HL Deb 12 February 1976 vol 368 cc214-22

4.20 p.m.


My Lords, it may be for the convenience of the House if I were to repeat now a Statement which has been made in another place by my right honourable friend the Chancellor of the Exchequer. The Statement is as follows:

"Two weeks ago this House debated unemployment, and resolved by a very large majority to 'take all possible effective measures to reduce it'. In that debate I said I hoped to present a further set of measures within a few weeks, taking account of proposals by the Manpower Services Commission and by the TUC and of other views expressed inside and outside the House. This I now do.

"Wherever possible the Government have been concerned to ensure that measures to reduce unemployment in the short term shall also reduce constraints on growth and employment in the medium term when recovery reaches its peak. I have therefore examined, with the Secretary of State for Industry, the scope for improving our industrial base by further expenditure under Section 8 of the Industry Act on schemes for the modernisation and restructuring of important sectors of industry. The £110 million so far earmarked for such schemes is now largely committed. I therefore propose to allocate a further £55 million for new schemes such as printing machinery and non-ferrous foundries, and to make available further funds for existing schemes, particularly ferrous foundries. Some £15–20 million of this sum will be spent in the next fiscal year.

"On a smaller scale, the Development Commission has told me that it could usefully spend £1 million more than the additional sum allocated to it in September last year, for building small factories in rural areas during the next 12 months or so. I am authorising this expenditure since I recognise that unemployment has affected some rural areas with particular severity.

"I told the House in the unemployment debate that we were looking at the possibility of further assistance to stock building to help industry during the recession in fields where it is possible to foresee future demands with reasonable certainty. I am now pleased to be able to tell the House that the National Enterprise Board is discussing with the industry ways of providing finance for the stockpiling of machine tools of types which are expected to be needed during the recovery. The intention is to devise arrangements which will be a good bargain for the NEB and for the industry, and will help to maintain capacity and provide employment during the remaining months of the recession. I believe honourable Members will welcome the role which the NEB plan to assume in the field of stock building.

"One of the worst-hit sectors in the recession has been the construction industry, although there are signs that demand is beginning to revive in some parts. We have taken steps in the last two years to provide it with some extra work in the public sector. In considering further measures of this nature, I have had to make sure that there is no risk of expenditure slipping into future years, when public spending must be contained so as to permit the movement of resources into exports and investment. We have therefore decided to concentrate on the improvement of public sector housing, which can be started quickly and finished before the end of the financial year 1976–77. We propose to provide £50 million for house improvements, where the effect on employment and the social benefit will be greater than in any other field of construction.

"I turn now to the two temporary subsidies for employment which the Government announced last year. The Temporary Employment Subsidy, which was introduced last August for a year, provides £10 per week per worker for six months for an employer who agrees to postpone a redundancy of 25 or more workers. It is now estimated that 55,000 workers will be covered by the scheme. I propose to make two changes.

"First, I propose to extend the length of the period of payment. The first firms to use it will very soon exhaust their six months' entitlement. The maximum period of entitlement will therefore be extended from six to 12 months. This means that the 55,000 jobs affected may be preserved for a further period beyond six months. Secondly, I propose to reduce the minimum size of a qualifying redundancy again, from 25 to 10 workers. This is estimated to bring a further 3,000 or so workers within the scope of the scheme.

"The gross Exchequer cost of extending the period of payment to 12 months is estimated at £14½million, and the cost of reducing the minimum qualifying redundancy at £1½million. There will be savings in unemployment benefit and gains in National Insurance contributions and income tax; these will depend on the circumstances of the workers covered by the subsidy, but in aggregate they are likely to mean that the subsidy will have little or no net effect on the public sector borrowing requirement.

"Next, the recruitment subsidy for school-leavers through which employers who recruit unemployed school-leavers receive £5 per recruit per week for 26 weeks. The scheme is at present limited to those who left school last summer or before, but I propose that it should now be extended to those who left at Christmas 1975. The cost of this will be about £ ¼ million.

"The Manpower Services Commission has been considering what more it could do to employ and train those who would otherwise be out of work. It has proposed an extension to its scheme for job creation. So far, £40 million has been allocated to this programme, which should provide some 30,000 to 35,000 jobs. If proposals continue to come in at the present rate, the whole of that £40 million will have been pre-empted by bids received by about the end of April, and approved by the end of June. The Scheme would thus begin to taper off in the autumn, just when there is a particular need to provide extra jobs for those of next summer's school-leavers who fail to find other work. We have decided to allocate a further £30 million to the programme, as the MSC proposed, to keep it going at peak level until the end of the year. We shall need to consider before then, in the light of the latest prospects for employment, how quickly the scheme should be tapered off in the early months of 1977. This extension should permit the creation of some 20,000 to 25,000 extra temporary jobs. The net effect on the PSBR will be small.

