HC Deb 18 November 1986 vol 105 cc452-537
Mr. Speaker

Before we start this debate I must tell the House that a large number of right hon. and hon. Gentlemen have indicated a wish to take part in this the fifth day of the Debate on the Address. I have no authority to limit speeches to 10 minutes—

Mr. Tony Banks (Newham, North-West)


Mr. Speaker

—during this debate. I hope that not too many people will be disappointed. May I be allowed to continue to say that if hon Members are economical in their speeches it will be possible to call many more or them. I must tell the House that I have selected the amendment in the name of the Leader of the Opposition.

4.23 pm
Mr. John Smith (Monklands, East)

I beg to move, at the end of the Question, to add: But humbly regret that the Gracious Speech contains no credible strategy for securing a continual reduction in unemployment or for strengthening and modernising manufacturing industry and recapturing home and foreign markets for British goods. Today we debate the crucial and fundamental issues of employment and industry. Despite the Government's blatant attempts to cook the figures by means of 18 different alterations in the collection and presentation of unemployment statistics, as we all know unemployment is frighteningly high. The real figure is in excess of 4 million, whatever the Government's cooked statistics present. Of that total, a frightening number are under the age of 25. Some 1.25 million of them are on the dole and 1.3 million are classed as being in long-term unemployment. For many of them the prospect of any employment in future must look bleak.

The cost of unemployment to the nation is £22 billion. That is a frightening commitment in terms of public expenditure, let alone in terms of the human misery that these figures reveal. In the northern part of Britain, too many of our communities have been devastated by the unemployment which has come to visit them since the Government took office.

I wish to concentrate on the problems that beset manufacturing industry. Since 1979, 20 per cent. of our manufacturing industry has disappeared. I doubt if there is any period in our economic history during which there has been such a wholesale reduction in the industry which sustains the productive capacity of Britain.

Despite the Government's windfall of North sea oil which none of our principal competitors in western Europe — with the exception of Norway — have had, despite the enormous revenue benefits that that has brought and the support it has provided for balance of trade and the balance of payments, we have seen a steady economic deterioration in manufacturing industry since 1979. The most frightening aspect of that—there is not a word about it in the speeches by Ministers or a single reference to it in the Gracious Speech—is the alarming deficit in the balance of trade on manufactured goods. In the first nine months of this year, that deficit was just under £4 billion— £3,997 million, to be precise.

Since the industrial revolution and up until 1982, Britain was always in surplus in the balance of trade on manufactured goods. We slipped into deficit under this Government in 1983 and have continued downwards ever since. Unless there is some dramatic change in the figures for the last quarter of this year — there can be no reasonable expectation of such a dramatic change—the outturn figures for 1986 will show Britain in deficit to the extent of £5 billion on manufactured goods.

Mr. Phillip Oppenheim (Amber Valley)

Could the right hon. and learned Gentleman tell the House the trend of the figures in our manufacturing trade balance during the years of the last Labour Government? Was the balance in our favour, and was it falling or rising?

Mr. Smith

If the hon. Gentleman had listened a little more carefully, he would have saved himself the trouble of putting that question, because, throughout the whole of the period in which the Labour Government were in office, we had a surplus in the balance of trade on manufactured goods. Perhaps I could be generous about the matter. Throughout the term of office of all previous Governments we were in surplus on that balance of trade.

Mr. Oppenheim

Was the balance rising or falling?

Mr. Smith

The hon. Gentleman may have misunderstood the point that I am trying to make, but it is simple and clear. We went into deficit under this Government for the first time in our history and the position is getting worse and the trend is towards a deficit of £5 billion in 1986. Perhaps for once the Secretary of State for Trade and Industry will address himself to this matter because the country needs to know the Government's policy about the balance of trade on manufactured goods. What is the strategy for returning us to a surplus? What is the Government's attitude to that? The Prime Minister constantly tells us that exports are rising, but she never tells us that imports are rising faster than at any time in our history.

Mr. Kenneth Hind (Lancashire, West)

Will the right hon. and learned Gentleman kindly explain to the House and to the people in the north-west and in Avon how, in his intention to build up the manufacturing export base of Britain, the commitment of the Labour party to abolish all the export organisations attached to the Ministry of Defence and its military advisers, which produced £2.8 billion-worth of exports in 1985 and more in 1986, will help industry and employment?

Mr. Smith

I can explain that quite simply. The Labour party's non-nuclear defence policy will be of far greater assistance to British industry than the policy pursued by the Government, too much of which has to do with assisting industries in other countries rather than in this country.

Perhaps I could return to my main point. Have the Government any strategy for reversing the balance of trade in manufactured goods, or will we continue until, in 1990, as the economic department of Lloyd's bank predicts, we will have a balance of trade deficit in manufactured goods of over £13 billion? There will not be much in the way of economic manoeuvre then, whichever Government are in power; and that is what will happen if present policies continue. I hope that the Secretary of State will address himself to this matter, because the Government must face this problem.

The other serious problem that faces Britain and which is shown by the pattern of industrial development and unemployment is the north-south gap. Many of the areas that were once the powerhouses of British industry are in frightening decline. A most revealing document on this matter is the regional development fund submission by the Government to the EEC. The Government have wriggled a lot in seeking to explain away this document, but in terms of Community law the Government were obliged to submit such a document. The document clearly said that the Government did not think that there would be a reduction in unemployment below 3 million by 1990. Clearly, there are no plans in the Government's strategy to effect any reduction in unemployment between now and 1990—a long period.

What is interesting above all is what the Government said in the document about various parts of Britain. On the west midlands, they predicted an increase in the working population and a fall in the number of jobs available and concluded: These features suggest little prospect of an improvement in the region's basic unemployment problem in the period between now and the end of this decade. The people of the west midlands have been told to expect no solutions from the Government.

The document says: Continuing restraints on public expenditure … curtail the resources which central, local and public sector authorities have available to undertake development programmes or take advantage of significant infrastructure development opportunities. This in turn limits employment arising from construction programmes and major capital projects. That is correct. Every year, requests for a modest public works programme by Labour Members, people involved in other parts of the economy and even the CBI have been turned down flat by the Government, although they know perfectly well that the easiest, most effective way of getting some of the 400,000 unemployed building workers back to work is through a public works programme. Such a programme would put those building workers back to work improving houses, modernising the inner cities and improving the down-at-heel public infrastructure which afflicts so many communities.

On the northern region, the Government's report states: The most important problem facing the area is unemployment. The present high levels of unemployment are unacceptable, but the situation will not improve until a number of other more fundamental problems are resolved. The document details those fundamental problems: weak economic infrastructure, lack of investment, an excess of unskilled and shortage of skills, environmental dereliction and social deprivation in education and health particularly. On Scotland, the prospects for Strathclyde are described as follows: Overall therefore, there appears to be little possibility of sufficient expansion in the economy to reduce unemployment significantly in the next few years. The prediction for Yorkshire and Humberside is: Future employment prospects are not encouraging. Employment levels are unlikely to rise in the short or medium term". On Wales, the comment is: The overall economic activity rate in Wales is lower than any other region of Great Britain and is expected to remain so during the period that this programme covers. That is until 1990. On the north-west, the description of Greater Merseyside is: Prospects for reducing unemployment are frighteningly bleak — there are only approximately 4,100 unfilled vacancies in the sub-region.

Mr. Cecil Franks (Barrow and Furness)

Will the right hon. and learned Gentleman refer to the Labour party's manifesto and the Labour party conference decisions? I remind him what will happen in Cumbria, where 16,000 jobs will disappear at Sellafield and 9,000 will disappear in Barrow because of the cancellation of Trident. What does the right hon. and learned Gentleman propose to put in their place?

Mr. Smith

It is not surprising that the hon. Gentleman wants to distract attention from the Gracious Speech; nor is it surprising that he should wish to distract attention from the European regional development fund, about which I thought he would ask me. His misconstruction of the Labour party's manifesto commitments is patently absurd and I shall not waste my time bandying words with him on that.

The document submitted by the Government to the EEC displays a frightening picture of the reality of life in Britain today, especially the difference between the north and the south. What was the Government's answer? The Chancellor of the Duchy of Lancaster told us, when he was in a different capacity, that the unemployed of the north had to get on their bicycles and move to the south. We have seen that happen, with unemployed people from the north moving down to areas of relative prosperity. In many cases they find jobs fairly easily, but then they run into the housing problem. Even if the husband and wife both work, they discover that, even with the maximum mortgage they can get, the amount they have will be probably 15,000 below the lowest house price in the area. Therefore, they must either commute between their families in the north and their work in the south—to the destruction of family life and at enormous expense —or retreat, disillusioned and defeated, back to the communities from which they came.

Would it not make much more sense if we sought, for once, to have a regional industrial policy that brought work to the areas where people were willing, able and anxious to work and where we had used high expenditure to build up communities, instead of forcing people to tramp all over the country like industrial gipsies looking for employment wherever it can be found and unable to sustain it because of the circumstances which I have mentioned?

Mr. Richard Hickmet (Glanford and Scunthorpe)

Will the right hon. and learned Gentleman give way?

Mr. Smith

No. Hon. Members cannot accuse me of not giving way, because I have given way three times during my short opening remarks. [Interruption.] Conservative Members cannot distract me with their continual chatter. They should listen to some of the points which I have made and to the criticism of their policy.

Today, in regard to one of our most important industries, crucial decisions will be taken in the Council of Ministers. I hope that the Secretary of State for Trade arid Industry will tell us the Government's plans for the shipbuilding industry. As he knows, with the EEC phasing out existing schemes for support by the end of this year and deciding what type of intervention will start on I January 1987, a crucial decision must be taken.

The right hon. Gentleman well knows the rapid decline in Britain's merchant shipbuilding industry. The number of employees in the industry is down to 5,000 or 6,000. It is crucial that the Government fight for a proper support system. An independent report obtained for the European Commission by A and P Appledore suggested that the level of support should be 36 per cent. The EEC's proposal is for 26 per cent. I hope that the Government will fight for an increase towards the level of 36 per cent. If they do not, there can be little confidence that the British merchant shipbuilding industry will survive. Indeed, British Shipbuilders' chairman has used those terms.

We must decide—this goes for other countries in the Community as well as for the United Kingdom — whether we will surrender the shipbuilding industry to far east competition or whether we will maintain it so that it is there when the upturn in orders comes in the 1990s. I cannot believe that any Government would decide that a trading nation such as Britsin should not have a merchant shipbuilding capacity, when so many of our goods go round the world in British ships.

There is the twin problem also of the catastrophic decline in the British merchant shipping fleet since the Conservative party came to office. As my hon. Friend the Member for Dunfermline, East (Mr. Brown) pointed out recently in a letter to the Secretary of State.

Without a tougher Government bargaining position, Britain laces the prospect of conducting our trade and protecting our defences in ships built in Japan or Taiwan, repaired in Korea, crewed in Panama, and flying the flag of Liberia". I hope that we never reach that stage, but the position is as crucial as that. I hope that the Secretary of State will clearly set out his commitment.

Mr. Don Dixon (Jarrow)

Is my right hon. and learned Friend aware that the EEC Commission, acting on a report by the Court of Auditors, has decided to stop the allocation of non-quota regional development funds, which are designated for shipbuilding areas, because certain funds have been misappropriated by the Government?

Mr. Smith

My hon. Friend has properly drawn attention to another serious matter. The Government have not been committed to the British shipbuilding industry but they have the opportunity today in the European Community to make that commitment clear. I hope that the result will be that the Government will play their part with other countries in saving the EEC's shipbuilding industry from extinction.

Mr. Hickmet


Mr. Smith

I am not giving way to the hon. Gentleman at this moment.

Another industry of crucial importance, about which the Government are extremely shifty when they make any statements to the House, is the motor vehicle industry. We know the tangled tale of the Government's policies towards the British motor vehicle industry which was played out during the earlier part of the year. They attempted to get rid of British Leyland and Land Rover to General Motors. We know of the ignominious retreat of the Government from that policy. Perhaps even worse, we know about the surreptitious plot to sell the Austin Rover group to the Ford Motor Company, which might have been known to some of the directors of Austin Rover but was certainly not known to most of the senior management in the company. I am glad to say that the Government were forced to retreat in rapid disorder from that sordid position as well.

The trouble now is that they have lapsed into inactivity. I suspect that, because of fear of electoral consequences, the Government will not move to do any more damage to the British motor vehicle industry between now and the next general election.

Mr. Robert Atkins (South Ribble)


Mr. Smith

I will not give way.

It is not enough for the Government to have no policy towards the British motor vehicle industry. What is needed, especially for Austin Rover, is a strong commitment by the Government to see the company through to success. Other Governments give that support to their motor industry. It is high time our Government gave that support to our industry. The Government's objective is to privatise the Austin Rover group rather than see it through to success. We fear that in order to assist that process they will reduce the volume of production from above 400,000 down to what they might regard as a profitable niche at about 200,000. That would involve substantial job losses, the closure of plants and a further retreat of one of our important engineering industries. Let us never forget that it is not just the industry which is at stakes it is all the component supplying firms as well. They are an important part of the economy notably in the west midlands, but of many other parts of the industrial structure of the United Kingdom.

Mr. Robert Atkins


Mr. Smith

I hope that the Secretary of State can say without equivocation that the Government stand solidly behind the motor vehicle industry. That is the view of the Opposition: I wish it was shared by the Government.

The other area in which I believe the Government are in danger of going badly wrong is in connection with the steel industry. The notion floated recently in a letter by the Prime Minister to the hon. Member for Glanford and Scunthorpe (Mr. Hickmet) was that the Government intended, after the next election, to privatise the British Steel Corporation. Of course, there are two elements to that policy. In order to create the profits that would be a necessary prelude to privatisation, the danger is that there would be substantial cutting of existing steel plant as it presently exists. That would be bad enough. The notion that a long-lead, long-term strategic industry such as the British steel industry should be surrendered to the short-term perspectives of the City of London strikes me as absurd. One of the crucial issues at the next election for people in the steel communities and the industrial areas of this country will be to realise that, if they elect a Conservative Government, the British Steel Corporation will be privatised. I think that they will be able to weigh that up very easily for themselves. If I may say to the hon. Member for Glanford and Scunthorpe, it was not wise to get the Prime Minister to write that letter to him.

Mr. Hickmet

I am grateful to the right hon. and learned Gentleman for advising me on my election campaign. It was under Government ownership, as a nationalised industry, that 120,000 steel workers lost their jobs. It was because of the interference of Government in the way in which that industry operated that the British Steel Corporation got into that appalling mess. Before the right hon. and learned Gentleman laughs too much, he will recall that that happened because his Government shelved the Beswick report. Now, the hon. Member for Kingston upon Hull, East (Mr. Prescott) wants to double the work force and reduce it to penury again. Return it to the commercial sector, and run it properly.

Mr. Smith

I could hardly accuse the hon. Gentleman of making a precise point. That was a rambling intervention. It was interesting that he did not attempt to justify privatisation. I hope that he is not expecting Opposition Members to accept responsibility for policies towards the steel industry, which has been run by this Government since 1979. The hon. Gentleman should make up his mind. He is sometimes telling us how successful the steel industry is and claiming that if that is true it must be a success that is accorded to the public sector, as well as any deficiencies that are accorded to the public sector. The hon. Gentleman should get his act straight before he meets his own electorate.

The only hope for the British steel industry—

Mr. Richard Holt (Langbaurgh)


Mr. Smith

I think that I have given way more than most people would in a speech of this kind.

Mr. Holt

It is on the steel industry.

Mr. Smith

I do not care how often the hon. Gentleman mentions the steel industry, I am not giving way. He knows the rules perfectly well. Conservative Members know that I have already given way far more than people normally do in a speech of this kind. I think that they are insatiable on this matter.

Crucial decisions have to be made on aerospace. To be fair to the Government, they did support the A320 programme.

Mr. Roger King (Birmingham, Northfield)


Mr. Smith

It was privatised, but it cannot fund Airbus on the private markets. That is the point that the hon. Gentleman should grasp. When British Aerospace was privatised, the Government said, "That is marvellous. We do not need to worry about it any more, it is a burden off the back of the Government." However, on the first major international project it is looking for assistance from the Government because it says that the private market and private ownership cannot face up to the responsibilities of being involved in Airbus. That does not seem to be a good case for the privatisation of British Aerospace.

Mr. Michael Heseltine (Henley)


Mr. Smith

Please note—I am giving way to the right hon. Gentleman.

Mr. Heseltine

Perhaps the right hon. and learned Gentleman could remind the House what it was that persuaded the previous Labour Government to pull out of Airbus.

Mr. Smith

I think that mistakes have been made in the past. Indeed, the right hon. Gentleman might have made a few fairly recently. One thing is clear: there will be no future for British civil aerospace unless the Airbus project goes ahead. I would have preferred the right hon. Gentleman to say he supports the case I am making instead of trying to make cheap party political points. The right hon. Gentleman, who espouses the view of the national interest, which sometimes differs from the Government Front Bench, could be usefully employed in supporting some of these projects during his temporary idleness on the Back Benches. I hope that Conservative Members will join in pressing the Government to support the Airbus project, especially the A330 and A340 submissions which are about to go to the Government, if they have not already arrived. There will be no future for civil aviation unless the Airbus project is supported.

Mr. James Callaghan (Cardiff, South and Penarth)

My right hon. and learned Friend is making a powerful speech. In the interests of accuracy, would he remind the House that it was the Labour Government in 1978 who negotiated our way into the Airbus project when there was a great deal of competition and a desire by some other nations to exclude us? The right hon. Member for Henley (Mr. Heseltine) knows that perfectly well.

Mr. Smith

I am grateful to my right hon. Friend for putting the record straight about the period when he was responsible for handling these matters.

The important question, which Conservative Members do not seem to wish to engage in, is, what the Government are going to do about the project now? If they come out of Airbus or do not give British Aerospace the support which will allow it to continue as a full member of Airbus, there are other people who will want to join the consortium instead of British Aerospace. I hope that it might be possible for Conservative Members, now and again, to glimpse the national interest and, when they see it, to support it.

Another industry of great importance to this country is information technology. We are again seeing Britian slip behind. A substantial part of our deficit in the balance of trade in manufactured goods comes from that so-called sunrise industry. The figures for recent years show a pathetic record. In 1979, the deficit in the office and data processing trade was £227 million. Last year it had risen to £670 million. In electronics engineering, the deficit in 1979 was £164 million and in 1985 it was over £1,000 million. And that is in one of the newer industrial areas, making up a substantial part of the deficit in our balance of trade in manufactured goods. It is not simply a case of some decline in the older industries; it is affecting the whole of our industrial structure.

One of the National Economic Development Office's reports, chaired by Professor Ashworth — an excellent report compiled by leaders of business, trade unions, independent experts and Government servants—marked out a strategy for information technology. It is lying gathering dust on a shelf in the Department of Trade and Industry. No action has been taken to correct the serious deficiencies in our national policy.

The Ashworth report says: A sunrise industry … is being eclipsed before it has even risen … in the new industrial revolution we are failing to the point where we cannot maintain key technologies … on present trends we will not have an independent broad based IT industry by the end of the decade. Those are chilling words for anyone who cares about Britain's industrial future.

But have the Government any strategy whatsoever for the information technology industry? None at all. That is because they do not believe in industrial strategies. They do not believe in planning for the success of Britain's industry in this competitive world in which we struggle to make a living. There was a short period when the Government seemed to espouse the sunrise industries, when the present Secretary of State for Education and Science had a role to play in the Department of Trade and Industry, but that was a mere flickering, arid it disappeared. The Government have sunk into slumber again on this crucial part of our industrial future.

One of the reasons why, in all those areas of industrial activity that are selected for discussion today, there is no strategy, no driving force to make the necessary changes, is partly that there has been a decline in the role of the Department of Trade and Industry. It has now been marginalised almost into insignificance. Such initiatives as the Government take, such as the Urban Development Corporation programme, come from the Department of the Environment. Other initiatives may come from time to time from the Department of Employment, but never is there a spark of anything from the Department of Trade and Industry.

Secretaries of State have come and gone in bewildering succession. Sometimes I feel like a force for order and stability in the House when I look at the number of people flitting back and forth, who temporarily hold the seats in the Department of Trade and Industry. It is not just that the Government think so little of the Department as not to man it properly and intelligently, but the notion of having a powerhouse Department of Trade and Industry — a policy that any intelligent Government would follow—runs contrary to the Government's strategy for British industry, which is non-intervention, non-involvement.

In our successful competitor countries, there has been plenty of Government leadership and involvement, but that is not to happen here. That is why the expenditure of selective assistance to industry has halved since 1979. Our regional industrial policy is in tatters. Unemployment has mushroomed in all those areas, as the Government have withdrawn their responsibility for the economic health of those areas. Even worse, the expenditure is planned to halve yet again a few years ahead.

There is no reference to those problems in manufacturing industry, of regional decline and of rising unemployment in the Queen's Speech or the autumn statement. The Secretary of State did not fight for another halfpenny from the Government for any programme that his Department had in mind because the Department, under his leadership, has no programme in mind for attacking the problems of manufacturing industry.

However, the Government must now know, as the whole House knows, that unless we build up our manufacturing industry, not only will we not be able to create the wealth that alone will sustain a civilised society, but we shall not be able to pay our way in the world. We shall not be able to turn round the catastrophe in the balance of trade in manufactured goods. What is the Government's attitude to that? The Government are complacent. They hardly seem to know that the problem exists. In the Prime Minister's own contribution to the debate on 12 November, she took refuge in the selective use of statistics, and said that things were fine because "manufacturing investment grew by 5.5 per cent. in 1985." What the right hon. Lady did not tell us was that at this stage investment is 17.1 per cent. less than in 1979. What is the point of going 5 per cent. forward if one remains 17 per cent. behind?

The right hon. Lady also drew attention to the fact that Manufacturing export volumes are at record levels."—[Official Report, 12 November 1986; vol. 105, c. 17.] She did not say that imports are going through the roof and that since 1979 manufacturing import share of British markets has gone up by 30 per cent. What an increase in the penetration of our market by our competitors since the Government came to office. That is why we have drawn attention to that matter in our amendment. We believe that the time is overdue for Britain to have an industrial strategy and to make sure that the investment is available for British industry and that there is sufficient expenditure on research and development, which is crucial to the new products and processes upon which we may make our living in decades ahead. That is why education and training are of fundamental and vital importance to the rebuilding of our industrial structure.

None of that will happen under the present Government. In the past seven years, we have seen a sad and debilitating decline in British manufacturing industry associated with the steepest rise in unemployment in our history and the sharpest deceleration in the health of the economies of the older industrial areas. Now this country is deeply divided, socially, politically, industrially and economically. Those are the results of the foolish, free market policies of Government non-intervention, and the decision to turn our back on the crucial wealth-creating part of our society—our manufacturing industry.

Meanwhile, we in the Labour party are clear on two things. First, we must wage war on unemployment. That is why the Labour party is committed, in the first two years of government, to reducing unemployment by 1 million, as a step along the road to getting back to a society in which the Government take responsibility for employment. I thought that the problem had been solved in 1944, but here we are in 1986 still asking the Government to accept that basic responsibility. It is one that we gladly accept and will discharge.

Secondly, the rebuilding of manufacturing industry will be one of the crucial tasks for the Labour Government. Without the policies that Labour proposes, that industrial recovery will not occur. I am glad that the day when the policies will change and when the Government will change is only months, not years, ahead.

4.58 pm
The Secretary of State for Trade and Industry and President of the Board of Trade (Mr. Paul Channon)

Once again — we have heard it often — the right hon. And learned Member for Monklands, East (Mr. Smith) has given the House his usual doom-laden and depressing account of the condition of British industry as he sees it. Once again, his description bears little resemblance to reality. It is not surprising, with his party in that condition. It is a characteristic of his party that no matter how good the news may be, no matter how much progress is being made, Labour Members will always paint the worst possible picture, and portray the situation in the worst possible light. They revel in it.

I am happy to tell the House that the position of British industry today bears no resemblance to that described by the right hon. and learned Gentleman. In fact, the outlook and prospects for British industry are better than they have been for many years. We are now in our sixth successive year of steady growth. [Laughter.] It is a laughing matter to Labour Members. Over the past three years, our growth has averaged around 3 per cent., combined with low inflation—a combination that has not been achieved for a generation, and certainly has not been achieved under a Labour Government. As a result, investment is at record levels. Company profits rose by 20 per cent. last year alone, and company profitability is at its highest for over 20 years. I am not sure whether the Labour party still derides profit. Sometimes its policies seem to be designed to ensure that no company ever makes a profit again.

Ms. Clare Short (Birmingham, Ladywood)

Will the right hon. Gentleman give way?

Mr. Channon

I am only at the beginning of my speech —the opposite of a peroration.

Ms. Short


Mr. Channon

Very well.

Ms. Short

I am grateful to the right hon. Gentleman for giving way. I represent a constituency in the west midlands, the heartland of Britain's manufacturing sector. In the central core of Birmingham, 300,000 people are living with 30 per cent. unemployment. That is the biggest collection of poverty in the whole of western Europe, and is the effect of the decline in Britain's manufacturing industries. The Minister cannot pretend that that picture is acceptable or tolerable.

Mr. Channon

I will deal in detail with the points made by the hon. Lady and by the right hon. and learned Member for Monklands, East. I will explain to the House that the picture of industry upon which the right hon. and learned Gentleman concentrated, very understandably, is a travesty of the truth.

No one denies that there are serious unemployment problems; that is common ground in the House and is understood and appreciated by everyone. My right hon. and learned Friend the Paymaster General and Minister for Employment will say more about that —indeed, he said more on that subject during Question Time today and in a recent debate.

I remind the House that the number of vacancies now stands at its highest level for seven years and the fall in the unemployment register over the past three months is the greatest for 13 years. That is the good news, which the Opposition are unprepared to accept.

In the past, the Labour party has always been opposed to profits, but greater profits lead to greater investment and that leads to more jobs. On that front the outlook for industry is good. The right hon. and learned Gentleman devoted most of his speech to the manufacturing sector, and said that manufacturing industry is in almost terminal decline. That is simply not true. As a proportion of our national output, manufacturing output has declined. However, it has also done that in France, West Germany, the United States of America, Japan and almost any developed economy one could care to name.

Although this may come as an amazing shock to the Opposition, that decline did not start on 3 May 1979. It has been taking place for many years, including the years when the Labour party was in office. My hon. Friend the Member for Amber Valley (Mr. Oppenheim) stressed that point in this intervention. The only contribution that the Labour party made was to exacerbate the problems of manufacturing by standing in the way of change and by attempting to prevent the adaptation of our economy. Manufacturing industry was burdened with yesterday's methods, yesterday's techniques and yesterday's products while our competitors all over the world were producing goods more cheaply, quickly and efficiently.

It is impossible to stand in the way of change if we want to see a prosperous productive economy—an economy which is constantly changing. I believe that we have to encourage and assist that process and not try to prevent it. As a result, manufacturing industry has been adapting and growing. Since the end of the recession in 1981, output has risen by 13 per cent. While, in common with most other industrial countries, there was a slight pause earlier this year, there are now clearly signs of a resumption in growth with manufacturing output up 1 per cent. in the last quarter and forecast to grow by a further 4 per cent. next year.

