HL Deb 11 July 1979 vol 401 cc886-980

3.10 p.m.

Lord BOYD-CARPENTER rose to move, That this House welcomes the determination of Her Majesty's Government to reverse the decline in the economic strength and competitive power of this country, and the changes which they have initiated to achieve these ends. The noble Lord said: My Lords, I hope that your Lordships will feel it appropriate if, at the beginning of this debate, I make it clear that, so far as I personally am concerned, I have no intention whatsoever of asking your Lordships to register any decision on this Motion. I think that it would be inappropriate to do so for two reasons. The first is that my purpose in moving the Motion is to seek—I would hope with a very wide measure of agreement in the House—to establish the grave and dangerous situation in which our economy stands.

Secondly, in view of the very high calibre of the noble Lords who have indicated their intention to take part in the debate—other, of course, than the mover—it would be a great pity if the fact that I shall seek (as I shall) not only to draw attention to what seems to be wrong, but to indicate, however tentatively, steps which in my humble view might be taken to improve matters (but on which I am perfectly certain there will not be a particularly wide measure of agreement), were to blur the general effect. Therefore, with your Lordships' permission—which, of course, I shall require—I should like to treat the debate as if it were a Motion for Papers, which for technical reasons which I am quite incapable of explaining to the House it cannot apparently be and I shall at the appropriate moment seek your Lordships' permission to withdraw the Motion. I hope that in these circumstances we may have—and from the list of speakers I think that we shall have—a discussion which will contribute something to the development and guidance of public opinion on what is, we must all agree, the basic issue facing our country at present.

I do not think that there is anyone in the House, whatever his or her political views may be, who is other than deeply concerned with the developments of recent years and with the situation with which all of us—the Government, the Opposition, those on both sides of industry—are concerned. I would suggest that the seriousness of the situation merits very full and penetrating consideration.

I remember being told by a very distinguished medical man that the sudden onslaught of some disease or illness was not necessarily a matter of very much concern. However, sensible people would be right to be alarmed at a slow, insidious, almost unnoticed decline, or growth in some defect. It is precisely that type of complaint from which I am afraid it is only too abundantly clear the body politic of this country is suffering today. And, for the reasons that that great physician gave to me in the medical sense, it is perhaps the more alarming. There has been a decline over quite a number of years, not merely relative to our competitors in the industrial world, but in absolute terms. Our productivity has been disappointing and, as an inescapable consequence of that, our standards of life have begun to fall.

Like many of your Lordships, business takes me to many parts of the world. And, like I imagine many of your Lordships, one feels a good deal of awkwardness and embarrassment when confronted with the almost open contempt with which our country's economic effort is now regraded in many countries. Perhaps what is even more difficult to bear is the touching sympathy of friends. One finds this whether one goes to the countries which not long ago we defeated in war or to the countries which not long ago we rescued and put on their feet again. It is a very widespread feeling that one encounters, more abroad than at home, and indeed I shall seek to quote one very distinguished observer, who, from points of view abroad, was able to form devastingly clear views on this matter.

It may be of help if I very briefly sketch the background. Since the war there have been three phases in the movement of our economy. There was a short period, five or six years after the war, when we were buoyed up with the euphoria of victory and the almost surprised consciousness of survival. We suffered the illusion that six years of carnage and destruction had mysteriously made us all very much richer. There is no doubt at all that in those early years we failed, when compared with countries that had been occupied and devastated, to modernise our industries, and we spent too much time on restructuring institutions and on making alterations which, whatever their merits, had very little to do with our capacity to earn our living in the world.

Then came 1950–51 and the break-through of which I ventured to remind your Lordships only a few weeks ago, under the guidance of that great statesman my noble friend Lord Butler of Saffron Walden. This country made a break for freedom, and for some years after the initial pains and agonies—which I recall as his Financial Secretary only too vividly—we were successful and we saw a period of rising standards. Indeed, they rose so much that the Prime Minister of the day in the late 1950s was able to say to the people of this country, "You've never had it so good". Although, as noble Lords will recall, that remark was criticised on perhaps grounds of taste, no one ventured to criticise it regarding its accuracy. Factually it was an era of rising standards of life among all sections of society; of stable currency and of falling taxes, whose ever increasing yield—because they fell on the products of a growing economy—enabled widespread improvements to be financed in our social services. It was an era of high employment. Unemployment at that time was something like a quarter of what it is today. It was a period of recovery, of hope, and one can perhaps sum it up by saying that it was a period of confidence.

Then, sometime in the 1960s, the malaise seemed to fall upon us, and we have had a fairly long period of decline masked sometimes by fortuitous circumstances, and particularly perhaps by the fortuitous circumstance that millions of years ago the Providence that formed this earth put large quantities of oil at the bottom of the North Sea which no one discovered until this era. However, there has been a steady downward process. It has been so well summarised that I hope your Lordships will allow me to quote from the famous dispatch which Sir Nicholas Henderson wrote as his valedictory dispatch from the Embassy in Paris. After a most successful tour in the post which my noble friend the Leader of the House adorned, he wrote what he believed—we are all happy, I think, to discover wrongly—to be his valedictory report on his public service. He wrote: In the mid-1950s we were still the strongest European power militarily and economically. We were also well ahead of all Continental countries in the development of atomic energy. It is our decline since then in relation to our European partners that has been so marked, so that today we are not only no longer a world power, but we are not in the first rank even as a European one. Income per head in Britain is now, for the first time for over 300 years, below that in France. We are scarcely in the same economic league as the Germans or French. We talk of ourselves without shame as being one of the less prosperous contries of Europe. The prognosis for the foreseeable future is discouraging. If present trends continue, we shall be overtaken in gross domestic product per head by Italy and Spain well before the end of the century". He supports—as I, too, can support—those gloomy statements by figures which tell the same tale. I promise not to weary your Lordships by quoting too many of them. I have always held the belief that speakers are apt to use statistics for the same purpose as a drunken man uses lamp posts; that is, more for support than for illumination.

However, some figures throw a certain light on the scene. For example, in 1954 our gross domestic product per capita was ahead of that of France and Germany; in 1977—the latest year for which we have complete figures—it was at only two-thirds of their level. Our growth in productivity has been an equally sorry tale. Taking as a base figure the figure of 100 in 1954, in 1960 we were still slightly ahead, but by 1977 our figure was 168 against a figure of 286 for France and 277 for Germany. That is an immense and overwhelming difference. Even more vivid is the value of output per man-hour in manufacturing industry. Again, in 1977 Great Britain's was £2.70; France, £4.50; and Germany £7.10.

The result inevitably—it does not need harping on—is that our standards of life have fallen relatively, because we have not been producing wealth to anything like the same extent as those countries, and, therefore, have not had it to consume. Moreover, it is an accelerating process. Between 1970 and 1973 manufacturing productivity rose by 17.3 per cent.; between 1973 and 1976 it actually fell marginally by 0.1 per cent. In 1959 our standard of living was the highest in the European Economic Community, except for that of Luxembourg. It is now only marginally ahead of that of Italy and Ireland. Our share of world trade was 25 per cent. in 1950; last year it was 8½ per cent. In 1950 we built 42 per cent. of the world's ships; in 1978 we built only 4½ per cent.

In recent years up to this year we have at least been relieved of some of the anxiety over the balance of payments which haunted earlier Governments—relieved, of course, by that North Sea oil, to which I have referred. But even more striking, in so far as the figures for the first part of this year are complete—and I recognise, as do your Lordships, that various problems with the Government machine have meant that the figures are far from complete—is that it appears that we had a current account deficit on the balance of payments of £1,000 million in the first four months of the year. So even the consolation that North Sea oil propped up our balance of payments was denied us over that period, leaving us with the grizzly speculation of where we would have stood if, like our competitors in Europe, we had not had the support of that oil.

This is a sad story. Some optimists try to cheer us by saying that this is still a very good country in which to live, which is true, and by commending our quality of life. But our quality of life—in which we take pride—our tolerance, our good sense and our good manners have developed against the background of a society which was also yielding rising material standards to its people. It is at least a matter of some doubt and hesitation whether that quality of life would stand a reversal of that economic background; whether, if standards were to fall—as they are now indicating they will—that whole fabric of life on which we pride ourselves would, in fact, endure. After all, if one wants to make oneself shiver, one can only reflect what an erosion of material standards did to the bright and happy hopes of the Weimar Republic of the 1920s, and how that story ended.

Therefore, the situation which Her Majesty's present advisers face is a grim one. Indeed, they may well sympathise with the Irishman who was asked by a tourist to tell him the road to Limerick. The Irishman gave a complex route, which puzzled the tourist, leading him to ask for further explanation. The Irishman simply shrugged his shoulders and said, "Well, if I had wanted to go to Limerick, I would not have started from here". Had they had a choice, Her Majesty's Government would not have started from here. But they are here and they have to handle a situation, because a couple of months ago the majority of our fellow countrymen decided that they wanted a change of direction in our affairs. It is this situation, which Her Majesty's Government must face, which I have tried to analyse with such fairness as I am capable of, against which we have to judge their measures.

I shall not spend much time on the measures; as I said at the beginning of my remarks, they will perhaps be the controversial part. I am sorry if they cause any offence to any noble Lord, but I do not think that one should discuss the state of our country today without, however modestly, suggesting actions that can and should be taken to remedy it. I believe that not to do so would seem to reek of a defeatism which I, personally, decline to feel.

However, the background to this is to realise that in this era my noble friends on these Benches represent the party of change. We have moved a long way from the days of Prime Minister Salisbury, who is reputed to have said, Heaven forbid that I should ever touch a vested interest". Conservatives are now the party of change. Noble Lords opposite are, in the true sense, the conservatives—the preservers of the cosy, consensus relationship, which in easier times might well make sense. My noble friends represent the party of change, and change, of course, involves serious risks. I commend to your Lordships the thought that simply to continue as we have continued—and I am not making a party point against any particular Government—over the past 15 years, leads just to the conclusions so eloquently set out in Sir Nicholas Henderson's report: a steady and continuing decline to below the level of Italy and Ireland; ever falling standards with all that that would do to our society, to our position in the world and to our capacity to defend ourselves.

Therefore, I hope that the House will feel, as I do, some sympathy—even if it does not agree with the precise methods—with the approach of Her Majesty's Government. I can begin with a matter on which I imagine there is a good deal of agreement; that is, the reductions in personal taxation. These certainly were very strongly urged by the Liberal Party, who played a very honourable part in the last House of Commons in imposing some modest change in taxation on the then Government. Indeed, in recent months, Mr. Healey has indicated with great fairness that personal taxation has been at too high a level. So at least on the relaxation of taxation—I shall not be led into the precise detail or into the argument whether some noble Lord would have added a penny—the principle of reducing personal taxation is important for the following reason. The basic incentive which makes any decent, responsible man make every effort is the desire to benefit his own kith and kin, to give his own family a better share of the good things of life. If he has the ability and the energy to do it—to give them a steadily improving share of the good things of life—that is fundamental human nature. Any Government, whatever their political colour, who ignore that are certain to get themselves into very serious trouble indeed.

Politics and economics are the science of managing people. It is extremely important to realise that if one takes, for the highest of public purposes, too large a share of what a man at any level of earnings is earning, one is quite certain to diminish the effort that he makes, perhaps causing him to emigrate, to ease up or not to take extra responsibilities—it varies with the individual. But one is dealing here with a human reality, which is really what government is all about. I hope, therefore, that the action of Her Majesty's present advisers in reducing the level of taxation as a principle will strike the House as a sensible and proper way of dealing with this situation.

If you are faced, as we are, with a relative—sometimes an absolute—decline in productivity; if you are faced with reduction in the efficiency of your economy and the output of your industry, it is necessary to look at the incentives which cause people to work harder and more efficiently; to train; to take up apprenticeships; to go to night school; to take courses; so that they can make a more effective, and to them, more remunerative contribution to the national financial effort.

There are many other aspects upon which I would not wish to detain your Lordships because this is a great subject and we shall hear a great deal about them before the debate is ended. Let me give just one comparison on this point. In 1978, last year, before the changes in my right honourable and learned friend's Budget of a few weeks ago, a man on the then average wage in this country—about £80 a week—with two children, paid in the course of a year in income tax and National Insurance contributions something like £700. This is £200 a year more than would be paid by any other opposite number of his on that wage level in the EEC.

It is surely no coincidence that we are so out of step in this respect and also so sadly out of step, as the figures I have quoted to the House show, in the similar effort and success of our production and of our creation of wealth. There is one other aspect which may be controversial but which I should like to touch on because it raises quite serious issues. We have high-mindedly used very considerable resources in this country to prop up companies, or even industries, that were in decline. That is to say, we have taxed the profitable concerns to subsidise and keep in business the unprofitable.

I do not take a doctrinaire view on this. There may well be cases, particularly where national defence is concerned, where it is a sensible thing to do. But if you carry that process too far you reach the situation which, according to the Permanent Secretary of the Treasury in his note to the Permanent Secretary of the Department of Industry earlier this year, we had reached, of actually incurring greater losses in keeping those concerns going than can be offset by the increase elsewhere in national wealth. That may well be an explanation of our relative decline.

This policy is an easy one to slip into. It touches most people when an old firm, that has given good employment for many years in perhaps a rather broken down area of this country, is in trouble. It is so easy to use public money to prop it up. It is a temptation to which I have no doubt my noble friends are very far from immune. But carried beyond a certain point it must be wrong to use resources earned by profitable companies which could use those resources in developing their own profitable enterprise, in order to prop up enterprises which, for one reason or another, are running at a loss and likely to continue so for a continual period.

There is the awful warning, if one wants to touch on it, of the efforts—so well intentioned—to prop up the shipbuilding industry, which have had the most unhappy effect of subsidising competition for our hard pressed ship operators. Supporting cheap shipbuilding for foreigners has led to our own shipping industry—and some noble Lords will speak with much greater experience of this than I—undoubtedly feeling very serious effects.

There are many other measures that we shall hear about. I hope that we shall follow the example of the noble Lord, Lord Butler of Saffron Walden, who in the 1950s removed restrictions upon production and development. I was glad to hear that the Price Commission was to go. Noble Lords will have read the comments of the chairman of Whitbreads in the Press only the other day. There are others who have suffered from that body. I am also glad to hear that exchange control is being eased. There is very little justification for preventing companies investing their funds in appropriate and remunerative places at a time when it is the strength of sterling, rather than its weakness, which is causing preoccupation to Her Majesty's Government. There are whole areas in which we can improve things.

We come back to the fact that this country's situation, in the judgment of many people, is such that mere tinkering; mere modifications and adjustments; the mere taking of measures which will cause happy consensus to continue; will, as has been shown by the experience of recent years, be inadequate. The Government will take risks. Some of the things they do will undoubtedly be wrong. I personally have some reservations about the high level at which they have placed and maintained the minimum lending rate. If that is maintained for very long its side effects may be more damaging than the advantages to be obtained from it.

There is a whole area in which, as my noble friends will know, there are many people who hold differing views. The one thing for which we would not forgive Her Majesty's Government would be if they did not make every effort, by the taking of measures, however drastic, on, for example, public expenditure (which has already been mentioned today) which seem to be going to contribute to the end we all want to see: that is, that this country should return to the creation of wealth; should concentrate far more on the creation of wealth and perhaps concern itself, for that reason, a little less with its distribution; and should show respect and give help to those at all levels in our economy and in our society who can, and do, create wealth.

As I was reflecting on what I should say in this debate, and as I read the gloomy material, some of which I inflicted upon the House a few minutes ago, I came across some lines which seem to be so appropriate that I hope the House will allow me to quote them. They are words which Shakespeare put into the mouth of John of Gaunt: This land of such dear souls, this dear dear land, Dear for her reputation through the world Is now leased out, I die pronouncing it, Like to a tenement or pelting farm: England, bound in with the triumphant sea, Whose rocky shore beats back the envious siege, Of watery Neptune, is now bound in with shame, With inky blots, and rotten parchment bonds; That England, that was wont to conquer others, Hath made a shameful conquest of itself. There is one consolation. When Shakespeare wrote those words he knew that this country had come through the troubles which threatened to overwhelm John of Gaunt and his contemporaries, and had come through to the triumphs and glories of the Elizabethan age. It may be so again. My Lords, I beg to move.

Moved, That this House welcomes the determination of Her Majesty's Government to reverse the decline in the economic strength and competitive power of this country, and the changes which they have initiated to achieve these ends. (Lord Boyd Carpenter.)

3.39 p.m.


My Lords, we have just heard an interesting and fascinating speech. I think that the noble Lord had much to say. I was rather surprised, because he is usually a very effective debater and I admire his skill, that he seemed a bit lost, and finally he engaged in generalities. May I say something to him about his early history before I deal with the Motion. He mentioned the period immediately after the war. The noble Lord and many others of us came hack from the Services and we saw the beginning of a new Britain; a Britain which, in a period of time, was built up, and which also was envied by many other countries.

I refer to the creation of the Welfare State, of the National Health Service. One of the great jobs of a famous Minister of Labour who became Foreign Secretary, Ernest Bevin, was to bring back the men and women from the forces. He brought them back efficiently and smoothly, in contrast to what happened in the aftermath of 1914–18. All this was done. We sought also to build up the regions which had experienced unemployment: the regions of the North East, of my own West Cumberland, of Durham, Wales and Scotland. John of Gaunt did not deal with Wales and Scotland. I hope the noble Lord realises that the malaise then was cured and that Britain became a civilised State in the best sense. All the excesses that we knew in the 'thirties which angered men and women, all that period was changed and changed for the better. I am amazed that he did not give credit to the architects of that period: the Attlee Government; a great Prime Minister, backed up by men like Stafford Cripps, Hugh Dalton and others. They worked a revolution, and I believe that period will be regarded by historians as one of the great periods in British history.


My Lords, would the noble Lord also recall that that Government, of which he was a distinguished member, which he so extols, ended in a disastrous balance of payments crisis from which they ran away by going into an election they knew they would lose?


My Lords, the biggest crisis in the balance of payments was in 1964 under the Tories. We created stability in that period, and there is no doubt about that. I remember, along with my noble friend Lord Shackleton, and others who lectured in the States in that period explaining what was happening in Britain, how even American society admired many aspects of life in this country, especially the creation of the Welfare State and the building up of the National Health Service. I believe we achieved a miracle.

It is true that we all want to increase wealth; we all want our families to have better things. We accept that because, whatever society man lives in, that is a natural thing to expect, and there is no desire on the part of the Labour Party, whether in power or in opposition, to decry that principle. We want wealth, but we want that wealth fairly shared. After all, who creates the wealth? The trade unionists, who are so often attacked by noble Lords opposite—the men and women in the factories—are the people who create it. That is why I want a better educational system which will turn out more engineers.


They are shattering it, my Lords.


