§ 2.58 p.m.
§ The LORD PRIVY SEAL (Lord Shepherd)
My Lords, with the permission of the House I would now make a statement on unemployment. The Government made it clear before the Recess that they were considering measures to alleviate the unexpected increase in unemployment. I am taking the earliest opportunity to inform Parliament of the decisions which they have reached.
As the Chancellor of the Exchequer has repeatedly stated, our room for manoeuvre is severely limited by the need to control the public sector deficit, to improve the balance of payments, and to avoid any action which might directly or indirectly undermine the nation's fight against inflation, which in turn is one cause of our heavy unemployment. However, the Government fully share the natural and deepening concern in the country about the present level of unemployment, particularly among school-leavers, and the fear that it might rise higher still.
The Government's purpose is, despite the limitations I have mentioned, to check the rise in unemployment; to help keep people in jobs; and at the same time to safeguard and expand our industrial potential so as to provide the base for more jobs in the medium term. The Government have therefore decided upon two types of measures. Those which I will describe first are designed to have an early effect, without entailing continuing additions to public expenditure programmes in later years. The other measures will form part of our medium term programme of support for industrial investment.
These various measures are as follows.
Temporary Employment Subsidy: On August 18th the Government introduced a temporary employment subsidy for firms which have good long-term prospects and are situated in assisted areas. The subsidy gives them an incentive to suspend redundancies which would otherwise have taken place. This scheme has been in operation for only a limited time, but the initial results are encouraging. 300 These problems are not confined to the assisted areas and the Government intend to extend the scheme to the rest of the country. It is the Government's intention to review the working of the scheme in the light of experience and to introduce, as appropriate, any modifications in its conditions which may seem desirable.
Work Creation: The Manpower Services Commission will receive a grant of £30 million with the aim of creating 15,000 jobs by providing labour-intensive projects, particularly for young people, in areas of high unemployment. The Commission have been asked to ensure that the jobs concerned are such as would not otherwise have been provided, and that they are relevant to real and pressing needs such as those of our inner urban areas, including minor improvements to housing and health and education buildings. Wherever possible these jobs will be designed to provide some vocational training, and will be linked to appropriate forms of further education. The Commission will be announcing the detailed plans as soon as possible.
Recruitment subsidy for school leavers: Under this scheme firms who recruit young people who left school before the end of July 1975, and who have not had a full-time job since then, will be paid £5 a week per head for the first 26 weeks that they are employed. The date of operation will be announced shortly.
Training Measures: An additional £20 million is being allocated to the Manpower Services Commission for further expansion of the training programmes organised by the Training Services Agency, with particular emphasis on schemes for young people. Training allowances on certain courses provided by the Training Services Agency will be uprated, at a further cost of £5 million a year.
Labour Mobility: A further £3 million a year is to be made available to the Manpower Services Commission under the Employment Transfer Scheme operated by the Employment Service Agency to encourage the movement of unemployed workers to areas where jobs are available. In addition to these measures to reduce unemployment in the coming months, the Government have other proposals to increase industrial potential and so expand employment opportunities in the medium term.
301 Industrial Investment: In the last Budget statement £100 million was allocated for the acceleration of capital projects by individual firms and for industry modernisation schemes. A further £80 million will be provided, within the total available under Section 8 of the Industry Act for similar purposes. The capital projects scheme will continue and the Department of Industry is currently considering several further industry schemes.
Factory Building: An extra £20 million is being allocated to the building of advance factories and the modernisation of existing factories on industrial estates. In deciding the size of this factory programme, we have taken account of the receipts we expect to get from the EEC Regional Development Fund. In addition, the Government have in hand further work on the problems of the construction industry, where they recognise that the unemployment situation is particularly acute, and on which the measures which I have described will have only a limited effect.
At the same time, there is the need to avoid a continuing addition to the general run of public expenditure programmes over a period of years. We are therefore giving urgent attention to the scope for a carefully defined programme of works relevant to our principal social priorities which could be put in hand quickly and completed within the coming year, so as to help provide employment where it is most needed in this industry. A Statement on a carefully selected programme of works of this kind will be made with the minimumof delay.