In addition—and we did not hear a word from the right hon. and learned Gentleman about manufacturing efficiency—productivity is up by more than 30 per cent. since the end of 1980. That is an average of 5 per cent. a year over five years. During the lifetime of this Government, it has grown by an average of 3.5 per cent. a year—a growth record second only to Japan and four times as fast as under the Labour Government.

Let there be no doubt that the basis for continued expansion has been laid with buoyant profitability now at its highest level since 1973; rising investment which has risen 30 per cent. since its trough in 1983 and buoyant exports up by 18 per cent. since 1979 to record levels. Of course, manufacturing remains a vital contributor to the country's wealth. I cannot imagine a healthy and prosperous British economy without a thriving manufacturing sector.

Mr. John Smith

If things are progressing so splendidly, why is there a £5 billion deficit in the balance of trade on manufactured goods?

Mr. Channon

I am coming to that. I am telling the House the position in manufacturing. It is no more and no less important than any other sector. It now accounts for only one fifth of gross domestic product and one quarter of employment. The Opposition seem to think that the other four fifths and three quarters are irrelevant or worthless. That attitude is simplistic and wrongheaded.

Mr. John Swith

I did not suggest that.

Mr. Channon

The right hon. and learned Gentleman spoke for 35 minutes without mentioning anything else. I am entitled to assume that he is prepared to concentrate only on that one sector of the economy. It is a very important sector, but it is not the only sector. He ignores the contribution to our economy and national wealth of millions of people who are doing worthwhile and productive jobs.

The Government's policy should be to help both sectors of the economy succeed by creating a climate in which enterprise and business can flourish. The key to that is competitiveness in both cost and non-cost factors. Inflation has been brought under control — although, not surprisingly, we did not hear much about inflation from the right hon. and learned Gentleman.

Since mid-1983, inflation has averaged below 5 per cent. and in the past year industry's fuel and raw material costs have actually fallen. The one cloud on the horizon is unit labour costs, which in the past year have risen much faster in Britain than in our major competitor countries. The implications for competitiveness are obvious. High pay settlements must not be allowed to swamp the effects of productivity improvements. Rather, we need to take the benefit of those improvements in more competitive prices, leading to higher sales, higher output and more jobs. That is the message for all kinds of industry and the message that should go out from both sides of the House, although it does not seem to.

Mr. William Cash (Stafford)

Does my right hon. Friend, who has published an extremely interesting and worthwhile pamphlet on quality in British industry, accept that the quality of production is infinitely more important than many Opposition Members give it credit for? Furthermore, the Opposition's continual ranting on about the volume of production will be of no use to this country unless we produce goods of comparable quality with other places abroad.

Mr. Channon

I entirely agree with my hon. Friend. Quality and design are crucial aspects of British industry and I shall say a word about them in a few moments.

The most effective and productive way to create wealth is through the operation of a free market, and every Conservative Member knows that to be the case. No matter how clever the bureaucrat or how sophisticated the Whitehall computer, they will never match the power of the market in ensuring that the goods that are produced are those that people actually want to buy. We have to extend the scope of the market, make sure that it works efficiently and make good any defects in its mechanism.

That has to be done by bringing the disciplines of the market into public purchasing, by encouraging wider share ownership and by privatisation — which Opposition Members hate so much. Privatisation proves beyond doubt the power of private enterprise in a competitive free market. In company after company privatisation has resulted in an enormous leap in efficiency, performance, attitudes and involvement. Some 350,000 employees now have a stake in their companies and millions of British people have also bought shares. That is true public ownership.

Mr. John Smith

No it is not.

Mr. Channon

Is it not true public ownership for the people to own shares in their companies? The Labour party wants public ownership to be the pseudo-social ownership espoused by them—their new fancy word for renationalisation. That will disfranchise millions of ordinary people who have bought shares—

Mr. John Prescott (Kingston upon Hull, East)

And sold them.

Mr. Channon

Yes, but a great many have kept their shares. Under a Labour Government, there would be a return to Government interference, inefficiency, bad service and losses funded by the taxpayer.

Mr. Hickmet

Did my right hon. Friend notice the ludicrous proposal made by the hon. Member for Kingston upon Hull, East (Mr. Prescott) that we should use nationalised industries to increase employment? In fact, he said that in certain industries employment would be doubled. What effect does my right hon. Friend think that would have upon the efficiency of the coal industry, the British Steel Corporation, or the shipbuilding industry? The hon. Member for Kingston upon Hull, East was interviewed by the BBC on those matters.

Mr. Channon

The proposal of the hon. Member for Kingston upon Hull, East (Mr. Prescott) would clearly have a disastrous effect. I have learnt one lesson which I hope that my hon. Friend the Member for Glanford and Scunthorpe (Mr. Hickmet) has also learnt—

Mr. Prescott

He is paid to lie.

Mr. Hickmet

On a point of order, Mr. Deputy Speaker. The hon. Member for Kingston upon Hull, East (Mr. Prescott) has said that I am paid to lie. In my respectful submission, that comment should be withdrawn.

Mr. Deputy Speaker (Sir Paul Dean)

If the hon. Member used that phrase, I am sure that he will wish to withdraw it.

Mr. Prescott

I clearly did use that phrase, Mr. Deputy Speaker, in reference to the hon. Member making a dishonest statement about what I said. I was referring to the man being briefed to make untrue statements, but I will withdraw the statement that he told a lie.

Mr. Channon

I will return to the facts of privatisation. I have another quotation from the hon. Member for Kingston upon Hull, North—

Mr. Prescott

Kingston upon Hull, East — the Minister must not blame my hon. Friend.

Mr. Channon

No, the hon. Member for Kingston upon Hull, North (Mr. McNamara) is far too sensible. I meant the hon. Member for Kingston upon Hull, East.

The facts of privatisation speak for themselves to everyone within and outside the House except the Opposition. We do not hear much from the Opposition about the performance of Jaguar. That company has increased its turnover three times, turning a loss of £30 million in 1981 into a profit of more than £120 million in 1985 and creating 1,500 new jobs. Had it remained in state ownership under a Labour Government, those 1,500 people might still be on the dole. The profits of Cable and Wireless are up fourfold and those of the National Freight Consortium, with 17,000 shareholders, are up sixfold since privatisation. British Aerospace has also done pretty well. It would not have done so well under the right hon. and learned Member for Monklands, East. Profits are now up to £80 million in that flourishing company under private ownership.

Those are the reasons why we are determined to press ahead with our privatisation programme — because it works. I am delighted to reaffirm that in the course of next year British Airways, the British Airports Authority and Rolls-Royce will also take their rightful places in the private sector.

Mr. Franks

Before my right hon. Friend leaves the subject of privatisation, will he comment on the privatisation of Vickers Shipbuilding and Engineering Ltd., when 82 per cent. of the local work force bought shares, paying £1 per share in March for shares which now stand at £1.60, whereas Labour proposes to renationalise and give them worthless pieces of paper?

Mr. Prescott

That is another dishonest statement.

Mr. Channon

My hon. Friend is entirely right to point out the great success of VSEL, which has had an extremely important effect on employment in his area compared with the disastrous proposals that the Labour party would put into operation if it won a general election.

I shall now deal with the public sector, because it is not only in the private sector that things have to be changed. The right hon. and learned Member for Monklands, East criticised the fall in expenditure by the Department. I will tell him why that expenditure has fallen. In 1979, we had to provide more than £1 billion of taxpayers' money in external finance for expensive and inefficient DTI-sponsored nationalised industry. This year the figure will be £89 million compared with £1.2 billion — less than one twentieth, in real terms, of the amount that we had to find when we came to office.

After losing hundreds of millions of pounds per year in the 1970s, as my hon. Friend the Member for Glanford and Scunthorpe has pointed out, the British Steel Corporation made its first overall profit last year. Last week it announced a profit of nearly £70 million in the first half of this year. That is good news not just for the taxpayer, who had to finance the earlier losses, but for those who work in the industry. Steel producers throughout Europe and elsewhere have been engaged in a fight for survival. BSC has shown that it is a survivor. Its recovery still has a good way to go, but the Government's approach and the corporation's willingness to make that effort have given the work force a more promising future than it has had for a good many years. I very much doubt whether my hon. Friend the Member for Glanford and Scunthorpe needs any lessons in electoral strategy from the right hon. and learned Member for Monklands, East.

As well as in the nationalised and privatised sector, the Government have a role to play in the private sector in helping to improve both manufacturing and service industries by improving the working of the market. One way of doing that in which my right hon. and learned Friend the Paymaster General has been especially engaged is by getting Government off the backs of business and allowing firms to get on with the job rather than having a plethora of red tape and controls.

Mr. Prescott

Such as training.

Mr. Channon

I look forward to debating that with the hon. Gentleman. Although Government must avoid burdening business with unnecessary regulation, there are, of course, areas in which the Government have a duty to set and enforce the rules. One example is the financial services industry.

No regulatory system can entirely stamp out malpractice or fraud, but we are determined that there should be vigorous enforcement of the Financial Services Act and I am confident that this will provide a sound statutory framework for self-regulation. Recent events have shown that it can operate rapidly and effectively, as can the Government. On the evening of Thursday 13 November we received a report from the stock exchange on its initial conclusions in a particular case. We considered that report and on Friday 14 November I brought into force the relevant provisions of the Act on insider dealing. I appointed inspectors on Saturday 15 November. That shows the seriousness with which we regard our commitment to enforcement and our determination, in particular, to tackle insider dealing with all the powers available to us under the Financial Services Act.

The United Kingdom continues to consolidate its position as one of the three main financial centres of the world. The merger between the stock exchange and the International Securities Regulatory Organisation is to be welcomed as a major step in ensuring that Britain keeps its place in that sector. If markets are to operate successfully, they must be both efficient and orderly. Consumers, whether of goods or of services, must be sure that they will not be ripped off. As we are debating the Queen's Speech as well as the Opposition amendment, I should briefly inform the House that tomorrow in another place we shall be introducing a consumer protection Bill.

The new legislation will significantly improve consumer protection in terms of product safety, price claims and bargain offers. It implements a Community directive on product liability and will ensure that consumers can secure compensation for personal injuries caused by defective products without, as at present, having to show that the producer was negligent. The Bill will also require suppliers to ensure the safety of all consumer goods, not just those covered by specific safety regulations. It will give consumers greater protection from misleading price indications such as bargain offers when there has been no real price reduction and hidden extras are added to the quoted price.

The Bill will protect consumers from particular abuses but will also ease trade within the Community through harmonised product liability laws. I believe that it will also provide a powerful impetus to manufacturers to improve the quality of their goods—my hon. Friend the Member for Stafford (Mr. Cash) stressed the importance of this—as the concept of safety in the Bill will encourage them to make greater use of standards.

Mr. Ken Eastham (Manchester, Blackley)

Will the Minister give way?

Mr. Channon

We shall no doubt have many months of debate on this, but I will give way if the hon. Gentleman wishes.

Mr. Eastham

In considering the various protections advocated by the Government, will the Minister also consider the various aspects of protection for workers? One thinks especially of health and safety in factories in view of the considerable reduction in the number of inspectors. That is a great deficiency in an area that cannot be ignored.

Mr. Channon

The Bill will improve safety for workers in factories in some respects. If the hon. Gentleman will be good enough to await publication of the Bill, we can deal with those matters in detail in later debates. As is the custom, however, I thought that in courtesy I should inform the House of the introduction of that legislation.

The right hon. and learned Member for Monklands, East wants me to deal with the question of trade. Under the Conservative Government we have had six years of trading surplus. Of course, we shall move into a temporary deficit next year. That is because the price of oil has dropped. It would be astonishing if that did not have a temporary effect on the balance of payments. My right hon. Friend the Chancellor set out the effect of that extremely clearly in his autumn statement. I have every confidence that we shall soon move back into surplus when the exchange rate and everything else has adapted to deal with the new circumstances. I have no qualms about the future course of the balance of payments. We must consider the balance of payments as a whole — manufacturing, oil, services and everything else.

I have tried very hard to increase our trading opportunities in the Community by completion of the internal market, which would be of major benefit to British industry, and, with my colleagues in other countries, by trying to launch a new round of trade negotiations at the General Agreement on Tariffs and Trade ministerial meeting in Uruguay. That is a major step to advance the prospects of world trade.

It is common ground that we need better access for exports of British goods and services. A genuine opening of markets to British goods in the newly industrialising countries, agreed rules for liberalising world trade and services, new rules for resolving disputes more quickly and satisfactorily, lower tariffs and better curbs to inhibit trade in counterfeit goods are important issues to people outside the House, whatever hon. Members may say.

Mr. Robert Atkins

I welcome my hon. Friend's generalised case, but we agree that import controls are no answer. Indeed, they are counter-productive. Leyland Vehicles has done everything that is required of it in terms of competitiveness, design and providing support—all the things that my right hon. Friend mentioned—but it is still up against predatory financing in Europe, the Third world and the far east, which makes it extremely difficult for that company to compete, although its product is perfectly adequate, if not good for the market. Will my right hon. Friend turn his attention to that—I know that he has in the past—and develop a policy which encourages support for our export contractors abroad?

Mr. Channon

I certainly will. We are especially anxious to try to help our exporters obtain major public business abroad. We now have a soft loan facility, and the consequential increase in the aid and trade provision budget will enable the amount of ATP-supported business to be doubled from £250 million to £500 million by 1989. Business worth £300 million in China and worth very nearly £150 million in Indonesia can be financed from the soft loan facility. My hon. Friend the Member for South Ribble (Mr. Atkins) has been very active pursuing the interests of companies in his constituency. I hope that the soft loan facility will put British companies in a strong position to win major business in those important markets.

Mr. Bruce Milian (Glasgow, Govan)

Soft loans and ATP are of some significance to the shipbuilding industry, and discussions about that industry and support for it are going on in the EEC. Will the right hon. Gentleman say something about that as the industry is in a critical condition?

Mr. Channon

I am glad that the right hon. Gentleman has raised that subject. I quite understand his anxiety about the Commission's proposals, which are being debated today by the Industry Council. I cannot comment on what is going on as matters might well be moving fast, but we accept that there is a need for movement from the Commission's original approach. We well understand the view of the House and believe that the 26 per cent. should be increased. The exact figure to which it should be increased will have to be considered. No doubt the right hon. Gentleman will table questions, or opportunities will be found to keep him informed. If he cares to table a question today or tomorrow, I am sure that my hon. Friend the Minister of State, Department of Trade and Industry, will be delighted to tell him the latest information.

Mr. John Smith


Mr. Channon

I have dealt with a great many of the issues raised by the right hon. and learned Gentleman, but I shall give way.

Mr. Smith

I had not realised that the Secretary of State had dealt with the balance of trade question. It is alarming that there is likely to be a £5 billion deficit in the balance of trade in manufactured goods by the end of 1986. What does the right hon. Gentleman think about that and what action will the Government take to correct it?

Mr. Channon

The right hon. and learned Gentleman always concentrates on one aspect of our trade and fails to relate it to the others. He knows very well, as my right hon. Friend the Chancellor made it quite clear in his autumn statement, what the likely outturn of the balance of payments next year will be—a small deficit.

Mr. Prescott

One and a half billion pounds.

Mr. Channon

Yes, £1.5 billion—after years of being billions of pounds in surplus. That is a record of which the Labour party should be jealous. I am sure that we shall return to surplus when the adaptation has taken place. It is ridiculous for hon. Members to imagine that the price of oil can slip from $35 a barrel to $8 a barrel without having any effect on the balance of payments of an oil producing country. The right hon. and learned Gentleman knows the arguments — he simply chooses not to put them to the House.

Mr. Hickmet


Mr. Channon

I must not give way to my hon. Friend. He has already had one or two goes today.

Since the Labour party had the Department of Trade and Industry under its control, we have indeed switched our expenditure. We have increased expenditure on science and technology support to £415 million—three times as much in cash terms and twice as much in real terms as when we came to office. That is a real re-ordering of priorities in the Department—away from loss-making nationalised industries to helping British industry. Science and technology support represents an increasing proportion of my Department's budget—nearly one third this year, as opposed to a mere 6 per cent. when Labour left office.

The re-ordering of priorities has enabled us to fund programmes that did not exist in 1979, such as information technology awareness in schools, the Alvey programme into advanced information technology, international collaboration in Europe and the EUREKA project. All have been done because we have been able to alter our priorities and spend more on them and to waste less propping up nationalised industries, unlike the Labour party.

Mr. Prescott


Mr. Channon

Yes, indeed, EUREKA. The hon. Member laughs at EUREKA. If we are to prosper, we must have more collaboration with Europe, not less. I find it astonishing that Opposition Members should find that laughable.

We must have more foreign investment in Britain. Opposition Members are always difficult about that too. Support for inward investment since 1979 has created some 180,000 jobs, and we are now the third location in Europe for internationally mobile investment. We attract more than one third of all American and Japanese non-oil investment into the Community. That is good news for Britain.

Mr. Prescott


Mr. Channon

Inward investment creates jobs. Ford, for example, invested more than £1.5 billion in the United Kingdom during the past seven years, and provides jobs for some 50,000 people, and the hon. Member laughs.

The Government's policies are designed to help industry improve its competitiveness and win orders at home and abroad. Last week, the Confederation of British Industry published its manifesto. It also contained policy recommendations—

Mr. Prescott

Bare knuckles.

Mr. Channon

Not at all. It is articulating what the overwhelming mass of British business and everybody else believes. Everybody is in step except the Labour party, which believes that a return to profligate spending, high taxation, rampant inflation, state interference and militant trade unionism would not be a disaster for the country.

Mr. Prescott

What about training?

Mr. Channon

We hear the same old story over and again from the Labour party. The ad-men will dress it up. I expect that they will have a little brochure with a red rose on it. It will look very nice. There will be a few comfortable sounding euphemisms such as "social ownership" instead of renationalisation, but no amount of packaging will disguise it. Those policies would put us back at the bottom of the European league, which is where we were when Labour was last in office.

Every day, the Labour party seems to unveil another ludicrous proposal which would add to the costs and burdens on British industry. We had the great treat of the hon. Member for Knowsley, North (Mr. Howarth) arriving here this afternoon. Only last week, the hon. Member for Kingston upon Hull, East was at it again. On Monday, he announced his plan for a I per cent. levy on companies' turnover to finance industrial training. I am all in favour of industrial training — [Interruption.] The Opposition also laugh at that. Investment in people is vital if companies are to succeed, and I am constantly urging companies to devote more resources to training. Many companies such as Jaguar and British Airways already are, but an indiscriminate tax on turnover that falls on every company irrespective of size or profit and loss is economic lunacy.

Mr. Prescott


Mr. Channon

I am longing to give way to the hon. Gentleman. It would cost ICI more than £100 million, and it might cost the existence of many smaller companies. The only guaranteed result would be a loss of jobs. Now I give way to the hon. Gentleman.

Mr. Prescott

I shall deal with training in detail when I reply. However, is the Secretary of State aware that Mr. Holland, a director of the MSC, has been looking at training and he recommended that a levy should be imposed collectively, in the region of 2 per cent. of turnover? He is a person with a great knowledge of training. Therefore, before dismissing the idea that 1 per cent. should he a minimum levy, the Government should look at what others are recommending.

Mr. Channon

Then may I take it that that remains Labour party policy? I was not clear from the intervention of the right hon. Member for, Sparkbrook (Mr. Hattersley) whether it was or not. Perhaps the hon. Gentleman will let us know.

Mr. Prescott

It is certainly the Labour party's policy to implement training levies and grants to deal with the collapse of training in industry. I said at Knowsley, North that we had not yet decided on the percentage—[HON. MEMBERS: "Oh."] I said that I believed that 1 per cent. was a minimum because according to the Manpower Services Commission most of our competitors are spending between 2 per cent. and 3 per cent. of turnover on training. Britain is lamentably behind in the training of its labour force.

Mr. Channon

We are making very good progress. One per cent. is now a minimum, and the hon. Gentleman quotes with approbation those who suggest 2 per cent. Are Opposition Members carrying the right hon. Member for Sparkbrook with them?

Mr. Prescott


Mr. Channon

Really? It is noticeable that the right hon. Gentleman is not here, because he said: The idea that there should be a 1 per cent. levy is not policy, it wasn't described as policy by John, and I can't imagine that it's going to be policy". That is what the Opposition said on Friday, yet the hon. Member for Kingston upon Hull, East says something quite different today.

Mr. Prescott

The Secretary of State must accept what I said at Knowsley—that in my view 1 per cent. should be the minimum levy. I also made it clear that the Labour party had not made a decision about what the level should be. That is on the tapes and can be seen. In fact, I believe that the tapes were sent for, and they confirm that position.

Mr. Channon

It is very nice to know that it will be at least 1 per cent., because British industry can learn. As I have said, that sort of levy would cost ICI more than £100 million. Just think what it will cost other companies that are not making profits. Anyone who is a spokesman on employment, who puts forward such a ridiculous suggestion and who describes himself as interested in employment is talking nonsense.

Luckily, such crackpot schemes will not be put into practice. This Government's policies have helped to create the climate in which business is now flourishing. Prospects for the future are now brighter than for many years, and I urge the House to reject this ridiculous amendment.

5.33 pm
Mr. Ian Wrigglesworth (Stockton, South)

Nothing that the Secretary of State said will be any consolation whatever to the 3 million unemployed who still remain in the country today, and we have every prospect of them still remaining unemployed for the next three or four years if the Government continue their policies.

It is a pity that in his description of the Government's record the Secretary of State did not quote the figures from 1979. Almost all the figures that he chose came from either 1983 or 1981 whereas, as the House will know, most of the disasters, particularly in manufacturing industry, took place from 1979 to 1981 when there was a high exchange rate, high interest rates and when companies were being made bankrupt and people were being made redundant throughout the country.

If one looks at almost any of the indicators that the Secretary of State mentioned, one finds that we are only just getting back to the 1979 levels of output in most areas of the economy. It is a great pity that the Secretary of State did not dwell more on the two fundamental problems that are facing the country.

The first is our competitiveness. Although he mentioned that, he did not go into adequate detail about how badly we are doing compared with our major overseas competitors or how the Government propose to deal with the problem. Secondly, the right hon. Gentleman did not deal with the fundamental question in the minds of all Opposition Members — the disastrous decline in manufacturing industry, which is inevitably giving rise to the vast balance of payments problems associated with manufactured goods.

In fact, the balance of payments surplus and the benefits of North sea oil have masked the decline in the manufacturing sector. Indeed, they have done worse, because the Government have allowed them to undermine the manufacturing sector of British industry. The Secretary of State is quite wrong if he thinks that Opposition Members are not concerned with the service sector or the financial services sector. He need only listen to the speeches of the members and leaders of the CBI to realise that there is no future for the financial services sector in this country or for the rest of the service sector without a more substantial manufacturing sector than we have today. If we are to redress the balance of payments problems that are coming fast down the track, we shall have to do something about the manufacturing sector.

The Secretary of State brushed off—as though it was only a minor problem on the horizon—the £1.5 billion deficit in our balance of payments in the forthcoming year. The alliance flagged this up in its budget proposals published in March, and the Secretary of State is incredibly complacent if he thinks that it is a mere blip on the horizon that does not signal a major problem facing our economy and industry.

For a start, it is an extremely modest forecast compared wth some of the other forecasts that have been made. The CBI put the deficit slightly higher at £1.6 billion; the London Business School forecast a deficit of £2.4 billion; and a number of City institutions, such as James Capel, talk of it being £3 billion or £3.5 billion.

As the Secretary of State said, a deficit is inevitable given the fall in the price of oil, but the trouble is that we do not have the manufacturing capacity to fill the gap arising from the decline in the sale of manufactured goods. The Government must address themselves to this fundamental and long-term problem which will continue into the future. Over the next few months the country may enjoy a short-term consumer boom, but goodness me, the brakes will have to be slammed on hard immediately after the general election, because the confetti money of a consumer boom will do nothing to overcome the problem of the balance of payments to which the right hon. Gentleman referred. Indeed, it will make the problem worse, because 70 per cent. of that consumer expenditure goes into imports.

The Government boost to public expenditure is long overdue. It is remarkable to look at the recent autumn statement, which was a full folder containing a sheaf of press releases. Why was it published when it was? The Chancellor of the Exchequer said that he was following precedent, but he was doing nothing of the sort. If my memory serves me correctly, last year's autumn statement was made on this very day—on the penultimate day of the debate on the Queen's Speech. It was accompanied by the printed tables that are now contained in the autumn statement that was rushed out last Wednesday.

There is only one reason why the autumn statement was published in the form of a sheaf of press releases. It was an attempt to pre-empt the debate on the economy, which had been tabled as a motion for the Thursday of the week before the Queen's Speech, and an attempt to boost the Government's general election image by portraying them as being high spending.

The Government have increased demand in the economy, but, as those balance of payments figures demonstrate, the demand is for microwaves, videos and other consumer goods which are flooding into the United Kingdom and creating jobs in Japan, America and Germany, but not in our manufacturing industry. Unless the Government are prepared to do something to overcome our lack of competitiveness, that tale will continue.

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

Do I take it that the hon. Gentleman is criticising the autumn statement? If so, which lines of expenditure would the alliance parties reduce, if they had the opportunity? In the light of reports his morning, is he still committed to the increase in borrowing of £3.5 billion on top of the present level to which I believe he committed himself at the SDP conference in the autumn?

Mr. Wrigglesworth

Yes, we remain committed to the borrowing levels to which we were committed. Once again, we shall publish our Budget proposals in the run-up to next year's Budget so that hon. Gentlemen can see exactly the figures that we propose. We have done that consistently for the past two or three years and have had no hesitation in doing so—unlike the Labour party.

I shall come to the character of the demand that the Government are increasing in the economy shortly. But, first, the Government's forecast is that next year the level of unit labour costs will increase by only 2.5 per cent.— a decrease from 6 per cent. this year. I do not believe that and I do not think that anyone in industry believes it. How can that happen when pay increases at twice the rate of inflation are being agreed, when there is no sign of them moderating significantly and with all the prospects of greater pressure in the public sector for substantial pay increases? It is impossible for the Government to achieve that sort of target. It is sleight of hand to suggest that our unit labour costs will increase by only 2.5 per cent. in the forthcoming year. Competitiveness will not be improved, so the performance of our industry and commerce will be undermined.

The Government forecast inflation of some 3.75 per cent., but that is not what most commentators are forecasting for the forthcoming year and the year thereafter. That is a good reason why we shall not have the general election in 1988 or in October 1987. All the signs of these deteriorating forces on the economic front will by then be clear to the electorate. The speech by the Secretary of State today and the recent speeches by the Prime Minister and her Ministers show clearly that the Government are cutting and running for an early election before the economic squalls blow extremely hard. That is clear, if one looks at the underlying position of the economy.

We are now the 19th country in the world in terms of GDP per head of the population. We have been overtaken by Italy and we shall be overtaken by Spain in the early 1990s. We are gradually declining compared with other major countries and the events since the 1979 general election have only accelerated that trend. In three years' time we will still have an enormous quantity of unused capacity with more than 3 million people unemployed. Nothing that the Secretary of State has said today gives any reason to doubt that.

