Unemployment

HL Deb 04 March 1981 vol 417 cc1387-495

3.3 p.m.

Lord Peart rose to call attention to the unacceptable levels of regional unemployment; and to move for Papers.

The noble Lord said: My Lords, I beg to move the Motion standing in my name on the Order Paper. Before we debate the Motion itself, may I appeal to noble Lords to make short speeches. About 30 Members of the House wish to speak. No doubt both long and short speeches will be made but, as always, I shall try to be concise and not to overdo it.

I believe this debate to be an important one. I should like to congratulate my noble friend Lord Lee of Newton, who took the initiative within my party and thought that this would be the Motion which another place would develop in depth. For many years I represented West Cumberland, but I am going to speak for the North of England, a region which has suffered over the years. Of course it has had its triumphs but now there are pit closures. Collieries which employed large numbers of men have been closed down. I think of collieries on the East Coast and also in Northumberland and my own former constituency of Workington. I know what tragedies lie behind the figures. Noble Lords should get those figures from the Employment Gazette which is in the Library. Details are given there of every region and of the rise in unemployment in many of them, especially in the North of England area with which I am dealing: the Tyne, Newcastle, Wearside and Consett, which was destroyed "at a stroke", if I may use the famous expression of one Tory Prime Minister.

I do not know whether noble Lords read the speech of Mr. Heath which appeared in The Guardian of Thursday, 6th November— Former Prime Minister's criticisms strike a chord with Tory left wing. Heath attacks catastrophic monetary policy". I hope that every Conservative Peer will read the full speech. It is a strong indictment of Government policy. The Government have created a situation of nightmare proportions which I think is partly due to the Government's blind adherence to a catastrophic monetary policy. This is what Mr. Heath was attacking when he made his speech. The Government must change their mind. The Government must do another U-turn, otherwise many of our great industries in the North will be considerably affected, with disastrous consequences and high unemployment figures. The figures are still growing, as I know only too well.

What a contrast to the period when a Labour Government came to office in 1945! I never thought that I would again see villages and townships in my native Durham affected by Government policy such as we saw in the early 1930s: desolation, with towns like Jarrow—which became so famous as a result of the Jarrow March—murdered. When we discussed Consett quite recently I thought how similar that situation was to communities where in many cases they were making a profit. People forget this. In the North, dealing with Workington, I can point to the closure of very large factories and to a steel works which still has its problems. Maryport was a famous seafaring town many years ago. There we created virtually a new society. We repaired the ravages of the Tories in that area. I was always proud to be in that Government, to represent my constituency in that Parliament and to speak for the people of Workington.

What a difference there was when we first came to power! I can remember what the then Chancellor of the Exchequer, Hugh Dalton—I quoted him the other night in our forestry debate—said about the regions. It was so important. He said that he would provide money for the regions with a song in his heart. That Labour Government repaired not only the ravages of the war but the ravages of misrule before the war. It became a new and better society. People became more buoyant. They felt there was a future for them. We had the benefits of a health service which we created and which we were very proud of. I suspect that the Tories will still try to clip the health service and not to give it its full place in the community. They believe in private practice rather than in ordinary socialised medicine, if I may use that term.

We created a new society, a new fabric. We built roads—for instance, the A66, a great road which goes past Bassenthwaite Lake, which many people know. It provides a lifeline for West Cumberland and for the traffic which goes to Teesside and to other parts of the Northern region. We created an infrastructure. Now these areas are being attacked and run down. Factory after factory in the Northern region has been closed. This is a tragedy, similar to the one which we saw, as I said, in the 1930s.

It is also a tragedy for another reason. Unemployment has a great effect on our youth. Unemployment among the young is rising. They are the future of our country. It was the youth of our country who, when the war came, rallied to the cause, produced essential weapons and fought in the fine regiments of those areas. They were patriots in the best sense. It is a tragedy to see unemployment raising its ugly head in these areas. Only a Government can stop it. I believe this Government have created that unemployment, and it is the indictment which I make today. The noble Earl may shake his head but if he examines it he will understand what I mean by it.

Many of our young people, forced to leave school without qualifications, due to a new law concerned with social security—I have here a letter which appeared in the Guardian; I will not read it out but it indicates how there are now difficulties for young people who are forced to leave school without qualifications due to a new law concerned with social security. I am very glad that the Guardian has taken this up and highlighted it. Of course we welcome the Youth Opportunities Programme, designed to give unemployed youth work experience, set up by the Manpower Services Commission. It has its defects; due to a lack of worthwhile apprenticeships and because of the destruction of the manufacturing base they are being forced into the consumer and retail industries. I am not criticising these two industries, but I believe we should have our industrial base secure in both those regions. West Cumberland took the initiative and it is setting up an apprenticeship scheme, but, all the same, some are still being exploited in the retail trade by unscrupulous employers.

Many people must accept the fact that if we have unemployment and we have the destruction of our industry it has repercussions on other great industries. I speak for agriculture. I believe that agriculture has thrived because we had a thriving industry and because we once had a Government who brought in a new concept of assured markets and guaranteed prices. We have never let the farming community down, even though a Labour Government was sometimes very critical of the giving of subsidies to the farming community. I believe that it is important to have a healthy industry and a healthy agriculture, and that is what I have always tried to talk about and to effect in my political life. I know the noble Lord, Lord Soames, and I am sure he will agree with me on that. He was a distinguished Cabinet Minister in agriculture and has wide experience, and he knows the importance of the industry to the country.

So I would argue that here and now we must say "stop" to Government policy. There must be a U-turn; there must be a change, otherwise there will be darkness again for thousands of people in our country. I said that I would set a good example by making a short, concise speech. There are 30 people with their names down to speak today, and therefore I believe it is right that I should set a good example. I do so now but I believe that this Motion is important and it is an indication that we want to see a change in policy. I beg to move for Papers.

3.13 p.m.

The Earl of Gowrie

My Lords, the noble Lord the Leader of the official Opposition introduced this debate with passion and conviction, although he will not be surprised that I found his speech short both on diagnosis and on treatment of the evils of unemploy- ment. But I congratulate him on attracting so many speakers, a testimony to the anxiety which our acute manpower crisis is causing. As the Employment Minister, I can assure everyone that the Government will listen and will study everything said because we are intensely aware of the problems and difficulties which unemployment brings to many people and the real anxiety caused by threats of redundancy. We are as anxious for lasting solutions as anyone and we are quite open to advice. I am very much looking forward to the maiden speech of the right reverend Prelate. He brings us his special knowledge and concern for Liverpool, a region almost permanently afflicted with too much high unemployment.

The noble Lord, Lord Peart, has framed his Motion to concentrate on the regional effects. Our economy is, of course, regionally less well balanced than the economy of, for instance, Germany, whose major productive cities—Hamburg, Hanover, Frankfurt, Stuttgart, the Cologne-Dusseldorf complex, Munich—present an enviable geographical balance and industrial mix. Successive Governments of this country have had regional aid policies to try to correct our imbalance although it seems to me that most economists nowadays—unaffected perhaps by political considerations—are beginning to wonder whether transplanting industries from industrial areas to areas with less manufacturing tradition is always such a good idea. Of course, I recognise that at a time of high unemployment regions where unemployment is traditionally high may suffer proportionately: indeed their portion can increase by a kind of multiplier effect.

But in these opening remarks I want to concentrate, if I may, on unemployment generally and deal with regional issues in answering any questions put to me when I come to wind up. It is also true to say that at least one good thing about the present levels of unemployment is that pretty well everyone in the country is sharply aware of it. I really do not think we are two nations about this issue any more.

Areas like the West Midlands which have become used to high employment are suffering very badly and even the affluent suburbs of the South East are aware that unemployment threatens, if not parents, at least their children who are coming out of school in unprecedented numbers, early in this decade, only to face a very severely restricted job market. So I honestly do not believe that any part of our society is complacent, or indifferent or unaware of this manpower crisis, and certainly everyone wants to see it solved.

Like any great issue it is, of course, a matter of fierce political controversy. Yet at least one important thing that has happened recently is that there is increasing awareness that the full employment policies which were run by both major political parties from 1945 to 1974 are no longer being delivered by British Governments of either political persuasion. Because high levels of unemployment are politically unpopular, as well as wasteful in human and economic terms, this failure to deliver full employment argues that something more profound is going on than simple failure to come up with the right policies. When we add to this the knowledge that unemployment is a major problem in all the developed industrial economies of any significant size (it is of course, still easier to control employment if you govern a small country) it does seem to me important that we put the politics on one side for a moment and try to agree on both diagnosis and cure.

We have had many macro-economic debates recently and I do not propose to spend much time analysing the causes of unemployment or, to be more precise, analysing the reasons why ensuring high levels of employment by manipulating demand is no longer an option enjoyed by modern Governments. The reasons are not complex. Let me itemise them quickly. There is the downturn in world trade induced by competitive deflationary policies by Governments and these are following competitive inflationary policies by those same Governments, which in turn stemmed from the desire of the Western democracies to hide from their electorates the full consequences of the OPEC price rises, which have been nearly 2,000 per cent. since 1973.

There is the currency instability which OPEC has created and the refusal of the energy producing countries to reinvest their petro-dollars in the manufacturing capacity of the West. There is the rise of highly disciplined and competitive capitalist economies in the Far East. There are the demographic factors—the 'sixties baby bulge hitting the job market before the World War I baby bulge comes off it, and a huge increase over the past 20 years in the number of women who have entered the job market.

We in Britain have to consider all these things as well as the slowing down of inevitable structural change in industry as a result of the attempts of previous Governments to save jobs where they could not be saved for long as a result of restrictive labour practices by powerful unions and pay settlements out of line with productivity and the need to retain profits for investment. And we have to correct investment famine in manufacturing industry due to inflation and the profitability of financing high Government spending as well as the way in which high Government spending pre-empts resources for new and existing industry. I do not believe that these causes are subject to serious disagreement by analysts of widely differing outlook. The dominant reason for the fall in employment levels has been this inflation-led recession in the Western world. I am not passing the buck here, because we as a nation have contributed to the Western recession, and we cannot as a trading nation isolate out ourselves from its effect. So I am afraid that a substantial and lasting improvement in employment levels is largely dependent upon an up-turn in world trade and on our own competitive response to it.

I stress this matter of an improvement in our own competitive response, because, of course, I am not saying that it is a matter of wringing one's hands and sitting around until world trade picks up. The House will know that the Government's policies have two overriding aims. The first is to continue to bring down domestically induced inflation; and the second aim, and one can hardly separate it, is to improve the competitive position of our industry and to bring it into line, as it were, with the very successful and very competitive bits of our economy: agriculture, to which the noble Lord paid tribute, retailing, financial services, for instance, as well, of course, as the many sections of industry that are themselves still successful.

Now, in the control of domestically induced inflation the Government have been successful, and we are determined not to surrender our success. If we were to do so, the terrible inroads which inflation makes on profitability and investment would continue to cut away existing jobs, and, just as bad, continue to prevent new jobs from being created. I am sure that the public opinion polls are accurate when they indicate that many people would like us to give priority to unemployment and not to inflation. But the trouble is that unemployment and inflation go together like a horse and carriage. So do interest rates and inflation. We recognise the burden on industry and on employment levels of high interest rates. But remember that to get a real rate of return on investment, and to make investment worthwhile, you have to discount the level of inflation.

I am sometimes told that this is difficult for people to understand. I disagree. We all understand it in terms of our own planning and our arguments over the annual wage round. It is called keeping up with the cost of living. Investment, on which output, productivity, wealth and employment all depend, has to keep up with the cost of living also.

Then there is the Catch 22 question that faces all modern Governments. High Government spending to help industry—think of the regional aid and the money given to Leyland or British Steel—means high interest rates that squeeze industry. The Government have to compete in the money markets for the financing of our deficits and of our borrowing. One of the reasons we have to contain public spending, therefore, is our desire to see lower interest rates, so that we do not compete with industry for precious resources and crowd out jobs. Of course, if inflation continues to moderate, as we expect, it should be possible to cut interest rates further, and the welcome fall in the exchange rate over the past few days appears to be anticipating this. I am, of course, aware that the squeeze on manufacturing exports caused by the high pound has been very severe. It has cost jobs. We have never pretended that counter-inflation—which is the economic equivalent of putting yourself on a severe diet after years of self-indulgence—is other than painful, nor that it can be accomplished without a transitional rise in unemployment as the tight money squeeze takes effect.

How, then, does one protect employment levels while currency stability is being achieved? The answer again, I think, is not complex. There has to be a response in pay bargaining. Here the strong pound has helped rather than hindered as people in this country perceive inflation almost exclusively in price terms. The strong pound helps reduce price inflation and is, therefore, partly responsible for the sharp fall in wage demands. Unions have been adapting to a falling rather than rising price curve in the present wage round. So far, I can report, the average settlement has been 9½ per cent. in the private sector and 9 per cent. in the public sector. Of course, in terms of our present productive capacity, and in terms of the world recession, this is still too high overall. But it is a remarkable improvement in this economy to see wage settlements being achieved below price inflation. It is at last beginning to sink in that excessive pay claims do threaten jobs, one's own job as well as other people's.

In recent weeks union leaders have joined with industrialists in calling on the Government to lower interest rates and ease the pressure on the pound. As I have said, we hope to do this. But unions must not expect to recover in wage rises the price rises which a more competitive pound would bring. If they do so, we shall not be able to shield them from the consequences of more unemployment.

The central purpose of this Government, the moral ground on which it stands, so to speak, is that people do in the main act responsibly once cause and effect are not concealed from them. We are all human and subject to human pressures, and no one pretends that progress in this direction is as swift or as even as one would like. But I have to say that, far from being depressed, I am astonished and gratified at the speed at which reality is now sinking in. I also have to say that what is depresssing is the call by some members of the Opposition for artificial and, in this world climate of very low growth, quite unsustainable reflation of demand.

From the end of the IMF period of Mr. Healey's chancellorship in 1977 to the general election in May 1979, the previous Government doubled their public sector borrowing requirement. That was the U-turn from their own monetary control and cash limit policy. Real earnings rose by 14 per cent. over inflation, and that was by far the fastest growth since the war. That was intensely inflationary, and we are still suffering the hang-over from that wages binge, as well as the disastrous and inherited 1979–80 wage round. Yet, in spite of all that reflation, unemployment only fell by rather less than 10 per cent. in the initial stages, and at a cost of rising sharply later on. There are enormous dangers in stimulating a manufacturing economy which has been as uncompetitive as ours. You suck in imports and you suck in other people's unemployment.

Another problem we face is that in many industries we have had to cut our workforces drastically to bring them in line with international manning levels. I think most people agree that unless we do this we shall find ourselves priced out of world markets, with the inevitable result that more jobs will be lost in the long run. Of course, we have to do this in a humane and civilised way. One of the reasons why the Government's financial strategy has had to relax rather more than we would like is that the cost of buying people out of declining industries is very high. So is the c of the consequent unemployment and other benefit[...]

But it is altogether false logic to argue that this kind of expenditure could somehow be saved by continuing to postpone the painful transitions which industries like Leyland and British Steel have to make, and which hundreds of private sector industries have to make. The unemployed are paying heavily for the Labour Government's attempts to postpone changes that were bound to be imposed on our economy by our position as a world trading nation. And the reason why I have great confidence in our economic revival is that, now that these changes are at last taking place, albeit at high social and financial cost, British industry is now better equipped for international competition than it has been for many years. That is why it is so essential that we do not see yet another British Government abandoning its economic strategy in the face of political and other pressures as counter-inflation takes effect.

I would remind the noble Lord, Lord Peart, that this strategy is very close to that of the Government of which he was a distinguished member at the period of their greatest success against inflation. Of course, all of us are aware as practical politicians that the pressure is always greatest just as the results are beginning to come through.

In my job I am well aware of the difficulties for individuals of counter-inflation policy and the transition from an antiquated to a modern industrial economy. I have acknowledged the social and financial cost. I have acknowledged that the Government have had to adapt the speed at which we can move in our strategy. So we are doing what we can through regional aid, through industrial support and through our special employment and training measures to help industries and individuals. It is the purest political cynicism, and it will in time rebound badly on the perpetrators, to suggest that we are in some way an uncaring or hard-hearted Government, or that monetarism—which means only living within your means—is an unethical doctrine or one that was not used by the previous Government.

Without the Government's assistance to the nationalised industries—and on them depend the fortunes of myriad private concerns—unemployment would, of course, be nearly a million more again. Of course a lot of the money we spend on the nationalised industries involves modernisation, buying surplus labour out and preparation for eventual sale. But job protection is also a factor and without the special employment measures a further 300,000 people would be added to the register. These measures are helping about 1 million people.

The rise in the birth rate plus the manufacturing decline, plus the terrifying fact that over the last 10 years, with output excluding oil rising on average by less than I per cent. a year, we have increased wages by 320 per cent.—all this is the root cause of unemployment: not monetarism, Keynsianism or even Seventh Day Adventism! As the old bit of the Labour Party well knows, and as the new bits are likely to find out, there is no magic policy to deal with this other than painfully, other than making the move from the old high-manned, low wage, low investment industries to the new low-manned, high wage and high technological industries. They make the wealth and the wealth makes the employment. But as we change gear from one kind of industrial society to another, individuals and groups do, of course, get caught in the machinery. So I shall end with a group for whom I have special responsibility within the Government.

This is an acutely difficult time for all young people seeking work and I include those with relatively high educational attainments as well as the less well qualified. In this country the immediately post-war "baby bulge" joined the relatively buoyant labour market—particularly in the service sectors—of what now appears to be that pre-historic time, the swinging 'sixties. The baby bulge of those same 'sixties, to which I have to confess I contributed, is suffering now the horrid irony of coming on to the labour market in a world changed out of recognition by the crisis of energy supply and energy monopoly, and by the growth of competitive capitalist economies outside the West. I published some years ago a small poem about Biba's boutique in the 'sixties which reads pretty oddly today. It ended: No war now, no one poor under thirty, All the cold war babies dressed to kill". That nostalgic prosperity was not founded on better industrial health: that prosperity was founded on cheap primary products (and poorer producer nations) and very little competition outside the West. But now we have our own wits, our own skills and to a much greater degree our own resources to depend on. The labour market is still very successful.

We must remember that while youth and school-leaver unemployment continue on an upward trend and cause the deepest anxiety, the majority of young people who seek to enter the labour market do so successfully. The majority of those who are not initially successful, and who therefore join our special programmes, do in their turn go into real jobs at the end of the work experience which the public services provide for them. Of over 700,000 young people leaving school for work last summer, the proportion still unemployed is around 20 per cent. That is too high, but it is still a good record of achievement of the programmes.

When you consider the older unemployed there is a continual flow of people on and off the register between our rather obsessional monthly counts and still well over a quarter of a million people leave the unemployment register each month, most of them for jobs or training. How things turn out in the longer run will depend on how we adapt to a different industrial society and the success of overall economic policy. But unless we continue with the process of adaptation none of us may be in any doubt that the surge in unemployment will itself continue unabated and that the increases will fall disproportionately on young people, on the disadvantaged and on the long-term unemployed.

All that said, young people do need to know that there is hope and that there are vacancies. Even now at the trough of recession we are immensely short of people equipped to work in the electronics industries, in information technology, in service engineering and in traditional skilled manual crafts. All these arc wealth creating, and other jobs—too varied and plural to mention—depend on wealth creation. I am sometimes told that the transferable skills on which modern industrial employment depends ask rather a lot of people—that they need O and even A-level maths and things like that. I can only say that while this mix of skills includes abstract competence, manual dexterity, acceptance of responsibility and sensitivity to other people, all those same kind of skills are required in the process of learning to drive a car and millions of people can do that.

In a remarkable maiden speech to this House on 27th November last at column 223, the right reverend Prelate the Bishop of Lincoln said with all his experience as an industrial chaplain for many years: If I do not speak about the extreme importance of the revival of our economy as a national priority, it does not mean that I do not recognise it as an absolutely fundamental priority for us all. Having said that … I should like to go on to say that I have grave doubts—and they are not undocumented and I think that they are not unshared—as to whether we shall ever get back to the full employment, as we knew it for the first time in history, in the 'fifties, 'sixties and early 'seventies of this century. With modern manufacturing and service industry developing as it is at present, and as it needs to develop to be competitive, I cannot see that it will ever need to employ the number of employable people in our land. After each recession, as this country has recovered, there has been, each time, a larger pool of unemployed people. Therefore, the crucial political, social and human question, and therefore the crucial ethical question, is what is to be the fate of those people who our industries, as we know them at the moment, are unlikely ever to need to employ". I could not put it in a more cogent or less doctrinaire way than that. But while I recognise the crucial, political, social, human and ethical question, as the right reverend Prelate puts it, I do believe that the labour market is an immensely rich and varied and subtle mechanism. If the competitive and the wealth creating side of the equation is got right, then the other side will do most of the work, if not all of the work. Even at the trough of this recession, and with all our problems, the labour market in this country is employing 21.5 million out of 24 million. And we would be naive if we pretended that the informal or black economy did not exist. Of course we have no intention of leaving the whole thing to markets, as our support for the work of the MSC demonstrates. But the labour market is still a beautiful and successful mechanism and it is still doing its job in difficult conditions.

In concluding I in no way wish to minimise the difficulties we are facing and I know that we shall continue to face in 1981, not least because the greatest number of school-leavers since the war will come on to this difficult labour market at the end of this summer. Apart from the world wide recession which is affecting all Western countries, we have our own particular problems to which I have referred. As the Prime Minister said, there are no easy answers, but I believe that when the Government's policies are worked through we shall have a much stronger economy and a much better base from which to take advantage of any upturn in world trade. Inflation is falling fast at present and despite the pound, which I am glad to say has also eased, our share of world trade is holding very well. There is every reason for confidence if we do not, at great cost, continue to postpone changes that are bound to come in any case, and if we do not continue down the primrose path of paying ourselves more in wages and social benefits than our production allows. To go for the alternative cost of reflation at this time would lead to our industry becoming more and more uncompetitive, would draw in additional imports, and would, in the end, result in still greater unemployment for the country. No better tomorrow lies that way.

3.40 p.m.

Baroness Seear

My Lords, the last thing I want to do is to turn the debate on this extremely important and serious subject into a crude battle. On all sides of this House and throughout the country there is deep anxiety about the level of unemployment. It would be absurd to imagine that the Government are not as concerned about the issue of unemployment as are any other group in this country. They would be lunatic politicians if they did not mind about unemployment, and they would be inhuman monsters if, as individuals, they did not care about what is happening up and down the country.

Moreover, of course, although as the noble Earl, Lord Gowrie, has indicated, the causes of our unemployment are, in my view, exacerbated by the extremes of monetarism which the Government have applied, they stretch back a long way and are very deep-seated. This afternoon we do not wish to have yet another general economic debate, but we all know that the decline of British industry set in in the last quarter of the 19th century, and the modern Conservative Party can hardly be blamed for that. Indeed, I believe that I have to admit that there was a Liberal Government during that era. Perhaps their time is coming again; perhaps they will do better.

Of course, failure to reorganise industry and failure to tackle the necessary restructuring of industry, which could so much more easily have been done in the more prosperous days of the 1950s and 1960s, is a failure of both the Conservative and Labour Governments that we have had throughout that time. So this is an issue which should transcend ordinary party politics and on which it ought to be possible for us to reach a high degree of agreement on all sides of your Lordships' House.

However, having said that, the time is coming when the Government must take fresh action to deal with the unemployment problem with which we are now confronted; partly because the position is even more serious than the figures which we have been shown would lead us to believe. It is well understood that those figures leave out of account quite a number of people who are, in fact, unemployed: women who do not register, partly because they are not in a position to claim benefit and partly because they believe that there is no point in registering because there are no jobs to be got. They leave out of account many older people who have retired or who have given up the attempt to get a job, not because they want leisure, but retirement has been pushed upon them because there was no other option for them. They know—as the figures show all too well—that beyond a certain age the attempt to get a job is, in many parts of the country, totally futile, and they have given it up. Therefore, in fact, the figures understate the extent of unemployment today.

Moreover, some unemployment is being masked by the efforts—in many ways, of course, highly desirable efforts—of the Manpower Services Commission. A number of youngsters are employed in the youth opportunities schemes who are, in effect, unemployed. It is better that they should be so employed than that they should have nothing whatever to do. But if we were really doing our sums in a hard-nosed way, many of those jobs would not be included as full employment jobs. Indeed, the opportunities of the youth employment scheme, valuable though they are, can lead to a further disadvantage later on. It is very sad that it is necessary to terminate after 12 months in many of the schemes. There are parts of the country today where a youngster will receive an opportunity under the YOP schemes, only to find at the end of the year that he returns to a family or to a district where no one is working and that the experience of employ- ment is temporary, transitory and makes precious little difference to his ultimate employment prospects.

I know that the noble Earl, Lord Gowrie, has pointed out that many of these youngsters obtain jobs, and that is true. But many of them do not. During the youth employment scheme opportunity many of them do not learn anything; it is not a training that they receive. It does not contribute to their ability to get jobs, or to get jobs and to hold them when the time comes, when the economy recovers and when the demand will be for people with skills, which they have not been acquiring under the opportunities that they get today. Some have acquired skills, but many have not.

In fact the position is understated rather than overstated. Of course, in the regions—and it is, as I understand it, to the regions that this debate is primarily addressed—in some areas unemployment is becoming the norm. This is an extremely dangerous position to arise. Moreover, the costs of unemployment today are becoming hideous. It is not only the amount of money that the Government have to pay out in unemployment benefit, supplemented by social security benefits, but the social costs of unemployment are very difficult indeed to calculate with any kind of accuracy. I would not pretend to do so. I know that there have been elaborate attempts to give precise figures for the social costs of unemployment. But they certainly are real and they must be high. When we think of the anti-social practices into which youngsters, particularly those who are without employment and without hope of employment, inevitably drift and what that involves in terms of damage to property, of care for youngsters when they are convicted of damage and of illegal actions, and of the behaviour of many totally despairing groups among the ethnic minorities, all those add up to social costs which have a human and political effect of a disastrous kind, but which also have a real, high financial cost.

Therefore, unemployment is more serious and exceedingly expensive, and the time is coming when the Government must be prepared to make some further effort to alleviate it. It seems to me that, first and foremost, the Government should take certain immediate actions. I do not believe that there is any one thing that the Government can do, or any two or three things which will bring about a great change in the total position. But I believe that there are a number of things which, taken together, could make quite a considerable contribution. First and foremost—and we wait with expectation for next week—could the Government not cut the employers' national insurance contribution, which is a straight tax on employment? Could they not cut it advantageously in the regions of high unemployment? This would be the best encouragement to employment in the regions, because it would be encouragement for labour-intensive industry rather than for capital-intensive industry.

One of the legitimate criticisms of previous help in the regions is that it has tended to encourage capital-intensive industry to set up in the regions in areas where what is needed is labour-intensive employment; whereas a reduction of the employers' national insurance contribution is a direct encouragement to employment or a removal of discouragement to employment, which is what the employers' national insurance contribution is. Would it not be possible for the Government to consider, at any rate as regards the regions, exempting national insurance contributions of both employers and employees for all youngsters under the age of 21? As the noble Earl has said, we have a particularly acute problem of unemployment among the young, and that problem is particularly serious from a social and human point of view. If it were possible to say that, at any rate in the regions, employers could employ people under 21 without paying social security contributions, this would he a considerable help in encouraging the increased employment of youngsters.

There is no doubt that the high level of pay to young persons at the present time has been a real disincentive. We have talked often in this House about the example that Germany has given in dealing with its young persons coming out of school. One must say that one reason for the lower level of unemployment among German youth is that it costs employers in Germany proportionately a great deal less to employ their young people than it costs employers in this country. So that some adjustment of national insurance would do something to redress the balance and therefore help in the employment of these young persons.

These are things which could immediately be done. So too—and one hopes again that we shall see something of this in the Budget next week—would additional concessions to the small employers who can, in aggregate, absorb a considerable number of people. If every small employer in this country took on an additional young person, our problem of the employment of young people would be considerably reduced. Is it not possible, along with the other reasons for encouraging the small employer, to give special concessions here so that they could be given additional assistance in relieving the unemployment problem?

These are things which the Government can do immediately and which we very much hope the Government are going to do next week. But there are of course other things. I take the point of the noble Earl, Lord Gowrie, that the Government have had to cut back on expenditure in order to reduce the public sector borrowing requirement. But surely the time has come when the Government can distinguish between what used to be called above the line and below the line expenditure. For economies on above the line expenditure, we on these Benches are very much behind the Government. There has been a great deal of waste expenditure. We have to live within our income. That is fine. But with regard to below the line expenditure, today it is ridiculous to economise on the investment which will only cost us far more when we have to do it, and it is inevitable that we shall have to do it sooner or later. It will, however, cost us far more when we have to do it. Our failure to make this investment at the present time is costing us very dear indeed in terms of employment.

