HC Deb 22 July 1991 vol 195 cc974-91 6.45 am
Mr. Simon Hughes (Southwark and Bermondsey)

I am always happy to have an opportunity to introduce a debate and generally happy to have one even at this hour of the day. I am returning to an old habit. I had a fallow year last year, but in the two previous years I drew the 4.1 am straw and the 4.21 am straw in the debates on the Consolidated Fund Bill. At least I have moved to a slightly more civilised hour. I welcome the Minister to this early morning debate on London matters, and in particular on economic and employment prospects for Londoners.

This is a debate about the London economy. Colleagues who represent other parts of the country sometimes forget that one reason why the London economy is very important is that it is the area with the largest number of people in it. It is the most populous economic region. It is also the capital city. Sadly, it also has the greatest disparity of wealth. Increasingly, it is becoming two cities.

The figures in a report issued a few weeks ago by the London Research Centre for the London borough grant committee makes it clear that the average gross weekly income of households in Greater London conceals a far wider disparity between the highest and lowest income groups anywhere else. In 1988, the wealthiest 10 per cent. of households received £687.39 a week, more than 12 times as much as the lowest 10 per cent., whose average income was £56.97.

It is unfortunate that, until recently, we had a Prime Minister who did not seem to understand these things, despite representing a London constituency. In her final speech as Prime Minister, in the debate on the motion of no confidence in the Government, when I pointed out that there was one unchallengeable statistic—that during the years of her premiership the gap between the poorest and the richest had widened—the right hon. Member for Finchley (Mrs. Thatcher) gave what can only be described as a fatuous answer, which was: People on all levels of income are better off than they were in 1979. The hon. Gentleman is saying that he would rather that the poor were poorer, provided that the rich were less rich."—[Official Report, 22 November 1990; Vol. 181, c. 448.] Nobody would argue that case and it shows how little she understood or cared.

One further complication about London is that it has one of the most diverse communities. It is diverse in terms of age range and background, including ethnic background, language and the rest. Therefore, the London economy has great potential, but tragically, after 12 years of Tory rule, London increasingly is not working.

Let me give a few anecdotal examples before confirming them by means of some Londonwide statistics. My riverside constituency—or part of it—is supposed to be in the docklands corporation area and, as such, the beneficiary of Government goodies over the past 10 years. The corporation was set up 10 years ago this month. Yet some of the last manufacturing industries have closed this year: Paynes tea factory closed earlier this year and Sarsons vinegar factory is closing in a matter of weeks. One of the most established firms in the construction industry—Sir Frederick Snow and Partners, which is about 100 years old and has a worldwide practice—went into liquidation a few months ago. The construction industry is experiencing increasing difficulties. Jobs in the public service are also being cut: London Regional Transport is cutting its staff and—somewhat embarrassing for the Government—Guys hospital has done the same.

At a lunch with representatives of Price Waterhouse, a leading British accountancy firm and one of the largest employers in my constituency—if not the largest—I learnt that it had had to lay off a good many staff, for the first time ever. Constituents who run businesses complain to me that they are increasingly being priced out by massively escalating rents imposed by, for example, the British Rail Property Board on the one hand and the local authority on the other. A Conservative Member told me the other day that he had never known the position to be so bad that there were a number of shops which could not even be let on this side of the river, down the King's road.

The economic situation is far from good. I have compared the unemployment statistics for March 1983—the month in which I took my seat—with those for the current month. I am sad to report that the figure for Southwark and Bermondsey was 18.6 per cent. in March 1983 and is 18.5 per cent. now. That is hardly a great improvement to show for eight years of Tory Government.

Not only businesses but ordinary London residents are finding life increasingly difficult. The cost of housing is constantly rising. The average rent for a London room or bedsit is now £385 per calendar month. For a one-bedroom flat, the figure is £619; for a two-bedroom flat or house it is £774; for a three-bedroom flat or house it is £974; and for a four-bedroom house it is £1,075. Rents for bedsits, rooms and studios rose by 17 per cent. between November and May. In the same six months, retail price levels, which the Government use in setting housing benefit levels, rose by only 2 per cent.

Let us examine the disparity between those costs and people's earnings. The average rent per week for a bedsit is £76.15. The net income that someone under 18 would need to be able to afford that without recourse to housing benefit is £146.07. Fewer than 50 per cent. are earning that much, and thus able to afford such rents. A couple over 18 living in a one-bedroom flat with a weekly rent of £143.25 would need a net income of £278.30 to pay for it. Only half those living in the capital could afford that. The average rent of a one-bedroom flat for a single pensioner is £143.25 and that pensioner would need an income of more than £269. Not surprisingly, fewer than 10 per cent. of London's pensioners could pay that.

Those who have bought their homes have stretched themselves to the limit to take out mortgages. Record repossessions have resulted from their inability to keep up the payments. As those of us who served on the Standing Committee considering the Housing Bill predicted, housing benefit did not keep pace with those developments, and there is an increasing disparity between the rents of available properties and the housing benefit that would enable people without sufficient incomes to pay those rents.

Fares and prices generally in London are higher than elsewhere in the country. Thames Water rates have escalated enormously. London holds the record for the highest poll tax. Business rates in London are substantial. More and more people come to see me, having been served with summonses, with the bailiffs threatening to come to their door. When I hold a surgery, more people come to see me now than ever before. More people are in economic difficulties than ever before.

One of the blackest trends is that unemployment has been mounting increasingly for over a year. Ten of the 30 constituencies with the highest unemployment in the United Kingdom are in Greater London. Four of the top 10 in London include, I am sad to say, my own constituency. About 6,500 people in my constituency are registered as out of work. About 320,000 in Greater London are registered as unemployed. There are patches in my constituency—the area around the Elephant and Castle, for example—where unemployment is over 25 per cent. There has been an increase in unemployment in the London Docklands development corporation part of my constituency. In some areas it amounts to over 25 per cent. The age groups affected are those under 25, or those between 25 and 35.