Yes, my Lords, and now we are going to have a crisis in education. This Government will be cutting 70,000 teacher jobs at a time when we need to train our young people in our schools. Their schools are not often cut; I never hear of cuts at Eton, Harrow, Winchester and places like that. It is always in the State sector that we hear of such cuts. Why should that be so? Noble Lords opposite know that they are now embarking on a wrong policy, a policy which will be harmful to our economy because in the end we need skilled men and women in industry. There is still too much snobbishness in our educational system in relation to the creation of engineers; and that is true at all levels, even in the universities which concentrate too often on pure science. We need to train more engineers, and I should have thought that Lord Boyd-Carpenter, with all the interests he used to have—he was a very fine chairman of a Quango, which he now seeks to destroy—would be only too well aware of that.




The noble Lord may remember that I was once put on a Quango by himself. It was the Japanese Prisoner of War Fund, but I did not get any salary. However, he was on a good Quango and he never objected to that.


So were you!


I hope there will be no attacks on Quangos again, my Lords.


Oh dear!


The Lord President of the Council, the noble Lord, Lord Soames, is looking rather worried. I hope he will not worry too much, and I certainly hope he will not fall for the change of title on the part of the Tory Party as suggested by his noble friend. I read in the Financial Times: Tories now take a new name for Europe". It seems they are ashamed of their own party. It is amazing.

The Earl of GOWRIE



My Lords, would the noble Earl care to look at the article? It seems they are to be called democrats, as though that were a new term. I hope noble Lords will concentrate on what is happening in our economy: the Budget, the strategy of Government and planning. That is really what is important. I believe that the Labour Government over a period of time pursued the right policy in relation to industrial strategy. We tried to revive industry and we tried to create a better understanding with industry, private and public. Indeed, I remember hearing the noble Viscount, Lord Watkinson, in a debate in your Lordships' House, praising the planning agreements of the different sectors of industry, and I thought he made a positive contribution. I hope, therefore, from his vast experience, that we shall hear him today making a case quite different from the generalities and generalisations we had from Lord Boyd-Carpenter.


My Lords, the noble Lord should not anticipate my speech and I rise simply to tell him that I shall also be saying what I have said before; namely, that planning agreements are totally indefensible anywhere and I have never agreed with them.


My Lords, the noble Viscount praised the sector working parties and if he consults past issues of Hansard he will see I am right. I have always thought of him as a progressive businessman, and he should be delighted that I am calling him that. I am simply telling noble Lords that we must have the right strategy, and I have to ask this: Is the Budget we have just had the way to win the confidence of the British people who are going to create the wealth? It is in fact a move towards Professor Friedman's philosophy—in other words, the use of market forces. It is rather remarkable that a Chancellor should say, "I am putting more money into their pockets so they may pay the value added tax". What a strange choice of language!


They are "going bananas", my Lords.


My Lords, I believe the main effects of the Chancellor's Budget will be to produce massive increases in unemployment, with high prices. Even the Road Haulage Association believes the Budget will add £900 million to the cost of road transport in the coming months. There will be vast increases in indirect taxes and cuts in public expenditure, which in the end are bound to raise prices. The figure, a cut of one-third of £1 billion in the rate support grant is, I believe, likely to be met by terrific increases in rates, and that will cause great hardship to many families in the country. That attack on the rate support grant will therefore strike at the very heart of the wellbeing of the British people.

There will be increases in food prices. If the Government carry out their election promise to devalue the green pound to parity, there will inevitably be a rise in inflation as well. It has been estimated by the Chancellor that it will be in the region of 16 per cent., although the Secretary of State for Social Services expects the rate of inflation to reach 17½ per cent. by November. Added to that there will be an increase in unemployment. I understand that the Civil Service Department, the department of the noble Lord the Leader of the House, is now preparing for cuts of up to 150,000 in the Civil Service alone. There will he savage cuts, of £172 million, in support for the Manpower Services Commission and for job creation measures. That is bound to have an immediate and direct effect on unemployment. Thus, I believe the industrial strategy of this Government is wrong, and I wish that the noble Lord, Lord Boyd-Carpenter, had started to examine objectively what he is supporting, although he does not intend to press the Motion to a Division.

I was shocked at the way he attacked the National Enterprise Board yesterday and I thought that was very unfair of him. I believe that board has done much for Britain and needs to be continued. I spelt it out in a previous debate in your Lordships' House, and perhaps I may remind noble Lords and people outside the House that the National Enterprise Board is engaged in business in aero engines, electronics, machine tools, engineering, scientific activities, computers, medical exports, electric transformers and many other things. It has been responsible for a major section in our economy; yet we have noble Lords opposite sniping at it, as they have been continually.

I believe the Government would be foolish to scrap the National Enterprise Board, and I should like to know from the Leader of the House what is to happen to it. Are the Government going to keep it in tact, or are they going to listen to the advice which some of their supporters in this House are now giving? I hope not, because the National Enterprise Board is vital to the prosperity of the regions—those regions which even a Tory is now worried about. I have here a copy of a very good, fine speech by Jim Prior, the Employment Secretary. He said that there are basically two nations, and he told the Tory Reform Group in Cambridge that, if the Government were found wanting, the people would turn once again to Labour. He is very worried. I think that he is a progressive—one of the few in the Tory Cabinet—and I am glad that he has shown the country that he at least feels for the situation in which, as Employment Minister, he plays an important part.

I hope there will be no attempt to destroy organisations which seek to build up the strength of the regions in England, Scotland, and Wales. I should like the noble Lord to give an answer to that point when he replies. Where are the cuts to be? Are more cuts coming? I have in mind such organisations as the Manpower Services Commission, which I have already mentioned. What will be the extent of the cuts? The noble Lord must know that this country of ours needs good regional policies. We must remember that we are part of the Community, and I have here a copy of the regional development plan relating to the European Community. I hope that noble Lords will read it so as to find out to what they have committed themselves in Europe. Europe will be much more progressive than we are if we have the Tory way of thinking.

Do the Tory Government believe in regional policy support in relation to projects which arise and which are engineered in the regions by Europeans? In my former constituency part of the Lillyhall industrial estate was financed from the European Regional Fund. The noble Lord is a great, a fine, European. I hope that his Government will be strong in their support of regional policies emanating from Brussels, and I hope they will do nothing to harm the regions of this country.

I could go on arguing about such questions as whether or not we are to have a society in which the State positively intervenes and in which we do not rely entirely on market forces. I believe in a mixed economy. I suspect that many noble Lords opposite are still wedded to the rigid doctrine that I mentioned earlier, and which in the end leads them to Professor Friedman. I believe that a mixed economy is essential, and we must build up the regions in order to fight unemployment, which has caused so much distress over the years in our country.

I hope that the noble Lord opposite will give us assurances that in no way will regional aid be cut back. Only the other day I spent a pleasant afternoon in White-haven (near my old constituency) where I opened an extension to a factory. The firm involved are now dominated by Americans, but they have a good factory and every businessman whom I met there paid a tribute to what we have done in this country in the way of aid to the regions and the provision of grants and other financial aid in order to build up strength in those areas.

I hope that there will be no going back. I hope that we are not going to think in terms of market forces entirely. Remember that it was a Labour Government who built up an industry which the noble Lord and many other noble Lords are in. I refer to British farming. The noble Lord who opened the debate asked us to think of history, and I would remind him that one of the great agriculture Ministers was Tom Williams. What did he do? He did not rely on the forces of the market. Rather he brought in an Act which gave to the farming community assured markets and guaranteed prices. He succeeded, and agriculture, which had been neglected over the years, improved, which was unlike what occurred in the period after World War I during which the corn production Act destroyed at a stroke security for people in agriculture, both farmers and agricultural workers. It was a Labour Government who built up measures and gave aid to the farming community. The noble Lord himself was a very distinguished Minister of Agriculture and he, too, gave help and aid. As I reminded the House some time ago, he was also responsible for the creation of many good Quangos which have helped agriculture. The Meat and Livestock Commission is just one example.

I hope that noble Lords will not embark upon an attack on Quangos. The noble Lord must give an answer today, otherwise I shall go on pressing him. The Tory Party must come clean. If they destroy some of these Quangos (as we call them) they will in the end harm the efficiency of those departments that are affected by them. Here is another example of people who are going to pursue a doctrinal policy. I hope that the noble Lord will treat this question very seriously because he will have a major part to play in, I hope, keeping the Quangos and protecting them. Of course we do not want to keep organisations that have lost their use; I am not arguing that. But I believe that many of the so-called Quangos (to use the odd term that we give them) serve a useful purpose and enable men and women, whatever their political persuasions, to perform a service to the State and to the community.

I say to the noble Lord that here is another example where we are not ashamed of what we have done. However, I am worried about the attack on education. I am worried about the danger to the teaching profession and about the present lack of morale, as well as all the uneasiness that parents must feel. I believe that this is one of the tragedies of our time. We must not go back to a two-nation system; we must not go back to a system which divides the nation. I know that education does; I have always argued that. If children of the same age are sent to different schools, inevitably there will be a crisis. There will not be a democratic society in the best sense of the term. That is why I welcomed the move to comprehensive education, and that is why I resent what the Prime Minister is seeking to do in the Education Bill—to bring back selectivity. As I say, this is one of the great tragedies of our time. We shall fight the Education Bill through and through on the Floor of this House; and I know that many of my noble friends are waiting to go into battle. We shall not let it go through without making a major protest. What the Conservative Government propose to do is really scandalous.

I hope that the noble Lord, Lord Boyd-Carpenter, will again think carefully. He did not tell us much in his speech. It was a very vague speech. There was no precision in it—it was unusual for him. I think that he must have had a bad night, or some other trouble. I like the noble Lord so much, he is such a reasonable man, and he has done much. I hope that the noble Lord will not press the Motion. He said that he will not press it, though it cannot be a very good Motion if he is frightened to press it—


My Lords, will the noble Lord allow me to intervene? I think that what he is really trying to tell the House is that I did not deploy any of the points to which his office had prepared for him the answers. Therefore he finds it easier to answer by speaking about something wholly irrelevant, such as the Education Bill.


My Lords, I have not an office which provides me with a brief—probably that is why I now make better speeches. However, I hope that the noble Lord will take note of what I have said. I am sorry to say so, but the noble Lord's speech lacked precision. I hope that in the debate we will be able to examine critically what he has proposed.

3.59 p.m.


My Lords, it is the courteous custom of the House to thank the noble Lord who introduced the debate for having done so. I must confess that I thought that on this occasion I would find it rather difficult to do so in view of the fact that the noble Lord, Lord Boyd-Carpenter, instead of putting forward a Motion for Papers, which could later have been withdrawn, so framed his Motion as to give me at least the impression that he was seeking to oblige us to welcome, not only the Government's determination "to reverse the decline in our economic strength and competitive power"—a sentiment with which I am sure we would all agree—but also the means adopted to that end. In doing this, in my view, he acted, maybe unwittingly, in a way which was almost bound to call forth the retaliatory response which it in fact invoked from the main Opposition party, and has placed me, certainly, speaking from the Liberal Benches, in something of a dilemma.

This is because, in principle at least, if not in degree, I very much welcome some of the changes initiated by the Government; for example, reducing the higher rates of taxation, to which the noble Lord referred, in a way which is designed to restore the differentials for responsibility and skill which have been so seriously eroded in the last few years. In the interests of our long-term competitiveness there are certain measures, such as the relaxation of exchange controls, which should, in my view, also now be taken further; and there are others, like the increase in the rates of interest, that have, on the basis of such information as is available to me, perhaps gone too far.

On these points I am rather inclined to agree with the noble Lord, Lord Boyd-Carpenter.

But there is one measure, the absence of which I very much deplore, and that is any firm indication of the Government's wishing to confer with representatives of employers, trade unions and other interested parties under conditions which would enable a better public understanding to be gained of the effect on the national economy of increases in pay which are not matched by improvements in productivity. So keenly do I feel on this point that at one time, given the way in which this Motion was framed, I even contemplated suggesting to my noble friends that I should put down an amendment, which would have advocated such an educative process, in substitution for the last clause in the Motion as framed. But I rejected that idea because it seemed to me, on reflection, that it would serve only to exacerbate the conflict which in my view we should do all we can to limit.

I am left, nevertheless, to regret, as your Lordships see, the way in which the Motion is framed, because I cannot unreservedly welcome as a whole all the changes that the Government have initiated. Indeed, in another place my party has already opposed some of them; and if the Motion were to have been carried to the point at which it was pressed to a Division, then I think I should have been obliged to recommend to my noble friends that we should oppose it. It seems to me that that would have been a great pity, because we would simply have divided on party lines for and against the Motion. Because of the in-built Conservative majority in this unreformed House, it would no doubt have been carried by a substantial majority, but we would have achieved absolutely nothing, in my view, in terms of finding what the noble Lord, Lord Boyd-Carpenter, may call a cosy consensus relationship but what I prefer to regard as common ground on which alone, in my view, our basic economic and industrial problems can be solved; and the debate would then have been totally unproductive. With these considerations in mind, anyway, I am delighted that the noble Lord, Lord Boyd-Carpenter, as I understand it, for his part at least, is prepared to withdraw the Motion at the end of this debate, in just the same way as he would have done had he moved for Papers, and I can only express the hope that his noble friends will support him in that.

My Lords, it is understandable, I think, that, because so many of our basic national problems are of an economic and industrial kind, they are debated frequently in this House by people who have at least some experience in these fields. One of the attendant disadvantages, I think, is that when a noble Lord gets up to speak others must have a pretty shrewd idea what the particular Member is going to say, and it is salutory to think that that must be true of me just as much as of anyone else. Indeed, the prospect of listening to me may be more than ordinarily daunting to your Lordships because on the occasions of the last two debates in recent weeks on the subject of the Government's economic and industrial policies I have had something to say of substance. At least this afternoon I should like, for my part, to try to remedy that particular deficiency by talking, with some diffidence certainly, on only one theme, and briefly at that; namely, the motivation to work. In doing so, I should like to try to relate what it is that I have to say, I hope not in too hectoring a way, to a particular tenet of political philosophy which has featured prominently in the Conservative Party's recent election Manifesto, in the gracious Speech, in the Budget Statement which followed that Speech and, most recently, only yesterday in another place, in an answer which the Prime Minister gave to the Leader of the Opposition, and this concerning the desirability, in the Government's view, of providing greater financial incentives.

My Lords, it so happens that towards the end of my career in manufacturing industry I was responsible for the education and training of nearly 20,000 people in a large organisation, arid a particular responsibility I had was for the training of managers, supervisors and even, jointly with the trade unions concerned, shop stewards in what might be called the management of people. In giving this training we needed to establish whether certain motivational theories in fact stood up to the test of modern industrial life in offices and on the shop floor. A part of one of these theories, put in its simplest form, was that, although lack of adequate financial incentives or rewards, whether viewed absolutely or relatively to the rewards of others, could be a cause of dissatisfaction, the mere accumulation of more pay did not give rise to positive satisfaction at work. On the other hand, so the theory ran, factors such as responsibility, achievement and the recognition of that achievement did give rise to positive job satisfaction.

We sought to test this proposition by the simple expedient of inviting people to think back to those periods in their lives when they had been most inclined to give of their best at work, and I can only testify that, whether one was dealing with managers, supervisors or shop stewards, the result was invariably the same. Rarely indeed did those concerned say that at such periods money had been a significant factor in the situation; nearly always, on the other hand, it did indeed prove to be the case that factors such as responsibility, achievement, the esteem in which people were held by their colleagues, self-fulfilment and that sort of thing, were the matters which, in the view of the people concerned, had motivated them to give of their best. Therefore, these were the factors which we sought to introduce into the jobs of the people concerned. But that is another story.

If your Lordships are in any doubt as to the validity of this proposition, I can only suggest that you apply it to your own experience in this House. Whatever may be the factors which motivate us to contribute to the best of our ability to the proceedings of this House, I suggest that on one thing we might all agree—we do not come here for the money. I am certainly happy in anticipating that, with the prospective increase in the amount of expenditure that I incur in the course of my duties in having to stay overnight in London, I shall no longer be out of pocket; or, to the extent that I am, it will not be nearly as unrewarding as it is now.

For me, that simply supports the contention that absence of sufficient financial recompence can act as a discouragement. Surely, the things that cause us to give of our best in contributing as well as we can to the work of this House are the exercise of responsibility—whether that stems merely from an accident of birth, as in my case, or not—and those occasions when we are deemed by our colleagues to have performed well, and so on. If I may seek to apply this thinking to the subject of the Motion before your Lordships—namely, the means by which the Government should demonstrate their determination to reverse the decline in the economic strength and competitive power of this country—I would simply say that in the last few years the after-tax salaries of senior and middle management, on whose morale, in my experience, industrial performances largely depends, have been reduced to an extent which is altogether disproportionate to that of other categories of employees. This cause for justifiable grievance, as I see it, has now been removed; but I do not believe that the Government's objective is going to be achieved simply by the provision of further financial inducements. On the contrary, if it is possible—as I hope it may be—to reduce direct taxation still further, then in my view the perks which, understandably, multiplied in the wake of what seemed to me to be the penal higher rates of taxation imposed by the last Administration should now be progressively dispensed with.

The truth is that solutions to such problems as how to control inflation or to improve productivity, or to restructure (as the noble Lord, Lord Boyd-Carpenter, was saying) large parts of industry or to create more job opportunities are not within the power of governments alone to solve. In fairness to the present Administration, I do not think that they would claim to be trying to do more than to create conditions in which the solutions to those problems can be facilitated. In my view, we shall improve our industrial performance only by the very much more difficult, long-term, education processes involved in convincing people, in their own interests, of the need to accept change; that more real wealth can come only from a rise in output per man and that if employment, even at the present lamentable level, is to be maintained, we shall have to accept some reduction in our standards of living and so on.

I do not believe—and I have said this before and I cannot forbear repeating it—that radical changes like this can be effected until we are prepared to embark on them together. The noble Lord, Lord Boyd-Carpenter, an experienced politician, has attained high office of State and is also the leader of one of our most successful companies. In that capacity, he will know of the vital necessity of establishing a common purpose to which management and employees together can subscribe. I would respectfully suggest to him that that objective, the objective that he has in mind—and to which we would all, I imagine, subscribe—of seeking to improve our economic and industrial performance, is most likely to be achieved by seeking at least minimal agreement as to the means by which that can be done.

4.16 p.m.


My Lords, I think that all of us will be grateful to my noble friend Lord Boyd-Carpenter for having introduced this Motion which enables us to confront some of the really major, vast and complicated anxieties which face us all today. The Motion welcomes the determination of Her Majesty's Government to reverse the decline in the economic strength and competitive power of this country … The noble Lord, Lord Peart, raised a number of questions, some of which—I refer to those rather more relevant to the debate—I will attempt to answer in the course of my speech. Others, my noble friend Lord Gowrie will talk of in his speech.

