of long-term thinking. Exposure to market forces has led to dramatic improvements in productivity but the stock market is too short-term. We all know very well that many companies would like to take investment decisions in the medium term, let alone the long term, but are afraid to do so because of the impact on short-term profitability. They are afraid that it might invite unwelcome takeover bids.

I hope that my right hon. Friend the Chancellor will think in the time leading up to the Budget about how to encourage long-term investment decisions and provide some protection from the stock exchange raid. There are many more medium-sized companies in Germany than in Britain because capital taxation there has not driven companies to the market. Public companies which are perhaps protected by discretionary trusts find that the 10-year valuations for capital gains tax can mean that a great many shares have to be sold, opening them to the possibility of a takeover bid.

The measure that offers perhaps most hope for the future is profit sharing, with many more companies having profit sharing schemes and a significant body of employees owning shares and speaking for the work force. Many of us find the takeover of a company and the dismissal of many people wholly offensive. There is no doubt that there should be more protection for the company that is doing a decent job.

I join my right hon. Friend the Member for Cambridgeshire, South-East in wishing to see wider cooperation, especially in Europe. The greater financial strength of so many United States and Japanese companies demands that we identify our strategic interest and take steps to preserve it, or the most that we shall preserve is a series of minority holdings through pension funds and investment trusts. Perhaps that matter cannot be debated in public, but I think that we should all like much more assurance.

I regret the intemperate language of the motion. The problems of unemployment are far too serious for that. In industry we have learned the hard way the price of adversarial politics. It is time that hon. Members came out of their trenches more often and sought common ground.

Several Hon. Members

rose—

Mr. Speaker

Order. There is just time to call one more Back Bencher. I understand that the first of the Front-Bench speakers wishes to rise at 6.30 pm.

6.25 pm

Mr. Ron Leighton (Newham, North-East)

It is proper for the House to return to the subject of unemployment at the Opposition's bidding, because it is the main economic, social and, I would emphasise, moral issue facing Britain. The chronic multi-million mass unemployment is an appalling waste of resources and a crime against those whose souls rot on the dole in enforced idleness through no fault of their own.

There is no sign that anyone has come to grips with the size, scope or gravity of the problem. I do not suppose that anyone consciously thought in 1979, "Let us adopt policies that will cause unemployment of 4 million to 5 million." Yet that is what has happened. There is no sign of any improvement. The prospect that beckons is a continuation of mass unemployment into the foreseeable future.

Perhaps the most worrying feature is the relentless, remorseless growth within the overall total of the percentage of long-term unemployed, who now number 1.6 million. About 823,000 people have been unemployed for two years and 533,000 people have been out of a job for three years. Many have given up hope of ever working again, or of ever working at all, because many have not worked since leaving school and have never known anything other than a workless, jobless society. Many people are marrying and starting families never having had a job. In some areas, the whole of the young generation are being alienated and shut out of society. We tolerate this at our peril. We are storing up a time bomb for the future.

If a society kicks these young people in the teeth, we must hope that they do not return the compliment. Is it any wonder that, in some areas, especially where there is an additional layer of disadvantage—racial disadvantage—the situation can become explosive? The greatest distress is among the long-term unemployed. As clothes and household items wear out, the money is not there to replace them. It adds insult to injury that the long-term unemployed are the only group not allowed the higher rate of long-term benefit.

What are we to do about the problem? We cannot carry on in the old way, with the same tired, ineffective policies. The Government must be receptive to new ideas. There must be new approaches. At present, there is a complete failure of imagination. We must use our wits and intelligence to address this problem. That is what the Select Committee on Employment has been doing for the past year.

Is it not an amazing paradox that we are surrounded on all sides by acute, growing. unmet needs, both public and private, accompanied by resources, both human and material, which are left idle? Is that not crazy and uneconomic? We pay people to stay at home in idleness when so much needs to be done. When we have these unmet needs and unused resources, is it really beyond our wits to put the two together? It may be said that market forces are not doing this. I would say, "Too bad for market forces." We must find other ways to resolve this paradox. During the war, when we wanted tanks, guns and aeroplanes, we did not leave it to market forces—we mobilised our intelligence in a great national effort. That is what we must do now.

A good example is the fact that there is a £20 billion backlog in repairs for council housing, yet we pay half a million building workers to stay at home. Does that make any sense? It is a failure on the part of all of us. We must be able to do better. The Select Committee considered this problem carefully for a year. We concluded that no usual or orthodox upturn in the economy was likely or in prospect that would provide the millions of new jobs in two or three years to dent the current unemployment level. The Committee therefore recommended, as well as a mix of measures to regenerate the economy, an immediate programme of special employment measures for quick action in the short term with the target being the long-term unemployed, where the need is greatest.