There are always some chinks of light. The London chamber of commerce, in its quarterly economic trends survey published on Monday, said that there were some improvements and that 36 per cent. of service-sector companies now predict that profits will increase in the next 12 months, compared with 26 per cent. in the last quarterly survey. However, those companies make it very clear that they want and need interest rate reductions if they are to improve their business. They also say that jobs are now being lost at a faster rate in manufacturing companies than in service sector companies. The London chamber of commerce says that a total of 62 per cent. of manufacturers reported a fall in domestic orders in the second quarter and that 89 per cent. of businesses are now operating below full capacity, compared with only 81 per cent. in the previous quarter. The proportion of manufacturing employers reporting an overall reduction in staff rose from 41 per cent. in the first quarter to 52 per cent. in the second quarter of the year. The London chamber of commerce, concludes the article yesterday in the Financial Times, predicts that London will continue to suffer disproportionately from job losses. The reality is that the economy in London is not in good shape. There are very few signs of encouragement. There are very few signs that the recession is bottoming out and that things are getting better.

One of the things of which the Government claim that they are proudest is that they have chosen London as the flagship for their inner-city initiatives. In 1981, during the first term in office of the Secretary of State for the Environment, they chose to set up the London Docklands development corporation. Earlier this month there was a great beano to celebrate the establishment of the LDDC in 1981. There was, however, some subtle disinformation about the success of that venture. In the press release that was published to mark the first 10 years of the LDDC the claim was made that by the end of the century, jobs in London Docklands will increase from the present 53,000 to over 200,000. The press release continued: This compares with 27,000 when the LDDC began its work in 1981. The reality, according to the Government's own answer, given by the Under-Secretary of State for the Environment, the hon. Member for Salisbury (Mr. Key), on 8 May 1991, at column 520, is that the figures do not come to the same total. He says that there are about 48,000 permanent jobs and just under 5,000 temporary jobs, of which about 41,000 have become available since 1981. The majority of those—almost 25,000—are not new but relocated jobs. Fifteen thousand jobs have been lost and if one disregards temporary jobs, in the past 10 years the number of permanent jobs in docklands has therefore reduced. That is not a record of which the Government can be proud.

The Government have tried various measures. There have been plenty of programmes and initiatives, such as urban programmes, city grants, task forces, city action teams, city technology colleges, opted-out schools and opted-out hospitals. Some of them have had some success. In addition, Ministers were appointed not long ago to oversee seven inner cities—the hon. Member for Lewisham, East (Mr. Moynihan) was made Minister for London—but, as an editorial in The Times said about them on 20 April last year, They have sunk without trace. Sadly, the majority of the Government's initiatives have equally not succeeded. London has as many problems now as it had 10 years ago. New houses have been built and more are being built now than in recent years, but few are being built for rent, and many that were built to buy are still empty. There is much concern that if the docklands corporation is winding down, much of the social infrastructure, which is supported by Government and local authorities, will be lost. Day nurseries, creches, the Surrey docks farm in my constituency, youth centres and adult education classes are a source not only of social cohesion but of employment and training.

We have a terrible housing crisis. To show how ridiculous the housing policy for London is, I cite but one example. A constituent of mine who could not be housed by the local authority moved into private rented accommodation in a "Quality Street" home just off St. James's road. She moved there with her children. Her fiancéreturned from duty with the Army in Germany. If he went to live with her—he wanted to do so because they wanted to marry and be together again—she would have to forfeit the housing benefit that she received. He has moved back in and if he works, which he wants to do, they risk losing their benefit. The rent will be more than they can afford. They are likely to lose their home and as a result will be in bed-and-breakfast accommodation, or a hotel at best, if not worse. Any housing policy that offers people a disincentive to work is not compatible with getting our city working again.

We have reached a crisis in the way in which we look after and provide for young people. I put that point to the Prime Minister during Question Time the other day. Massive cuts have been made in the budget of the youth service in all London boroughs. Cuts have been as high as 50 per cent. in Haringey, 25 per cent. in Hackney and £1.5 million in Southwark. Without a properly funded youth service, the prospect of adequately providing for the needs of young people will be reduced and the chance of their moving to criminality will be increased. The crime figures are increasing.

The Government cannot claim to have a wonderful record on providing for the skills of young people. I quote the Financial Times of 14 March 1990. The article says: The Thatcher Government has not achieved a significant increase in staying-on rates which remain low by international standards. Academic achievement"— I remind the House that this is after 10 years or more in office— is unimpressive. Only about 30 per cent. of 16-year-olds gained the equivalent of five or more good GCSEs while just 16 per cent. of 18-year-olds gained two or more A-levels. The number of apprenticeships has fallen since 1979—apparently by almost two thirds in manufacturing. At the same time, only a tiny proportion of YTS graduates have gained worthwhile vocational qualifications. Around a third of 16 to 19-year-olds received no education or training. The current state of youth training is almost disastrous. A central London careers officer is quoted in this month's "Youthaid" working brief publication as saying that "July and August" is the "crazy season" in the careers service with no work and "no YT places". The mismatch between youngsters going to look for training or employment and the number of vacancies is becoming increasingly embarrassing. In employment exchanges—I went recently to my local one—the ratio between applicants and jobs is about 45:1. In some employment offices and jobcentres, the ratio is 70:1. People are desperately looking for youth training places. For many of them, there is none available. Unless the Government put significant new funds into the training and enterprise council programme and into youth training, those young people will go without the training or skill which, I remind the House, the Government have guaranteed that they should have.