Despite the Secretary of State's protestations, the autumn statement shows that the Government are fundamentally anti-industry. Of the £7.5 billion that the Chancellor of the Exchequer showered on the economy, the trade and industry budget showed a paltry £60 million increase which is intended for additional research and development. Obviously, that is welcome, but the new plans for the next three years project a fall in spending of one fifth in real terms, confirming the plans on spending set out in earlier White Papers for a massive turnround in regional expenditure and support for industry generally.

One cannot recognise from the Secretary of State's description of Britain, the Britain of Newcastle, Glasgow, Liverpool, Sheffield or Teesside, where we have 22 per cent. unemployment. According to him, everything in the garden is rosy. There would be a hollow laugh from the people of Teeside if they heard his description of the economy. I see little hope of those people being satisfied in the near future by any substantial and sustained fall in unemployment.

The Government must take much more clear and effective action to revive manufacturing competitiveness. There need not have been any absolute decline in our industrial base as a result of squandering North sea oil revenues, which have almost exactly met the additional cost of unemployment. While some deterioration in manufacturing competitiveness was inevitable because of the consequences on the balance of payments and exchange rate, it need not have been to the extent of the turnround of more than £22.5 billion, which will have taken place in the decade 1978 to 1987, even on the Chancellor's figures for next year's deficit.

The Government could have helped manufacturing industry and the whole business community, if they had followed the advice of the Confederation of British Industry and joined the exchange rate mechanism of the European monetary system. The Chancellor of the Exchequer, the Governor of the Bank of England and the Foreign Secretary are in favour of that, but only one person—the Prime Minister—is opposed to it. For some years the whole of manufacturing industry has been asking for that. Why has industry been asking for it, and why have we been advocating it? It would bring a greater degree of stability to the exchange rate and provide greater certainty for our industries which must sell overseas in difficult competitive circumstances. It would also help to reduce the premium that we must have on our interest rates, which are crippling large sections of manufacturing industry.

Our interest rates are at record levels. They are 4 per cent. above the average level of interest rates in the European Community. We hear a great deal about our difficulty in competing with Japan because of interest rates, but never mind Japan—every British business has an overhead of 4 per cent. on its borrowings in competing in Europe.

It would not necessarily be possible dramatically to reduce interest rates merely by joining the EMS. At times, we would have higher interest rates to protect the pound and we accept that. It is not an easy option, but it would bring about greater stability, not only in the British, but in the world monetary markets.

Dr. Michael Clark (Rochford)

Will the hon. Gentleman estimate what interest rates might be if, God forbid, there were alliance control after the general election and an alliance Government borrowed a further £4 billion? How would that affect interest rates? Would the position be better or worse?

Mr. Wrigglesworth

It is a bit rich for Conservative Members to lecture us on the lack of prudence in our budgeting because the proposals that we have published in our Budget statements in previous years are not much out of line with what the Government are doing now.

This year, the Government have increased public spending by £7.5 billion. For six years, Ministers have been saying that that was not possible and that it would be dreadful to do so because it would lead to an enormous increase in inflation. Now all the targets and indicators on monetary policy have gone out of the window. A reason why many forecasts show that inflation will increase in the coming months and next year is—

Dr. Michael Clark


Mr. Wrigglesworth

If the hon. Gentleman will listen to my response, he will have a reply. Inflation will increase because we have had a 140 per cent. increase in consumer credit in the past year. M3 and M0, the indicators of the money supply, have been racing ahead and that is why the Chancellor has jettisoned them as indicators of monetary policy, and seems also to have jettisoned any hope of keeping control of the money supply or even looking at the monetary indicators, which he should do.

Our proposals are still within the constraints that are necessary to be able to sustain the level of inflation that we have forecast in our published figures. Our public expenditure figures will be published in the run-up to the Budget next year, when we have done our assessment of the economy for 1987 in advance of the Budget, in the same way as the Government.

Dr. Michael Clark

How will it affect interest rates?

Mr. Wrigglesworth

It will not affect interest rags any more than the crowding out of selling British Telecom or British Gas shares, or any of the other means that the Government have used to reduce the requirement to sell gilts. If the hon. Gentleman is suggesting that by increasing public sector borrowing one thereby increases interest rates, where is the evidence of the Government's policy to demonstrate that that has happened? It has not happened. There is no reason why it should happen, provided that one is clear that we are maintaining the targets that we would have to maintain within the EMS and joining the exchange rate mechanism to be able to do so. I see no difficulty on that, and we have published all the figures that follow from the increased borrowing in our Budget statement, published in March this year.

Dr. Michael Clark

The hon. Gentleman has not said that there will be no increase in interest rates, but I think that that is what he is trying to say. He mentioned the £7.5 billion increase in Government spending under this Administration — his figure. Is he saying that, in the event of the alliance having any authority after the next election, it will cut the extra £7.5 billion that the Government have recently brought in and replace it with £5 billion or £4 billion of extra spending, so that in that way, there will be no increase in the interest rate? In other words, will the alliance chop the amount that we are spending to keep interest rates stable?

Mr. Wrigglesworth

No, I was not saying that. We shall carry on, as we have said that we shall, steadily and modestly increasing public expenditure over the lifetime of our Parliament. The Government have said that they want to increase public expenditure by 1.75 per cent. a year. We have said that we shall increase it at a rate of 2 per cent. a year. That means that in the fifth year, public expenditure will be increased by £10 billion. There is no reason why that scale of increase in expenditure should increase interest rates.

As I said earlier — this is the reply to the hon. Member for Rochford (Dr. Clark)—if we join the EMS, over the long term there is no question that although at times it might have to lead to an increase in interest rates, we would be able to reduce the level of interest rates—which is our intention and hope—because we would not have to pay the sort of premium that the Government are paying because they lack the willingness to join the EMS.

Mr. David Penhaligon (Truro)

My hon. Friend and I regularly attend Treasury Question Time, which clearly the occupants of the Government Front Bench do not. Does my hon. Friend agree that the Chancellor no longer argues that he has to maintain the interest rate regime that he is imposing because of the Government's deficit, but simply to defend the international value of the pound? There is little connection within limits, with the Government's debt requirement and the interest rate regime that is being imposed.

Mr. Wrigglesworth

There is no doubt, as I said earlier, that the level of interest rate that industry is having to pay has been related to the market's assessment of the pound and the underlying performance of the British economy. That has led to us paying a 4 per cent. premium—that is, 4 per cent. above the average—on the interest rates of our European competitors. That is the judgment of the market on the weakness of the British economy. If there is any problem on the future of oil prices, there could be a grave problem, not only in this respect, but in others, for the British economy which have not yet surfaced. If the price of oil should either fall or not rise above its present level, there will be enormous pressures on the Government to change their economic stance.

Mr. Kenneth Clarke

The hon. Member for Truro (Mr. Penhaligon) made a point to the hon. Member for Stockton, South (Mr. Wrigglesworth). I have in front of me reports of the Liberal party's annual conference, in which the hon. Gentleman took part, and the policy to which its members committed themselves. It says: The necessary increase in public spending nationally would be £5 billion a year and would need the support of an incomes policy. Will the hon. Gentleman compare that with his statement of a £10 billion increase over five years, which he claims is a carefully considered and costed alliance policy? What is the position? Is none of it affected by the increase in spending announced in the autumn statement which, to my astonishment, the hon. Gentleman seemed to be criticising?

Mr. Wrigglesworth

I am not criticising it. I was pointing out that the autumn statement shows that the Government seem to have learnt some lessons from the alliance, which we welcome. However, we are determined to keep a tight rein on public expenditure proposals that emanate from the alliance, which is why we are scrutinising all the proposals that alliance spokesmen and others are proposing to ensure that they are kept within reasonable constraints.

Unlike either the Conservative party in opposition or the Labour party in opposition, we have had the honesty to produce not only all the public expenditure figures but all the figures on exchange rates, interest rates and all the other consequences of pursuing the policies that we think should be pursued. That led The Daily Telegraph among other papers to congratulate the alliance on producing "model Opposition economic statements". The right hon. and learned Gentleman cannot criticise us for trying to cover up the public expenditure proposals or the consequences of our proposals.

The Government's approach to industry has been undermined by their unwillingness to declare a clear strategy for the manufacturing sector. We should like to see much more going into research and development and science budgets. I am pleased that the Secretary of State has been able to increase that this year. This is the seed corn for the future.

A great deal more needs to be done by Government, working in partnership with industry. The Government should not tell industry what to do, nor should they draw back and say that industry and business must get on and do their own thing and that Government have no role. The reality is that Governments must, and do, have a role in all our competitor countries. The phrase that we use to describe what we believe should be the right approach to business and industry is that the Government must work with the grain of the market. They must make up market deficiencies. The Government should do that by seeking to assist industry, but they should not tell industry what it should be doing. There are various ways in which one can do that, and I do not have time to go into all of them, but that is the approach that the Department of Trade and Industry should adopt towards industry to ensure that we overcome our lack of competitiveness and the great gaps in our manufacturing sector.

The Government should be developing a comprehensive system of education and training that brings together all the services in existence. When the Government came into office they were violently antagonistic towards the training boards and decided that they would abolish them. They were the awful quangos that at that time were very much out of fashion on the Government Benches, although they are not so much out of fashion now. New ones have been set up on Teesside. Quangos are not so unpopular now as they used to be. The Government set out to abolish the industrial training boards, but those that are left are doing a very good job.

The Manpower Services Commission, the technical colleges and various other bodies are involved in training and education. Their work needs to be dovetailed to provide a modular system of training so that gradually qualifications and certificates of qualification can be obtained which will be of value to people in their future careers. A youth training scheme that stands alone, with no qualification at the end of it, is no use. Young people need to take with them something which they can use as an aid to gaining further qualifications. The Government intend to move in this direction. I urge them to move rapidly in that direction so that at the end of two years young people will be provided with a certificate that will be of value to them throughout their working lives.

Mr. Holt

Does the hon. Gentleman agree that we should start the process in the schools and not wait until young people enter training at 16? Does he agree that qualifications should be borne in mind before children leave school?

Mr. Wrigglesworth

I agree with the hon. Gentleman that work done in schools must be relevant to the needs of industry.

Mr. Holt


Mr. Wrigglesworth

We must ensure that a comprehensive system of training and education is built up that can be used on a modular basis, so that even those who are aged 30 or 40 can obtain modules or credits and build up qualifications should they want to change course and branch out in a new direction. That is vital to the longterm interests of British industry. The only way in which we can succeed against the competition from Japan, Hong, Kong, Taiwan, the United States, Germany and France is to build up high-level skills and qualifications and to increase industrial productivity.

Mr. Holt

Will the hon. Gentleman give way?

Mr. Wrigglesworth

No, I have already given way on many occasions.

We agreed with the proposal to change the basis upon which regional aid is calculated, but the amount spent on the regions has been cut by half. The Government are planning further real cuts of the same magnitude by the end of the decade. When unemployment is at record levels on Teesside, Tyneside and in Scotland and Wales, the last thing that the Government should be doing is cutting regional aid. The Government must provide more regional aid.

Apart from handouts from Whitehall and Westminster, enterprise could be encouraged in the regions by devolving all the work that is involved in developing economic and industrial activity. A powerful case can be made for establishing development agencies, similar to the Scottish Development Agency and the Highlands and Islands Development Board, in the north-east, the north-west, the midlands and the south-west. The regions understand their own problems and opportunities. Devolution to the people there would benefit the regions. Regional development agencies would do a far more effective job.

Industry has been for far too long the political football of the Conservative party and the Labour party. Unless we are able to remove industry from the grip of this outdated, ideological battle which has taken place for far too long over the body of British industry, we shall never be able to provide an environment in which industry and business can thrive. Major areas of British industry — for example, steel, telecommunications and gas—have been the subject of party political debate for far too long. They are not the subject of party political debate in other countries. If such worthless and irrelevant dogma is injected into the debate about our industrial future, industry will never thrive as it should.

The key to breaking the grip of these two old ideological dinosaurs who are fighting over the body of British industry is the introduction of proportional representation. Too many right hon. and hon. Members are willing to try to reform other institutions, but they are never willing to try to reform or to improve the way in which government works. Fundamental reform of this House of Commons is needed. Fundamental reform of the way in which government operates is also needed to make it more representative of the majority of industrialists and business people who have no time for the nonsense of party politics and for the grip that it has held for too long on industrial policy. The sooner radical change in the form of government takes place and the sooner politics is taken off the back of business, the sooner business will be able to thrive.

Several hon. Members


Mr. Deputy Speaker (Mr. Harold Walker)

Order. I remind the House that Mr. Speaker has asked for brief speeches.

6.7 pm

Mr. Michael Heseltine (Henley)

I am glad that the right hon. and learned Member for Monklands, East (Mr. Smith) is back in his place. Those of us who have studied industrial policy for some time were amused by his reference to the need for reappraisal of the airbus. I remember all too well that during the 1960s the then Labour Government pulled out of Airbus. In order to protect its long-term technological base, Hawker Siddeley decided to invest private sector money in the project in order to keep Britain within the European consortium. However, Hawker Siddeley was nationalised for its pains by a subsequent Labour Government. That is an excellent example of the industrial and economic problems that have beset British industry.

It is all very well for the Social Democratic party to refer naively to removing the industrial debate from the political spectrum. However, that is at the heart of our concepts of ownership, the private sector and the great divisions between the Socialist influence and the capitalist influence. It is naive to believe that there is any way in which these issues can be removed from public debate. The hon. Member for Stockton, South (Mr. Wrigglesworth) would have a great deal more credibility, as would his party, had we seen a little more of the steel to which he now refers when he was a member of a Government who were happy to nationalise industry and to inject all these uncertainties.

Perhaps the most significant thing that happened last week was the overwhelming call by the Confederation of British Industry for the Government to adopt an industrial strategy. That our largest companies should have committed themselves to what only five years ago would have seemed an attitude of inconceivable intervention says something about the attitude of British industry to the position it now faces and to its realisation of the threat that is before it and against which it does not perceive that it can win, except in the concept of partnership with Government. It is fundamentally important that the leaders of British industry should have set a pace which demands a reappraisal of the view of Government towards their relationship with industry.

We have all indulged — I as much as anyone — in party trading of statistics to suit the side of the House on which we sit. But the decline of Britain's industrial base is not measured in the lifetime of this Government or of the previous one. Britain's industrial base has been declining relatively for most of this century. If one considers the statistics that matter — the share of the world's manufactured trade which Britain enjoys — they show that relentlessly, regardless of which Government are in power and regardless of policies and economic regimes, there has been a persistent decline in our share of world trade in manufactures.

I agree with many of the points made by my right hon. Friend the Secretary of State for Trade and Industry. The Government can claim great credit for the significant improvements in the effectiveness of our capitalist economy. The privatisation programme has moved an entire sector of the industrial economy back into the trading market place, where it can seek to secure for the nation new opportunities in a more competitive environment. The competitiveness and productivity gains were essential. They were forced upon us and the Government earn great credit for the courage with which they have stood up to the pressures and allowed the market place to impose disciplines upon us which we had long since avoided.

I have no doubt that the incentives which have been introduced for the starting up of small businesses are one of the most significant long-term innovations for which the Government's industrial strategy is responsible. Would that, as a nation, 20 or 30 years ago, when world trade was expanding and when the economies of the West were job-hungry, we had applied the same initiatives and energy to stimulating small industrial start-ups, and diversified our economy from industries which we protected and cosseted and sought to ensure did not face the increasing world problems.

Low inflation is a hard-won prize. Who can doubt the agony of the Chancellor of the Exchequer as he sees all the sacrifices which the Government have imposed upon the economy to bring down inflation now being frittered away because the private sector is indulging in the traditional British disease of paying ourselves what we cannot afford? Pay settlements of 8 or 9 per cent. when inflation is running at 3 per cent. bear no relationship to the competitive thrust that the competition of tomorrow will impose upon us. The Government are entitled to explain to the nation vigorously that it is not their example but that of the private sector that is leading tomorrow's inflationary spiral.

Who can seriously doubt, especially the Labour party which first began to raise the need to bring unions within the law of the land, that the Government's courage in doing that has been a watershed in industrial relations?

Mr. Prescott


Mr. Heseltine

The hon. Gentleman says, "Nonsense," but he will remember that it was the document "In Place of Strife" that first published a Government view that the unions had to be brought within the climate to which the entire trading economy must be adapted.

All those advances have revealed to me just how much further there is to go. Our competitors have not stood still while we have been making those advances. There is no realistic escape from the anxiety depicted by the Chancellor's recent forecast for the balance of trade next year. That, coupled with the fact that, for the fourth year in a row, real-term interest rates are at a record level, is the test of the judgment of the international money markets about the prospects of the British economy. One cannot escape from that. If we need to pay those rates of interest, someone is making a judgment about how we perform. That means that we must perform better and go further in the directions in which we have marched, and not go more slowly and backwards.

I shall say something about some—not all and not even in order of priority—of the uncomfortable issues which must still be confronted. The process of reinvigorating and pushing forward our industrial excellence must start with Government. A far more significant role must be given to the Department of Trade and Industry. As someone who has served with great pride in two recent Conservative Administrations, I know beyond peradventure that the all-pervading influence in society which dominates public expenditure and political priorities is the ethos of the Treasury. In industrial terms, and oversimplifying the position, it is the ethos that would arise if the financial directors of an industrial company were put in charge. The books would be properly kept, but that is not a formula for flourishing enterprise.

The Department of Trade and Industry should not he armed with powers to compel, direct or take over those who disagree with it. No capitalist economy operates in that way. Other capitalist economies ensure that owner, banker, manager and worker operate in a common endeavour to make their companies excellent and their products competitive. There is an attitude of partnership within companies, but there is also an attitude of partnership between Government and the companies. There is no absolute way in which those objectives are achieved. No formula can be taken from one or other of our capitalist competitors. There is no precise measurement or common model, but there is a common theme which depends upon an instinct of national interest. In the creation of wealth, manufacturing interest requires medium to long-term stability, not short-term financial gains.

The need to expose industry to the rigours of the market cannot be in question among Conservative Members. Japan, Germany and America are capitalist and competitive, but their capitalism exposes their companies to competition while at the same time using the resources and the influence of Government to enhance the market places to which those capitalist companies have access. Those Governments do not try to do the job of industrialists, nor do they pretend for one moment that industrialists can do their job without the help of Government. In Britain, we have failed, uniquely, to achieve an ethos where wealth creation through industry was a political priority, driving, not subsequent upon, other priorities. No capitalist economy can flourish unless the share owners, the managers and the workers in a company recognise a common purpose over the longer term in the company of which they are all partners.

As long as the Treasury dominates the Government's relationship with the owners, the bankers and the institutions of the City of London on the one hand, and the Department of Trade and Industry conducts a separate disalogue with managers on the other, the single-mindedness that is achieved by other capitalist economies will be missing. The failure of communication is not simply that between owner and manager. The standard of communication within British companies between managers and workers is simply not up to that of our international competitors. We waste significant parts of our most precious national resource — our skilled workers—because they do not feel sufficiently involved in the long-term success of the companies for which they work. For as long as I can remember, the CBI has urged its members to improve the standard of communication between the managers and the workpeople. Our best companies are the equal of any in the world, but the standards of the average are inadequate and those of the worst are abysmal.

I could not be more supportive of the procedures whereby we have brought the unions within the law of the land. It was an essential first step, but it was a negative step. It created an opportunity and I wish that the Government, in the Queen's Speech, had proposed a legally backed code of conduct and practice for the proper dialogue between managers and work people.

In any dialogue between the Government and industry, we must come to grips— everybody has said it for as long as I can remember—with the separate cultures of the public and the private sectors. The training of civil servants and the interchange between the complementary public and private sectors is, frankly, woefully inadequate. We cannot leave the career management of civil servants as offshore islands of the Treasury and the Cabinet Office. That is one of the most vital parts of stimulating the relationship between the public and private sectors. All the language that has gone on since Fulton is as though it had never been, because the culture separation today is as profound as it has been throughout the whole of that time. Until it changes, there will not be that sense of urgency within the public sector upon which the private sector depends.

My next priority has to be the educational system. It is an extraordinary and indefensible phenomenon that 3.25 million people in our society are out of work, yet in industry there are jobs galore for people who do not have the skills to fill the jobs. It is no good the shadow spokesman telling us that that is something to do with the Government. Most of the people who lack the skills and training went through the educational system when the previous Government were in power. It simply debases the currency and urgency of the situation to try to pretend that that is something—

Mr. Prescott


Mr. Heseltine

Forgive me. The hon. Member for Stockton, South (Mr. Wrigglesworth) kept the House for half an hour and I do not want to copy that example. The hon. Member for Kingston upon Hull, East (Mr. Prescott) will have one of the great privileges of half an hour of his own in which, if he wishes, to harangue the House at the end of the debate. I am sure that he will do it with his customary energy and, no doubt, his customary lack of intellectual commitment.

The essence of the dilemma about the quality of our educational system is precisely the dilemma that my right hon. Friend the Secretary of State for Education and Science faces today. Where are the Opposition coming from? They talk about the need for an industrial strategy and training the youth and then undermine all the Government's arguments when they are trying to obtain an educational system that depends upon quality as opposed to the cash input. If ever there was an argument and an example of how throwing money at a public problem does not solve it, it is in the proposal to just spew large sums of additional cash over the educational system.

We must be sure that authority is delegated to the headmasters and the headmistresses. We must make schools publish their standards and monitor those standards and push accountability back to local communities, including industrial communities. In other words, we must insist upon the educational system delivering the skills that industry needs, for which the jobs of tomorrow will be available.

Mr. J. F. Pawsey (Rugby and Kenilworth)

Before my right hon. Friend leaves that point, will he say a word about the comments of our right hon. Friend the Secretary of State for Education and Science on city technology colleges and the importance of bringing education into line with industry? Does he agree that the 20 CTCs that will be established are a positive step forward?

Mr. Heseltine

I wholly support the CTCs. They are exactly rightly targeted and, if I may take a historic view, they will do something to undo the damage of the social engineering that took the grammar schools out of the city centres. [Interruption.] Not content to harangue us for half an hour at half past 9, the hon. Member for Kingston upon Hull, East is now haranguing us from a sedentary position. If I explain my reluctance to give way to the hon. Gentleman it is because in the end I am a democrat and there are no Labour party supporters here but there are a large number of Conservatives. So much for the bleeding hearts that are so concerned about our unemployment. Where are they?

When I listen to the Social Democrats—did I say Social Democrats? I withdraw the inaccuracy: Social Democrat, alone upon the Benches, supported by one member of the Liberal party—I know that the reality of the care and concern of the parties in opposition is to be seen, not in the devastation of British industry, about which they talk, but in the devastation of British democracy.

If my party can conduct the debate in which we alone are apparently interested today, I wish to go on to the next subject which I believe needs a new thrust and initiative — the research and development programmes of the Government. Those programmes are scattered around Government Departments with no common set of disciplines or scrutiny. The Department of Trade and Industry—I believed this when I was Secretary of State for Defence—should be given a co-ordinating role to be sure that our scientific, technical and engineering resources in the public sector are not dissipated where there is no economic or industrial payback.

It is of the highest priority where we have such limited resources, increasing though they may be, that there should be budgets and time scales and payback in order to be sure that the wealth-creating process is given the priority upon which we depend.

We must also appraise the influences behind the disposition of the nation's savings. I want to mention just three, and I realise the political sensitivity of just one of them —mortgage tax relief, the tax-free income that is given to the pension funds and the privileges available to publicly quoted companies to buy up provincial businesses within a deferred tax regime.

I do not believe that it would be right or fair to withdraw mortgage tax relief from those who currently enjoy it and there is a considerable argument for maintaining it, particularly for first-time buyers. But in the priorities of tomorrow, as we look ahead, I wonder whether there is a better use of public money in the industrial challenge that we face and whether we would not be right over a period to phase out that form of subsidy in order to have released to us the opportunities and the resources to deal with the wealth-creating imperatives that we confront.

The fact is that our society does not operate within one free market economy. There are huge subsidies at work. The best part of £10 billion a year—one form of hidden subsidy after another presided over by the Treasury under all Governments—is redistributed in the way that I have outlined.

That has the consequence of drawing the nation's savings south and of concentrating the investment of much of those savings in non-wealth-creating activities. The centralisation of power that is a consequence of such a process is debilitating to the strength of industrial, and therefore, of provincial Britain.

We have—all Governments have—tried to counter those trends. We spent £600 million on regional policy. We spent £600 million on urban policy. But those subsidies are not commensurate to the scale of the subsidies which the Treasury provides, which have a countervailing effect.

Finally, I want to address before the House the scale of the industrial challenge that we in Britain will face tomorrow. High technology industries in the United States of America enjoy virtually total protection. They are supported at the frontiers of their capability by American taxpayers. The space, defence and strategic defence initiative programmes push America's capital excellence to the frontiers of human capability and skill and they are on a scale that Britain can never begin to contemplate equalling or matching.

Behind the rigorously applied protection on which Congress insists, those companies are in a position then to move into the market places of the world and to compete, not just in military terms, but with all the civil adaptations which that initial taxpayer funding created.

The Japanese economy is arguably even more protected than the American economy and it is much more heavily concentrated in the civil field. A study of how Japanese industrial excellence has penetrated American markets shows that it is, if anything, a bigger threat to the market places upon which our society depends.

The sums of money provided by the taxpayers of those two countries push their industrial excellence to the uttermost extreme, which presents a daunting threat to the peoples of western Europe. We can only address those imbalances if Europe co-ordinates itself into a single market, with a single law and a single competitive base, and if we pool the scarce research resources that are available to us. I welcome the almost visionary plan that Lord Cockfield has masterminded. The need to implement that plan by 1992 must be at the forefront of our industrial strategy, and I welcome the commitment of my right hon. Friend the Secretary of State to it.

In no way do I suggest that my list of priorities is exhaustive. Many more priorities could be added in our determination to provide a wealth-creating industrial ethos in this country. But I believe that that list addresses some of the central and long-standing difficulties that have beset our economy for decades, and not just during the lifetime of one Government or regime. The assumption that manufacturing industry faces a bleak futute or that tomorrow will be dominated by service employment is too simple. Someone will produce the things that we need. The danger is that it will be someone else.

Several Hon. Members


Mr. Deputy Speaker

Order. I remind the House that overlong speeches are made only at the expense of the rights of other hon. Members.

6.33 pm
Mr. Ron Leighton (Newham, North-East)

The House always pays great attention to the speeches of the right hon. Member for Henley (Mr. Heseltine), and did so again tonight. He may have made one or two partisan points, but perhaps that was done to ingratiate himself once again with his party. However, I hope to touch on some of his remarks.

The hallmark of this Government, their chief product, and the memorial that they will leave behind as their legacy to the next, and for which they will be mainly remembered, is the relentless growth of mass unemployment. That is their main achievement and the main consequence of the Thatcher years. They will go down in history as the Government who crippled British manufacturing industry and brought chronic mass unemployment, quite unnecessarily, back to this country, with all the waste, inequality, misery and hardship that that means. It is an appalling record of hopeless mismanagement and a crime against this country.