It amazes me that the Government Front Bench do not make this distinction. The press, the informed press, the CBI, the TUC, up and down the country have been saying "Borrow in order to invest". Surely the time has come to do this now, and to do it without further delay. Look at the things which could be done: development of the railways; development of energy saving equipment; development of insulation of houses. All these are ultimate cost savers. It is an economy to do it, and to do it now before the prices rise. The spin-off in terms of employment of investment of this kind is the best way of creating employment. It is far better than more money in the youth opportunities schemes of only temporary value.

So start now, with no further delay, to see that the investment which we shall have to make sooner or later is put in hand, and therefore will have employment consequences. But there is a further kind of investment, and I regard it as investment every bit as much as investing in the infrastructure, and that is the investment in people. I know that the noble Earl, Lord Gowrie, believes in the importance of training as much as we on these Benches believe in the importance of training. I know that he regrets—and he used the last paragraphs of his speech to emphasise this—youth unemployment, the problem of school-leavers, every bit as much as we do.

It is my belief that the time is coming when we have to treat the 16 to 19 age group as if it was not in employment at all. Youngsters should be based on jobs indeed, because they need the experience of being employed, but that time should be spent in learning, in acquiring skills and knowledge. The time and money should be invested in the youngsters, so that they turn out as people with skill and knowledge to develop the new industry which the noble Earl, Lord Gowrie, and we on these Benches want to see developing in this country, and developing as soon as possible.

If we do not make these investments, when we succeed in the restructuring of the industry, when we develop the high technology industries, the information industries and the rest which we want to see developed as much as he does, there will not be the manpower and the womanpower there to do the jobs which require to be done. The noble Earl, Lord Gowrie, knows as well as we know that we fail in this country to produce youngsters in sufficient quantities with the skills and knowledge that they are going to require; that they need now, but that they will need far more when the economy begins to recover. A really dramatic effort to take the 16 to 19 year age group out of the problems of unemployment and into the problems of further training based on employment would be the biggest single contribution to the reduction of unemployment, and to the reduction of the social problems associated with unemployment in the regions and in the country as a whole. That would be the single biggest contribution that the Government could make, and we implore them to make it soon.

3.57 p.m.

The Lord Bishop of Liverpool

My Lords, as this is the first time I have addressed your Lordships' House I ask your indulgence for any shortcomings in my speech. As Bishop of Liverpool I have a privileged view of a region deeply affected by unemployment. I see a community deeply hurt by those high levels of unemployment which have been experienced over many years. In Merseyside this is not simply part of a cycle, a bad dip in trade, although the losses of firms that we have experienced recently are so damaging that we wonder sometimes what industrial base will be left to pick up that upturn in trade.

I think, for example, of Spoke. Two years ago in 1979 Dunlop, a large employer in Spoke, closed. I hear today that the redundancy money is just about spent. When you come to that moment in a community, the ability of a community or a family to stand up for itself is severely damaged. If you ask how young people in an urban community have found a job, your Lordships will know that frequently it has been through "Uncle" or "Auntie" knowing someone who knew about an opening. If the elders in your family have been made redundant they can offer no help. That adds to that dangerous sense of powerlessness in a community.

Last night in Liverpool the Church leaders of all our main denominations were together, as we regularly are. I told them I was to make my maiden speech in your Lordships' House today on this subject. They asked me to speak on their behalf—for they of course also see other parts of the community—about the deep hurts being inflicted by unemployment. In that context, dare I say that as I have looked forward to membership of your Lordships' House I have hoped that the day may come when all the main Churches may be represented in this House?

Archbishop Worlock and I, at the request of the city council of Liverpool, have been down to London twice just lately as part of a delegation to meet the Minister of Agriculture, and later on our own to see the chairman of Tate and Lyle. Perhaps there has been some surprise here at the strength and unanimity of the voice with which representatives of every part of life in Liverpool have spoken about that closure. Is it surprising? Nearly a quarter of Tate and Lyle's production workers come from the Vauxhall area, where, according to the chief planner of Liverpool, the current unemployment figure is 46 per cent. All areas where inner city people live—and I am thinking both of the inner city itself and of those great corporation estates on the edge of Liverpool—seem today to have what you might almost call a basic figure of unemployment of some 30 per cent.

However, there are some encouraging signs in Liverpool. For example, with the help of Inner City Partnership, small advance factories have been built. Last year Liverpool was saying they could not build them fast enough to keep up with the demand, and that was very good news. We have leaned too much for a long time on the larger businesses, but your Lordships will be aware that it will take a lot of small businesses to replace the 1,500 jobs lost at Tate and Lyle and a further 1,500 lost at Courtaulds announced since then; 7,000 redundancies have been announced this year in Liverpool, not Merseyside—that is, in just two months—making 33,000 in the last five years. No wonder there is deep fear about whether there will be an industrial and commercial base to catch the upturn in trade. No wonder there is fear that, if you agree to a shake-out of over-manning—which is, no doubt, very reasonable and important—not only you but your son will have no job to go to.

The burden of changes in the market and technology falls unevenly on individuals and communities. It suited this country to have a great seaport on the West side of England. The industries of the North and Midlands, and Britain as a whole in war, needed Liverpool. Now Liverpool finds itself in the wrong place for trade. This Government and their predecessors have rightly intervened to help. Inner City Partnership has put substantial sums into the city and great hopes are pinned on the Merseyside Development Corporation. Yet I dare believe that the Government need do more to help industry and commerce. I hope that the leaders of industry and commerce will ask more questions when they hear, as I hear so often, destructive stories about Merseyside workers' militancy, for if they ask more questions they will, I believe, find that many firms make a very good living in Merseyside.

The burden of changes brought by technology adds to people's fears and those fears will not be put away by dogmatic statements; for example, the idea which is often produced to end a discussion that new technology always produces more jobs. I doubt if the history of the third world would substantiate that statement. We need new technology, but we also need appropriate technology and the appropriate mix, perhaps of high technology and, in places, intermediate technology. When we choose, as I know we must, to use high technology, we must count the whole cost of using it in our community. In my heart of hearts I agree with the right reverend Prelate the Bishop of Lincoln, in that I do not expect that we shall ever again have full employment in the old terms. I wish we could admit that; for we could then begin to debate what we shall one day have to discuss, namely, what a civilised society should do for those who are not needed in the market.

But even if I am wrong about that, there will be an awful lot of people in places like Merseyside in the next 10 years at least who will need opportunities that will not just happen for them. I hope we shall not he told that those out of work should all move to more favoured districts. Very large numbers of people will never move, perhaps because they lack the self-confidence or the skills or perhaps because they value family and community more highly. Perhaps your Lordships may think their set of values not entirely wrong. Those who move whenever we say, "There are jobs over there", will always be those who have more self-confidence, the get-up-and-go people. Many of them will move anyway. But, if too many move, the imbalance of the community is heightened and the risk of creating a community of the "left behind" grows.

If what I have said about the next 10 years is in any way true, it makes the character of the special programmes of the Manpower Services Commission very important. I deal with that from day to day because I am chairman of the Merseyside and Cheshire Special Programmes Board, and I wish to pay tribute to the staff of the MSC. The expansion has been of a quite astonishing scale over the last five years and has produced a remarkable flexibility. As for the scale of the operation for which my board is responsible, in the last month—we had our board meeting on Monday—2,500 young people have entered the programme in Merseyside and Cheshire. As chairman, have seen good projects sponsored by employers, local authorities and voluntary bodies. I see young people being given a good experience of work disciplines, a new view of their own abilities and a chance to try out a whole variety of different experiences and to have a new view of the community in which they are growing up. But of course the hardest part is when, in Merseyside, a very high proportion must, after 12 months, go back to the dole.

The Minister knows that his comment about young people finding jobs after 12 months is rather too optimistic in Merseyside. One cannot measure the success of a programme by who gets a job at the end of it, because that depends on the district, and there are some good projects where, sadly, well over 50 per cent. are going back on the dole at the end of them.

The basic youth opportunities programme has not changed much since it was introduced in 1976, but the scene outside has changed greatly. We on my board—I believe, rightly—have put a great emphasis on trying to find the right kind of experience and training to offer to those whom we perhaps unfortunately call "low achievers". We must continue that, but, as has been said, there are a growing number of youngsters with perhaps three O-levels coming into the programme.

I would make two points about the directions that I hope the temporary programmes may take. The first is about what we might call meaningful training. I understand the fear that if the state offers too much training, industry and commerce might then withdraw from offering training at all. I understand the philosophy which says, "You should provide only the skills which industry and commerce know they will need". But that would lead to offering the bulk of skills training where industry and commerce are already strong. How does an area like Merseyside break out of its double-bind when industry says it cannot come because there will not be the necessary pool of skills and the pool of skills cannot be created because industry is not coming? We are receiving requests from local authorities which want to help on a large scale—on Monday we heard of Sefton, Merseyside, wanting to help in offering training and skills—and I hope we may be allowed to offer more in that direction.

The second point I wish to make about the special programmes is that I hope we may be able to have more adult places, and I would remind your Lordships that "adult" simply means over 18. The new CEP—with all the initials, I have forgotten what that means—in replacing the STEP programme, has a very small-scale operation. I will explain how small. We in Merseyside and Cheshire receive the lion's share of the North-West's places; we receive more than the whole of Yorkshire and Humberside together. That is 2,800 places. But we have 50,000 unemployed in the priority groups of long-term unemployed. My board on Monday was trying to work out some priorities between possible target groups for CEP, and that is very difficult in such a tiny scheme.

When somebody has been out of work for 12 months it is much harder for him to find his way back into work. It is my hope that your Lordships will recognise that the burden of change, especially unemployment, falls unevenly on individuals and communities, that we should explore every avenue of sharing those burdens more fairly and that as a nation we should debate honestly the long-term implications of unemployment in an advanced technological society.

4.10 p.m.

Lord Taylor of Gryfe

My Lords, it is an honour and a pleasure to be the first to congratulate the right reverend Prelate on his excellent speech, based on his wide experience and his very deep concern about this miserable subject of unemployment. The right reverend Prelate appeared with great distinction on the playing fields of England, and today he has shown that his skill as an opening bat has not deserted him. I sincerely hope that while on subsequent occasions he may be relegated to being a tail-ender, he will not be discouraged from participation in further debates in the House of Lords.

This is a debate about regional economic policy, but regional economic policy must be seen within the total framework of the general economic strategy; and perhaps like the Leader of the Opposition I may be tempted to quote Mr. Heath. I am not sure whether he is part of the new bit or the old bit of the Conservative Party. But Mr. Heath said recently: I Find that I am not entirely alone among those in the Conservative Party who worked for its victory who are worried about the present situation. One of our intentions after the 1930s was to ensure that the Conservative Party was never again considered to be the party of unemployment. I ask my honourable friends to think seriously about that in our present circumstances". I am sure that the concern expressed by Mr. Heath is shared by the noble Earl, Lord Gowrie. I am a great admirer of the noble Earl, Lord Gowrie. He speaks with great erudition and great conviction. Similarly, I am also an admirer of the noble Baroness, Lady Seear, who speaks with great knowledge and such practical good sense, and perhaps I may be permitted to follow some of her arguments in discussing the general macroeconomic situation.

If there is one theme that seems to obsess the present Prime Minister, it is the theme that: "I could have cut income tax by 4p in the pound were it not for the amount we are paying out for nationalised industries. Extra public spending would not reduce unemployment. It is a recipe for more inflation and fewer jobs". That is an oft recurring theme in the Prime Minister's repertoire.

Less borrowing by the nationalised industries means greater unemployment and increased expenditure on social security. One unemployed man, married with two chidren, increases Government borrowing by £6,006 a year. Taking into account the tax revenue lost, the unemployed are costing the Government at least an extra £7 billion per annum—and are producing nothing. Surely that is a basic cause of inflation—there is paid out £7 billion without producing any wealth at the end of the day.

As the noble Baroness, Lady Seear, so clearly stated, the difficulty about the present Government in their economic strategy is their failure to distinguish between capital and current spending. Printing money to pay higher wages in the public sector would be wrong, and I think that it is right for the Government to hold the line on Civil Service pay. But spending for investment is precisely what Britain needs. The Government are fuelling inflation by failing to make the distinction between investment and consumption.

The money squeeze has reduced production—which is just as sure a way to increase inflation as is an increase in money supply. We have many examples of an increase in the money supply encouraging production without inflation, provided that the money is channelled to investment. The Japanese ran a money supply target not unlike our own between 1974 and 1977, and there was an increase of 14.7 per cent. Theirs did not lead to inflation like ours. That was because the money went to investment credit, which grew at the rate of 11 per cent., while Government and local debts amounted to only 3.8 and 0.8 per cent.

By failing to distinguish between money for consumption and money for investment, and by making a false distinction between public and private investment, the Government are not necessarily cutting inflation. In my view we must become much more pragmatic and flexible in this field, and it should not be beyond the wit of the Treasury to devise schemes for a greater participation of private capital within the nationalised sector, so that we have a practical example of a mixed economy working with a greater involvement of private capital. The rigid targets of the PSBR must be examined again with a view to achieving that end.

I served for a number of years on the British Railways Board, and I am conscious that supporting the electrification programme—a programme involving about £700 million—would immediately set the engines going in GEC, BICC and a number of other firms and this is so necessary at present. How much more sensible is that than the paying out of social security to the extent of £7 billion per annum and producing no wealth.

I make that general comment about economic strategy, but I wish to say a few words about the main subject of the debate, which is regional policy. I have found in the South of England that it is fashionable to say that regional policy has not worked, and I am delighted that the Government have committed themselves to regional policy and that by means of the Bill before your Lordships yesterday, the Industry Bill, have increased the financial support for the Scottish and Welsh Development Agencies; in the case of the SDA from £500 million to £700 million.

We must from time to time take stock and look very critically at the incentives for regional policy and at the instruments that we employ. I believe that the incentives have been just about right. I also believe that we must look at the Scottish Development Agency and clearly define its terms. It has not been an unqualified success, because I think that politicians tend to judge such agencies on a very short time-scale, and one or two difficult and unfortunate investments tend to he inflated in the public press to the detriment of their overall performance.

So let us be a little patient regarding the development agencies and let us be clear as to what we expect them to do. Immediately after the setting up of a Government agency of this kind, whether it be the Welsh Development Agency, the Scottish Development Agency, or the NEB for that matter, pressure is applied on the agency to become a rescue organisation. The agencies are under continual pressure to take over unfortunate situations and lame ducks. In order to assess these organisations it is, I believe, important to have separate accounts. That would distinguish the work of the agencies in rescuing certain firms, because of the social implications involved, from their other role of financing and supporting success.

I think, too, that we have to be clear that these agencies are not burdened with the responsibility of imposing industrial democracy, or even becoming a form of creeping nationalisation. The first and foremost task of these organisations in the present situation is to encourage industrial regeneration, identify growth, back success, encourage joint ventures where they are necessary, encourage mergers and work with the financial institutions in the countries in which they operate to extend long-term capital support. If industry has suffered from anything it is the fact that there tends to be in the financial institutions a rather shorter view of industry and its prospects than is the case in Germany or in Japan. So the SDA and the Welsh Development Agency, and the NEB, have a positive role to play in encouraging financial institutions in that direction.

The development agencies must also be the main instrument for attracting inward investment. I know there is a finding in the Scottish Select Committee that this work should not be pursued by the Scottish Development Agency but that the embassies abroad should be the centres for the attraction of inward investment. I should like Members of your Lordships' House to read a lecture recently delivered by Alan Lord, now chief executive of Dunlop but formerly a senior official at the Treasury, in which he distinguishes between the resilience, the energy, the enthusiasm and the cost-consciousness of industry as against the rather different climate of operation in the Civil Service. I do not believe that the embassies can be the instruments for attracting inward investment. I believe businessmen have got to talk to businessmen, and that can be best done through agencies like the SDA, the Welsh Development Agency and so on.

Inward investment is not only very important because it attracts new industry: the impact of inward investment by American and Japanese companies on the whole standard of management in some of the areas which have been depressed, like some of the poorer areas of Scotland, is tremendously important in that it injects a new interest, a new excitement and new ideas. So I hope that the inward investment function of these agencies will be an important factor in regional development.

Last month I happened to be in Japan talking to some of the companies which are considering coming to this country, and I believe that in this connection we are pushing at an open door. The Japanese are highly sensitive to the criticisms which are now being made about their large-scale imports into the EEC, and many major companies are looking for centres to establish production units in the United Kingdom and elsewhere in Europe. I spoke to one company, the Nippon Electric Company, which had decided to come to Livingston in Scotland. I said, "Why did you decide to come to Livingston, as against some of the other new towns? There is a good deal of competition in the electronics field around Livingston, near Edinburgh". They said, "That is precisely why we came to that site—because you have established there a climate for new technology, for new ideas, for electronics and so on. We will not go to the depressed areas, where we would inherit traditional attitudes in industrial relations. We look for new areas, where you can create a new kind of environment"

Regional policy is in fact working in Scotland, and Government intervention in this field is not to be discouraged. The oil industry, thanks to the intervention and direction of the Off-Shore Supplies Office—Government intervention—now supplies 72 per cent. of the total requirements of the North Sea from United Kingdom sources, many of these jobs created in Scotland. Indeed, the oil industry is now bigger than the coal industry in Scotland. It employs 100,000 people. Similarly, in electronics. We are getting a changed emphasis in the economy of Scotland. There are now 30,000 jobs in electronics. It is bigger than shipbuilding or steel. So we are in fact moving from the dying basic industries into the new developments. This is done by Government support and Government encouragement, and long may that continue to be so.

But the people of Scotland, too, are not neglecting their own opportunities. Last week I attended a lunch at which Prince Charles presented awards to industry. This was a competition organised by the Scottish Council—and the noble Lord, Lord Polwarth, is one of my colleagues in that organisation. The Scottish Council went round to the banks and the oil companies and collected £250,000 to award as prizes for new ideas and small businesses. They said, "Let us have a national competition. If you have a bright idea for a new industry, submit it". There were over 2,000 inquiries originally for the scheme, and of that number 730 people—small companies, businessmen, scientists and others—took the trouble to apply. The awards were made last week. There were a number of awards in each of the regions of Scotland. Industry and the banks in Scotland have agreed that they will continue to support these ideas by seconding finance officers and other personnel to encourage the small man in areas where his experience may be limited.

So I believe that in the development of regional policy we have not only to encourage the Government in their macro-economic strategy, but we have also to try to create within the regions a new atmosphere towards inventiveness, and try to switch over from the old industries. I live in the shadow of Linwood, a dying town, but I think it would be foolish for me to go to Linwood and say, "We will fight for the retention of Linwood", because the market is against it at the moment. At the same time we have an obligation to go to Linwood and say, "What new industries can we attract to create opportunities for employment?" I hope that this debate in your Lordships' House will encourage the Government in well-doing and may spark off some ideas and encouragement to relieve this terrible problem.

4.28 p.m.

Lord Thorneycroft

My Lords, I welcome this debate and the opportunity to contribute to it, not least for the opportunity to hear the right reverend Prelate the Bishop of Liverpool in his maiden speech, when he spoke with great knowledge and understanding of the bitter problems of the great area over which he ministers. I join with the noble Lord, Lord Taylor, in saying that I hope we will hear him on other occasions—and I join with the noble Lord, Lord Taylor, on many other matters, too. One of the encouraging things about this debate is the remarkable degree of unanimity and understanding with which a great subject has been treated.

My Lords, I suppose this is the gravest and most complex problem with which we have to deal. We could almost leave out the word "regional", in a way, because there is no region in this country, nor is there really any section of the community, which is not affected by what we speak of here. Unemployment has been rising inexorably under all parties and all Prime Ministers for 20 years. I think it is worthwhile remembering that. And in each cycle the low point has been higher and the high point has been higher—and that is something which has social consequences, to which the right reverend Prelate referred.

That is the background of the debate, and I do not mean by that there is nothing that anybody can do. I mean that the causes and cures of this affliction lie, to some degree, beyond the ordinary techniques which politicians debate about or apply in these particular circumstances. In this scene I would speak, and speak briefly, on only two aspects. One part of the problem is the ability or inability—very often the latter—in this country to adjust fast enough to a very rapidly-changing technological and trade pattern. If you fail to move fast in a very rapidly changing world, then you soon lose out on any advantages that might be available. The other part is outside this country. The upsurge of oil prices in 1979–80 was almost more dramatic than that in 1973, but it has had a vast effect on the trading patterns of the world and our ability to sell abroad. This is something which has resulted in a world recession of a major size and magnitude, and it is that world recession which is the whole backcloth of the problem that we are talking about.

I want to make a few comments about those two problems—and, to start with, about the recession. The recession will end. Recessions do end. I think it is wise that we should be careful how we approach that thought. Stock building will start again. And may I observe that coming out of a recession can sometimes be almost as painful as going into a recession. Do not let us think that it is going to be that simple, with imports beginning to be sucked in and a whole different range of problems started. But do not let us do anything that hampers our ability to take the fullest opportunity of the situation that then develops. Above all, then we shall need sound money. We shall need to be winning the battle against inflation and it will be vital that we hold on to any competitive advantages that we have.

The ability of a country to fight a recession varies. The strong do best. The Japanese do very well, indeed. The Japanese, without any—or virtually any—energy reserves at all, without oil, virtually without coal, without anything, by sheer drive and determination to increase their competitive ability, hold themselves up, set an example, to the world and become almost something that we in Europe are afraid of because of the force of the competition that they can deploy in the export markets of the world outside. The weak do worst. Here we must confess wherever we sit that we are among the weak. And why? We went into the recession uncompetitive, uncompetitive not just in the public sector but in the private sector, too. Not always, of course. Agriculture?—all right, competitive. And many of the services. But in the main, in manufacturing, let us confess that we went in with a competitive ability substantially below that of most of our principal competitors abroad. And, in the public sector, over-manned, under-productive.

And we had all those problems on our shoulders before we started. We had had three years of an incomes policy. It had broken down and we were faced with what happened then—an enormous upsurge of wages. And there were people all round, Government, private employers, imitating one another, paying 20 per cent. increases in wages, wages that they could not conceivably claim that they could afford to pay, which resulted within months in very substantial losses of jobs—as many warned them at the time. Unlike Japan, we had developed a very different and very strong trade union movement. Indeed, we had recently strengthened it. It had developed for itself a very wide range of restrictive practices and practices generally none of which was conducive to rapid adjustment in a changing world. We were the low paid, the unproductive and the unagile of the community. I say those things because if you want to have a lesson on what is not the way to enter a recession, that is not the way to enter a recession. Let us not blame each other. Let us blame all of us. That is the way we work.

The question—and I am going to be very brief—is this: what do we do? I think we stop swearing at one another! I do not think that any of us has much justification for swearing at anything, to tell the truth. I think that too many things have gone wrong. And it is not as though any of us—and this is one thing which has emerged from this debate—is standing up and saying that he has the solution to the problem. I certainly am not. I am saying that many of the causes are beyond what we can alter.

There is one other "don't". It is: do not institute a general reflation of the economy. Nobody has suggested that. The noble Baroness, Lady Seear, did not suggest it. Do not go and do that, because, if we were to take financial and economic measures which would get inflation really moving again and wages up, and all that, then in the long term it would mean a loss of jobs and even in the medium term it would render us quite incapable of taking advantage of the end of the recession when it comes.

Borrowing? Of course, borrow! Sometimes people talk as though Governments do not want to borrow. I never in my life knew of a Government that did not want to borrow. They borrow right, left and centre. The only problem is that there comes a point when you have borrowed so much that it is difficult to borrow very much further—and one must accept the fact that the more you borrow the higher the mean lending rate (or whatever it is called) goes up. This is also a factor in dealing with the situation on jobs and the rest. But by all means spend. People may make many accusations against Her Majesty's Government, but a failure to spend money is not very high on the list at the present time. And I make no apology for them spending money. It may be difficult politically at this moment to stand up and say that they were right to back British Leyland on the day that they came out with a £400 million loss for last year. But, talking about the regions, what about the great West Midlands region where I was brought up, where I learned to admire the variety and skills with which they tackled so many occupations and the contribution they made to the country? Ripping British Leyland out of that or watching it collapse—with all the small businesses around it where the components are made—would be a tragedy of a major order.

Let us not criticise one another for doing what has to be done. Politics is about doing what has to be done. It is not about economic theories of any kind. Politics is doing what has to be done, sometimes in a world which you would not particularly have chosen. By all means let us encourage private businesses. I am more of an optimist than many about the job-creation aspects of encouraging small business. If you study what happened in the United States of America, a great part of their job creation has come not from General Motors but from small businesses. It has come from thousands of small businesses. The difference between America and us is not in the size of the big businesses but in the number of the small businesses. So I agree with the noble Baroness, Lady Seear, in what she said about that subject.

I was fascinated to hear the right reverend Prelate talking about advance factories. It is amazing that even at this moment, when so much is going against us, small advance factories are being snapped up. People are actually starting to do work. In his Merseyside may I comment on one other aspect: great firms like Pilkingtons which are established and have the knowledge and the know-how, are going to immense lengths to help, assist, teach and give advice to small businesses starting up in their areas. That situation of the strong helping the weak and the large helping the smaller, is something which is of great importance and assistance to us.

Let us do anything we can to temper the Employment Protection Act. We want small businesses to employ people. "Employment Protection Act" sounds a lovely name. Small companies are firmly of the belief that if they have virtually to marry the people that they employ, then they are not prepared to employ them. This is their attitude. We have to deal with human beings. Do not let us apologise if we scale it down still further.

Let us maximise the assets that we have. For example, energy. My noble friend Lord Gowrie represents both employment and energy—and much else, but those two certainly—in your Lordships' House. May I ask the employment part of him to take the energy part and give it a fairly stiff lecture. I should be deeply grateful. I am not asking that we should try to subsidise energy as the United States of America does. I am bound to inform him that there is industry after industry, and activity after activity in this country which is not getting bulk supplies of energy on the same scale as competitors overseas. It just is not happening, whatever we say.

Although I am frightfully good on the public platform and deal skilfully with all the answers that I have—and I am prepared to go on—it would help me very much indeed if a rather more convincing statement was capable of being made. I believe that constructive intervention is an "in" word in the Conservative Party today. I am a constructive interventionist. If the energy side of the noble Earl could start to operate in that direction, it would have the support of both sides of your Lordships' House.

I agree with maximising the use of labour, too. In London, for example, the rehabilitation of old houses is a labour-intensive activity; but it is an immensely successful activity. It saves a lot of other things and it is amazingly sensible. We must do that; we must train; and, above all, we must stay in Europe. The noble Lord was talking about Japanese investment. People will invest in this country. The attraction of this country—apart from the fact that it has a Conservative Government and a few other things—is that it has skilled workforces available and a huge market on its doorstep. We must hold on to this. Do not let us have any talk or suspicion that we might be losing that market in any way at all. It is one of the great pluses that we have.

That is really what I wanted to say. There are things that Governments can do; but, by Heaven! there are a lot of things that everybody can do. It is not all a matter for Governments, but for industry, the CBI and the unions. Somehow or other we must turn this country into one a little more suited to the century in which we live and with rather fewer restrictions. The CBI produced 50 points the other day and I was happy to see the majority had nothing whatever to do with government at all; they had to do with industry, management and unions.

We should look at the rules about employing apprentices. It does not take seven years to teach anybody everything. Methods of making it easier for young people to go into work are matters which require consideration by management and unions. We need new approaches by banking, in the loans and provision of capital for small businesses. We need different approaches in training and education in this country. This is a national job, and that is why I was so delighted to participate in a debate on a subject which your Lordships were quite plainly treating as a national problem.

4.45 p.m.

Lord Rhodes

My Lords, it is always a pleasure to listen to the noble Lord, Lord Thorneycroft, whom we respected and heard so often in the House of Commons. But before I continue with what I have to say, may I say to the right reverend Prelate the Bishop of Liverpool that we liked what he had to say, we liked him and that he could have done a very useful job just about now in Barbados. I was Lord Lieutenant in Lancashire for some three years and I grew to love Liverpool. During those three years I visited Liverpool 153 times at various functions. We hope that we shall have the pleasure of listening to the right reverend Prelate on many occasions in the future.

I never approach this subject without deep emotion; but I am trying to stifle it this afternoon. I never think of it without asking myself: where are we going to get the inspiration to give us the moral strength to be able to treat the unemployed as valuable citizens in the community? This is surely what all this is about.

All round the North-West there are advertisements displayed of this nature: On the orders of BL, 1.2 million square feet of factory space at Speke". In accordance with instructions from BICC, 325,000 square feet at Kirby". Meccano wishes to dispose of 245,000 square feet in Liverpool". Courtaulds offer 263,000 square feet, 200,000 square feet, 218,000 square feet and 850,000 square feet". So it goes on and on.