As my noble friend Lord Boyd-Carpenter said, there is, alas! no room for argument about the decline of our national strength—that is, in comparison with others. It has been so far only a relative decline. Let us hope that it will never become an absolute decline. My noble friend quoted a few figures. I will not quote many, but, in order to show the degree of the comparative decline, I think it is necessary to bear some figures in mind. My noble friend referred to our share of world markets in manufactured goods. I am taking this over a 25-year period; we have declined from some 80 per cent. to 20 per cent. of the world market. The growth of our gross domestic product during the past 25 years has been of the order of 75 per cent., while in France and Germany it has trebled. In terms of gross domestic product per head, both those countries are now of the order of 50 per cent. higher than we are.

Small wonder, indeed, when you look at the figures of our productivity—a rise in Britain in 25 years of some 70 per cent., while France and Germany both multiplied theirs by more than two-and-a-half times. This leads me to the figure, my last figure, which seems to encapsulate, for me, at any rate, so many of the economic indices; namely, the comparison of the figures of our exports and imports of manufactured goods which traditionally used to be of the order of 3 of exports to 1 of imports and which is now, give or take half a percentage point or two, about "even Stevens", about 1 to 1.

From where, therefore, if it were not for the benefit of North Sea oil, for the boon of North Sea oil, would be coming the money to pay for the raw materials and the food we need to import? I do not want to go back to the Attlee Government, I have been talking now about the past 25 years. Whether or not our Welfare State is better or is not so good as those of other countries, whether or not more has been done by one party or another in this regard, I do not think that this is the main argument that we should be having across the Floor of the House in this debate. Our argument and disagreement with the last Government was that, given these facts and also the highly inimical if not malign international economic atmosphere in which we were having to live, too many of their actions and policies aggravated rather than improved what was already a thoroughly bad national situation.

What was the economic position when this Government came to power? Well before the election it was clear that any hopes of a substantial balance of payments surplus had been disappointed. We had a bare surplus in 1978, and a forecast deficit of £1 billion in the first four months of this year. Inflation was already back in double figures and rising, with a sub-stantial number of significant price increases already in the pipeline, delayed until after the general election: postal charges, bread, beer, milk, gas, electricity. They were all waiting. Production was slowing down, and the number of unemployed was widely forecast to be at least 1½ million by the end of the year. The growth in world economic activity was forecast to be less this year than last.

What effect did a brief consumer spending spree as a result of last year's substantial pay awards have? It sucked in yet more imports through the failure of our own industry to supply the extra goods which the extra demand called for. We had in effect arrived at the moment of truth with the really frightening prospect that unless we changed our ways, and changed them quickly, our relative decline might become an absolute one. Given that situation, it is simply not enough to do a little here and a little there to try to change, as my noble friend said, in effect, long-term trends with short-term measures. And, worse still perhaps to try to tackle problems which are predominantly on the supply side of the economy with policies aimed at manipulating demand. Hence, my Lords, the Budget, to which the noble Lord, Lord Peart, referred, which is perhaps the main indicator so far of the Government's economic policies, and which set out to avoid both these practical and conceptual errors. Just as the main causes of our decline have been long-term and on the supply side, so too must be our solutions.

There are four major elements of economic strategy that I should like to touch upon. The first concerns the need to strengthen incentives—to which my noble friend rightly paid much attention—by allowing people to keep more of what they earn. This is far from being an abstract principle, based only on generalities about human character. It is based on hard evidence. It is based on the experience of others. It is based on the evidence that we hear from industrialists and trade unionists. And it is based on the evidence of the ballot box. Of course it is not the only answer but it is a feature of the answer. Our overall burden of taxation is not in effect radically different from that of many of our international competitors. But the way we distributed it most certainly was! Indeed, as I have said before in this House, it would have been hard to have designed deliberately a system which was better structured to penalise success and discourage initiative at just the points where this could do most damage to the economy as a whole.

Now, my Lords, may I look for a moment at what we need in the labour force from an economic perspective. We need, first, a labour force of the highest possible quality. In other words, it needs to be fully equipped to face the technological challenges that lie ahead. In turn, it must be trained to the highest possible level. Yet what do we find in practice today? We find shortages of people willing to take on apprenticeships. And in many areas of industry, despite our high level of unemployment, we find a shortage of skilled craftsmen and engineers.

Then in all too many cases, we find a shortage of suitably qualified management. We do not need to look very far to find one of the major reasons for this: it is because training almost always involves short-term sacrifice for long-term gain. But for far too long, much of that long-term gain has been thought at least to have been taxed away. So people decide—rationally from the point of view of the individual, but disastrously from the point of view of the country as a whole—that training and apprenticeships are not worthwhile.

Another facet of the labour force that is essential for any advanced industrial country is flexibility—flexibility to change jobs and to move around the country when necessary. Yet in practice, people are often unwilling to do this, despite the financial incentives that may be offered Again, this arises in large measure because far too high a proportion of the gain is not theirs to enjoy when they haved moved; it goes to the taxman; and far too few own their own houses which they can sell to buy another elsewhere.

Finally, we need a labour force which is enthusiastic and dedicated. Of course, in no way is this solely a question of financial incentives. Indeed it is one of the most reassuring aspects of the British way of life that there are any other sides to motivation. But the importance for morale of our high levels of personal taxation—in particular our high marginal levels of personal taxation—cannot be overstated. Why work an extra two hours when you have to work a third one for the taxman?—even if you are only earning well below the national average.

It is considerations of this kind that lead one inexorably to the conclusion that something has to be done about the way we pay our tax, and that is why sweeping income tax cuts were introduced in the Budget. Not because it was a "giveaway" Budget—far from it—but because it is essential that we achieve major changes in the structure of our tax system if we are to remove major obstacles in the say of modernising our industrial actions and attitudes.

The second general principle of our economic policy to which I should like to refer is the need to enlarge the freedom of choice for the individual by reducing the role of the State. This is not just a question of political conviction, but a matter of economic judgment; and it is a matter of common sense. It is rooted above all in a recognition that competition has a role to play not only between industrial nations, but within them, and that in turn it provides by far the greatest spur to individual effort, efficiency and initiative. If this now sounds something of a truism, your Lordships will remember that up till recently, such talk had become highly unfashionable.

The principle of freedom of choice has already been reflected in a number of Government actions or announcements. For example, a start has been made in the long overdue process of relaxing exchange control. Dividend controls will lapse after 31st July. The Community Land Act is to be scrapped. And, at the very highest level, a start on rolling back the frontiers of the public sector has been taken.

Noble Lords on both sides agree on the principle to which the noble Lord, Lord Peart, referred, of the mixed economy in our country. We agree with it because it is a fact of life: so we had better agree with it. But where we disagree is over where the public sector should end and where the private sector should begin, and vice versa. There are, of course, elements in the Labour Party which seem to be increasing in influence if not in numbers, and which would be quite prepared to see the public sector spread its tentacles far wider and deeper than they are at present into the private sector. In no way can this be right and in no way does this find favour with the electorate, as was made clear above all, I believe, in the general election.

We on this side of the House—and the noble Lord, Lord Peart, referred to the Welfare State—yield to none in our desire to secure lasting improvements in the quality of public services; but such improvements must be sustainable, and in order to be sustainable they must be founded on a firm economic base. It is no good just mouthing words such as, "How nice it would be if we had this" or "How terrible it would be if we did away with that". What we do must be founded on a firm economic base so that we can continue to pay for it. Major changes in the economy as a whole must, and will, come first. We cannot spend money that we have not got, and we will not continue the evil process of spending public money on a scale that damages the interests of the private sector, on which the process of wealth creation so heavily depends.

The third element of economic strategy is the need to reduce the burden of financing the public sector so as to leave room for commerce and industry to prosper. Our logical starting point in this respect has been the overriding need to reduce the rate of growth of the money supply; for if we do not do this we shall have no hope whatever of squeezing the fundamental causes of inflation out of the system. Too high a public sector borrowing requirement, with a given money supply target, simply gives rise to a sharp credit squeeze in the private sector, with harmful effects on both investment and jobs.

Another principle for the conduct of economic policy is related to pay bargaining. If we are to encourage responsible bargaining, as we must, we need to ensure that those who take part in collective bargaining understand the consequences of our actions and of their actions. There are two aspects to this. In the first place, let there be no doubt of the Government's resolve to stick to the monetary targets announced. That resolve will not be deflected by any short-term pressures that may build up. This being so, it follows that excessive pay rises will have one effect, and one effect only: that is higher unemployment. That does not sound pleasant, and it is not pleasant, but it is a reality of life—because we are not going to allow our economic and industrial recovery to be put at risk by a continuing upsurge in inflation. I think that many trade unionists understand the logic of this very well, but we certainly intend to ensure that the message is repeated again and again.

Secondly, there are the implications which excessive pay increases will have in the long run. In addition to unemployment, which can occur quite quickly, large rises in money earnings unmatched by productivity (which was a point quite rightly referred to by the noble Lord, Lord Rochester) will raise unit labour costs. That in turn will do further damage to our international competitive position, causing further unemployment and lower living standards for the country as a whole. I am sure that no one, whether inside the trade union movement or outside it, wants this to happen. For our part, we will do everything in our power to ensure that it does not happen; but ultimately it is a question for the British people themselves. We must cease to think in terms of pay increases being automatically related to increases in prices. There simply will not be the money available to pay increases unless they are matched by genuine—and I repeat "genuine"—increases in productivity. To take this a little further, it is only when cause and effect are reestablished as principles in economic life that the British economy will pull back from its dangerously inflationary tendencies domestically, and start to correct the regional and other imbalances which make our chances of industrial recovery all the more difficult.

May I assure your Lordships that we have no illusions as to the magnitude and the sensitivity of the task. We are convinced, nevertheless, that the country has the human and national capacity to undertake it; and in a world shaken and made volatile by further gathering recession, we are aided—so far at least, and hopefully this will continue—by the stability of our political traditions and institutions. Certainly after years of decline the task of turning around the British economy seems daunting. Many years of steadfast and sound government will be needed. The Government will inevitably make mistakes—for what Government does not?—but we hope that steadfast and sound government will put Britain back on to a par with countries which 20 years ago were far behind us.

The necessary change in performance is well within our grasp as a nation, if we choose. How many even moderately successful companies would consider a 3 per cent. increase in output as beyond their reach, given the right conditions? And a 3 per cent. increase in total output would do the trick. It would be roughly equivalent to the benefit which flows from North Sea oil and gas. But if the change in performance necessary to revive our country's fortunes and to restore its self-confidence is but a matter of a few percentage points, the change in personal attitudes necessary to bring about this improvement is, on the other hand, both fundamental and vast. The little more and how much it is, The little less and what worlds away". The Government's whole strategy is designed to offer leadership—for that is their job—and opportunity, for it is only the people of our country who can do the job. It offers a challenge, above all, to individuals to look again at their own country's needs, to question their own attitudes and their own values, to take courage and to act in faith.

4.39 p.m.


My Lords, I thank the noble Lord, Lord Boyd-Carpenter, for introducing this debate, but I want to bring your Lordships down from the sublime general arguments we have been listening to to a very few small, particular ones. The Motion welcomes the changes which the Government have initiated to achieve the reversal of our present economic decline. So far as those changes go I welcome them, but they have not gone very far as yet, in particular in relation to small businesses; and it is about small businesses that I want to speak today.

In our debate on unemployment three weeks ago, the noble Lord, Lord Northfield, gave some figures. He quoted from a book, and if true—and he qualified his remarks by saying that—they are quite horrifying. He said at column 1040 of the Official Report of 20th June, that at the level of the smallest businesses—that is, businesses of less than 10 employees— there are only about 27,000 manufacturers in this country as compared with 180,000 in France and 150,000 in Germany". That comparison is very similar to some of the larger comparisons made by the noble Lord, Lord Boyd-Carpenter, and to the same effect—that we are very far behind. Here is an area in which growth and expansion can be created quickly, and it is now essential to display speed in this if we are to avoid the catastrophe of huge structural unemployment. But the conditions for that speedy growth must be set by the Government and, so far, they have not been.

The first of those is surely availability of finance at a reasonable rate of interest. The noble Lord, Lord Northfield, still at column 1040, mentioned the example of Japan, where he said that small firms have access to £400,000 at 7¼ per cent. He went on to say that in this country more than one firm is really put in jeopardy by sudden fluctuations in the bank rate. We must get the interest rates down. I realise the overbearing need to reduce inflation, but until we get those interest rates down we shall not be able to start the expansion of the small businesses.

Secondly—I apologise for quoting the noble Lord, Lord Northfield, so much, but his speech three weeks ago went remarkably to the point of our problems—the noble Lord stressed the importance of the help that can be given to small businesses through the provision of small sites for factories and workshops by local authorities and development agencies. I want to take this a stage further and ask the Government to take a very close look at our present planning controls, to see whether they can be relaxed. At present, the planners' attitude and inclination is to say "No", leaving it to the applicant to make out a good case for obtaining approval of a change of use, or for opening up a business in a residential area. So there is a lack of encouragement to the go-ahead person who wants to start up something new in his own locality.

Obviously, where noise, smell or a large increase in traffic would upset the neighbours, there should be a rejection of the application. But these rejections are far too frequent, and I get a very strong impression that the real reasons for some of them are either objections to competition from other businesses in the area, or the fact that the applicant has jumped the gun and upset the planning authority. I believe that the attitude of planning authorities should be changed to become one of basic approval of new applications unless the objections are overwhelming. With the imminent advent of the technological revolution, I believe that many people will want to work from and in their homes and they should be encouraged to do so, especially while there is an energy crisis. Why should small businesses not be allowed to start up in residential areas, including more corner shops, more small repair enterprises and more craft businesses?

I come now to some other disincentives which are restricting the growth of small businesses, and first and foremost are the restrictions of the employment protection, redundancy payments and minimum wages legislation. All are very fair, theoretically, but in practice they are utterly inhibiting to businesses which are very small but ready to expand. I am talking about those which start up as family operations and get to the position where they want to take on outside people. At once, they come up against a barrier of laws of which they know nothing but about which they have heard a lot of bad rumours. I know that two draft orders were laid before Parliament yesterday—the draft Employment Protection (Handling of Redundancies) Variation Order and the draft Unfair Dismissal (Variation of Qualifying Period) Order—but they are not yet available in the Printed Paper Office. All I know about them, therefore, is what I have read in today's papers. They cover the handling of redundancies and unfair dismissals, but I do not believe that they go far enough and I should like to see small businesses—and not just those with less than 10 employees—exempted altogether from this kind of legislation.

Another disincentive to expansion of the very small business is Pay As You Earn. The owner realises that he is going to get involved in tax and insurance collection, with a tax official breathing down his throat. He knows nothing about it, so he has to make up his mind to go out and get help and—and I am now speaking against my own personal interest, because I am in business to provide that help—that help is an additional cost which has nothing to do with the productivity of the business. I should like to see PAYE done away with altogether, because it is also such a huge disincentive to the employee who never receives in his pocket his full earnings and who, if he works overtime to help increase productivity, immediately sees an even higher proportion of his earnings removed in tax.

If PAYE cannot be abolished altogether—and we should never keep on with a method of tax just because it is the most convenient way of collecting it—at least I hope that the day will very soon come when the threshold for commencing to pay income tax is raised to take the ordinary worker out of the PAYE system. We ought at least to put the minimum wage below the tax threshold, but we do not even have that at the moment.

I want to raise one other point. Rather like my remarks about planning controls, it is a question of attitude. Here I want to criticise the attitude of the Inland Revenue towards the self-employed. This is now becoming especially important, because the expansion of self-employment is the one field in which new jobs can be created speedily. All new businesses start as self-employed businesses, or as very small limited companies, but most start as self-employed businesses or partnerships. I know that the Inland Revenue are concerned about the black economy and that their job is to collect back taxes, but they are inclined to be particularly severe on the self-employed.

I do not propose to go into what many people think is a witch hunt against the self-employed; a great deal has been said and written about that. But the attitude which I call into question happens in the case of person starting up in business for the first time, when the sources of their capital are questioned. Recently I had to deal with such a case. As soon as the tax inspector was sent the first year's accounts, he queried the capital involved and immediately assessed the proprietor for seven years back tax, at the enormous assessment of £5,000 a year. That man had recently married. Before that time he had been a wanderer, picking up jobs here and there and never using a bank account. How could he possibly prove to the inspector of taxes, or even to the General Commissioners, how much money he had earned in previous years? There were no records.

The case went on for a year and eventually we had to settle for quite a high assessment on that man, which very nearly bankrupted him. Indeed, it would have done so if his local bank manager had not had trust and faith in him. That man is all right, even though he has had to pay an enormous amount of back tax. But think of his customers; think of his friends. None of them is going to start up a new business after hearing about what happened to him. I feel that this attitude of inspectors of taxes must be changed, perhaps even at the expense of not collecting a little more tax from those who may have been working on the black economy. My Lords, I have tried to make out a case for help for small businesses. I believe that this help is required very quickly, because it is the area which can be expanded most speedily and with the greatest effect in terms of creating new jobs.

4.53 p.m.


My Lords, I do not know how many of your Lordships remember Harry Crookshank who was a much loved Leader of the House of Commons. He was loved by both sides. I remember Harry Crookshank once embarking upon a debate of this character, when there was an incoming Conservative Government and an outgoing Labour Government. He spoke about the skeletons in the cupboards and he was challenged as to what and where these skeletons were. He said that they were "hanging like chandeliers in all the offices in Whitehall "—I think to the delight of both sides of the House of Commons. It is customary on these occasions for people to talk a little about the legacies they have inherited, but I think it is perilous. It is dangerous to exaggerate all the problems of one's country and to exaggerate the problems with which a Government are faced. Moreover, we are sitting on these Benches because we claimed that we had some kind of a solution, perhaps, to some of the problems; we were there to try to do something about them.

It is a fact that the incoming Government found that borrowing was too high—even higher than it was said to be. It is true, as the noble Lord, Lord Soames, has said, that the balance of payments is in serious disarray. It is also true, as the noble Lord. Lord Boyd-Carpenter, has pointed out, that productivity is low and that the expectations of the British public are very high indeed. But, in a way, all these things were expected.

In politics, it is not the expected things that are a problem. It is the things that are unexpected; it is the new things that happen. The arts of Government are not really concerned with what one debates in elections; they are concerned with what is going on in the world. The sudden upsurge of oil prices imposed by OPEC is, in a way, a far more dangerous and damaging thing for a Government to face than any of these other matters. It would be difficult to overestimate the effect of that sudden upsurge. The damage that it will do to the developed countries, to the developing countries, and perhaps most of all to the undeveloped countries, is certainly something which ought to be widely recognised. That was, as I say, unexpected.