In 1979, when unemployment was one third of its present level and had been steadily falling for two years, the Conservatives said that Labour was not working. Their election manifesto of that year promised more genuine new jobs, and the first Queen's Speech in 1979 did the same. That was the promise. Were ever a Government more mendacious? Was ever a prospectus more fraudulent? Has ever a failure been more utter and complete? Millions of our people have paid with their jobs for that failure. British manufacturing output is less now than it was seven years ago, in 1979, while every other industrialised country has raced ahead.

Manufacturing investment is still 17 per cent. less than in 1979, and our manufacturing trade balance has moved from a surplus of £2.7 billion in 1979 to a deficit now of more than £7 billion. Instead of a leaner, fitter economy, we have been left with an emaciated skeleton. Vast areas of industrial Britain have been laid waste. It is the worst disaster that Britain has suffered in peacetime, and it is continually getting worse. There is no end to this carnage. Every day brings worse news. Thousands of manufacturing jobs are being added to the dole queues every month.

At one time we were told by the Government's economic witch doctors that the way to end unemployment was to reduce inflation, that reducing inflation would be painful in the short term, but that it would provide the solution. We do not hear that now. Short-term pain has led only to long-term pain. Now that inflation is down, unemployment is at an all-time high—worse and longer lasting than in the 1930s. Even the fall in inflation owes little to Government policy. It is due to the fall in world commodity prices. Inflation has fallen everywhere, and much further in the other industrialised countries. Our inflation is still points ahead of theirs, with the loss of competitiveness that that means.

Faced with this appalling record, and knowing that they must soon meet their maker at an election, the Government twist and wriggle. They fiddle the figures. They alter the way that statistics are compiled, massaging the figures downwards each time. That has been done 18 times since the Conservatives came to power. Perhaps it is legitimate to make some adjustments in the way that the figures are collected, but not every month, because they then lack all credibility or honesty, and make it impossible to obtain a clear picture of trends.

Perhaps the Government think that if they keep on redefining the jobless they will redefine them out of existence by the next election. Certainly one group that will not lose their jobs are the statisticians, who constantly revise the figures downwards so that we are no longer comparing like with like. Another growth area involves the 1,500 extra staff taken on to put the unemployed through an inquisition by demanding to know whether, within 24 hours, they will get on their bikes, leave their home towns and accept poverty wages elsewhere. That is something of which the Paymaster General should be ashamed. Employment Ministers should be the champions of the unemployed, and their voice in Government. Instead, they are harassing, persecuting and hounding the unemployed. Hit squads of bounty hunters are being sent round the country to shake people off the register.

It is not the availability of the jobless for work that is the problem, but the availability of work for the jobless. The Government's view is that if the dole queues cannot be reduced by providing work, they will reduce them by fiddling the figures, and by intimidating and frightening people away from applying for benefit. To suggest that we have unemployment because the workshy will not walk round the corner to available work is to insult those whom the Government have injured.

In my constituency, 3,342 people have been interviewed by Restart but only 24 have been placed in jobs. That is a fraction of 1 per cent. The Government's approach to unemployment is one of conjuring tricks, mirrors and sleight of hand to give the illusion that unemployment is falling. Apart from those bullied off the register, the other factors at present are the expansion of the community programme and the second year of YTS. As a result of them, the headline totals will be reduced. The only "jobs" being created at the moment, are part-time, low-paid jobs that do not offer employment protection, holiday pay, sick pay or pension rights, and that are mainly taken by women.

Simultaneously, thousands of full-time jobs are still being destroyed month in, month out. Moreover, as many of those "jobs" are only for a few hours a week, sometimes in the evening, they are often second jobs, which results in double counting. The 1984 labour force survey revealed that 450,000 people had second jobs, and that 250,000 people were self-employed in second jobs. the survey showed that that practice was growing.

The Government's wriggling reaches an extreme when, after all their failures, they try to take the subject off the agenda altogether. At the time of Beveridge, the then Government said that they accepted responsibility for the maintenance of a high and stable level of employment. That was the contract between Government and people in the post-war settlement. This Government have now reneged and given up on that. They say that it has nothing to do with them, that they are only the Government. They say that Governments have little influence and that everything is beyond their control, so we should not blame them. Of course, they did not say that at election time, but that is what they are saying now. Like Pontius Pilate they have washed their hands of the matter.

That retreat is a terrible abdication. It is treason for democratic politicians. They say that Governments do not create jobs; customers do. But who is the customer for roads, drainage, or hospitals and the equipment that goes into them, or for schools and the furniture and books that go into them? It is the community collectively, with the Government as their agent. As the Government rein back public expenditure on those vital services, at the diktat of a bizarre monetarist dogma, they not only impoverish our society but cause unemployment. Spending is spending. It is grotesque nonsense to pretend that private spending is always meritorious and virtuous whilst public spending is not. Often, particularly when those essential services are provided publicly, the reverse is true.

Here we can put our finger on one of the main ways in which the Government are causing unemployment. As all advanced industrialised countries become richer — this was the point made by the Secretary of State—the number of those employed in manufacturing gently floats downwards, while the number of those employed in the services, such as health, education and personal social services gently floats upwards. One process complements and compensates for the other, maintaining an equilibrium of stable employment. That is what happened in Britain in the decade before 1979.

From 1966 to 1974 employment in manufacturing decreased by 8 per cent., while it increased in personal services by 25 per cent. From 1974 to 1979 employment in manufacturing decreased by 8 per cent. while it increased by exactly 8 per cent. in personal services, but from 1979 to 1985 employment in manufacturing collapsed by 25 per cent. whereas in personal services it increased by only 1 per cent. Since 1979 there has been a violent collapse of employment in manufacturing with no adequate compensatory increase in services. We elect, rightly in my view, to provide these services publicly, and this makes them vulnerable to Government cuts. The Government have caused unemployment by engineering the collapse of British industry and by reining back expenditure on, and therefore employment in, our public services.

The National Health Service is a good example. The Office of Health Economics sent us a booklet recently that gives us the facts. It tells us that in 1960 Britain was one of the nine largest spenders on health care, but we are now the smallest spender among the western developed countries in terms of percentage and of national wealth. The OHE tells us that over the past six years relative spending in the United Kingdom has fallen behind the OECD as well as the European average by as much as 25 per cent. annually. Countries such as the United States of America, Sweden, West Germany, the Netherlands and France all spend very much more than we do in absolute terms and as a percentage of gross domestic product.

Further evidence comes from Eurostat, which is the statistical office of the EEC. It gives figures for what it terms social protection, which is social security, health provision, housing and social services. As a percentage of GDP, Britain is at the very bottom of the EEC league table. This means that the Government have unnaturally and perversely reduced the growth in employment that we would have had in these services. Their main effort now is the privatisation of auxiliary services, and this merely leads to fewer people being employed and dirty hospitals. This hostile and wrong-headed approach to our great public services deprives our people of the standards that they desire and is one of the causes of unemployment.

My second point is directed to a subject to which the right hon. Member for Henley addressed himself. The other main area in which the Government's delinquency is causing unemployment is British industry. The Government adopt the same philosophy and accept no responsibility. They say that it is nothing to do with them and that everything is to be left to market forces. If large swathes of British industry disappear, they show no concern. Yet that lack of concern and inaction is responsible for the growth of unemployment. As the Government stood back, doubtless muttering monetarist catchphrases, 1.7 million jobs were lost in manufacturing between June 1979 and June 1983. A quarter of British manufacturing industry was destroyed in three years. That appalling fact alone would justify driving the Government from office.

The collapse of manufacturing pushes the rest of the economy into decline. If fewer goods are made, less transport is needed to move them and less steel is needed, and so the list continues. As the Government stood back complacently, the healthy surplus in trade in manufactures which they inherited was transformed into a frightening deficit, for the first time since the days of the Tudors. Only the foreign exchange that is earned by North sea oil temporarily disguises the disaster.

I agree with the right hon. Member for Henley that unemployment cannot be tackled without an industrial policy, which is what the country is crying out for. The Government's blindness and ideological obstinacy is suicidal for Britain. Perhaps there are historical reasons for these attitudes. Perhaps business and politics have been kept at arm's length because the first industrial revolution that happened in Britain took place spontaneously, as it were, and was independent of Government support. At that time Governments were probably largely unaware of the changes that were taking place. Perhaps the tradition of non-intervention stems from that period.

That is in sharp contrast to our industrial competitors such as Germany and France and, even more so now, Japan. In these countries, which were often seeking consciously to emulate Britain's industrialisation, there was Government involvement and initiative from the beginning. We might recall that Bismarck's Prussian railway system was publicly owned from the start. It used German-made rails and rolling stock that were ordered from the developing iron and steel industries of the Ruhr. A comprehensive system of vocational training was introduced and the banking system was developed to provide long-term finance to domestic industry.

This has all been brought to a fine art in Japan, where there is no nonsense of a hands-off attitude. The MITI, the Ministry for International Trade and Industry, directs and guides industrial development and the assault on world markets like a military operation. When Japan decided to create a motor car industry, it produced 2 million cars in the first year. What is happening to the British motor industry by contrast? It was once a major world supplier, but we now buy over 60 per cent. of the motor cars for our domestic market from abroad. If we cannot make motor cars, what are we to make and how are we to earn our living? Hundreds of thousands of jobs have been lost in the motor industry, and many more have been lost because of the knock-on effects in the steel industry, in tyre producing plants and in the industry that produces and supplies spare parts.

Mr. Andrew Rowe (Mid-Kent)

Is it not a strange fact that fits ill with the hon. Gentleman's argument that Jaguar, now that it is a private company, is creating jobs, and that the motor car industry, which has been in public ownership for a long time and throughout the whole of the decline in employment, is struggling to emulate Jaguar's example?

Mr. Leighton

I welcome Jaguar's success, but I think that the hon. Gentleman will find that the progress of Jaguar was dependent upon the injection of public money in the past. Jaguar was the successful part of Leyland and it was privatised.

Do the Government care about what is happening to the motor car industry? Do they have a view? Do they accept any responsibility for whether we have a motor car industry? Are they willing to see it go the way of the motor cycle industry, the typewritter industry and others, and disappear altogether? Do they not realise that that attitude is the mother and father of unemployment?

I demand a Government who will take responsibility. Our domestic producer, Austin-Rover, has under 20 per cent. of our own market, and recently the Government tried to sell it off to the Americans. Can anyone imagine the American Government, or people allowing their motor car industry to fall into foreign and possibly hostile hands? No other country in the world would take that view. We must have a Government who take responsibility on behalf of the whole people, in the national interest, for employment and industry.

There is a great divide between the modern Conservative and Labour parties. The Conservative party believes that unemployment is a force of nature like the weather, or the plagues of the middle ages, which Governments cannot and should not try to do anything about, but we are in politics because we believe that these forces must be brought under democratic control and subordinated to the needs of flesh and blood. That is the main purpose of democratic politics in modern times. I remind the House that the plagues were brought under control by collective effort. Likewise, it is possible to end the waste of lives and resources and bring an end to the social divisions that are caused by the plague of mass unemployment. All that would be possible if we willed it and showed the necessary imagination, intelligence and determination.

This will be done when we have a Government who shoulder the responsibility gladly and make it their chief aim of policy, and subordinate all else to that end. It will be done by a Government who mobilise the energy of the people behind a proper industrial strategy which achieves the necessary investment and research and development and initiate a thorough-going training programme. We must have a Government who will create the wealth to fund the expansion of our great public services so that we can be proud, and not ashamed, of our schools, hospitals and social services, and the employment that they will create. Of course this can be done, and we should make a start now. We must lift the curse of unemployment from our people. If this Government, who now have the support of only a third of the electorate, are not willing to do that, they should make way for those who are.

6.48 pm
Mr. Esmond Bulmer (Wyre Forest)

I believe that the Queen's Speech will be welcomed by industry because it is consistent and short of measures that it will have to assimilate. I believe also that industry welcomes the progress that has been made since 1979. Unlike the right hon. and learned Member for Monklands, East (Mr. Smith), it has not forgotten the winter of discontent. It has taken great satisfaction in the Government's success in controlling inflation and introducing a framework of industrial relations law that has done much to improve our competitiveness.

If we are to be really competitive, we must abandon the annual fix, the wage round. If the Labour party were to bring itself to think more in terms of profit share and merit increases, and if it were really serious about creating new jobs, it would join us in going down that road.

I believe that industry welcomes the Government's promotion of free trade and the success of the last GATT round. My right hon. Friend needs to be rather more robust in his approach to the Japanese. The position about whisky is a crying scandal and the Government are under no illusions about how industry feels about the need to join the European monetary system.

Industry welcomes the promotion of a free market, the abolition of pay, dividend and exchange controls, the privatisation programme, and the moves to wider share ownership. This evening, I should like to explore the limits that the Government are prepared to put on the operation of market forces. Marx described the drive to monopoly as the Achilles' heel of capitalism and we have seen a huge growth in takeovers. In 1983 they were worth £2.3 billion, in 1985 the figure was £7 billion and for the first six months of 1986 it is £8.4 billion. It is hardly healthy to see many large companies preferring to trade in other companies rather than developing their research programmes and producing new products.

Those takeovers that produce the quickest returns are in the same product area, confer price leadership and lead to a rapid reduction in excess capacity. Some of these takeovers may fall foul of the Monopolies and Mergers Commission, but the majority will not because they are carried through for diversification. Usually, they involve a degree of asset stripping and sometimes they are an ego trip for individuals. Of course, some are desirable because they are sleeping giants which need to be stirred, but the analysis carried out by Professor Franks at the London Business School of nearly 3,000 companies involved in takeovers over 30 years, showed that, measured as a combination of share price movement and dividend payments, the return was lower than before.

That is one of the criticisms that can be levelled, but another is what the fear of a takeover does to the management of companies, the extent to which it leads managements to cut research and development because they fear that if they make a sizeable investment the costs incurred will cause their profits to dip and that is when the bid will come in. That short-term problem must be addressed. The position will be made worse by the changes now occurring in the City of London. Clearly, many American hankers have creative ideas about how to break up a number of large companies and of course, the fees are enormous. Argyll had to pay £30 million for its effort to take over Distillers. If a large American tobacco company had wished to take over Distillers, could the Government, in the light of their experience with British Leyland, have stood hack?

I wonder how far my right hon. Friend has thought about what he will do if in the coming months a series of British household names come under attack as a result of the massive new sums of money that will now flow into the City of London. We have some sort of failsafe mechanism for dealing with works of art, but as far as I can see we have no such mechanism for our major companies. It is hard to believe that either the French or the Japanese would allow a significant company to pass into foreign ownership. Another fear is that takeovers are often unhealthy in that they are too highly geared. The fear of the junk bond syndrome is real and it was the reason for my right hon. Friend referring the bid by John Elliott for Allied to the Monopolies and Mergers Commission.

I have another fear about the mismatch between the power of the manufacturer and the retailer. Under British law, two manufacturers seen talking together and with 3 per cent. of the market could find themselves in real trouble, even though the retailer has 30 per cent. of the market. The concentration of buying power is forcing out many medium-sized companies and if my right hon. Friend examines the figures he will see that such companies are disappearing at an alarming rate.

The remedies do not all lie with Government. As David Walker of the Bank of England reminded the CBI conference, who is it that puts pressure on pension funds to perform? Often it is the company which complains that its future is in the hands of 25-year-old fund managers. Clearly, there is a need for companies to talk more often and more freely to their institutional shareholders and to establish that most elusive of goals, the sustainable growth rate. In Japan, lower returns are accepted because the Japanese put growth first and those low returns are accepted because there is no capital gains tax and the return comes in that way. I hope that my right hon. Friend the Chancellor of the Exchequer will consider that argument.

The Government have accepted the need to look at these problems again and are engaged in a review of competition strategy. They will need to define the market, and I hope that they will accept the concept of regional monopoly. That is especially important when one considers the role of television, because television companies have monopolies. If a manufacturer wishes to produce a new product and sell it through two retailers with 30, 40 or 50 per cent. of the market and those retailers will not give clearance for such a new product, the product cannot be launched.

On another level, some large companies might wish to compete on a continental or even a global basis and there are strong arguments for allowing them to grow to the point where they can compete in world markets. I think there is sympathy in Whitehall for this, but Brussels must not be forgotten and increasingly, competition strategy may be orchestrated from there.

Large businesses can pose a substantial threat to small businesses. That has long been recognised in the United States where there is a system of law designed to prevent powerful business combinations from driving out of business the small dealers and worthy men whose lives have been spent therein". That was how the Surpreme Court put it.

I hope that, in his review of competition strategy, my right hon. Friend will consider some of the arguments put to him, especially those advanced by Dr. Anderman, a professor of law, who is an expert in American anti-trust legislation. His advice is that British competition policy should be reformed to include explicit support for small business. There should be more opportunities for individual firms affected by infringements of competition laws to take the initiative to enforce such laws by private actions, and the rules of competition should be more clearly defined.

The Government will be wary of too close definition, which may prejudice the pragmatic approach. Having accepted that there is a case to be answered, let us hope that a way can be found through a difficult series of judgments that will facilitate the growth of companies that can play a global role, especially in the fast-growing market in the Pacific; that will provide companies with clearer guidelines on what will and what will not be permissible; that will define product and market areas more clearly; that will offer greater protection for small businesses from the abuse of power by larger companies; and that will recognise that market forces that are allowed to operate in a way that puts the short term above the long term can be deeply destructive of our best interests. If my right hon. Friend can find his way through this minefield, he will deserve the thanks of us all.

6.58 pm
Mr. Ken Eastham (Manchester, Blackley)

I found the speech by the hon. Member for Wyre Forest (Mr. Bulmer) extremely interesting and a little stimulating. He seemed to be expressing a panic felt in business circles because of firms being taken over. That is the sort of thing from which Opposition Members have suffered for several years, because we have seen many takeovers which resulted in people in industry losing their jobs. Now we are seeing a new dimension, because foreign money is coming into Britain and a new group of people are in panic in case they are displaced from their jobs in big business and management. I hope that hon. Members will take seriously the speeches made in the debate and some of the speeches that we make from time to time in which we make passionate appeals for consideration by the Government.

I was employed in manufacturing. Few hon. Members come from manufacturing industries. By and large, we have solicitors, barristers, accountants, writers and journalists, but hon. Members who have worked in manufacturing are thin on the ground. One of my hon. Friends, who is the oldest Member in the House, often said to me that most hon. Members have never made a mousetrap in their lives. I understand his sentiments.

I draw the attention of the House to a deputation on behalf of GEC Manchester which met hon. Members today in one of the upper Committee Rooms. I worked in manufacturing for that company when it employed 25,000 people, but it is now doubtful that even 4,000 people work there. That lobby told us that the final thrust of redundancies was about to take place. It seems to be the fag end of turbine manufacturing in GEC Manchester.

I should not like the House to think that I am making a special plea only because of the position of GEC Manchester. It would be unfair not to recognise that the same crisis is occurring in NEI in the north-east. My hon. Friend the Member for Gateshead, East (Mr. Conlan) has raised the problems of the power industry in an Adjournment debate and my hon. Friend the Member for Jarrow (Mr. Dixon) has referred to it also. I cannot emphasise enough to Ministers that the power industry is facing a crisis because of a lack of orders. That problem is not due in any way to inefficiency, bad work or late deliveries. Indeed, the power companies have competed successfully abroad. But sometimes foreign orders dry up. If we are to continue to have a British power industry, it is essential that the Government assist.

Mr. Nicholas Winterton (Macclesfield)

I hope that the hon. Gentleman will not be inconsistent. It is my understanding that both companies are involved in the construction of nuclear power stations. How would the hon. Gentleman equate his remarks about appealing for Government assistance with the fact that his party is apparently against the development and building of nuclear power stations, which feature prominently in the construction of both companies?

Mr. Eastham

I am sorry that the hon. Gentleman misunderstands the power industry. I am thinking of turbines, and it does not matter whether the fuel is conventional, fossil or nuclear. I hope that on this occasion we shall not deceive the House by going down that road. Electricity generation depends on large turbines and the heat source does not matter. I am addressing my remarks to the power industry—namely, the production of turbines. The Secretary of State made great reference to nationalised industries. I am referring to private companies—they are not failures—which face the same crises suffered by even the nationalised industries which people attack from time to time.

Only a few years ago the Government said that they intended to set up a new power station every year for 10 years—10 new power stations.

Mr. Bernard Conlan (Gateshead, East)


Mr. Eastham

My hon. Friend says, "Nuclear." Whether nuclear or conventional, we have now had more than seven years of Conservative government and they have not yet placed one order for a power station.

The Government have no excuse. All the experts recognise that in the 1990s we shall face an energy crisis. The present power stations will be decommissioned and replacements are required. It can take up to seven years to construct a new power station. It is imperative that this major decision be taken now. The Government cannot rely on the excuse that they are waiting for the outcome of the Sizewell inquiry. It is recognised that fossil fuel as well as nuclear power stations are to be built. I assure the House that the heat source chosen makes no difference—the power stations are still required, and the Government have a duty to the nation to place the orders for them now. It is a scandal, and even crazy, that Britain is importing energy from France. Cables supplying power equivalent to that produced by two power stations are bringing electricity from France. France runs its electricity generation system at a massive deficit. It appears that we are buying French electricity to offset some of France's losses and, possibly, to balance their trade. At the same time, we are destroying our power industry.

It is crazy that Britain has the capacity, skill and resources to build power stations, but, even with that information staring the Government in the face, they still will not place orders for new power stations. The Government should place two orders this very week, not next year or after the general election. I may be wasting my time appealing to the Secretary of State. He may say that he is responsible for the Department of Trade and Industry and that employment is not his worry. But we are all responsible. The Cabinet is jointly responsible in the major issue of power generation.

Power stations could he helped in other ways during this crisis — for example, in small measure through refurbishment. Rotors and blades are urgently needed in some power stations. Those are some aspects where deficiencies could be made up until some orders get rolling again. It is a tragedy that the deputation which I met should have to tell us that there is no future for them in the power industry.

Mr. Peter Thurnham (Bolton, North-East)

As someone who has spent many years working in the turbine manufacturing industry, I obviously feel strongly about the hon. Gentleman's points. If he is dissatisfied with the way in which decisions are made in the electricity industry, as presently constituted, does he suggest that it would be better privatised?

Mr. Eastham

I am nonplussed by those remarks. The two largest manufacturing companies involved in power generation in Britain are privately owned. I do not understand the question. The customer, in the main, is the Government. When we talk about power stations, we are talking about billions of pounds. Therefore, it cannot be left to a small company or some board to say that it is prepared to buy a power station. It is beyond that. The dimension and scale of a power station depends on a Government making the decision.

I would be grateful if, for once, the Minister during his reply could find time at least to comment on the power industry and give some hope to the skilled men who are now losing their jobs through no fault of their own.

The Secretary of State mentioned how the economy was picking up. He said that everything was rosy. However, he did not mention mass unemployment. Things are not rosy at all. Unemployment is creating poverty in the major cities on a scale that has not been seen since the industrial revolution. I have a document which refers to poverty in Manchester. It refers to an area adjacent to GEC Manchester at Trafford Park. I am not talking about Greater Manchester or the 10 districts, but about one small area.

The document says: unemployment has increased from 11 per cent. in 1978 to a staggering 24 per cent. in 1985 … half of all Manchester residents are having to live below the poverty line … In October 1985, 45,700 residents were unemployed, that's 25 per cent. of Manchester's workforce … 43 per cent. of those are under 20 years of age and 37 per cent. of those aged 20 to 24 are unemployed. In all honesty, the Minister cannot stand at the Dispatch Box and tell us that everything is rosy in Britain when one can see the misery, poverty and unemployment in the city that I represent. I know that my city is not alone. The problems are the same in the north-east, in Scotland and in Northern Ireland. It is one catalogue of events after another. I denounce and refuse to accept the statement that everything is so successful under this Government. In fact, it has been a disaster.

I remember the debate about Westland helicopters earlier this year. Hon. Members spoke about the bright future during that debate. I was particularly interested and took part. I was involved because, being an engineer, I have a special concern for the men on the shop floor. Unfortunately, the debate seemed to dwell on the trouble and difficulties of the Prime Minister and the resignation of two Cabinet Ministers. Other than my speech, very few people even mentioned the Westland helicopter engineers.

At that time, the management was soothing the workers and telling them that their jobs were assured. However, I can now tell the House on good authority that there are already serious closures in the experimental department. That means that there will be a loss of design capability. Until now, Britain has led the way in rotor head design for helicopters. We will not be the leaders if design and research are being cut. We will be dominated by America, as some of us felt at the time. It will be a screwdriver job. Westland will no longer have the initiative, drive and expertise to compete in the making of helicopters.

The Government have their greedy eyes on Rolls-Royce. They are waiting like vultures to take over. I can assure the Minister and the House that it gives the workers of Rolls-Royce no confidence to think that the company may be privatised. The Government think that the solution to everything is selling off and privatising. We should remind ourselves that Rolls-Royce was privately owned. It suddenly went into a crisis and had to be nationalised—not by a Labour Government but by a Conservative Government. Within a matter of days, that Government had to introduce legislation. They could not afford to allow the company to go under, so it was nationalised. It is now making handsome profits and is successful nobody can deny that. Because of that, the Government now think that it is timely to do the plunder job. They want to plunder the assets and take the profits, as if there was something clever about it. It is a disaster. I can assure the House that the work force recognises the dangers. If Rolls-Royce is privatised, hundreds, possibly thousands, of workers know that they will lose their jobs.

I am a Member of the Select Committee on Employment. A month ago, we visited Japan. We learned much from that visit. Both sides of the Committee recognise the great difference in the attitude to man management. For instance, there was far less brutalisation. The management was concerned about the work force and wanted there to be jobs. The management wanted the workers to share in the prosperity. That is the sort of thing we do not see. If one wants any proof of that, there is adequate documentation of the visit and there are hon. Members in the Chamber who witnessed some of the interviews that took place. There is far more co-operation between the Japanese Government, management and work force. There is also higher investment and twice as much research. That is why Japan has been so successful.

We went to a small company and spoke to a man who called himself a small employer. He employed 82 people. If Britain continues on its present course, that will soon be a big employer in this country. He told us that he could afford to buy a new robot which cost £250,000. He borrowed the money from the bank at a rate of interest of 4⅛ per cent. In Britain, the rate of interest would probably have been about 16 per cent. or 18 per cent. Is it any wonder that Britain cannot compete? The fact that we cannot compete with other countries is not due to a failure of the workers.

When the Government have been in office for nearly eight years, it is a great tragedy that they have learnt no lessons whatsoever. They can send people abroad who come back with all the facts. They can go and see the successful companies and recognise how they were successful, but they still refuse to learn the lesson. Not much has been said about this. At the moment we are faced with the prospect of a massive balance of payments crisis. That crisis is looming now, and the Government know it. Unless they jump and run quick for a general election, that crisis will be on their shoulders. Only politicians and the economists recognise how serious the matter is, yet the Government, again, are still ignoring the lessons. They think that it is far more satisfactory to have people on the dole, producing nothing and earning nothing, rather than doing productive work.