These are good, modern factories. Many are single-storey buildings. Numerous engineering plants are for sale equipped with modern craneage and up-to-date engineering facilities. I saw an advertisement the other day for one factory for which ICL had no more use at a rental of 3p per square foot. It has been recently air-conditioned, carpeted and fitted with sprinklers. In Liverpool there arc 6½ million square feet available. In Manchester the figure is 8 million square feet.

These buildings are throwing long black shadows over the manufacturing industry of the North-West. Empty space means no work. Set against this for manufacturing industry there is the commercial market. The commercial market is firm. It tells the story far more graphically than ever I can as to what is taking place because manufacturing industry is losing out while service industries arc not. People believe we can run this country on service industries and perhaps a little bit of manufacturing, but they are making a big mistake. We cannot. If you think you can run this country on service industries you automatically assume that we have 17 million to 20 million too many people in this country. We hear that the service industries are marvellous and that we have to adapt ourselves to the sophisticated, modern techniques, making electronic equipment, and so on. Right. But we have to have bread and butter besides cake, and a lot of our industries are bread and butter industries. It is no comfort to a cotton worker coming out of employment to know that service workers are still being recruited to jobs with index-linked pensions.

I will not go over the problems and the reasons for the recession and what has taken place—everybody has seen that in the papers time and time again—but these empty factories mean unemployment, and unemployment means less production. Employees in my area, in the North-West, fell by 100,000 in the year to September 1980 and over three-quarters of the job losses were in manufacturing. But paradoxically the rapid fall in output and employment has been accompanied by a continued buoyancy in consumer spending, which rose in the North-West to a record level in 1980. What does that mean? It means that we are buying foreign. Average living standards have continued to rise as a result of the strong pound and the ability to buy cheap imports.

In the North-West region 329,500 people are officially out of work, out of a total for the United Kingdom of 2.460,300. But figures can be made to prove anything, and the figures in the Gazette last week give a very misleading picture. Figures published last week showed that employment had fallen by 1,122,000 jobs since June 1979. The number of jobs lost has exceeded the numbers registering for the dole because, as the noble Baroness, Lady Seear, said earlier, many have given up hope of ever finding another job and retired early. What it amounts to is that 270,000 people who lost their jobs between July 1979 and December 1980 have not signed on as unemployed. They have given the job up. So for the official figure of 2,460,000 one should read 2,730,000—two and three-quarter million.

The noble Earl, Lord Gowrie, mentioned people coming on to the labour market according to the census figures at the rate of 200,000 a year. A lot of those are not included in the official figures in the Gazette. So it is nearly 3 million now. We are stuck with this totally unacceptable number of jobless and, what is worse, a massive decline in the numbers of potential jobs. Young people now, when they come to middle age, will have a lot to say about this generation which has got us into this mess.

From the general to the particular, this situation can be multiplied by as many times as there are towns in the North-West. Take a town like Oldham, which I know well. One in nine have no paid work to go to. That is the official figure. It is expressed as a percentage, according to the Gazette, of 11.5, which coincides with the official figure for the country as a whole. The real situation is far worse in that for every Oldhamer without a job there is another Oldhamer working short time. Three thousand workers, or 90 per cent. of the remaining workforce in textiles, in Oldham are working less than a full week. In engineering the picture is even worse. There are over 5,000 on short time in Oldham, and on top of this 1,000 further jobs are to go in redundancies already announced.

I turn now to the more constructive side of it. Manufacturing industry is facing a dilemma we have never encountered before in my lifetime. Never do I remember a situation where we have a cyclical recession and one which affects the very structural base of our industry simultaneously. We manufacturers have grown used to cyclical recessions; we regarded them as temporary setbacks which could be taken care of as and when trade revived. For instance, in the textile trade the length of time between peak and peak was of the order of three and a half years. The length of time varied according to the particular industry of course, but never before do I remember a recession of this kind.

The dilemma is to know how much of an industry is going to survive. This has been highlighted in recent days by ICI's results last week. Their big loss-maker has been the fibres division. It would take the judgment of a Solomon to come up with an answer as to whether or not in present circumstances our domestic fibres industry can survive at all. The time has arrived for the Government to declare their policy on some of these issues. For instance, do the Government believe that it is imperative that we, as an industrial nation, should have a fibres industry? Are they prepared to declare that we are going to keep a textile industry in this country? If so, what are they doing about it and how do they propose to create the conditions in which the industry can thrive?

One of the disadvantages of EEC membership is that we cannot negotiate nationally on import penetration. Every developed industrial country in the western world has an element of protection for existing textile industries, but most of our European partners have allowed their textile industries to go by default, particularly Germany. As action on protection needs the political support of all the members of the EEC, we naturally find it very hard going to get any backing at all. So in the textile trade we face a situation where we have partners in Europe who are indifferent to our plight. Free circulation in countries with a small textile industry is a boon, but to us it can be a nightmare. Brussels is inadequately staffed and negotiations there on our behalf are bound to be weak and feeble. The Government must take a tougher line. And what about those firms which are nearly going out of business because of interest rates and the other handicaps they have suffered during the last year or two?

What should be done now? I reckon we should have a register of those firms which have gone out of business showing what has happened to their order books, and we should ascertain whether any of the business could be transferred to firms which continue in being. Steps should be taken to identify imports coming into this country illegally. I drew attention in a previous speech in November to what was going on in Europe, preparatory to Greece joining the Common Market. I then drew attention to the fact that a firm in this country was able to produce electronic equipment which would identify imports into this country, as and when they reached the top quota level. This has been adopted by Greece. If Greece can take it, why cannot we? The idea has come from this country. A young firm in Farnborough is able to do this, and it would take a lot of the steam out of the criticism of allowing imports into this country. What is good enough for Greece should be good enough for us.

I want to finish on this note. We must be competitive. Our productivity must be as good as, or better than, anybody else's. We are a good way behind. Forming new parties will not get us out of this trouble. No party in this country will get us out of this trouble, if it is not able to inspire the unions to put their weight behind the determination to exist and to succeed. That applies to noble Lords opposite as well as it applies to us, and the sooner we get it into our heads that this is a necessary component of what the future holds in store, the better. It can be done, but time is running out. It will be very difficult to get back again industries which have gone so far down. All we can hope is for a change on the part of the Government, which could come next Tuesday, and I hope that what the CBI, the unions and everybody else, except the Government, has been saying then comes to pass.

5.3 p.m.

Lord Kilmarnock

My Lords, unemployment is lamentable nationwide, and even more lamentable, as the Motion suggests, in those regions where it strikes most cruelly. It is disheartening to read in the latest Manpower Services Commission quarterly report that it is still at its highest in assisted areas where a concerted attack is being made on it. All the same, I must enter a note of dissent with the noble Lord, Lord Peart, in the attribution of the whole responsibility to the Government—I think he said that the Government have created a situation of nightmare proportions—because it seems to me that this rather obscures the real issues, or a large part of them.

In saying this, I do not seek to defend the Government's policies, to which some percentage at least of the alarming figures are due. The question is: for what percentage of unemployment can the Government be directly blamed? It would appear from their policy that some credence has been given to the relationship between wages and unemployment, known as the Phillips' curve, from which a further series of suppositions of feasible combinations of unemployment and inflation are derived. Of the various combinations of these two factors, which the theory postulates, the Government have undoubtedly chosen—or had until recently—a trade-off yielding the lowest inflation rate. This has undoubtedly had a considerable effect on unemployment. But of what magnitude?

Various estimates have been made. According to a recent commentator in The Times, the Government's policy could mean that every 1 percentage fall in inflation was achieved at a half per cent. decline in national output and a rise in unemployment of well in excess of 100,000. Giving the Government the benefit of the doubt, let us take 100,000 for each 1 per cent. decline in inflation and let us accept that this has come down from 20 per cent. approximately last summer to 13 per cent. approximately today; that is, by 7 per cent. This particular trade-off yields us 700,000 unemployed. This is lamentable indeed. But it is a questionable assumption and it is not the whole story.

In a valuable annexe to their last labour market report, the MSC writes: If we wish to redefine unemployment to include unregistered unemployed and those who would be unemployed but for special measures, our estimate for Great Britain is that the figures would be about 3 million: 2.32 million registered … 300/350,000 unregistered and 357,000 covered by special measures". The latest figures of registered unemployed have now risen to 2.42 million, which gives us something over 3 million on that calculation. So we are talking of 700,000 to 800,000 unemployed who might conceivably be attributed to Government policy, or perhaps a quarter of the total, and this is probably an exaggeration.

When the Opposition in another place seeks to lay all the blame for the whole amount on the Government they are doing us less than a service, because they are obscuring the real issues and the real challenges. I honestly do not believe, nor do I believe that they believe, that a simple change of Government would stem the tide, nor that had they been in office they would have been able, except at crippling cost, to reduce unemployment to an acceptable or tolerable level of, say, half a million or even 1 million on the register in present circumstances. So I repeat that I am saying none of this to condone the Government's classical market clearance philosophy, or to detract from the humanitarian concern of the Opposition, which I share. But to be fair, it must be roundly stated that even a Labour Government would have found itself with a large and growing unemployed population.

That takes us to the recession and I was interested to hear the noble Lord, Lord Thorneycroft, say, cheerfully, that the recession will end; recessions do end. But on what does he base this assurance? The first thing to do, surely, is to try to classify it with a little more precision. I see that the noble Lord, Lord Kaldor, is down to speak, so perhaps he will be able to assist us. What kind of a recession is it? Is it just a cyclical one of the 9- to 10-year variety which is identified by some economists? If we are tempted to call it a downswing, are we not caught up in the semi- incantatory magic of words, which leads us to presuppose a corresponding upswing, without any foundation but wishful thinking?

If there is to be an upswing, what will make it happen? Does the machine just go round and round, like a fairground Big Dipper in which we patiently sit? Or is this so-called recession a trough, in one of those 45 year-long cycles identified by other economists? And when does a recession become a depression or a slump? Is it different in kind and magnitude from any that we have experienced before? Is it curable simply by leaving market forces to do their work?

The short answer to the last question is, obviously not, as has recently been demonstrated. Much has happened in the 200-odd years since the publication of The Wealth of Nations. The Government have already recognised this to some extent, in the steps they have taken to support British Leyland and British Steel. Possibly, like the noble Lord, Lord Davies of Leek, before his speech on redundancy payments last week, they have been boning-up on their Schumpeter, when he says—I quote from Capitalism, Socialism and Democracy, page 90: … there is certainly no point in trying to conserve obsolescent industries indefinitely, but there is a point in trying to avoid them coming down with a crash and attempting to turn a rout, which may become a centre of culmulative depressive effects, into an orderly retreat". So the need for orderly retreat is now recognised. But what position is the orderly—or now less disorderly—retreat to fall back on? How, when and where is the next campaign to be planned?

If we leave all new investment to market forces, what happens? What does the market like? What do the pension funds, the banks and the other institutions like? They like nice fat, juicy properties—incidentally, fuelling inflation—and they like works of art. They dislike manufacturing industries with a dubious future. Once the principle of state intervention is accepted—or the practice without the principle—it is surely of vital importance where it is applied. I want to make it quite clear that I am not advocating the Government's becoming a direct employer of last resort by increasing employment in the public services. I am not suggesting their spending their way indiscriminately out of a slump. But I am suggesting that they should prime the pump by direct investment, or by matching venture capital at certain potential growth points, some of which are identified in this report on industry, which I have in my hand, by the British Conservative Group in the European Parliament, under such headings as environmental equipment, energy, energy conservation, aerospace, information, micro-electronics and so forth. These were some of the points which were made earlier by the noble Baroness, Lady Seear, with which I very strongly agree.

For goodness sake, let some of the savings the Government expect from the reduction in Civil Service manpower, which they have undertaken to make, be spent at the cutting edge of the economy, in which I would include education, training and retraining. So, after the orderly retreat, surely there must be a planned advance. But even supposing some such initiatives are taken and that fresh industries do take off, what about demand? It was also Schumpeter who wrote: The capitalist engine is first and last an engine of mass production, which unavoidably means production for the masses …". And Schumpeter was that arch-romantic of capitalism who mourned the passing of the old-style entrepreneur. Surely he is an acceptable text, even for the noble Lord, Lord Cockfield.

If we do not distribute income as widely as possible in our own country, demand will be slack and business in all sectors will fail. This is not just a question of demand-inflation or demand-reflation, which I think the noble Earl, Lord Gowrie, spoke about. It is a question of the maintenance of a reasonable level of demand by spreading wages reasonably widely. Wealth can only be created by the sale of goods and services. The same goes for the world at large. Are we not constantly reminded that we are a nation of exporters? But to whom, in a situation of depressed world trade, are we to export?

This brings me to the third world. I do not want to turn this debate into a platform for the Brandt Report, with some of which I disagree. I am inclined to doubt whether the Bretton Woods institutions can play the role envisaged for them, but there is no doubt whatever in my mind that the recession, depression, slump or whatever you wish to call it has to be studied against the background painted in broad strokes by Herr Brandt and his colleagues and that our aid programmes should be seriously reviewed and possibly upgraded against that background. What the Prime Minister dismissed in another place as handouts may well be the essential blood transfusions necessary for a revival of world trade.

I know that it is difficult to persuade textile workers in Lancashire that they should contribute to rural infrastructure or population programmes in Bangladesh, but the fact remains that the gross national product per capita in Bangladesh in 1978—I do not think it has changed much since—was 90 dollars and that in our country, despite all our troubles, it was 5,030 dollars, or over 50 times as much.

If anyone asks what is the connection between these figures and regional unemployment in this country, the answer surely is clear. These figures are hardly an equable or indeed viable basis for the expansion of world trade upon which we are constantly told we have to rely for our very survival. So it is very much to be hoped that the Government will go to the forthcoming meeting in Mexico in a constructive spirit.

This debate has been less contentious so far than I had expected, and this is a matter for congratulation. I was glad to hear the noble Lord, Lord Thorneycroft, say that we must stop swearing at one another. We shall get nowhere—this is quite correct—by one of the major parties indiscriminately putting all the blame on the other, and vice versa. That is nonsense. It simply distracts us from thinking seriously about possible remedies. Where these charges have been levelled—and the other place has been much more culpable than this one, I am happy to say—they have opened up the ground to the Social Democrats (I say this with respect to the noble Lord, Lord Rhodes) which is where an awful lot of people would like to be, given half the chance. The major parties should take note. The writing is on the wall.

5.15 p.m.

Lord Keith of Castleacre

My Lords, I should like to begin by congratulating the right reverend Prelate the Bishop of Liverpool on his most excellent maiden speech. Unemployment, I think we are all agreed, is probably the greatest social scourge in this country today and is likely to remain so for a number of years to come. As the noble Baroness, Lady Seear, so rightly said, the problem of unemployment is not new to us; it has been with us for many years. We used to have masked unemployment, by which I mean underemployment: low productivity, accompanied by low wages, which enabled us to have two or three times as many men to do a specific job compared with some of our most efficient competitors.

Inflation, rising costs and the high level of sterling have made us increasingly uncompetitive in many fields. This has been exacerbated by the current recession, which is worldwide, and has forced industry to shed labour at an unprecedented rate. It has only done this in order to survive. It is of little solace to tell ourselves that the entire world is suffering in the same way to a greater or lesser extent. However, it is interesting to note—the noble Lord, Lord Thorneycroft, drew attention to this—that those countries with the highest productivity are suffering least.

It seems to me that it is a great pity that we still tend—although we have not done it in this House today—to treat our own desperate problem in terms of adversary politics. It is a matter of economic fact that high inflation has always been followed by a recession and high unemployment. Some six years ago we reached an inflation rate approximating 30 per cent. We now have 2½ million unemployed. If it were not for all the other underlying factors in our industrial life, we could, I think, expect this figure to drop substantially as the world economy picks up. But I do not expect this to happen unless we can all get together and much improve our productivity. Personally, I support the Government's economic policies, for I believe that inflation is our greatest threat. And we shall not get unemployment down or, indeed, prevent it from continuing to rise until we can beat inflation.

Many people on both sides of industry are calling for a reduction in interest rates and a lowering of the exchange rate. I believe, on balance, that the time has come when we can afford some reduction in the MLR, but when advocating this reduction we have to remember that the public sector borrowing requirement is being buoyed up by three factors. First, revenues are depressed as a result of the recession and poor company profits and, therefore, poor taxability. Secondly, unemployment is causing very substantially increased amounts to be spent on social security payments. Thirdly, the nationalised industries have become an ever-increasing drain on the Exchequer.

Whether the exchange rate has anticipated a substantial fall in MLR is hard to say, but I think that to a large extent it has. By that I mean that a cut in MLR in the near future will not necessarily bring down exchange rates much further. Those advocating this course and its consequent effect upon exchange rates must not overlook the fact that the Government have to fund their deficit and also that the lowering of the exchange rate will have an adverse effect upon inflation. It is said, though I cannot prove it, that a 10 per cent. reduction in the exchange rate will cause approximately a 5 per cent. increase in the inflation rate in our present circumstances. Notwithstanding this, I still advocate a reduction in MLR.

The economy is rather like an Atlantic liner. It takes a long while to slow down but, having slowed down, it takes an equally long while to accelerate again. This reduction in the MLR is probably the most important and immediate single step which we can take.

Much is said in various places about putting a great deal more money into the economy. The danger here lies in the fact that we have just sucked a lot of money out of the economy, and if we put it back again, we shall probably revive inflation and the last stage could well be worse than the present. Incidentally, where is the money to come from? The Government's room for manoeuvre is severely limited. It has little money available to help the private sector, after the demands of steel, shipbuilding and the like. I think we are in danger of spending too much of our available resources on those sectors of industry which cannot be regarded as having substantial growth prospects, some of which are destined to become an even greater drag on our more profitable and progressive industries as time goes on. Unemployment—its causes and its cures—are complex and long term and, if I may say so, it is a pity that we cannot agree on a course of action and stick to it. Industry in this country has been for far too long a political football.

We require more investment. Equally, we require greater use to be made of existing investment. We require greater productivity, which can be brought about by greater flexibility in work practices and manning. We are all in this together—politicians, managers and the workforce. The unemployment problem, long-term, will be solved just as much on the shop floor, as it will in these buildings. So far as the regions are concerned, I believe (I am sorry to say this) that much of the vast sums of money spent on regional aid since the war has been long-term unproductive. I believe that the time has come to rethink our regional strategy on a long-term basis and to do this is in a bipartisan manner. I hope the Government will take the initiative in this matter.

5.23 p.m.

Lord Blease

My Lords, in this debate reference has been made to the steeply rising and disastrous levels of unemployment with which we are faced today in all regions of this country. Unfortunately, as a region the Northern Ireland jobless situation looms largest because the patterns in the rates of unemployment in Northern Ireland are greatly influenced by the fluctuations in economic activity in Great Britain. We in Northern Ireland have today the highest numbers unemployed since the early thirties. The figure for unemployment last month—February—was 17.3 per cent., comprising 21.2 per cent. males and 12.1 per cent. females. This compares with 9.8 per cent. for Great Britain with 11.8 per cent. males and 7.0 per cent. for females.

However, as with the unemployment statistics for other regions, there are within each region great variations in the rates of unemployment for the sub- regions. For example, while the overall rate for Northern Ireland is 17.2 per cent., the male rate for unemployment in Cookstown is 36.9 per cent., in Dungannon it is 36.8 per cent., in Londonderry it is 31.2 per cent., in Newry it is 35.1 per cent. and in Strabane we have the appalling rate of 44.4 per cent. of males unemployed.

When we consider the unacceptable levels of regional unemployment we cannot ignore the awful sense of hopelessness, human misery and utter despair that exists in streets where there are rows of households where no adult male has a paid job. Even in the city of Belfast, we have wide variations in the rates of unemployment as between local government wards, with West Belfast having rates in excess of 40 per cent. I listened carefully to what the noble Earl the Minister said, and I believe I heard him correctly when he disputed the concept of two nations. Unfortunately, I believe that we have two nations emerging today; namely, a nation of the employed and a nation of the unemployed; a nation of workers and a nation of the workless.

The Earl of Gowrie

My Lords, I am most grateful to the noble Lord for giving way. I simply wanted to remind him of what in fact I said, which was that in terms of awareness of the phenomenon and problem, we are no longer two nations. Everybody, including those who live in the affluent suburbs of South-East England, is having some contact, either directly or through their children, with unemployment. It was in that context that I said the concept of two nations was breaking down.

Lord Blease

My Lords, I thank the noble Earl, and I stand corrected. However, horrific as these official figures are, the Northern Ireland Committee of the Irish Congress of Trade Unions claims that the statistics so far as Northern Ireland is concerned are "underreported". In a memorandum submitted last August to the Prime Minister, Mrs. Thatcher, the Committee stated that the figures ought to include the numbers who are part-time workers and a category of unemployed married women and also those who are temporarily unemployed. I think the noble Baroness, Lady Seear, and others mentioned this in connection with the total compilation of figures of the unemployed.

I think it is important in a Northern Ireland context to stress that, in proportionate terms, if these figures were reflected throughout the United Kingdom, they would equate to over 4 million unemployed. Surely no Government could persuade even their own party that their industrial and economic policies were working for the benefit of the country if such figures applied to the whole of the United Kingdom. While the heaviest unemployment in Northern Ireland is found among the textile, the construction and the processing industries, there is evidence in Northern Ireland that the recent steep increases in redundancies have pervaded the various levels of management specialists and the professional and executive categories of employment.

A few weeks ago I had the harrowing experience of talking with an executive manager aged 52 years who had just been told that he was redundant. The £18,500 position he had held for over 16 years was axed, along with some 300 other of the company's management personnel and artisans. He is one of the many top and middle management personnel who finds himself for the first time a shocked, sacked victim of the Conservative Government's measures to strengthen the economy and to correct the underlying industrial weaknesses.

In the last four months, unemployment in the United Kingdom among managers and executive specialists has soared by 57 per cent., with some 130,000 higher grade executives and technologists looking for positions. I would suggest that already we sec signs of the managerial revolution on its way and a lot of re-thinking is being done by top management and others. But, in connection with Northern Ireland, it means that those persons in that category, whom we consider make a tremendous contribution with their skills and expertise, are being faced by these problems, and we are being denuded of the skills that will be required should the economy begin to take off.

Your Lordships will not need me to remind you that unemployment is a human tragedy. Hidden within every statistic there are thousands of individuals who suffer personal demoralisation and psychological distress. There can be no doubt that it is the unemployed and their families and the socially disadvantaged who are bearing the main burden of the Government's policies in dealing with the recession. Think of the despair and the sense of hopelessless that can arise among unemployed people in a region such as Northern Ireland, where last month the figures indicate that 25 per cent. of those unemployed—25,142—were out of work for over one year, and where 47 per cent., or 47,024, have been queueing for the dole for six months or longer. In the course of the past year the needs of the long-term unemployed have been shamefully neglected and ignored. It is these long-term unemployed who suffer most from the brutal effects of high unemployment, with its inevitable consequences of extreme poverty, personal demoralisation, family stress, and, sadly, as we know, at times the complete breakdown of family life. The right reverend Prelate the Bishop of Liverpool mentioned this in his maiden speech.

On 18th February the Northern Ireland Minister of State, Mr. Adam Butler, announced the establishment of a new Action for Community Employment scheme. It is stated that this scheme would provide 450 jobs for long-term unemployed adults in Northern Ireland in its first year. While I welcome this scheme, I can only repeat what others have said, that it is too little and too late to make any impact. I should also wish to add that the whole scheme will requite careful monitoring and scrutiny in close co-operation with the trade unions, especially unions with membership in the construction industries.

While unemployment among any section of workers is to be deplored, a particularly disturbing feature is the sharp increase in the number of young people without jobs. In the province some 42,928, or 43 per cent., of the unemployed are under 24 years of age. While in February there was a slight decrease, there are still some 9,396, or 9.5 per cent., of the unemployed who are under 18 years of age. This level of unemployment among young people represents a disgraceful waste of resources, both in terms of human resources and in terms of financial and technical resources which have been committed to their education over the years. This, of course, is true of the position of young people throughout the whole of the United Kingdom.

There is, however, another aspect to the problem as far as Northern Ireland is concerned. Here I quote from a document issued by the Northern Ireland Committee of the Irish Congress of Trade Unions: The young unemployed who live in circumstances of cumulative social disadvantage, in terms of poor housing and lack of recreational facilities, become potential prey for the godfathers of violence and recruits for terrorist organisations, or they themselves become the victims of violence". My Lords, I believe there is fairly conclusive evidence that oppressive levels of unemployment are themselves a contributory factor to violence in our community, leading to death and destruction. The Northern Ireland Committee of the Irish Congress of Trade Unions are convinced that urgent remedial action designed to tackle and eliminate the scourge of unemployment would in itself have direct beneficial results in the security situation and in easing community tensions. The effects of unemployment are cumulative. These lead to even greater social deprivation and to what some have termed a "poverty culture".

My Lords, is it not a crime against humanity, against little children, that in Northern Ireland, where we have the worst housing conditions and the most serious overcrowding in the United Kingdom, we have at the same time some 24,000 construction workers without jobs?—that is, one half of the total skilled labour force in the construction trades in Northern Ireland are idle. Is it not a crime against suffering humanity to read in an official report of a Government appointed committee the following?—and here I quote from the report of the Subcommittee on Personal Social Services for Blind, Partially Sighted and Hearing Impaired People, published in December 1980. These are the words in the conclusions: Our study has indicated that the provision of personal social services tailored to meet the specific needs of the blind and partially sighted has deteriorated over recent years.…The main difficulty and basic reason for this situation is shortage of personal social services staff with specialised training. We found a similar lack of suitably trained specialised staff when examining services for the hearing impaired people.". The suitably qualified persons are available, but they are not being employed.

May I again quote from an official report, the report of the Advisory Committee on Infant Mortality and Handicap in Northern Ireland, which was published last September. This was a committee appointed by Lord Melchett in December 1978, when he was the Minister of State for Northern Ireland. The report was entitled the Baird Report and I quote from page 72: There is still a greater proportion of children in Northern Ireland dying before the age of one year than in Great Britain and most other economically developed countries. Socioeconomic deprivation is associated with low income and, in most instances, poor housing conditions. Both factors influence infant morbidity and mortality and it is essential that action is taken to alleviate these problems". We may ask, what action do we have from the Government? The set reply, certainly, that I have seen and have received, and which I sometimes think must come out of a word processing machine, is: "In view of the present financial climate the Government are unable to commit resources. They are, however, sympathetic to the problems."

The levels of unemployment in the regions are unacceptable and we strongly urge the Government to root out the cancer of regional and structural unemployment. We realise that action will be required at at least two levels: first, there must be immediate and short-term measures; secondly, there should be undertaken in consultation with regional representative interests the activation of coherent and comprehensive policies to ensure effective and sustained dynamic regional economic development. I would agree wholeheartedly in putting forward those two forms of action. But, as stated already from both sides of the House, a genuine partnership needs to be fostered between the Government, the Opposition and the representatives of industry at all levels. I believe that that goal of genuine partnership has to be fostered and promoted by the Government. Other regions will have the forms of action that are most suitable to their needs.

I should like in conclusion, to say what is required as immediate action for Northern Ireland. First, there needs to be effective co-ordination of all the organisations and representative interests involved in the promotion of productive employment. Secondly, there must be urgent discussions and decisions on the issues concerning supplies of energy, with the objective of ensuring that Northern Ireland industries are placed in a fair competitive position. Thirdly, some provision is needed to ease the high internal transport charges and to ensure a fair competitive position concerning passenger and freight transport between Northern Ireland and Great Britain. Give the regions a fair opportunity to compete and contribute to the well-being of the whole of the United Kingdom.

5.38 p.m.

Viscount Watkinson

My Lords, we should all be grateful to the noble Lord, Lord Peart, for raising this very important issue, and I think it is only natural that he, and the noble Lord, Lord Blease, should highlight the problems of particular regions. It so happens that when I was Parliamentary Secretary to the Ministry of Labour I was asked to make a special study of regional unemployment, because, to show that despite what some people say, nothing changes, the then Conservative Government had inherited a serious unemployment problem from the preceding Labour Government. I was asked to go to Lancashire and North-East Scotland and many other places to look into the problem. I shall not bore your Lordships with what I found, but shall say only that I became convinced then, and I think I remain convinced now, although that study took place a long time ago, that regional problems are dependent on the health of the economy as a whole. I certainly agreed with my noble friend Lord Gowrie when he said that, and other noble Lords have also said it. But by that I do not mean to try to minimise what I believe is a very serious moral problem, and I think that it is high time your Lordships' House discussed it at length.

If I may say so, I wonder whether the Government and all concerned realise clearly enough that it is a kind of special problem for Britain and that, when the recession eases—and I agree with my noble friend Lord Thorneycroft that it will, although there do not seem to be many signs of it yet—we shall still have residual problems, such as the problem of gross over-manning still not weeded out and the narrowing of our industrial base due to the so-called benefit of having North Sea oil. Moreover, as the recession eases and the economy picks up we shall see ever more clearly the effects of the job-shedding capabilities of electronic micro-miniaturisation of one kind or another.