What is needed? I and my colleagues in the House believe that we have to start by getting the economic strategy right and by getting the fundamentals of the British economy in order. That requires one to do fundamental things, such as cutting interest rates. We must ensure that we have a proper fiscal policy that encourages growth. We must invest in the sectors of the economy which desperately need investment, such as education and training. Unless we do that, we shall not be able to get the economy going again.

My hon. Friend the Member for Berwick-upon-Tweed (Mr. Beith) set out succinctly a summary of proposals in his speech on the Budget. We proposed that almost £2 billion should go into education, training and child care, and £1 billion or more into public transport. In London, that would include a fast link to the channel tunnel and an increase in the London Transport external financing limit. We proposed a £1 billion package for business, including legislation to tackle the late payment of bills. We said that a transitional relief scheme was needed for the uniform business rate. We proposed a package for jobs, particularly jobs that are environmentally friendly.

The country and London need such an investment package. Without such a strategy, the economy of London will not recover. We need a regional strategy, too. One cannot have a regional strategy without a mechanism for delivering it. We are more certain than ever that, without co-ordination of economic regeneration policy by a Londonwide authority, we shall never get the capital city moving again.

We need to deal with the disparity of income to which I alluded. That can be done only by a decent citizen's income to ensure that the gap between the rich and the poor does not increase, but decreases. We need to ensure that there is a series of measures to encourage enterprise, training and the rest. At our conference in Nottingham in the spring Liberal Democrats approved the establishment of regional development agencies to stimulate and encourage regional economic activity. We proposed local development agencies as a method for injecting extra resources from outside the area. We proposed the decentralisation of local authority services. We have to ensure that the political, democratic process is the vehicle through which economic regeneration happens.

We need more money in vocational training. We need to ensure that there is a better link—there are some good examples—between education and jobs. We must ensure that there is a bias towards those who find it difficult to obtain work, for example, those with disabilities. Child care provision is needed by many women who would like to get back to work. We need to help those from the black and ethnic minorities who are, according to all the statistics, the most discriminated against in terms of their economic and employment opportunities.

We will be unable to fulfil those needs unless people have adequate housing in which to live at a cost they can afford. That is why we believe that housing cost relief should be introduced. Mortgage tax relief should be abolished and replaced by a more equitable system. We must ensure that a new form of funding is introduced through an intermediate level of rented accommodation.

We must deal with our skills shortage. Walworth school in my constituency has converted its top floor into something called the "world of work". That teaches secondary school pupils how to prepare for the world outside and it does a good job. Yesterday a training and access programme whereby one can obtain information from a machine in the shopping centre in Surrey Quays was opened. Such initiatives are good, but they are not sufficient unless we have an economic strategy to back them up. Unless we undertake co-ordinated economic planning we will not succeed.

The transport system of the capital city must deliver people to and from work without frustration and often delay. The London chamber of commerce and the Confederation of British Industry have made it clear that our reduced efficiency and reduced ability to compete with other nations is the price we pay for the congestion of our capital city.

In the short term we must introduce an urgent package of measures to bring jobs to the capital city. If that does not happen we will pay the price not only in terms of increasing poverty, homelessness, poor health and increased expenditure on social security, but in terms of bad morale. It will also lead to a capital city that looks increasingly dirty, tacky and in poor repair. One cannot have a successful citizens charter if those citizens do not have the ability to earn a decent wage with which they can enjoy the services, public and private, in relation to which the charter seeks to give them rights.

We must have immediate economic activity, stimulated by the Government, to bring jobs to the capital city. We could invest in housing, school buildings and hospitals. We could do that in a practical way by reducing the controls on capital receipts and relaxing the controls on local government by exempting some of its activities from capping. We could employ a large number of people in energy conservation activities to make our homes better insulated and draught-proof. We could put more money into the training and enterprise councils so that they can provide a much more wholesome and wide-ranging service. We could second people by transferring them from employment to train people who are not in employment.

We could put money into seedcorn businesses through loan guarantee schemes and business expansion schemes. We could help businesses by giving them a statutory right to interest after 30 days so that they are not increasingly in trouble because of the late payment of bills. We could also give those businesses the power to enforce more effectively the payment of their debts. We could give local authorities the opportunity to be much more effective generators of wealth.

If we do all those things, our capital city stands a chance of taking its place in the post-1992 Europe. If we do not, many of the jobs and economic benefits of a united Common Market will go to Frankfurt, Paris or even Glasgow or Birmingham.

In my time in the House I have never felt that, in one respect, London risks going back to the dark ages that prevailed a decade ago. But it seems that economic history could repeat itself. Crime is rising, and youth crime in particular. Racial tension is increasing and the British National party is finding it easier to recruit and is working harder at it. The tension between the traditional long-standing communities—principally white, and including the Irish as well as the British—and the more recently established communities is growing. It is growing because there are not enough jobs and houses for both, so people are feeling aggressive and defensive. The police will confirm that the number of incidents of racial violence and threats is growing in our capital city.

One reason why so few people vote Conservative in a constituency such as mine—this goes back to before the war—is that they realise that, although the Conservatives may promise much for the inner city, the minority will obtain the majority of the benefit while the majority will remain relatively as poor as ever. Many will continue to struggle because the goodies simply do not trickle down as the former Prime Minister, the right hon. Member for Finchley (Mrs. Thatcher), and her advisers thought that they would. That is not to say that my constituents have not been failed by others, too.