We studied cutting taxation as a means of creating jobs but that is a comparatively expensive way of creating jobs. The net cost of an unemployed person is £47,000. Special employment measures which cost between £3,000 or £4,000 per person are obviously the best buy if the aim is to reduce unemployment. These measures produce 10 times the number of jobs as tax cuts and the measures can be targeted at the long-term unemployed. The number of long-term unemployed is 1.6 million. Our recommendation is that we should provide a job guarantee to the long-term unemployed. That could be done by providing about 1 million jobs. The community programme is being expanded to a quarter of a million places. Where are the other three quarters of a million jobs to come from? One obvious source is urban rehabilitation.

We recommend that there should be a programme of building improvements with 300,000 extra jobs provided at a net cost of £1.5 billion. The second part of the programme would be in health and personal social services—especially helping with care in the community. An extra 100,000 jobs could be found here at a net cost of £400 million. The third part of the programme would be a wage subsidy to employers in the private sector of £40 a week to take on 350,000 long-term unemployed in addition to present staff. That would cost £1.4 billion.

That is a necessarily short summary of our recommendations, which would result in a million extra jobs introduced over a three-year period at an additional cost, when operating fully, of £3.3 billion. I ask the Government to consider these recommendations carefully and not to give a knee-jerk rejection to them. It is not a programme of make-work; it is real work with a socially useful output. The Select Committee report has been carefully researched and, indeed, we sought a second opinion from the London Business School. The Government have not fallen over themselves to accept the report and they talk of the cost involved. I ask them to consider the gravity of the problem and to ask how serious they are in tackling it. After all, what is the cost of the dole queue? It is approaching £20 billion. The sum of £3.3 billion is less than the cost of the Falklands operation and only a third of the cost of defeating the miners' strike.

It is not money down the drain. If there were an extra million workers they would create an enormous amount of added value and we might find that the programme, had paid for itself. The Government must not say there is no alternative. There is an alternative in the report of the Select Committee. The Government must consider the report and give us a debate in Government time. If we adopt this programme, it will bring back hope and raise the morale and spirit of the nation.

6.33 pm

Mr. John Prescott (Kingston upon Hull, East)

The debate has revealed the House's strong feelings about unemployment and the type of policies that would be pursued if the House decided to reduce it. The right hon. Member for Cambridgeshire, South-East (Mr. Pym) went a long way to express our views about the problems of unemployment and the scale of the necessary changes to the economy if we were committed to full employment. I appreciate that the right hon. Gentleman will probably not join us in the Lobby this evening. We understand that the various candidates for leadership of the Conservative party have various means of expressing their points of view—loyalty to the Government or the need to be caring capitalists. The debate has shown the division between those who believe the Government can do something about the level of unemployment and those who do not.

The right hon. Member for Cambridgeshire, South-East also mentioned some of the improvements in the economy. We do not dispute that there have been some improvements in the economy and that we need improved productivity and improved investment in our industries. That is our case, too. However, in various parts of the economy, there are major challenges to the traditional attitudes about how to bring about change. We do not argue that change is easy, but changes must be made. What is the role of the Government in the process of change?

The major indictment of this Government and the Chief Secretary to the Treasury is that they have reiterated their ideological belief in the supremacy of the market—public expenditure is bad but private expenditure is good. When one talks to private business men one discovers that they depend to a considerable extent on expenditure in public industries. The bus industry is an example. It has collapsed because of deregulation. Orders for buses have fallen from 30,000 to about 9,000. There have been grave difficulties and unemployment in the private sector because of its dependence on orders from the public sector.

Our major argument with the Government is on their belief in a laissez-faire approach. The Government believe that the market is the best determinant of our economy and the levels of unemployment. If the market produces the present record high levels of unemployment, the Government can stand aside and be completely indifferent to the consequences in the knowledge that that it is the result of market forces at work.

We have heard a great deal about the levels of unemployment but I do not intend to go into the various statistics. It is sufficient to say that unemployment is at a record level and has been so almost every month since this Government came to power. Unemployment continues to increase.

The level of unemployment is deliberately maintained by Government policy. A report from the Organisation for Economic Co-operation and Development shows that the average level of unemployment in Britain since 1979 has risen above the average for OECD countries. Under previous Governments—Tory and Labour—levels of unemployment always remained at the OECD average. There has been a significant change since 1979. The Library has worked out that that change represents approximately an extra 1 million unemployed. The OECD's conclusions are that the difference can be explained by the Tory Government's different public expenditure programmes.

Those conclusions are serious evidence to substantiate the charge that the Government's policies have caused higher unemployment than has been experienced under previous Tory Governments or indeed Labour Governments, which pursued different policies.