The measures designed to affect the unemployment problem in the short term are estimated to involve a gross cost of £75 million but, when account is taken of the savings on unemployment benefit and supplementary benefit, the net effect on public expenditure is reduced to roughly £45 million, of which approximately £20 million or less may fall in the current financial year. Government tax receipts will also increase as a result of the incomes generated by these measures, and thus the overall effect on the borrowing requirement will be further reduced. Provided that industry take full advantage of these schemes, the maximum number of jobs involved would be of the order 302 of 100,000. These figures do not of course take account of the cost and employment effects either of earlier measures by the Government in this field, which are now taking effect, or of possible additional expenditure on construction works. The amount allocated for industrial investment will be spread over a period of years, while the extra provision for factories may be spent within some eighteen months.
The gross cost of these two measures will be £100 million, bringing the total gross cost of all the measures which I have announced to £175 million, of which perhaps something under £40 million will arise in the remainder of the current financial year and about £80 million in 1976–77. As I have said, there will be substantial savings to be set against the cost of the shorter term measures. The measures to increase industrial investment will also generate both some tax flow-hack and some direct employment in the short term, though their primary objective is to strengthen our industrial base in the future. Approval will be sought for the Vote provision required for the various measures under the normal procedures.
My Lords, that concludes the Statement.
§ 3.7 p.m.
§ Lord ABERDARE
My Lords, the House will be grateful to the noble Lord for having made that important Statement. I am sure that there is nobody in this House who does not deplore the appalling figures of unemployment, especially among school-leavers, and the grim prospects that face us for the coming winter. But I can hardly agree with the noble Lord when he starts his Statement by saying that this was an unexpected increase in unemployment. We have been warning the Government ever since they came into power that their policies of complete lack of control of inflation, especially spiralling wage inflation, until far too late, and the lack of confidence shown in industry as a result of their industrial policies, would undoubtedly result in a rise, and a very considerable rise, in unemployment.
I welcome, however, the statement of the noble Lord that it was important to avoid any action which might directly 303 or indirectly undermine the nation's fight against inflation which, in turn, is one cause of our heavy unemployment. We on this side of the House would entirely agree that inflation is the main enemy. That being so, why did the Government not tackle their own spending? Why do they not drop some of the controversial and extravagant Bills which are at present resulting in this House having to sit for another week more than another place, and which will occupy the whole Parliament in October? Nothing could be calculated to give greater confidence, both abroad and at home, than if the Government took some action of that sort.
We shall have to study the detailed provisions in greater detail. I do not suppose that there will be a chance of a debate in the present circumstances in which we find ourselves, but we certainly sympathise with what the Government are trying to do at least to help school-leavers, to expand the training programme, and to encourage labour mobility. But perhaps of the greatest importance of all is to resist the temptation to reflate the economy too quickly. That could only result in even worse disaster. As I heard the Statement I took it that this indeed was in the Government's mind. The noble Lord seems to accept that this is not the time for the economy of this country to be reflated. I hope he can reassure us on that point.
§ Lord BYERS
My Lords, we on these Benches express our deepest sympathy to those who today find themselves out of work. What worries us about this Statement is that the Government seem to have no grip at all on the economic situation and no plans for restoring confidence to industry. Instead, they bring forward this mixture of palliatives, some of which can be welcomed but some of which may adversely affect our long-term aim of bringing down inflation and making British industry competitive. Of course we welcome the emphasis on retraining and labour mobility—we have emphasised that in the last year or so as an absolute essential in this country—but I should like to know how the new skills and new jobs are going to be identified and what plans there arc for placing these trainees in useful employment when they have finished their training.
304 The proposal to extend the subsidy of £10 per worker could in my view in many cases put off the essential reduction in over manning in many industries and prevent industries from reducing their unit costs and becoming competitive with other countries. We have grave doubts about the wisdom of this particular course, and I ask the Government whether they will study the Canadian practice by which they seem to have created 100,000 now jobs for about 50 million dollars. I sincerely ask the Government: when are they going to put forward a comprehensive policy for British economic recovery?