After 12 years of this Government, London's economy is in a bad way. On balance, the Government's initiatives have not rescued the capital city or prepared it for the 1990s, let alone the next century. Unless they realise what is needed soon, Londoners will have to look elsewhere for an economic agenda that will meet the job. My hon. Friends and I offer an agenda that will give London and Londoners the opportunity to get back to work.

7.16 am
Mr. Henry McLeish (Fife, Central)

This is an important subject and I congratulate the hon. Member for Southwark and Bermondsey (Mr. Hughes) on selecting it for debate.

In a sense, our capital city is in crisis. The economy and employment structure of the city are also in crisis. Twelve years of economic mismanagement have been added to in the past year by a unique recession that was horn in Downing street and is not shared by any of our European competitors. The debate is also about a capital city in which one in seven of the population lives. It is at the centre of the world's financial services and it makes an enormous contribution to Britain's wealth and production. Naturally, it is rich in traditions and in the history of democracy and government and still stands as a beacon throughout the world. Therefore, it is worth fighting for.

I wish that the same could be said of the Government. London is now experiencing circumstances created in the past 12 years by deregulation, deskilling and the casualisation of much of the labour market. We cannot afford that to continue, especially as we move toward the challenges of the late 1990s. The Government cannot be trusted with London's economy or the employment prospects of Londoners in the next few years.

London is also suffering from the unfettered free market excesses in which the Government indulge and from which they try to take credit. In the mid-1980s the capital experienced a boom but it has also experienced the ravages of the current recession. They are made much worse by the fragility and vulnerability of an economy created by 12 and a half years of Conservative Government.

It is important to catalogue some of the reasons why the hon. Member for Southwark and Bermondsey and many others feel anguished about what has happened and are apprehensive about the future.

A key statistic that must be thrown into the debate is that of unemployment. In Greater London in the past year of the Government's term of office, unemployment has risen since June 1990 from 199,267 to 329,524—an increase of 130,257, or a 65 per cent. growth in unemployment. That speaks volumes about the misery created for individuals and their families, the waste of skills and the capacity lost in both the services and manufacturing industries over that period.

As we are talking about the party of "sound economics" and "economic competence", Londoners will want to know that the current bill for unemployment—the cost to the Treasury in benefits and lost receipts—is a staggering £2.5 billion. That is the cost to Londoners and the country of the Government's incompetence. Over the past year, from June 1990 to June 1991, the Government have added almost £1 billion to the price that we are paying for unemployment, which gives a new resonance to the Chancellor of the Exchequer's comment that unemployment is a price well worth paying. That price is often measured in human misery, and is now also being measured in financial terms. That dents the Government's capacity to preach, as they frequently do, that they are the Government of sound finances.

The other issue often raised by the Government is their employment record. If we consider the Government's record on employment growth in London from 1981—when we were first able to obtain the statistics—Nye find that only 69,000 more people have been working in London during the past decade, of whom 34,000 have double jobs. Another 29,000 people occupy training places. If one subtracts the double jobbers and the training places from the civilian work force in employment, one discovers that in the United Kingdom's capital city only 6,000 more people are in work now than in June 1979, which is simply deplorable. No self-respecting Government could present that record to the people of the capital and suggest that it was a success.

Another key indicator of the labour market is the number of people chasing every vacancy. We have interesting statistics to show the results of Government failure over the decade. In London, in January 1980, 2.3 unemployed people were chasing every vacancy. In March 1991, 26.2 unemployed people were chasing every vacancy. That is a massive rise of more than 1,000 per cent. in the number of people chasing jobs in the capital city. Is that a record of which the nation can be proud? Is it a record of which the Government can be proud? I hardly think so. Once again, we find that employment growth is a myth. Vacancies have slumped dramatically, and more and more Londoners are in the agonising position of chasing fewer and fewer jobs. That can never be a record of success.

It is more important to consider what is happening now in the capital city. In our surveys of job losses over the past year—we have carried out quarterly surveys—we find that the south-east has lost almost 80,000 jobs, and we think that that figure is only 50 per cent. of the total. What a catalogue of misery and failure there is in London: 150 jobs have been lost at Ford of Dagenham, 100 jobs have been axed at BBC television in London, 600 jobs are to go at Lewisham hospital trust, 550 jobs are to go at Marks and Spencer in London, 34 jobs are to go from Mirabeila magazine in London, 435 jobs have been lost at Charing Cross and Westminster hospitals, 430 jobs have gone from Riverside health authority, 500 jobs have been axed from Rolls-Royce cars in London.

The story goes on and on. Is there no end to the misery that Londoners must experience before the Government start to take seriously not only the capital's economic problems but, more important, those of the nation—from which we cannot divorce the economy of London, which has been hardest hit by a combination of mismanagement and recession?

The Conservatives will never face up to the fact that, in a modern economy, one cannot pursue a policy that allows unfettered free market excesses to co-exist with poor skills and low investment in technology and capital equipment. That is a recipe for chaos. Sadly, chaos and crisis are facing not only London's economy, but the people of London.

If we need a reminder of how badly out of line we are with other G7, OECD and Community states, we need look no further than the OECD's July report, which shows that the United Kingdom's gross domestic product fell 2.5 per cent. between the first quarter of 1990 and the first quarter of 1991. In comparison, GDP in Germany is growing by 5.2 per cent., in France by 0.9 per cent., and in Japan by 5.9 per cent. It cannot be claimed that Britain's recession is shared by other developed countries. That myth has been propagated by the Government to ease the concern felt by their supporters and others in London, who believe that the Government can still deliver. However, their track record proves that they can never deliver what the capital needs.

The OECD report shows also that unemployment in the G7 countries as a whole will rise from 17.2 million in 1990 to 19.7 million in 1991, and that Britain will account for one third of that increase. What a reflection that is on the British economy when measured against the six other most productive and wealthiest nations on earth. Why is it that after 12 years of Conservative government the statistics suggest that one third of G7's unemployment burden will fall on London and the rest of the United Kingdom?