I believe that the policies of the Government are correct. They were correct before this new blow and they are even more appropriate after it has been delivered. It is surely right that we should spend less. It is surely right that direct taxes should be lower. As the noble Lord, Lord Soames, has said, the level of taxes in some areas was almost designed to stifle initiative, risk-taking, wealth creation and effort, and it is right that that should be corrected. In putting their policies into effect, it is right that the Government should seek to safeguard the poorest and do everything they can to ensure safety at home and security abroad. All that, I think, we would accept from them.

The scene which confronts us was, as the noble Lord, Lord Boyd-Carpenter, said, rather well painted by Sir Nicholas Henderson, in words certainly shorter than Gibbon's but certainly telling. He described a nation in decline. It was the portrait of a people who had lost an empire and found themselves curiously linked with a Continent which they did not altogether understand and which some of them, perhaps, did not particularly like. To be honest, Sir Nicholas omitted to state that the Foreign Office itself was the last Department of State to have discovered Europe, or to have done very much about adjusting this country to the situation that it was there. But so much of what he said was so right that I forgive him these minor lapses.

In any event, the role of Government is not concerned with the errors of Government departments or even with the legacies of previous Governments. It is concerned with dealing with the world about us. If you deal with the world, and a country, I think that you have to take it as you take your best friends—warts and all, with all their virtues and vices. It is not much good complaining about these things. You cannot—at least very easily—change them.

If we take this country, it is a great country, it is basically a rich country. It has enormous resources but it seems to have developed—and this was really the theme of the speech made by my noble friend Lord Boyd-Carpenter and, to some extent, of Sir Nicholas Henderson—a certain lack of will: a weakness in manufacturing industry and incredible rigidities. I shall not elaborate on these. We have a Post Office today in which one can hardly get the urgent letters dealing with export trade to their destinations and yet nobody can find jobs for unemployed students. It seems incredible that we should need to do so much and have so many people doing nothing. It is a sort of strange contortion into which we have got ourselves with our rules and regulations.

Also we lack a certain sense of common purpose. Indeed in some ways the only common purpose in this country that men find very easily is that they join together rather enthusiastically in small groups in order to snatch wealth from one another, but that is about the only grouping that one can detect.

I am not going to make a long speech —in fact I am hardly going to make a speech at all. My purpose really is to pose a question. The noble Lord, Lord Soames, expressed the belief that the Government would give the leadership and the opportunity, and may I say that I believe that, too. I have great confidence in my noble friends and my right honourable and honourable friends in the Government. I think the measures that they take will create an opportunity for the people of this country. The question that I pose is, will the country take it? I think that is by far the most urgent and difficult question. That is the gnawing question that is in the mind of any thoughtful person at the present time.

I believe the answer depends upon a great deal more than politicians. Frankly, I am not absolutely certain of the answer. If I look at this country today it seems to me that we lack the discipline of the Germans. People are always citing German systems that seem to work; it is not their systems that work, it is the Germans that work. They have a certain discipline. We lack the faith that the French still seem to hold in the destiny of their great country. We lack the financial ambitions of the United States of America. In the United States, men genuinely want to be rich, to succeed, but we do not have that passionate desire to get on here—not in the same way—and we certainly lack the incredible flair for manufacturing which is possessed by the Japanese.

So we lack some of these things but we do possess an awful lot. If we look at this country today, with its oil, with its coal, its gas, its fertile fields and, incidentally, one of the ablest and most efficient agricultural industries in the world, with great traditional skills and a kind of great tradition of being able to get on with one another, we see somehow or another we possess all that, we have all those things going for us. The question is, can we really use those assets and those opportunities? I think the answer as to whether we can or not is not going to be given simply by politicians. Politicians argue about techniques and how to approach things, I argue—I am quite a keen politician myself—but I do not kid myself that things are done by politicians: other people do the things and, as my noble friend said, the politicians can create the opportunities but they cannot do the things.

So when I ask my question, "Will they take it?" I do not think of politicians, I think of managers. They have been knocked about a good deal in the last few years. I do not criticise managers but many of the managers I know are punch drunk by now; they are spending two-thirds of their time arguing with the unions and about one-third of their time trying to run the businesses, and it is a pretty poor division of effort. Some of them do not feel that they are even doing either of those things particularly well.

Then there are the trade unionists. I have actually thought very well of some of the speeches made by leading trade unionists lately. They have spoken with great courage and very realistically and one of the things that made me happy in the election—apart from the fact that we won it, which made me quite happy, too—is that we somehow managed to get through the election without having a battle about the trade unions. I thought that was a great thing; there was very little abuse on either side about that. That was good. Yet if the trade unionists are to play a part there will have to be some noises a little more constructive than those coming out of the trade union discussions going on this week, with an utter refusal to look at any of the amendments which the nation is plainly demanding should take place and which are indeed couched in the most moderate terms.

There are many trade unionists in this House. I should welcome hearing occasionally a good trade union speech in this House from someone who would say, from all his experience in it, where the trade union movement stands today and where it expects to move now. They have a responsibility and it is a responsibility which should find, somewhere, a voice.

Then there are the investors: they are the people who take risks, they are the people who create wealth. The problems that we have to face are also deeply rooted in the educational system of this country. How to find the men, how to find the young men, how to see that people are leaving school sufficiently numerate and sufficiently literate to be able to play a part in the enormous and difficult and complicated industrial society in which we live? I think we are entitled to ask whether, if we create the opportunity, it will be taken.

I am the chairman of the Conservative Party and. as I have said, I am interested in politics and in political debate, but somehow or another I feel that in the real problem which confronts us it is the same on both sides. There is no party in this country that can bail the British public out if they press their follies beyond a certain point. It does not matter which side we stand on. Therefore, whatever we say across the Floor of the House of Commons we have a role outside as well. We need to tell people that we cannot just print money that they have not earned; we cannot fake jobs which they have not created; we cannot debase our currency in order to protect the inefficiencies of some of the factories in this country, as we are indeed sometimes asked to do. I have therefore to pose the question: Given all the opportunity; assume that the Government are right—as I do; assume that they do it all—will the British people still be prepared to take that opportunity? I think it is a time for men and women on all sides in politics to tell the truth to any of these great audiences who are prepared to listen to it.

5.10 p.m.


My Lords, I rise to support the Motion so effectively moved by my noble friend. I could hardly do otherwise, because the measures so far adopted by Her Majesty's Government after all bear at least some resemblance to the proposals fought for by the Confederation of British Industry under my presidency and that of my successor. So I have a natural anxiety that they should succeed. Yet I should like to echo what my noble friend Lord Thorneycroft has just said: success requires a greater degree of response from management and men than any Government have so far achieved in the last decade, or perhaps since the war. That is the measure of the task which my noble friends face, and I am sure they realise it.

I propose to use my few remarks not to continue with further diagnosis, because whatever we may say in this House or outside we all know in our hearts that our country cannot go on like it is, and if it does it will not only be privately bust but will soon become publicly bust as well. I should like to try to see what are the possibilities of cure. It is only fair to say that the CBI is doing its best to see that managers and employers do try to respond to a Government that I think on the whole rather surprised them by doing a good deal more of what they were advocating than they expected. Sir John Methven, the Director General, has just sent a very powerful appeal to every member to try to respond, and the British Institute of Management and the Institute of Directors, to take two other bodies, have also done what they can in supportive action.

Yet again I have to say that whatever action has so far been taken, either by the Government or by anyone else, it is only a beginning if we are to turn round the British economy. I have not changed my view since I said in this House some time ago, when sitting on the Opposition Benches, that if you want to spur the basically lazy British people to change their ways you have to use every available stick and carrot. I think my noble friends will have to do that. It is people's personal reactions that in the end will save us or sink us. On the other hand, previous strategies have been sincerely meant. Coming to what the noble Lord, Lord Peart, said about planning agreements and the industrial strategy, I continue to support the industrial strategy. I think it was right; I think it is right, and I hope my noble friends will make some use of it. A great deal of quiet sensible work has been done. What I said about planning agreements was, first, that individual planning agreements were purely a political device beloved of the Left-Wing of the Labour Party, and of course merely designed to nationalise everything through the back door without the benefit of parliamentary procedure. I am glad to be able to say all that again. All I did say when a Labour Government were in office was that if you have to have planning agreements I would prefer them to be sectoral planning agreements, which is something that one perhaps could live with. That is no doubt true. However, it is much better to have none at all.

Whatever the sincerity of previous Governments, and I do not refer only to the party opposite, we have to face the fact that the policies they put forward just have not done the trick, and therefore it must be in the national interest that this Government should succeed. We have to face these facts: Much British management and its workforce is debilitated by the years of high taxes and State control. Whether the British "black economy" really amounts to 7 or 8 per cent. of the gross national product, as was said the other day by somebody who ought to know, I do not think that is nearly as important as the fact that it illustrates a totally debased attitude of mind in many people to the job they are trying to do or should be trying to do. Therefore, it must be difficult to turn this attitude round; and it is only too plain, as one begins to see the season of trade union conferences again, that the activists who ran our last winter of discontent are still with us and are still able to make their disproportionately small numbers effective in terms of the media and all the rest. So that problem faces us still.

Well, my Lords, many managers—and I am sure I speak the truth in this—will try very hard to make this new strategy work; will try to give something back to a Government that they feel have at least tried to understand some of their problems. But I am sure Ministers will be wise enough to assume that a change of Government policy by itself will not at once suddenly cause British industry to be more efficient and more productive. Let us hope that in the longer term it will, but I hope that this Government will not calculate on some kind of immediate turnround. It is going to be a long job. As my limited experience of politics dictates that you had always better back yourself both ways if you can, I should like to mention a few ways in which I think my noble friends should follow up their initially good start. After all, although we may all say, and say with justice, as my noble friend has just said, that in the end the arbiters of our destiny are the managers, the trade unionists, the ordinary people of Britain, it is Her Majesty's Government that will take the ultimate responsibility, perhaps a little praise for success, but certainly they will take the blame for failure. So I think the Government shoud try to follow and to assist certain initiatives.

There is one example I would like to give at once. Ministers should ask industrialists to tell them in precise terms what they are doing. I quote from a recent CBI letter to every member of the CBI: Industrialists must do everything in their power through the efficient and competitive management of their enterprises to ensure that the policies which the CBI has long advocated and which are now being pursued by the Government lead to higher productivity, higher living standards, more jobs and a more successful economy in the interests of British people as a whole". The Government must ask the members of the CBI how they are going to do this, how they are getting on, what can be done to help; and they must go on asking. They must also ask firms what they are doing, through active participation with their work people, to see that the problems surrounding their own work people's jobs are clearly understood. As this Government have taken off the shoulders of the employers all the horrors surrounding the Bullock Report, I think that kind of return is the least that the Government should ask for, and they should see that they get it. Many employers are already doing this, but all must do it if we are to succeed. People must understand at their place of work exactly what the problems are and how they affect their own jobs.

Turning now to pay, I do not think anybody much relishes an autumn of pay negotiations against the background of an official l7½ per cent. inflation. I think many managers do not yet know what is going to hit them and how much more on their own they are.

However, the Government could do a good deal to help, not in the sense of going back to norms or pay policy but by making an attempt at least to get a tolerable level of wage settlements—and that is about all that we shall get. Therefore, the Government must take active steps now to ensure that employers, trade unions, nationalised industries and, above all, the employees who are paid by our taxes—the tax dependent employees in the Health Service, local government and so on—understand the economic background against which the autumn negotiations must take place.

If I may say so, it is no use relying on the Treasury brief to do that. It is no use, I am sad to say, perhaps relying on the kind of first-class speech which my noble friend has just made. We must find some way of sitting these people down, letting them argue the matter out and making them go away convinced about the facts, but I do not say convinced about what the level of pay should be. I shall not go into that matter because I think that the facts are ugly enough to concentrate people's minds. We all know what they are. Look at the new militancy of many members of OPEC. What will that do to us?

Although it is right for the pound to be riding high, people should understand that we are not efficient enough to stand a two-dollar plus pound without some loss of export markets, unless we become much more efficient very quickly. People should understand that. There is a need for much more import substitution. Why should we have a terrible yen to buy foreign motor cars when we can make a great many more in our own country? Let us remember that the United Kingdom is now trying to grow faster against a world that is moving rapidly into recession—a tough proposition.

Finally, as has been said on either side of the House, what is the use of more pay without more productivity? This is not a pay policy: it is just setting the parameters of what can be paid without increasing inflation to a point where any further pay is immediately destroyed by an increase in inflation. I cannot see a better way of doing this—and I am trying to be specific—than by having an early meeting of the National Economic Development Council with the Prime Minister in the chair. If the Government know a better way, then obviously they should and will take it. If they want to invent some body, then let them go ahead and do so. However time is short. If this autumn's pay round is to be conditioned by the facts, then time is desperately short to rub those facts into the minds of trade unionists, employers and everyone else. Whatever difficulties we may have over the Government's, in my view, entirely justified mandate on labour relations and other matters, we ought to keep this subject separate and we ought to stick to the hard facts because they are ugly and they do, after all, make all the difference between survival for us all, whether we are trade union leaders, managers, politicians or anyone else.

I now come to my last and most important point. We must now work once again towards a national anti-inflation policy. There should not be any great difference between the parties on this. Speaking for my colleagues in the CBI, we always did our best to support the previous Government as regards their anti-inflation policy, and I hope that the CBI will certainly do its best to support this Government's anti-inflation policy. Therefore, there should not be great differences between the parties. There is certainly no difference between the TUC and the CBI. We both know that in the end it is no use living with double figure inflation. It is not a way of life of any value to anyone in Britain.

Now that the Government have quite rightly exercised their mandate for a shift from direct to indirect tax—for what it is worth, a shift advocated by the CBI over the last four or five years—let us get back to the task of trying to get national inflation down to single figures, and low single figures. Every one of us, whatever our job, has a part to play and somehow, if we are to win the battle, the Government must try their best to achieve this. I give all credit to the previous Government. They tried—but I do not think that they succeeded very well—to get a sense of national purpose through their industrial strategy and other methods. I do not think that they did it very well; I do not think that they succeeded, but they tried.

This Government must try and one hopes that they will be a good deal more successful, because we shall not get our people and our country through to better times without the concept of working together and having something to strive for. That can best be expressed at present by the need to get inflation back to the sort of figures that now apply to our main competitors—4 or 5 per cent. How we can possibly live on the basis of double figure inflation as long as that takes place is something that should be carefully spelled out to trade union leaders before they enter into their autumn round of pay discussions.

It is all very difficult. As my noble friend has said, who knows, as we stand here, whether they will succeed or whether they will fail? All we can say is that if they fail this will not be a country worth living in any more. Therefore, on the whole, I am pretty well convinced and I wish the best of good fortune to my colleagues. Let them stick to their courage; let them get on with the policies and I believe that in the end the country will see the sense of it all and they will succeed.

5.27 p.m.


My Lords, it is difficult to follow my four noble friends who have already spoken on the main points which arise from my noble friend's Motion. My noble friend Lord Boyd-Carpenter has given a masterly assessment of the situation facing this country and the present Government. His words should be widely registered and heeded. My noble friend Lord Soames pointed out that our country's recovery is dependent upon a firm economic base. That must depend on our industry being competitive and successful.

I should like simply to expand on three of the matters which have already been touched upon: the balance of payments; the United Kingdom's offshore oil and gas; and employment, particularly the need to distinguish different kinds of job. As regards the balance of payments, the figures for the first four months of this year were available only recently, and my noble friend Lord Boyd-Carpenter pointed out that they were about £1,000 million minus. It was not known earlier in the year what even the provisional figures were. It was not known during the last general election. I cannot help being reminded of the similarity to the situation in October 1964, to which the noble Lord, Lord Peart, referred in his amiable speech. The Labour Party at that time made great capital during the election of a temporary worsening of the balance of payments situation, because the provisional figures came out at the end of September,1964— only a few days before polling day. In a similar situation this year during the recent election, no figures at all were available; but had provisional figures come out then, they would have shown something in the order of a balance of payments deficit on current account of £1,000 million compared with about £800 million which was being bandied about in 1964. Why were those figures not available?


My Lords, the £800 million alleged against the 1964 Government was in respect of a whole year. The £1,000 million for this year is in respect for four months.


My Lords, I am grateful to my noble friend. I was, indeed, going to move to that point. I do not wish to detain your Lordships for long on this matter, but it is important. I was asking why it was that the figures, even for a few months, were not available. The answer is because of an industrial dispute—an industrial dispute in the official machine which meant that neither the computers nor the statistics were available. That was yet another reflection of the state of the nation during last winter.

The figures for 1964 show—and in retrospect one can now look them up and see—that in fact it was simply a temporary trough during the course of that year and for the whole year the balance of payments deficit on current account came out at about £360 million. This, of course, would not have been noticed by the general public if it had not been that these figures came out during the course of a general election. They were, of course, seized upon by the party in Opposition at that time.

The irony of these events is that only a few weeks ago in a similar situation, with the roles reversed, no figures at all for the recent situation or for the contemporary situation—even provisional figures—were available because of strikes. On 19th June, when the figures were revealed for the balance of payments in the first months of this year, we could see that the situation was serious, even though that situation has been assisted, and increasingly will be assisted, by North Sea oil.

That brings me to my second subject. Again, I declare the interest which I have declared before, that I act as a consultant in the oil industry. The availability of offshore oil now flowing in the late 1970s is of great significance to our country at a difficult time. But we must make the most sensible use of that oil and gas, and of the revenues which they generate. Of course, they will not solve our problems but they can be of great help to us during the 30 or so years when we can enjoy these resources. The noble Lord, Lord Peart, asked for precision. Indeed, somewhat surprisingly, he appeared to ctiticise my noble friend's opening speech for lack of it. Therefore, I shall pick up the annual Brown Book which has come out today on the oil industry and turn to page 18, dealing with exploration. There we find the sentence: Total expenditure on exploration in 1978 amounted to £257 million, which represents a decrease of £118 million from the 1977 level. This reflects the decrease in drilling activity". That is a very substantial reduction in exploration drilling in the United Kingdom Continental Shelf. I must state—and I have said this before in your Lordships' House—that the last Government were less than adept in dealing with our offshore oil and gas resources. Neither side of the House can regard that falling away in exploration as satisfactory.

Although it is widely accepted that there must be a depletion policy from about 1981 onwards, it is also accepted that we must first achieve self-sufficiency in oil. I would remind your Lordships that the exploration and production of these resources involve very high risks and massive resources. Only consortia of companies with huge investment, on which no return can be expected for several years, are able to carry out this work. There are also losses to be incurred every time a hole is drilled—losses of several million pounds every time a hole turns out to be dry. Therefore, the technological resources of the world were needed to find the oil, and they are still needed.