"These are measures to maintain or create extra jobs while unemployment remains high. I am convinced that they are both necessary and cost-effective for this purpose. But as well as these measures to provide jobs in the immediate future, we must do everything possible to build up the scarce skills which will be in demand when the economy is running nearer to full capacity. The Manpower Services Commission have put forward proposals to provide, from next August, some 30,000 to 35,000 extra training places in industry, at a cost of approximately £55 million. About £45 million of this applies to new first-year apprentice training and the rest to second-year apprentices and to other measures, including schemes for non-craft training of the kind that the engineering industry is considering. Again, the Exchequer cost of this is very largely offset by the savings on benefits for the unemployed, and this expenditure will be a valuable addition to the effort which is already going into providing training in industry. First-year apprenticeship grants will be available to employers who take on extra apprentices under arrangements to be worked out by the Industrial Training Boards in consultation with the Training Services Agency. I greatly welcome the speed with which the Manpower Services Commission has reacted to current needs and I am glad to be able to accept these proposals in full.

"I know the whole House is concerned that we should do everything possible to avoid the demoralising effect of long periods out of work on young people just out of school. The further education system should also have a role to play in this field. Therefore I shall be considering with my right honourable friends the Secretaries of State for Education and Employment what more can be done to make the best use of the further education system for this purpose during the recession.

"The Secretary of State for Northern Ireland will be announcing the details of a comparable set of measures costing £8 million, of which about £5 million will be spent in 1976–77.

"The estimated total cost of all these measures is about £220 million. But less than £140 million of this will be spent during the coming financial year. The large items of expenditure on training and on industry schemes are phased over the next two or three financial years because training is organised by academic years, and industry schemes are partly financed by interest relief grants spread over a period. But, in both cases, most of their real effect on employment will be felt in the coming year. Because of the offsets which I have mentioned earlier, the net cost to the public finances is likely to be less than half of the gross cost, or about £60 million in 1976–77. Altogether the measures are likely to provide about 140,000 jobs or training places—though not all of these jobs will last as long as a year and some may be at the expense of other jobs. Over the coming financial year the net effect on employment could be about half that figure.

"I am convinced that this set of measures is the most cost-effective way of providing more jobs as quickly as possible and of improving our industrial capacity, without a general reflation of domestic demand which is widely recognised to be inappropriate at this time, and within the limits on public spending which we must respect if we are to achieve stable prices and steady growth in the upturn. I shall of course want to consider in my Budget whether by then there is scope for doing more along the same lines."

My Lords, that concludes the Statement.

4.30 p.m.


My Lords, I should like to thank the noble Lord for repeating that extremely long and very detailed Statement. I am sure that in the middle of an important debate on another Bill it would be quite wrong to go into the merits of the various proposals, even if one could have taken them all in in the course of hearing that Statement. Let me say, in general, that of course we support any measures that will minimise the tragedy of unemployment, regardless of the differing degrees of responsibility for it that we may place on the Government.

May I ask three questions of the noble Lord? First, I would ask him to confirm that there is no intention in the Government's mind at present of reflating the economy, which would only result in a worse long-term unemployment problem? Secondly, may I ask him for an assurance that the extra public expenditure which is involved in these measures can be contained within the ceiling of £12 billion, which I understand was agreed with the International Monetary Fund for the year 1976–77? Lastly, wearing another hat, may I ask the noble Lord to confirm that some of the £1 million which is to be spent on building small factories in rural areas will be spent in Wales?

Baroness SEEAR

My Lords, we on these Benches should also like to thank the noble Lord for the Statement that he has just read. We recognise the cruel dilemma facing the Government in wishing, on the one hand, to avoid premature reflation, which could only have the result in the long-term of making the existing situation very much worse, even if it provided temporary alleviation, and hav ing to deal with rising and very grievous unemployment on the other.

To some of these measures we can only give the most hearty welcome. It can only be right to stockpile against greater demand when recovery takes place —stockpiling of material and stockpiling by improved training, building up to the level of resources that we are going to need. We should also like to support very strongly all efforts being made to provide for school-leavers, the effect of unemployment on school-leavers being plainly of a far more serious kind than in any other area.