I think that your Lordships would all agree that our level of productivity is still too low and still makes us somewhat uncompetitive in many export markets. It is also rather a wry consideration, which the Governor of the Bank of England pointed out the other day, that, while the so-called benefits of North Sea oil tend to cushion our quite disastrous position in many industries, they are of course spurring on those nations like the Japanese and the West Germans who do not have access to their own indigenous oil to greater efficiency and greater efforts and thus to becoming greater competitors for us in third world markets.

We all know that in the past we have invested too much of our national wealth in a bureacracy that we really cannot afford and, I am afraid, in social services which we cannot afford in some degree as well, and not enough in job creation by putting money into more creative and more long-term developments. So we have a problem, and I think that it is worth saying that it is a particular problem for us in Britain. I do not think that we should be surprised about it. I do not want in any way to introduce a contentious note into what has been a very uncontentious debate, but really this was evident in the term of the last Government. When I had the benefit of the quite large research capacity of the CBI behind me as president, I remember saying advisedly a number of times—and it is on record—that we should have over two million unemployed if we did not mend our ways. So the present Government have, in fact, inherited most of this problem. They certainly have not created it. They have, of course, also inherited much of the policy of trying to meet it, as the noble Lord, Lord Thorneycroft rightly said. I think that they are doing it very well and I do not see what else they could do. So I hope that this is a subject on which we can somehow in our rather strange democracy find some common ground.

There is no single economic nostrum that will effect a cure. It is too serious to be a political shuttlecock. If I were an unemployed man or woman in Liverpool—and we all listened with deep sympathy to the very remarkable speech of the right reverend Prelate, who knows what he is talking about in that area—I should not be very interested in a party battle about unemployment, but I might be very interested in seeing some kind of debate in the nation as to how I might hope to have a job in a year or so. I believe that it would be much more encouraging for people who are out of work if they felt that those of us who have some responsibility in public life were bending our minds to try to see how we can create as many jobs as possible in years to come. Full employment, maybe not: but more employment there clearly must be.

That, I think, means that we might have to think through again some of our industrial strategy. We may have to consider awkward matters like earlier retirement. I know that the Government have just said that that is totally impossible because it is too expensive, but I am not sure that we shall not have to think about that. Another matter that we might consider is one year's public service for school-leavers to give them a chance of a year's useful employment in some way, as happens in some other countries in the EEC. I only give those as examples, trying to show that there must be some new thinking in the long term if we arc to cope with this problem, because I fear that it may go on much longer than most of us would wish and we ought to be preparing for that time.

I think that a rather good example—and it just so happens that it is a good example—of what I mean is that later this week the CBI will be publishing a very important discussion document on how, after months of discussion among all its members up and down the country, it sees the situation and what it thinks should be debated and discussed about our industrial strategy for the future. If I may say so, I think that it has been very wise, and perhaps a lesson to us all, not to put this forward as any kind of cure-all or strategy, but purely as a question for discussion—discussion, I hope, with the trade unions, because I could not agree more with the noble Lord, Lord Rhodes, that, if we cannot somehow persuade the trade unions to take a more co-operative and more forward-looking attitude to the whole problem of how we are to restructure employment, we shall never succeed in it and nor will they.

Therefore, I hope that this initiative of the CBI will be welcomed and I hope that it will do something to continue this type of national debate on how we can find a solution to what is a serious moral and personal problem. Unemployment is about people: it is not really about politics or about economic policy. It is about a man who feels ashamed because he has not got a job or somebody, as another noble Lord said, who, because he has no job, cannot any longer help his son or his daughter to get one either. That is what it is all about. It is in my view a serious enough situation to call for a more national response and, if I dare say so, a more united response than we bring to some of our national problems.

Of course I do not want to go into details in what I hope will be quite a short speech, and I certainly do not want to preview what the CBI will be saying tomorrow or the next day. If I had a favourite request it would be that the Government should cut the national interest surcharge, the insurance surcharge, and I strongly support the noble Lord, Lord Thorneycroft, in what he said about the inequitable burden of energy costs compared to that borne by many of our competitors. Whether they fudge it or whether they do not, the fact is there and I hope that the Government will look at it.

However, I do not want to get into details; I do not want to talk as such about regional problems although, if I may say so to the noble Lord, Lord Blease, as someone who still has business contacts in Northern Ireland, who was stationed there in the last war and who knows and likes it very well there is an almost desperate situation for many men and women there who want to work, but it is the broad national policy that must be right. I am not for a moment suggesting that the Government should change their present policy. I think that on the whole it is right. But some how I think they must support it with a rather better consensus—for example, they must persuade the trade union movement that there is some sense in continuing what many people feel is a fairly tough policy. It must be tough and it will be painful.

In my view, 1981 will be a very painful year indeed, with small signs of light at the end of the tunnel. However, we must go through it and I think that steps should be taken to try to persuade the trade union movement that they, too, have an interest in sticking to this policy and seeing it through to success. If we present them with the facts they are, on the whole, reasonable enough men—at least in private—and able to accept that those are the facts and are true; and, although perhaps they would never admit it in public, that might well condition their views in private. I believe that there is a job to be done there and if the CBI paper makes a small contribution to that and helps the debate to go forward with the TUC in the NEDC or anywhere else, then that is all to the good.

I have been around for quite a long time. I have been in politics and I have been in industry. I have been in the CBI. I do not know what you would call the CBI; it is neither one nor the other. I have worked happily with many Prime Ministers, including Mr. Callaghan, who I think tried very hard to get a proper policy of wage restraint, and we should all be better off if he had succeeded. I think that our present Prime Minister deserves our support in trying to get through an immensely difficult and painful policy, but a policy to which I do not think any viable alternative is presented by any other party at this moment. So there we are.

However, what depresses me is that we have not succeeded. In this House it seems easier to get a broad, reasonable consensus as to what has to be done. That is not echoed in the world outside. It was not echoed in Glasgow the other week when the Leader of the Opposition led a great march through that city. Therefore, I think that we have to do some rethinking of our industrial policy and strategy. Although what the CBI says—and, on the whole, the CBI speaks for a fairly large section of private industry, and its members are having a very rough time (the roughest time that I have ever known since I have been in business)—will not be good for the CBI and its members, I very much hope that it may perhaps do a little to stimulate this kind of discussion that we have had here this evening and which I think we so desperately need throughout the body politic, the body economic and the body industrial of our nation. If we could achieve that, I should feel happier about encouraging those people who are now out of work that there is still something to look forward to, that it will not always be like this, and that maybe in 1982 there will be a real chance of this country making real progress again.

5.52 p.m.

Lord Evans of Claughton

My Lords, I hope that the noble Viscount, Lord Watkinson, will not mind if I do not follow his speech precisely because, as he said, he has covered the general problems of unemployment. I wish, without apology, to concentrate my remarks on a particular regional problem; that is the North-West area, and in particular Merseyside.

In that context I very much welcome the maiden speech made by the right reverend Prelate the Bishop of Liverpool. It was a remarkable speech; it was of great strength and assistance to those of us who live and work in the Merseyside area. I must say that I shall remember his speech for a long time and I hope that the words he said will be very carefully noted by the noble Earl the Minister. In spite of reorganisation of local government, the ecclesiastical authorities did not follow, and although the right reverend Prelate is the Bishop of Liverpool—and I live on Merseyside but not in his area—nevertheless I was very glad to hear the valuable words that he uttered, with the considerable experience that he has of the great problems that we suffer on Merseyside.

To echo remarks that other noble Lords have made, it seems that the problems of some of our regions—and the remarks made by the noble Lord, Lord Blease, about Northern Ireland are, of course, special remarks because Northern Ireland's problems are special—are very serious indeed in terms of unemployment. Those of us who live and work on Merseyside have had to come to the conclusion that at present they appear to be endemic; major closures of large industries are taking place at an absolutely sickening pace in that part of the country.

The last statistics, which are recent ones, for February 1981 for the Merseyside Special Development Area—which covers an area slightly larger than Merseyside County Council and includes Ellesmere Port—show unemployment at 15.8 per cent. overall. The percentages in some parts of Merseyside, particularly the inner urban areas, are of course very much greater, and are also much greater among young people and ethnic minorities. We on Merseyside have a different problem as regards ethnic minorities in that the majority of the ethnic minorities are people who have not come to this country recently, but have perhaps lived on Merseyside for six, seven or even eight generations. Nevertheless, despite the fact that they are even more native Merseysiders than I can claim to be—my family having lived there for only three generations—they still suffer a greater element of the problems of unemployment than do their non-coloured, co-natives of Merseyside.

In February 1980 the number unemployed in the region was 91,008, which included—and I think that this is very significant—3,562 school-leavers. In February 1981, the following year, this figure had risen to 109,487 unemployed, including 5,425 school-leavers—an increase in 12 months of 18,479, which includes an increase of 1,863 school-leavers. In addition to this, the Merseyside Chamber of Commerce economic survey for the last quarter of 1980 revealed that 55 per cent. of companies responding to their questionnaire were working at less than 80 per cent. capacity, and only 15 per cent. of industries on Merseyside were working at full capacity. I know that the noble Earl the Minister is very much aware of this. He was kind enough to brave the dangers of coming to Merseyside to speak at the Liverpool Luncheon Club, so I am sure that he is aware of the problem. But I do not apologise for repeating the very desperate cancer of the problem that we have on Merseyside.

In December 1979, 74 per cent. of companies on Merseyside were working at more than 80 per cent. capacity, while only 45 per cent. were working at more than 80 per cent. capacity in December 1980. In 1981 so far—and the year has hardly started—there have been 6,900 redundancies on Merseyside and in the last six months 11,400, coming mainly from Vauxhalls, Tate and Lyle and Courtaulds, in the last two months. In addition to the closures, there have been significant reductions of work forces in Lucas, Girling, Austin Packaging and Plessey.

Against this, without any exaggeration, tragic background, on 17th February 1981 the Department of Industry announced the allocations from the European Regional Development Fund. This is the first 1981 allocation and relates to four industrial and 225 infrastructure projects located in the United Kingdom assisted areas, and, of course, very welcome it is from the European Community. But the figures reveal some very interesting and significant regional variations. If we take the unemployment figures for the various assisted areas as at 11th December 1980, we get what I believe are some very interesting and rather disturbing anomalies. The Northern region of England had at that time 175,949 unemployed and received per capita of unemployed £728 in aid. Scotland, with 261,760 unemployed, received £635 per capita. Wales—for which I have some personal sympathy—with 138,003 unemployed, received £691 per capita unemployed; and the special case of Northern Ireland, with 93,752 unemployed, received per capita £975. At the same time the poor old North-West, which includes Merseyside and Liverpool, with 322,415 unemployed, received only £321 per capita. I am not saying that those crude statistics prove that there is a deliberate policy of differentiation against Merseyside, but I think that they are significant and worth considering in the context of the very serious and desperate problems of Merseyside.

Despite these discouraging statistics, the local agencies have been struggling heroically to stop the pouring away of the region's lifeblood. The City of Liverpool and the four other district councils are all working desperately to get new jobs in one way or another. The county council, of which I am a member, has itself taken many initiatives. We have an economic development office which is active in co-operating with and co-ordinating a wide range of organisations and agencies to encourage regeneration, and 5,000 new jobs have been created in the last year.

Financial incentives in the form of wage subsidy schemes over and above Government grants are being provided by the county council for small industries. Loans are being made to small companies and entrepreneurs who are seeking to start new businesses. Because of being new to industry and therefore not able to get assistance from our rather traditionally minded banking, system—any of us who read the new paper recently will realise that our joint stock banks are not nearly as generous or as helpful to new industries as they are on the Continent—they are providing assistance to those industries who do not have a track record that the banks could, as they are at present constituted, support.

As the right reverend Prelate mentioned, we have, with the approval of the Government, recently set up a company first of all to create employment by raising Manpower Services Commission funds to carry out environmental improvements; secondly, to train unemployed school-leavers in basic skills at a rate of 1,000 school-leavers a year, which is only touching the surface of the problem but is an important contribution to providing skills, which we all agree is one of the most important things required in relation to our present industrial problems. We are creating 1,000 jobs for school-leavers during a year, so that they will at the end of that period have a skill. They will not necessarily have a job, but they will have a skill.

Thirdly, we are undertaking new economic initiatives in conjunction with—and again I would suspect that this is a matter the Government would welcome—the private sector of industry. We have set up the Merseyside Innovation Centre jointly with the University of Liverpool and the polytechnic to help local companies to take advantage of new technological advances, so that secure employment prospects for the future can be provided. We have co-operated with the Pilkington Glass Company in the St. Helens Trust to create new skills for the people in the St. Helens area.

Yet, despite what I hope your Lordships will agree is a considerable exercise in self-help, the canker of unemployment spreads on Merseyside. The closure of Tate and Lyle and Courtaulds is to many Merseysiders virtually the last straw. The Treasury pointed out in its economic survey published in early February that every unemployed person costs the taxpayer approximately £3,500 a year in lost tax and unemployment and social security benefits. On this basis the two closures at Tate and Lyle and Courtaulds will cost the taxpayer about £10 million this year, without taking account of redundancy payments and so forth, and without taking account of the misery, uncertainty, and the secondary unemployment that this brings about, and the feeling of being a second-rate citizen, which the people in long-term unemployment suffer so much.

On Merseyside we are in desperate straits, and I do not think that mutual recrimination helps the unemployed. Much of the rhetoric and confrontation politics is at its worst in the debate on unemployment. We hear that under Labour there were 1,500,000 unemployed, and under the Tories there are 2,500,000 unemployed. This kind of rhetoric does not help the unemployed. If it is only 200,000 unemployed the unemployed person is unemployed and he is suffering terribly. This continual rhetoric about tuquoques, that this is the fault of that Government or the other Government, is creating an atmosphere of increasing bitterness and resentment among not only the unemployed but the people witnessing the problems of the unemployed throughout the country.

The monetarist policies have in my opinion exacerbated the problem. Mass marches through the centres of Liverpool and Glasgow do not alleviate the problem. I wonder sometimes, when the revival comes, whether employers will not say, "Gosh, perhaps we had better not open a new industry in Liverpool or Glasgow because there is a crowd of troublemakers there who spend their time matching up and down". That is precisely the image we do not want on Merseyside. We have not got a bad employment record. There is a thing called the Merseyside image: the image of people always on strike.

We have a record, of course, of casual labour and very bad conditions indeed, and uncertainty of any permanent employment on the docks, and so on, but we on Merseyside have not got a bad record of strikes and industrial unrest. Very often because of our gallows sense of humour—if you live on Merseyside you have to have a sense of humour!—we possibly contribute, by the success of our local comedians, in drawing attention to local problems which are not serious. We have no worse a history of industrial unrest on Merseyside than any other area or region in this country. But I sometimes think that we rather enjoy drawing attention to ourselves and making jokes, which makes a small number of people a large amount of money and probably gives a great deal of pleasure, but in fact gives a totally false picture of industry on Merseyside.

As a solicitor I act for a number of firms which are very prosperous and have never had any strikes at all. If your Lordships, and particularly the noble Earl the Minister, look at many of our companies on Merseyside, you will find that they have no problem about strikes at all in a very wide area. We are glad of the help that we have had from the development corporation. As your Lordships may know, I personally would have preferred that this was done through local government sources. We are pleased and somewhat apprehensive about the proposal to set up an enterprise zone in Speke.

What I ask is that we do not use this debate, or debates in another place, or throughout the country, as a kind of numbers game. It is not going to benefit the unemployed at all. We ought to be looking at the kind of initiatives that can be taken, such as my noble friend Lady Seear, for instance, mentioned. Also—and I must make this criticism—Members in another place for the Merseyside region, unlike the North East Members, do not tend to work together. There is not any joint Conservative, Labour and Liberal body of Merseyside Members working together. They all seem to meet separately.

I would hesitate—in fact I have not got the courage—to tell them, or to try to knock their heads together, but they do operate separately while the North East MPs, possibly because they are nearly all Labour, tend to operate together. Nevertheless, there is a lot that the local Members of Parliament could do. The local authorities on Merseyside, working hard as they do, tend, as the noble Earl's right honourable friend the Secretary of State for the Environment found in the inner urban areas, to squabble a little among themselves. But that again is part of the Merseyside image, of which the Government should not take too much notice. We do all get on very well really, but we tend to squabble rather publicly. The Members of Parliament in another place and the local authorities have a duty to work together.

At the end of the day we must look to Government resources to assist us much more than they have done in the past. Much has been done; a great deal more has to be done. What I want to underline is that we, as a county council on Merseyside, have tried every possible initiative to encourage new skills and new jobs. What we look for is encouragement from the Government to bring new industry and new initiatives to Merseyside.

6.10 p.m.

Lord Davies of Leek

My Lords, we have had an interesting debate so far, although in some ways it has been like a half-baked cake. I say that because an effort has been made to get an economic debate going, plus a regional and area debate, along with a debate designed to defend comedians in times of trouble on Merseyside and elsewhere. Max Boyce, considering his record, should get extra payment from the Government for keeping down the tempers of the Welsh in the working men's clubs of Wales. I know only too well the place of the stage and comedians when nations are at war or are otherwise in trouble. That is a worthy state of affairs and noble Lords in all parts of the House will agree that we need them.

I cannot understand why noble Lords generally, in taking part in this debate, have not realised that there is nothing very new in what we are talking about. My old grandmother used to say to me, "Save things for a rainy day, boy bach". With that in view, I have saved this copy of a Daily Mail publication entitled The Economic Crisis foretold by the Daily Mail, 1921–1931. Here is a real encyclopaedia of truth. Dated 22nd February 1930, it starts by referring to, "The swift effective remedy"—I have heard something about that in this debate—and says: Between 20,000 and 25,000 members of the United Empire Party were enrolled in 'The Daily Mail' branch in one day. With unemployment leaping up week after week, and now in excess of 1,500,000; with works and mills closing down; with taxation rising and an inexpansive revenue, the nation is coming to realise that some swift, effective remedy must be applied without delay, if we are to avert disaster". Let us see how the new party, as it then was, intended to avert it: The three old-fashioned parties"— talking about the party opposite and these Benches, apart from a small bunch sitting somewhere else, but I shall not go into that— have nothing to propose and no help to offer in this crisis of our existence. The United Empire Party, on the contrary, has a definite and practical constructive plan". What was that plan? Subsidies to the farming community". The noble Viscount was not so sure about giving social welfare to farmers or anybody else.

Heavy duties on foreign manufactured goods". We have been moaning not just in the pottery industry but in the axle of industry in the West Midlands, about the EEC subsidising energy. The booklet goes on to talk about preference within the Empire, but we smashed that up by joining the Common Market. It goes on: Ruthless economy … Firm defence of British interests", Later it goes on to deal with what it describes as "grandiose imperial schemes" and the House should take especial note of this because what we are getting today is a repetition of the past: Great economies were possible in many directions, but the easiest and quickest of them all was to stop the steady drain of millions of pounds a year for grandiose Imperial schemes which this country in its present state of impoverishment simply cannot afford I wish the Government today would take note of that, bearing in mind the £5,000 million they intend to spend on all sorts of new weapons and so on. It goes on: When South Wales is reduced to making public appeals for charity; when Tyneside is living on the dole; when the textile mills of Lancashire and Yorkshire are working little more than half time; with many of our blast furnaces shut down, it is an almost unbelievable scandal that the Government should still be squandering the nation's money upon the swamps of Singapore and the deserts of the Near East". The river of history still runs, though not always between the same banks; they are the same old problems. The fact of it all is that the system of society we call business is breaking down all over the world. In my view, the present crisis is deeper than that of 1931 and will last longer. For the first time, South-East England is beginning to see the effects of unemployment as it never saw them before. Yet at this time we are lily-livered enough not to stand up to the subsidising of energy, coal and oil, in the Common Market, but instead leave our own manufacturers out in the cold having to fight when we are producing the cheapest coal in the world; ours has a subsidy of only £1.062 compared with a subsidy of £34 a ton in parts of the Common Market. Unless we take sovereignty back into our own hands, how can we expect to stand up to that kind of competition, and I am all for fair competition.

I do not want to bore the House—it is dangerous to do so—with a long speech. Nor do I want to recite masses of statistics which many noble Lords know as well as I do. If necessary I could supply detailed statistics for the whole of the West Midlands, for Stoke-on-Trent and for my area. I will not do that but, to be fair, I must mention a few points where the Government have been helping and where, I am pleased to say, some of the wets have succeeded; the rising damp in the Cabinet is now so high that some of them will need lifebelts to escape.

There are different problems today and, to exemplify that, let us consider North Staffordshire, which I know well and which, although a Celt, I had the opportunity for about 35 years to represent, and I owe a lot to the people of that area. Because of them I have been able to live a most interesting life, a life which I would not swap for that of a millionaire, having served in both the other place and now here. Do we hear the cry that we do not possess the skills? Of course not. You cannot find more skill anywhere than that displayed in the British pottery industry, the skill possessed by, and demonstrated in the fingers of, the people who work in it. Is it the fault of the trade unions? Some of the most effective and least arrogant or militant unions to be found in the British trade union movement are in the pottery industry.

Is the management weak in the North Staffordshire potteries? In fact, management there is strong. Not only that, it is constructive and rubs shoulders daily, as does management in the textile industry, with the people working in the potteries. Consequently, it is not the old béte noire of most of the ultra conservative people; it is the reality of the world crisis that is losing markets for the British pottery industry. The noble Viscount knows perhaps better than most of the appeals the manufacturers have made and the need to get industrial energy to the source of production. Consider Wedgwoods, which I know well, and some of the other potteries. They have transformed their potteries to meet modern technological needs, but they are using expensive fuels. Nye Bevan said we had an island of fish and coal yet were poor. Were he alive today he would say we have an island of oil, gas, fish and coal yet are suffering the problems of the workhouse.

Why is it that, come what may, we do not stand up to the Common Market and say, "We are going to get industrial energy to the bases of construction so that we can compete in world markets"? If we do not do that, we shall be ruined, and we are already going that way. Whether or not the lady is for turning, she must be made to spin right now on this issue, but I had better not develop that theme any further. Although I have spoken for only eight minutes I do not want to occupy too much of the time of the House, so I will not speak for more than about 11 minutes.

I regret that the Minister is temporarily not in his place. The noble Earl, Lord Gowrie, is extremely able and states his case clearly, 99 times out of 100 doing so without venom. I am delighted to see that the Government have announced a grant worth £3½ million to deliver raw materials to the pottery industry. I will not go into the scheme in full, but the grant is to bring china clay to a suitable place in the potteries so it will be cheaper to run it to the various potteries which need that clay, thousands of tons of which we export from Cornwall. Sidings and new railways will have to be established. That is a new step in a new direction and that £3½ million boost to the industry in Stoke-on-Trent will not be misspent.

Now I come to my favourite topic, agriculture. For many years I represented an area containing 3,000 farms, 1,400 of them under 30 acres. As a Welshman I know how tough farm work is, and I know how tough coal mining is, too. The position of agriculture in this country must be thought about. The recession and the increase in the numbers of unemployed—the workless—are reflected in agriculture. In particular this can have repercussions and indirect effects on the incomes and prosperity of the small acreage farms; and so it is in North Staffordshire. Only this week Staffordshire farmers called on the local MPs for help. Incidentally, I should say that there is co-operation among the North Staffordshire MPs. For years I worked closely with the Conservative Member for Stone. When there were common problems he would turn up with us at the factories. We looked into the problems, irrespective of the party point of view. I have in mind, for instance, Hugh Fraser who has represented Stone for 30 years or more. I have in mind other Conservatives, too. So there must not be gained outside an impression that Conservative, Labour, and Liberal Members in the other place do not co-operate in their local areas when facing the kind of problems that are universal.

The National Farmers' Union has asked for something to be done for the farmers in Staffordshire who are: appalled at the attitude of the Minister of Agriculture in supporting the lower price increases proposed by the EEC Commission, knowing as he does that the industry's real income fell by 24 per cent. last year". All the farms to which I refer are contiguous or adjacent to town areas. Once there is depression in the towns and villages, it is reflected in agriculture. Therefore, when we are discussing unemployment, we also must discuss the increased unemployment among agricultural workers throughout Britain. It would be a sad blow to Britain's health if we were to lose these great producers of our food.

Having made those remarks, I think that I can leave some of my other points for another day, since I am sure that we shall have an opportunity for a full economic debate. I wish to conclude by making an appeal on behalf of the small businessmen. The noble Baroness, Lady Seear, made an excellent appeal in this respect, and I believe that more help should be given in this area. I should like to repeat this week's figures for the number of workers involved in redundancies in industries employing 10 people or more in England, Scotland and Wales. In England the figure is 520,692, in Scotland it is 84,169—small businesses smashed!—in Wales the figure is 55,209. As was rightly said by the noble Baroness, and by the right reverend Prelate (in an excellent speech), it takes many small businesses to employ, say, 10,000 people. We should keep our eyes on these people. I feel sure that the people of England and British Governments will evolve a way to help us out of the crisis, but we must realise that it will take a long time, and the people and their politicians will have to be patient.

6.24 p.m.

Lord Boardman

My Lords, it is always delightful to follow the noble Lord, Lord Davies of Leek, whom I had the privilege of following on many past occasions in another place. I am sure he will forgive me if I do not go into detail on the arguments that he raised. Of course the level of unemployment is a matter of wide concern, as has been expressed throughout your Lordships' House, and naturally I share that concern. However, I believe that we should put the figures in perspective, and, as has been said, we should realise that they form part of a world recession. Though it may be of little consolation, our figures may not look so bad when compared to those of other countries. Of the nine countries in the European Community (excluding Greece), two of them (Belgium and Ireland) have levels of unemployment higher than ours, and three of them (France Denmark and Italy) have figures approaching ours. In the past few months the trend has been rising in those countries. That is no consolation, but I believe that, in looking at our own problem here, it is right that we recognise that it is part of a larger problem which, as previous speakers have said, arises against a background of world recession and rising oil prices.

Of course, in some areas of this country the problems are particularly severe, and in a magnificent maiden speech the right reverend Prelate rightly drew attention to the particular problems of Liverpool, as indeed did the noble Lord, Lord Evans of Claughton. Those problems are of very special concern.

I entirely share the concern that has been expressed regarding the problems facing the youth, and I was delighted to hear my noble friend Lord Gowrie refer to the support that is continuing, and that is to be increased, towards finding opportunities for youth. This is very important, as indeed is the training and retraining of adult workers who have become unemployed.

We should not forget—though perhaps the noble Lord, Lord Davies of Leek, did so—the importance of the European Community and the contribution that it has made to this situation. Apart from its substantial financial contribution to training and retraining and towards the rationalisation of our industry, the Community is essential to us if we are to have any real prospects of recovery and growth as part of the European scene. I believe that those who have said—as the noble Lord, Lord Davies of Leek, tended to say—that there was a disadvantage here have got their sums completely upside down.

What is the answer? None of us can claim to have it. The answer is certainly not massive reflation—and I do not think that that has been suggested in any part of the House today. All the evidence of history shows that the post-war Keynesian policies have produced an upward trend in both inflation and unemployment. The two have gone hand in hand. Should any of your Lordships wish for better evidence of that fact, I would refer you to the January issue of the Journal of Economic Affairs, which puts the arguments very clearly and concisely. Keynesian policies, certainly in today's world climate, would create distortions both geographically and in industrial sectors, and would make inflation and unemployment worse.

It is perhaps worth noting that the industries which in the past have received most aid are those that are now creating the greatest levels of unemployment. I have in mind the steel industry, and indeed as a Minister I was responsible seven or eight years ago for giving that industry very large sums; and unemployment is now flowing from that. What I say now is not to criticise the decision made then, nor to criticise the decisions made in the past few months. Circumstances led to those decisions, and had decisions not been made to grant subsidies, the impact felt elsewhere would have been very grave.

I feel some concern about certain of the Government measures today. If one discriminates in favour of someone then, to my somewhat simple mind, that almost inevitably means that one is discriminating against another section. In the case of the steel industry we have seen that the support and subsidy that is being given to the British Steel Corporation is understandably being interpreted by the private sector as discrimination against it. I hope therefore that the concern I feel regarding the enterprise zones will not be justified. The zones represent a bold, imaginative gesture, but in so far as they create new employment within particular areas, we must be careful to ensure that they do not create unemployment immediately outside those areas. We must ensure that there is not a risk of businesses just outside the areas of the enterprise zones being imperilled by the subsidised competition that will be created within the zones.