My noble friend Lord Boyd-Carpenter referred to providence as having placed these oil and gas resources below the North Sea. But only 10 years ago we did not even know they were there. It is only within the last 10 years that they have been discovered and developed. Even today, we still would not know that the oil and gas were there had not international consortia been encouraged to take the very high risks involved. I would remind your Lordships that man landed on the moon before the oil was discovered under the North Sea.

As regards exploration now, the deeper waters of the Continental Shelf will require a very high degree of technology. There are also decisions to be taken on development, as to whether marginal or difficult fields should be proceeded with. Changes in the price of oil affect this. For example, the recent increase in the price of oil, to which my noble friends have referred, has one effect in making greater the value of the oil in our Continental Shelf. But against that must be weighed the much greater development costs which have arisen. I understand that the Government are reviewing the whole situation against the background of the legislation and the organisation which is now in existence. I am sure that that is right, as they have been in office for only little over two months. How much of our future oil and gas should be used as fuel—should be burnt off—or should be used as feedstock for our chemical and plastics industries; and decisions on the use of revenues in the future, are all matters that must be taken into account.

There is a comparison that can be made with the Netherlands. I am sure that any who have visited the Netherlands recently or spoken to Dutch friends will recognise that the Dutch are worried that they did not make full and proper use of the revenues from the gas, which was the first discovery in the North Sea, now running out. We at least can learn a lesson from that. Let us make sure that the resources themselves are best used and also that the revenues which arise from them are not frittered away.

I come to my third subject, which is the different kinds of jobs which are generally just spoken about as jobs. We know that the Government will have to face very difficult decisions on redundancies in certain industries. My noble friend Lord Boyd-Carpenter referred to the shipbuilding industry. I spoke on the relationship which he mentioned between that industry and the shipping industry in our debate on shipping exactly three weeks ago, so I shall not repeat myself now. I shall simply say that in a situation where there is at least three times more capacity in the world for building ships than there is demand for ships, some action must be taken. But this can he painful, because that industry is inclined to be concentrated, with its ancillary industries and component suppliers, in particular areas of the country.

However, with those decisions must also come the encouragement of replacement jobs. If possible those jobs must be real, new jobs—jobs that will last for a reasonable time, and not just stop-gap jobs. In the past we have been able to obtain considerable sums of money from the EEC Social Fund to help with training and retraining. In fact, not enough publicity has been given to the amounts which have been received, particularly in regions where there is high unemployment. I trust that the Government will continue to apply for and receive assistance of that kind. It makes some counterweight to the budget situation, where it is suggested that we do not do so well, particularly in the Common Agricultural Policy.

There is also the question of service industries. I believe that the jobs in service industries are important as well as the jobs in manufacturing industry. Therefore, the principle behind that tax known as the selective employment tax—not lamented, but deceased—of discrimination against the service industries is even less relevant than it ever was. However, as we have also been discussing a Budget brought out shortly after a general election, may I remind your Lordships that that new tax—SET—was brought out in a Budget precisely six weeks after the polling day of a general election, when not a word had been said about a tax of that kind during the whole election campaign—not one word. Therefore, when there is criticism now that last month's Budget may not be exactly carrying out, in every item, what was said beforehand, there is no doubt that it is carrying out the principles which were widely ventilated by the Conservative Party during the election. Let any critics remember 1966, and the announcement in that Budget, six weeks after a general election, of a totally new kind of tax about which nothing had even been said beforehand.

There is a place for temporary stop-gap jobs as long as they are not confused with the real, lasting jobs I have spoken of. In certain circumstances short-term schemes can be of help. But may I give an extreme example. There has been in the last year a seaside town in this country which has given temporary employment to people to sweep the sand and pebbles off the promenade. The promenade is so situated that normally every day the waves bring them up, and then the little squad, or the large squad, come along and sweep them away. When the weather was not so inclement and the sand and pebbles were not thrown up on the promenade, a bulldozer came out in order to place them there, and they continued the daily job. I do not condemn that kind of job creation. That is an extreme case of job creation, and it may be that it will fulfil a certain purpose where school-leavers are concerned who have nothing else to do, no other activity, where you might get vandalism.


My Lords, will the noble Lord give way?


In a moment. I have already decided that I will not disclose the place. I believe it is not the only one; I think others have done it as well, and I decided that I would not disclose a particular place. I give it as an example.


My Lords, I hope the noble Lord might give way. He has not given way yet to anybody in his speech.


My Lords, I have already given way. But if the noble Lord is only going to ask the same question, I have already answered it.


My Lords, unless the noble Lord gives way, he will not know what I am going to ask him. It is extraordinary to make that sort of allegation and not be prepared to support it in any way whatsoever. I hope that the noble Lord might reconsider giving at least some indication so that those of us who are particularly interested in the examples given can verify them.


My Lords, I have already decided that I would not. So far as I am concerned, I am not condemning anybody who does that kind of thing, but I give it as an example because it can fulfil a purpose as long as it is not confused with the real jobs which are needed if Britain is to recover. The recovery of Britain depends upon those real jobs rather than the stopgap schemes which, as I say, do have a place in helping during difficult periods. The Government are now setting about the task in the right way; the task of creating the climate in which British industry can succeed and provide the real jobs.


My Lords, before the noble Lord sits down, may I ask him whether he is aware, with regard to the creation of real lasting jobs, that over recent years the United Kingdom has fallen behind, not only Japan in a disastrous way but every European country for which there are figures, in development money, in forward investments. So that the creation of new industry, based upon new discoveries demanding high-risk capital, is something which the Government, I feel, should look to.


My Lords, I am most grateful to the noble Lord, Lord Zuckerman, for that additional point. May I just also take the opportunity—as I had not sat down—of continuing by saying that I do not intend to be what my noble friend Lord Mansfield's father once said when the Stone of Scone was delivered to him at his home Palace of Scone. He said, "Take it away" to those who had delivered it. But when he was asked, "Are you going to give us away, though?" he said, "No. I am not a Campbell."

5.45 p.m.


My Lords, I should like to begin by thanking my noble friend Lord Boyd-Carpenter for giving us the opportunity of discussing this vital topic in this debate today. I feel perhaps that as I am the sixth in line of noble Lords speaking from these Benches, I almost owe the House an apology. But I am glad to see that the seventh is the noble Lord, Lord Davies of Leek, and no doubt he will live up to the tradition of the seventh being far the greatest, which will be more than enough to balance the six who went before.

I shall not spend time in discussing the analysis of the position, which has already been so fully and interestingly discussed by my noble friend Lord Boyd-Carpenter and others. I shall make only one comment: my own forecast is that had the present trend of decline continued for another five years, with the policies which noble Lords opposite and their right honourable friends were pursuing, I believe that within those five years the decline in the economic life of this country, and the loss of our competitive edge, would have reached a point where it would have become necessary to have drastic import controls on the trade of this country, and systems of controls in this country which would go very far indeed. I believe that it was a sense of the peril which is really facing this country that caused our people to vote as firmly as they did in the last election, despite the anxieties which obviously many of them felt.

The Government have already published the main outlines of their policies in the Budget in particular, but a number of other statements have made it plain that there is to be this sharp reduction in personal tax; there is to be a sharp reduction in public expenditure, and strict financial disciplines. But the touchstone for success of the whole of this broad strategy is the creation of new wealth, and that must of course be by the private sector. Profit is to be seen as a virtue and not as a vice. The belief, which I share, is that the incentive of increased earnings and increased profits will stimulate the formation of new business and will expand existing business, and strengthen the competitive edge of our businesses generally to hold existing markets, and indeed to win new ones.

There are two essential factors for success. First, those in management will be attracted by the increased cash earnings, by the increased profit that is attracted to them, to make the effort and take the risk to start up and expand existing business. Secondly, those in employment will be attracted by the increased cash earnings to co-operate with greater effort and application to achieve greater productivity and lower costs of production. I agree with the noble Lord, Lord Spens, that the prospect in small and medium sized business is good. The lower rates of personal tax change the equation of what enterprise is worth undertaking. This is a background I well understand. It is where I started. I would expect that there may be some complaint from some parts of business, despite what my noble friend Lord Watkinson said, when they find that some subsidies and grants which have been paid in the past will no longer be there. But I think they will probably accept this in the end and learn to live with the market.

I remember the precedent of 1951, to which the noble Lord, Lord Peart, referred. I was Parliamentary Secretary in the Ministry of Agriculture at the time, and I therefore took some part in this great strategic change that we then brought about, of ending State trading, State purchasing of food and every commodity of life the country required, and returning to free markets. There were great risks attendant on taking that step and we were heavily opposed of course by the Opposition Labour Party of the day. The cries of gloom and doom that the noble Lord, Lord Peart, uttered today were nothing to what he said in those days about the risks there would be, the dangers to the poor, the unemployment that would follow and so on.

But we held steadfastly to our task, and here I entirely join with my noble friend Lord Boyd-Carpenter in agreeing that Lord Butler was the supreme architect of that great strategy. He firmly told the merchants that they should get back to trading. For half a generation they had existed on fixed margins which the government underwrote; the government did all the buying and took all the risks. The day had come when the merchants had to go back into the market, use their own capital and skills, judge what the consumers here would buy and what quality they would pay for, and what they would pay for it. The merchants did this, to the immense benefit of this country, giving us again freedom of choice and a rising standard of life throughout the fifties, as has been referred to. I think all that will happen again, and that when our managers get a little more elbow room they will find they are better off with lower taxes and less Government help.

The other aspect of this equation which is important but which has not been mentioned today is the brain drain. This is something we may all deplore but, my word! it is doing us harm. Relief from penal levels of taxation I believe will check the loss of top talent and attract those men and women to remain and work here, and I hope it will attract some to return as well. We must recognise that, however much we may deplore the departure of these people, top talent today is in an international market, be it in making music, in playing games or in the more mundane business of commerce and industry. Top talent is in an international market and these extremely able people can command top international salaries wherever they move to.

They are the innovators and leaders whom we really need for the value of their spark of genius in our national life today, and it is something to be said time and again that while this may be the day of the common man, it is also the day of the uncommon man, the man who has the ability to understand modern technologies and finance and the leadership to persuade men and women to join with him in developing it. I therefore hope to see something come from that.

I turn to the second major factor, which is the prospect of employee co-operation. That we must win too. From small businesses I have no doubt there will be a good response, whether they have a few or a few dozen employees. Where the boss works alongside his workers there will be an atmosphere of mutual confidence and they will work well together, and the greater rewards will cause greater effort. Big business—the private sector, nationalised industries and public services—is a different dimension altogether, and one we well understand here. There we must expect and ask for wise leadership from management, but they have to win the co-operation of the trade union leaders who speak for the body of the workforce; and now, this week, when the Government have published their consultation paper on the legislative amendments which the Government wish to make—it is right to make this comment—some opposition has already been expressed.

The proposals which the Government have made, for consultation only, really do no more than suggest giving legislative effect to the code of conduct which th TUC and the last Government agreed and published last February. It is not the time to discuss them now, but that is what they are in substance and it seems there has been an over-reaction by the trade union leaders, who have already, immediately, declared their opposition. I hope that wiser counsels may prevail, and there are three major points which I feel are worth making in this context.

The first is that our people have made it very plain by their vote in the last general election that they do not want another winter like the last one, with small groups of militants holding defenceless people to ransom in order to put pressure on the Government of the day and to try to make the Government do what they believed they should not do. That undoubtedly was a major factor in the general election result. Today the Conservative Government, in their policies in regard to industrial relations and other matters, are doing no more than carrying out what they said they would do in their general election Manifesto. To do less would be to renege on our promises.

The second major point I wish to make is that we here well understand, though sometimes I feel that people in the country outside do not, that governments in a parliamentary democracy are expected to govern in the interests of the whole community, and government therefore cannot accept domination by any sectional interest, however important and powerful it may be, even as powerful as the TUC. To do so would be to undermine the credibility of parliamentary democracy in effective government, and that would be a very long step towards a dictatorship in this country, as it has been in many others.

We do well to remember—this may be a glimpse of the obvious but I will say it and say it again—that the history of mankind, today and always, has been that men and women have lived largely under dictatorships and that parliamentary democracy is a very rare achievement of mankind. It is achieved only by men and women who have been prepared to work and fight and sacrifice to bring it about and it is maintained only by men and women continuing to do that. That is what is at stake now when the Government of the day are challenged by an outside body of such tremendous power.

The blessings of freedom and order that a parliamentary democracy give are so great that I am certain we in this country are still determined to fight for it and keep it here. A dictatorship, of the Left or Right, is equally objectionable. Nearly all freedoms would go with it and one of the freedoms that would go is undoubtedly a free trade union movement. I am sure all trade union leaders well understand that.

The third point, on a much more mundane level, is the economic and financial one which has already been made, but I will make it again. It really has been driven home in the last five years that big pay increases without increased productivity benefit no one, and, my word, they hurt retired people on fixed incomes. In the past five years, pay has doubled but so have prices. The result is that the pound has lost half its value and British industry has lost its competitive edge, with unemployment more than double what it was five years ago and with manufacturing industry pretty well stagnant. Thus, big increases without increased production are the road to ruin, and the lowest incomes suffer most.

I hope those arguments will moderate the pay claims in the next round coming up this autumn. I very much agree with my noble friend Lord Watkinson that, with a 17½ per cent. increase in the cost of living, it will be a tough round, but I commend my noble friend Lord Soames's words, which I am sure are right. The trade union leaders, many of whom noble Lords here know, as I do, are experienced men, shrewd men who well understand all these things and the force of these arguments. They are compelling arguments for co-operation with the Government of the day in the interests of all their members, the ones who voted for us and the ones who did not. I just hope that they will pick up the document which they signed with the last Government last February and see what is said there: that partnership is basic to success, and that the national target is above all being against inflation, reducing it to small, single figures. So I conclude by commending what my right honourable friend the Prime Minister is doing and the leadership that she is giving. She is discharging her electoral promises, and I believe that she is giving us as a nation the chance to reverse this perilous decline and to start ourselves off on the road to a sounder, safer, better economy—


My Lords, before the noble Lord sits down, may I ask him two questions? The first question is: how does he reconcile his speech with the fact that the relative decline of Britain started in about 1875 and has continued ever since? Secondly, does he think that a cut in the education programme, when we have already a grave shortage of skilled manpower, will contribute to the competitiveness of the country?


My Lords, I am afraid that I could not hear the noble Lord's second question, but my answer to his first question would be, certainly there have been trends of decline, but there have also been trends of improvement, and if the noble Lord's excellent memory on historical matters will go back to 1951, he will recall what has already been referred to in the debate: the massive improvement that we achieved during the years 1951 to 1964. They are sometimes called the 13 wasted years, but my word the nation would be glad to see them back again.

6.2 p.m.


My Lords, for two or three months I have missed the mental activity which I receive in this noble House. I make my own Christmas cards, and my next one will depict a steamroller going along a promenade with a couple of fellows carrying bags of pebbles and a gang behind with brushes to sweep them away. I do not know whether the setting should be a Welsh seaside or, bearing in mind the noble Lord, Lord Campbell of Croy, whether it should be a Scottish seaside. No Member of this noble House has the right to introduce a piece of mythology like that unless he is prepared to say where it happened. This could happen in the other place. I was delighted to hear the noble Lord, Lord Thorneycroft, who at this moment is enjoying himself with his own joke. The noble Lord, Lord Thorneycroft, mentioned that grand Member of the other place, Captain Crookshank, who came here. We all interrupted that Leader of the House at our peril. I remember with happiness and a little nostalgia his reply to a question from my side of the House—the questioner thought that it would absolutely bend him—when he said that he found skeletons hanging like chandeliers in every cupboard in every Ministry.

I recall a little of my philosophy. I was not educated at Oxford or Cambridge; I went only to red brick places—universities and Welsh grammar school. Between 1300 and 1340 Occam's razor was a piece of philosophy that the noble Lord, Lord Campbell of Croy, should remember. Dear old Occam posed what was known as Occam's razor: Entia non suns inultiplicanda praeter necessitatem. That means, when translated—and this is the better English translation: things not known to exist should not, unless it is absolutely necessary, be postulated as existing. Did the steamroller really exist? The noble Lord had better apply the philosophy of Occam's razor to what he said before he repeats it in other parts of the country.

I want to know what we are talking about. I have been here all day, though I was called out of the Chamber for a short while. I have turned down what would have been a welcome dinner tonight in order to listen to the debate and so educate myself. So what are we talking about? The noble Lord, Lord Boyd-Carpenter, was one of the finest social security Ministers we ever had. It appeared that at one time he knew more about social security than did his advisers. He is a very able Member and I do not say that with any facetiousness. The noble Lord has put forward the Motion: That this House welcomes the determination of Her Majesty's Government to reverse the decline in the economic strength and competitive power of this country …". That is all right up to there. Nobody would vote against that. We all welcome determination; of course we do. There is nothing in that; it is a pillar of cloud. But the Motion includes the phrase, "to reverse". To reverse what? The Motion says: To reverse the decline in the economic strength and competitive power of this country… Now who do you blame for that, my Lords? The Motion then adds that we welcome the changes which the Government have initiated to achieve these ends. So in this debate we should be looking not so much at history, but at the changes which the Government have introduced during the three months that they have been in power. That is the logic of the debate. We have not heard much about that.

I have here a cutting from today's Evening Standard which I saw in the Library. The headline reads: Rich get richer … Poor get poorer". That used to be our cry in our university on rugby playing days. There is an old rugby song: It's the rich what gets the pleasure, and the poor what gets the blame". Let us see what is said in the report of the Royal Commission that has just been published. Denis Healey, from the other place, made a famous general election speech in which he said that he was going to squeeze the rich until the pips squeaked and the cartoonists gave him a worse image than they gave Wedgie Benn. He did not squeeze any pips. What are the facts put forward by the Royal Commission? The facts, released today, include the statement that the years 1974 to 1976 were years of plenty. In 1974, when Mr. Healey became Chancellor, the top 1 per cent. of the population owned 22.5 per cent. of the nations' personal wealth, and by 1975 the figure had climbed to 23.5 per cent. So the Labour Government have not done too badly for noble Lords on the other side of this noble House. Why do not noble Lords thank us a little?

At the other end of the wealth league table, the position was reversed. This is our end of the league, or my end; the lumpen proletariat. That is a Marxist phrase; one should not use it. Between 1975 and 1976 the share of the national wealth held by the bottom 50 per cent. declined from 6.7 per cent. to 5.6 per cent. The figures are contained in the latest report from the Royal Commission on the Distribution of Income and Wealth, a body which, after doing all that work and finding out all those facts, is soon to be wound up by Maggie. That will be another Quango gone.