There was a claim from the Conservative Benches that the level of the working population is higher than under the previous Labour Government. That is wrong. I know, Mr. Speaker, that one cannot say it is a lie, but it is factually wrong. The evidence is there for all to see. The working population grew by 40 per cent. in the five years of Labour Government but when we left office more than 500,000 more people were in work. Now, however, well over 1 million fewer people are in work. These are the facts, and we should address ourselves to them.

The Government believed that radical reform was necessary when they came to power. They set the market free and removed the obstacles. They followed a policy of deregulation and privatisation and they reduced employees' rights, trade union representation and gave tax deductions for companies. The result has been a trade deficit. Listening to the Chief Secretary, one would almost believe that there was no trade deficit. The consequences of the Government's policies is a shift from a £4 billion surplus to a £9 billion deficit. They have also produced record unemployment.

The Government have had one success—over profits. The idea of reducing the burden of taxation on companies was to release resources so that we would get investment and jobs. It is interesting to see what happened to profits. Between 1981 and 1984, gross profits secured by companies rose by 45 per cent. As a proportion of gross domestic product, they increased from 9.1 per cent. to 14 per cent.—almost a 6 per cent. shift. Productivity increased, so profitability increased. As a result of that favourable tax treatment, industry received £14.4 billion in extra profits. That is fine if the result is increased employment, increased investment or more training.

The money clearly did not go into wages as there was only a 2 per cent. increase in wages in real terms during that period. The proportion of gross domestic product paid in wages fell by 5 per cent. Industry saved about £5 billion in wages and salaries. It is clear, therefore, that it was not pressure from wages and salaries that caused difficulty with investment.

There was no shortage of money for investment. We were told that the skill and potential of managers would release resources. The trouble is that we do not have such managers in the main. Their flair and foresight led them to put 0.15 per cent. of turnover into training, whereas our competitors invest 2 per cent. The Manpower Services Commission tells us that America spends about £1,500 per head on training, compared to our £200. The Government reduced the regulations, got rid of training boards and closed training centres. The result has been a collapse of training for the very people who, although on the dole now, could be used to advantage when the economy gets moving again.

The decision was made not by unions but by management. Such incompetence is almost unique to Britain. Training is regarded as a cost, not as an investment, in Britain. It is a major problem for our management. It is not as though they are short of money—profits have increased by nearly £15 billion. Where did it go? Perhaps it all went in investment. We know, however, that, far from maintaining the earlier level of investment, we had disinvestment to the tune of £5 billion. That is the scale of the decline. Investment in manufacturing is now lower than it was in 1979.

Those facts are gleaned from Government reports and the Treasury. So where did the money go? Presumably it was invested in property in New York and the like. It is exactly the same problem that an earlier Tory Government found. When they released such forces, the money was invested in property, not in manufacturing.

I have said that wages increased by only 2 per cent. in real terms, but the increase was not across the board. The top 10 per cent. secured a 16 per cent. increase last year, whereas the lowest 10 per cent. suffered a 5 per cent. fall in income. The people who really benefited are those with share options. It is said that they have had a 180 per cent. increase in salary. They are the people on the Confederation of British industry council. They are the people who, like Sir Terence Beckett, maintain, "You get nowt for nowt." They are putting something like 180 per cent. more into their pockets but complaining about wage increases of 2 per cent.

I am glad to say that things will change. I recently read a CBI News report of what the Prime Minister said. It was she who brought the top people's pay awards to the House on the same day that she introduced legislation to reduce wages for employees in wages councils industries from about £45 a week. They get less in a week than many of those who work in the City get in one hour. CBI News reported: 'Some of them', she admits, 'are being drawn to the City rather than to industry in pursuit of the biggest salaries', and she deplores it. Is that not evidence of the market system? Is that not what it is supposed to be about. and what we are supposed to applaud?

The report continues: 'But, you know, we cannot do anything about this. We have got to do something about jobs."' This is the heart of the argument. She says about Government: 'All we can do,' argues the Prime Minister, 'is to create artificial jobs.' That did not seem to put the Chancellor off when he told us, the last time he came to the House, that unemployment would come down. It was a Budget for jobs, he told us. What were the artificial jobs that he spoke of? An increase in community schemes and in the youth training scheme of nearly 200,000 places. That is how much the Government are fiddling the figures, ready for the election, to get a reduction in unemployment, or what the Prime Minister calls "artificial jobs". We do not dismiss them as artificial.