§ Lord SHEPHERD
My Lords, I am grateful to the noble Lord, Lord Aberdare, for expressing his approval of the proposals which he has just had a chance to examine and I hope that after further careful examination he will still feel in the same mind. Naturally, all of us share with the noble Lord, Lord Byers, a deep sense of sympathy for all those who suffer the consequences of unemployment. I must confirm immediately to the noble Lord, Lord Aberdare, that these proposals are in no way a reflationary policy. I agree with him fully that in the present economic circumstances it is out of the question to reflate the economy because of its consequences for inflation as a whole, and dealing with inflation must be our primary task. In regard to public expenditure, this is under review in the medium term with a view to continuing the reduction of the deficit, which in some respects we inherited and which we have seen grow; but the base was there and strong steps were initiated in the April Budget.
Of course there is the point that, if one provides a subsidy for the retention of labour within firms—and let us recognise that these proposals are dealing with firms which have a long-term prosperous future before them—this could encourage over manning. But there is a view taken, which I share, that one of the great problems of this country in the past has been that when it has moved from a period of minor recession into a period of growth we have had a shortage of labour and firms have had to fight with each other for what skilled labour is available. There is therefore a case, in anticipation of the upturn in economies and world trade in 1975, that there is much to be said from a company point of view that they should 305 retain the labour for that period, But I agree with the noble Lord that it would be quite wrong for it to be used for the maintenance of the ease and comfort which come from overmanning. I agree with the noble Lord about training; there is little point in having training if there are no jobs at the end of that period. But as we have said—and I think most economists are anticipating that there should be this upturn in world trade next year— we shall, in that case, be in great need of skilled men, particularly young men, to go into the factories.
Of course I understand that the noble Lord, Lord Aberdare, speaking from the Opposition side—and particularly as so many noble Lords have reluctantly come to your Lordships' House during this week in September—had to say some harsh words about Government policy. True, unemployment in this country is at an unfortunately high level. True, some of it is due to domestic matters. But there is a very deep world recession and I remind the noble Lord that our percentage rate of unemployment has been held well below the average of all the other Western industrial countries. If criticism is given, at least the noble Lord should give credit to the Government for being able to maintain it, true at a cost, but I think we were right to seek to contain unemployment as long as possible.
§ Lord BYERS
My Lords, perhaps I could put a supplementary question to the noble Lord about the worker subsidy. Is it intended that this subsidy should be selective? We have been told that there are 40.000 men surplus in British Leyland. Is it really the case that when we are trying to get Leyland, as our only British car industry, competitive with the Japanese and Germans, we should be subsidising 40,000 men on the pay roll?
§ Lord SHEPHERD
My Lords, first let me assure the noble Lord, Lord Byers, that it is selective. It is certainly a new scheme and I should be happy to send him a good deal of information about it. It goes only to firms which can prove that they have good long-term prospects, though there may be short-term redundancy. Then assistance is given. Certainly it is at present not available to British Leyland, which is not within the assisted areas.
§ Lord HALE
My Lords, may I ask my noble friend specifically to say whether the payments and expenditure he has announced today represent all new expenditure or can it be included in some of the previous announcements, as was the case with the last £20 million for the textile industry—for which I thanked the noble Lord twice over—because it was part of £100 million previously announced? May I ask him further to say whether, in this replanning, account will be taken of the position in the assisted areas with specific regard to the East Lancashire industrial conurbation? I appreciate that he may not be able to answer this offhand, but can he give an assurance to dispel the rumour that the people responsible for the direction of new industries are not directing to that conurbation, where empty mills and unskilled unemployed provide a very attractive proposition for new industry?
§ Lord SHEPHERD
My Lords, the objective of these proposals, particularly in the short-term, is towards those areas in the main within the assisted areas and in particular to young people and school-leavers. I should not like to answer offhand the other matters to which my noble friend referred, but I shall examine them and communicate with him within the next day or two. In regard to new money, this programme in the short-term will be spread over the next two years. Some of it could be described as new money. I suppose that at the end of the day it is all new money. But some of it will be clawed back or would have arisen in a different field, for example through unemployment or supplementary benefits. But we think this scheme should be right. Let us be frank. It is of a limited nature, but I think it will be welcomed in certain areas.