Now let us consider the point about changing the decline. In my little old study the other day I was reading a very old report, covering the years 1927, 1928 and 1930. That was a long time ago, and I am becoming old and a little decrepit now. It is the Maine report. I could bring it here tonight, take scissors to it, cut lumps out of it, and quote it, and it would form an up-to-date speech, because all the economic problems were the same in those days as they are now: the struggle for markets; improving our productivity; getting good managers. It is all there.

What has happened? We are still speaking the same language, forgetting that the entire system of the world's production of wealth has altered because of the magnificent and majestic progress of man's inventions and his inventive mind. So we are using old-fashioned phrases, arguing with semantics, when, as the noble Viscount, Lord Watkinson, said in his speech, we should be looking at the realities. And what are the realities we should be looking at? Among them is the declining production of oil and the increasing production of (now a platitudionous phrase) the micro-chip. In 1960 a computer cost £60,000, and you had to put it in a room with air-conditioning. If any noble Lord went into a computer room in the 'sixties he will know that the room had to be air-conditioned. Now, for £20, on a silicone chip, one centimetre in size, you can get exactly the same; and, in a clerical office, it could put 40 people out of work in 10 minutes. We are meeting the point where, unless we get a modification of the acquisitive society, the production of the machine which should release man from slavery is throwing him into destitution and despair. Hence the militaristic attitude of the trade union movement and, sometimes, the bitterness.

Let me give an example in the mining industry. I do not know whether there are any colliers among noble Lords, but I would say that I could make a pit uneconomic in two months. I could go and buy modern pit prop equipment at a million pounds a throw and push it into the headings and into the sideways, and I should not get enough coal out of that pit, with the amount of manpower employed with modern methods, to pay for those machines over a period of long years. In other words, when you talk about a pit being economic or uneconomic, you must try to understand the problems of mining. You are not running a factory, where people have beautiful toilets and where they can have a cup of tea when they are tired or can be bandaged up by a nurse 10 yards away from a heading. I am talking about a modern pit, with very expensive equipment, mangling coal. Today, you never see a truck with those beautiful, delicious, shining lumps of coal, those huge lumps of coal, some weighing half a hundredweight, that we used to see as kids on the trucks in the South Wales sidings which went down to a sea of coal in Cardiff. Today, most of the coal is crunched up; and in some of the railway sidings which we no longer use because of "Beechingitis", there are millions of tons of what we call small coal, unused.

We should be looking at the mining industry. Do not scoff! We could get this production with two weeks' work a month, and let the miners have the other two off. We could get the production in society today, with an intelligent use of the machines that exist, with much more leisure. The tragedy is—and I do not mean this in (I do not like this English word) a snide way—that our people must be educated to use leisure. They must get the culture. That is regarded as a horrible word by some. Was it not Goering who said, "When I hear the word 'culture', I reach for my revolver"?

This is what we should be aiming at, not longer hours.

Now, greater productivity. My goodness!—how the time goes; I have been speaking 11 minutes. Let me take an example. We say, "Growth, growth, growth! " Analyse the word "productivity ". What do we mean? The tyre industry is dominated by Michelin, Dunlop, Goodyear, Firestone, Pirelli, Avon and Uniroyal. They employ some 41,700-odd men. Despite the fact that the number of vehicles in use has continued to rise since the worst days of the recession the tyre replacement factor—the number of tyres sold divided by cars and vans in use—has not improved ". If he were here, the noble Lord, Lord Lucas of Chilworth, would confirm this. This has been due to the impact of the steel belted radial tyre which lasts up to 25 per cent. longer than the textile belted radial and more than twice as long as the crossply ". I apologise to the House for reading this, but I think it is important for this point to be driven home. In 1972 only one replacement radial in three was steel belted but by 1978 it had risen to well over 50 per cent. and is now the standard type of car lyre ". My Lords, that is not a problem of bad management, naughty trade union leaders or anything else. It is a problem impinging upon man because we have discovered better ways. The danger of yelling for growth is that you get built-in obsolescence—cheap and nasty plastic materials; horrible plastic things which have no tactility and no beauty to look at, and which do not feel good. We are filling the world with ugly things because we scream for growth and scream for people working harder and working longer. The machine should liberate mankind from that kind of slavery.

Having said that, my Lords, much of what I was going to say because of that damned steamroller pushing pebbles on the promenade has been altered. I will come to my last point. Economists worry me. They use phrases. When I was a youngster studying economics we had "sun spots ". Then there was the "crawling peg "in Europe. Do your Lordships remember the "crawling peg "? None of them knew in the least what they were talking about, but it was the "crawling peg ". It was wonderful to make a speech and to mention the "crawling peg "three times. Everybody said, "Oh—doesn't he know what he is talking about! "

My Lords, there are worries in the Treasury, which turns out a lot of this stuff. I could analyse the Budget, but your Lordships have heard enough from me by now, but there is a great new thing. The "Phillips Curve ", it is called. Have your Lordships ever heard of the "Phillips Curve "? This is a new economic trend. The noble Lord, Lord Home of the Hirsel—and I beg the noble Lord's pardon—did better years ago, when he was Prime Minister, using matches to do his economics, than these people are doing today.

This is illustrated by the wide acceptance in government circles of an economic theory called the Phillips Curve '. It is accepted in Government circles. The Tories are falling for it hook, line and sinker! The theory is—and noble Lords should not get worried; I am nearly finished— that there is a direct correlation between unemployment and wage rates—raise unemployment and wages will fall and vice versa. However the theory ", as usual, fails to take into account the intervention of the unions in setting national as well as local wage levels for the job ". So the point is to weaken the unions and the theory will have a chance to work. My Lords, in an extreme form, that has happened in Chile. Let me warn your Lordships in all seriousness, that this is what the Government opposite are threatening to do. It is dangerous. There is no need for us to get into fights. There is no need for us to quarrel. There is a need for the trade unions, labour and management, to look at these facts about the world in which we are living today, to make a success once again, and to make Britain British.


My Lords, before my noble friend sits down I wonder whether he would make it clear that I have no responsibility for the " Phillips Curve ".


My Lords, I am grateful. We will leave it at that.

6.20 p.m.


My Lords, I am sure we are all delighted to see the noble Lord, Lord Davies of Leek, back in his seat and fully restored. I must say that after listening to him, I am sure that none of us would have realised that he has been away for three months; he is now back here in his usual fighting form and has given us an entertaining speech, one which I thought a remarkable example of brevity to some of us on both sides of the House. I had prepared a speech and I have now thrown it away, because everything that I was going to say has been said so much more effectively in what I think were some outstanding speeches this afternoon. I am sure that that would be agreed on both sides of the House.

We are grateful to my noble friend Lord Boyd-Carpenter for giving us this opportunity. My only regret is that we have not had more contributions from the Benches opposite. In spite of the last stirring speech that we heard, I agree with one noble Lord who said that he wished we could hear more from eminent trade union leaders from the other side of the House. The trouble is that normally they do not arrive in our company until they have been out to grass; and sometimes I feel that by then they may have lost the enthusiasm to make the kind of contribution that we should like to hear.

I would simply now, in the circumstances, pick up one or two points and echo them from my own experience. I have got the impression that there is really little disagreement throughout the House on the serious state of the country—of the patient—and, indeed, to a large extent, on the diagnosis of his condition. I think that the main differences are on the prescription necessary to turn the patient round from a near-terminal illness towards a state of recovery, convalescence and full health. I thought it right of my noble friend Lord Thorneycroft to point out how limited in this field are the powers of politicians of any party. It is up to people at all levels whether we are going to pull round or not. All that politicians can do is to try to create one part of the climate necessary to make people realise what their part is and how to play it and the consequences if they do not. This was brought home to us seriously by one or two speakers.

It has been said with regard to the package of measures announced by the Government that they should not have moved so speedily; that they should have moved more gradually, for instance, with tax changes. I think that this is a false understanding of the position. I think that the country has felt bogged down, demoralised and totally uncertain how to get out of its rut. I think that that is the result of the policies of previous successive Governments. I think that only a drastic change of climate offers any hope for our own people to get together and pull round. We all know that a heavy, sultry, humid climate is not conducive to thinking, to enterprise and to dynamic behaviour and that a more invigorating blast is occasionally more effective in stimulating the brain and the action.

What we have been presented with is a more invigorating climate, and I believe that people could be prepared to respond to it. At bottom, I think there is a genuine desire for more freedom to make one's own decisions and to follow one's own path. I have seen this particularly among the younger generation. More and more, I have found that the young are rejecting going into major enterprises and major organisations because of the bureaucracy, control and the rate of taxation that they suffer. More and more have been tending to set up their own enterprises from scratch. I am not suggesting that they are all "moonlighting "but that they are finding more fruitful paths for their activities. There is something that we should be encouraging and I believe that by cutting the rates of taxation we are encouraging them to follow careers more widely than they do at present.

I think that the other basic fact running through the package of measures is a recognition that, although we are an island, we are not insulated from the European Community and from the rest of the world. Whether in industry, in commerce or in the arts and sports and so on, we are playing in the international league and, therefore, the conditions must be comparable to those internationally. That is another reason why I welcome the changes in taxation, particularly in the heavy burden that was previously on higher and middle management and which I am glad the noble Lord, Lord Rochester, with his close personal experience in that field, referred to and acknowledged that the levels of tax were a very real deterrent. It is particularly so in international companies where people compare their position with those of their colleagues working overseas and sometimes having to make difficult changes from one country to another, with grave financial problems.

The same thing relates to the removal of the Price Commission and its apparatus. I frankly believe that it was more cosmetic than anything else. The cost of administering it—not merely of running the Commission but for all the companies involved—and the vast amount of work involved in representing matters to it probably out-weighed any benefits in reduced prices.

Here, again, I believe that our position in the international market is the answer to keeping prices at a reasonable level. I refer to competition in the international markets. I think that, through this, there is still plenty of discipline against a monopoly situation. We are in a mixed economy, as the noble Lord, Lord Peart, has said in his speech; and I do not think that any of us would deny that. I think the question at issue is where the boundary comes in the mix—and that has been said before. I think that all that the private sector is seeking is a little greater freedom and a little less c[...]nstraint in order to put its talents to use.

I want to speak briefly on two specific points. One relates to regional policy. The noble Lord, Lord Peart, in his speech, was I think inevitably roused to indulge in some ritual sparring with the opening speaker. I do not blame him for that; but I think that he rather suggested that this Government were going to sweep away regional policies because of their intentions to alter, or, at least, to investigate, the powers of the National Enterprise Board and other bodies. I do not believe, from anything that I have heard, that this is the case. I am sure that there is a role for the National Enterprise Board but I think that its role in relation to investment in industry should be closely examined. I think it still has a role in the regional field. That is also very true in relation to the Scottish Development Agency, a smaller body which has been less ambitious in its investment operations. But I am sure that there is a continuing role for it in a number of functions such as industrial estate management and industrial promotion overseas, and in bringing together local authorities and so on. They have, I think, now got a well-defined relationship with other bodies in this field, notably with the Scottish Council for Development and Industry. I hope that what will happen—and I suspect that this is so—is that the Government will review the power of these bodies. I think that a Statement was made in this House that in doing so they would first consult other interested organisations. I hope that the noble Earl who is going to reply will confirm that that is the case.

We have got to keep regional policies; they are increasingly being developed by our competitors, in particular, in the European Community; and this is accepted. If we are to compete for foot-loose industry, we must have them. But I am all in favour of their being refined, sharpened and perhaps concentrated rather more than they have been over the last few years.

The final point that I should like to make relates to the state of the pound, to which reference has been made already. We should welcome the strength of the pound in recent months. It will make an undoubted contribution to reducing inflation; but we must recognise that it owes quite a bit of its strength to North Sea oil rather than to our competitive position industrially. So this is a difficult act for the Government, a balancing act where they will have to decide at what point the pound has gone high enough, and to exert the influences that they have to avoid our exports becoming uncompetitive and an undue drawing in of imports, which is a danger. I am sure that they will have close regard to this. Subject to those points, I should simply like to say that in general I believe the policies announced by the Government have the greatest hope of giving this country the opportunity to rescue itself from the rut in which it is at present.

6.31 p.m.


My Lords, I too should like to thank the noble Lord, Lord Boyd-Carpenter, for the opportunity that he has given the House in what I believe has been an extremely interesting debate. I say this with some hope that I may not completely ruin it, but owing to the length of time the debate has inevitably taken, like the noble Lord, Lord Polwarth, and my noble friend earlier, I have also cut out large chunks of my speech. I hope in that regard that it does not sound too incoherent.

I am glad to follow my noble friend in this debate. He and I not so many years ago spent a great deal of time trying to change the industry of Scotland from what had been predominantly the old-fashioned industries. We had many unpopular things to do at the time, but we did at least in the early 'sixties get the basis of a great many important American electronics industries to settle in that country.

Corning back to the immediate point of this debate, I am a little worried, despite the excellence of many speeches, that there is still too great a degree of complacency about the situation which the country now faces. I enjoyed almost every moment of my noble friend Lord Soames's speech, but when he said it was not too difficult to put the whole of this matter right, it merely needed a 3 per cent. increase in output across British industry which would solve all our problems, that is dangerous thinking. I am quite certain that is not true and cannot ever be true in the situation in which we find ourselves today. We have, I am afraid, in this country a situation where a great many of the industries—just as happened in Scotland 17 years ago—have no long-term future. That does not mean to say you can cut the whole lot out, but you have to plan the build-up of new industries that this country needs if it is to survive the problems which are certainly being posed, not so much by America, as it used to be—because America itself is following a slight curve in decline—but by some of the newer growth industries from Japan, Germany and France. This is not going to be done across the whole board by a 3 per cent. increase; it is going to have to be done fairly quickly over the next five or 10 years with a great deal of hard thinking and a great deal of cash.

The feeling has been stated more than once—I think my noble friend Lord Thorneycroft referred to it, and probably my noble friend Lord Soames as well—that politicians cannot really solve these problems. They cannot, but—my goodness!—they can make them impossible for anybody else to solve them. We have been suffering from this for most of the past 15 years whichever party was in power. The truth of the matter is that if one looks at Cmnd. 7439, which was published by the last Government in January of this year, it shows that the planned research and development expenditure of this country was £482 million in 1974–75, that it fell to £358 milion in 1978–79, and was planned by the last Administration to be £284 million for 1982–83. That is almost half what it had been nine years before and at a time when perhaps at no other time in British industrial history had there been a greater need for an enormous increase in research and development expenditure.

If that was the late Government's thinking about how to get our country moving in the new sphere, then I am afraid they were totally failing the country. I should like my noble friend on the Front Bench to give the House at some convenient date, if he cannot do it today, details of the money which our competitors in Germany, Japan and France are spending, not just on research and development but on special new research into new projects. This would give the country a very good insight into the problem which we have to face if we are going to stay alive as a manufacturing industrial nation at all. I know that we have great problems of discussing things witn the trade unions. The great majority of them are very sensible and reasonable people who will talk extremely sensibly and reasonably so often when one is talking to them round a table, but they are not always—for reasons which we understand—so forthcoming outside when the media are about.

We have great problems to solve in that field, and we also have great problems to solve in the management field. One of the things most necessary if we are going to succeed in getting on to the right lines for the 1980 decade—something which is probably most necessary of all—is to establish really significant increases in the training for skills right through from management to the shop floor. I read in the Paper today—and reference has been made to it earlier in the debate—that owing to the shortage of teachers it might be necessary to diminish the teaching of Greek and Latin and possibly I some other foreign languages as well. I will willingly sacrifice every one of those—even though I was a Classical scholar—if the Government of the day will increase the training which is needed in engineering and other skills. This is going to be the key to our future and this, I hope and pray, my Government will succeed in doing.

It is not only on the shop floor, because those of us who have been in industry and moved around a bit know that there are a number of managements of sometimes quite big firms in this country who send their young officers off to learn about micro-processors and all these new ideas, but when they come back they do not get any chance to take part in any decision-making or to use any of the skills that they have been learning. This is not by any means always the case; but it is too often the case that young people are trained and then advantage is not taken of the training that they have acquired.

My Lords, I have spoken for long enough. I hope with all my heart that our new Government will be able—and they must do it quickly because I do not believe there are more than four or five years available at the most—to get this new development on its feet, and that they will do it bravely. If they make some mistakes, let them be mistakes of spending too much money on modern technology and not too little, because too little, as one has seen over the past five or 10 years, has had no effect at all. Let us try to re-establish the principles which did Britain so well for a very large number of years, so that the quality of the goods that we produced, the dates of delivery and the excellence of the design of the goods and now technological skill will once again make it possible for us to export even with a strong pound, and also make it possible for our own manufacturers to fill the gaps when demand in this country surges up, so that we do not all have to buy foreign goods because they are there at the right time, their quality is on the whole better and their delivery dates and services, before and after purchase, are better. We have a long way to go. It is not going to be a easy road, and I wish the Government every possible success on it.

6.41 p.m.


My Lords, I did not intend to speak in this debate simply because this is the theme on which I speak most of the time—that is, Britain's economic decline—and ever since my maiden speech nearly three years ago, most of my speeches, as some of your Lordships may recall, have dwelt on this subject. So if I speak now it is because I am tempted to do so after listening to the speeches of noble Lords opposite.

It is very gratifying to find that there is now a very much greater awareness of the deadly seriousness of our situation than there was a few years ago. In some ways our present situation reminds one of 1940, although what is in question is not our military survival but only our economic survival. But it can be just as dangerous and may lead, at a certain point, to a collapse which is too bad to contemplate. So in that respect I am fully in agreement with what the noble Lord, Lord Boyd-Carpenter, said, and also with what was said by the noble Lord, Lord Soames, whose presentation of the facts I thought was a very fair one—to the point of acknowledging for the first time that this is not an over-taxed country but that, in relation to other European countries, we are by no means at the top of the taxation league but somewhere nearer the middle or just below the middle. He made much of the fact that our tax system is different and that the marginal rates are much higher. As I have often said, I am against high marginal rates, but I must, point out that here the noble Lord Lord Soames, was in error because I could mention several European countries which are highly successful in production and productivity and show none of our signs of decadence, and who yet have as high, or even higher, rates of taxation than we had and whose public sector or whose social wage takes up an even bigger proportion of output than ours—I refer to the examples of Sweden, Denmark or Norway.

I feel however that the diagnosis, as distinct from a factual analysis, of the noble Lords opposite did not stand up to examination. And, as my noble friend Lord Peart mentioned, they are very short on remedies. Exhortation and hoping for the best are not good enough. We can always hope for the best but it does not get us very far. I agree with the noble Lord, Lord Thorneycroft, that we can never be certain of the ultimate causation of comparative success or failure but the least one should expect is that any explanation of the causes of things should survive the test of logical consistency. We should not be so prejudiced as to ignore broad historic facts, which are inconsistent with the explanations that are being put forward.