If we are to return to full employment, there will have to be major changes in the labour market. We cannot produce enough jobs out of manufacturing industry or enough jobs of 40 hours a week. However, all manner of community services are crucial to society. There is an alternative to what the Chancellor said—what was it, a 1 per cent. reduction in wages leading to 150,000 jobs? The highest unemployment has been suffered among people whose wages have decreased. We know that the Treasury fiddled the figures. Warwick university showed that they fiddled the model. The Paymaster General's Department fiddled the information in reports, as I said last night.

Many choices have been presented to the House, whether by wets in the Tory party, the Centre Forwards, the Social Democratic party or the Church, which is called Marxist when it suggests that people should be got back to work. There is a range of choices. The latest is that presented by the Employment Select Committee which my hon. Friend the Member for Newham, North-East (Mr. Leighton), its Chairman, outlined. It showed where there could be 500,000 jobs in a range of activities at a cost of £3 billion.

It is not that we cannot provide work to enable people to make a useful contribution or that we cannot find the money to pay for it; the decision is political. The Paymaster General came here with the liberal face of the Tory approach. He had the heart, the concern and the smile, but it was he who rubbished the Select Committee report before it had reached the press. He made it absolutely clear that any possibility of creating work or of reducing unemployment was not an acceptable proposition. In the next 12 months, the Labour party will spell out precisely where the 1 million jobs to which we are committed will come from, how they will be financed and what the consequences will be.

I have heard a lot about housing. The Government have produced 2,000 fewer houses per week for every week that they have been in office than Labour. If we used the £6 billion which local authorities have to meet housing needs, 500,000 building workers could be put to work. That is a positive way in which to get people back to work. The point at issue here is whether the Government have any desire to do anything to reduce unemployment.

6.47 pm

The Paymaster General and Minister for Employment (Mr. Kenneth Clarke)

I was most nearly moved to audible dissent when the hon. Member for Kingston upon Hull, East (Mr. Prescott) went over the old ground and said that we are deliberately keeping unemployment up, but I am quite sure that he does not believe that. The debate is between a range of opinions about what led to unemployment doubling under the Labour Government, to it increasing again while we have been in office, and what is to be done now to get the figures down.

I almost agreed with the hon. Gentleman in parts of his speech. He was worried about training in industry, and about the effects of extremely high salaries in the City. I look forward to discussing with him or hearing from him what he proposes to do about either problem. However, he will appreciate my difficulty. I have 12 minutes in which to respond to policy contributions from three directions. If I can exercise that self-discipline which I usually fail to achieve when winding up debates, to do justice to all of the sides I must try to give about five minutes to my right hon. Friend the Member for Cambridgeshire, South-East (Mr. Pym), about two minutes to the Liberal party and about five minutes to the Labour party. That would not do justice to my hon. Friend the Member for Wyre Forest (Mr. Bulmer), who made an extremely thoughtful speech, with the bulk of which I entirely agreed.

My right hon. Friend the Member for Cambridgeshire, South-East first brought me into the Government. I spent a time serving as a Whip in his Whips Office. I still listen to my right hon. Friend's speeches with the slight feeling of someone listening to a former headmaster giving an end of term report. I am glad to say that our personal relations are somewhat friendlier than that.

I listened to the strategy my right hon. Friend the Member for Cambridgeshire, South-East set out. He was the only speaker in the debate who set out in detail the policy options that he would propose to deal with the problem. The Opposition Front Bench certainly did not come forward with any policy. My right hon. Friend did not launch a diatribe against Government policies. Instead he made a number of points with which I wholly agree. Looking at the policies he was advocating, one can only conclude that the Government amendment should be supported.

I agree with my right hon. Friend's remarks about international co-operation. He described the need for that co-operation between developed countries all of which suffer from the same dire problems of persistently high unemployment. He gave credit to my right hon. Friend the Prime Minister, my right hon. and learned Friend the Secretary of State for Foreign and Commonwealth Affairs and my right hon. Friend the Chancellor of the Exchequer in their efforts to gain greater co-operation and stability in exchange rates and so on.

My right hon. Friend spoke about the commitment to growth that is required. I would point out to him that there have been five years of sustained growth in this country. That growth is high by our own historical standards and high in relation to that of our neighbours. That growth must be sustained and if possible taken beyond the present 3 per cent. level. My right hon. Friend talked about the importance of backing manufacturing industry in connection with growth. I agree that it is essential to boost the wealth-creating capacity of manufacturing industry to sustain the level of growth which my right hon. Friend mentioned.

I agree with the point raised by my hon. Friend the Member for Wyre Forest—a point was also raised by the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley)—that we must not look to support declining manufacturing industry as a means of eliminating our present unemployment problems. Technological advance in that area means that we may be able to generate more wealth but we will not return to the days of mass unemployment on the workshop floor. That is why the Government have put the emphasis on the service industries, tourism and leisure, small businesses and self-employment. Those will be the growth areas in the economy over the next few years.