I conclude with a sincere and passionate plea. I wish that the Government would seriously take on board my remarks about the power industry. For goodness' sake, do not let us wait until after the Sizewell inquiry. The two new power stations could save the day. That is my plea.

7.20 pm
Sir Ian Gilmour (Chesham and Amersham)

I entirely agree with the hon. Member for Manchester, Blackley (Mr. Eastham) that unemployment is still desperately serious, but I should like to begin by being the first speaker in the debate to congratulate the Government on the recent fall in unemployment. This is the first occasion in the past five or six years, when I have been making speeches on the economy, that unemployment is not higher than it was the previous time that I spoke.

Dr. Norman A. Godman (Greenock and Port Glasgow)

May I correct the right hon. Gentleman in one regard? Unemployment in Scotland continues to grow, and that was acknowledged by the Secretary of State for Scotland in a speech that he made in my constituency but two weeks ago.

Sir Ian Gilmour

I am sorry to hear that. In fact, I did know it, but I was talking about the overall figure. The hon. Gentleman will agree that it has gone down.

Some critics have claimed that the recent fall in unemployment is the result of the Government fiddling the figures again. The hon. Member for Newham, North-East (Mr. Leighton) said that today. I do not believe that such claims are true. Many of the new jobs may not be so-called "real jobs", but I have always advocated an extension of the special employment schemes, so I am far from complaining about that. People employed in youth training and other special schemes are doing useful jobs for the community and themselves.

I have always thought that market forces would need much help from the Government, and they are now beginning to get it. I also welcome the Government's change of heart over demand management, otherwise known as reflation. I would not use the term "U-turn" because that would he indelicate, but clearly there has been a change. As with unemployment, I have always believed that market forces would need help if adequate overall growth were to be achieved. There are now reasonable signs that the Government are set to adopt a more expansionary fiscal stance.

Again, as over the unemployment figures, there are those who believe that the change in policy represents a mere electoral conversion and that the Government will revert to their previous policy after the election. I do not believe that at all. I am sure that it is not true, but if it were, it would constitute a strong argument for more frequent elections. More frequent elections would be a great benefit to the Labour party because it could fight an election on its present crazy defence policy and so on, get beaten, start again, and possibly hope to get something better. However, I do not believe that more frequent elections would help the alliance because it already changes its policies more than once a year, so more frequent elections would not make any difference.

While I welcome the Government's new flexibility, I am, like a number of my right hon. and hon. Friends, worried by the continued absence of an overall economic strategy. We all know that for growth to be enough to bring down unemployment and to be sustainable in the long term, it has to be more than the growth in productivity and there has to be balance between the various components of demand. Investment, particularly in manufacturing industry, must rise at least as fast as output, and exports must rise as fast as imports. As we know, that has not happened since 1979. Overall growth has been so slow as to cause a rise in unemployment of about 2 million. The component parts of that growth have been disturbingly unbalanced.

Practically all the rise in domestic demand since 1979 has taken the form of public and personal consumption, particularly consumption of consumer durables, which has risen no less than 30 per cent. on the strength of the credit explosion. Yet output of manufactures, even after its recent welcome rise, which my right hon. Friend the Secretary of State spoke about today, is still 4 or 5 per cent. lower than in 1979. So, more than the entire rise since 1979 in British demand for manufactured goods has come from imports, which have risen by nearly 40 per cent. As if that were not enough, investment in manufactures, so crucial if we are to be able to build for the future, is currently falling. In the third quarter of this year it was no less than 22 per cent. lower than in 1979.

The very high level of interest rates must have been partly responsible for that fall in investment. If I can make a short digression: it has become rather difficult to characterise the Government's monetary policy or to know exactly or even approximately what it is. Once upon a time, monetary policy was measured by the growth of the so-called monetary aggregates. By that criterion, monetary policy has been extremely expansionary as most of the monetary aggregates have been going up by between 12 and 20 per cent. over the past year. That does not—except to one or two people — herald a large rise in inflation. The huge growth in the money supply is simply the consequence of a huge increase in lending, mainly to households. In the year to June 1986 net lending to the personal sector reached a staggering total of £29.3 billion. a sum equal to some 12 per cent. of total personal disposable income, and 26 per cent. up on the previous year.

It is a remarkable paradox that, by the monetarist criterion, monetary policy has been extremely slack, while by the interest rate criterion, monetary policy has been extremely tight. So, if we take everything together, the effect of monetary policy on the increased demand has been almost wholly perverse, stimulating consumption and restricting investment.

Meanwhile the balance of trade in manufactures has deteriorated by over £10 billion, driving the current account into substantial deficit in the third quarter of 1986. It is structural deteriorations of that sort that should now be a cause for very serious concern. I am afraid that I do not think that the Government's attitude to the situation is defensible. Dangerous and deeply entrenched structural declines require strategic thinking and planning.

The Treasury is now forecasting a current account deficit of about £1.5 billion next year, although that is only a little more than occurred in the third quarter of 1986 taken by itself. Many independent forecasters think that it will be more than that, and I am inclined to agree with them. But even if the deficit is only £1.5 billion next year, it will be a great deal larger the following year. The prospect at present is that it will continue to get progressively larger in following years, at least so long as the growth of output continues. Of course, if it does not continue, there will be a large increase in unemployment again. The decline in oil production and the trends in trade in manufactures will ensure, by one route or another, that we enter a new era of economic decline possibly combined with renewed inflation. That was the conclusion of the Aldington report a year ago, which has not been adequately answered either by the Chancellor of the Exchequer or by the Treasury in their evidence or reply to the Select Committee.

There have been several suggestions on how the situation should be dealt with. I have put forward some before, but that would be another speech, which I shall not make now. What is needed is such support for British manufacturing industry, whatever form it takes, to enable —or force—it to be competitive in world markets.

There is, therefore, a great deal of consolation for the Opposition and the alliance in the fact that they are going to lose the next election. There will be a nasty crisis in the next Parliament and the opposition parties can count themselves lucky that not they but my right hon. Friends will he dealing with it. It will be a difficult and unpleasant task. Instead of waiting for that crisis to arrive, I hope that my right hon. Friends are taking steps to prevent it. Unfortunately, there are no signs of them doing that at present, but I hope that before long we will see such signs.

7.30 pm
Mr. James Lamond (Oldham, Central and Royton)

This has been an extremely interesting debate. I wish first strongly to associate myself with the remarks made by my hon. Friend the Member for Manchester, Blackley (Mr. Eastham), and especially those about the turbine manufacturing industry. Like my hon. Friend, I was an engineer before I came to this House. I am honoured to say that I am sponsored by the Amalgamated Engineering Union Technical, Administrative and Supervisory Section. Many hundreds of our members are involved in the turbine industry. As the Government procrastinate month after month and year after year, they should remember that, when the day comes when they decide to place the orders or instruct the orders to be placed, the skills and ability to manufacture the turbines may have disappeared. They cannot be retained for ever if no orders come in to sustain them.

Another interesting contribution to the debate came from the right hon. Member for Henley (Mr. Heseltine), who told us about his views—some of which differed fairly radically from the points made by the Secretary of State. Getting a little away from the subject of today's debate, the right hon. Gentleman spoke about mortgage interest tax relief. It was interesting to note that he believes that that is, perhaps, taking far too big a proportion of the amount of money available for public spending. Although the right hon. Gentleman was careful to hedge around what he proposed should be done, I wonder whether he put this and the other views that he expressed this afternoon in Cabinet? We shall never know. It would be interesting to know whether the Cabinet seriously discussed his point about mortgage interest tax relief and whether and why it rejected his proposal.

I want to remind the House of the time, some years ago now, when there was a Labour Government and the Prime Minister was Leader of the Opposition. I clearly recall her attacks on the Labour Government. She suggested that anything the Labour Government did to try to increase employment was not creating real jobs. She used to cry for real jobs. In fact, she used to call out, "Not real jobs," from a sedentary position when we were doing our best to create employment.

I do not know exactly what the hon. Lady meant by "real jobs". However, I cannot believe that, if she were sitting on the Opposition Benches today, she would have allowed the many different schemes put forward by this Government, in an attempt to mop up young people off the unemployment register through the Restart programmes and so on, to come within her definition of real jobs. Nor can the Opposition accept the Government's cry now that all that they can do is create an environment in which jobs can be created by industry. The right hon. Lady placed the blame for unemployment fairly and squarely on the shoulders of the Labour Government. Those of us who have been Members for some time can remember the campaign of 1979 and the well-known posters—which have already been referred to — which stated that "Labour isn't working". The posters claimed "Labour isn't working", not "Industry isn't working". Apparently the Government were at fault if there was unemployment then, but now the Government wash their hands and say that they can do very little about unemployment.

I do not want to detain the House for very long. It is only a week or so since I spoke about unemployment in my constituency. The employed and unemployed people in Oldham do not recognise the Britain that was described so touchingly by the Secretary of State today. He said that everything in the garden was lovely—investment was increasing; employment was increasing and new businesses were starting up all over the place. That was the picture that the Secretary of State painted.

Mr. Nicholas Winterton

indicated assent.

Mr. Lamond

I am astonished that an hon. Member from the north-west who is deeply involved in the textile industry should be nodding and suggesting that, for once, he supports his own Front Bench. I cannot believe that the hon. Gentleman thinks that that is the picture in the north-west.

In my area we rely heavily on manufacturing industry, but the number of people unemployed is increasing all the time. The number of job vacancies is something like one for every 24 people who are unemployed. It is not a matter of these people lying in bed all day, not looking for work or having to be sent for and asked if they are making a real effort to find work. Of course those people want work, but there is no work in that area.

The Minister attempted to defend the questionnaire, which urges the unemployed to move, as a simple effort to comply with the law as it has always stood. The problem is how can the law and the regulations be applied. Are they applied with compassion or absolutely ruthlessly?

In order to drive down the number of people registered as unemployed—not the number of unemployed but the number registered as unemployed, which is different — and so to save the face of the chairman of the Conservative party who I think has a position in Government—

Mr. Kenneth Clarke

My right hon. Friend is the Chancellor of the Duchy of Lancaster.

Mr. Lamond

Yes, he is the Chancellor of the Duchy of Lancaster. I am sure that he is well paid for that job, although I do not know how much time he devotes to it.

However, the Government are trying to save the right hon. Gentleman's face because he said that if unemployment is not below 3 million by the next election, the Tory Government are not worth re-electing. Of course, we agree with him. Even if unemployment is below 3 million, the Conservative Government are not worth reelecting. In order to reach that figure, the Government have applied the new questionnaire absolutely ruthlessly.

Let us suppose that one of my constituents wishes to move to London. I have met such people and I have tried to help them get jobs as bus drivers and so on, but the Minister's Department does not help. The Department denied my constituents a grant to move to London and allowed it only after I had made representations.

However, putting that aside, let us assume that one of my constituents has found a job and has received assistance to get to London. Can anyone imagine how difficult it is to find rented council accommodation in London? If my constituent wanted to buy even the most modest accommodation, can any hon. Member believe that he would find somewhere to house his wife or family within 10 miles of London for under £75,000? That would be pretty difficult. My constituent's home in Oldham—which might be quite comfortable—may be valued at £25,000. If he sells his home and buys one at £75,000, he will have an enormous mortgage around his neck.

It is economically impossible for my constituents to move even if there are jobs available in London. My constituents do not understand where is the wonderful booming Britain that Ministers continually describe.

Efforts are being made in Oldham to provide more work in the area. The Secretary of State for the Environment made an extraordinary attack on local authorities in yesterday's debate. He seemed to think that every Labour councillor in the land was some kind of devil, albeit a democratically elected devil, determined to drive all employers out of the local authority area. That is completely untrue. Oldham metropolitan borough has made great efforts through its industrial development unit to attract industry to the area. Of course there has been an enormous rundown in manufacturing industry. The textile industry has been almost ground into the dust. I do not suggest that that process began in 1979, because it began many years earlier, but with the limited resources available the local council has done its best to encourage new industry in the area.

My hon. Friend the Member for Blackley cited the example of Rolls-Royce, which was saved for the nation by a nationalisation measure pushed through the House, as I recall, in a matter of hours. A large firm in Oldham — Ferranti — was also in dire financial trouble and would have gone to the wall with the loss of 5,000 jobs in and around Oldham, not to mention the impact on other areas of high unemployment, but for the intervention of the National Enterprise Board. I wonder how many Conservative Members remember the NEB.

Mr. Eric Forth (Mid-Worcestershire)

The what?

Mr. Lamond

The hon. Gentleman may not wish to recall it, but the 5,000 employees of Ferranti in Oldham are happy to recall it, because without the intervention of the NEB in taking up the shareholding and providing the necessary cash flow to save the firm, their jobs would have disappeared. Having been given a breathing space and, in my view, better management, that firm has gone from strength to strength. It is now expanding and those jobs are much more secure. The Conservative Government, of course, abolished the NEB and sold the shares at a profit. Without the intervention of the NEB, unemployment in my constituency would be far worse today. The Minister should remember that any Government can intervene positively to assist employment in areas such as Oldham.

Oldham council has also intervened positively and successfully. A multi-million pound scheme is now almost finalised for the installation of a new print plant on a site in the Hollinwood area vacated by Ferranti when it moved out of heavy engineering. Oldham council has succeeded in attracting new industry. Instead of attacking local government on every possible occasion, as exemplified by the attitude of the Secretary of State for the Environment who is supposed to be responsible for encouraging local government, the Government should recognise the great value to be obtained in assisting local government to bring new industry to these areas.

The new plant at Hollinwood is not an isolated example. The success of the Labour-controlled council in Oldham—Labour has a substantial majority with 43 councillors out of 60—was used by the Tories in a party political broadcast as an example of how effective local government could be in attracting new industry to an area. Labour councillors in Oldham are determined to ensure that as many jobs as possible come to Oldham, but they are struggling against the odds. Council leader John Battye has said: like other local authorities in Mrs. Thatcher's Britain, Oldham has had to learn to be commercially hard-nosed about such deals— with firms attracted into the area— since there is precious little practical assistance from Whitehall these days. The Minister should take that to heart and examine closely how he can encourage local authorities to be his agents in attracting industry to their areas, especially to areas such as Oldham which have been hit so hard by the decline of manufacturing industry. Many thousands of people in Oldham are out of work—three times as many as when the Government came to office.

I shall not go into all the things that the Secretary of State forgot to mention in his rosy picture. For some reason, the highest interest rates ever are now being inflicted on this country. I shall not dwell on that, although it must surely be a measure of the outside world's confidence in Britain and its economy, save to say that people look to the Government, whether it be a Labour or a Conservative Government, to do something to bring work to areas so badly hit. There was nothing in the Queen's Speech to deal with that matter, which is of prime importance. It is the first priority of those in Oldham who are unemployed and it is of considerable concern to those who still have jobs because they know that the threat hangs over their heads, too.

7.46 pm
Mr. Nicholas Winterton (Macclesfield)

I am happy to follow the hon. Member for Oldham, Central and Royton (Mr. Lamond) as we have a common interest in one of the six largest employers in this country—the textile and clothing industry. I commend the hon. Gentleman and his colleague the hon. Member for Manchester, Blackley (Mr. Eastham) on the robust case that they put to the Government urging them to recognise the problems currently facing the power industry and to take certain action. That action should perhaps have been urged on the electricity generating authorities rather than on the Government, but both hon. Members made a powerful case.

I was sad that the hon. Member for Oldham, Central and Royton was not with me this morning when I attended the annual convention of the British Clothing Industry Association or at the lunch at which my right hon. Friend the Secretary of State for Energy was the principal guest. I shall not refer in detail to my right hon. Friend's speech, but it took up many of the poets raised on both sides of the House in this important debate on employment and manufacturing industry about the essential necessity—I use the two words deliberately — of ensuring a meaningful future for our manufacturing industry. All the other sectors of the economy — services, banking, tourism or whatever — basically serve an industry that makes something and their whole future and raison d'être must be based on a thriving and in the future, I hope, an expanding rather than contracting manufacturing base.

Mr. Norman Sussman, chairman of the British Clothing Industry Association, was not so pessimistic as the Opposition about the problems of industry. He believes that British industry probably now has a better chance than ever before to compete in the world arena. He went on to stress, however, that the Government have a role to play in this. They cannot just sit back passively when almost every other country, developed or developing, is prepared to back its own manufacturing industry in a far more positive way than have successive British Governments.

In the United States, Japan and recently developed countries such as the Republic of China — Taiwan —where Governments practise private enterprise, often epitomise it—if they can buy from their native industry, they will do so, and no country does that with more venom and determination than Japan, with whom we have a ridiculous imbalance in trade.

I also visited Japan in the autumn. I know what incentives, encouragement and help the Japanese give their industry in so many devious but well planned ways. We have to play these people at their own game if we are to survive. It is no use my right hon. and learned Friend the Paymaster General saying that they have come to invest in the north-east and perhaps at Swindon with the Honda plant—that is a Trojan horse. It is primarily for their own interests. They know that, sometime in the future, somebody will put up the shutters and say of the imbalance, "Enough, no more. We will import no more Japanese products."

The Japanese play the game very well. They have established manufacturing plants here, but they are for the benefit of Japan. Some of the schemes have been entered into as partnerships, but those who read how Japan enters partnership arrangements know that, although they might start as the minor partner, they end up as the major one. They will screw their host country into the ground for the benefit of Japan, the Japanese people and the Japanese economy.

The Government should beware of Japanese investment in Britain. We have a duty to safeguard our manufacturing base. There are many things that I could say, but I should like to take as my text some remarks made during an excellent address by Dr. James McFarlane, the Director-General of the Engineering Employers Federation, to a meeting of the all-party group for engineering development in the Palace during the summer. He said: The nations who win economic battles are those who organise themselves to do so. Like military battles, they can't be left to chance. Dad's Army would have been no match for the Panzer divisions, whatever we thought at the time. Luckily the barrier of the Channel saved us from putting Dad to the test. But there are no harriers to the inflow of trade. Some people might ask what is so special about British manufacturing and what is the difference between it and tourism, banking or service industries. What is special is the time scale which, for manufacturing, is utterly different from that for retail, banking, travel and tourism, and trading in the City.

Perhaps I might divert to comment on what my hon. Friend the Member for Wyre Forest (Mr. Buttner) said. Unfortunately, he is no longer in his place, but he spoke of problems that face the City. It is obscene that the banking system — primarily the merchant banks — is prepared to fund massive takeovers which will not produce one extra product or one extra job, but will make the reputation of one or two people and make one or two people and organisations, which are already wealthy, even wealthier. That money should be directed by a responsible and constructive City into the country's manufacturing base.

What is the difference between manufacturing and retail, tourism and banking? Manufacturing cannot make an immediate and substantial return. It appears that the people who produce company reports today are more concerned with the bottom line at the end of each year than about any long-term strategy which will benefit the company, its management and their employees, many of whom are skilled.

Is it not ridiculous that we should have had takeover bids for Distillers, Allied-Lyons, Wedgwood and now Simon Engineering up in the north-west? It is quite wrong that the City should make a quick and ready buck and not be prepared to put money into the country's manufacturing base.

I am a pragmatic, traditional Tory. Unlike Opposition Members, perhaps, I come from a business background where we produced something. What is more, I have been responsible for paying the wages at the end of the week — a very sobering experience. If my right hon. and learned Friend the Paymaster General, others on the Front Bench and their advisers had had similar experience—it is unfortunate that many of them have had none—their attitude to manufacturing industry would be far more realistic.

Mr. Franks

If, as my hon. Friend says, he has experience of paying wages at the end of the week, presumably he has had the experience of earning a profit. If he deemed it necessary to earn a profit, what was the difference between his business and big business?

Mr. Winterton

My hon. Friend intervened cogently earlier. I am afraid that, with hindsight, he may regret his latest intervention. He cannot have been following the logic of my argument. Of course I believe in profit. He should bear it in mind that Vickers at Barrow cannot make a profit immediately after an investment to guarantee the City and the people who have invested in it an immediate and hefty return. People are now making much more money from the quick buck by taking money in and out of the country when the exchange rate fluctuates. It seems wrong that money should be spent on that rather than on manufacturing industry.

The Government have achieved a great deal in regard to inflation. I am sorry that my right hon. Friend the Secretary of State for Trade and Industry did not mention the problems experienced by industry because of interest rates. Interest rates in Britain are abnormally high, extremely damaging to industry and a disincentive to invest. The hon. Member for Blackley, who has been to Japan with the Employment Select Committee, said that he met there a business man who was able to borrow £250,000 at an interest rate of 4.5 per cent. If such a facility was available to British industries, there would be a dash to the banks and investment, would result which would stimulate the economy in many areas of industrial activity and, in due course, lead to a substantial number of people being taken on. Surely that is what we want.

Sir Kenneth Lewis (Stamford and Spalding)

I am intrigued at the support that my hon. Friend is giving the Front Bench. Does he believe that, to get interest rates down, it is time to go into the snake in Europe? That would bring them down.

Mr. Winterton

My hon. Friend's many years in this place have given him experience that I envy. I am instinctively opposed to our entering the European monetary system. To a certain extent, I leave the decision to those who know a lot more than me. The Confederation of British Industry appears to be shifting, but my right hon. Friend the Chancellor and the Government are the best people to make the decision.

My job is not just to be supportive of the Front Bench. It is to stand up and say what I believe, bearing in mind my experience and contacts. I have consistently been a strong advocate of manufacturing industry. I do not like being told that the clothing industry has an import penetration amounting to 32 per cent. or that the textile industry is faced with even greater import penetration. In the motor car industry about 57 per cent. of our market is imported, whereas for motor cycles the figure is 79 per cent. or even higher. Even in the clock industry there is 85 per cent. import penetration, and in leather goods the figure is as high as 63 per cent.

Those are only some of the statistics that I could quote. I do not like to see such a development because it is unhealthy for the economic prosperity of our country. In addition, it will not help to generate employment or to reduce unemployment, to which my right hon. and learned Friend the Paymaster General and Minister for Employment is so dedicated.

There are ways in which Government can help without stirring up inflation. Several hon. Members have said that insufficient attention is paid to research and development. That was one of the points that Norman Sussman made in his chairman's address to the British Clothing Industry Association convention today. He said that the Government should assist industry by making contributions towards increasingly important research and development costs.

My right hon. and learned Friend may say that the Government are already doing so, but as my right hon. Friend the Member for Henley (Mr. Heseltine) said, it is no longer appropriate for one employer or company to stand alone facing international competition. We must follow the example of other countries and have a partnership between private industry and Government.

I congratulate the Government on making £100,000 available to the British Fashion Council. That should be warmly welcomed. It is a wise spending of taxpayers' money that can be used to extremely good effect.

The Government should look again at the reintroduction of capital allowances. That would be welcomed by the British manufacturing industry. Reductions in corporation tax do not equate with the capital allowances that manufacturers were able to claim, and they were of great benefit. I heard that again this morning from at least half a dozen of the largest textile and clothing employers in the country. Therefore, these matters should have Government support and should be considered.

I have spoken longer than I intended, but I feel so passionately about British manufacturing industry that I am prepared to speak out time and again from the Government Benches to say that Members with manufacturing background and experience believe that the Government will neglect our future manufacturing base at their peril.

8.3 pm

Mrs. Renee Short (Wolverhampton, North-East)

The hon. Member for Macclesfield (Mr. Winterton) has entertained and instructed the House with a lively and forthright speech. The Government Front Bench probably did not like it, but the Opposition did. The hon. Gentleman's time on the Select Committee seems to have had some effect on him.

There were also two notable speeches from two other Conservative Members who are no longer present—the right hon. Member for Henley (Mr. Heseltine) and the right hon. Member for Chesham and Amersham (Sir I. Gilmour). Things are certainly moving on the Government Benches.

According to the unemployment unit, the real level of unemployment, based on evidence before the Ministry indulged in the 17 massaging operations, would be 3.9 million — more than 500,000 higher than the present admitted figures. So much for the recent fall in unemployment, and so much for the boasting of the Minister for Employment and the Secretary of State for Trade and Industry.

The reality is that unemployment is rising, as many of my hon. Friends have said. It is rising in the north, and even in Northern Ireland where is stands at 20 per cent. of the working population. Even on the basis of the massaged official figures, 40 per cent. of the unemployed—1.3 million—have been out of work for more than a year, more than one third of them for more than three years. The figures show that more than 1.25 million young people below the age of 25 are unemployed, that under this Government unemployment has risen by more than 2 million and that there is no sign of a substantial reduction in these figures under this Government. That is the reality that we face today.

In the west midlands, a further 125,000 job losses are expected in the next five years if this Government are returned at the next election. That is in addition to the enormous number of job losses that we have experienced so far. In Wolverhampton, 23,000 people are out of work, among them nearly 9,000 who are under 25. Many of them are young people who have never known what it is to have a job since they left school. What a recipe for social unrest. That has been the case not only in Wolverhampton but in other large cities, including London. What sort of heritage is that for the Government to provide for our young people?

The greatest disaster that befell British industry under this Government has been the fate of manufacturing employment, which has fallen by 25 per cent. Even the CBI forecasts further cuts in manufacturing. It is clear that the hon. Member for Macclesfield has been listening to the CBI.

The Government's claim that employment has risen by 1 million in the last two years is based on a fallacy. In fact, the number of full-time jobs has fallen. The Government's claim is based on the rise in part-time work and self-employment, but those figures can only be guessed at, and as we know to our cost self-employment does not last for very long.

Industrial production is stagnant and is actually no higher than it was in 1979. Manufacturing output is still 7.5 per cent. lower than in 1979, and manufacturing investment is still 17 per cent. lower than it was at the same time. Those figures reveal the serious situation that is now facing manufacturing industry, and they account for the very high level of unemployment.

In 1979, the Labour Government had had five years of desperate struggle behind them, due to unfavourable trade balances and restrictions imposed by financial stringency without any of the assistance from oil reserves that this Government have had—which they have squandered to the tune of £53 billion since they took office.

The most damaging part of the present situation is not the increased rate of bankruptcies, which are twice as high as in 1979, or the rate of company liquidations, which are more than three times as high, but the fact that our manufacturing trade balance went into deficit in 1983 for the first time ever, and is still in deficit, while manufactured imports have increased their share of the British market since 1979.

The Government boast about cuts in income tax, but the burden of taxation as a whole has increased by 6 per cent. of GNP since 1979. At the same time, public assets are being sold off at an alarming rate, and well below their real value, to meet the demands of this wasteful Administration.

Our industries, particularly manufacturing and construction, which are in competition not only with western Europe and America but with the great potential of the far east, are dependent for survival on three principal factors. The first is the application of up-to-date scientific knowledge and experience. That is a sine qua non for industry today. The second is having a reservoir of trained, well-educated, experienced manpower. That is also important. The third is the need for trust and co-operation between management and work force, but we do not have much of that at the present time. It is with deep regret that I must say that none of those requirements have been fulfilled to any appreciable extent uner the Government.