While being critical, perhaps I may follow the point made by my noble friend Lord Thorneycroft on the question of energy prices. I believe that industry has carried an excessive burden in this respect for far too long; and I believe, too, that it has added substantially to the levels of unemployment. At last this seems to be appreciated. I say "at last" because many of us with some experience of this have for a long time been arguing with the Government and with others as to the pricing policy adopted, particularly against the larger energy users, who are almost invariably also the larger employers; and I know that noble Lords opposite have used powerful arguments on the same lines over quite a long time. I recall, when I was president of the Association of British Chambers of Commerce, putting forward the arguments as to the impact that our energy pricing policy was having on industry and commerce some year or so ago and it is a matter of some regret to me that it has taken so long before the penny seems to have dropped—because I understand from a report which has only recently come out that it is now conceded that our heavy energy users have been paying too much for their energy. I hope that this is something which will be put right quickly. It is unimaginable that the French or the Germans, if they were in our happy position, would have adopted the policy that we have pursued here.

I believe, too, that there is a case, as has been said—the noble Baroness, Lady Seear, and others have referred to it—for looking rather carefully at the public sector borrowing requirement and the break-up and analysis of it. In government as in industry, I believe, as has been said earlier this evening, one is justified in borrowing for infrastructure, for capital expenditure; whereas I believe there is seldom a case for borrowing to pay the wages. I recognise from previous experience that this creates certain problems within government by way of presentation and the like, but I believe that underneath that there is some sort of thinking that should be further developed within government, and which could have a favourable impact in the longer-term upon unemployment.

Having made my criticisms, my Lords, may I extend my full support to the general policies which the Government are adopting in this crisis, in this difficult period? The Government, in a short period, are attempting to break out of an environment which has brought us lower and lower in each cycle. It is an environment which I believe is hostile and contrary to the will and spirit, and indeed the history, of the people of this country. I believe that this is our economic Alamein. But as casualties mount, as good firms die and as innocent people are put out of work, pressures on the generals are mounting to retreat or to change their strategy. In my view it would be fatal to do so, because in our hearts, I believe, most of your Lordships know, as do most people in their hearts, that there is no other way. I sense that despite the setbacks that there have been on some parts of the front the worst is nearly over, but there is a long hard slog ahead. It will require courage and it will require compassion—compassion for those who become the casualties—to see this through; and these are qualities which I believe we in your Lordships' House should be and will be willing to support.

6.35 p.m.

Lord Taylor of Mansfield

My Lords, the first thing I should like to do is to congratulate the right reverend Prelate the Bishop of Liverpool on his maiden speech. I have known him in other spheres. As a matter of fact, I have been a great fan of his, quite honestly, as a wielder of the willow; and in congratulating him I would say that even if he does only half as well as a bishop and as a Member of this House he will do very well indeed.

My Lords, by coincidence I think today's debate is somewhat related to a television series that begins tonight. It is about a man who was a Member of this House and of the other place, and it is called The Life and Times of David Lloyd George, known latterly as the first Earl Lloyd-George of Dwyfor. I think that what I am going to say in this connection has some relationship to our debate today. The authoress who has made the investigations and carried out the research for this programme is, first of all, a compatriot of Lloyd George, a Welsh lady, and in the current issue of the Radio Times she tells us that after all this research and this investigation she has reached a conclusion. She says: I believe that if Lloyd George had headed the 1929 Government my father"— that is, the lady's father— and millions of others would have got out of the dole queue several years earlier than they did". I know that is going back quite a long time, and I mention it only to indicate that in the same old dole queue the numbers are nearly as big as they were in the days of Lloyd George and the queues arc getting as long as they were in the late 'twenties and early 'thirties. What the historian of the future will say about the present position I do not know, but I believe it will not be very flattering.

However, I want to make a few general remarks about the tragedy of unemployment, particularly as it affects the individual. I know that this scourge has collective as well as individual repercussions, but I want, if I may, to talk about the individual repercussions. It goes back a long time, to when I was a member of the old Board of Guardians, which was abolished in 1930. I was doing the fortnightly visit of the hospitals and the casual wards, which were used for vagrants. Some people who were not too sympathetic used to refer to them as a domicile for tramps. On one particular occasion there was a man who had had a night's accommodation in the work-house, in the vagrant wards, and he was scrubbing floors—on his knees, mind you. I said, "Good morning", to him, and he rose and said, "Good morning, sir". Mind you, like him I was in the ranks of the unemployed, as well as being a member of the Board of Guardians. I said to him, "What are you doing here?" "Oh," he said, "I'm from the shipyards of the North-East, and I am unemployed without dole. I am here because I refuse to impose upon my father, who, too, is unemployed but who, unlike me, gets the dole". I said, "Where are you making for?", and he said, "To the hopfields of Kent, to earn a few shillings to help me as far as the immediate future is concerned".

For me as a young man that was a very emotional experience. From that day till this unemployment has frightened me; it has been a nightmare. I undertook within my own soul that what I could do, either by word of mouth or by action, to remove this scourge of unemployment from our nation I certainly would do. I asked this young man, "What part of the North-East do you come from?" He told me and I concluded—and this will strike a note in some minds—that he might have been from the Palmer Shipyards at Jarrow which was one of the names linked with the marches of the unemployed in 1930. I remember this young man saying to me—and I think it important to relate it—"You know, sir, to be unemployed is disappointing and frustrating. Normal, legitimate, personal ambitions are right down at zero and the light of hope burns very low; it is only a mere flicker." That man expressed the tragedy of what it was to be unemployed. He was right. How justified he was in his bitterness and frustration. I bade him, "Good morning." I was in sorrowful mood. I do not think that while memory lasts shall I forget that particular episode which impressed on my young mind the necessity of doing all that one could to avoid, at any rate, mass unemployment.

There seems no flicker of light at the end of what is a long dark tunnel. Hope becomes less and less, social values tend to become eroded and anger and bitterness develop in such fertile ground as unemployment. Today there are millions of wage-earners, and also a large number of workers in the modest-salary bracket, who are apprehensive about losing their jobs. Believe me—and I am sure that we all know this—they do not relish the prospect of joining the unemployed at the labour exchange. But we all know that every day now the media announce that this or that factory is to close with the loss of any number of jobs up to thousands. These folk are put on the roads. The tragedy is that, if the economic pundits are anything to go by, the avalanche of job losses is to continue and it is forecast that by the end of this year the figure will be, officially, 3 million. The unofficial figure would include the people who are not registered, such as married women; and that might be anything from half a million to I million extra. That gives us some idea of the astronomical size of the problem with which the nation is confronted at the moment.

I have given a little study to the figures in the Ministry of Labour Gazette. They provide anything but enjoyable reading; for behind the collective figure of almost 2½ million, there is the individual, there is the family with the individual and the domestic problems to cope with. To think that one in 10 of the British workforce are now without a job! Over the month of January this year, 5,600 a day joined the dole queues. This hardly seems believable. And there seems to be no end in sight at the moment. I could not gather a glimmer of hope from the speech made by the noble Earl, Lord Gowrie, that there would not be further redundancies and closures of factories and works.

I want to say one or two words about the region from which I come—the East Midlands. In the South-East, the increase in unemployment over the last 12 months has been 92 per cent. In the East Midlands, it has been 103 per cent. That is the region from which I come and I want to say a word or two particularly about Mansfield; that part of it referred to as the Exchange area. Normally that particular area is not dependent on one industry and we have always been thankful for that. That was one of the tragedies of Wales—one or two industries, steel and coal; that was all. And when anything happened there was a colossal figure of unemployment. Although we have diversity of industry—textiles, boot and shoe, engineering, metal box—and have had these for many years now, and although the preponderant industry is the production of coal (in which at the moment there is no unemployment) the area over the past 12 months has had an unemployment increase of 103 per cent.

When I got home last weekend the local paper was waiting for me. In big, black type the headline reads—and, my Lords, I exhibit it here and you can see this headline— Mansfield Jobless Total Soars Again". The area as I have said is diversified in industry. I should like to quote a part of the article. Incidentally, this is not a Socialist or Labour paper but the local paper. It says: Gloom and doom shrouds the Mansfield area with the release of the latest unemployment figures this week". A graph accompanying the article shows how the figure has risen from 3,800 in January 1980 to 6,226 in February of this year. There are 403 vacancies; and 176 of those are for census interviewers—jobs which will only last a few weeks and which do not touch the problem at all.

I shall conclude now with a quotation from the Guardian from Monday of this week in the light of what I have said about what is taking place nationally: The Government must endeavour to take honest stock of its policies and draw the only possible conclusion, a substantial shift of strategy is required. More than one million have lost their jobs in 18 months. Output has fallen at twice the rate anticipated even by the Treasury a year ago. Factories are producing less than during Mr. Heath's three day week and even less than in 1967. Company liquidations are at record levels. These are tangible signs of economic mismanagement since the wartime coalition promised that our Government would never again allow mass unemployment to afflict Britain". What a picture! What a scenario! The Government want to give some time and attention to our own country and pay less attention to the economic theory of monetarism as proposed by Milton Friedman.

6.52 p.m.

Lord Polwarth

My Lords, in terms of numbers we are now exactly half way through the speakers' list. I hope for the sake of your Lordships that we are slightly further than that in terms of total time. I shall certainly do my best to obey the injunction of the noble Lord, Lord Peart, on the subject of brevity. May I apologise in advance to my noble friend who is to wind up, and to the noble Lord, Lord Ross of Marnock, that I must leave before the end of the debate because of a long-standing function that I would find it difficult to miss this evening.

I have been most impressed by the deep feeling on all sides of the House about the gravity of this problem. I have been even more impressed by the comparatively little scoring of party points in the course of this debate. There has been a great deal of coming together of minds. There is a rather sobering realisation that no one party and no one section of the community bears total responsibility for the very difficult problem that we have, and I think that there is a widespread realisation that though we may be an island geographically, we are not an island and cannot be one in the present-day economic world. We should remember that nearly every other country in the Western world is faced with rising unemployment even if the figures are not as high as ours.

There is even considerable concern at the moment, for example, in France. Last week, the Prime Minister there was announcing a package of measures for the short-term problems of unemployment which bore a striking resemblance to those being introduced or already introduced by our own Government.

I should like to concentrate my thoughts a little towards the problems of Scotland. I find myself very much in agreement with what has been said from the opposite Benches by the noble Lord, Lord Taylor of Gryfe. In Scotland the level of unemployment is indeed unacceptably high. There has been a long and depressing list of redundancies and closures announced which I do not need to go over in detail, culminating in the impending closure of the Linwood plant of Talbot, the Peugeot subsidiary. I know that there are more to come. We must be concerned and anxious about the future of the steel industry in Scotland, even with the package announced last week.

There is a slightly less depressing side to the situation in Scotland, and we must remember this. In past recessions, the rate of unemployment in Scotland has regularly risen to at least 50 per cent. above that of the United Kingdom as a whole and, on occasion, to double the rate of the United Kingdom as a whole. At present, at an adjusted figure of 11.6 per cent., it is only 20 per cent, above the United Kingdom figure. While that is cold comfort, it is much less bad than it might have been. We owe this partly to the effects of the oil industry, of which we have already heard this afternoon; and an interesting fact—again partly due to the oil industry—that with previous regular depopulation, particularly from the Highlands, we now find by contrast that over the past 10 years the population of the Highlands and Islands Development Board area has risen by 7 per cent.—no fewer than 21,000 souls, which is not so bad.

We have heard today of some of the new projects. The noble Lord, Lord Taylor, spoke of the new Japanese electronics venture coming to Livingston. The Timex company are about to embark on making the new "flat" television, as it is called, in Dundee, which will at least safeguard a thousand jobs. The Racal electronics firm are expanding at Newbridge, and Glenrothes has really become the boom electronic town of the United Kingdom.

I remember 25 years ago discussing with Dr. Beckman in California whether he would set up a plant in Glenrothes. He did, and today I am delighted to hear that the company is about to build a second plant. At Clydebank—one of our blackest spots—the French owned UIE company have obtained another order for a jack-up rig. Rolls-Royce have an order for £130 million worth of aero-engines to be built in East Kilbride and Livingston.

All is not gloom, and I suggest that there is a moral here for the United Kingdom. All of these are high technology industries, and it is thanks to the efforts that have been made by Scots in Scotland over the past quarter of a century in trying to attract this type of industry to Scotland and develop it there, that we have seen these results. We have already to some extent been through the fire and we are well placed for the future.

I agree entirely with the noble Lord, Lord Taylor, on the subject of Talbot at Linwood. I remember talking with the late Lord Rootes, who at that time was most enthusiastic about opening a motor plant in Scotland. All of us up there saw this as our great salvation. Here was a marvellous new industry that was going to have all sorts of spin-offs and benefits for the Scottish economy. I remember at the time meeting a leading American industrialist who happened to come from Detroit. When I told him this, he said: "I cannot think why you want a motor industry alongside you in Scotland".

I have come to the conclusion that he was right. I do not believe that production line work of this type is in the Scottish character. The Scot is by nature independent—some would call it other things, I know. I believe he is much happier and much better at exercising his skills in an individual way. This is where things like electronics and the new technology industries are far more what we should be after. We should forget about the motor industry and concentrate on new industries.

On the general policy, I believe that the Government would be quite wrong to do a U-turn, as they are sometimes being urged to do. As my noble friend Lord Gowrie said, inflation is still our biggest threat and we are at the same time at last beginning to see results in bringing it down. The medicine is working, but at the same time I believe the time has come to start reducing the dose. I was glad to hear the noble Lord, Lord Thorneycroft (in a very unorthodox kind of Conservative speech) recommending a greater degree of pragmatism and flexibility. In this I entirely follow him.

Could I suggest a few items on my prescription list for the Government's consideration? Like so many other speakers, may I suggest that we get rid of the national insurance surcharge? It is a tax on employing people and we want to employ people. I believe that we should seriously consider reintroducing a form of regional employment premium. It was a grave error to abolish this at the beginning of our term of office. It did a great deal, I know—and I have spoken to industrialists who were affected by it—to cause employers to retain labour and to keep people in employment without necessarily increasing their costs. I believe, like so many other noble Lords, that we should concentrate on cuts on current spending in the public sector. It is still much too high. Also, let us be more flexible on spending on investment. Here I would speak particularly of the railways, not merely in terms of the work they will give to manufacturers and contractors, but it will be a great benefit if we can achieve more electrification of the other line to Scotland and within Scotland. I also think the Government should reconsider the de-scheduling of certain assisted areas which is proposed from 1982, not necessarily treating them identically but in the light of circumstances.

I hope that the Government will give full backing to the Scottish Development Agency. I know it is the subject of controversy within the Conservative Party as regards its necessity or desirability. I believe it has done and is doing a good job, and I would agree with the noble Lord, Lord Taylor: let it go on with the job of attracting industry from overseas. The kinds of people who go on these missions are people with direct experience. They are far more likely to succeed than the members in our posts overseas. I say that with no disparagement to them, because they can give a good deal of help and back-up in the operations. So let the SDA get on with that job now that they have taken it over from the Scottish Council.

Finally, on the pricing of energy, which so many speakers have mentioned, it really is ludicrous when we have such great advantages in energy supply and costs that we should not enjoy them. I almost admire the tenacity of certain Ministers in defending or maintaining the position that we were not at a disadvantage. I notice this attitude has been changing lately. I even read that one Minister, I believe yesterday, was complaining rather querulously that the French and the Germans were actually subsidising their industries to our disadvantage, and that this was against the rules. I think that the only way to deal with this kind of thing is to respond in kind. It is simply no good trying to play cricket with people who not only do not wish to play cricket but have not the faintest notion of the rules, to start with. And how the French must be laughing at us!

Those are a few rather rebellious thoughts, but I believe that we should not get too depressed. There is light at the end of the tunnel even if it is not, as somebody once said, a train coming in the opposite direction". I believe that the regions, and Scotland particularly, represent a great opportunity. Let us seize the chance offered by this period of depression and "slack" to muster and redeploy our resources and to make the most of them, particularly with the high technology industries. Let us get on with providing the right kind of education and training for our young people so that they can man these industries in the future and give us back our edge competitively. The wheel will turn in time, certainly if we stick to the policy of killing inflation. And when it turns there will be great opportunities. I think the regions have a great part to play in making us once more a world industrial power.

7.4 p.m.

Baroness Fisher of Rednal

My Lords, I hope that the noble Lord who has just spoken will accept the fact that I shall not be following him. My knowledge of Scotland is very limited, but perhaps I might say that my knowledge of the West Midlands is quite extensive, after spending over 20 years in public life in that area. In the past, of course, the West Midlands has been a wealth creating region. It had relative prosperity and job security for the people in the region. It has been able in the past to assist in the more depressed areas of the country, but in the West Midlands we are no longer that rich parent. We have come to the same stage, unfortunately, as some of the more depressed areas in the country.

I shall have to be very careful, like the noble Lord, Lord Rhodes, who said, I think, that he becomes very emotional upon this particular subject. I also become emotional on it and I am trying tonight not to be so; but when one lives among the people, as I do in Birmingham, and sees the women shopping, when one goes round the markets and sees people who are looking now for the best bargains, this is when it strikes home to you what it is all about.

I think what we have to recognise—and other noble Lords have said this—is that there is a very human aspect to unemployment. I think it was the noble Lord, Lord Thorneycroft, who said, "The recession will disappear". The noble Lord, Lord Polwarth, also said that better times would come, but the bitter memories of those who have suffered in the recession will stay. That is the unfortunate part about regional unemployment, and especially in the North-East and in Wales. The bitterness those people have to suffer will not be eradicated in one generation or in two. The Conservative Party must recognise that when the recession is over they will not get rid of those bitter memories and will obviously put the blame, rightly and truly, at the door of the Conservative Government.

It is no good noble Lords saying "ifs" and "buts" on the other side when they speak. I believe it was the noble Viscount, Lord Watkinson, who said that when we go to Liverpool they would rather hear what is going to be happening in the future. Those people are not worrying about the future; they are worrying about what is happening tomorrow, next Friday and the Friday after, the amount of money they are going to have, and the lowering of their standards. But I do not want to speak about Liverpool, because the right reverend Prelate the Bishop of Liverpool did that. I do not know all the cricketing terms, but he did not knock this maiden over by his speech! I thought it was very well done, and we congratulate him on it.

Unemployment in the West Midlands is now rising more rapidly than in the rest of the United Kingdom. The February figures last week showed that the unemployment situation is now 11.7 per cent. as against 9.5 per cent. in November and only 5.6 per cent. 12 months ago. These are cold statistics. They clearly show how the recession is affecting the industrial heartland of Great Britain. I use that term because Great Britain depends upon the West Midlands for its export potential, which is the greatest contributor of any of the regions in the country. There is a real fear that the West Midlands, with its heavy dependence on manufacturing industry, could suffer irreparable damage if the Government do not change their monetarist policy. Other noble Lords have said that you translate these cold statistics into individual men and women, and you translate them in the West Midlands to a great variety of manufacturing. As regards vehicle manufacturing, I think everybody believes that the West Midlands just has British Leyland in its midst; but although it has a great vehicle manufacturing industry it also has a great drop-forging industry and a great carpet industry. In fact, in Kidderminster is the largest concentration of carpet industry in the world.

The noble Lord, Lord Davies of Leek, mentioned the Potteries and the famous firms that are there. Also in Birmingham—and I know the area very well, because I represented it for a very long time—there are more small businesses than in any other part of the country. Some of those small businesses are in the famous jewellery district of the city. I can speak with experience, because I am a member of the Board of Guardians of the Assay Office, as is a noble Lord on the Government Benches. Last year was a very bad one for those small businesses in the jewellery district, because of the high price of gold. But this year the position is even worse and production, much of which is work with export potential, is 50 per cent. down.

Noble Lords have been speaking about young people. May I give your Lordships the latest figures for the City of Birmingham. They show that there is a total of 8,674 young people, between the ages of 16 and 18, in that city who would be working if work were available. But the latest figures from the careers services in January showed that there were 143 vacancies. How do you share out those jobs between nearly 9,000 young people who are waiting for work?

Noble Lords need to recognise that working in manufacture is not a sub-standard way of earning a living. That type of work has been a much despised part of the British economy. Because people get dirty hands in their work, they are considered in some circles to be a little sub-standard. One of the things which this Government could do quite easily is to make sure that manufacturing is given its proper status in the professions of this country.

The West Midlands workers are said to have metal running through their veins, instead of blood. The West Midlands is a real reservoir of skilled workers in many industries. They are a resilient group of workers. In the main, they are tough and, perhaps, very plain-speaking which does not always go down too well with some people. They are plain-speaking not only as employees, but as bosses in industry who say, on so many occasions, that Whitehall does not understand anything about manufacturing. But these people have a reputation for working, hard, very often in very dirty jobs, and working all through the night on shift systems. They are a very self-reliant group of people, whom one quickly learns to admire if one travels further North than Watford. I say that with the kindest sentiment, but I feel that there is a London mentality and a South-East mentality which does not readily understand regional problems.

In the West Midlands we have survived the worst economic depressions over the past 10 years without any Government aid. In the past, we in the West Midlands have not been fortunate, not only with Conservative Governments but also with Labour Governments, and we have not been able to get IDC certificates to expand industry. We recognised that they ought to go to the more unfortunate regions. But the West Midlands itself is now one of those unfortunate regions, and it behoves the Government to recognise that if we lose the industry of the West Midlands we shall lose a tremendous export potential.

I think that one noble Lord on the Cross-Benches mentioned the Brandt Report. The basic thesis behind its findings is that the cutting back of aid is no way to help the world's economy and to cure the recession. I want to draw the attention of the Government to the fact that their policies also help to create unemployment. I have university researches which show that, in the main, small firms benefit from aid programmes and the Government cut of £100 million from bilateral aid programmes has had serious repercussions on them.

The findings of the university researches show that one company in five that gained aid orders employed fewer than 100 people. Almost half the companies which one won orders under bilateral aid employed fewer than 200 workers. Therefore, it seems that the Government are cutting what we call public expenditure on aid programmes and, at the same time, are speaking eloquently about how they are trying to help small businesses, but that because of their policies they are doing exactly the opposite. Because of the cutback in the aid programme, there is a cutback in the orders which small businesses are able to get from bilateral aid. Therefore, I say to the Minister that it is important that the Government look at their policies and at their repercussions. Might I venture to say to the Government that they should take a pragmatic view of small businesses. I do not despise the efforts to help small businesses, but if we feel that they are so necessary to the economic recovery of the country, could we not appoint one Minister—call him the Small Businesses Minister, if you like—and one department with direct contact—

The Earl of Gowrie

My Lords, I am most grateful to the noble Baroness for giving way. We do, in fact, have a Minister for Small Businesses. He is my honourable friend the Parliamentary Under-Secretary at the Department of Industry.

Baroness Fisher of Rednal

My Lords, I thank the noble Earl for that comment. But I think he would agree that the Department of Trade, the Department of the Environment, the Department of Industry and the Department of Employment all claim to have some concern for the small business sector, and it is shared between various junior Ministers. But in Birmingham and the West Midlands we also have what we call the well-managed companies, the large companies—the ICI group, the GKN group, Lucas, Metal Box and other such companies. What are they saying about the Government's policy? Noble Lords have mentioned two or three problems. But what these companies are saying is that they are confronted with weak demand, for which the Government must take some responsibility. The noble Earl shakes his head, but when I speak to the Chambers of Commerce and to industrialists they tell me not only about energy problems, but about the high interest rates and all the other factors which are within the purview of the Government.

They say that excess capacity and short-time working push up their unit costs. They have high fixed costs. They are large organisations which are geared to a greater output than they have at the moment, because of the weak demand. But they cannot bring down their unit costs, because they are geared to a high demand.

Many of these large industries have recorded the great loyalty of their workforce. They are not criticising them for shoddy workmanship or poor output. They are not criticising them. In fact, they are doing just the opposite. They are saying how loyal they have been. Therefore, it behoves Government Ministers to stop saying that workers are pricing themselves out of jobs by asking for extravagant wage increases. If the Government will look at the findings which have been published by the Department of Health and Social Security they will see that the vast majority of the unemployed were low paid workers when they had work. Government research shows that it is not the workers who are pricing themselves out of jobs. It is those lower down who, unfortunately, are now out of work.

I apologise for speaking at great length. I accept the great sympathy which the noble Earl, Lord Gowrie, has shown for the young unemployed, but at present great concern is being expressed about the future of the training boards. No doubt the noble Earl knows that 500,000 apprenticeships are being run by the industrial training boards. I wonder whether he could enlighten us tonight about what is to happen to those boards? If the noble Earl cannot do so, is he able to assure us that those 500,000 young people with apprenticeships will not suffer by the Government amalgamation of industrial training boards with some other organisation?

When the noble Lord, Lord Thorneycroft, spoke, he seemed to fail to understand that the Government's action in cutting back the housing investment programme has meant not only that local authorities cannot build houses but that they have no money with which to carry out renovations or make old houses decent to live in. If he feels so strongly about this point, why did he not come to this Chamber when we discussed the Housing Bill and convince his noble friends on the Conservative Benches that the right thing to do was to support us on this side of the House when we said that not only would people suffer but that the industry would suffer: that there would be a spin-off effect from the Government's policy of cutting back on housing? Not only do you cut-back on your construction workers who number one-fifth of the unemployed males in the country; you also cut back on the production of things like baths, toilets, window frames, paint and timber. You cut back on all those manufactured products. The same applies to the cutback in education. You do not cut back only on the number of teachers in schools and on nursery school provision. The education cutbacks do not stop at the head teacher's desk. They affect the book publishing firms and the factories which are producing school furniture, foolscap paper and other paper for use in education.

I could go on, but noble Lords may think that I have spoken for quite long enough. It is true to say that in the West Midlands the local authorities are doing everything they possibly can to help to create employment. This includes the West Midlands county. In certain circumstances, they give loan guarantees to small firms. They also operate rate relief schemes. We are fortunate that in Birmingham we have the University of Birmingham and the University of Aston, both of which are involved in a number of immediate and future schemes to help industry. It may interest the noble Earl to know that the University of Aston has published a very good paper on the grave shortage of engineers who are being trained in the universities of this country. We have to accept that if there is a shortage of engineers, we shall be short of many things when the recession is over.

There is plenty of gloom around in the West Midlands. Despondency and waiting for better times are no part of the mental equipment of the workers, the local authorities and industry in that area. We ask the Government to recognise that there are problems. Noble Lords have amplified some of the needs and the way that they can be met.

I am very pessimistic. My pessimistic view is expressed quite clearly by the CBI's regional director in the West Midlands. He said only yesterday that, the most grim news in the West Midlands is still the labour market, where we expect very large numbers of redundancies in the next two or three months—numbered in thousands.

That is a very sobering thought for the Government. It is important that they should recognise that the unemployment figures throughout the region show that their economic and industrial policies are not working. What we are asking for is not only that the Government should receive documentation from the CBI and study it but that they should also seriously consider documentation from the TUC. That is the only way in which we shall work together to make Britain viable once again.

7.28 p.m.

Lord Balfour of Inchrye

My Lords, I feel I owe an apology to the House, and particularly to the noble Lords yet to speak, for intervening now, but it is through an administrative slip from which we all periodically suffer. I undertake not to stand for very many minutes between the other speakers and the House.

I feel that we are all particularly grateful to the noble Lord, Lord Peart, the Leader of the Opposition, for giving us this opportunity to have this most interesting and constructive debate. I speak as a full supporter of the Government and their economic policies, but I must admit to some misgivings concerning the future. I put these in the simple form of questions to the Minister, to which I hope he will be able to give a reply that will reassure not only my humble self but many Government supporters outside this House. I hope that we shall receive replies which will satisfy us.

First, we are winning the battle of inflation but, when won, will the battlefield be scattered with the corpses of industries which will not rise again? There are already many which are mortally wounded. Secondly, when the battle is won, will the price of victory be such that industries, great and small, cannot find capital for restarting and rebuilding their enterprises? What inducements will there be for capital investment if the battlefield is so scattered with corpses and with those who are gravely injured? Where will the capital come from? Will the revived industries be able to accept the present levels of taxation for industry? I do not know. That is one of the questions on which I hope we shall hear something from the Government.

My third question is this. In the battle of inflation are we losing the battle for employment? When the recession passes (as it will) shall we be left with a labour force, widely dispersed, many of them suffering from years of unemployment and often with skills lost? It is really impossible for the Government to give a positive answer to my fourth question because it depends upon world conditions, but the Government have experts. It is: For how long do the Government think the present recession will last? I read constantly the learned sayings and declarations of various expert bodies of economists, and they all vary. Some say that the recession is passing; others say that it is getting worse. What is the Government's view on this?

Lord Kaldor

That it is getting better!

Lord Balfour of Inchrye

My Lords, what do the Government think that the figure of unemployment may rise to? It is not all gloom. I was reading in the Hansard report of another place in a debate on unemployment in the South where the Minister, Mr. Norman Tebbit, shed a beam of light on the darkness and gloom, saying that there will probably be 6,000 new jobs created in the South, spread over the next two years. That is comforting, but that is very small compared with the grave redundancies we see every day in ICI, in Courtaulds and in other great enterprises.