I agree with my hon. Friend the Member for Wyre Forest in his remarks about industrial policy. The difficulty, of course, is to achieve the balance, which he was trying to describe, between supporting industry without intervening or subsidising those sectors which are failing and declining.

I agree that we must protect our industries against unfair foreign competition. We must also maintain a positive public sector purchasing policy. However, neither my hon. Friend the Member for Wyre Forest nor I would like to advocate protectionism as that could lead to the defence of weakened industries.

I support my hon. Friend's views on regional policy. Not before time have we made regional policy more rational and concentrated its employment-generating effects on more closely targeted areas. In response to my hon. Friend, I can say that I am now closely connected with inner city policy. I agree with my hon. Friend that it is not just the amount of money that is important but how that money is put to best effect. Central Government are now putting £670 million into the inner cities and we must ensure that that is targeted in such a way that the residents in those areas are aware of a great improvement in job prospects. I could continue to relate areas of agreement with my hon. Friend but I wish to stress that the debate conspicuously lacked any policy proposals from the Labour party of the kind my right hon. and hon. Friends mentioned. The Government are, however, examining planning constraints that inhibit enterprise, labour mobility and so on. We are also in favour of continuing the expansion of the road programme. Planning and design problems would lead anybody looking at the road programme to realise that it cannot be accelerated more than it is now. The trouble with capital spending, and the reason why it is not the simple answer that the Opposition propose, is that the programme is not labour-intensive enough in modern circumstances to be a complete answer to the problem. There is no great gulf between myself and my right hon. and hon. Friends.

The hon. Member for Truro (Mr. Penhaligon) made his contribution on behalf of the Liberal party. The hon. Gentleman is consistent in his speeches at Liberal party conferences and thereafter, as he always returns to the subject of incomes. We must accept that one of the difficulties in analysing the problems of unemployment is that unit labour costs continue to rise. We are not as successful in keeping labour costs down as are some of our major competitors. The hon. Gentleman will not carry me back to the policies of the 1970s to which he is plainly committed.

The hon. Gentleman came up with a new phrase today. He said that he was in favour of some form of restrictive pay strategy. The hon. Gentleman normally calls a spade a spade and talks about a statutory incomes policy. He was anxious to make it clear that that would not apply to anybody in dispute at the moment as he is in favour of a £4 billion settlement for a wide group of public sector workers who might consider his proposal as a kind of threat. The hon. Gentleman has not solved the problem of how to make a statutory incomes policy stick.

The Labour party did not address itself to incomes. That topic was notably absent from Opposition Members' speeches, although there was a mention about City salaries which I accept is a fair subject to complain about.

The right hon. Member for Sparkbrook, who led for the Opposition, presumably had a hand in the choice of this debate and I assumed that he would put forward an alternative economic strategy which would give us a guide as to how the Labour party would tackle unemployment if it were in office. The right hon. Gentleman did nothing of the kind. He spent a great deal of time simply having a knockabout swipe at the unemployment figures, something that his hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott) normally does better. When I tied the right hon. Gentleman down to why he said that the Government were fiddling the unemployment figures, he cited the changes that were made in 1982 for claimants, when the unemployed were no longer required to register at jobcentres. That was explained at the time and made a difference of about 100,000 to the unemployment figure. From 1983 we also said that men over 60 who were registering to keep their national insurance credits, and sometimes to get benefit, no longer had to register. That made a difference of another 162,000 to the figure. Even with these reductions, I cannot see how the right hon. Member for Sparkbrook reached his figures. The right hon. Gentleman knows why the Government did that.

Mr. Prescott

They were fiddling the figures.

Mr. Clarke

It was a tedious task for former school teachers and former bank managers to sign on at benefit offices simply to get credited with their national insurance contributions. Is the shadow Chancellor's solution to the problem of getting accurate unemployment figures to bring back that meaningless nonsense of everyone having to traipse to the benefit office once a week to sign on? I have already explained the difference in the figures and the right hon. Gentleman cannot reach the figure he was claiming.

The right hon. Gentleman cannot ignore the labour force survey. When we produced the labour force survey and compared it with the number of claimants, it showed that 870,000 people in 1984 were not included in the count of claimants looking for work. It also showed that there were 940,000 people included in the claimant count who either had a job or were not seeking one.

The result of the labour force survey is that the unemployment figure is somewhat below 3.4 million. I have always candidly described those figures at Question Time as never being exact and have always said that we should look at ways of improving the calculation of the figures. The main constraint, when we try to obtain more accurate figures, comes from hon. Members who make easy, knockabout speeches trying to claim that we are fiddling the figures.

Mr. Hattersley

Will the right hon. and learned Gentleman give way?