I am not entirely happy that the employment provisions being made for school-leavers are necessarily the best that could be made. The idea that any job is better than no job is not a very satisfactory solution. Therefore, we are very glad to see the provisions for further education, which seem a far more appropriate way of dealing with the unemployment facing school-leavers than just putting them into any kind of job. Perhaps we have more reservations about some of the other provisions which have been included. The idea of delaying redundancy is attractive in the short run, but, if you are only delaying redundancy which will in any case eventually take place, it is a very shortsighted way of dealing with the problem, when all one is really doing is maintaining, and indeed encouraging, overmanning, which is a large part of the problem that we face.

In the midst of a debate as important as the one we are having this afternoon, I do not wish to prolong the comment from these Benches, but I should very briefly like to make two points. One is that the kind of unemployment we have today is of a different order from that which we faced in the inter-war years, and I would ask noble Lords opposite whether all interested parties could have an opportunity to explore the importance of those differences. It remains true that there are still labour shortages. Only this morning I was at a factory which is unable to recruit labour; and I think we have all had experience of that. The Training Services Agency stated only six weeks ago that there were shortages of labour in a number of important areas, and we really must explore this aspect in detail as soon as possible. With those reservations, we should like to support the Government.


My Lords, I apologise to the House for the length of the Statement. I was placed in a difficulty yesterday. I had the option of not repeating it or of having it printed, but it was put to me that if I, as Leader of the House, regarded it as an important Statement then it ought to be repeated; and I think the House will agree that it is an important Statement and that it was right that I should repeat it. May I say to the noble Baroness, Lady Seear, that I agree with her about the young school-leavers. This is not just a question of providing any job for the job's sake. Perhaps in the early days of the job creation scheme there could have been grounds for criticism, but I understand that the Manpower Services Commission now have concrete plans for extending this scheme, mainly with training as part of the job, and I think that this is to be welcomed.

To the noble Lord, Lord Aberdare, I would say that I have no doubt at all that the "rural areas" will include the Principality, or, shall I say, that some parts of the Principality will be regarded as rural areas. The amount involved here is covered and is within the agreement which we have with the IMF. I am very happy to give the noble Lord an assurance that at present the Government do not intend a reflation. Perhaps we have learned the lesson provided by noble Lords opposite in 1972 and 1973. I fear that there is another Statement, and I wonder whether we ought to have that now.

Viscount ECCLES

My Lords, I am very grateful that there is to be £1 million for small businesses in the rural areas, but what about the towns and cities? There are a great many small businesses in them, particularly craftsmen; craftsmen in the bookbinding industry, craftsmen in all the conservation crafts where there is a tremendous shortage of workshops and of people to carry out the work that we know. Are they included? Will they get any help?


My Lords, the noble Viscount must be well aware that at the present moment we are operating under very severe financial constraints. I should have thought we would have been open to criticism if we sought to do all the things we should like to do. The £1 million is specifically to help some of the smaller towns and villages in the rural areas, where there are crafts. The other towns will, of course, gain by some of the other measures which have been proposed. I hope that the House will now allow my noble and learned friend the Lord Chancellor to make the Statement on behalf of the Prime Minister. After that, we can very quickly move back to the debate in which I believe there are some 34 speakers to take part.


My Lords, at the risk of appearing to disobey the suggestion made by the noble Lord, may I say that there was one sentence in the Statement of the Chancellor which is disturbing. The Chancellor said that he is looking to his Budget to do more along the same lines. But the only lines in the Statement are tinkering about with subsidies, and unless in the Budget, which must come soon, there are fundamental tax changes which will encourage genuine and subsidised investment, we shall not solve the problem of unemployment or lack of trade. I hope that merely doing more along the same lines, tinkering with little lines, will not be the action which the Government take in the Budget.


My Lords, I cannot prevent the noble Lord from intervening despite my plea, but can only say that he does not do himself justice by so doing.


My Lords, one approaches this subject, when one comes from the industrial Midlands, with a deep sense of responsibility and I do not feel that the Statement made from the Dispatch Box reflects the responsibility and urgency of this question which is placed before the nation. I do not believe that any Member should be chastised, even as mildly and delightfully as the noble Lord, Lord Shepherd, does it when he is pursuing a subject of this fundamental importance.