My fifth question is this: In seeking to reduce inflation by strict money control will many of our home markets of great industries continue to suffer from imports from Europe, the USA and Asia and therefore the essential home markets for industry to be lost, possibly for ever? Then there are textiles, a topic about which the noble Lord opposite knows so much more than I do. However, 100,000 jobs were lost in the year 1980. The motor-car industry is struggling to revive with the taxpayers' money—your money and my money. Surely there should be some control over limitless foreign imports in selected trades. I believe that some control of imports is part of the official policy of the party opposite, but it does not matter to me whether it is or not. I am personally convinced that there should be some limitation of imports in certain selected trades.

My sixth question is this—and the Minister will be glad to hear that it is the last one. During this time of recession should we not reconsider for the special cases a policy of not accepting virtually without limit certain classes of imports? GATT—the General Agreement on Tariffs and Trade—was formed in a different economic world to that in which we live today. The pure milk of free trade has been diluted. GATT rules are twisted, bent and openly defied by other countries in their endeavours to protect their own national interests within their own frontiers.

The Government's reply to this is always one word—retaliation. If we control our imports from a country they will not like to buy our airliners. That is, broadly speaking, the defence for continuing free imports. Surely the answer is that, if we produce the best article at the right price, we need not fear retaliation because it will be sold in the market requiring that article. I do not believe we should be deterred from looking at special cases by the bogey of retaliation. I am not in any way suggesting a system of general tariffs or general limitation of imports, but for the sake of employment and industrial survival at a time of world recession I am suggesting that certain cases should be granted some quantitative control of their imports.

I conclude with these words: we have had recessions in the past and we have overcome them. In the great recession of 1921, after World War I, there were conditions very similar to those existing today. There was a strong pound, unemployment was rising and the traditional free trade country was for the first time forced to abandon the pure doctrine of free trade to protect some vital and vulnerable industries. The safe-guarding of Industry Bill was introduced by Mr. Stanley Baldwin when he was President of the Board of Trade in July 1921—an awful long time ago!—with these words: The object of the Bill, of course, is to prevent loss of employment ". My Lords, I would leave in the minds of your Lordships the thought that history repeats itself.

7.38 p.m.

The Earl of Halsbury

My Lords, our debate is taking place on the initiative of the noble Lord, Lord Peart, whom we thank for it, because the locust years are now yielding their harvest of Dead Sea fruit. How often have I not asked your Lordships, in rhetorical mood, do we have to be cold, hungry and unemployed before we come to our senses?—because if that is the way we insist on having it, that is the way it will have to be and, my Lords, that is the way it now is. A world depression has found us out. We, with one of Europe's weakest, softest economies, are having to endure a long overdue shake-up of our shortcomings.

The noble Lord, Lord Thorneycroft, dealt with this so well that I do not think I need enlarge on what he said, beyond adding one thought: alas! that the massive structural unemployment that is now with us has been brought on in great part by the mistaken efforts of those who have striven so hard to avoid it but employed all those means which ensured its arrival in due course.

It has happened before in my lifetime. Only those who, like myself, arc running up to their middle 70s or older were of full age, having attained their majority, and in employment in October 1929. The signal lamps had shifted during the summer from amber to red in conformity with a massive transfer of what we now call "M/" across the American economy from the sector which financed agricultural and raw material production to Wall Street for the purposes of financing a boom and some rather grotty loans to Europe. Inflation in one sector, deflation in another, Stock Exchange prices rose, agricultural prices fell. When the bubble burst—and this is the point—those funds did not flow back again as a normal response of the system to an imbalance. Something else happened instead. It always does.

A little German merchant bank which financed the textile industry, called the Norddeutsche WolleKamerei—I remember seeing it all in the Evening Standard as the run up to the wicket of failure—failed and cannoned into the Credit Anstalt, which failed and cannoned into an American merchant bank, which failed and cannoned into other merchant banks, and brought down the entire system like ninepins. Over three years—monetarists can well take note of this—half the M3 in the United States was sterilised and went out of circulation, and all of this of course reacted on our economy here. At the trough of the depression in 1932 somebody asked Keynes, "Has there ever been a depression like it before, and how long did it last?" "Yes", said Keynes, "It was known as the Dark Ages and it lasted 400 years".

The years of the 'thirties were years of disaster, as dramatised, and as experienced by many, though not all. But they were also years of redeployment in industry. From the trough of the depression annual growth in real terms, real wages, was 3 per cent. By the end of the decade four-fifths of the dwellers in slums had been rehoused, while industry and employment shifted away from the old mining centres, which were its natural location, as electrical consumption quadrupled during that decade and made industrial costs increasingly independent of the location of industry. That, of course, was what set up the industrial migration. The industries with which we entered World War II had been transformed out of recognition from the industries with which we entered World War I.

Then again in 1970 the system, the economy, did not respond as it should have when the Heath Government liberalised credit; a pre-election post-pay freeze wage-inflation was already gathering momentum. The new money created by liberalisation of credit did not go into industrial investment. It went into a housing boom. The system did not respond as was expected. Something else happened instead. Now today, as the Government struggle to reduce inflation as a prelude to increasing investment, the system is again not responding as briskly as could be wished. Something else is happening. It always does.

We have built into the system indexed pensions and redundancy payments, and scales of unemployment relief which are keeping consumer expenditure up just at a time when the Government are trying to reduce it for redeployment as investment. Did anyone ever question whether the scale of what we were providing could be afforded in a major recession—that is, at the only time when it was going to be needed? Did anybody suppose when it was set up that it would actually be a barrier to Government therapy which could control the economy? The noble Earl has my sympathies. He struggles in the toils with the consequences of what we ourselves have done with the best of motives. Like the victims in a Greek tragedy, all those who have done the wrong things for so long in order to avoid unemployment have brought it on the heads of those they have tried so hard to protect.

My Lords, what was it that Roosevelt did that rescued the situation as he found it in 1933? He made massive infrastructural investments with borrowed money. That is what Mr. Len Murray wants the Government to do today. It is what the noble Lord, Lord Taylor of Gryfe, has pleaded for in his contribution. Why would it be wrong for the Government to do now what it was right for Roosevelt to do then?

Lord Kaldor

My Lords, may I just say that the British National Government in 1932 is a better example than Roosevelt in America?

The Earl of Halsbury

My Lords, that may be, but I chose Roosevelt as an example, and if the noble Lord will permit me, I will construct my speech in my own way and choose examples of my own selection. I repeat, why would it be wrong for the Government to do now what it was right for Roosevelt to do then? If the demand on the capital goods sector falls below its potential output at full employment the wage packets in that sector cannot load the demand on the consumer goods sector and produce full employment there. Investment is the overall clue to full employment. My Lords, I survey the House of Peers, from prince to pensioner. Which of you ever bought a blast furnace to play with? Only investors do that. But for 36 self-contradictory years since the war we have treated profits which generate investment as a dirty business and those who make them as anti-social. We kill the goose that lays the golden egg as we go along. Whatever you can say, pay increases are still leading inflation and fuelling its continuance. If Mr. Murray had his way and if the noble Lord, Lord Taylor of Gryfe, had his way, the Rooseveltian trick would not work. The paper money that saved the American situation in a gross deflation would only leak back from the capital sector to the consumer sector in an inflationary environment. That is the essence of the matter, as I see it, and why the solution of the noble Lord, Lord Taylor of Gryfe, does not apply in this case. So we must reconcile ourselves to the shakeout continuing. We never could have maintained those over-manning levels indefinitely in any sort of competitive environment. We have been living a fantasy life and now we have got to face reality.

Viscount Caldecote

My Lords, if I may ask the noble Earl a question, is he really saying that investment is a bad thing?

The Earl of Halsbury

My Lords, on the contrary, I am saying it is the only thing, but it is the one thing we have legislated ourselves out of; a position to invest in.

Viscount Caldecote

My Lords, the noble Earl criticised Lord Taylor of Gryfe, who was advocating it.

The Earl of Halsbury

I was saying it cannot be done in the way he wants at the moment. A trading nation such as ours cannot ignore its terms of trade. If they turn against us our standard of living must decline, or we must work harder, or we must work more effectively through rising productivity. In such circumstances it is futile to suppose that we can make someone else pay our share by putting in for a compensatory pay rise. It is sometimes said there are only two sentences you need to learn in a foreign language when travelling abroad. The first is, "My friend will pay for the drinks". That is no basis for a policy. The second is one with which I will not trouble your Lordships this evening.

To turn to practical politics, there is a mechanism which we could use if only we would study it, and that is the retirement/recruitment mechanism. It provides a painless redeployment rate of 2½ per cent. per annum, 25 per cent. per decade. At this rate we could by now have redeployed—it is a fantastic thing to think of—90 per cent. of the immediate postwar employment pattern. You cannot, of course, turn a coalminer into a doctor or a schoolmaster, but you can turn his or some other miner's son into either. If a miner retires and is not replaced, while a miner's son is recruited into some other employment, the effect is the same. That is one of the things we have to learn how to do continuously instead of periodically and panic-wise.

Whatever can be managed can be mismanaged. Whatever can happen does happen sooner or later. Our task has always been, and we have not discharged it, to formulate fall-back plans against our own or someone else's mismanagement. Governments, in the plural—eeny, meeny, miny, mo; I do not care which they are—are all transient epiphenomena on the time-scale of the processes they are required to control. From time to time we must suppose ourselves faced with a mismanagement situation whose roots lie far too deep for identifiable recriminations but whose result is unemployment that has to be coped with. Premature retirement for all and earlier pensionability can switch on a relatively painless relief mechanism. One year's retirement, at 64 instead of 65, can mop up between a quarter of a million and half a million unemployed. Later recruitment to industry in the post-educational years by employment on some kind of national service, removal of the waste rubbish and the coal-tips of the last century and so on, would mop up a like amount per age group.

But if the plans do not exist in advance, if the mothballed earthmovers and the people who train people how to use them are not waiting in reserve in advance of the slump, it will be too late to improvise them when the slump is irreversibly peaking as it is now about to do. No such plans or equipment now stand waiting for someone to press a button, so what cannot be helped will have to be endured and the innocent will pay for the guilty as they always do. It is a very sorry business.

But since something is better than nothing, "Improvise what we can" should be the motto of the Government. Youth opportunities?—Yes; reduce the bank rate?—Yes, as far as we can reduce it without turning it into negative interest; reverse over-valuation of sterling?—Yes, if it can be managed; re-price energy?—Yes, if it can be managed, and so on. We must sweat it out.

It appears that massive industrial redeployment is paid for by individual hardship. One thinks of the enclosure movement which modernised our agriculture. One thinks of the Industrial Revolution itself, the Russian collectivisation of the peasantry and the redeployment of industry triggered off by the Great Depression. They were all painful.

Now the rectification of the overmanning levels has been triggered off by other mechanisms: the rise in oil prices which unsettled a West already strained inflation-wise by the ill-judged United States' attempt to pay for the Vietnamese war without increasing taxation. All those statistical processes, unplanned and unprepared for, have wrought untold individual mischief. But let us put evil to good account as the noble Lord, Lord Polwarth, recommended and as we did earlier in the thirties. I was very glad to see so eloquent a spokesman for Merseyside in the right reverend Prelate the Bishop of Liverpool. That was where I spent the first depression. I am glad that somebody still has his eye on it even if it gives me a deja vu feeling.

Must our collective lack of foresight, our inability to plan and our failure to control be forever coupled to the long, long tale of man's inhumanity to man, which is just as disastrous when it rises out of incompetence as when it rises out of malevolence? In the words of the popular song, "When will we ever learn?"

7.53 p.m.

Lord Jacques

My Lords, first I should like to congratulate the right reverend Prelate on his maiden speech. I think that it reflected the man as we have known him over the years. I would also congratulate the noble Earl on the considerable skill which he showed in getting over the great difficulties in presenting a plausible case for Government policy. I should now like to state the opposite side of the story.

Every Government must spend their way out of depression. The choice is not whether they should do so or not; the choice is how they will spend their way out. In so far as they spend their way out in unemployment benefits, they spread gloom and they foster demoralisation and discontent. But in so far as they spend their way out on capital assets which will increase the efficiency of the country in future, they spread buoyance and inspire confidence in the future. It is tragic that so much of our national resources is going in unemployment benefit and in aid to industries which are struggling more than they need have struggled. That is in part due to the Government's economic policy which has been so narrowly-based on tight monetary control. I am speaking of facts and not of what has been said in the last few days.

The Earl of Gowrie

My Lords, I should not intervene from a sitting position. The fact of the matter is that it has been based on rather untight monetary control.

Lord Jacques

My Lords, the Government's policy as we have been told from time to time, has been based very narrowly and very strictly on tight monetary control. It is also due to the Government's attitude to industry. I would not go as far as to say that it has been an attitude of confrontation; but I would say that it has been an attitude of unwillingness to co-operate, an attitude of being dogmatic which is reflected in the rhetoric, "There is no other way—there is no alternative", when everybody who is not blind knows that there are alternatives which are worthy of consideration.

The first object of Government policy was to reduce inflation. But at the same time as they were exercising tight monetary control they were increasing those things which increased the retail price index. They increased VAT, they increased energy charges to the consumer and they increased mortgage interest. Those increases were all reflected in the retail price index. In due course they were reflected in wage settlements. Consequently, in spite of the reduction of inflation in the last few months, inflation is still well above what it was when the Government took office. We all take some comfort in the decline over the last few months. We hope that that decline will continue. But let there be no mistake, any continuation of the decline in inflation cannot be due to the Government's tight monetary control, because, in fact, the supply of money last year was running at twice the rate of the target. Therefore, it must be due to other reasons, which we have been saying to the Government during the last 20 months. The Government's second objective was to insist upon a shake-out—a shake-out so that we achieved greater efficiency. That shake-out has gone far too far. Even the most efficient firms are suffering. Let us take ICI as an example. ICI is suffering not only because of structural changes—I will grant that it is in part due to structural changes—but also because of the Government's monetary policy. The high rate of interest, the over-valuation of the pound and the loss of markets for perfectly competitive products in normal circumstances produced by ICI—

The Earl of Halsbury

My Lords, I hope that the noble Lord will allow me to intervene. Would he agree that ICI has just coughed up £95 million in redundancy payments?

Lord Jacques

My Lords, it might have coughed up £95 million in redundancy payments. That just spells out what I am saying. It is a perfectly competitive and efficient firm and yet it has redundancies on a substantial scale. I have in mind, for example, an enterprise of which I have first-hand knowledge. That enterprise has been planned during the last five or six years at a capital cost of £9 million. Every possible step was taken to ensure that the very latest methods and the most sophisticated methods were used in order to get the absolute minimum unit costs. The enterprise commenced business last year. It has attained the output which was expected, but it is showing a loss because of excessive interest charges which it has to pay upon the capital. That enterprising firm is having its reserves depleted and frittered away in excessive interest charges.

The Earl of Gowrie

My Lords, what is an excessive interest charge?

Lord Jacques

My Lords, an excessive interest charge is one which is high because it is unnecessarily inspired by Government policy.

Viscount Caldecote

My Lords, may I interrupt—

Lord Jacques

My Lords, just a minute, the noble Viscount has either made his speech or will get an opportunity to do so. It is now my turn. There you have an example of a firm which, during the last decade, has been planning this and has taken every step to get the absolutely perfect, sophisticated methods to achieve the lowest unit costs. It has attained the output required, but it is losing money because of Government policy. Our industries have been suffering for far too long from the over-valuation of the pound. It should have been part of Government policy to bring the pound into line with the domestic price levels. But instead the Government have used all their powers and all their resources to maintain the value of the pound.

I will admit that in part the value of the pound is due to the depreciation of other currencies. But I must also say that there is more money than ever before seeking a secure haven for a short period because of the high price of oil. The pound has that security because of North Sea oil. We have been foolish enough to attack that short-term money with high rates of interest. Instead, we should have been doing as some of our EEC partners do; that is, we should have been taxing the interest, instead of offering a higher rate. Loss of business to firms that are suffering from the over-valuation of the pound means that their unit costs are increased. Consequently, in the same way as success breeds success, so failure breeds failure. They are so intent on maintaining their survival that they are having to cut back in research, development and investment, and in some cases they are abandoning markets. The Government's monetary policy has gone far too far.

I shall be constructive and suggest alternatives. First, we ought to reduce drastically the rate of interest. No matter what the side consequences are, the advantages in getting down the rate of interest will be far greater than the disadvantages which we might suffer. Coupled with that, we must use everything that is within our power to get the pound in line with the domestic price level. That is only fair to our own industries. As long as we allow the pound to be above the domestic price level, we are bleeding dry our industries.

Secondly, North Sea oil tax receipts should go into a fund for the redevelopment of Britain; they should not be given away to private industry or to public industry, but should be loaned at low rates of interest on the basis that we select those industries for loans which will give the best results to Britain, not merely in the short-run but in the long-run. The problem is in spotting the winners. We shall make mistakes, but it is better than squandering North Sea oil as part of the tax receipts. If the diversion of the North Sea oil tax receipts into a special redevelopment fund means that we have to increase the PSBR, so be it; it is far more important that our people should know that the benefits from North Sea oil will be used for the benefit of the country in the future and will not be frittered away in part of Government's revenue.

Thirdly, we must make changes in our banking system. We must encourage our banks to lend to industry on a long-term basis. We must encourage our banks to give preferential rates of interest to industry, and preference, for example, over consumer credit. Consumer credit is far less important than investment in industry. The Government can do that. All they have to do is to tell the banks that they will share the risks with them in relation to industry if they will give industry long-term investments, and if, at the same time, they will give industry lower rates of interest. By sharing the risks, the bank has an incentive to do this, and the Government are putting themselves in a position where they are entitled to insist upon that being done.

Fourthly, we must get rid of the national insurance surcharge to employers. But we must go further than that. Our position is now completely altered and it is time that we had a joint investigation by Government, trade unions and employers to examine the present taxes upon employment, and to see how far they should be altered because of the changes in our economic situation. For too long we have been discouraging the employment of labour and encouraging the employment of capital. Our position has changed, and we must re-examine it.

Fifthly, on training, we must give a high priority to those skills which require years to acquire and less priority to those skills which can be learned in a matter of weeks. We must also give some priority to the skills required by the newer industries, on the lines put forward by the noble Baroness, Lady Seear. My final suggestion is this. There is evidence to show that unemployment moves in the same direction as money earnings per unit of output. Unemployment can therefore be reduced by lowering the wage and price inflation and by raising productivity. The time has come when the Government should go to both employers and unions and say that they want consultations with a view to having a joint, agreed policy for the purpose of minimising unemployment. That is the way in which we can save our industrial base. These are strong remedies, but we have a very urgent problem.

I was due to speak on unemployment in the South-West until I heard the noble Earl, Lord Gowrie, when I thought that I would prefer to state the opposite side of the case. In a matter of two minutes I should like to say something about the County of Cornwall. We all know Cornwall as a good place to have holidays. But when we have debates on unemployment we tend to overlook a place like Cornwall because it is remote in distance and has a relatively small population. But for many years Cornwall has been suffering from high unemployment. The latest figure is that in Cornwall there is unemployment of 14.8 per cent., and one half of that is long-standing. The other half has developed in the last few years, and more especially during the period of this Government.

The local people, and in particular the county council, are doing everything within their power to attract industry; and I have had a look at the work which they are doing, and am attracted by the quantity and the quality of the work that is being done. They are also co-operating with the neighbouring county of Devon. They have set up a bureau for the purpose of attracting industry from abroad to both counties. I am also satisfied that they have received substantial aid from central Government of both parties, and especially from central Government agencies. I would pay particular tribute to the Development Commission for Rural Areas. It has built 31 small factories in Cornwall, 26 of which have been occupied. In the past few years there has been a good record in trying to mitigate the problems of Cornwall. All I can do at this stage, as unemployment becomes more and more a national problem, is to plead with the Government not to forget Cornwall, but to bear it in mind as one of the places that requires attention.

8.11 p.m.

Viscount Caldecote

My Lords, the noble Lord, Lord Jacques, made a forceful and sincere speech. I should like to put a slightly different point of view from his, but not entirely, for I very much agree on many aspects of his speech. The noble Lord, Lord Jacques, suggested that the shakeout in industry was not necessary. I would disagree entirely on that point. In my experience British manufacturing industry has been desperately overmanned for years. If we are going to increase our productivity to make ourselves competitive, as you will see later in my speech, I believe that that shakeout has been absolutely essential. The noble Lord mentioned also a company of his acquaintance which he said was paying excessive interest. There are two reasons for paying excessive interest. One, because rates are too high, and the other because you have too much borrowing, and I suggest that perhaps the firm of his acquaintance has borrowed too much and it was not only because the interest rates were too high. There are two sides to that question.

Unemployment is a very emotional subject because it affects people and family life. As the noble Lord, Lord Thorneycroft, said, it is not just a regional affair, it affects people all over the country. It is important to look at the issues realistically and to seek practical solutions with a clear understanding of the background of the problem. I started my life in industry building ships on the North-East Coast. I heard many terrible first-hand stories of the unemployment in the 1930s. Terrible because it was long-term unemployment, and it led to enormous personal and family hardship. I made many friends among those wonderful Geordies on the North-East Coast.

The spiritual damage came from a feeling of utter hopelessness; of no one caring; of not being wanted. The physical damage in those days was terrible too because the dole was inadequate and the housing conditions were often appalling. Today the physical hardship is not too serious because of the welfare payments that the unemployed receive, and the better living and housing conditions. It is still a problem for those who lose their jobs, but it is not the catastrophe that it was in earlier days. But the spiritual damage is still there, particularly among young people, and it remains desperately serious. It rapidly increases with the length of unemployment. I do not think there is any point in pretending that unemployment, particularly long unemployment, is not a terrible thing, to be avoided if we possibly can. But as the noble Lord, Lord Thorneycroft, reminded us, unemployment has been on a rising trend in Britain for years. It is also now a serious problem elsewhere in Europe, and particularly in Germany where it has not been a problem before.

Unfortunately, we in Britain, for reasons which other noble Lords have mentioned today and which I shall not repeat, have added to our problems in many ways and we have lost a big share of world trade that we used to have. In addition to those longer-term factors it is a fact that Government action in controlling money supply and inflation, high interest rates, and the like, has had a major short-term effect on home demand for products made in British industry. It is important to appreciate the result of this. Early in 1980 two things happened. Consumers foresaw difficult times ahead. They preferred to save rather than to use their rising incomes in consumption. The savings ratio increased over a few months by some 2½ per cent.

In many companies stocks had been high at the beginning of the year for tax reasons, and in the High Street shops saw no increase in sales and they reduced their orders on the wholesalers. So the de-stocking started. The orders on the wholesalers decreased; the orders by the wholesalers on the manufacturers decreased; the orders by the manufacturers on the raw material suppliers like BSC and ICI decreased. The whole process gathered momentum, with the resulting massive cutbacks in employment that we have seen, leading to a serious increase in unemployment, super-imposed on the long-term world trend to which other noble Lords have referred.

It is now a very worrying situation. But there have been benefits from all this sacrifice and hardship. Prices are rising much more slowly because of intense competition for available business. In my view—perhaps an oversimplified view—the main reason why inflation has come down is that companies, manufacturers, with rising costs have not been able to put up their prices because of the competitive position and the lack of orders.

Pay settlements in industry have come down to a much more reasonable level, and I hope that the financial sector will follow the example of manufacturing industry in that way, and the public sector too. Inflation is coming under control. Manufacturing costs are coming down. When demand increases, as I hope it will at the end of this year, our productivity will be much greater than it was before, our costs will be down, and we shall be very much more competitive, provided of course that we continue to have sensible pay settlements, as the noble Earl, Lord Gowrie, has pointed out. Then we shall be able to obtain more orders at home and in the export markets, and that is the prize that we can hope to win. Everyone in responsible positions in industry has a solemn duty to strive to win that prize, for there is no inherent merit in closures of factories or reductions in job opportunities.

So, my Lords, we must ask—and this is a fundamental question of this debate—could we have made these vitally necessary changes in attitudes, in use of resources, in improved productivity and competitiveness, without going through this dark, grim valley of unemployment? I would answer to that question emphatically "no"; we could not have achieved these necessary results without going through this period of hardship. I do, with great respect, disagree in that connection with the noble Lord, Lord Peart, who introduced this debate with such sincerity.

We must also ask the question, how much longer can industry continue under these present conditions? How much longer can we afford the loss of thousands of jobs each day? Perhaps six months? Perhaps nine months? But not longer than that. If no effective action is taken soon 1981 will be another year, or perhaps the first year, of really lower consumer demand, much less investment and, I am afraid, ultimately falling exports, which have held up amazingly well so far. If unemployment is not to rise to unacceptable levels, if long-term damage to industry is to be prevented, action must be started now to reverse the downward trend, for any action takes quite a long time to come through to effective results.

There must be no let-up on the anti-inflation policy; no U-turn there. That would cast away the results of all the sacrifices that we have endured over the past two years. That means constant pressure on lower costs through pay restraint, improving productivity, and on reducing unproductive Government expenditure. But industry needs help too—needs it desperately, from lower real prices by national monopolies; from lower interest rates; lower taxes on energy and fuel, and on employment, as other noble Lords have stressed. That help is urgently needed now, and I hope we shall see the beginnings of it in the Budget next week.

In addition to continuing pressures on these rather well trodden paths, we need some more fundamental initiatives if we are to get out of our present difficulties and overcome this period of stagnation and rising unemployment. I would mention two which could, I believe, be quickly effective. The first is related to investment in nationalised industries, and here I support warmly the points made by the noble Lord, Lord Taylor of Gryfe. Instead of concentrating on the difference between investment in the private and public sectors, is it not time we started to differentiate clearly between wealth-creating investment, whether in the private or public sector, and all other expenditure under Government control?

That is a distinction between wealth-creating investment wherever it is and wasteful revenue expenditure. It seems that the Treasury have a dogma that one cannot separate Government expenditure into two different kinds, capital and revenue. If we took that view in industry we should be considered criminally negligent and incompetent. I cannot see why, now that Government are deeply involved in wealth-creating industry, in the nationalised industries, the same view cannot be adopted in Government affairs.

There is a vast pool of private sector savings. In 1979 it increased by £17½ billion and in 1980 it is estimated that it will increase by a further £20 billion. We should concentrate all our efforts on encouraging a large proportion of that flow of savings into wealth-creating projects here at home. We should free the nationalised industries from all constraints on raising capital that is not guaranteed by the Government; they should be freed from all constraints on raising capital for profit-earning, wealth-creating projects. Until demand returns in the private sector, private sector companies will be short of cash flow themselves for investment, so in the meantime let us get things going again by looking at wealth-creating investment in the public sector, with the investment provided from the private sector.

There are many opportunities in the national monopoly industries—in telecommunications, transport and energy—for this sort of profitable investment. Many projects have already been fully evaluated and have been found to give a very satisfactory rate of real return. If we could move in that direction and provide that investment, it would give a great stimulus to industry very quickly right throughout the country. I have no doubt that the vast experience of the London financial market could find ways and means of doing that, if only the Government would let them off the hook and accept the principle of distinguishing between capital and revenue.

The rigid control of Government revenue and welfare capital expenditure is as essential as ever it was and, in that connection, the PSBR is still important. But, as I say, let us get away from the dogma that capital expenditure in the public sector can be damaging, but not in the private sector. Action in that way could help us to break out of the present depressing down-ward spiral of falling investment because of excessive PSBR, leading to greater Government expenditure related to unemployment, and less money available for investment. We could restore confidence quite quickly, consumer spending might pick up again and, with it, job opportunities. Of course there would be risks involved, but I believe there is a far greater risk involved in not taking some kind of action on those lines. Happily, I believe Government thinking is moving in that direction. I hope it will move that way a lot faster in the next few weeks.

There is another initiative by the Government which I believe would also give a valuable and quite quick stimulus to employment in the realm of small companies. I have no doubt that the Budget will make changes that will give some financial advantages to small companies. However, I urge the Government to look again, as my noble friend Lord Thorneycroft suggested, to see what might be done to remove restrictive regulations from small companies employing, say, fewer than 10 people, for instance on the conditions of employment and dismissal, for planning purposes and even in health and security.

I believe we must go as far along that road as we possibly can, and it might even be necessary to establish a new kind of small company—the unregulated private company—and it might be necessary for employees taking jobs in such a company to sign a statement to the effect that they understood they were going into a company where they would not be so well protected by all the regulations as they would be if they went into a big company. I believe many people would prefer to work under those conditions than not to have a job at all. Those are perhaps somewhat unconventional ideas, but I hope the Government will look at them on the principal that when one is in a very difficult position one should not rule out anything, however peculiar it looks to start with.