We have a record of 26 Nobel prize winners in the past 30 years for scientific achievement. Japan, which everybody praises for its industrial development, has only four. There is a lesson for us to learn from that. We have the Nobel prize winners, as we should, but Japan has the industrial development and a great increase in the standard of living. Japan also has an enormous political influence in the far east and south-east Asia because it has many more engineers and it has them where it matters —in the decision-making positions in industry. We do not have engineers and scientists in those jobs.

The same applies to Germany. I have yet to come across a German engineering company of any size — even a small one—where the majority of the board of directors, including the managing director, are not qualified engineers. Again there is a plain lesson for us to learn. In the United Kingdom the high flyers, even in science degree courses, tend to gravitate towards the City, where they can earn many times their salary expectations in industry.

In the other place an excellent Select Committee report on overseas trade published a year ago stated that labour productivity of comparable firms in West Germany was no less than 63 per cent. higher than in Britain because of our lower technical expertise, our lack of adequate education and our lack of adequate training for the work force. Have the Government taken any notice of that report? Of course not.

In October 1982 NEDO reported that Japan produced over four times as many engineers per head of the population as Britain. Moreover, Japan maintains a continuous flow of engineers and scientists from industry back into the universities for periods of one to two years, mainly to update their expertise and knowledge, without any loss of career prospects. That is important. Why do we not do that? Perhaps the Minister will tell us.

In all our major European competitor countries there is a legal obligation for companies to include on the board a proportion of representatives of the work force. Not only has that resulted in a great improvement in industrial relations and in the identification of the work force with their industry, but in production and industrial methods. Why do we not do that? Perhaps the Minister will tell us.

The next Labour Government will have to face up to the need for greatly increased investment in higher education, particularly in engineering. Ways must be found specifically to improve the social and financial standing of engineers and scientists in society, to change the climate of opinion in our industrial companies—at present a mere 5 per cent. of directors have any engineering training and expertise — and to ensure that their management structure includes a majority of technically trained, experienced people at the decision-making level on the boards of directors and management boards. That is the sort of partnership—and the Government are talking about partnership—that we should encourage in industry today. I hope that the Minister will tell us how he will achieve that.

8.13 pm
Mr. Cecil Franks (Barrow and Furness)

During the debate there has been much talk of the need for greater public expenditure and frequent reference to the north-south divide.

The north-south divide exists for real. One cannot be a Member of Parliament for the north or be born in the north without being aware of the real differences in standards of living and attitudes between the north and he south. One question that has not been addressed or, indeed, asked, is why the divide should exist. There is no logic in it. The divide certainly does not exist because of a failure in public expenditure. Public expenditure has not solved the problem in the city of Liverpool. Indeed, during my years in local government 30 miles down the road from Liverpool, in Manchester and Salford, local authority colleagues of all parties and I used to look with envy and then anger at the sums going into the city of Liverpool and Merseyside, and at how they were wasted. If throwing money at a problem solved it, today Liverpool and Merseyside would be the most prosperous areas of the United Kingdom.

It is not the quantity of money that counts, but the quality of the targeting and administration of the funds. I listened to the hon. Member for Oldham, Central and Royton (Mr. Lamond) and it is tempting to pick up the gauntlet that he threw down because I take a completely different view from him of the utter waste and squandering of funds in local government. The only difference between local government and any other nationalised industry—local government is a nationalised industry—is that with major nationalised industries, such as British Coal and British Steel, we are dealing with one company, whereas with local government we are dealing with 135 different nationalised companies, each of which is run its own way—inefficiently and incompetently.

I want to talk about the practice rather than the theory and to ask various questions which during the past 12 months I have been asking different Opposition spokesmen, but without success. I shall talk about the effect of industry and economic theory in south Cumbria.

South Cumbria has no special status, but it has a work force and a management which take a pride in what they do—that pride did not exist on Merseyside—and unions which take a realistic attitude. I invite the House to compare that with what happened in Merseyside and Birkenhead where the work force was hell-bent on destroying its industries and jobs, until a change in attitude and direction eventually brought security of employment and jobs.

What alternatives do the Opposition parties offer my area? Both Front Bench spokesmen and Back Bench Members have talked about how they will create jobs. Let me tell them how they will destroy jobs, if they do what they say they intend to do. They say that they will cancel Trident, so immediately 9,000 jobs will be lost. They say that they will phase out Sellafield, which is 40 miles up the road from Barrow, so immediately 16,000 jobs will be lost in the constituency of Copeland together with 50,000 jobs throughout the country.

The right hon. and learned Member for Monklands, East (Mr. Smith) talked about the trade deficit. Will he add to his figure the £12 billion-worth of firm orders currently enjoyed by British Nuclear Fuels, £4 billion of which are export orders? Do Opposition Members realise that the largest exporter from the United Kingdom to Japan is British Nuclear Fuels? When they and the hon. Member for Stockton, South (Mr. Wrigglesworth) speak about the trade deficit, they should add £2 billion for the loss of profits earned by the nuclear processing industry.

I posed this question to the right hon. Member for Llanelli (Mr. Davies) in the defence debate last summer, and I posed it again this afternoon to the right hon. and learned Member for Monklands, East. What will replace the 25,000 jobs that will be destroyed over a weekend if the Labour party has a chance? It is not just the 25,000 jobs immediately but the knock-on effect. There are thousands of other jobs in shops, cafes and restaurants and in the small businesses that supply both Vickers and Sellafield. The Labour party will create an industrial desert in west Cumbria because it has nothing to put in place of these jobs. When it talks about creating jobs, it should look at the other side of the equation.

An explanation was forthcoming during the defence debate, which was endorsed at the Labour party conference. It is that a Labour Government will build hunter-killers. I presume that the right hon. Member for Llanelli knows what a hunter-killer is, as he is a spokesman for defence matters. I am not sure that the spokesmen for the Labour party on trade and industry matters know. Allow me to inform them. A hunter-killer submarine is a floating nuclear power station. The single reactor in a hunter-killer can provide sufficient electricity for a town of 50,000 people. The Labour party is saying that it will close Sellafield and destroy the jobs that go with it and the local economy because it believes that nuclear energy is inherently dangerous but, 40 miles down the road, to keep a different audience happy, it will build 15 small nuclear power stations.

Mr. Prescott

I addressed Sellafield workers a couple of weeks ago. Even with any phasing-out proposals for nuclear energy, Sellafield will clearly be there by the end of this century.

Mr. Franks

I listen in amazement to a responsible political party that would have the public believe that nuclear energy per se is dangerous but then says, "Don't worry. Even though it's dangerous, we shall take 20 years to phase it out." The Labour party must make up its mind on this issue. I clearly recognise, as do other Conservative Members, the inherent difficulty of trying to square a circle and to circle a square as the Labour party is trying to do.

Not content with destroying the jobs in Barrow and Cumbria, for good measure, we have the 19th century concept of which the Labour party cannot rid itself. The Government have privatised the shipyards in Barrow with the result that 11,500 out of 12,500 employees have invested their own money in their jobs. The Labour party proposes to renationalise the industry, as though bureaucrats and civil servants can run a business better than a business man. Surely the Opposition have been down that road so many times in the past that sooner or later they will realise that state control of industry is a recipe for the destruction of jobs and high taxation. High taxation has a direct correlation to high unemployment. The two go hand in hand and one cannot ask the general public to believe that state control and state management is anything other than the road to inefficiency and incompetence.

My hon. Friend the Member for Macclesfield (Mr. Winterton) made an important point: profit must be earned. Without profits, there are no jobs. He asked why we have such market penetration in the motor car, motorcycle and clothing industries. Is not the answer self-evident? The person who really matters—the consumer who will spend his money—does not buy a Japanese car just because he wants to but because he recognises that the Japanese product is better than the British product. Instead of featherbedding weak and incompetent management and instead of giving in to 19th century work practices and 19th century restrictions— [Interruption.] — Opposition parties ask that incompetent British management should be featherbedded by import restrictions and protection as though, by cosseting British industry, one will improve by one iota our industry. That is the direct route to destroy jobs. [Interruption.] I always gauge the effectiveness of what I am saying by whether the Opposition attack my policies or my person. The more that they attack me personally, the more satisfied I am that my points are getting home.

Mr. Tony Favell (Stockport)

Will my hon. Friend say a few words about how well protectionism has worked in eastern Europe?

Mr. Deputy Speaker (Mr. Ernest Armstrong)

Order. The hon. Member for Barrow and Furness (Mr. Franks) must continue his speech on the amendment.

Mr. Franks

It is tempting to go down that route and speak about protectionism in eastern Europe and the loss of liberty there and to go into the loss of liberty in any European country that claims to be socialist—

Mr. Deputy Speaker

Order. The hon. Gentleman must address his remarks to the amendment.

Mr. Franks

I apologise, Mr. Deputy Speaker. I was trying to deal with the intervention from my hon. Friend the Member for Stockport (Mr. Favell).

What is the role of public expenditure? It is to supplement the private sector, not to complement or compete with it. It is there in a supportive role, to fill a gap, to build a hospital when one is needed or a by-pass when one is needed. It is not there to be in competition with the private sector, which has its own role to play. We hear calls for Government to spend more money. There is no such thing as Government money—it is taxpayers' money, the money of us all. The taxpayer is the consumer and without the consumer, without someone to buy products, all the words in the world and all the taxpayers' money is wasted. Without a consumer there is no producer. That is the fundamental lesson that the Opposition refuse to understand, but which the Government, happily, have taken on board.

8.28 pm
Mr. Richard Caborn (Sheffield, Central)

I shall try to keep to the amendment, Mr. Deputy Speaker. I thank you for calling me to speak about this part of the Queen's Speech, concerning industry and employment. I say that because I now represent the constituency with the highest youth unemployment rate in the country, and that is according to Hansard, 3 November 1986, column 394. The unemployment of young people under 25 years of age in April 1986 was 4,281, which represents 42 per cent. of total unemployment in the city. I hope that the hon. Member for Barrow and Furness (Mr. Franks) believes that those people have a lot of liberty.

That is only part of the serious situation in Sheffield, where nearly 2,000 young people have not had a job since leaving school. Unemployment in my constituency stands at 10,500—some 26 per cent., and that is on the Government's figures. In fact, if one calculates the figures before the 17 changes that the Government have introduced to massage the unemployment statistics, the more likely figure is 30 per cent., with well over 12,000 people unemployed.

The increase in long-term unemployment is horrific. Nearly 3,500 people in Sheffield have been unemployed for more than two years. Last Thursday I asked the careers office in Sheffield how many people were unemployed. I was told that 5,718 young people were unemployed and, that 4,753 young people were on the youth training scheme. That adds up to 10,471 young people who are chasing 17 vacancies. It shows the extent of the human misery in Sheffield, Central, and that kind of human misery is experienced in many of our inner cities.

Twelve thousand of my constituents are not, like some Back Benchers, playing at being unemployed for a week in order to gain cheap publicity. Unemployment is a disease, which cannot be understood by pretending to be unemployed. Many young people have never had a job since they left school. The pressures that are experienced by those who have been unemployed for more than two years cannot be appreciated by a Conservative Back Bencher who hops into unemployment for one week of so-called experience. It is a disgrace that he should try to obtain such cheap publicity and then walk off and make a television programme for a large sum of money.

My hon. Friends have already said that the Queen's Speech offers nothing to my constituents. Furthermore, it provides no assistance to industry and very little assistance to local authorities that have to deal with the day-to-day problems of unemployment and its knock-on effect. The programme outlined in the Queen's Speech is an insult. No effort has been made to bridge the divide between the north and the south and the employed and the unemployed. The only growth has been the growth of the human scrapheap. The result of the programme outlined in the Queen's Speech will be that unemployment will become even worse.

Towards the end of 1985 the Archbishop of Canterbury's commission produced its report "Faith in the City". It dealt in depth with the crisis and it called on the Government to take a series of special measures to alleviate some of the problems and to regenerate the inner cities in terms of both their social fabric and their industrial base. The Government's response was lukewarm. Indeed, certain prominent members of the Government were critical of that report. The Government's actions have been the very opposite of those advocated in "Faith in the City".

The local authority in Sheffield has tried to grapple with many of the unemployment problems. It has tried to develop co-operatives and to have a partnership with industry. It has enjoyed limited success, but what has the Secretary of State for the Environment done? He has rate-capped Sheffield and has also reduced the amount that it can spend by £70 million. That shows the commitment of this Government to a city which has the worst record of youth unemployment in the country.

On 7 November 1986, the president of the Sheffield chamber of commerce delivered a speech at the annual dinner of the chamber of commerce. The Sheffield chamber of commerce has been used many times in this House by Conservative Members to discredit local authorities, in particular Sheffield. However, the president said: The city council is only too aware that rates can continue to increase and it is actively seeking a solution. Some ideas are now being considered, which I am certain would not have made first place in the past. I would like to make one thing quite clear. No-one—and I mean no-one—could manage this city on a rate-capped level of £258 million. It is no use arguing that if certain actions had been taken in the past, things would have been significantly different. Is that not true of most situations? Would not some industries, or companies, or football teams be more successful today, or even be still in business, if they had taken a different decision in the past? The benefit of hindsight is available only after the event. The president began his speech by saying: It has become almost customary over the past few years for the gentlemen of the press to use this evening to collect some 'knocking' copy against the city council. This evening, gentlemen of the press, I am sorry, but you are going to be disappointed. Since the start of our respective years of office, the Lord Mayor and I have agreed that no useful purpose could possibly be served by haranguing each other". That is in stark contrast to statements that were made yesterday from the Dispatch Box. Furthermore, deplorable statements were made by the chairman of the Tory party at a dinner last night. The right hon. Gentleman seems now to be so paranoiac, bitter and twisted that he could not even run a whelk stall successfully.

This Government are universally condemned because of their vindictive, dogmatic and uncaring approach to cities such as Sheffield. If the Government do not rethink their policy, thousands of people could be thrown on to the human scrap heap in Sheffield, at great financial cost. Already the cost to the Exchequer of unemployment in Sheffield, Central is about £67 million a year.

Moreover, there has been deregulation of transport. At one time Sheffield had one of the most efficient transport networks in the country. However, fares have been increased by 300 per cent. and a further increase is in the pipeline. Furthermore, 2,000 transport workers have been made redundant. That is the state of play today, but the outlook is even worse. There is to be a further expenditure cut of 23 per cent. in 1987–88 and there is to be yet another cut of 20 per cent. in 1988–89. That will result in a further loss of services and more redundancies. Concessionary fares may also be put in jeopardy.

The impact of this policy on the vehicle building industry is unbelievable. Indeed, it may have dealt a mortal blow to the bus manufacturing industry in the United Kingdom. Who will gain from that? Conservative Members have shed many crocodile tears. Those who have taken advantage of deregulation by providing minibuses are continental companies. Few of the vehicles have been manufactured in the United Kingdom. Furthermore, those who benefited from the deregulation of coaches were manufacturers of coaches on the continent. Deregulation has not benefited United Kingdom manufacturers. The effect of deregulation on employment in south Yorkshire has been devastating. Voluntary organisations have had to curtail many of their activities. Deregulation has dealt a mortal blow to the social fabric of the city. For what purpose? Was it to prove a dogma or an outdated economic theory, or was it to reinforce the belief that one is never wrong?

The Prime Minister has tried to formulate industrial policy on her feet, which is not unusual, or by writing letters to Back Benchers — for example, to the hon. Member for Glanford and Scunthorpe (Mr. Hickmet), about the privatisation of the steel industry. I warn the House that if the Government privatise the steel industry in the manner outlined in that letter, it could sound the death knoll of the steel industry. Every other European steel industry is going in the opposite direction. They are going for economy of scale. To anyone who knows anything about the steel industry, the argument that steel workers will be asked to invest their redundancy money to buy shares in ludicrous.

I conclude by quoting part of the report "Faith in the City" commissioned by the Archbishop of Canterbury: It is not charity when the powerful help the poor … it is justice. That is what the British people are asking of the Government. There is no mention of that in the Queen's Speech.

8.40 pm
Mr. Charles Morrison (Devizes)

After the difficulties and gloom of the recession years, it is encouraging that some of the indicators are beginning to point in the right direction. I have no doubt that they will be helped along by the autumn statement of the Chancellor of the Exchequer. What pleased me more than anything else about his statement was the increase in capital expenditure of about £1 billion. I have been asking for that for some years. I welcome the Chancellor's action, as it will create much-needed infrastructural improvement and will push down the already falling unemployment figures a little further.

There is some cause for quiet satisfaction about the way in which some things are going, but it is not yet time to throw our hats in the air. Although we are doing better, other countries do likewise. As we have heard, manufacturing output has reached its highest level for six years, but it is still well behind the figure for 1979 and 1980. If we take the 1980 index for manufacturing output as 100, France has reached 98—but it has mostly had a Labour Government—West Germany has reached 110, the United States has reached 119.4, Japan has reached 122.3 and Britain has reached 105.6. There is an improvement, but it is nothing like enough.

On the plus side, since 1980, productivity has increased by 28 per cent. Even so, against that background, it is not surprising that employment in manufacturing is still falling, that import penetration is still growing and that the United Kingdom's share of world trade is still falling. Some believe that what we lose on the swings of manufacturing we regain on the roundabout of service industry. That is seriously to misjudge the position. Granted that service industry is responsible for 60 per cent. of the gross domestic product and manufacturing for only 20 per cent.; granted also that manufacturing employs only about 5.5 million people; but another 20 million people depend upon it in one way or another. Furthermore, such is the relationship in exports that a 1 per cent. fall in manufacturing exports requires a 3 per cent. rise in services to compensate.

No one in his senses would wish to detract from the achievements of the service industries—most notably the City of London—but, relatively, manufacturing industry remains far more important. This seems to have been recognised in other countries much more than in Britain.

Today, we have been reminded that manufacturing output as a proportion of gross domestic product has fallen in most advanced countries. The figures from the report of the House of Lords Select Committee on External Relations, Trade and Industry show that, in 1984, in the United Kingdom, manufacturing production was lower by 4.3 per cent. than it was in 1975, whereas in Japan it was 61.4 per cent. higher, in the United States it was 41.6 per cent. higher, in West Germany it was 16 per cent. higher, in Italy it was 22.1 per cent. higher and in the Netherlands it was 22.7 per cent. higher. Those figures show that, although manufacturing industry has fallen as a proportion of gross domestic product, it is only in Britain that manufacturing industry has fallen in absolute terms. That is a frightening thought, which must be kept constantly in the Government's mind.

The present state of the United Kingdom's manufacturing industry can be summed up as being much more efficient than in 1979, more productive, healthier, more realistic and more determined, but its great weakness is that there is not enough of it. What can we do to expand and develop it? There is no easy answer, but I should like to make some comments on education, attitudes and strategy, which to some extent are complementary to the remarks made earlier by my right hon. Friend the Member for Henley (Mr. Heseltine).

On education, we must create a better qualified, better educated and more highly skilled labour force. I welcome the announcement of the city technology colleges, the two-year youth training scheme and other training initiatives, but we must recognise what is happening in other countries. For example, only 53 per cent. of our 17-year-olds are still being educated. In the United States, the figure is 87 per cent., in West Germany it is 89 per cent. and in Japan it is 94 per cent. I realise that the concept of apprenticeships may have changed, but 10 years ago in the United Kingdom there were 100,000 apprentices. Now there are 40,000. Ten years ago in West Germany, there were 500,000 apprentices. Today, there are 600,000. Much more must be done in skill training and retraining. As a prerequisite, much more must be done to interest people in skill training. Even with the current high unemployment, skill shortages exist, especially in the south of England.

On attitudes, manufacturing industry must be given much more respect as the most important creator of wealth. If it is, it will attract more young men and women of ability. The City of London exists to manage wealth. Tourism is a characteristic of the expenditure of wealth. Service industries, to a considerable extent, would not exist without manufacturing industry to service. Those who mine, those who till the soil — they have been too successful —and above all those who turn raw materials into finished products are most responsible for the creation of wealth. Thus, they should be treated as an elite. We are not doing so to the extent that we should.

In Britain, also, we must learn to accept that we live in a small country. From Los Angeles to San Francisco is 350 miles. From New York to Washington is 237 miles. In each case, the latter city is considered local to the former. From Dover to Carlisle or the Scottish border is a mere 392 miles. From London to Sheffield is 160 miles. Yet in each case, we treat the latter city as though it was in a different hemisphere, despite good rail, road and air communications.

It is worth noting that the attitude in Britain is not held by incoming investors. I know of two Hong Kong Chinese clothing firms that have established factories in Britain in the past year—one in Liverpool and one just outside Newcastle upon Tyne. Those companies were established in those parts of the United Kingdom because the companies, the management in Hong Kong, having made the decision to set up business in Britain, looked first and foremost at where there was spare labour. Not surprisingly, they found that in the north and they went there. It was that consideration, not grants, which led those businesses to make those decisions.

A major mental effort is needed by United Kingdom business men and investors in new industries to accept that the British Isles are small, so there is an overwhelming argument in favour of development where there is a large pool of unemployed people and a manufacturing tradition. What is more, that must be done because there simply is not enough space to go on using up more and more land in the south.

But Government must give a lead, and here I come, last but most importantly, to industrial strategy. My right hon. Friend the Member for Henley referred to the views of the CBI. The director general of the Engineering Employers Federation recently wrote: British industry needs consistent understanding and support if it is to succeed in the hard and unforgiving markets of the world. The Government must constantly remember that in the harsh world free trade and competition may well be the theory, but worldwide too much trade is not free and too much competition is not fair. Hence, a developing partnership between industry and the Department of Trade and Industry is of immense and fundamental importance if British industry is to compete effectively. I was also very pleased to hear my right hon. Friend arguing again for an enhanced status for the Department of Trade and Industry.

My right hon. Friend the Secretary of State for Trade and Industry was encouraging today. May he have continued success in his endeavours to create a climate in which industry and business can prosper. Only if he succeeds can we guarantee a healthy balance of payments, falling unemployment, inner-city redevelopment and greater national prosperity.

8.52 pm
Mr. Don Dixon (Jarrow)

The Labour party's amendment refers to the lack of a Government strategy for securing a continued reduction in unemployment. My right hon. and learned Friend the Member for Monklands, East (Mr. Smith) was correct to refer to the famous—or infamous—remark by the chairman of the Tory party as Secretary of State for Employment when he suggested that the unemployed get on their bikes. What the right hon. Gentleman forgot was that when people who are made redundant move to an area for a job, usually the last in are the first out. My constituents have experienced that. People from regions such as mine find themselves in the midlands, or wherever they have gone for work, out of work and hundreds of miles from their friends and families. That is what happens when the Government try to turn us into a nation of industrial nomads.

The right hon. Gentleman also forgot that the young and active tend to move away from the community. They do not take the old people's homes, community centres, libraries or schools with them. They are left to be paid for by the community and there is nothing in the Queen's Speech to say that the £400 million which the Government have taken away from the five metropolitan districts in Tyne and Wear in rate support grant is to he repaid.

There is nothing in the Gracious Speech to help the 7,945 unemployed in my constituency. That is the Government figure. The unemployment unit figure is 9,428 people unemployed.

In reply to my Adjournment debate last week on unemployment in my constituency, the Minister referred to jobclubs. I do not know whether that is a Government strategy to create jobs. The only jobs that they create are for the people in them.

I do not know whether the Minister realises what it is like to be one of the long-term unemployed. Since the Government took office long-term unemployment in my constituency has increased fourfold, from 900 to almost 3,600.

What does the Minister think happens when someone who has been out of work for two or three years has a little envelope dropped through his postbox inviting him to go down to the jobclub? I go down to the jobclub and the interviewer says, "Look here, Dixon, they tell me that you have been out of work for a considerable time. What do you do?" I say, "Well, I am a ship's carpenter. I have worked in the shipbuilding industry." The interviewer says, "Well, I am sorry, you will appreciate that the shipbuilding industry has run down. There is no shipbuilding on the south side of the Tyne." In the whole constituency of Jarrow only five men are involved in shipbuilding. Hawthorn Leslie's, which employed almost 3,000 people in 1979, is now closed. Palmers is on care and maintenance. Mercantile dry dock, which employed almost 400, is now closed.

"I am sorry, Mr. Dixon," the interviewer says, "but shipbuilding is definitely out. Is there anything else that you can do?" I say, "Well, I bought a plot of land and built my own house." The interviewer says, "Oh well, there you are, you will appreciate that the local authority which, five or six years ago was building 700 houses a year, built only 46 last year and is building 25 this year."

The housing investment programme allocation to the local authority which was £14.3 million when this Government were elected is down to £5.3 million. To keep up with 1979 value, it would have had to be almost £27 million. So the local authority are getting only one sixth of the amount of money that it was getting in 1979 to build and maintain its housing stock. So it is no good expecting a job in house building.

The interviewer asks, "Is there anything else, Mr. Dixon, you can possibly do?" I say. "When I was in the army and I used to be put on jankers I would be sent to the officers' quarters and told to cut grass with a pair of scissors." The interviewer says, "We may be able to help you with something there. We may be able to send you down to the local authority and it may have some grass cutting job for you." I say, "But I read in the paper the other week that because of the cuts in the rate support grant the local authority is paying gardeners off, so how on earth could it employ me, a ship's gardener, to cut grass?"

That is the Government's idea of artificial jobs. The local authority pays off experienced gardeners and then we go along and, under the Manpower Services Commission, people who are trained to build ships or houses are given money. That is what the jobclubs are for. That is what we are talking about. Do not let us have this academic nonsense when we talk about unemployment.

The problem is that some Conservative Members have never seen a pair of overalls, let alone worn them, yet they talk about unemployment. The hon. Member for Macclesfield (Mr. Winterton) talked about paying men. Certainly we want to pay men. People want to be employed. They want to go out and earn a living for their families. That is what this is about. The majority of people about whom I am talking are not percentages or statistics, they are wage earners and bread winners — one-parent families and married people who want to earn to support their families. That is what we should be addressing ourselves to in the House.

Other hon. Members want to speak, so I do not want to take up too much of the debate today. But when hon. Members debate unemployment in the House, I wish that they would talk about people, not about figures, percentages and statistics.

9 pm

Mr. Robert Harvey (Clwyd, South-West)

Three and a half years ago, I was elected for Clwyd, South-West, a constituency where the unemployment rate stood at about 18 per cent. At that election, like other Conservative party candidates up and down the country, I said that, contrary to the claims of the Opposition parties, inflation, which affects the climate of industrial investment and which had been brought down from 15 per cent. to 5 per cent., would not rise again as soon as the election was over. In fact, it has remained at 5 per cent. or lower for all of those years.

Like other candidates, I claimed that economic growth, which was about 2 per cent. that year, would continue to be maintained. In fact, it has been higher since then, with growth last year exceeding that of any other western country, even that of the United States. That is a remarkable recovery by any standards. I claimed, along with other Conservative candidates up and down the country, that the Government would stand up to extremist union minorities that sought to railroad their members into unwanted strikes, and from the miners' strike onwards that has been the case.