According to the OECD's report, the Government are breaking another record, because in terms of investment, growth and employment, Britain has not only been at the bottom of the league for the past two years but is destined to occupy the lowest place in the league table for the two years ahead. That makes four years of the most unenviable economic record of any country in G7, the European Community or the OECD.

I hope that when the Minister replies he will mention the macroeconomic dimension, because that clearly influences prosperity and development in the country as a whole, and has a major bearing on the capital over the next few years.

London is facing a whirlwind of the factors I described. Londoners want to know what the Government intend to do about the problems which they identify but which the Government are no longer willing to acknowledge. What steps do the Government intend to take to invest in Britain's productive economy or to reverse the massive national cuts in training budgets that are hitting the capital particularly badly?

What do the Government intend to do about the youth training guarantee, which is now a shocking indictment of the Government's couldn't care less attitude? The Government offered every 16 and 17-year-old a place on youth training, and the London boroughs and the London training and enterprise councils are anguished because they cannot deliver the necessary volume of places with current Government financial commitments. Equally, they cannot deliver any quality in YT because their budgets are stretched to the limit as they attempt to provide volume. That is another problem which the Minister should examine, because it has a bearing on the future of skills in London and on the prospects of young people to be able to exercise opportunities to gain the skills that their fathers and grandfathers had before them. The Minister must tell us why a generation is being let down in the capital.

It is clear that we need real solutions to real problems. We can no longer trust the Government to indulge themselves with the unfettered free market and its excesses. We can no longer allow them to indulge in economic mismanagement on a grand scale. We also cannot allow the Government to get away with suggesting that we are faced with a unique recession that is part of a worldwide phenomenon which they can do little about.

We need sustainable low interest rates that give certainty to industry so that it can invest in the productive economy and thus create jobs. We need to use the tax system to promote investment and innovation. We need to have a legislative framework to ensure that employers invest in skills. We can no longer leave everything to the whims of the market or leave employers to invest if they think fit. There should be a partnership between the nation and industry and between industry, young trainees and adult trainees. We must move forward together. We need, above all, a partnership economy in which the Government, the unions and employers work together.

We can look to Germany, to France and, increasingly, to Italy—Japan is different for cultural reasons—and we can see success born of partnership, of investment and of a national desire to seek consensus on our way forward in the 1990s. We need, as the hon. Member for Southwark and Bermondsey said, regional devolution for parts of the United Kingdom, including London. That would allow the capital once again to have a voice at the top table on matters that are important to it.

I have set out the real solutions that the nation and the capital need. I challenge the Minister to say whether the Government intend to continue to con the capital or whether they will introduce a new industrial strategy in the 1990s that will help Britain and London.

7.32 am
The Parliamentary Under-Secretary of State for Employment (Mr. Robert Jackson)

It is always a pleasure to have debates with the hon. Member for Southwark and Bermondsey (Mr. Hughes), even at this ungodly hour of the morning. It is a pleasure also to debate matters with the hon. Member for Fife, Central (Mr. McLeish), whom I have recently been getting to know as he speaks from the Opposition Dispatch Box.

The hon. Member for Southwark and Bermondsey is an old sparring partner. I look back with pleasure on our past encounters. He offered us a sober analysis of London and its problems, and the Government welcome the opportunity that he has given us to debate London and its problems, even though we do not share his conclusions.

The hon. Member for Southwark and Bermondsey attacked my right hon. Friend the Member for Finchley (Mrs. Thatcher). He described as fatuous her comment on the problems of inequality. On the contrary, she expressed very well the classic dilemma of the problem of income redistribution. There is a choice between a degree of inequality leading to incentive and greater wealth creation—in other words, a system where there is a higher standard for all with wider differentials than there would otherwise be—and a policy of equality that leads to a diminution of incentives, and less wealth creation, the end result being a lower standard for all with narrower differentials between the better off and the less well off. That is the classic dilemma which my right hon. Friend the Member for Finchley expressed correctly. If the hon. Member for Southwark and Bermondsey wants to see how those choices work, let him compare eastern Europe and western Europe, and East Germany and West Germany as they once were, which exemplify the choice that my right hon. Friend was describing. His remarks about fatuity were wrong and unjust and could be retorted on his own comments on the matter.

The hon. Members for Southwark and Bermondsey and for Fife, Central expressed their concern about unemployment in London. It is no secret that over the past year unemployment has been rising faster in London and the south-east than in some other parts of Britain. However, that rise has been from a very low base, so the unemployment rate in London is still below the United Kingdom average. We must put unemployment in London in perspective. It is 15.9 per cent. lower today than its peak of 396,400 in June 1986. Long-term unemployment in April 1991 was 70,894—56.2 per cent. lower than it was at its peak in January 1986, when the figure was 161,817. That reflects real progress.

Despite what the hon. Member for Fife, Central said about the growth in employment, the fact is that employment in London has grown. In March 1991, the latest available date, London's civilian work force in employment was 122,000—that is 3 per cent.—higher than in March 1983, and it includes a 55 per cent. rise in self-employment. The hon. Gentleman chose a different base year from the one that I have chosen, so the argument is really about which is the appropriate year.

Mr. McLeish

I accept that we can all be selective about the periods for which we produce statistics. However, the Minister must surely accept that we are comparing the Government's record, so that record must start in June 1979. Does he accept that in London in January 1980 the number of people unemployed was 104,000, and that it is now almost 300,000? That is a significant increase measured over the 12 and a half years of Tory Government. How can the Minister defend that?