I have much sympathy with the noble Lord, Lord Balfour of Inchrye, on his point about import control. However, I fear the retaliation that might result from it. Would it not be better to make it absolutely clear to every Government department—the Customs and Excise, the people who certify products for use in this country and the like—that their first duty is to help British industry and not to play the Queensberry Rules? As I say, new initiatives are needed if the difficulties which are associated with rapid change are to be overcome. We are all aware of the immense cost of unemployment, in financial terms and in terms of human misery. Action is needed now. It is owed to those who are suffering the effects of unemployment. The vast majority of British people want something to be done as quickly as possible provided—I repeat this—that it will not lead us back along the path of inflation. The will, spirit and skills are there, but how long will they last?

I conclude with a little story which I am sure will warm the heart of the noble Baroness, Lady Fisher of Rednal, because it comes from the West Midlands. I was visiting a factory there the other day which had suffered very large redundancies and I said to one of the shop stewards, "I am afraid you have had a very rough time in the last few months", and she replied, "It is all right. We will pull through ". I thought that was rather splendid and I was proud to be associated with people who took that sort of attitude after the time they had been through. We can pull through and we will, but we need action this day if 1981, probably towards the end of it, is to be a year when things look up and we can look with more confidence to the future.

8.28 p.m.

Lord Underhill

My Lords, in view of the number of speakers to follow and in deference to your Lordships, I will refrain from dealing with the national issues for three reasons: first, because one cannot deal with them adequately in only a few moments; secondly, because my noble friend Lord Jacques expressed much better than I could the views which I hold; and, thirdly, because I wish to put some figures on record. I recognise that behind every figure are human beings, as other noble Lords have said. In that connection, when we talk about a shake-out, we must realise that that involves human beings. It means privation, impoverishment, disillusionment and bitterness. We must always bear that in mind and I recognise it when I say I wish to put some figures on record.

My noble friend Lady Fisher of Rednal said there was a London and South-East mentality. If there is such a thing, those who live in London and the South-East had better start to think again. This area is often regarded as the fortunate region and, as of January, the region still had the lowest percentage unemployed of any region, 6.8, the next lowest being East Anglia with 8.1.

We recognise that some regions have unemployment percentages almost twice that of London and the South-East, but unemployment in the South-East is increasing at a very rapid pace. Between October 1979 and October 1980 unemployment in the South-East, excluding Greater London, increased by 59 per cent., compared with the national average increase of 51 per cent. Because of the greatness of the population as compared with other regions London and the South-East naturally have a much higher number of unemployed. Over half a million people are now without work in the London and South-East area; that represents a fifth of the unemployment total of the United Kingdom.

In the area of Greater London alone the number of people unemployed in February was 249,000. That represents an increase of 86 per cent. since the Government came to office in May 1979, and in the 12 months of 1980 the increase was no less than 70 per cent. That is for Greater London alone. The closures and lay-offs do not give the full picture, because many employers cut staff by not filling vacancies, and naturally that has an additional serious effect on the labour market. In Greater London the number of vacancies available through employment offices, job centres and careers offices total only 16,000. Remember I said that unemployment in Greater London totalled 249,000. The number of vacancies notified through those offices involves a drop of 77 per cent., compared with the vacancies as in May, 1979. In fact throughout the whole of the South-East region the number of vacancies is only 33,000 approximately, with 500,000 unemployed.

The run down of British Leyland will obviously affect the situation and hit the South-East region in Abingdon and in Oxford. There has already been the closure of the Park Royal bus-making plant, with over 600 jobs gone. Another substantial closure was the Firestone tyre plant at Brentford, in West London, with 1,500 jobs lost. The very enterprising toy making works of Lesney's at Hackney suffered the loss of 800 jobs.

I shall not bore your Lordships by detailing other closures, but there is quite a list of closures or lay-offs involving concerns affecting various numbers of men and women, ranging from 250 to 2,000 in each case. Most of the area of the South-East outside Greater London has been regarded by many people—this is the South-East mentality—as one of some affluence, but unemployment is also hitting those counties. Although Berkshire, Hertfordshire, Surrey and West Sussex, for example, have only roughly half the national average of unemployed, East Sussex, Essex (which happens to be my county) and Kent each has 9 per cent. unemployed—that is only 1 per cent. below the national average. These are areas that have been assumed by most people to be affluent.

However, even those figures hide the true situation in some areas. Local areas where the unemployment rate is more than the national average of 10.2 per cent., where the rates are between 10.5 and12 per cent. include Ramsgate, where male unemployment is almost 15 per cent., Southend, Chatham, Hastings, and the Isle of Wight, which has 4,000 unemployed—a rate of 10.5 per cent. I should like to give two other examples. Male unemployment is particularly heavy in Margate, where the rate is 24 per cent., and in Sheerness, where it is 17 per cent.

Even Slough, which for very many years has been regarded as a magnet for labour, is being hit. Although unemployment there is still only 6 per cent.—I say "only" but a rate of 6 per cent. represents many tragedies—it is the worst rate there for very many years. Since November 1979 there has been short-time working by 31 firms in Slough, and another 80 firms have had redundancies involving from 12 to 240 workers. Even Milton Keynes, our latest new town, is being hit with 8 per cent. out of work.

To return to Greater London, although the overall figures are very disturbing, they conceal some very bad black spots. For instance, London Dockland has an unemployment rate of 10.6—that is above the national average. There are local areas as bad, or very much worse. I have the figures as at December 1980 for the areas covered by the local employment offices in Greater London. I shall not weary your Lordships by giving them all, but I think that I should quote a few. I shall give round figures. In Hammersmith there were 7,800 out of work, but notified vacancies totalled only 300. In Hackney—those of your Lordships who know London will know where these places are—there were 7,800 unemployed, with 250 vacancies. In Holloway the total was 7,500, with 240 vacancies. In Marylebone the unemployment total was 7,400, but there were no vacancies, and in Brixton the unemployment figure was 5,700, with 77 vacancies. One could go on and give other figures.

A noble Lord mentioned that in another place Mr. Tebbit had said that 6,000 jobs will be found in the South-East in the next two years. That would be useless—well, not useless; even one job is valuable. But in relation to the problem of 500,000 unemployed, and hearing in mind some of the figures that I have mentioned, it is pathetic. It has been said that many firms in London have found problems in recruiting and retraining the right type of labour. Yet I understand that three skill centres, at Enfield, Kidbrooke, and Poplar are to close. I should like the noble Earl to confirm whether that is so. If it is so, I hope he will say whether the Government will reconsider the matter, since in view of the substantial number of unemployed such closures are the last thing that should be done at this time.

Many noble Lords will have noted reference to the Youthaid Group report, which stated that, there is a disproportionate burden of unemployment which is being carried by young blacks. This is recognised as a major injustice and a serious social problem". Many of the areas in London with the highest numbers out of work—and they include some of the areas to which I have referred, with heavy unemployment, and hardly any vacancies—have a high proportion of youth unemployment, in particular among the ethnic minorities. I think most noble Lords will appreciate that that situation presents grave dangers. Therefore, I am pleased to note that the Home Secretary is to carry out an inquiry which may have some effect on this serious problem, which could involve very great dangers for race relations in particular areas of Greater London. As one moves about, particularly in Greater London, one sees throughout the area property after property of small and medium-size firms up for sale or to let. I see different examples of such properties each day as I travel to and from your Lordships' House.

I recount all those details—I recognise that there must be policies to deal with them—in order to place on record the fact that this area of comparative affluence is at the moment being affected by unemployment possibly more quickly than most other regions. Unemployment in the area is rapidly worsening. I mention these facts so as to emphasise the need for policies to be taken—policies which may have to be very drastic—in order to deal with the situation.

I do not believe that one can assume, as some individuals do, that at some time the recession will pass over. In view of the time, all I would say on this issue, is that sometimes a prod must be given in order to move a recession. Despite what people say about Keynesian policies being out-of-date, there needs to be created a demand, because nobody will produce goods unless there is a demand for them. I hope that the Government will take into consideration very seriously the suggestion which has been made by noble Lords in all parts of the House, that the Government ought seriously to consider the policy of public borrowing in order to get investment in constructive jobs, which will provide the necessary machinery by which private enterprise can make the goods—and so the thing goes round. I believe that unless we give that sort of prod we shall not get out of this recession as quickly as we ought.

8.40 p.m.

Lord Hampton

My Lords, following that powerful speech by the noble Lord, Lord Underhill, perhaps I might briefly once again draw the attention of the House to the critical unemployment situation in Northern Ireland consequent upon what the noble Lord, Lord Blease, said earlier in the debate from his personal experience. The noble Lord, Lord Blease, referred to "horrific figures" of unemployment. Perhaps the figures I give may differ slightly at times, but we are in general agreement. The noble Viscount, Lord Watkinson, referred to the almost desperate position in Northern Ireland, and my noble friend Lord Evans quoted the special problem of Northern Ireland with his caution about playing the numbers game. I shall attempt not to over-play it.

Your Lordships may perhaps have seen an article in the Economist of 10th January this year which had the brilliantly succinct heading, "Guaranteed Depression". It commented that a sense of perspective is returning in the Province, and that people are now more worried about the state of the economy than about the protests in the Maze Prison. Yesterday we heard about fresh troubles at the Maze, but our primary concern today is with unemployment rather than terrorism.

In his vivid television series Robert Kee made the point that Ulster has always been an economically disadvantaged part of the United Kingdom, but that its rulers sought, to appease the discontent of its Protestant supporters by indulging them with a sense of privilege, where jobs and housing were concerned, over the Catholic minority". He looked back, of course, to the devastating depression of the 'thirties and pointed significantly to the unemployment of today. At both times the situation in Ulster was, or is, worse than in the rest of the United Kingdom. Ulster's unemployment rate remains the highest at around 21 per cent., with some of the poorest (largely Catholic) areas up to almost 50 per cent. One in five of the potential working population is therefore unemployed, and this is at least twice the average for the United Kingdom.

On top of this the problem must be seen in its political context. Perhaps the most disturbing of the available statistics is that of the number of young people unemployed; and the noble Earl the Minister showed that he was well aware of the general problem of the young, as did my noble friends Lady Seear and Lord Evans of Claughton, and many others. A trade union report says that 14,865 out of 99,849 unemployed are under 19 years of age, and are particularly vulnerable in Northern Ireland to the influence of paramilitary groups.

It is probably agreed on all sides that the problem is critical, but the Government insist that Northern Ireland gets special treatment in higher public expenditure per head than in any other region. I submit that this is true only in recent years, and that the increase partly redresses the balance of neglect in the past. The largest single item in public expenditure is social security, and this spending does no more than seek to ensure that wages are up to the official poverty line, and spending here is bound to be considerable. A major additional burden—10 per cent. of public funds—is also drained off to the maintenance of law and order, compared with 4 per cent. in the United Kingdom as a whole.

Therefore, I also submit that in spite of the special problem in Northern Ireland the Province has not in fact received special or favourable treatment in the matter of public expenditure. At the time of the Chancellor of the Exchequer's visit to the Province the Northern Ireland Office announced the loss of 2,000 more Civil Service jobs, and the threats of further cuts. It is sad, indeed tragic, that at a time when greater co-operation with the Republic of Ireland might be so valuable, the honourable gentleman, Mr. Ian Paisley, the Member in the other place for Antrim North, sees fit to attack any such move out of hand. I humbly submit that he could be better occupied than in organising amateur theatricals in inconvenient places.

To return to the problem of the young unemployed, I quote from a booklet produced by the Fair Employment Agency for Northern Ireland in February 1981. This is called Into Work? (with a question mark)—Young School-leavers and the Structure of Opportunity in Belfast. It emphasises that a number of schemes have been put forward to train school-leavers and provide some basic skills. So far so good, but two cautions are mentioned. Firstly: It should be noted however that these schemes rarely provide permanent "— that is my emphasis, my Lords, on the word "permanent"— jobs with secure futures"; and the difficulty of getting permanent jobs has been referred to by the noble Earl, once again, and by the right reverend Prelate the Bishop of Liverpool in his admirable maiden speech.

Secondly, the report (and another on Londonderry) emphasises the sad results of religious/sectarian discrimination whereby Catholic boys and girls throughout the Province find it harder to get jobs than their Protestant counterparts. It is also claimed that a significant portion of the young people who have been born and educated in Northern Ireland are today leaving the country, but without the safety valve of more or less certain jobs in Great Britain, as is more normally the case.

My Lords, I would end by paying tribute to LEDU, the local enterprise development unit. This organisation seeks, as its name suggests, to give modest support to local initiative. In February, for instance, it helped to launch a manufacturing co-operative in the Shankill Road area to produce a range of high quality children's clothing and other garments". A report referred to this as a fascinating blend of grass-roots initiative and enthusiasm backed by the finance and expertise of LEDU and a local bank". That is admirable, but on such a small, small scale—less than two dozen employed, I understand. Can the Government not give encouragement on a larger scale to the hard-pressed Province? I shall listen with great interest to anything further the noble Earl can say when he comes to reply.

8.47 p.m.

Lord Brooks of Tremorfa

My Lords, your Lordships will be pleased to learn that after a very long day I intend to comply with the request of my noble friend the Leader of the official Opposition and to make my comments as brief as I possibly can. It is almost exactly a year since I initiated a debate in this Chamber on the social and economic situation in Wales, and asked the Government what policies they were pursuing to alleviate the problems facing the people of Wales. Unfortunately, although the Government listened—and, indeed, today the noble Earl, Lord Gowrie, again said that the Government were listening—they do not seem to hear what is being said. The noble Viscount, Lord Trenchard, replying to my debate of a year ago, said for the Government of that day: I hope I have indicated, first, that the constraints on this Government are very real; secondly, that I believe other policies … have failed, and I would ask your Lordships to give our present ones the backing they deserve".—[Official Report; 20/2/80; col. 887.] My Lords, the plain truth is that the economic position in Wales and other regions is a great deal worse now than it was a year ago. The Government have not shown that they deserve backing for their policies with regard to unemployment in Wales. Indeed, very recently a Government Minister said that even when the present policies have worked through there will be areas of Britain which will have to go by the wayside. Statements like that strike a chill in the hearts of all of us who come from those areas suffering in a way that we have not known for over 40 years.

The Prime Minister said in her now notorious speech in Swansea: If the unemployed of Wales cannot find work they should move". She will never be allowed to forget that heartless and ignorant comment. Indeed, her observation demonstrated quite clearly that the Government do not believe that the policies being pursued can cure our problems. Her attitude offers only despair. The Secretary of State for Industry visited the North of England early last year and was reported as saying to a group of people anxious about employment, "It is up to you". As I said in my speech in February, 1980, this had echoes of the 'thirties, when Walter Runciman said to the people of Jarrow, "Your destiny is in your own hands". No wonder that more and more people are saying that the Conservative Party is the party of unemployment.

At the core of the Government's financial and economic policies is the insistence on reductions in public expenditure. The results of cuts in the public sector are having a devastating effect on Wales, Scotland and many regions in England. The Government's reliance on new private sector investment should be tested against the realisation that in Wales there is hardly any dynamic private sector which is not dependent in some way or other on Government subsidy. We calculate that up to 66 per cent. of all employment is either directly or very strongly underpinned by public expenditure. If one takes Government, local and national, the public utilities and the nationalised industries, there is almost nowhere else in Wales to look for work. We are almost entirely dependent on the public sector and we are being hurt much more than other areas of Britain as a result of the Government's policies. This blunt instrument of public expenditure cuts which the Government are pleased to call an economic policy is having a savagely disproportionate effect on the people of Wales.

As a measure of what is needed in South Wales alone, the Standing Conference on Regional Policy in South Wales (a conference made up of Gwent and the three Glamorgans) has estimated that some £300 million of public spending will be needed or £200 million net of regional aid expenditure over a five-year period to provide 20,000 new jobs in manufacturing industry in South Wales alone. This compares with £48 million over two years which has been offered by the Government—£48 million is the response of the Government to assist Wales which, together with the Northern region of England, is suffering the highest unemployment of any area in mainland Britain. We have at the moment over 140,000 unemployed, and about 100,000 on short time or special schemes. Many areas are suffering chronic unemployment; areas in Clwyd with a rate nearing 20 per cent. and up to 35 per cent. in parts of Flint. The Government are presiding over the disappearance of jobs at the rate of 1,000 a week, 200 every working day. If we look at the figures, county by county, for 1979 and 1980, we can see why we reply with a loud "No" to the Government's plea for support for their policies. The figures of jobs lost are: South Glamorgan, 1979, 3,842, 1980, 6,760: Mid-Glamorgan, 1979, 5,841; 1980, 11,231: West Glamorgan, 1979, 2,472; 1980, 15,550: Gwent, 1979, 4,760; 1980, 10,969: Dyfyd, 1979, 2,979; 1980, 6,849: Powys, 1979, 108; 1980, 552: Gwynedd, 1979, 2,574; 1980, 4,790 and, finally, Clwyd, 1979, 8,546; 1980, 7,712. That is the catalogue of misery that we have suffered over the past 12 months in particular.

May I at this point apologise to the noble Earl, Lord Gowrie, that I shall not be able to be present for his winding-up speech. To continue, there is a very serious problem at the moment in the Llanelly area. Your Lordships will know that recently there has been a NEDC report on energy costs in British industry. I see that the Guardian reported yesterday that the Government are likely to give the steel industry more favourable electricity tariffs. While I do not expect the Minister to reply in his winding-up speech, I should be grateful if he could give an indication of whether, even at this late hour, it will be possible to help the Dupont plant in Llanelly. This plant is known as one of the most efficient steel plants in Europe. The proposed closure has been caused partly by high energy costs. The factory uses two electric are furnaces and the energy costs are higher than the wages costs and 30 per cent. higher than Dupont's competitors on the Continent and elsewhere. The closure will increase unemployment in the Llanelly area from 15 per cent. to 20 per cent.

I repeat my plea to the noble Earl and hope that the Government will take a closer look at this so that even now that closure might be averted. The position is worsening almost daily. We call upon the Government to put dogma aside, to recognise that a 19th century knee-jerking response of the Prime Minister to the economic problems of the regions can only widen the gap between the "haves" and the "have nots" and convince yet another generation that the Conservative Party is truly the party of unemployment.

8.57 p.m.

Viscount Rochdale

My Lords, the noble Lord, Lord Brooks, will forgive me if I do not follow him in the details that he gave. This has been a most important, interesting and fascinating debate and one feels a degree of responsibility in daring to make a contribution towards it. The noble Lord, Lord Peart, who for many years was the Member for Workington, the constituency in which I live, is always very much respected in this House and I think we owe him a great debt of gratitude for introducing this debate and giving us the opportunity to discuss the many difficult problems which arise out of the vexed subject of unemployment. It is a complex issue which, in my view, can be brought under control and the levels reduced only by very careful and continuing analysis of the causes.

We have heard a great deal about that this afternoon. But it is also an issue with a very great human impact, demanding considerable and compassionate understanding—and that is something which, I have noticed in the past, political parties have not always readily accorded to the motives of their opposite numbers. It has been a matter of great encouragement today to feel that that sense was entirely absent and that we were discussing the matter together on all sides to see how best the problem could be overcome. In my view—and I am encouraged in this by what other noble Lords have said—unemployment in this country, though we may have our special problems, is a world-wide issue and something that should cut right across party political boundaries.

There are, I would suggest, certain reasons for the high level of unemployment from which we are suffering today. It is to no little extent the result of the underlying and very disabling trends that have been developing insidiously, in this country over a great number of years to which Governments of both colours, and indeed all of us as individuals, have probably made our contributions—no doubt often with the very best intentions—but which have weakened our abilities to withstand the pressures of storms such as we are up against today.

May I give two very quick examples of what I first have in mind? I started in the textile industry in the North-West. In the 1920s I have no doubt that the industry felt that it was so secure that it could export those industries to the more backward countries, the Indian sub-continent and so on. It was not so very many years after that when the textile industries of the North-West realised what tremendous competition they were up against from those countries. That was the beginning of the withdrawal of those industries. Again, after the Second World War, we gave great assistance in the building of steel plants and shipyards overseas. Today the effect of that has been tremendous world over-capacity and enormous competition, to our serious disadvantage.

There are many other reasons that one could give that have had this debilitating effect on industry today. There is the effect of changing fashions—and I am not talking merely of textiles but of all sorts of industries—to which we have too often been rather slow to react. There has been, I believe—but I hope no longer persists—a hesitancy on both sides of industry to adjust to the latest available technology, with the result that the way has been left open for our competitors.

Perhaps also the dominant industrial position we held in the past encouraged us in the very natural human way to look for an easier, more comfortable life, providing a less exacting way of working and living, over-manning, higher standards of living and more leisure. One could go on suggesting all sorts of issues that have had the effect, whether from the point of view of management, trade unions or individuals, of reducing human endeavour and slowing down to a level at which we could all too easily be hardly secure enough to resist the stormy world in which we live today.

I am not for one moment suggesting that that is true of all industry. There are shining examples today of some very, very good and successful industries: telecommunications, electronics, aerospace and pharmaceuticals. One could quote a very great number of good ones. But it seems to me that the overall effect of these underlying trends has led us to our Achilles' heel of inflation. When we are up against world recession, our present experience is one that can hardly be a surprise to us, and a very difficult one when we also remember that we are today having to deal with the largest male labour force that we have ever had to provide for.

I am therefore quite certain that the present Government are right in making inflation their primary target; but it is all too obvious that, when it becomes necessary to stop the slide of decades in the matter of a few years, it becomes extremely painful. 1 heard the other day—I do not remember whether on radio or television—an analogy which seemed to fit the case absolutely. It was the case of a gentleman who had been to his dentist and had had an extremely painful sitting. The dentist said to him: "You can't possibly complain considering the years that you have eaten so many sweets and chocolates". That to me really describes one of the underlying problems that we are up against today. We have allowed ourselves to drift comfortably down, perhaps unknowingly—

Lord Brooks of Tremorfa

My Lords, I wonder whether the noble Viscount would give way on that point. Would not a better analogy be the story of the man who kept batting his head up against a wall because it was so wonderful when he stopped doing it?

Viscount Rochdale

My Lords, no. I do not agree with the noble Lord. I believe that my analogy is the right one because we have, however unconsciously, allowed ourselves the comfortable way of life. It has been the "We've never had it so good" idea that has resulted in our difficulty and our lack of productivity.

The enormous variations of unemployment in the regions have been mentioned, and noble Lords have referred to particular regions in which they are interested. I recently came across three figures which were published by the Manpower Services Commission in November of last year. I believe they are still reasonably up to date and they indicate this very difficult problem of variation. For every one vacancy there are 41 unemployed in Northern Ireland; in the North-West the figure is 12; in the South-East, it is two. Those figures for the South-East may not, from what the noble Lord, Lord Underhill, said, be quite right today. The figures relate to three months ago. However, those very wide variations show what a difficulty we have there. The North-West (the region I know most about) is third in the list with a figure of 12. One can see that that is largely a result of the region's historical concentration on traditional industries such as engineering and its allied industries, and textiles and its allied industries. Today those groups of industries account for the bulk of the job losses. However, it is significant that in this region, with all its tradition of manufacturing industry over the years, employment in services is the dominant source, with 56 per cent. of employment.

So what should we do? Mention has been made of the importance of lowering the MLR. We hope that will come soon, as it may. Also perhaps there might be a further drop in the value of the pound. An easing of the recession will come and that will help; but, for the various historic reasons that I have tried very briefly to hint at, I take the view that we cannot see a full return to the same pattern of employment as we have known in the past. It will be a different pattern, and we must prepare for that. It is a pattern which will need more of the new and more sophisticated industries based on ever-developing technology. Some of these industries may not yet have been dreamed of, but some are there now and more will come.

The problem therefore must be, as I see it; what do we do with the immediate intervening problem? What must be sought is the correct balance between giving aid to the worst stricken areas in the short term without making matters very difficult for the most important new industries—developments of far greater importance to our long-term industry and prosperity in the future. I do not believe that an overall judgment on this is possible. Each case has to be considered on its merits, but my inclination is to feel that in the past we have been all too obsessed with the immediate problems and needs—this is probably true of both political parties—sometimes in aid of political advantage, so that we have lost sight of the future.

I should be personally apprehensive about a more restrictive import policy, except in very special cases. On the other hand, unfair competition—and here I have in mind fuel prices and dumping—must be pursued as hard as we can. I know only too well how difficult it is in the case of dumping actually to bring anything to book. It is a most difficult thing, but whatever can be done I should prefer to see done within the context of the European Community.

More general restrictions on imports could too easily encourage—and I am sorry that my noble friend Lord Balfour referred to the question—retaliation. I do not quite agree with him there. I still think that more general restriction on imports could lead to retaliation in respect of those new industries which we must develop if we are to have future prosperity at all. It is for those industries that we must prepare our younger people—and I use that word in preference to "juvenile"—because they will be the people who can man these new industries. We want to prepare them for it now.

For that reason I applaud the Government for what they are already doing and are planning to do through the Manpower Services Commission. But I want more of that: I want the work they are doing for young people to be extended perhaps for longer periods. Here is a field in which I suggest we should spare nothing, not only from the point of view of compassion for these young people who are out of work, which is very important, but equally as an investment for the future by means of education, by training for skills, both manual and otherwise, and by encouragement to acquire the right enthusiastic attitude to work and, if possible—and reference to this has already been made today—with the active help of industries, giving practical experience to many of these young people through one or other of the Government schemes. Here is a field—the helping, training and preparing of young employees—which would give the greatest scope for imagination. It brooks no cuts—that is, no U-turns. Indeed, we want the very reverse. We want more of it. I very much hope, in pressing Her Majesty's Government on this, that, when my noble friend comes to reply, he will be able to assure me that I am pushing at an open door.

9.14 p.m.

Lord Kaldor

My Lords, I very much agree with the noble Viscount, Lord Rochdale, that this has been a most remarkable debate. It is remarkable chiefly in the extent to which there is a recognition now, on all sides of the House, of the magnitude of the disaster that has befallen this country. Even so, it is important to underline the position a little more by putting it in a historical context.

The devastation created by the rapidity with which economic conditions worsened, particularly from the middle of last year, has no parallel at all in British history. There was no period in either the 19th century or the 20th century which was anywhere near as bad. The worst year, during the so-called Great Depression of the 19th century, was between 1878 and 1879, which recorded a fall in manufacturing output of 5½ per cent. The worst that happened during the great world depression after 1929 was between 1930 and 1931, which recorded a fall in manufacturing output of 6.9 per cent. As against that, the reduction from 1979 to 1980, year on year, was 10 per cent.

Just to show how the position rapidly worsened, if your Lordships take the last quarter of 1980, as against the last quarter of 1979, the fall in manufacturing output was 13½ per cent., and in the 12 months December to December it was 15 per cent. We do not yet know the figure for January to January, but I should not be surprised if it was even worse. Nothing like this has happened before and it was not an act of God nor of the King's enemies.

It was not inevitable. Despite the frequent protestations of some groups of Ministers, that this is the necessary price which one has to pay for squeezing inflation out of the economy as part of the counter-inflationary strategy, I do not believe for one minute that they foresaw that this would happen, nor do I believe that they would have gone about it in this way if they had suspected that this would happen. I think that Ministers were taken as much by surprise as industry and everyone else.

The noble Earl, with his consummate skill, gave an admirable speech earlier this afternoon and made the best case he could for the Government's policies. But I am afraid that his best was not good enough, because if one analyses what he said it does not stand up to examination. The first thesis was the 2,000 per cent. increase in oil prices; OPEC and the ensuing world recession was the cause. There is no reason why we should suffer from this in the same way as countries which have no oil and have to import it. They have a deterioration in the terms of trade. We are on the gaining end of this change and not on the losing end.

Secondly, it is no good referring to the world depression when no other country has a depression which is anything like it. The EEC published figures just a few days ago, from which it appears that, whereas in the 12 months ending in January 1981 unemployment increased by 3.9 per cent. in Italy, by 13 per cent. in France, and by 26 per cent. in West Germany, it increased by no less than 65 per cent. in the United Kingdom. So that this tremendous acceleration of economic contraction and recession has no parallel anywhere and, as I say, there was no need for us to have it because we were not compelled by a deterioration of the terms of trade. We were not compelled by the need to have to tighten our belts in order to be able to procure oil or anything of that kind.

Moreover, this time there is a smell of the decomposition of the body economic, which was wholly absent in the case of the earlier recessions to which I have referred. The noble Lord, Lord Balfour, referred very aptly to battlefields. He could have added that already there are scavengers around, like those so vividly described by Victor Hugo in Les Misérables who followed after the Battle of Waterloo. Scavengers make money by picking up worthwhile pieces of machinery and equipment and shipping them abroad. Almost every day we hear of factories being dismantled and their contents and machinery being shipped in crates to America. At the same time the scavengers are after living bodies, not just material objects. Our designers, engineers and skilled workers are all being tempted to emigrate abroad where they can get better jobs and better pay.

I want to set this against the picture which the noble Earl tried to present us with: that we are in the middle of a creative transformation, of a great industrial revolution by which we lose our older industries which we are no longer fit to have and instead have new, high technology, high wage, dynamic industries. I do not know where these new, high technology, high wage, dynamic industries are. When I look at countries which have these dynamic industries, countries like Japan which certainly has more of them than anybody else, or America, with Silicon Valley and all that, I see that they do not have to lose their older industries. They do not have to lose their steel industry, their engineering industry, or their shipbuilding industry. It simply is not true that industrial change implies any of these things.