This Government have delivered. The story of this Government has been one of constant, uninterrupted, solid, even dull achievement, based on sound finance, while never ceasing to increase Government spending in the areas where it really matters, such as the NHS and education. Yet there was one area in which I felt that achievement was missing. I refer to the decline in manufacturing industry and the level of unemployment, which was running at more than 3 million. I believed that the unemployment figure was unlikely to fall unless special action was taken to bring it down. I believed that we were facing something unique, and quite different from anything that had gone before — something that the economists have no name for, although I shall try to give it one: jobless growth. Never in any previous period of such sustained growth in British history has unemployment failed to fall as it has this time. As the economy has recovered and expanded, the level of joblessness has stayed—until very recently—exactly where it was. Indeed, I welcome the fall in the latest figures.

The answer of the Labour and alliance parties has been to say that we should expand the economy still faster. If the present level of expansion is failing to generate jobs, there is no reason why a much faster rate should be expected to do so. Moreover, much faster economic expansion, on the scale advocated by the Opposition, would destroy the sound foundations for our present level of economic growth. No, that is not the answer.

What is the cause of the problem of jobless growth? Of course demographic factors have in part been responsible. Of course the number of part-time jobs has grown encouragingly and dramatically. Of course the high level of wage settlements has continued to price workers out of jobs. Yet all of those things, even together, do not explain how unemployment can stay above 3 million after five years of economic growth.

I am passionately convinced that unemployment has failed to fall because we are witnessing a modern industrial revolution. The new high-tech industries that are replacing the old are creating more wealth but employing fewer people. That must be welcomed. The opportunities for a more leisured and prosperous society are huge, and in the long run new service industries should reduce the level of unemployment. But in the short term, there are hundreds and thousands of victims of this process, unskilled and semi-skilled people being shaken out of the traditional industries. They had to be shaken out of them, because there was no future for them. [interruption.] Those people are now stranded in the twilight zone of idleness that is the lot of the unemployed. It is interesting that the Opposition should find the lot of the unemployed so amusing.

Thus the Government had to get to grips with an entirely new problem. I have long felt that the Government should be prepared moderately to relax the fight against inflation in an attempt to help the unskilled and semi-skilled, who would otherwise have no hope of a job. This time last year in the House I urged the Government to embark on a carefully targeted programme of job creation through investment in public and private housing. I also believed that they should concentrate on a skills programme to help workers adapt to the new technological revolution.

Finally, it seemed right that, if there is to be more wealth and less work in society, that work should be shared more equally by encouraging a shorter working week, early retirement, job sharing, and so on, for those who want it, within the proper economic constraints. I still urge the Government to embark on a long-term review of the impact of new technology on working patterns, and to introduce a reduction in the age of qualification for the job release scheme to 60, so that those who seek earlier retirement can take it, and in so doing—as we heard earlier today — create 50,000 jobs at a cost of £132 million. That is surely one of the most cost-effective methods of cutting dole queues while assisting those who have done arduous jobs all their working lives.

I have, however, long been deeply critical of the view that tax cuts, however desirable they may be in themselves, are a cure for unemployment. After all, the standard rate of income tax has fallen by 4p in the pound since 1979, but unemployment has not fallen. For that reason, I was unable to vote for the 1p reduction in the standard rate that was a feature of last year's Budget. By contrast, after the autumn statement I could not but warmly commend my right hon. Friend the Chancellor of the Exchequer on the realism and courage that he had shown. That my right hon. Friend is not the monetarist dogmatist, as he has for so long been portrayed by the Opposition, is obvious from the way in which he has allowed M3 to rise by 18 per cent. this year. Some may criticise that as irresponsible but the Opposition cannot possibly consider 18 per cent. too little.

The Conservative party is not one that is given to dogma. Above all, it is pragmatic. If one approach is not yielding results, the party has always had the courage and common sense to learn from experience. Without abandoning his absolutely correct goal of keeping inflation under control and retaining international confidence in the economy, the Chancellor of the Exchequer has used the money that the success of his policies has made available to seek to reduce the present unacceptable level of unemployment through spending on local authorities and education and, above all, a massive increase in spending on housing. That is an act of political courage and responsibility and is not to be confused with the sort of binge that is being urged by the Opposition, which is to increase spending by £26 billion.

My right hon. Friend the Chancellor of the Exchequer has not stolen the Labour party's clothes, because they are at least six times too big. Nor has he indulged in a pre-election spending spree of the sort with which we are all too familiar under previous Labour Governments. The difference is that the Labour party usually spends money that it does not have while the Government are spending money that they do have. With the public sector borrowing requirement still running at only £7 billion and with Government spending as a proportion of gross domestic product continuing to fall, there is no danger of inflation as a result of these measures. The money that is being spent has been earned and will not have to he paid for in future.

Over the past seven years our economy has been one of the most consistently strong performers in the western world. The only charge that can be levelled against the Government is that of erring on the side of caution, and that charge can no longer be levelled after the autumn statement. The great tradition of the Conservative party is to let those who want to better themselves and get ahead do so, and enrich all of society in the process, while helping those who cannot help themselves. That is what the Government have done and I hope that when the House comes to debate the autumn statement the Opposition will have the good sense and honour to support the economic measures that are wise and bold and with which they surely cannot disagree.

9.8 pm

Mr. John Prescott (Kingston upon Hull, East)

The hon. Member for Clwyd, South-West (Mr. Harvey) reflected a great deal of what has been said in the debate, and I mean the whistling in the wind and the rhetoric about the success of the Government's policies that have come from Conservative Members. At the same time, Conservative Members have expressed extreme concern about unemployment and the decline in manufacturing.

Earlier in the debate there were many more hon. Members in the Chamber than there are now. The right hon. Member for Henley (Mr. Heseltine) referred to the number of Conservative Members present and said that it illustrated their great concern. That concern lasted only until the end of his speech, when he left the Chamber not to return again, taking his cohorts with him.

Most of the evidence that has been adduced by hon. Members on both sides of the House is that many of the indices of the economy are reflecting the crisis that we are witnessing in the balance of payments, real interest rates and the investment level in manufacturing, which is below that which prevailed in 1979, and not success. Many areas of the economy show the decline over which the Government have presided.

One of the constant themes of the debate has been the decline of manufacturing industry. The hon. Member for Devizes (Mr. Morrison) said, correctly, that, while it is true that manufacturing is declining in most developed countries, it has not declined in any of them at the absolute rate at which it has declined in Britain. That is one of the strategic facts about the basic British economy to which any Government must address their attention. When the oil money runs out, that will create real problems, because we will still have to finance an economy on this scale and we will also have the ever-increasing problem of the balance of payments.

It was suggested that the Government may be running into an economic crisis. I did not hear the speech of the right hon. Member for Chesham and Amersham (Sir I. Gilmour) but I understand that he said that perhaps the Opposition would not like to inherit the problems that are coming. That is true, but I am afraid it is the lot of Labour Governments in the post-war period to inherit the problems of Tory Governments. That is true of whatever period one cares to select. We have constantly had to deal with that sort of problem.

Little has been said about unemployment, and I was amazed that at Question Time the Paymaster General found it difficult to say whether he could make an assessment of the real figures of unemployment. For him to doubt that an assessment could be made is flying in the face of evidence. The claim last week that unemployment had dropped by 20,000 was welcome, although the drop had more to do with the fiddling of the community programme schemes, the availability interviews and the Restart programmes. Given that there was a reduction of 20,000, that was over the 90 months during which the Government have been in power, because in 81 of those months unemployment increased at that rate each month. The Chancellor of the Duchy of Lancaster said in a speech that 600,000 jobs would he lost if a Labour Government were elected. More jobs than that have been lost each year over the time that the Government have been in office.

Mr. Thurnham

Will the hon. Gentleman give way?

Mr. Prescott

No, I do not have enough time.

For the Chancellor of the Duchy to suggest that that might be the cost of installing a Labour Government is hypocrisy. Perhaps I could give the Paymaster General a list showing 18 changes that have been made to the unemployment figures. I do not want to deploy that argument again, but officially I shall give him the list and perhaps he will write to me if he thinks the figures are wrong. They show the adjustments that the Government have made since they came to power. I shall not dwell further on that, except to say that, if one looks at a House of Commons Library paper about unemployment and the adjustments and changes that have been made, one sees that there have been nine large changes. Two of them increased unemployment by 43,000 and the others decreased it by 380,000. That is a considerable difference.

The House of Commons Library is much respected by all hon. Members and the research by the people there is generally accepted. They have prepared a document about unemployment and perhaps the Paymaster General will look at it to see whether he accepts that the level of unemployment is considerably greater, quite apart from the schemes, than the level given officially by the Government.

I have looked at statistical changes by the Government and in four Government Departments a survey carried out by the Library found that since 1979 the Government have made 100 adjustments to the statistical data. The Government have not only been fiddling the unemployment figures; they have been fiddling figures in a number of Departments. Perhaps we could take as an indicator the number of people who are employed and see how many people are employed now and how many were employed in 1979. The figure has fallen from 22.6 million to 21 million. That is a fall of over 1.5 million in the number of people in work. That shows the scale of the decline since 1979 and the reality of unemployment.

The Minister denied that there was intimidation at the work activity interviews or restarts and said that they were not designed to remove people from the unemployment figures. However, more and more evidence shows that that is not true. We all receive many letters about intimidation. He did not chose to deny today that in the Devon area 70 per cent. of people referred to the adjudicator were restored to benefit. That must show that the amount of interviewing in the early stages is intimidating people in order to remove them from the list. The adjudications show that. The Paymaster General claims that as one of the successes of his system, but the fact that 70 per cent. of people are being taken off at first interview shows that his Department should look much more carefully at the way in which interviews are being conducted.

I have before me a report in the Yorkshire Post of 13 August 1986 about a women who was refused a place on the community programme scheme because she was not registered as unemployed and was therefore not eligible for benefit. A top civil servant, Mr. Fodgen, appeared before the tribunal and according to the article, admitted that this had the effect of reducing unemployment figures, and that this had been a factor in the decision of Ministers to change the criteria. That was said before a tribunal by an under-secretary in the Department of Employment.

I do not know whether the Paymaster General is going to rush to the Dispatch Box to give an answer similar to that which he gave when we gave him evidence of an official who had told people, "You must get 30 thrown off the list to earn the money to pay for your wages." He was referring to the "bounty hunters". The Paymaster General disowned that official, saying that the official had had no authority to make such a statement. The right hon. and learned Gentleman was right, but I hope that he corrected that attitude among officials. Yet here there is a top civil servant from his Department appearing before the tribunal and saying that the Government's policy is to use the community programme to reduce the unemployment figures. I give way to the Paymaster General.

Mr. Kenneth Clarke

I am grateful to the hon. Gentleman for giving way, because, for reasons of time, I was not going to intervene. On his first point, one of the main reasons why benefit is withdrawn from people is that they have failed to attend an interview about their employment. That is a long-standing rule. As the regulations now stand, a person has to fail to attend two interviews before benefit is disallowed. But half those people do attend an interview and are reinstated. That is, in part, the reason for the figures from Devon and everywhere else.

Ms. Clare Short

That comes before the cases go to the adjudicator.

Mr. Clarke

I have not seen the Devon figures. Half those whose benefits are suspended for failure to attend an interview get their benefit back, either because it is reinstated by the adjudicator or because they turn up at an interview. I shall have a look at the Devon figures.

On the hon. Gentleman's second point, we have chosen to make the community programme available to those who receive benefit because that is the best test of those in greatest need of the work experience available under the community programme. Of course it has an effect also on the unemployment statistics. But we are talking about the 3 million unemployed, and the hon. Gentleman can hardly object to the fact that we concentrate the community programme on those whose conditions we constantly debate in the House.

Mr. Prescott: I think that the Paymaster General has not denied what the civil servant said. It was one of the criteria used by the right hon. and learned Gentleman. He should be aware, with respect to what he said about the adjudicator, that these are cases that have been suspended and have arrived at the adjudicator. Seventy per cent. of them have had their benefits restored. The right hon. and learned Gentleman needs to bear that point in mind.

I am concerned about another matter. The right hon. and learned Gentleman says that he has not seen the Devon figures in the press, as I did. It is about time he demanded the figures from all the trial areas to find out what is going on in those areas. I hope that tonight he has learnt the lesson and that he will go to the trial areas to see whether victimisation is occurring at interviews.

The Government make great claims about 1 million jobs, but they have created part-time, self-employed work. For example, part-time employment has increased considerably. That is a major part of the jobs involved. It would be fair to see what has happened to full-time equivalents in work. Under the Labour Administration, the number increased by nearly 100,000. Under this Government, it decreased by 1.5 million. That is another reality of the change in the market.

The Government make great claims about the self-employed and say that they are concerned about the figures. Under the Labour Administration, the number increased by 342,000. Under this Administration, it increased by five times as much to 1.5 million. The reality is that the definition of employment is based on a 5 per cent. survey. It is a simple projection based on surveys, not a definition. The Paymaster General says that he cannot get a figure to find out the number created by the adjustments in the unemployment figures, but it does not stop him fiddling the self-employed figures which are based on a 5 per cent. survey and not on a count of the number of self-employed. We very much resent the double dealing by the Government which is exposed in these figures.

The Government are now claiming that there are more vacancies than before. The vacancy level is equivalent to the level of 1979. That is claimed as a success by the Government. They usually use, not 1979, but 1983. That is what they keep referring to. They do not go back to 1979. There are a couple of interesting points about those vacancies. First, in 1979, unemployment was one third of what it is now. To compare vacancy rates is hardly the same in that situation. Secondly, the proportions of vacancies provided by community programmes in 1980 was 2.5 per cent. It has now reached nearly 15 per cent. The Government are offering those part-time low-paid, skivvy jobs on community schemes, calling them vacancies and then saying that vacancies are at a record level. Not only do they fiddle the unemployment and employment figures but they are now fiddling the vacancy levels by providing community programme schemes. That is the record of the Government. That is the record that nobody has time to listen to when they explain the position on unemployment.

That kind of argument would have fitted Goebbels well. In an article in The Guardian the Chancellor of the Duchy of Lancaster said that Labour's policy would cost 850,000 jobs. Nearly as many as that have been lost every year since the Government took office. I looked at the justification for that. Apparently, 600,000 of those jobs would be lost by the implementation of a minimum wage. I do not know what is the evidence for that. Nobody has provided any evidence. The assumption is that £120 will be paid, which is the minimum common decency rate under the Council of Europe. As we point out, there are 1 million full-time workers who are paid less than £80 a week and there are 3 million full-time workers who are paid less than £100 a week. One has to make a judgment as to whether to pay £80, £90 or £100. That judgment has not been made by the Labour party. One cannot assess the cost or the jobs lost. It is fiddled, as they fiddled the cost of Labour's programme.

It is claimed that 150,000 jobs will be lost as a result of sanctions on South Africa. Where is the evidence for that? Where is the justification and the research? The hon. Member for Barrow and Furness (Mr. Franks) — he made many remarks about hon. Members not being present and he is not in the Chamber now—said that 100,000 jobs would be lost because of our nuclear energy programme. He said that Sellafield would close overnight. We believe in phasing out nuclear energy. However, if anybody believes that we can phase out nuclear energy before the next century he is living in cloud cuckoo land. Anybody knowing the technical problems involved in phasing out nuclear energy, no matter how one plans to go about it, knows that it is extremely difficult to implement and to start the reprocessing for which Sellafield is needed. We hear election rhetoric. People are trying to scare those in jobs in the nuclear industry. Again we hear the typical Goebbels slander that we heard from the right hon. Member for Chingford (Mr. Tebbit) about the BBC. He is now getting ready for the election. Whatever the argument, clearly there is no substance.

One theme that has come through in the debate, which apparently caused controversy—I am shocked that it should cause controversy—is that for decades Britain has not trained enough of its people. Labour Governments and Tory Governments have not trained enough members of the labour force. There is no doubt about that. If we look back to the debates of 1964 when the Tories established the industrial training boards, the analysis then about the shortage of every type of skill, traditional and modern, and in information technology is the same today. In fact, it is considerably worse now because the Government have abolished 16 of the industrial training boards. They have got rid of the levy system and the Manpower Services Commission has closed 29 of its skill training centres.

The hon. Member for Devizes spoke about the scale of apprenticeship decline in this country and about our training compared to our competitors'. He rehearsed the arguments on training, competition and competence that are to be found in documents that have been produced for us all to read. The reality of training in Britain is that we have never done enough. We are certainly doing less now and we are even short in some of the basic trades—

Mr. Thurnham


Mr. Prescott

Sit down.

We are short of workers in some of the basic trades such as bricklayers, plasterers and all those involved in housing building programmes. In the construction industry, there has been a collapse in the number of apprenticeships from 65,000 to 49,000, and that industry maintains the levy system. [Interruption.] Those apprentices have been replaced with cheap YTS labour. So in the construction industry there are many semi-skilled people who cannot get work. We do not have the bricklayers or plasterers to provide the skills. That is what we are desperately short of. If anyone is in any doubt, he should look in a jobcentre, at the little notice that says, "We want a bricklayer, not a time-served bricklayer. None of the YTS or community scheme 12-month jobs. We do not want them. We do not want to pay for training." Industry has never wanted to pay for training. Even in engineering—

Mr. Thurnham

Will the hon. Gentleman give way?

Mr. Prescott

Sit down.

Even in engineering, 24,000 apprenticeships have been reduced to 9,000. There has been a loss of 150,000 apprenticeships in engineering and manufacturing. Even the Butcher report for the Department of Trade and Industry said that we are desperately short of people for modern information technology, computers—all those sort of things. The Government's own report says that.

The reality is that our industry has always seen training as a cost. It has never wanted willingly to put money into investment on training. There are some good exceptions, such as Rolls-Royce and Jaguar. It is interesting to note that Jaguar spends 1 per cent. of its turnover on training, not such an astounding figure, but one that the Minister always claims. Jaguar has not been destroyed by setting that figure. According to the Secretary of State, it is a success symbol. Why? Because it puts in sufficient investment, it gets the productivity. That is at the heart of what we are talking about—not wages in relation to productivity, but how much we put into investment and improve design and productivity.

People suggest that if British industry paid a I per cent. levy, that would be destructive of British industry. The fact that it is not spending 1 per cent. is destructive.

A comparison has been done on how much the British spend on training as a proportion of their turnover. We spend 0.15 of 1 per cent. on training, which is the equivalent of £2 billion, according to the Manpower Services Commission. Most of our competitors —Germany, Japan, the United States and others—spend 3 per cent., which is about £30 billion compared to our £2 billion. The result is the difference in skills and apprenticeships, training, and competition. The hon. Member for Devizes catalogued some of those differences.

The public sector is no better. It has been ditching training and apprenticeships as fast as the private sector. All the nationalised industries have been doing it in their desperate desire to get the return on capital to show that they are profitable in the short term while not investing. The public sector has been just as bad. The Government have put pressure on the figures so that it ditches investment and treats training as a cost, not as an investment. We have found constantly that the public sector has done those things.

Let me make it clear that there will be a radical training programme which meets our needs. It will have to be financed by levies, grants and some form of industrial boards and organisations. Those will be the means by which we finance the training programme. If industry abroad does it and British management will not, what alternative is there for the Government? There is only one. The Government believed that if one gave the money back to industry, it would invest. The Government have given £30 billion back in corporation tax, but it was not put into investment or training. It was put into a massive outflow of capital abroad, to invest in the countries of our competitors.

We are not prepared to tolerate Britain being turned into a semi-skilled skivvy nation. We have to train our people. We have to pay for them. One thing is for sure: industry should carry its fair share of those costs just as its competitors do. Believe me, industry will carry its fair share and its costs of that training. [HON. MEMBERS: "Oh."] Yes.

I shall tell the House something else. In all the industrial training boards before, there were so many exemptions from paying the levy that 75 per cent. of companies got out of paying it. We cannot tolerate that.

We all have to pay a fair share towards training. If industry will not do it, the Government are the only body that can deal with that strategic decision. If the 1 per cent. turnover shakes people, let me tell them that it was Mr. Geoffrey Holland, the director of the Manpower Services Commission, who in a paper to the commission made it clear that he thought that it should be about 2 per cent. of turnover. A Labour Government would do something about training.

During the debate on the Queen's Speech, some hon. Members claimed that the expansion of public expenditure was welcome. The proposed public expenditure is a bit of a fraud. The proposed £8 billion is to deal with over-expenditure. In reality, that is not a great deal of money, but it is a figure that stands out. It just covers the overexpansion in a number of local authority budgets. As the right hon. Member for Henley said at the time of the 1983 election, "Spend, spend, spend".

Some £400 million has been put aside for housing. We know that the requirement is for some £20 billion and that local authorities have about £6 billion in their accounts from capital receipts. Talk of £400 million is, therefore, an insult when there are 500,000 building workers unemployed and when 2,000 houses a week fewer are being built now than under the Labour Administration. It clearly makes sense to put the resources, people and demand together to create jobs.

Hull has devised a plan to build 1,000 houses. It is possible for local authorities to enter into a housing programme, undertake proper training and so meet the training needs to provide the skills needed in those housing programmes. A total of 5,000 jobs would be created over a five-year period at a cost of £66 million a year. That is a properly costed figure. We can make a judgment about whether we are prepared to finance that programme, but that order of expenditure can begin to produce jobs. Let us make no mistake about that.

Local authorities can and have created a considerable number of jobs. The Secretary of State for the Environment sneered at local authorities that do a very good job fighting to maintain services and jobs against a hostile Government, who have taken £20 billion off local authorities in rate support grant and then produce the kind of schemes described by the Paymaster General when he went to Southwark and offered it £8 million for the task force scheme, which is intended to co-ordinate jobs.

My hon. Friend the Member for Newham, North East (Mr. Leighton) recently asked how many things had been done under the new task force. He was told that 31 projects had been initiated. Interestingly enough, one in three of them are training projects, which again reveals the failure in training. About £1.3 million has been spent since February — not a large amount. It is approximately £40,000 for each project. I am sure that most of the projects have been well used. One is a feasibility project for a shop selling ethnic culture items in Leeds. I am sure that there is a need for such a project, but it is hardly the kind of housing programme or jobs that we need to get people in our inner cities back in employment.

I have many examples of similar projects, such as a feasibility study to set up a nursery in Leeds. That is great, but Leeds needs more jobs than can be provided in a nursery. There is a feasibility study for a co-operative shop on the Gloucester Grove estate in north Peckham. I do not doubt that there is a need for such projects, but they are peripheral and marginal to the problems in the inner cities.

If the Government want a policy for local authorities to create jobs such as that envisaged through the task force, they should ask the local authorities to provide alternatives. Indeed, Southwark has sent the right hon. and learned Gentleman a plan that would create 5,600 new jobs at a cost of £135 million, costed in capital and revenue, at an average cost of £9,000. Of these, 20 per cent. are in housing and 20 per cent. in social services.

Do not think that jobs in the social services are not needed. There was a demonstration today by COHSE about mental health welfare. This caring Government are throwing patients out of mental hospitals into the community to be cared for, yet they do not give any money to local authorities to look after them. That is the kind of community care that exists. When Southwark talks about providing jobs in mental health care or in caring for old people, it means real jobs meeting real need with real money. That is the alternative course that a Government can take.

The Labour party offers that alternative — not the skivvy community schemes of the Tory Government. We have an alternative for providing real jobs through local authorities, nationalised industries and the regeneration of our industrial base. Given that chance, we will return Britain to work in a positive way.

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

Last month saw the third successive fall in the seasonally adjusted level of unemployment and we have seen the largest three-month fall in the figures since 1973. At one point, I almost thought I heard grudging approval of that from the hon. Member for Kingston upon Hull, East (Mr. Prescott), but like most of his Back Bench colleagues he has responded to three months' encouraging news by trying to denigrate and discredit the figures which show that desirable trend.

The hon. Gentleman said that he did not want to debate the figures and I certainly do not wish to go through that whole debate again. At Question Time today I answered every question on the Order Paper about the figures and I answered in full. I will enter into correspondence with the hon. Gentleman, who is still in a complete muddle about the figures. So far as we can tell, the "Devon figures" to which he refers relate to an experiment being carried out at Newton Abbot in relation to availability for work and quarterly attendance for benefit. So far as we know, no one has ever been deprived of benefit as a result of that experiment, but I will happily deal with all those matters in correspondence with the hon. Gentleman and put the information in the Library.

The hon. Gentleman cannot undermine the encouraging trend which so worries Labour and Liberal Members, because total unemployment has indeed begun to fall. I will discuss availability testing, which has caused so much fuss, on another occasion, but that had not even come into effect nationally when the last figures for the quarter were produced for October. We have the highest level of vacancies since 1979 — more than 200,000 — and the figure is still rising. That is not affected by any of the changes, either. There is also an increase in the number of people employed.

Mr. Prescott

That is the community programme.

Mr. Clarke

The number employed has increased by more than a million since the last general election and by more than 200,000 in the last full year. The seasonally adjusted figures that we use for vacancies do not include the community programme. Time and again the hon. Member for Kingston upon Hull, East makes rash assertions on the spur of the moment which do not stand up to examination.

Total employment has now been rising for 13 successive quarters. That steady increase is the best that we have seen for a generation in this country. Of course, we need to do better than that. I agree with my right hon. Friend the Member for Henley (Mr. Heseltine) and my hon. Friend the Member for Wyre Forest (Mr. Bulmer) that unit costs are still too high and that we must break some of the had traditions of British wage bargaining to accelerate the growth of new jobs.

Mr. Dave Nellist (Coventry, South-East)


Mr. Clarke

That does not mean a low wage economy. We want a high wage, high productivity, high performance economy but the high productivity and performance must come before the high wages to keep unit costs in line with profits.

Mr. Nellist

Will the Minister give way?

Mr. Clarke

I know that the hon. Gentleman was unlucky in not being called in the debate, but I am afraid that I must press on.

I wish to address myself to the problem underlying all that has been said about employment today. Unemployment is too high. That is why I take comfort in the trend now being established, which the Government seek to maintain and accelerate. When people try to analyse the problem and make speeches of the kind that we have heard from the Opposition today, they seem to forget that a total of 3 million unemployed, which is where we are, represents a high level of flow into and out of employment. It is not a standing army of 3 million people who are out of work all the time. Last month, for example, 521,400 people left the ranks of the unemployed while 434,800 joined those ranks. The difference produced an encouraging 95,743 fall in the headline total. Most of the people who had become unemployed for the first time were, willingly or unwillingly, between jobs. Half of them will have found jobs within three months and eight out of 10 will have found a new job within one year. That is why we concentrate on the long-term unemployed.

When considering how the economy is performing and trying to understand why the Government are emphasising the long-term unemployed in their unemployment policies, we should be aware that about 88 to 89 per cent. of our labour force is in work at any given time. Some hon. Members have deprecated the fact that people in work are getting better off all of the time. About 11 to 12 per cent. —at the moment 11.7 per cent.—are out of work, but many are willingly or unwillingly between jobs. It is the more than I million long-term unemployed — 4.9 per cent. of the work force—who are the social problem to whom we should address ourselves, and about whom the hon. Member for Jarrow (Mr. Dixon) made an entertaining, but slightly inaccurate, speech.