Mr. Clarke

I have no time to give way. I would give way to the right hon. Gentleman if I had more time because, when I looked for policies in his speech, all I could see was his reference to directed reflation.

Mr. Hattersley

rose—

Mr. Clarke

The right hon. Gentleman does not want to hear about directed reflation.

Mr. Hattersley

rose—

Mr. Clarke

I will give way and see whether the right hon. Gentleman wishes to improve on the policy he put forward of directed reflation coupled with a commitment that the Labour Government would not raise the standard rate of income tax. That was the policy which my right hon. Friend the Chief Secretary to the Treasury analysed and so reduced the right hon. Gentleman to silence. The right hon. Gentleman has a minute in which to put a little more flesh on those pathetic bones.

Mr. Hattersley

I confirm both those policies. The right hon. and learned Gentleman has spent most of the time in his consideration of my speech discussing the unemployment statistics. Is it or is it not a fact that if the unemployment figure was calculated on the pre-Tebbit basis it would be 3.8 million and not 3.4 million?

Mr. Clarke

I guess that it would be about 3.6 million, because the right hon. Gentleman would include many people who are not unemployed but who go into the benefit office to obtain credit for their national insurance contributions. It is no good the shadow Chancellor arguing about the figures. Our policies on the service industries and tourism and the direct measures that we are taking at huge cost are more effective than anything he put forward.

Question put, That the original words stand part of the Question:—

The House divided: Ayes 204, Noes 293.

Division No. 72]	[7 pm
AYES
Abse, Leo	Alton, David
Adams, Allen (Paisley N)	Archer, Rt Hon Peter

Ashley, Rt Hon Jack	Hamilton, James (M'well N)
Ashton, Joe	Hamilton, W. W. (Fife Central)
Atkinson, N. (Tottenham)	Hancock, Michael
Bagier, Gordon A. T.	Hardy, Peter
Banks, Tony (Newham NW)	Harrison, Rt Hon Walter
Barron, Kevin	Hattersley, Rt Hon Roy
Beith, A. J.	Haynes, Frank
Bell, Stuart	Healey, Rt Hon Denis
Bennett, A. (Dent'n & Red'sh)	Heffer, Eric S.
Bermingham, Gerald	Hogg, N. (C'nauld & Kilsyth)
Bidwell, Sydney	Home Robertson, John
Blair, Anthony	Hoyle, Douglas
Boyes, Roland	Hughes, Dr Mark (Durham)
Bray, Dr Jeremy	Hughes, Robert (Aberdeen N)
Brown, Gordon (D'f'mline E)	Hughes, Roy (Newport East)
Brown, Hugh D. (Provan)	Hughes, Simon (Southwark)
Brown, N. (N'c'tle-u-Tyne E)	Janner, Hon Greville
Brown, R. (N'c'tle-u-Tyne N)	Jenkins, Rt Hon Roy (Hillh'd)
Brown, Ron (E'burgh, Leith)	John, Brynmor
Bruce, Malcolm	Jones, Barry (Alyn & Deeside)
Caborn, Richard	Kaufman, Rt Hon Gerald
Callaghan, Rt Hon J.	Kennedy, Charles
Callaghan, Jim (Heyw'd & M)	Kilroy-Silk, Robert
Campbell, Ian	Kinnock, Rt Hon Neil
Campbell-Savours, Dale	Kirkwood, Archy
Canavan, Dennis	Lambie, David
Carlile, Alexander (Montg'y)	Lamond, James
Carter-Jones, Lewis	Leadbitter, Ted
Clark, Dr David (S Shields)	Leighton, Ronald
Clarke, Thomas	Lewis, Ron (Carlisle)
Clay, Robert	Lewis, Terence (Worsley)
Clelland, David Gordon	Litherland, Robert
Clwyd, Mrs Ann	Livsey, Richard
Cocks, Rt Hon M. (Bristol S)	Lloyd, Tony (Stretford)
Cohen, Harry	Lofthouse, Geoffrey
Coleman, Donald	Loyden, Edward
Concannon, Rt Hon J. D.	McCartney, Hugh
Conlan, Bernard	McDonald, Dr Oonagh
Cook, Frank (Stockton North)	McKay, Allen (Penistone)
Corbett, Robin	McKelvey, William
Corbyn, Jeremy	MacKenzie, Rt Hon Gregor
Craigen, J. M.	Maclennan, Robert
Crowther, Stan	McNamara, Kevin
Cunliffe, Lawrence	McTaggart, Robert
Cunningham, Dr John	McWilliam, John
Dalyell, Tam	Madden, Max
Davies, Rt Hon Denzil (L'lli)	Marek, Dr John
Davis, Terry (B'ham, H'ge H'l)	Martin, Michael
Deakins, Eric	Mason, Rt Hon Roy
Dewar, Donald	Maxton, John
Dixon, Donald	Maynard, Miss Joan
Dobson, Frank	Meacher, Michael
Dormand, Jack	Meadowcroft, Michael
Douglas, Dick	Michie, William
Dubs, Alfred	Millan, Rt Hon Bruce
Duffy, A. E. P.	Mitchell, Austin (G't Grimsby)
Dunwoody, Hon Mrs G.	Morris, Rt Hon A. (W'shawe)
Eadie, Alex	Morris, Rt Hon J. (Aberavon)
Eastham, Ken	Nellist, David
Edwards, Bob (W'h'mpt'n SE)	Oakes, Rt Hon Gordon
Ellis, Raymond	O'Brien, William
Evans, John (St. Helens N)	O'Neill, Martin
Ewing, Harry	Orme, Rt Hon Stanley
Fatchett, Derek	Owen, Rt Hon Dr David
Faulds, Andrew	Park, George
Field, Frank (Birkenhead)	Parry, Robert
Fields, T. (L'pool Broad Gn)	Pavitt, Laurie
Fisher, Mark	Pendry, Tom
Flannery, Martin	Penhaligon, David
Foot, Rt Hon Michael	Pike, Peter
Forrester, John	Powell, Raymond (Ogmore)
Foster, Derek	Prescott, John
Foulkes, George	Radice, Giles
Fraser, J. (Norwood)	Randall, Stuart
Freeson, Rt Hon Reginald	Redmond, Martin
Garrett, W. E.	Rees, Rt Hon M. (Leeds S)
George, Bruce	Richardson, Ms Jo
Gilbert, Rt Hon Dr John	Roberts, Allan (Bootle)
Gould, Bryan	Roberts, Ernest (Hackney N)
Gourley, Harry	Robertson, George