Mr. Jackson

The hon. Gentleman was fair in saying that we should look at the year in which a Government take office. However, there are different stages in different economic cycles. From a political viewpoint it might be appropriate to compare 1979 with 1991, but if we want to compare like stages in the economic cycle a different choice of base year is appropriate, and that is what I did.

There is every reason to believe that activity in the Greater London area will pick up once the overall economy bottoms out of the recession. We must accept that any reduction in unemployment will lag a little behind that upturn in economic activity. However, as the hon. Member for Southwark and Bermondsey was fair in observing, there are signs of recovery. He referred to the London chamber of commerce quarterly economic trends survey, which has just been published, and which shows that the rate of decline in the London service sector is slowing and that there are signs of economic recovery and confidence. Some 36 per cent. of the service sector companies predict that profits will increase during the next 12 months compared with 26 per cent. who thought so in the last quarterly report.

The hon. Member for Southwark and Bermondsey asked for a further reduction in interest rates. He was joined in that by the hon. Member for Fife, Central, who was pleased to introduce into the debate what he called the macroeconomic dimension, and he wanted me to comment on that. Of course the Government want to bring interest rates down, and we have done so by 4 per cent. over the past six months. Hon. Members must question the compatibility of the drive to reduce interest rates with the commitment—which the Labour and the Liberal Democrat parties share with the Government—to membership of the exchange rate mechanism and to a parity of DM2.95 to the pound. Indeed, the Liberal Democrats add to that a commitment to move to the narrow band. The Government are also interested in doing that, but the Liberal Democrats are especially strong in emphasising it.

What is the compatibility between the acceptance of that discipline by the major Opposition parties and what is being said about the rapid and precipitate reduction of interest rates? The fact is that those commitments to the ERM and to the parity within it limit our freedom of manoeuvre on interest rates, and hon. Members must accept that.

The hon. Members for Southwark and Bermondsey and for Fife, Central must also consider the implications for this exchange rate commitment of the plans that they have described for increasing public expenditure dramatically. Their policies do not add up. I do not think much of the "new economic agenda" of the hon. Member for Southwark and Bermondsey, as he was pleased to describe it.

Mr. Simon Hughes

One could criticise the amount that my colleagues and I suggest on the ground that it is too little rather than too much, even though the difference between us and the Labour party is that we are prepared to ask people to pay 1p in the pound extra on basic income tax to fund the education and training component. I do not believe that it is valid to criticise on the ground that it is too rapid an injection of additional investment. If anything, given the extent of the economic need, it might be too slow, which might be a more valid criticism.

Mr. Jackson

Whether it is too much or too little must be determined in relation to the overall commitment that the hon. Gentleman and his party have made to ERM and to parity within it. The market will judge whether it is too much or too little. I am sure that the market will conclude that the scale of the increase in public expenditure that both parties urge is inconsistent with that commitment. There would be a perceived loss of control of the public finances, causing a fall in parity and a return to rising inflation and undoing all the work that we have done.

Mr. McLeish

rose—

Mr. Jackson

I see that the hon. Gentleman wishes to intervene. In the interests of debate, I happily give way to him.

Mr. McLeish

I am grateful to the Minister. The hon. Gentleman misrepresents the policies of my party. Skills training is a key aspect of investment. Does the hon. Gentleman accept that in the 1990s we need increased productivity and growth in all the sectors of the economy? The supply-side initiatives of other countries are much sharper than ours—their investment is leveraged and targeted and they can see returns. Does the hon. Gentleman accept that the Government's cuts in training are counterproductive because they will not lead to the skills base that we require or to our having the qualified people whom we need? Does not the hon. Gentleman accept that any sensible Government should spend more on that key aspect?

Mr. Jackson

I was going to comment on training, but I shall respond to the hon. Gentleman's point. Of course the Government believe that investment in training is important. That is why, since we came into office in 1979, we have increased by two and a half times in real terms the amount of spend on training and vocational education. That is a significant increase.

There is a certain element of "fatuity" in the debate, to use the word of the hon. Member for Southwark and Bermondsey. One must recognise that the skills base and investment in it are not achieved by the Government alone. In 1986, the Department of Employment conducted a survey of training funding, which the hon. Member for Southwark and Bermondsey has seen. That survey clearly established what one would have expected to be the case if one thought rationally about it—that the vast bulk of the investment in training is made by employers or their work force. Quoting from memory, in 1986 the Government spent about £7 billion a year on training, most of it in the form of tax concessions to employers; individuals spent about £7 billion a year, most of it being lost income of students while studying—I do not know whether I regard that as a cost, but the economists did so—and employers spent £18 billion a year.

Anyone who is seriously interested in the amount spent on training should consider employers' investment in it. We have lots of evidence that that investment has been increasing, including evidence that it has been holding up in the present recession. The Confederation of British Industry surveys of industrial behaviour show that a much larger number of companies are increasing their investment in training than are decreasing it. During the 1980s, there was substantial investment by the Government and employers in training, and that is significant for the 1990s.

Mr. McLeish

Does the Minister accept that any investment must be measured in terms of return? If we are to believe the figure of £18 billion investment by employers, which we do not, we would be spending roughly twice as much as the Germans, in which case, would not the Germans be getting a far better return on their investment than we are? If we are talking about all that investment being ploughed into the British skills base, why do we still have no coherent system for 16 to 19-year-olds and why do we have a poverty of programmes for the unemployed, with 20 per cent. of British employers spending nothing on training and 52 per cent. of employees receiving no training—figures from the same report that the Minister quoted?