It is the core of long-term unemployed people who are suffering the hardship of being unable to share the rising living standards which the vast majority of the rest of the population are beginning to enjoy. That is why we have made the long-term unemployed the target of our effort. They have replaced, as our first priority, the young unemployed.

Mr. Laurie Pavitt (Brent, South)


Mr. Clarke

I shall not give way. They have replaced the young unemployed as our number one priority because youth unemployment is now steadily improving. The number of under-25s out of work has gone down by more than 60,000 during the past year. The rate for the under-25s has dropped, although it is still too high, to under 19 per cent., which is well below the European Community average. With the youth training scheme and other efforts, we are experiencing a steady drop in unemployment among the under-20s — about 20 per cent. during the past three years.

Now that the economy is growing and the country is getting wealthier, we must not develop a society in which a large core of workers prosper in the labour market while on the periphery there are people who have been allowed to drop out of the labour market altogether. That is where the package of policies that we call restart fit in.

Opposition Members, who express concern about this long-term unemployed group of people who are at risk of dropping out of the labour market altogether, should consider what they say and the effect of their actions when they denigrate the restart programme and the attempt to help the long-term unemployed.

It is almost wicked to attack restart, because it demoralises the staff whom we have taken on to help the long-term unemployed, and it puts off those whom we are trying to help. We are tackling the problem of long-term unemployment because the growth in employment and vacancies is making it steadily easier to give them positive assistance. Opposition Members have not even bothered to visit their jobcentres and to get in touch with people to find out the difference between the various proposals.

The hon. Member for Jarrow, whose constituency I know well—I have considerable concern for unemployment there — made an entertaining and witty speech about what he called "these job clerks", who he thought were the sum of the restart programme and were giving no help. He was led astray by the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) who has said that jobclubs are places where young people get together and talk about employment.

Jobclubs are the beginning of what we are doing. They are an idea that we imported from America. Long-term unemployed people are brought together each day and apply for at least 10 jobs a day. They have the skilled support of somebody in the jobcentre and receive the support of free correspondence, free telephones and advice.

I first came across these jobclubs when they were being tried out in the north-east — in Durham and Middlesbrough. We are now spreading them very rapidly. The hon. Member for Jarrow dismissed all his and said that we should talk about people rather than statistics. I have with me a press notice issued today by the Sunderland jobclub, which is not far from the hon. Gentleman's locality. That club has now been operating for 15 months and out of 145 people who went along, 105 have now got jobs—[HON. MEMBERS: "Hear, hear."] They celebrated their century with a man who got a job as a heavy goods vehicle driver. It is utter rubbish to say that these are skivvy jobs. they are real jobs.

Labour Members must realise that as the economy expands— [Interruption.] The Opposition do not want to listen because they are seeking to discredit the figures and the schemes that they have inaccurately described.

There is a mismatch between the long-term unemployed seeking the work and the jobs that are increasingly available in the economy. Often there is a combination of people on the one hand who have given up looking for work, who are not good at searching for it or who lack essential skills and, on the other, of employers who cannot find workers. Not all such employers are poujadistes or hard-liners. There is a genuine difficulty in the system. That is why we have introduced our restart programme, which offers jobs, work experience, training and subsidised self-employment. It is having considerable success.

On top of the £3 billion worth of employment and training schemes in the Department, we have only recently announced an extension of jobclubs to 1,000 throughout the country. We shall extend restart in pilot areas for those who have been out of work for six months or more, and we are piloting the new job training scheme which will guarantee a training place to every long-term unemployed person under the age of 25.

Mr. Leighton


Mr. Nellist

I am here as well.

Mr. Clarke

I give way to the hon. Member for Newham, North-East (Mr. Leighton).

Mr. Leighton

I am grateful to the Paymaster General. We are listening to him closely, and I agree that we should all visit our local jobcentres. I have visited mine and have discovered that of more than 3,200 people interviewed, only 24 have got jobs.

Mr. Clarke

That is a grotesque and deliberate underestimate of what has been produced. The hon. Gentleman has mentioned the figures for those who have been referred directly from the interview to a job. Such numbers are quite small because we are talking about people who have been out of work for 12 months whom the interviewer has fixed up with a job. The hon. Gentleman knows that he must add all those who have gone on to the community programme, work experience, training, the enterprise allowance scheme and restart advice sessions. He also knows that most of those who attend restart courses do not report back. We do not know where the people who have come off the register have got jobs or training. However, the hon. Gentleman is taking the narrowest and most inaccurate figure that he can find in an attempt to denigrate what we have done.

We undertook a preliminary survey in the pilot areas because we wanted to know what was happening. I have not relied on the results too heavily, but we chased up those who had gone off the register since our first pilots and scarcely believed the results ourselves. When asked why they had stopped claiming benefits, 60 per cent. replied that they had got a job. We shall follow that survey up to see whether that is so.

This placing of people through the employment services into the economy—which Labour and Liberal Members spend most of their time trying to denigrate — flows from the success of the mainstream economy, which has been expanding for six successive years and is beginning to absorb back into our labour market all those with skills and training as well as an increasing number of young people and long-term unemployed. Within that macroeconomic policy on which all, in the end, depends, is the growth that my right hon. Friend the Secretary of State describes.

Many hon. Members — largely Conservative Members, including my right hon. Friend the Member for Henley and my hon. Friends the Members for Macclesfield (Mr. Winterton) and for Devizes (Mr. Morrison), but also the right hon. and learned Member for Monklands, East (Mr. Smith) — concentrated particularly on the key role of the manufacturing sector in our economy. They pressed that we should give proper priority to it. I wholly agree with all those who stressed the importance of continuing to restore the strength of the manufacturing sector of our economy. It must play a key role in our recovery. It is essential that the efficient production of manufactured goods contributes to the country's wealth.

As my right hon. Friend the Member for Henley said, one is talking about reversing a position which began, not in 1979—he measured it in terms of the loss of our share of world trade — but at the beginning of this century. This debate has taken place in the Chamber on and off for a long time, and my right hon. Friend the Secretary of State addressed himself to that. We do not throw our hats in the air, but it is encouraging that, since 1981, to use the yardstick of my right hon. Friend the Member for Henley, manufacturing industry has successfully held its share of world trade. We are seeing an increase in manufacturing output and manufacturing investment. and, obviously, we must sustain that.

I do not get excited about whether we use the term industry or strategy. I am somewhat biased against the words "industrial strategy" because when I was in opposition in the late 1970s I had to shadow the so-called industrial strategy of our predecessors, which was the most profligate and senseless strewing around of Industry Act money to every sector of the economy.

We shall observe the contents of the strategy put forward by my right hon. Friend the Member for Chesham and Amersham (Sir I. Gilmour), and where we agree with them we shall adopt them. Although we see a continued strengthening of our manufacturing base, that in itself will not be an answer to our employment problems. No one must misunderstand that. We are fully committed to the manufacturing sector, but, as the Leader of the Opposition conceded in a speech only two weeks ago, we cannot look to the manufacturing sector to be the major source of new employment. [Interruption.] The proportion of people working in manufacturing has been falling in every modern economy for years and it will continue to fall even if output, wealth and earnings are maintained. That is happening here and in other developed countries.

We must not simplify the matter. We want to maintain manufacturing employment, but we must look to areas where quicker growth can be expected in a modern economy. That includes the service sector, high technology industries, more personalised products, less mass production, more small and medium-sized business, greater self-employment, and more people working part-term and on short-time contracts. We must develop a flexible, modern labour market. That is the type of labour market that we shall have in the 1990s, if we are successful. The Opposition resist it and say that it is not producing real jobs. They mean that it is not producing unionised jobs in traditional heavy industry, on which their power base depends. That is history, and is not to do with the Conservative party, or the Government. It is economic development which is very much against them.

I agree completely with all those who placed emphasis on training and education, which are the key background to a recovery in manufacturing and every other sector of the economy. We have devoted enormous effort to that. My hon. Friend the Member for Langbaurgh (Mr. Holt) talked about schools and, the TVEI, and said that an increase in technical and vocational education was essential. YTS is the achievement of the Government. I agree with the hon. Member for Stockton, South (Mr. Wrigglesworth) that we must achieve a two-year YTS scheme which gives a definite step towards a useful qualification. We must also consider adult training. We are developing open learning. I must say to my hon. Friend the Member for Devizes that the decline in apprenticeships is due to a decline in traditional training. Modern training is the sort that we must develop. We are introducing the new job training scheme. We are spending £270 million a year on adult training, helping 250,000 people, but I agree that we must continue to exhort British industry to do more, as the best and most profitable industry does.

However, the hon. Member for Kingston upon Hull, East reiterated, with a certain grim intensity, that his method of boosting training is to bring back levies—at least 1 per cent. — and, he implied, without the exemptions that were available in the 1970s for those who carried out the training. The hon. Gentleman cited Geoffrey Holland, who has made speeches as I and my right hon. Friend the Secretary of State have, saying that British industry does not invest a high enough proportion of its turnover in training. Geoffrey Holland is not in favour of levies.

Mr. Prescott

Yes he is.

Mr. Clarke

No he is not. It is no good the hon. Member making policy on his feet in a by-election in Knowsley, getting himself in a mess and citing in support an authoritative person who does not agree with him. I was in the Conservative Government that introduced levies and grants. I was in the Conservative Government that abolished levies and grants and most of the training boards because they did not work. The effect of what the hon. Member is proposing is not that Jaguar will be allowed to carry on spending its 1 per cent. on training but that the Government or an agency will collect at least 1 per cent. from each company and perhaps redistribute some of it back. That is a £6 billion exercise in bureaucracy, as the last one became, and the money will not go to training. We all know that Mrs. Barbara Castle gave us the Humber bridge to win Kingston upon Hull, North. Knowsley, North was never worth £6 billion. The hon. Gentleman should not make promises like that, but he does it all the time.

When we had a debate in March, the hon. Gentleman and his colleagues, the right hon. and learned Member for Monklands, East and the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley), were stuck to find a policy that lives up to the daft claim that the Labour party knows how to take I million people off the unemployment list, and something turns up every week as they try to justify that claim. In March, the hon. Gentleman promised a detailed policy within 12 months, but we have not got it.

Mr. Prescott

It is not a year yet.

Mr. Clarke

Only four months are left.

The hon. Gentleman is sticking to levies — he has given up nationalised industries, and the postmen will not deliver the letters in pairs — and has turned to local authorities. Two weeks ago he went to Southwark, a council with which I am trying to work. I go to north Peckham more often than he does, and I am trying to get Southwark to co-operate in MSC programmes and trying to get work experience and training there. We have given Southwark partnership authority status and have put money into the estate about which the hon. Gentleman talked. He wanted a shop, and we have put in £1 million to refurbish the blasted buildings!

Southwark is now a source of the hon. Member's policy. It has produced a detailed plan which it says will create 6,000 jobs in two years, at a cost of £9,000 each. The hon. Gentleman became lyrical and said that it was an ambitious programme that is very realistic. He said that under Labour, local authorities will be the engines of growth in our economy, and that the Southwark document was the best thing that had happened on the employment front for a long time. He endorsed that again today. Of those 6,000 jobs, about 4,500 will be in the council. It even includes a bigger personnel department to cope with the other new jobs in other departments. The council says: The new wage earners will have £28.5 million to spend in Southwark's shops, creating more private sector jobs. There would not be any shops left after Southwark had put up the rates.

This is nonsense policy. We have a policy of growth and recovery and we are steering the unemployed back into jobs. The trend is going against the hon. Gentleman. I ask the House to reject the amendment.

Question put, That the amendment be made:—

The House divided: Ayes 197, Noes 348.

Division No.1] [10 pm
Abse, Leo Garrett, W. E.
Adams, Allen (Paisley N) Gilbert, Rt Hon Dr John
Alton, David Godman, Dr Norman
Anderson, Donald Golding, Mrs Llin
Archer, Rt Hon Peter Gould, Bryan
Ashley, Rt Hon Jack Gourlay, Harry
Ashton, Joe Hamilton, James (M'well N)
Atkinson, N. (Tottenham) Hamilton, W. W. (Fife Central)
Bagier, Gordon A. T. Hancock, Michael
Banks, Tony (Newham NW) Hardy, Peter
Barnett, Guy Harrison, Rt Hon Walter
Barron, Kevin Hart, Rt Hon Dame Judith
Beckett, Mrs Margaret Healey, Rt Hon Denis
Beith, A. J. Heffer, Eric S.
Bell, Stuart Home Robertson, John
Benn, Rt Hon Tony Howarth, George (Knowsley, N)
Bennett, A. (Dent'n & Red'sh) Howell, Rt Hon D. (S'heath)
Bermingham, Gerald Howells, Geraint
Bidwell, Sydney Hughes, Dr Mark (Durham)
Blair, Anthony Hughes, Roy (Newport East)
Boothroyd, Miss Betty Hughes, Sean (Knowsley S)
Boyes, Roland Hughes, Simon (Southwark)
Bray, Dr Jeremy Janner, Hon Greville
Brown, Hugh D. (Provan) Jenkins, Rt Hon Roy (Hillh'd)
Brown, N. (N'c'tle-u-Tyne E) John, Brynmor
Brown, R. (N'c'tle-u-Tyne N) Jones, Barry (Alyn & Deeside)
Brown, Ron (E'burgh, Leith) Kinnock, Rt Hon Neil
Bruce, Malcolm Kirkwood, Archy
Buchan, Norman Lambie, David
Caborn, Richard Lamond, James
Callaghan, Rt Hon J. Leadbitter, Ted
Callaghan, Jim (Heyw'd & M) Leighton, Ronald
Campbell, Ian Lewis, Ron (Carlisle)
Campbell-Savours, Dale Lewis, Terence (Worsley)
Canavan, Dennis Litherland, Robert
Carlile, Alexander (Montg'y) Livsey, Richard
Carter-Jones, Lewis Lloyd, Tony (Stretford)
Clark, Dr David (S Shields) Lofthouse, Geoffrey
Clarke, Thomas Loyden, Edward
Clay, Robert McCartney, Hugh
Clelland, David Gordon McDonald, Dr Oonagh
Clwyd, Mrs Ann McGuire, Michael
Cocks, Rt Hon M. (Bristol S) McKay, Allen (Penistone)
Cohen, Harry McKelvey, William
Coleman, Donald MacKenzie, Rt Hon Gregor
Conlan, Bernard Maclennan, Robert
Corbyn, Jeremy McNamara, Kevin
Craigen, J. M. McTaggart, Robert
Cunliffe, Lawrence McWilliam, John
Cunningham, Dr John Madden, Max
Davis, Terry (B'ham, H'ge H'l) Marek, Dr John
Deakins, Eric Marshall, David (Shettleston)
Dewar, Donald Martin, Michael
Dixon, Donald Mason, Rt Hon Roy
Dobson, Frank Maxton, John
Dormand, Jack Maynard, Miss Joan
Douglas, Dick Meacher, Michael
Duffy, A. E. P. Meadowcroft, Michael
Dunwoody, Hon Mrs G. Michie, William
Eadie, Alex Mikardo, Ian
Eastham, Ken Millan, Rt Hon Bruce
Evans, John (St. Helens N) Morris, Rt Hon A. (W'shawe)
Fatchett, Derek Nellist, David
Faulds, Andrew Oakes, Rt Hon Gordon
Field, Frank (Birkenhead) O'Brien, William
Fields, T. (L'pool Broad Gn) O'Neill, Martin
Fisher, Mark Owen, Rt Hon Dr David
Flannery, Martin Park, George
Foot, Rt Hon Michael Parry, Robert
Forrester, John Patchett, Terry
Foster, Derek Pavitt, Laurie
Fraser, J. (Norwood) Pendry, Tom
Freeson, Rt Hon Reginald Penhaligon, David
Freud, Clement Pike, Peter
Powell, Raymond (Ogmore) Smith, Rt Hon J. (M'ds E)
Prescott, John Spearing, Nigel
Radice, Giles Steel, Rt Hon David
Randall, Stuart Stewart, Rt Hon D. (W Isles)
Raynsford, Nick Stott, Roger
Redmond, Martin Strang, Gavin
Rees, Rt Hon M. (Leeds S) Thomas, Dr R. (Carmarthen)
Richardson, Ms Jo Thorne, Stan (Preston)
Roberts, Ernest (Hackney N) Tinn, James
Robertson, George Torney, Tom
Robinson. G. (Coventry NW) Wainwright, R,
Rogers, Allan Wallace, James
Rooker, J. W. Wardell, Gareth (Gower)
Ross, Ernest (Dundee W) Wareing, Robert
Ross, Stephen (Isle of Wight) Welsh, Michael
Rowlands, Ted White, James
Ryman, John Wigley, Dafydd
Sedgemore, Brian Williams, Rt Hon A.
Sheerman, Barry Wilson, Gordon
Sheldon, Rt Hon R. Winnick, David
Shields, Mrs Elizabeth Woodall, Alec
Shore, Rt Hon Peter Wrigglesworth, Ian
Short, Ms Clare (Ladywood)
Short, Mrs R.(W'hampt'n NE) Tellers for the Ayes:
Silkin, Rt Hon J. Mr. Chris Smith and
Skinner, Dennis Ron Davies.
Adley, Robert Carttiss, Michael
Aitken, Jonathan Cash, William
Alexander Richard Chalker, Mrs Lynda
Alison, Rt Hon Michael Channon, Rt Hon Paul
Amery, Rt Hon Julian Chapman, Sydney
Amess, David Chope, Christopher
Ancram, Michael Clark, Hon A. (Plym'th S'n)
Arnold, Tom Clark, Dr Michael (Rochford)
Ashby, David Clark, Sir W. (Croydon S)
Aspinwall, Jack Clarke, Rt Hon K. (Rushcliffe)
Atkins, Rt Hon Sir H. Clegg, Sir Walter
Atkins, Robert (South Ribble) Cockeram, Eric
Atkinson, David (B'm'th E) Colvin, Michael
Baker, Rt Hon K. (Mole Vall'y) Conway, Derek
Baker, Nicholas (Dorset N) Coombs, Simon
Baldry, Tony Cope, John
Banks, Robert (Harrogate) Cormack, Patrick
Batiste, Spencer Corrie, John
Beaumont-Dark, Anthony Cranborne, Viscount
Bellingham, Henry Critchley, Julian
Bendall, Vivian Crouch, David
Benyon, William Currie, Mrs Edwina
Bevan, David Gilroy Dickens, Geoffrey
Biffen, Rt Hon John Dorrell, Stephen
Biggs-Davison, Sir John Douglas-Hamilton, Lord J.
Blackburn, John Dover, Den
Body, Sir Richard du Cann, Rt Hon Sir Edward
Bonsor, Sir Nicholas Dunn, Robert
Bottomley, Peter Dykes, Hugh
Bottomley, Mrs Virginia Edwards, Rt Hon N. (P'broke)
Bowden, A. (Brighton K'to'n) Eggar, Tim
Bowden, Gerald (Dulwich) Emery, Sir Peter
Boyson, Dr Rhodes Evennett, David
Braine, Rt Hon Sir Bernard Fairbairn, Nicholas
Brandon-Bravo, Martin Fallon, Michael
Bright, Graham Farr, Sir John
Brinton, Tim Favell, Anthony
Brittan, Rt Hon Leon Fenner, Dame Peggy
Brooke, Hon Peter Finsberg, Sir Geoffrey
Brown, M. (Brigg & Cl'thpes) Fletcher, Alexander
Browne, John Fookes, Miss Janet
Bruinvels, Peter Forman, Nigel
Bryan, Sir Paul Forsyth, Michael (Stirling)
Buchanan-Smith, Rt Hon A. Forth, Eric
Budgen, Nick Fox, Sir Marcus
Bulmer, Esmond Franks, Cecil
Burt, Alistair Fraser, Peter (Angus East)
Butler, Rt Hon Sir Adam Freeman, Roger
Butterfill, John Fry, Peter
Carlisle, John (Luton N) Gale, Roger
Carlisle, Kenneth (Lincoln) Galley, Roy
Carlisle, Rt Hon M. (W'ton S) Gardiner, George (Reigate)
Gardner, Sir Edward (Fylde) Lester, Jim
Garel-Jones, Tristan Lewis, Sir Kenneth (Stamf'd)
Gilmour, Rt Hon Sir Ian Lightbown, David
Glyn, Dr Alan Lilley, Peter
Goodhart, Sir Philip Lloyd, Sir Ian (Havant)
Goodlad, Alastair Lloyd, Peter (Fareham)
Gorst, John Lord, Michael
Gow, Ian Luce, Rt Hon Richard
Gower, Sir Raymond Lyell, Nicholas
Grant, Sir Anthony McCrindle, Robert
Greenway, Harry McCurley, Mrs Anna
Gregory, Conal Macfarlane, Neil
Griffiths, Sir Eldon MacKay, Andrew (Berkshire)
Griffiths, Peter (Portsm'th N) MacKay, John (Argyll & Bute)
Grist, Ian Maclean, David John
Ground, Patrick McLoughlin, Patrick
Hamilton, Hon A. (Epsom) McNair-Wilson, M. (N'bury)
Hamilton, Neil (Tatton) McNair-Wilson, P. (New F'st)
Hanley, Jeremy Madel, David
Hannam, John Major, John
Hargreaves, Kenneth Malins, Humfrey
Harris, David Malone, Gerald
Harvey, Robert Maples, John
Haselhurst, Alan Marland, Paul
Havers, Rt Hon Sir Michael Marlow, Antony
Hawkins, Sir Paul (N'folk SW) Marshall, Michael (Arundel)
Hawksley, Warren Mates, Michael
Hayes, J. Mather, Carol
Hayhoe, Rt Hon Barney Maude, Hon Francis
Hayward, Robert Mayhew, Sir Patrick
Heath, Rt Hon Edward Mellor, David
Heathcoat-Amory, David Merchant, Piers
Heddle, John Meyer, Sir Anthony
Henderson, Barry Miller, Hal (B'grove)
Heseltine, Rt Hon Michael Mills, Iain (Meriden)
Hickmet, Richard Mills, Sir Peter (West Devon)
Hicks, Robert Mitchell, David (Hants NW)
Higgins, Rt Hon Terence L. Moate, Roger
Hind, Kenneth Monro, Sir Hector
Hirst, Michael Montgomery, Sir Fergus
Hogg, Hon Douglas (Gr'th'm) Moore, Rt Hon John
Holland, Sir Philip (Gedling) Morrison, Hon C. (Devizes)
Holt, Richard Morrison, Hon P. (Chester)
Hordern, Sir Peter Moynihan, Hon C.
Howard, Michael Mudd, David
Howarth, Alan (Stratf'd-on-A) Neale, Gerrard
Howarth, Gerald (Cannock) Nelson, Anthony
Howe, Rt Hon Sir Geoffrey Neubert, Michael
Howell, Rt Hon D. (G'ldford) Nicholls, Patrick
Howell, Ralph (Norfolk, N) Normanton, Tom
Hubbard-Miles, Peter Norris, Steven
Hunt, David (Wirral W) Onslow, Cranley
Hunt, John (Ravensbourne) Oppenheim, Phillip
Hunter, Andrew Ottaway, Richard
Hurd, Rt Hon Douglas Page, Richard (Herts SW)
Irving, Charles Patten, Christopher (Bath)
Jackson, Robert Patten, J. (Oxf W & Abgdn)
Jenkin, Rt Hon Patrick Pattie, Geoffrey
Jessel, Toby Pawsey, James
Johnson Smith, Sir Geoffrey Peacock, Mrs Elizabeth
Jones, Gwilym (Cardiff N) Percival, Rt Hon Sir Ian
Jones, Robert (Herts W) Pollock, Alexander
Joseph, Rt Hon Sir Keith Portillo, Michael
Kellett-Bowman, Mrs Elaine Powell, William (Corby)
Kershaw, Sir Anthony Powley, John
Key, Robert Prentice, Rt Hon Reg
King, Roger (B'ham N'field) Price, Sir David
King, Rt Hon Tom Prior, Rt Hon James
Knight, Greg (Derby N) Pym, Rt Hon Francis
Knight, Dame Jill (Edgbaston) Raffan, Keith
Knowles, Michael Raison, Rt Hon Timothy
Knox, David Rathbone, Tim
Lamont, Rt Hon Norman Rees, Rt Hon Peter (Dover)
Lang, Ian Renton, Tim
Latham, Michael Rhodes James, Robert
Lawler, Geoffrey Rhys Williams, Sir Brandon
Lawrence, Ivan Ridley, Rt Hon Nicholas
Lawson, Rt Hon Nigel Ridsdale, Sir Julian
Lee, John (Pendle) Rifkind, Rt Hon Malcolm
Lennox-Boyd, Hon Mark Rippon, Rt Hon Geoffrey
Roberts, Wyn (Conwy) Thompson, Donald (Calder V)
Robinson, Mark (N'port W) Thompson, Patrick (N'ich N)
Roe, Mrs Marion Thome, Neil (Ilford S)
Rossi, Sir Hugh Thornton, Malcolm
Rost, Peter Thurnham, Peter
Rowe, Andrew Townend, John (Bridlington)
Rumbold, Mrs Angela Townsend, Cyril D. (B'heath)
Ryder, Richard Tracey, Richard
Sackville, Hon Thomas Trippier, David
Sainsbury, Hon Timothy Trotter, Neville
St. John-Stevas, Rt Hon N. Twinn, Dr Ian
Sayeed, Jonathan van Straubenzee, Sir W.
Shaw, Sir Michael (Scarb') Vaughan, Sir Gerard
Shelton, William (Streatham) Viggers, Peter
Shepherd, Colin (Hereford) Waddington, David
Shepherd, Richard (Aldridge) Wakeham, Rt Hon John
Shersby, Michael Waldegrave, Hon William
Silvester, Fred Walden, George
Sims, Roger Walker, Rt Hon P. (W'cester)
Skeet, Sir Trevor Wall, Sir Patrick
Smith, Tim (Beaconsfield) Waller, Gary
Soames, Hon Nicholas Walters, Dennis
Speed, Keith Ward, John
Speller, Tony Wardle, C. (Bexhill)
Spencer, Derek Watson, John
Spicer, Jim (Dorset W) Watts, John
Spicer, Michael (S Worcs) Wells, Sir John (Maidstone)
Squire, Robin Wheeler, John
Stanbrook, Ivor Whitfield, John
Stanley, Rt Hon John Whitney, Raymond
Steen, Anthony Wiggin, Jerry
Stern, Michael Wilkinson, John
Stevens, Lewis (Nuneaton) Winterton, Mrs Ann
Stewart, Allan (Eastwood) Winterton, Nicholas
Stewart, Andrew (Sherwood) Wolfson, Mark
Stewart, Ian (Hertf'dshire N) Wood, Timothy
Sumberg, David Yeo, Tim
Tapsell, Sir Peter Young, Sir George (Acton)
Taylor, John (Solihull) Younger, Rt Hon George
Taylor, Teddy (S'end E)
Tebbit, Rt Hon Norman Tellers for the Noes:
Temple-Morris, Peter Mr. Robert Boscawen and
Thatcher, Rt Hon Mrs M. Mr. Tony Durant.

Question accordingly negatived.

Debate to be resumed tomorrow.