Here I would mention two points. The first is that the world did not begin 20 years ago. That is a point I have made many times. This country had a very poor record in relation to other countries in the 40 years before the First World War: in fact if I were to transmute the figures quoted by the noble Lord, Lord Soames, and apply them to the relative growth rates of the manufacturing industries of Britain as against Germany, or the United States the picture always would have been a worse one in the 40 pre-World War I years than it was in the 25 years since World War II. So that does not fit in with all those explanations which point to inflation, high taxation, or lack of incentives due to taxation as being the basic cause of our troubles. If that were so, why has our record been so poor when none of these existed?

Secondly, any explanation must also take into account something of which we have not heard a word, so far as I am aware, during this debate—that our record was not uniformly bad over the last 100 years. We had an interval of around 25 years when we had very fast growth. That was between 1932 and 1957. Ignoring the war years, our manufacturing production increased at a compound rate of 5 per cent. a year, which compares with 2 per cent. in the pre-World War I period and with 2½ per cent. in the period since 1960. So, this again, I think, needs an explanation. Why did we do so well in the middle period and so badly now, before and since?

I realise that I must not, as an additional speaker, take up much time; but briefly, I should like to mention four factors which seem not to have been considered adequately or at all, and which I regard as major causes of our difficulties. I put first the poor quality of our business leadership, which is very ancient. You have only to read studies like The British Entrepreneur, 1870–1914, by Professor Aldcroft which was published in the 1960s, together with numerous other historians, or the studies of Professor Gowing at Oxford, as well as numerous other studies, to see that the British entrepreneur, even in the 1880s, was out-standing as a cause of poor performance, due to his prejudices against education, against anyone who had a university degree or against the introduction of new methods, new techniques, or entering new fields.

Although in some ways the position has radically changed, in a more funadmental sense this is the basic trouble today. What is it due to? I should say that this is not so easy to explain in a few words. It has something to do with the archaic methods by which we select our business leaders, as against the methods followed by other countries. The noble Lord, Lord Thorneycroft, made a very apt reference in this context to Germany. He thinks that the Germans do so much better than we do, and he went on thinking aloud and said that it is not because of this or that but just because Germans, as Germans, seemed to him superior. I would say that this is not the case—certainly not always. I think he will agree with me that in the Battle of Britain in 1940 the inferiority of British pilots over German pilots was not so clearly evident; nor, when it came to military staff work in the war, did we prove in any way inferior to the Germans, according to the military historians. But if you look at the German business leadership, it is obviously very much better than ours—not just a little better, but enormously better.

This has something to do with their system of two-tier directorships under which the upper tier consists of people outside the business whose chief job is to select the managing directors entirely on criteria of efficiency and ability, and they (the members of the supervisory board) are people who are experts in this matter of selection. Professors of chemical engineering become heads of the biggest chemical concerns. That has always been the German tradition. In Britain the expert ends up as the best backroom boy. He is not in the administrative class, but only in the executive class, which is a rank below it. That seems to me the major reason.

I would also draw the attention of noble Lords opposite, and particularly of the noble Lord, Lord Thorneycroft, to the fact that this is not only my view but is the predominant view of the German business leaders themselves who almost unanimously gave it as their opinion, in an enquête organised some years ago by the German newspaper Der Spiegel, that it is the poor quality of business management that is mainly responsible for the weakness of British industry. They strongly disputed the view that British workers are in any way inferior to German workers when they are properly led. They asserted that they could get just as high production out of them as out of German workers, and the same view was also echoed by Japanese business non-operating subsidiaries in this country. So that the poor quality of British leadership is a most important factor—I am sorry that the noble Viscount, Lord Watkinson, is not here because I should have liked to watch his face in response to this remark—but it is not something that we can change overnight.

Secondly, you cannot ignore the fact that in competition in industry the law of cumulative causation holds, which means that success breeds success and failure begets more failure. Every businessman knows that if he loses his market share he is up against it and gets into increasing difficulties. That has important consequences which are often not taken into account. It is no good saying that we must weed out all the loss-making industries if we are losing in competition. Any such weeding out simply means more losses and a greater shrinkage. It does not mean that you can thereby reverse the position. Profitability is a very poor test in a situation such as ours, where so many of our resources are idle. Are we right in shutting down the shipbuilding industry or any other major industry on the grounds that we are not fitted to its production? Why are we not fitted? Only because those industries have been so poorly led that they cannot compete with other countries who are more efficient. There is no reason why Sunderland or the Clyde should by nature be less well endowed to carry on shipbuilding activities than any other part of the world. That also applies to many other industries. So that the announced policy of this Government—and I wonder how far they will carry it out in practice—to kill off lame ducks everywhere and let them drown may, in our present situation, cause nothing but an acceleration in our econo- mic decline and untold misery to the local communities which are destroyed in the process.

My third point is that we must create a favourable environment for increasing output. Without increasing production trying to increase productivity is hopeless. We do not want higher productivity as such. If high productivity merely means less employment but not more output it is pointless. We must increase production and I am very glad that on this note the noble Viscount, Lord Watkinson, took what appeared to me a more sympathetic line when he mentioned import penetration in the motor industry.

If we want British industry to reverse the decline of British industry then we need a period of protection. It seems to me an absolutely inescapable conclusion, however unpalatable it is. Sooner or later we are bound to recognise this, but the later we recognise it the worse will be our situation. We joined the Common Market at the worst possible moment, and the effects of entry—as the noble Lord, Lord Thorneycroft, may remember, because he was chairing some meetings in Cambridge at which I was arguing the case against entry into the Market—have been that the Germans were able to penetrate our markets enormously faster than we were able to gain markets in Europe. The result of that was that our export-import balance in manufactures to which the noble Lord, Lord Soames, so rightly drew attention as something absolutely vital, deteriorated at an accelerated rate. If I remember rightly the noble Lord, Lord Thorneycroft, said at that meeting that we were agreed on all sides that entry into the Common Market meant much greater risks. It would put us in a better position if we succeeded but in a much worse position if we failed. I am afraid that up till now the latter is what has happened.

Fourthly, and lastly, we must be sensible about inflation. People believe extraordinary things by way of dogmas and cabals on the "money supply ". They believe that the money supply is the main factor which causes inflation, and to prevent prices rising all you have to do is to control it. This seems to me absurd. It is a complete reversal of the chain of causation and until this matter is seen more clearly, it is hopeless to expect the Government to follow intelligent policies. It is hopeless to expect them to follow policies which lead to an improvement in our situation and not to our further impoverishment. Here again I was glad to hear that the noble Viscount Lord Watkinson, was perhaps a lone voice in calling for a "National Anti-Inflation Policy ". He did not say what he meant, but he could not have used more precise language in the circumstances. But clearly a National Anti-Inflation Policy is something quite different from what this Government are at the moment engaged in. Those are the main points that I wanted to make and I am sorry if I have taken up so much time.

6.58 p.m.


My Lords, my noble friend Lord Kaldor has not spoken for too long, because he has left me in the happy position of not having to say some of the things I should have said, and of saying several things which I should not have thought of saying about the debate so far. I think it was the noble Lord, Lord Rochester, who said early in the debate that we have been discussing this kind of subject fairly frequently in recent weeks. I have a feeling that the noble Earl, Lord Gowrie, must be particularly conscious of that. I am not sure whether this is the fourth or fifth debate of this kind which he has summed up in the last few weeks. I shall be interested to see whether he can think of something new to say, and during my brief remarks I shall try to stimulate him into covering some new fields. It may be that the fact that we have been discussing this subject rather regularly recently, was what led my noble friend Lord Peart to complain, when he rose to speak, that the speeches that he had heard, did not contain anything very new.

As my noble friend Lord Davies of Leek pointed out, the Motion which we have been discussing contains at its beginning nothing with which anybody could possibly argue. The long-term goal to make everybody better off is something shared by all governments of all countries, I suspect, and it is certainly something with which nobody on this side of the House would disagree. Of course, we welcome the determination of this Government—again shared by all Governments, I suspect, in this country for many years—to reverse the long-term decline. We had quite a long discussion in a recent debate about when that might have started, and there was some annoyance on the Liberal Benches when somebody suggested that it might have been one of their former Prime Ministers who started the rot. Today, my noble friends Lord Balogh and Lord Kaldor have put various dates on it. In any event, there is no argument about that part of the notion. What my noble friends on this side of the House would express some concern about are the changes which the Government have adopted to try to meet these objectives.

I think it is fair to say that the Government have been reasonably forthcoming about how they think they will achieve their long-term aims. However, it is also fair to say that there has been a deafening silence about what, exactly, those long-term aims are. The kind of generalities which have been expressed in the debate on today's Motion are all very well, but we have had no information about what the Government expect and want to see happen to the level of unemployment: by how much it will fall and how long it will take to fall. Nor have we seen any forecast about the level of inflation, other than that it will go up to 20 per cent. by the end of this year. When do the Government expect inflation to come down, and to what level and over what period of time?

The Government have said—and I have said that they have been quite clear about this—how they expect to secure whatever these long-term aims may be. They have said that they will create the opportunities and that the people of this country must then seize those opportunities. Even if we accept—although we on this side of the House do not accept it for a moment—that these opportunities are being created, we have to ask—as the noble Lord, Lord Thorneycroft, asked—whether people will seize them. The noble Lord very honestly admitted that he had his doubts.

In fact, it seems to me that the Government's long-term strategy goes something like this. They have increased taxation on everybody except the very richest, all of whom since the Budget, whenever they have been asked in public, have said quite firmly that the massive handouts which they have been given will not make them work any harder. If you are being paid £60,000 a year as the chairman of a big company, it is very difficult to admit that you are not already working as hard as you can. As I have already said, the Government have stoked up inflation to what they now estimate will be 20 per cent. by the end of the year—that is, within six months or so of the Budget and of taking office. Their only solution to the inflation which they have created is higher unemployment, as we have heard quite clearly stated by a number of noble Lords opposite during today's debate.

Then, having somehow created these opportunities, they have no idea how people will respond to them. Indeed, they seem to go slightly further than the noble Lord, Lord Thorneycroft, went in simply wondering about it, to judge by what was said by the noble Viscount, Lord Watkinson, in what seemed to me to be an extra-ordinarily insulting view of the people of this country. The noble Viscount said that the people of this country are basically lazy. It was a great pity that the noble Viscount was not here to hear what was said by my noble friend Lord Kaldor about the management of British industry, for what my noble friend said was based on a rather more scientific and careful appraisal of our performance, compared with other people, than the noble Viscount's remarks about the people of this country, and whether or not they are lazy.

It seems to me that already we can see the Government preparing the ground for the failures which they and their supporters are clearly expecting. The noble Earl, Lord Gowrie, said in a recent debate that the last Heath Government were not to blame for the property boom which they created. He said that the people who were to blame were those who did the investing in property. Indeed, he went slightly further than that and said, as though Keyser Ullmann had never been invented, that it was the trade unions who were doing all the investing during the property boom.

So much for the Government's long-term strategy. Turning to the shorter term, it seems to me that the Government's overwhelming priority in almost every field is to make an attempt to have it both ways. People have already commented on the fact that before the election the Government said that they would not double the rate of VAT. Now they are saying that because two times eight is 16, not 15, they have kept their promise. It seems to me that there is a slight difference between a party in Opposition saying quite clearly that they have no intention of doing something and then doing it a few weeks later. Various other examples of Governments doing things which had not been discussed before they were elected were mentioned by noble Lords opposite during the debate.

Talking about the election campaign, we also heard the interesting view of the noble Lord, Lord Boyd-Carpenter, who said that we on this side of the House have now become the party of "cosy consensus ". I seem to remember a slightly different picture being painted by members of the Conservative Party during the election campaign. However, it may be fair to say that in comparison with the extremely Right-Wing Government that we in this country now have, my noble friends and I do represent a "cosy con sensus ".

In any event, the Government have introduced a tax cutting Budget, so they claim, which will nevertheless put tax up in a full year by £425 million. Therefore, as the noble Lord, Lord Soames, said in his remarks today, it certainly was not a "give-away "Budget. In fact, as I have already said, the Budget and the economic consequences which flow from it appear to have left everybody worse off, except those who were already very well off before the Budget was introduced.

In view of all this, it is not surprising that in the short-term the Government admit that things are going to be very hard. I suspect that it may be the case that some noble Lords opposite rather welcome the fact that unemployment is due to rise to the staggering totals to which clearly it will rise, because they see this as the only effective way of curbing what they regard as the excessive power of the unions. But none of them so far has come out and said that.

What noble Lords opposite want and expect to happen is not all that easy to discover. The noble Earl, Lord Gowrie, kindly told my noble friend Lord Wells-Pestell recently in reply to an oral Question in the House that public sector employment is not going to rise at the rate at which it has risen in the past—something which several noble Lords might have been able to discover for themselves. On 20th June, the noble Earl was a little more forthcoming and said: However, we believe that large-scale redundancies may be contained to acceptable, though still painful, levels ".—[Official Report, col. 993.] As I have said, the best estimate which those outside Government can make is that unemployment will rise to 2 million in the near future. Indeed, my noble friend Lord Wallace of Coslany said this in a recent debate, without any contradiction from the Front Bench opposite.

A little later in the same debate on 20th June, the noble Earl had a sudden attack of candour. He said that he did not think that any strategy of either party could do anything to reduce the very high level of unemployment within 10 to 15 years. I think it is fair to say that that is the first glimpse we have had from the Government of exactly how long they expect very high levels of unemployment to remain in place in this country under the economic and industrial strategy which they are pursuing. And it is a very gloomy prospect in the long-term as well as the short-term.

I do not know whether that is why the noble Earl is worried about what he described as the "national hypersensitivity" to unemployment in this country. It seems to me that it is becoming a feature of this Government that if a particular statistic or set of figures does not suit their case they ignore it, or re-jig it. If the retail price index is going up too fast, they simply take oil out of it. If anybody complains about the high level of unemployment, they are told that they are simply being hypersensitive about an issue which they should not worry about at all.

I am sure that the noble Earl wishes to respond to many of the points made by those who sit behind him, so I should like to ask him only one question. It is a simple one, and I hope that the information will be readily available; namely, how many public sector jobs will be lost as a result of the cuts in public expenditure which were announced in the Budget, or which have been announced by the Government before or after the Budget, and how many jobs will be lost as a result of decisions which have been made since the election on the imposition of cash limits. I know that noble Lords opposite consider that all this short-term shedding of labour in the public sector is neither here nor there, but I hope that the Government will at least admit that it is of some consequence to those who will be out of work as a result of these cuts and that they will therefore be able to go a little further than the noble Earl went at Question Time the other day and tell us exactly how many people are likely to be affected.

I have said that the noble Earl has sat through several of these debates recently. I suspect that there was one moment in this debate which made him rather more uncomfortable than he has been in previous debates. That was when it appeared, at least, that the noble Lord, Lord Boyd-Carpenter, was suggesting to my noble friend Lord Peart that his remarks on the education service were irrelevant to the Motion. I remember very well at least twice in your Lordships' House during the time when the noble Earl was in opposition hearing him tell us about his experience in comparing what had happened to his own contemporaries when they left university and his wife's contemporaries in Germany. I fully agreed with the conclusions which I understood he was drawing from that—that is, that the people in this country who have the privilege of a university career are, because of our social system and the way that we have viewed industry in the past, simply not attracted to the wealth-creating sector of the economy. They are attracted to things like the professions, to which, incidentally, the noble Earl's Government have just given a large salary increase and tax relief.

If he still holds that view—and it is certainly one that I hold and shared with him in the past—the noble Earl must be extremely worried, even if the noble Lord, Lord Boyd-Carpenter, is not, about the cuts which are taking place in training and in the secondary sector of education. Noble Lords may have seen the headmaster of a large comprehensive school being interviewed on television the other night. He said that if the proposed cuts were implemented a lot of the secondary school children in his school would cease to have chemistry lessons at all because neither the equipment nor the staff would be available. The other thing that would suffer would be trips outside the school—for example to local firms.

The noble Lord, Lord Glenkinglas, said that he would happily sacrifice the classics and a foreign language, although I should have thought that a foreign language was now widely accepted as being very important for a nation like ours which exports much of its production. But he would happily sacrifice the classics if we would keep in schools some of the things which I think he and I would agree are important. However, the fact of the matter is—


My Lords, I am grateful to the noble Lord for giving way. The point I was making was that more money must go into retraining people for skills in the engineering industry and that if one has not the money for both, then that is where it ought to go.


My Lords, I quite agree but I hope the noble Lord would agree in turn that it is a lot easier to retrain people and make them competent in engineering if, for example, they have learned some mathematics, some physics and possibly some chemistry at school. It is there, before one even starts to get people trained or retrained, that the cuts which the Government have introduced will do the damage. I am sure the noble Earl and I would agree that we should like to see those scientific subjects retained. There may be some other things which, if there have got to be cuts, the noble Earl would say should go first, but the fact of the matter is that what is going to happen, as is all too often the case, is that it will be "last in, first out ". Where science and contact with local industry have just been introduced into schools—inevitably at some extra costs—they will be the things which will be lost.


My Lords, if the noble Lord will give way, he is asking us how many cuts there will be in this, how many people will leave, what will be the cuts in the other. I think he probably realises that, if the expenditure which was planned by the last Government were to continue as it was planned and without any cuts at all, the proportion of the GNP that goes into the public sector would continue to rise. I am not asking the noble Lord for a particular figure of what he thinks it ought to be; I am stating the fact that it is a higher percentage of the GNP in this country than in any other country among our European partners. Does he believe that there should be some limit—without asking him what that limit is—on what the percentage of GNP taken for the public services should be?


Yes, my Lords, of course there should be a limit. That was accepted and quite clearly stated on a number of occasions by the Government of which I was a member. The noble Lord knows that perfectly well. As my noble friend Lord Kaldor said—although I do not think the noble Lord was present—there are some other countries with as high a level of public sector expenditure as this country and many of them are more successful than we are.

I do not think the criticism which the noble Lord has made of what I am saying removes the obligation on the Government at least to say how many people are going to lose their jobs as a result of the cuts in public expenditure which they have announced and the imposition of cash limits in the way that they have decided. The noble Lord may think it is a very good thing that all these jobs will be lost but I should have thought he would accept that a Government which believes in telling people what it is doing (which I understand this Government does) would at least give us that information, and I hope the noble Earl will be able to give us that information when he winds up the debate, particularly with his Leader beside him nodding in response to what I have said.


My Lords, I was nodding in disagreement.


Well, my Lords, the noble Lord did not indicate disagreement when he nodded to me so I am afraid that, like everything else, the Front Bench opposite have got it back to front again.