Mr. Jackson

The hon. Gentleman talks knowingly about the German spend on training, but there is no equivalent figure on training from the Federal Republic of Germany. No OECD country has carried out a survey as thorough and far-reaching as our 1986 funding study. That is why it is difficult to make international comparisons in this area. The hon. Gentleman will be interested to know that so far as one can judge, compared with all other Governments, the British Government's spend on training in 1986 was relatively high. But the hon. Gentleman is not in a position to make that judgment about the scale of spend between Britain and Germany because the German figures are not as complete as ours.

The hon. Gentleman tempts me to make the point that if one looks at the outcome of training—he is right that that is the bottom line; we do not train for training's sake but for the return—one of the most interesting points is that during the 1980s the rate of growth in the British economy significantly exceeded that of, for example, Germany, and other countries which, historically, have a better training record than we have. That suggests that one must recognise that training is only one of a number of inputs into improvement in productivity in the economy. That would lead one to consider the other factors and they would include such considerations as industrial relations, the ability of management to manage and all those kinds of considerations which Opposition Members tend to overlook for the obvious reason that their commitments are all designed to make it more difficult for those factors to be improved.

Just as the hon. Member for Southwark and Bermondsey betrayed a certain lack of grasp in his economic analysis and incoherence between his exchange rate commitments and his spending and interest rate plans, so the same can be said of the hon. Member for Fife, Central and his comments, particularly on recession, which he described in that part of his speech devoted to the macroeconomy as being unique to the United Kingdom. Has the hon. Gentleman read the OECD report from which he quotes? I strongly suspect not. Has he read the conclusions of the G7 summit—they are shorter and may be easier to read—where he will find that the different member states around the table only a few days ago here in London were talking about the recessions affecting their economies and welcoming the signs of a recovery from those recessions?

The hon. Gentleman talks about unemployment rates, but a number of other western European countries have significantly higher unemployment rates than ours. Spain has an unemployment rate of 15.4 per cent. and in Italy, France and the united Germany unemployment rates are considerably higher than ours. The rate of rise in unemployment in the United States and Canada is greater than ours. There has even been a rise in unemployment in recent months in Japan. The hon. Gentleman has got the world economy completely wrong.

Mr. Simon Hughes

The hon. Gentleman is right in saying that other countries have higher unemployment rates than Britain, but he must now amplify the comments of the Chancellor by saying what he believes is an acceptable rate of unemployment in Britain. It is not the implicit message of Government speeches that the present rate of unemployment is acceptable, unless the Minister is now saying that such is the unimportance of high unemployment relative to reducing inflation that such a rise is acceptable. What is the acceptable unemployment figure either nationwide or in London that the Minister would commend as part of the Government's economic strategy?

Mr. Jackson

The hon. Gentleman talks glibly about acceptable levels of unemployment. There is not a great deal that the Government can do about them. The hon. Gentleman should compare notes with his hon. Friend the Member for Orkney and Shetland (Mr. Wallace) with whom I had a discussion on the radio the other day in which he used a phrase that I am happy to echo. He said that there was no miracle cure for unemployment. There is indeed none. Unemployment rates are determined by millions of independent decisions being taken in pay bargaining in firms across the country.

In a nutshell, the most recent figure for wage rises was 8.25 per cent. Inflation is falling rapidly, towards 4 per cent. by the end of the year. Productivity increases in this phase of the recession are about zero, or perhaps even below zero. People are pricing themselves out of work. The Government cannot control that process—unless the hon. Member for Southwark and Bermondsey is advocating a return to incomes policies. But the consensus emerging in the House is that such policies are not feasible propositions, irrespective of their merits, in the modern economic climate.

Mr. Simon Hughes

The vast majority of workers are not pricing themselves out of work; they are accepting relatively low wage settlements. If anyone is setting a bad example of pricing themselves out of work it is the people at the top end of the market—

Dame EIaine Kellett-Bowman (Lancaster)

The leaders of the unions.

Mr. Hughes

They are less reprehensible than the leaders of industry. We heard the boss of the post office workers union mention a figure of £40,000 as his salary on the radio yesterday—

Dame Elaine Kellett-Bowman

Not bad.

Mr. Hughes

Not as bad as what the chairmen of the water industry have awarded themselves. The pressures, in any case, do not come from people pricing themselves out of work. The London chamber of commerce has made the point that one of the greatest pressures on jobs comes from the Government's interest rate policy and from the other economic levers under their control. They are far more influential than the levels of wage settlements.

Mr. Jackson

I enjoy seminars of this kind, even at this time in the morning, but the hon. Gentleman must be serious. The fact is that although many people are accepting lower increases in wages—perhaps even reductions in wages—averages are always derived from figures above and below a line. The present average settlement is about 8.25 per cent.—well ahead of productivity increases and inflation. People are being priced out of work.

The hon. Gentleman says that all this is the Government's fault because it has to do with interest rates. Obviously, they play their part, but all parties are committed to the exchange rate mechanism and to parity within it. It imposes limitations on each and all of us—on the extent to which we can reduce interest rates. So other factors bear on interest rates and it is not possible to reduce them more rapidly than we are reducing them, in the light of the probable market response to doing so.

Mr. McLeish

Is there any measure on which the Government are willing to stake their record? In the past 12 and a half years, unemployment has doubled—a key measure of success or failure. Vacancies have slumped. Are they a measure of success or failure? Only the equivalent of 166,000 full-time jobs have been created in 12 years. Are they the measure? Despite what the Government say, our skills base is still not up to the standard of that of the Germans, the French or the Japanese. Is the Minister prepared to admit that the Government have failed on any of these counts? There is certainly no miracle cure for unemployment or the problems of the labour market, but how long do we have to wait? The Chancellor has talked of vague stirrings. Will the Minister predict when the recession will bottom out and improvement will begin?