§ 3.20 p.m.
§ Lord HARMAR-NICHOLLS
My Lords, with regard to the £30 million scheme mentioned by the noble Lord the Leader of the House, which I understood is to repair houses and public buildings, is that not committing local authorities to an expenditure of which they have no knowledge at a time when they are having to trim their budgets in order to meet the other suggestions made to them by the Ministers responsible? So why talk about £30 million to set up a 307 scheme? Are we not, perhaps, committing local authorities to spending many hundreds of millions of pounds which they will have difficulty in raising if they are to carry out the other instructions already given to them?
§ Lord SHEPHERD
My Lords, none of this money will be required from local authorities. This work creation scheme will be operated by the Manpower Services Commission. They will receive schemes from various sponsoring bodies, which could be local authorities, voluntary bodies or a number of organisations which may have schemes to improve the environment, particularly in the urban areas, and which could help to solve some of the housing problems, and could include improvement schemes. Welfare and amenity type schemes would, I think, describe them. This is not a figure which is to be placed at the door of the local authorities, nor will they be expected in any way to administer the scheme.
§ Lord ORR-EWING
My Lords, will the noble Lord bear in mind that many people in all parts of the House have been urging him and the Government to initiate training and re-training and aid for those who wish to move, and therefore these measures will be warmly welcomed in all parts of the House? He said in his Statement that this is a careful programme of work. Will he bear in mind that British industry is desperately needing to build confidence and, therefore, to make the investment which is so highly desirable? Nothing better could be achieved than if the Government worked out their own programme either to amend or to abandon such measures as the Bills to nationalise the shipbuilding, ship repairing and aerospace industries, the Community Land Bill and the Bill on pipe-lines. If these measures were abandoned the Government would, at a stroke, do more to reinstitute confidence and the expansion of British industry to a competitive position than any other single step that they have announced today.
§ Lord SHEPHERD
My Lords, clearly this is where we have to diverge. The noble Lord asked whether I would reconsider the matter. The answer is, "No".
§ Lord LEE of NEWTON
My Lords, under no circumstances is it possible to 308 avoid shortages of skilled labour once the world slump is over. Therefore is my noble friend saying that where employers are being asked to retain labour they should, during that period, ensure that there is retraining of that labour for the new crafts in which we will have the shortage which has always occurred whenever we have gone into a boom period? Secondly, would he agree that no matter what we try to do on a short-term basis, there is no answer to the problem of the shortage of capital investment which has been with us for very many years? So will the Government make sure that employers accept that this is the right time, now that there is a recession, to get their programme of capital investment ready in order to take advantage when the tide turns?
§ Lord SHEPHERD
My Lords, on the first supplementary question I entirely agree with my noble friend. In regard to the second, which covered investment, training and confidence, these factors are all, shall I say, different bricks in a wall; they fall with each other. Investment has been a failure of this country for as long as I can remember. If it has to be laid at the door of any Government, it could be laid at the door of all Governments. I believe that today there is a real sense among those who command both sides of industry—and I have this sort of impression from hearing some of the reports of discussions at Neddy—that we have to co-operate together, and investment is a vital factor. The Government can play their part, but I hope that industry will recognise that this country has, perhaps, greater potential than many other countries in Europe.
§ Lord BARNBY
My Lords, the noble Leader referred to the imbalance of the national accounts. The noble Lord, Lord Byers, appealed for a general statement as to the policy of the Government in dealing with this situation. Presumably, that would include a policy of reduction of national expenditure. The deficit, which involves borrowing, is reported by the Press to be £12,000 million for this year. The noble Leader emphasised that an expenditure of £275 million could in no way be regarded as increasing the deficit; the figure is not reflationary. In this situation it seems, above all, that there is need for an early statement by the Government as to their intentions 309 with regard to reducing the expenditure, which would give more confidence to lenders. Presumably, among those we intend to borrow from we must include our foreign lenders.