Rogers, Allan	Straw, Jack
Rooker, J. W.	Thomas, Dafydd (Merioneth)
Ross, Ernest (Dundee W)	Thomas, Dr R. (Carmarthen)
Ross, Stephen (Isle of Wight)	Thorne, Stan (Preston)
Rowlands, Ted	Tinn, James
Ryman, John	Torney, Tom
Sedgemore, Brian	Wardell, Gareth (Gower)
Sheerman, Barry	Wareing, Robert
Sheldon, Rt Hon R.	Weetch, Ken
Shore, Rt Hon Peter	Welsh, Michael
Short, Mrs R.(W'hampt'n NE)	White, James
Silkin, Rt Hon J.	Wigley, Dafydd
Skinner, Dennis	Williams, Rt Hon A.
Smith, C.(Isl'ton S & F'bury)	Wilson, Gordon
Smith, Rt Hon J. (M'ds E)	Winnick, David
Snape, Peter	Woodall, Alec
Soley, Clive	Wrigglesworth, Ian
Spearing, Nigel	Young, David (Bolton SE)
Steel, Rt Hon David
Stewart, Rt Hon D. (W Isles)	Tellers for the Ayes:
Stott, Roger	Mr. Sean Hughes and
Strang, Gavin	Mr. Ron Davies.