Mr. Jackson

I am delighted to have the hon. Gentleman join the ranks of those who say that there is no miracle cure. I shall probably have future opportunities to remind him of that. Some people sagely and soberly nod their heads and say that there is no miracle cure, then chant some mantra and attempt to produce rabbits from a hat as if there was a miracle cure. We have strayed from the terms of the debate.

The most significant measures of economic success, at least in a liberal economy but not with a capital L, are the increases in per capita income and wealth. By those measures, Britain did well in the 1980s and our record stands comparison with that of other countries. The economy is now much stronger than it was in the late 1970s. That is generally recognised throughout the world and the Opposition should also recognise it.

Mr. Simon Hughes

rose—

Mr. Jackson

The hon. Gentleman should not have interrupted so often with general points about economic policy. I shall not give way to the hon. Gentleman again, lest he tempts me to stray from the straight and narrow path.

The hon. Member for Southwark and Bermondsey was extremely critical of the London Docklands development corporation, and was quite wrong. When the LDDC was created the underlying trend was of a sustained loss of dock-related industry. The hon. Gentleman spoke graphically about jobs in the area in recent years. About 150,000 jobs were lost in the five relevant London boroughs in the preceding two decades. There was no diversity in the local economy and there was fast-rising local unemployment. The LDDC dramatically turned the tide and created the conditions for employment. That process is not yet complete, because it has largely been a matter of developing infrastructure, environment and confidence and encouraging the development of a diversified range of factories and offices.

The LDDC is also helping the main providers of education and training to improve their services and it aims to create a stronger, more up-to-date diverse local economy. There has been 14.1 million sq ft of commercial development and a further 21 million sq ft is under construction or committed. The number of firms in the area has doubled from 1,100 in 1981 to 2,300 in 1990, and more than 50 per cent. of those were start-ups and not transfers. Employment has also grown, with 17,000 jobs in new business start-ups and 24,000 in relocation. The hon. Member for Southwark and Bermondsey should pay tribute to the considerable progress made by LDDC rather than knock it.

The hon. Gentleman also criticised the Government's training record in London. We discussed the macro figures. London's youth training budget for 1990–91 is £47.83 million, which is slightly higher than the actual spend in 1990. The employment training budget is £48.44 million. There are more than 15,000 trainees on youth training and more than 11,000 are benefiting from employment training.

The hon. Member for Fife, Central asked about the youth training guarantee. The Government are fully committed to that guarantee and it is too early for Opposition Members to say that we are not delivering it. We shall not know about the demand for youth training places until we are clearer about the plans and intentions of summer school leavers. We are monitoring the situation and are in close contact with the TECs, and we shall act to ensure that the guarantee can be met. That cannot be contradicted, because we will not know the figures until later.

Mr. McLeish

The Minister will be aware that the Department carried out a review on or around 26 March after the Secretary of State expressed concern about the delivery of the guarantee. He will also know that on or around 24 May there was yet another survey of supply and demand for youth training places all over the country. This is July, and Government documents now show that it will be September before the picture is clear. Plainly, the youth training guarantee is not being delivered in many TECs and local authority areas. Will the Minister concede that and tell the Secretary of State that TECs need more money and that if they do not get it the youth training guarantee will not be worth the paper on which it is written?

Mr. Jackson

The hon. Gentleman is a great expert on purloined documents, and I liked the language of the police courts that he used—"on or around." It sounded like the hon. Member for Linlithgow (Mr. Dalyell), and his talk of the Belgrano.

The hon. Member for Fife, Central knows from his purloined documents that the Government are concerned, as they must be, about their ability to deliver a guarantee that they have given. He has recorded the fact that we have been monitoring the position. We continue to do so. Nothing that he said has controverted the point that I made—that we cannot know the position until we know the state of the demand that there will be for YT places. I assure him that it is our intention to deliver on the YT guarantee. I have said that at least a dozen times in the House. The hon. Gentleman should stop pressing us, because he is riot implying that we do not intend to honour the words that we have uttered in the House.

I am grateful to the hon. Member for Southwark and Bermondsey for instigating this debate. Unlike some, I do not believe in selling London short. We in this House have the honour of working in one of the world's greatest capital cities with an outstanding economic and employment history. And in my opinion London's prospects for the future are just as exciting as its past has been.

Firms in London employ 3.5 million people, twice as many as in the whole of the east midlands. It contributes 15 per cent. of Britain's gross domestic product, and though we hardly think of it as a manufacturing centre, there are 21,500 manufacturing premises in the capital. It is true that, like other areas of the United Kingdom, London is suffering job losses and rising unemployment. But when Opposition Members talk as though London is derelict, polluted, impoverished, and grinding to a halt, I wonder whether they ever spend any time out and about the capital.

London has some of the finest museums in the world. As I went to see it only a couple of days ago, I mention in particular the new Sainsbury wing of the National gallery, so generously endowed by my hon. Friend the Member for Hove (Mr. Sainsbury). We have great orchestras, theatres, parks, leisure attractions and sporting venues that match the best in the world.

London also represents one of the most important, arguably the most important, financial, commercial and telecommunications centres in the world.

As the economic policies of the Government bring about a return to prosperity, London is well placed to be a major beneficiary. Our inner city policies are encouraging economic regeneration in partnership with the private sector, with the docklands as a shining example. London's transport system is currently being strengthened, at a cost of billions of pounds, through projects such as the extension of the docklands light railway to the City, and the Dartford crossing. All these urban and infrastructure improvements will provide huge opportunities and benefits for London's businesses and workers.

I recommend to the hon. Members for Southwark and Bermondsey and for Fife, Central that they reflect on these developments in a more balanced way, to give a more balanced presentation of the opportunities as well as the problems that face London.