I have a vivid recollection of what was done by an earlier Government at a stage as critical as this. The Geddes axe was something that was applied in all spheres of the national economy and a lead was given by the Government. May I ask the noble Leader two questions? First, is not an increase of the national deficit a type of reflation? Secondly, although he mentioned, perhaps with some justification, that our percentage of unemployment is less than many other countries, is it not true that if some of those other countries had exceeded their income to the extent that this country, under this Government, has done, the comparison might have been different and our position would not appear to be so advantageous?
§ Lord SHEPHERD
My Lords, if I were to reply to the noble Lord, I should be guilty of enlarging this Statement on unemployment to the broader field of economics. I would say to the noble Lord only that the Government believe that the public expenditure deficit has to be reduced. A review is being undertaken for the medium term, because public expenditure cannot be cut with immediate effect, owing to the fact that many years ago we became committed to programmes which are now in the course of being dealt with. We are dealing with this subject and will make a Statement in due course. But when we bring our proposals forward, particularly for removing subsidies and for trying to deal with deficits in nationalised industries and the like, we hope that we shall have the co-operation of the noble Lord and his friends in the unpleasant task, and in the impositions which we shall have to put on our people.
§ Lord WADE
My Lords, my intervention will be briefer than the last one. Many people are still puzzled as to precisely how these proposals will work out. For example, as I understand it, there are still unfilled vacancies for apprentices. What effect, if any, will these proposals have? Secondly, there is still a need for machine shop workers with particular 310 skills in certain industries, whereas in other industries there are workers who are surplus: what precisely are the steps that are to be taken in those kind of cases and whose responsibility will it be?
§ Lord SHEPHERD
My Lords, it will be the responsibility of the Manpower Services Commission to which, by Statute, we have transferred the old role of the Department of Employment. I agree with the noble Lord that there are some areas where there are shortages, particularly of skilled people, and that is one reason why we have given the small increase which is to deal with some 8,000 operatives by giving them assistance in moving from one place to another to take up the jobs that are available. However, the matter of how this is to be implemented we must leave to the Manpower Services Commission which, I know, is very alive to the imbalances which exist between one region or another.
§ Lord AVEBURY
My Lords, while it is an appalling waste of skills to have school-leavers out of work for extended periods, is it not even worse for graduates who have come out of our universities during last summer to find themselves without jobs? Would the noble Lord consider extending the unemployed school-leavers' scheme to those graduates who have not had offers of work which use their professional skills since they came out of university this summer?
§ Lord SHEPHERD
My Lords, I will look at that, but I would not agree with the noble Lord that one section of the community will, because it has been privileged in going to university, feel unemployment to be any harder or harsher than those from a different section of the community. However, I will look at the matter to see whether this particular group could be incorporated with the school-leavers. I doubt it at the moment, but I will look at it.
§ Lord AVEBURY
My Lords, would the noble Lord not agree that, while unemployment may be no worse for the graduate than for the school-leaver, the waste of the talents of graduates is infinitely worse from the country's point of view than is that of people without their skills?
§ Lord SHEPHERD
Possibly but not necessarily, my Lords. We have been discussing this matter for 35 minutes. One of my difficulties as Leader of the House when dealing with matters is when to bring the discussion to an end. I hope that I have the unanimous support of your Lordships when I suggested that we should now move to the next enlightened piece of business.
§ Lord SHINWELL
My Lords, is my noble friend aware that it is easy enough to pick holes in any scheme—and I imagine that there are many people here who would like to pick a lot of holes in this scheme—but that we are encouraged by the fact that the Government are doing something? Can we have some assurance that these schemes, even if they are minor schemes and not altogether effective, will be implemented as soon as possible?
§ Lord ALPORT
My Lords, may I make one point? When the noble Lord the Leader of the House asked us not to ask any more questions, and to get on to the next business, there were many noble Lords including myself and my noble friend who sits behind me who would have liked to ask a question but who did not do so; would it not be right that, when the Leader of the House makes such a request, nobody—even a distinguished Member of this House such as the noble Lord, Lord Shinwell—should take advantage of the situation?