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

Hanley, Jeremy	Lord, Michael
Hannam, John	Lyell, Nicholas
Hargreaves, Kenneth	McCurley, Mrs Anna
Harris, David	Macfarlane, Neil
Harvey, Robert	MacGregor, Rt Hon John
Haselhurst, Alan	MacKay, Andrew (Berkshire)
Hawkins, C. (High Peak)	MacKay, John (Argyll & Bute)
Hawkins, Sir Paul (N'folk SW)	Maclean, David John
Hawksley, Warren	McNair-Wilson, M. (N'bury)
Hayes, J.	McQuarrie, Albert
Hayward, Robert	Madel, David
Heathcoat-Amory, David	Major, John
Heddle, John	Malone, Gerald
Henderson, Barry	Marlow, Antony
Hickmet, Richard	Mather, Carol
Hicks, Robert	Maude, Hon Francis
Higgins, Rt Hon Terence L.	Mawhinney, Dr Brian
Hind, Kenneth	Maxwell-Hyslop, Robin
Holland, Sir Philip (Gedling)	Mayhew, Sir Patrick
Holt, Richard	Merchant, Piers
Hordern, Sir Peter	Meyer, Sir Anthony
Howard, Michael	Mills, Sir Peter (West Devon)
Howarth, Alan (Stratf'd-on-A)	Miscampbell, Norman
Howarth, Gerald (Cannock)	Moate, Roger
Howell, Rt Hon D. (G'ldford)	Montgomery, Sir Fergus
Howell, Ralph (Norfolk, N)	Morris, M. (N'hampton S)
Hubbard-Miles, Peter	Morrison, Hon C. (Devizes)
Hunt, David (Wirral W)	Murphy, Christopher
Hunt, John (Ravensbourne)	Neubert, Michael
Hurd, Rt Hon Douglas	Newton, Tony
Irving, Charles	Nicholls, Patrick
Jenkin, Rt Hon Patrick	Page, Richard (Herts SW)
Jessel, Toby	Parkinson, Rt Hon Cecil
Jones, Gwilym (Cardiff N)	Parris, Matthew
Jones, Robert (Herts W)	Patten, J. (Oxf W & Abgdn)
Jopling, Rt Hon Michael	Pawsey, James
Kellett-Bowman, Mrs Elaine	Portillo, Michael
Kershaw, Sir Anthony	Powell, Rt Hon J. E.
Key, Robert	Powell, William (Corby)
King, Roger (B'ham N'field)	Powley, John
King, Rt Hon Tom	Prior, Rt Hon James
Knight, Dame Jill (Edgbaston)	Pym, Rt Hon Francis
Knowles, Michael	Raison, Rt Hon Timothy
Knox, David	Rathbone, Tim
Lamont, Norman	Rees, Rt Hon Peter (Dover)
Lang, Ian	Rhodes James, Robert
Lawler, Geoffrey	Rhys Williams, Sir Brandon
Lawrence, Ivan	Ridsdale, Sir Julian
Lawson, Rt Hon Nigel	Rifkind, Rt Hon Malcolm
Lee, John (Pendle)	Roberts, Wyn (Conwy)
Leigh, Edward (Gainsbor'gh)	Roe, Mrs Marion
Lennox-Boyd, Hon Mark	Rossi, Sir Hugh
Lilley, Peter	Rost, Peter
Lloyd, Ian (Havant)	Rowe, Andrew
Lloyd, Peter (Fareham)	Rumbold, Mrs Angela

St. John-Stevas, Rt Hon N.	Thorne, Neil (Ilford S)
Sayeed, Jonathan	Thornton, Malcolm
Shaw, Giles (Pudsey)	Thurnham, Peter
Shaw, Sir Michael (Scarb')	Townend, John (Bridlington)
Shelton, William (Streatham)	Townsend, Cyril D. (B'heath)
Shepherd, Richard (Aldridge)	Tracey, Richard
Silvester, Fred	Trotter, Neville
Sims, Roger	Twinn, Dr Ian
Skeet, Sir Trevor	van Straubenzee, Sir W.
Smith, Tim (Beaconsfield)	Vaughan, Sir Gerard
Soames, Hon Nicholas	Viggers, Peter
Speed, Keith	Waddington, David
Speller, Tony	Wakeham, Rt Hon John
Spence, John	Walden, George
Spencer, Derek	Walker, Bill (T'side N)
Spicer, Jim (Dorset W)	Waller, Gary
Spicer, Michael (S Worcs)	Walters, Dennis
Squire, Robin	Wardle, C. (Bexhill)
Stanbrook, Ivor	Watson, John
Stanley, Rt Hon John	Watts, John
Steen, Anthony	Wells, Bowen (Hertford)
Stern, Michael	Wells, Sir John (Maidstone)
Stevens, Lewis (Nuneaton)	Wheeler, John
Stewart, Allan (Eastwood)	Whitney, Raymond
Stewart, Andrew (Sherwood)	Wiggin, Jerry
Stewart, Ian (Hertf'dshire N)	Wilkinson, John
Stokes, John	Winterton, Mrs Ann
Stradling Thomas, Sir John	Winterton, Nicholas
Sumberg, David	Wood, Timothy
Tapsell, Sir Peter	Woodcock, Michael
Taylor, John (Solihull)	Yeo, Tim
Taylor, Teddy (S'end E)	Young, Sir George (Acton)
Tebbit, Rt Hon Norman	Younger, Rt Hon George
Temple-Morris, Peter
Terlezki, Stefan	Tellers for the Noes:
Thomas, Rt Hon Peter	Mr. Tim Sainsbury and
Thompson, Donald (Calder V)	Mr. Tony Durant.
Thompson, Patrick (N'ich N)

Question accordingly negatived.

Question, That the proposed words be there added, put forthwith pursuant to Standing Order No. 33 (Questions on amendments) and agreed to.

MR. SPEAKER forthwith declared the main Question, as amended, to be agreed to.

Resolved, That this House notes that the Government's success in the battle against inflation has already brought with it nearly five years of soundly based economic growth and rising living standards; applauds the achievement of manufacturing industry in raising productivity to record levels; and welcomes the continuing rise in the number of people in work.