The noble Lord, Lord Boyd-Carpenter, opened the debate by saying that the economy stands in grave danger; we, on this side of the House, would say that the danger has become a great deal graver since the election and that this has happened because everything which this Government have done since the election has either fueled inflation or increased unemployment, or both. As the noble Viscount, Lord Watkinson, said in an extraordinary admission, which I think again might have been said before the election rather than after, if the Government's policies fail—as we believe they will—this country will not be worth living in.


My Lords, before my noble friend sits down I should just like to ask him whether he would not agree that a ratio is a relationship between two magnitudes and if the ratio of public sector expenditure to the GNP goes up, it is to be judged quite differently whether the ratio changes on account of the rise in public sector expenditure or as a result of a fall in the GNP. I am very much afraid, that, so far as the projections made by the noble Lord, Lord Soames, are concerned, the increase in the ratio results from a fall on the denominator and not a rise in the numerator.


My Lords, I invariably agree with everything that my noble friend says, particularly when I am not likely to understand it until I have read it in Hansard the following morning!

7.17 p.m.

The Earl of GOWRIE

My Lords, in spite of what the noble Lord, Lord Melchett, said about the fact that one might have wearied after winding up, I think, three or four and opening two, economic debates within the last few weeks I can disabuse him of any weariness on my part as I have enjoyed them all and this one not least. I think perhaps one of the differences between the noble Lord, Lord Melchett, and myself is that I tend to come to your Lordships' House prepared to give the Government's views and opinions but also to learn and I am not sure whether the noble Lord, Lord Melchett, really took in the major lesson of the debate, which is the limitation of Government—what they can do apart from creating a climate which people will then take up for themselves. This is a definite and clear difference in policy and in attitude and even in ideology between my right honourable and my noble friends and some, although not by any means all, of the right honourable gentlemen in another place and the noble Lords opposite.

I think one of the most important things that can happen to our political economy in the next few years is that the Labour Party will decide on which side of these divides it will come down. The leadership of the Labour Party is quite clear about the extent of the mix in the mixed economy, but it is not clear to us whether the Left of the Labour Party has come to any such conclusions; and from the noble Lord's remarks there seems to be very little doubt about where he would fall in that category. I rather enjoy being described as a member of an extreme Right-Wing Government who spend a lot of their Wednesday afternoons debating on the merits of the noble Lord, Lord Butler, as my noble friend Lord Boyd-Carpenter mentioned when he opened the debate, that he was his Financial Secretary. I must say that is not a Government that I recognise under that description.

The noble Lord really asked me to gaze into the future and to give a precise itemisation of what the future will bring. He was kind enough to say that I had been candid in the past and I shall be candid now and say that I do not know what the future will bring. How many jobs will be lost, both in the public and the private sectors of the economy, will, in my opinion, depend very extensively on what kind of pay settlements are made, both in the public and the private sector. We know that there is a close correlation between levels of pay and levels of employment, and that is why we are urging responsible pay bargaining in this context.

I have said earlier—and it was a speculation, as I enjoy speculating in the context of general economic debate, as the noble Lord, Lord Kaldor, does—that in my view the present levels of unemployment were really much higher than the published figures. I think there are many more people who are in employment which is so badly based in investment or productivity terms that it will only be a matter of time, whoever you put into government, before they will tumble on to the register, and that is to he very much regretted. What we are trying to do as a long-term strategy is to see that the wealth creating private sector of the economy has more resources released to it by which it can create real jobs. I will come back to that a little later.

The diagnosis is quite clear and agreed on all sides and I am not going to go over it again. There has been a high level of talent and speaking ability and I am not going to add my rhetorical halfpenny to what has already happened. I am just going to deal quite quickly, if I may, with the specific points that noble Lords have made to me. My noble friend Lord Boyd-Carpenter—and I congratulate him on the fire as well as the specific gravity of his speech, if I may put it that way, in spite of what the noble Lord, Lord Peart, said—did have a caveat and anxiety about the sterling rate and the high minimum lending rate, and this was echoed by my noble friend Lord Polwarth. Certainly sterling has been strong recently and since the Budget it has risen by about 6 per cent. in effective terms and by over 17 per cent. against the dollar.

I think the rise primarily reflects two factors: the first, and probably most important, is our favourable position among industrial nations as an oil producer at a time when oil prices have been rising very fast. North Sea oil benefits our balance of payments directly and it also encourages international investors to buy sterling. There is, of course the factor of the high interest rates, and these are of course unwelcome for businesses, both large, and, as the noble Lord, Lord Spens, said, small, businesses on whom we depend. We do not, therefore, welcome the high interest rates in any sense. But we did inherit a situation in which the money supply was getting badly out of control and in order to regain control it was necessary, in our view, to take immediate action in the Budget, including the rise in minimum lending rate. The noble Lord, Lord Kaldor, was quite clear that he thinks we have over estimated and various people have overestimated the role of money supply in getting down the rate of inflation. But we are determined to keep to our target, and the short answer to the noble Lord is that we shall see in, I would guess, 1982–3 a very sharp decline in the rate of inflation. We will have to calculate which of us was right.


My Lords, I am very grateful to the noble Lord for giving way. Are the Government so certain that raising the minimum lending rate will cause the money supply to shrink when the money supply is defined as M3, including interest bearing deposits? I know from fairly good authority that those who worked on this subject in the Bank of England and elsewhere failed to establish any tolerably good relationship between changes in the interest rate and changes in M3. What I have against this Government's policy is not simply that they pay so much attention to the money supply but that they use an instrument, the minimum lending rate, for regulating it which is wholly unsuited to the purpose and creates havoc with industry.

The Earl of GOWRIE

My Lords, the noble Lord has been right in his life and he has been wrong in his life. We always listen to him, and I will look at that point and see what officials think about it and what my right honourable friend the Chancellor thinks about it. The noble Lord has been quite clear; he has a strategy for the economy which would involve probably withdrawing from Europe and probably the imposition of import controls. As I am one of the few Conservatives who have publicly aired the debate about import controls, admittedly when in Opposition, and another was my noble friend Lord Harlech, I may not be on the side of the angels as far as the noble Lord is concerned but I have at least an open mind.

I was going to come to the noble Lord's speech later, but I will deal with it now, if I may. The real point I want to make to him is this. The noble Lord is a passionate sceptic about the role of money and the rates of inflation. There is a programme for measuring whether this will happen. The alternative strategy, either a statutory prices and incomes policy under the last Conservative Government, or a sort of semi-statutory prices and incomes policy under the last Labour Government, has not been conspicuously successful. So let us see how this one does. Before I leave the point of the high minimum lending rate, I must make a point in my own field of employment. It certainly seems to us of paramount importance that people do not borrow money which is fundamentally there for investing and for new wealth-creating opportunities simply in order to pay off excessive or inflationary wage claims. We would anticipate that the high rates of interest would have a definite effect on the pay bargaining system.

The noble Lord, Lord Peart, made a splendid speech rallying his troops. He said at the end, "Many of my noble friends are just waiting to go into battle ". As someone who sometimes has deplored in Opposition the rather bland nature of debates in your Lordships' House—always informed, but sometimes rather bland—I was delighted that we were going to have a bit of block-busting and knock-about in the present Parliament. I do not think I would regret that at all. But as well as calling his troops into battle—perhaps a little prematurely as a general election seems fairly far away at the moment—he did ask me a serious point about the Social Fund and our attempt to try to get our payments and benefits into greater line with Europe. I think this was of interest, too, to other noble Lords; another noble Lord raised the point but I cannot at the moment pinpoint who it was. I am grateful that Lord Peart drew our attention to the Social Fund because it is an area within my department where I have special responsibility. We recognise the need to increase our share and to this end schemes have been adapted and new schemes devised to meet the Commission's stated preferences. We will concentrate our effort on those schemes and those geographical areas to which the Commission give high priority. One of the difficulties is that industrial strategy, regional areas of need, are defined rather differently in Europe from the way they are defined here, and one of my jobs is to try and get closer correlation and a closer match in that respect.

The noble Lord, Lord Rochester, drew the attention of the House to the point which many noble Lords have made about the question of incentives at the higher end of the market, bringing down the marginal rates. There are various views here. The noble Lord, Lord Rochester, thought that 60 per cent. was wrong, that it was inflammatory in some way. The Liberal Party, I understand, has come down as thinking that 70 per cent. is about right for the top marginal rate. I do not know what Lord Melchett's idea is—probably still 83 per cent. or upwards. Mr. Pardoe whose loss to Parliament is generally regrettable though the particular result I do not regret, has said that 60 per cent. is too high and that 50 per cent. is right. I must say that I do not look on this as a kind of button which you press in order to generate an immense new effort in the economy. I look upon it as morally wrong for people to pay more than 50 per cent. of their income. I think 60 per cent. is high, but we are working on it and we hope to get it down at a later stage. This is a clear issue of principle as far as I am concerned.

The noble Lord, Lord Rochester, raised the question of education at work. Of course, I agree with the noble Lord, Lord Melchett, that education is of very great importance, and training matters in my department are of paramount importance. When we have another employment debate perhaps we might take training specifically, but it is too wide a subject to deal with tonight. Lord Rochester said that he would like to see a more informed and better structured framework of discussions between Government, employers and unions on major developments in the economy. We have quite a lot of sympathy with that objective. In our Manifesto we stated our desire for more open and informed discussion of the Government's economic objectives so that there is wider understanding of the consequences of unrealistic bargaining and industrial action.

My right honourable friend the Chancellor said in his Budget Statement that the Government will be more than willing to consider better methods of ensuring that the dangers of higher pay without higher productivity are, fully understood by all those concerned with wage negotiation ". I point out to the noble Lord, Lord Rochester, that the question is one which Ministers are considering very carefully.

If I praise the speech of my noble friend Lord Soames, people will echo the immortal words of Miss Mandy Rice-Davies and say, "Well he would, wouldn't he!" However, I would draw the attention of the House particularly to the remarks which my noble friend made when he said that this was not a give-away Budget. In fact, as noble Lords opposite have recognised, it is something of a deflationary Budget—it has had to be. It is a Budget of structural change. We must not confuse structural alterations in the tax system and the rest with the fact that it is a deflationary Budget.

The noble Lord, Lord Spens, and others mentioned small firms. My department is certainly working on reviews. We have already laid orders concerning methods by which the effects of the Employment Protection Act on small business—which have been universally held to be deleterious—may be amended.

Two amendments which should be of considerable help to all employers, particularly small firms, were laid before the House of Commons yesterday in the form of draft orders. They will raise from 26 to 52 weeks the qualifying period of service before a complaint of unfair dismissal can be made, and will reduce from 60 to 30 days the period within which the Department of Employment must be notified and trade unions consulted on redundancies involving from 10 to 99 employees. The Government are particularly concerned to be helpful so far as possible to small firms and that has been a recurring theme in our review of the employment protection legislation.

We are looking at planning controls and at the mismatch of rules and regulations which my noble friend Lord Thorneycroft mentioned. We are also looking at special enterprise zones in difficult areas where the relaxation of some controls might be of assistance, although no decision has been made about that yet. My noble friend kindly gave me notice that he was taking his wife to Monteverdi's Vespers, and that certainly is a more enjoyable pursuit than listening to me winding up! I rather liked him saying, as one who had just masterminded the winning of a general election, that he was quite a keen politician. My noble friend has also added a new word to the English language which is "polly-tician ". Politicians must be careful of imitating their elders and betters in that context.

He raised a very important point, which exercises me in the department a great deal, which is how to find the young men and women sufficiently literate and numerate to fulfil the tasks which society provides. As the noble Lord, Lord Melchett, was castigating me about hypothetical rises in future unemployment, I should point out to him that one must also realise that in this intensely mismatched economy there are vast vacancies. One of the most depressing jobs that I have had since being appointed Minister is to go to areas in South London, where there are large vacancies in the labour market, and where we are trying to train people in the very elementary social skills which they must have in order to get a job in the first place. We are trying to get a better match there.

My noble friend Lord Watkinson was kind to us and of course demanded much of us. He said that we have the intense problem of trying to grow faster in a world in recession. He asked for an early meeting of the NEDC, with the Prime Minister in the chair, to explain that pay must be matched with increased production, and he asked to be told our attitudes about the NEDC. It met on 6th June for the first time under our Administration, and there was unanimous support for continuing the work of the Council and of the sector working parties. Therefore, the Government value the commitment of the TUC, the CBI and other interests represented on the Council to tripartite discussions on major policy issues.

My noble friend Lord Campbell of Croy dealt with the oil issue. I point out to the noble Lord, Lord Davies of Leek—who also raised that matter—that we had a splendid debate in his absence (and we are all glad to see him back) on this topic, to which I would refer him. It is true, of course, that the United Kingdom, as a substantial producer, is affected rather differently from most industrial countries by the recent price rises. A rise in prices has little impact on our trade balance and we therefore do not suffer the loss in terms of trade which is experienced by other countries. So, we are in the lucky position of being likely to experience a smaller fall in living standards. Nevertheless the rise in oil prices may well lead other Governments to adopt more restrictive policies and that could check our growth by reducing demand for exports. So, we are on a knife-edge in this situation, and we must all do what we can in the international markets and in international diplomacy to try to see that things improve.

I am glad that my noble friend Lord Nugent of Guildford brought to the attention of the House the fact that we have honoured many of our commitments. He specially talked about some of our commitments in terms of industrial rela- tions. I should like to take this opportunity, in the context of my noble friend's speech, to point out that we, of course, have no quarrel with the trade union movement. We know that the work of the movement is critical if there is to be sufficient economic recovery, especially in the industrial sphere, to ensure a better life for its individual members and a less shabby environment for them to work in.

We also know that our own internal arrangements for industrial relations have not just tilted the balance of power too heavily towards unions from employers—as I think my noble friend was suggesting—but tilted it also too heavily from responsible union leaders towards militant and unofficial groups. We hope that the very modest measures that we are putting forward, instead of the radical reforms which many people would like us to make, will correct that imbalance. These measures, which are under discussion at present, will, of course, be debated in this House in due course.

The noble Lord, Lord Davies, said that rich people become a lot richer under a Labour Government. Under any Government which inflates by 100 per cent., those with valuable assets will probably see more than a 100 per cent. rise in their assets, and I am sure that people have done very well out of it. I would also refer him to our debate, prior to his return—which we welcome—on microchips and to a thoughtful essay by Edward Goldsmith in The Ecologist about an ecological approach to unemployment, about which we could all learn quite a lot. He drew attention to my noble friend Lord Home of the Hirsel's efforts with matches. The noble Lord did very well by comparison with recent Governments, and perhaps we should all return to our matchboxes.

My noble friend Lord Glenkinglas spoke about the importance of training. As I have said, training is such a large subject that I hope it may be a subject for a small debate later. As it is an area in which I have some responsibilities, I can say that we value the work of the Engineering Training Board levy. I had a word with the noble Lord, Lord Scanlon, and said, "You really should come along to the House and give your show a plug, because it is doing valuable work and needs to do more ". The noble Lord, who gets more jovial year by year, said to me that the trouble was he was longing to come, but he was never free at 2.30 p.m. which is when he has to take the oath. Therefore, I hope that the noble Lord, Lord Peart, will urge him to do so, as we are all looking forward to hearing him.

I have dealt with the remarks of the noble Lord, Lord Kaldor, and to some extent—though not, I am sure, to his satisfaction—with those of the noble Lord, Lord Melchett. I would recommend the noble Lord, Lord Melchett, whose concern for unemployment I cast no doubts on whatsoever, to look at the mismatch in our economy, to look at the level of vacancies as against the levels of people who are out of work, to look at the intensely regional character of the difference—the south of England is still a very prosperously employed part of the country with less than 3 per cent. unemployment and many vacancies—and to try to concentrate his remarks on constructive suggestions as to how these regional imbalances might be corrected.

To sum up, last month's Budget marked, as the debate has recognised, a fundamental change in the direction of economic policy. The days when Governments fine tuned the economy in a desperate attempt to stimulate a little more growth or to shave a percentage point here or there off the RPI are now over. In their place we have a long-term strategy, designed to tackle the deep-seated problems of the supply side of the economy. I acknowledge that it will take years rather than months before this strategy produces tangible results. But I think that then they will be results that will last.

The really important matter here is that, in our view, the previous Administration had come to recognise that our economic problems were basically supply side problems. Although they got the diagnosis right, in our view they got the solution wrong. Their solution was the industrial strategy which, despite its fine-sounding name and containing much sense, amounted in practice to a continuation of the interventionist policies practised by previous Labour Administrations. Such policies effectively amounted to taxing the efficient sectors of the economy in order to subsidise the inefficient ones. That is hardly a recipe for faster growth. Inter- ventionist policies of that kind have conspicuously failed to achieve the regeneration of industry which they were intended to do. Therefore, in our view, it is time to abandon them, and with this debate we are making a start.


My Lords, can the Minister assure us that his comments about the regional imbalance in the matching of jobs and vacancies mean that the Government will look at regional employment policies very selectively, in a constructive way, rather than slashing them too violently?

The Earl of GOWRIE

My Lords, we are doing so.

7.41 p.m.


My Lords, those of your Lordships who were present at the beginning of this debate may recall that I indicated that when we reached this stage I would seek your Lordships' permission to withdraw the Motion. In a moment I shall seek to do that. However, before doing so, I hope that I may be allowed to say that I very much hope that the House as a whole feels, as I do, that we have had a debate of very considerable value.

The noble Lord, Lord Melchett, pointed out that there have been other debates relating to the economic issues which confront our country, which is, of course, true. On the other hand, as the noble Lord, Lord Kaldor, so well said, this is an issue of deadly seriousness. Those were his words. If this House is to survive, in my humble submission it is essential that we should frequently discuss what is the central issue of our national life, on the solution of which our survival depends. I hope that this debate may have made its own modest contribution to that end, particularly because it was attended by two noble Lords on the Benches opposite whose economic advice has done so much to mould—for good or for ill—the economic fortunes of this country over the past 15 years. I hope that the noble Lord, Lord Peart—who, if he will allow me to say so to his face, was a most excellent and understanding Leader of the House—will also (though he showed a little restlessness at the beginning of the debate) feel that none the less the debate has been a worthwhile exercise for the House as a whole to undertake. At the least he may console himself with the fact that it gave him an excellent opportunity to give us a lively trailer for his speech or speeches (I do not know which) on the Education Bill next week.

I am not inhibited, as is the noble Earl who has just spoken, in what I say about the noble Lord the Leader of the House, for the noble Lord and I have been colleagues over a good many years. I am happy in the consciousness that nothing has ever been known to make him blush. In my judgment the speech which he made to the House this afternoon by itself would more than have justified this debate as a clear, forthright and authoritative summary of the Government's economic policy, which I found to be one of the best statements that I have heard, and I thank him for it. Having said that, I ask your Lordships' permission to withdraw the Motion.

Motion, by leave, withdrawn.