It is the height of irony that our Ministers, who are supposed to be such great advocates of what they call "supply side economics", should do so much to reduce not just demand but also Britain's capacity to produce for the sake of phoney and ill-conceived financial economies. On the one side we hear blood-curdling reports of Russia's aggressive intentions here, there, everywhere; in the Middle East, in Europe and in South America and of our determination to resist her everywhere as though we were still a world imperial power with a great industrial base. Yet at the same time we do everything we can to reduce our capacity to do anything of the kind.

Unlike any other industrial country in the world, we literally halved our steel producing capacity from 28 million to 14 million tons. At 28 million tons it was considered to be grossly inadequate for our long-term needs—witness the Heath Government's plan which wanted to raise production by 1985 to 36 million tons. Then there is the overhanging threat of the total liquidation of the steel industry if they cannot stop making losses. In one watertight compartment of his mind Sir Keith Joseph is thinking of the advancing Russian hordes and how to resist them, but in another watertight compartment of his mind his only concern is how to get rid of the steel industry which is a luxury which the British taxpayer can no longer afford. The thought that while we may have the most wonderful modern nuclear deterrent we shall no longer be able to make our own bayonets seems to have escaped him.

Unquestionably, the most important single cause of our present plight has been the growing over-valuation of the pound. I want to make it quite clear that I hold the previous Chancellor and the previous Government, not the present Government, responsible for that. It started in October 1977 when the pound was set free for the sake of—what? For the sake of averting a completely imaginary danger that the inflow of foreign money would cause inflation. Unlike with the present Government, where money supply, and M3, is growing at 20 to 25 per cent. a year, the money supply throughout 1977 rose by only 10 per cent. while foreign money came into the country; in other words, it could all easily be sterilised by the borrowings of the exchange equalisation fund.

Nevertheless, the Government thought that they must set the pound free as it conflicted with their monetary target. That started a process as a result of which the pound is now over-valued in relation to what it was in 1977, according to the estimates of the International Monetary Fund and of the OECD, by 55 to 60 per cent. Our relative manufacturing costs in relation to the others have risen by that amount and it would need a reduction in the exchange rate of at least 33 per cent. to bring us back to where we were in 1977, before we set the pound free.

I do not think there is any technical problem in bringing down the exchange rate. Indeed, the process may have begun already in the expectation that the Budget may bring lower interest rates. The danger, as I see it, is the other way round; that once international speculators realise that the pound is on a downward trend (as happened in 1976) there will be a tremendous bear speculation which, once it really gets going is like an avalanche and will be almost impossible to hold; and in the absence of exchange control, there is nothing to limit the sterling outflow. Even if that did not happen, even if we could bring the process to a halt at the right point, so to speak—not over-shoot it—even then it has serious domestic inflationary consequences. A 33 per cent. increase in import prices would imply a 10 per cent. rise in final costs, even before taking into account any consequential increase in wages; that is, consequential on the rising prices.

For these reasons I am convinced that, while we should never have allowed ourselves to get into this position—this was a fatal mistake; even more fatal than the famous return to the gold standard in 1925, which only caused a 10 per cent. over-valuation, and not a 50 per cent. over-valuation—now that we are in it, exchange depreciation is not the way to get out of it. It is not a viable solution because it is too dangerous. It is clear that whatever we do we must stimulate demand. In that sense, recovery and reflation are inseparable and the day somebody manages to make the Prime Minister understand that that is so and that it is no good railing against it and saying "I will not have reflation under any circumstances"—if you do not have any reflation you will not have any recovery and if you do not have any recovery you go down the drain. You cannot stand still.

The Earl of Gowrie

My Lords, did the noble Lord try to persuade the previous Prime Minister of the same point?

Lord Kaldor

Well—

Noble Lords

Answer!

Lord Kaldor

The previous Prime Minister would never have said that he was against reflation. I do not think for a moment that he would have said that, but I agree that the previous Chancellor of the Exchequer, who was my chief at one stage, fell a victim to seductive influences coming from Thread-needle Street, and was persuaded to decap the pound. There is no doubt about that and that is the source of a lot of present evil.

So, whatever we might do, we cannot avoid reflation, but it is important that the fiscal stimuli should be administered in ways that will improve our international competitiveness and reduce the rate of inflation, and therefore I am very much in agreement with what the noble Baroness, Lady Seear, said in the course of this debate; we should apply the fiscal stimula so as to reduce our costs and not to increase demand. The best method of doing it is by employment subsidies, as REP used to be. As the person who was responsible for inflicting both SET and REP on this country, I felt some gratification when I heard noble Lords on the other side mention REP with approval; one noble Lord said it was a pity that it was ever withdrawn.

I have no confidence in schemes which relate to additional employment only, because they are not very effective, but I cannot go into that now. But across-the-board subsidies which subsidise all employment are a different matter. They are the same as devaluation. A 10 per cent. subsidy on wages is the same thing as a 10 per cent. devaluation. REP was abolished in 1976 because both the ECC and the IMF wished that we should do so, and we were happy to oblige. By that time, however, its value had become so much eroded through inflation that it did not seem to matter all that much.

I agree that a beginning ought to be made by abolishing employers' social insurance contribution and surcharge, which together take at least 10 per cent. of payrolls, and that would be the equivalent of a 10 per cent. devaluation. If we confined it to the sectors which are exposed to international competition, which are largely manufacturing and tourism, it would cost some £4 billion if given at a flat rate throughout the country. If you do it at a differential rate according to the local level of employment it might cost less, but its effectiveness on our international competitiveness would also be less. I would recommend giving it at a flat rate throughout the country, a 10 per cent. basic reduction applying to the whole of manufacturing industry, which you obtain merely by removing that employers' contribution and surcharge, and spending another £4 billion in regionally differentiating supplements.

Even these two measures would only carry us two-thirds of the way towards restoring competitiveness. That is why I feel we cannot rely on saving this country's economy by any one type of measure alone. Noble Lords may know my views. I think it is inevitable that we should have import controls if the question is one of saving vital industries. It would be absolute madness on our part to let the motor-car industry go the same way as the motor-cycle industry has gone simply because we say, "We are not as good as the Japanese. Why should we have motor-cars? The Japanese are better at this." Well, to hell with it; the Japanese may be very much better, but we would be very much worse off as a nation if we did not produce motor-cars, because we would not have the money to import them and we would not be able to give employment. When it comes to saving the motor-car industry, I listened to the speech of Sir Michael Edwardes only a week ago, and he regards it as quite inevitable that imports should be controlled if this industry is to be saved.

I think it is essential—and I was very glad to hear that the noble Lord, Lord Balfour, shares my view—that we should have import controls. The introduction of import duties in 1932 induced the one period of rapid economic growth in the last 100 years. In the five years between 1932 and 1937 our industrial output increased by 50 per cent. One should remember that. I agree entirely with those noble Lords who said that the dangers of retaliation and so on are very much exaggerated. The only countries which could retaliate are those which sell far more to us than we sell to them, so they would not want to cut off their nose to spite their face. Third world countries or the OPEC countries will not retaliate just because we limit the imports of German, French or Japanese goods.

The question which is no doubt on the minds of noble Lords—and 1 am about to finish—is, where would the money come from? I mentioned £8 billion to begin with in order to turn the economy round. The answer which I can give, without hesitation, is that it will be covered out of additional revenue and reduced expenditure due to increased production and lower unemployment. Indeed, £8 billion spent on employment subsidies would increase final demand net of duplication by some £16 billion or, say, 6 to 7 per cent. of the GDP at current market prices. With unemployment at 10 per cent.—indeed more, for reasons that we heard this afternoon—and industrial excess capacity of about 25 to 40 per cent. according to business surveys, a 6 to 7 per cent. increase in output (and output would certainly increase faster than employment) at least £6 billion, or 75 per cent., of total additional expenditure would be covered by increased tax receipts and lower public expenditure. In other words, if we spent £8 billion on additional subsidies, £6 billion would be financed by the consequential reduction in the PSBR due to those two factors. That would leave us with only £2 billion—25 per cent.—which could easily be covered by savings due to higher corporate profits and higher personal savings due to higher incomes.

Sooner or later a policy along these lines must be adopted if we are to reverse our cumulative economic decline. I know of no other policy that is capable of reversing it. It is nonsense to think that we can reverse these present trends without a big reflation. There are no obstacles in the way of its adoption—only false dogma and political prejudice.

9.38 p.m.

Lord Mottistone

My Lords, I hope that the noble Lord, Lord Kaldor, will forgive me if I do not follow him precisely. I wish to try to restrict my remarks to one particular subject to which I shall come in a minute. In any case I am sure that my noble friend the Minister of State, if he has not done so already, will be able to answer very satisfactorily the points that have been made by the noble Lord, Lord Kaldor.

I must say that the noble Lord, Lord Kaldor, and the noble Lord, Lord Jacques, reminded me very much of the time five years ago, when we were sitting on those Benches and what fun it was when we were attacking the then Government, who were struggling madly to control unemployment and put the country to rights with their then programme. I must confess that although we on this side are perhaps not as expert as all that, by God! we do not really seem to have done very much worse than noble Lords opposite did when they had the chance.

I must apologise to the noble Lord, Lord Peart, who I thank greatly for initiating this debate, for I have very much enjoyed what I have heard, and I must also apologise to several other opening speakers for not having been present at the beginning of the debate because of other unavoidable commitments. I am particularly sad not to have heard the right reverend Prelate's maiden speech which seems to have been a particularly splendid one. I shall look forward to reading it tomorrow.

I wish to raise one subject. I have narrowed my speech down to one subject partly because other people have said practically everything that has to be said, and partly because I hope that I shall not detain your Lordships for too long. I believe—and this point was raised by both my noble friend Lord Rochdale and the noble Lord, Lord Underhill—that one of the most tragic aspects of unemployment is its effect on youth. I shall not dwell too much on the ethnic minorities, although they are a real problem. I wish to deal with youth as a whole, because it seems to me that they suffer doubly: some of them will not only suffer the debilitating effect of being unemployed, but they may well have never yet worked.

Although it is jolly tough for the man and his wife with two or three children—and they are a different problem—at least they have probably worked on the way. Furthermore, it seems to me that youth are not just a temporary problem: they are a problem that will be with us more rather than less in the future, for two reasons. One is the changing pattern of the workforce's activities altogether, and the other is—and I am not being critical in this respect—the gradual narrowing of the gap in wages between the brand new young chap fresh out of school and the experienced man in his twenties. Therefore, it means that companies which would be prepared to take on the young people, now do not see any particular advantage in doing so. They say: "Why not have a young experienced chap if you can get him for roughly the same price?" Therefore, I think that youth will be a problem all the time.

I have an idea which I should like to float towards my noble friend the Minister of State which he may like to consider for the future. Here I take a point made by the noble Earl, Lord Halsbury, when he said "We are in a terrible position, but for god's sake let us plan for the future". If we cannot pay for what I am about to suggest in the immediate future—in any case, it will require a bit of planning—for heaven's sake let us get on with it, so that it can be put into effect as soon as possible.

Three reasons brought me to this particular conclusion. There is a fourth which is contained in some remarks which were made by the Duke of Edinburgh last week at a special conference organised by the industrial training boards. But this idea has been germinating in my mind and I shall explain very quickly just why.

The first point is that your Lordships will know that since, I believe, 1912 the Germans have had compulsory further education for all youth. The noble Baroness, Lady Seear, will correct me ill am wrong. Therefore, there is a precedent. The second background thought is that I shall never forget the young man in his thirties who was a manager of a company for which I then worked, who desperately wanted to do the diploma in management studies. I said, "Why do you want to do it and why do you think this will be a problem?" He said, "Oh, well, when I left school I was mad keen on football and so not only did I go straight into that, but I did not even work at school for the last couple of years because I was just playing football". He then said—although he did not put it in quite these words—"Now I have seen the error of my ways. I am too old to play football and I have become a manager in this company, but I want to improve myself ".

So with the very good assistance of Aston University in Birmingham, which ran a very good DMS course at the time, we made a special effort to allow this chap to have off one day a week to do the DMS course. The prospect was to spread it over five years. It was a terrible programme for him. However, the important point is that he failed. He could not make it; he just did not have what it took. He had not learned enough in the past, and from his point of view he could not attend the course full-time because he had a wife and family to support, and he would not have received any grant for that particular course. Therefore, that is the second point I want to make.

The third one is our own example of Government support for people who have the necessary A-levels to go to university or polytechnic to read for a degree as a mature student, for up to three years, paid for by the state. We do this already. That applies to those people who have the necessary qualifications for a degree course. My idea is that this should be extended to everyone, and I would suggest that everyone should be allowed to take a two-year course—for otherwise I think it might be a little out of proportion (I will tell noble Lords why I have selected two years in a minute)—for a mixture of public service, as was mentioned by my noble friend Lord Watkinson in his speech and, indeed, as was also mentioned by the noble Earl, Lord Halsbury, education and training. I am not going to dwell on the mix and content, and all that kind of thing, partly because of the time, and in any case it is a difficult problem. That would need to be carefully studied. Nor am I going to talk about who runs it, but I hope to heaven it would not be the Manpower Services Commission. We need something much more flexible and less narrow than that.

The concept is to have this two year course which is a combination of public service and education. People would take it whenever they wanted to in their lives, just in the same way that you can as a mature student. Some people feel they need it when they are young, and others do not get around to it until they are in their 30s. I estimate that you would need between 750,000 and 1 million places in any one year. This would free the jobs that are needed by the young people or, when times are hard, perhaps we would find the young people taking up this advantage at an earlier age rather than a later one.

It should be possible to manage it on a general principal. If the Government say that they cannot afford it, then perhaps they cannot without getting ready for it. But they did afford that sort of period of two years when we had National Service immediately after the war. That is exactly what they were paying for. The chaps were educated, admittedly to be good sailors, or soldiers, or whatever, and they did their service for the country. I say, let us reintroduce this on a different basis with a different end product. The training and education could be towards equipping them for the tasks which are needed by the country, which companies will not train them for, because companies train them for the tasks for which they need them. To a certain extent this would get over a lot of other problems as well.

All I seek to do is to put the idea in the mind of my noble friend the Minister of State. I do not expect him to answer this, except perhaps to say that he will pay good attention to it. At this stage I do not want to waste the time of your Lordships any more. But I should like to leave it as a thought, as a way through that would solve the problems of the young, and have, in the words of the noble Earl, Lord Halsbury, a dramatic effect on what might, even when the country has been put right—either in a proper way, or in the way that the noble Lord, Lord Kaldor, said that it should be—still be a problem of unemployment at a greater level than there was, say, 30 years ago. Therefore, this would kill a whole lot of birds with one stone, and I commend it to your Lordships as something that needs more than just a passing thought.

9.48 p.m.

Lord Sefton of Garston

My Lords, may I tender my apologies to your Lordships for the fact that my name is not on the list of speakers? I was not certain that I could get here today. I had an appointment in the North-West. In the event, I managed to arrive here and I have heard three-quarters of the speakers. I am very sorry indeed that I did not hear what must have been an excellent maiden speech by the right reverend Prelate the Bishop of Liverpool. Knowing him, I am quite certain that it was an excellent speech.

I am certain that the House will be well aware of the statistics affecting Merseyside in regard to unemployment, because I heard most of the speech made by the noble Lord, Lord Evans of Claughton. In any case, it was never my intention, even had I managed to arrive here in time, to deal with the statistics for Merseyside, because this Motion seeks to draw attention to the unacceptable levels of regional unemployment. Because it does that, it is quite evident that that implies that it is concentrating on regional problems—the difference between one region and another.

I accept completely the sincerity of my noble friend Lord Underhill when he talks about the problems of London, and how very concerned he is about the social problems and all the other problems that now arise in London. Nobody denies those problems, but the figures he quoted have been normal in Merseyside for 30 or 40 years. If they are now unacceptable in London, how much more unacceptable have they been for that long period in Liverpool?

The noble Earl, Lord Halsbury, said that when we fought our way out of the 1931 slump some unexpected things happened. I am not in my middle seventies. At that time I had finished serving my apprenticeship, and for my pains I spent the next 18 months on the dole, just prior to the Second World War. The economy did not pick up in Merseyside. My first experience of national economic problems occurred when I was working as an apprentice in a house belonging to someone whom I considered to be very wealthy. He worked in a big shipping office in Liverpool. He came home and stopped us working because he had just discovered that the White Star Line was being moved to the South of England. That was an indication of something new that was happening and it has been happening ever since.

It took the rearmament programme and the move up to the war to make the nation realise that the people of Merseyside were necessary for the life of the country. We started getting jobs then, when the port was needed and when the Battle of the Atlantic had to be won. We started getting jobs when it was necessary to produce the bombers which flew over Berlin and blew it to pieces. But underlying all that there was no solution to the unemployment problem in Merseyside. That was never found because in 1946 the unemployment figure was more than double the figure for the nation, and Merseyside became an assisted area. Ever since, from 1946 onwards, Merseyside has been an assisted region.

I do not blame this Government for the present economic situation. The last election was open and was fought on a simple premise: "Vote Conservative and we will free the entrepreneurs, reduce income tax at the higher levels, lift the restrictions on private enterprise and on the backs of private enterprise enter a new prosperous era". They said, "Let us free the economy", and the trade unions agreed. That is why I do not blame this Government, but it was a tragic mistake for the nation. When the trade unions spurned the idea of a further social contract with the Labour Government, they compounded the felony and those who are sufficiently lily-livered—if I may use that expression in regard to a Member of this venerable House—to leave the Labour Party and give up the battle to make sure there is co-operation between the trade union movement and the party are the people who must share the blame, because they are espousing those ideas of a free society.

It is not the job of a Government to tell British Steel what to do; leave it to British Steel because it is their job, but let me tell your Lordships what is happening in Shotton. I am concerned about the region of Deeside and Merseyside; I am not concerned with regions drawn on a map but regions welded together by the economic and social links that bind people together in one region. It is only a few short months since British Steel told the Government, and the Government told the nation, that the capacity for manufacturing liquid steel to go into our finishing works was too high. We had huge stocks of sheet steel at the finishing plants at Shotton waiting to roll in and be finished into various products.

Within a few months the unemployed steel workers in Shotton have been standing on street corners, and for the last three weeks have seen a fleet of lorries moving sheet steel into the production mills. It has been coining from Runcorn, from the Continent. Is it planning if within a few short weeks of extra capacity being cut down it is necessary to go to the Continent, and so throw our people out of work? I ask that because in Flint we are not talking about 1 in 10 unemployed; in Flint we are talking about 3 in 10 unemployed. In parts of Liverpool we are talking about 4 in 10 unemployed—and they have been there for years.

And let me say this, if I may quote the editorial of a national paper: If the smug and complacent South-East think that once again the people in Merseyside and the North-East and Northern Ireland are going to tolerate the situation much longer, then they are very sadly mistaken, because they are not". I come from Liverpool. I was born in Liverpool, and may I say for the benefit of the noble Lord, Lord Evans of Claughton, I am not a comedian; and there is nothing comic about the situation on Merseyside. There has not been anything comic about it for half a century, and there is not now. No one must tell me that people marching through Liverpool, demanding their rights as citizens of this nation, are to be blamed for anything.

Would it have made any difference if in fact we had never had marches and we had not been forceful in Liverpool? Would it have made any difference to Tate and Lyle? At the very time that the Tate and Lyle Liverpool refinery was first threatened with extinction what were Tate and Lyle doing?—building a glucose refinery on Thamesside, where the unemployment problem was nil. Is that having a regard for the social consequence of your action? Of course it is not. The Government reply to me from the Bench opposite was that it is a matter for the sugar refining industry; it is not a matter for Government. That was what I was told last week when I asked what were they intending to do. Of course they had been to see Tate and Lyle in Liverpool. They had looked in the factory and had come to the conclusion that there was no alternative to closure. Of course there was an alternative.

The truth is that no one was prepared to face the alternative, because they have put on a shrine the idea that the most important thing in this nation is the profitability of companies, even the profitability of nationalised undertakings. I do not accept that. It may be heresy to say so, but I say it, and say it firmly. The only important thing about this nation is its economic health measured in the welfare of the people who reside in it. That is the most important thing. If it means a subsidy for steel, if it means increasing the taxes of the higher wage and salary earners, then those things should be done. I say that because it is a cardinal crime to see what is happening—the noble Lord opposite again seems to think that this is something humorous. It may be that he does not like the way that I put it, but here is a typical example of the smug, complacent South-East attitude that looks at a statement like that and then can smile.

London has a problem. London has many problems. One of them arises from the fact that they are shedding labour because the cost of labour is too high. The cost of labour in offices in London is a burden that the private office sector is no longer prepared to tolerate. So it sheds labour, and there is a problem. The cause of the problem is the Civil Service in London. If ever there was a place that is too highly congested, if ever there was a place that is inefficient, if ever there was a place that wasted resources, materials and men in a transport system that is overloaded at peak hours, it is London.

Yet as Sir Keith Joseph was saying that at least 50 per cent. of the regional policy of the Government meant transferring jobs from prosperous areas to less prosperous areas, the Government stopped the transfer of 3,500 Civil Service jobs to Merseyside. They scrapped a completely new office block that was being built. They scrapped the whole concept. And now in this moment of dire peril for the nation we are actually talking about building more massive office blocks on the Thames and denying to the homeless people of London the land where the houses should be built. We are planning London in order to ensure that within the next 10 years the commuters will still pour in—with all the complaints that there are about a most inefficient transport system.

Last night I drew up a list of some of the things that, after my experience of 25 years in local government in Liverpool and many years' experience before that, I felt could begin to be resolved if the drift to the South-East that has taken place in this country could be halted. The whole of the North-West Economic Planning Council, consisting of some of the leaders of the major industries in the North-West, subscribed to the view that the drift to the South-East was the one major danger facing the provinces of the United Kingdom, and that it should be reversed and that somehow or other the old economic activity that used to be in existence in the North-West should be restored. The Government scrapped all the economic planning councils. The Government have continuously set their face against the idea of having a regional policy, against the idea of diverting resources from the prosperous areas to the lesser prosperous areas.

But, as I have said before, the drift does not stop as a drift from Scotland, from the North-East and from the North-West, all continuously getting worse economically. After every slump and boom they come out the worst. But it does not stop there, regardless of whether or not we are in the Common Market. I believe that we were right to go in, because economic forces dictated that we were part of Europe, and that is the important thing. Economically, we are part of Europe and should play our part in that place. Economic forces have been saying for the last 20 years that the move is down England and out of the United Kingdom, and that the major centre of activity is moving over to the Continent. One of these days the biggest financial houses in London are going to realise that they can just as well set up their organisations in Calais as they can in London, and when they do it is going to be a very sorry time, not only for the South-East of England but for the whole of our nation.

All we on Merseyside say is this, that there are wasted resources existing in the region. We are asking, and have been asking for 40 or 50 years, for the opportunity to employ those resources on behalf of the nation. We have been continuously denied that opportunity. The time for asking is over. Your Lordships can take it from me that Merseyside and many other places, ultimately, are going to start demanding, and then you are going to have trouble, not only in the East End of London, as you had the other day, but in all the major cities.

10.3 p.m.

Lord Ross of Marnock

My Lords, I am sure my noble friend Lord Peart will be very gratified by the response that has been evoked by his Motion that we should discuss (dare I say it?) regional unemployment, and the fact that we consider it unacceptable. We have won one victory, anyway; everybody agrees it is unacceptable, even the Front Bench opposite. But, of course, there is another reason why I think my noble friend should be gratified. That is because this debate has evoked probably one of the finest maiden speeches that I, certainly, have heard in my experience in either the other place or here. The right reverend Prelate charmed us and cheered us with performances at Lords. He is just as much at home in "the Lords"! He knew his subject, too. His sincerity came through because he was talking about something he lives with; and those of us who have very strong Christian leanings and feel that the Church must be involved in all these things were very grateful indeed to hear what the Church in Liverpool was doing. The people's problems were their problems. It was part of Christianity and Christianity is part of life.

I began to wonder whether it was a regional debate, especially when I heard the noble Earl who speaks for the Government. It may well be a measure of the crisis in employment that the Government were anxious to use this debate over a much wider field to treat the whole question of employment and unemployment to try to justify themselves; because we did not get much about the regions. There was a reference to regional aid and to the SDA—and I will come back to these things if I have time and if anyone is prepared to sit to about midnight. The noble Earl tried hard but he did not even convince his own supporters. They were loyal to a point. They said: "There must be no change of policy". Then they said, "But …". I do not know whether the Prime Minister will pay any attention to this debate. Somebody said again that the lady must not be for turning. I got the impression from the importance that the Government put on this and from the reaction of their Back-Benchers, distinguished Back-Benchers, that the lady does not know where to turn. That is the truth.

I did not want to have any competition in respect of the various regions. Let us remember that many of the people who are unemployed in London were Liverpudlians or Scots or Welsh originally. You cannot deny the figures. I see that the noble Lord, Lord Evans, is away. He does not like the numbers game. We must face the fact about the numbers.

On 10th May, 1979, in the South-East area, which includes London, the unemployment figures were 267,000; the figures for last week were 526,000, over half a million. The increase there is higher than it is in Merseyside, Scotland or even Wales. The worst of the increases during the same period occurred in the West Midlands. The figure there was 117,000 when this Government took over and today it is 273,000, an increase of over 150 per cent. These are areas which in other depressions are not hit so quickly or not hit so hard as the traditional areas. Mind you, the traditional areas have suffered, and suffered considerably. We have heard about the Potteries, about Merseyside; and it is not just these figures that matter. These are the figures for the regions as a whole.

One of the most telling points made by the right reverend Prelate the Bishop of Liverpool was the fact that when you take these older industrial inner city areas, unemployment is highest and housing is worst. That is where the deprivation is. He suggested about 40 per cent. in some parts and, generally speaking, 30 per cent. The same is true of Strathclyde in Scotland. We had a bright idea—this is not just one Government—that we start up new towns outside Glasgow. Before we were finished, we were taking all the best people from Glasgow and leaving virtually a handicapped city. As a Government, we started rebuilding Glasgow, reshaping it. This is the kind of thing which the noble Baroness, Lady Seear, was talking about when she said that there are certain investments which should go on—and not just modernisation of the houses; and that is important. There should be more imaginative approaches to the whole question of our inner cities. Capital has to be spent if Britain is going to be worthy of the kind of people that we hear about today. They are not the feckless unemployed. We have heard about the skills that we have and the adaptabilities. Let us do something about it.

The Prime Minister made a speech the other day in which she said it would be terrible if people lose faith in money. It would be even worse if people lose faith in Governments and in democracy. Somebody—I think it was the noble Lord, Lord Evans of Claughton—mocked or did not seem to like marching, whether or not it be in Liverpool. I think the noble Viscount, Lord Watkinson, had something to say about troublemakers on marches in Glasgow. I hope that is the only kind of trouble. Remember, in the march in Glasgow we expected about 30,000 people and we had nearly 70,000. There was not one person arrested; it was disciplined and peaceful. Representatives of the Churches, trade unionists and businessmen were there. This is the kind of feeling that is welling up in the country.

If we break faith with those people I can assure you, my Lords, that we shall be letting down democracy itself. It is no good for the Prime Minister to say, as she did in Wales, that if you cannot get a job then why not move. But where to? There was a time when London was Mecca, the South-East, or even East Anglia. Look at the figures. Where are they going? Northern Ireland? Only with the Army! The figures are staggering and denote a crisis that cannot be mocked, as someone suggested, about comparing figures—I think it was the noble Lord, Lord Mottistone. The total unemployed in May 1979 in this country was 1,299,000. In February 1981 it is 2,463,000, an increase of 1,164,000. To take the jobs that used to be despised by noble Lords opposite—because they were not real jobs—those in the Youth Opportunities Programmes, community industry and training for skills, even in that youth section alone we have 174,000 young people. If you take the total of the special employment projects, it is 926,000. That is the real measure of the employment troubles of this country.

It is not good enough for the noble Earl to rise and say, "We are beating inflation. We are taking the medicine". Is the patient going to be alive after the Government have been satisfied about this one particular disease? They are treating one disease but the patient will die of another one. I have been fascinated by the extent to which the noble Lord, Lord Polwarth, almost followed the noble Baroness, Lady Seear, in respect of the criticisms of the Government and what they really could do. The favourite one of course is the national insurance payment—that that should be considerably reduced. There are others.

If the Government do not want to call it a U-turn, I am prepared to say it is not a U-turn. They have to deal with this question of the regions in terms other than of the South-East. In the North there is 13.6 per cent. unemployment; 13.5 in Wales, 12.3 in the North-West, 12.7 in Scotland and 17.3—and we are not finished. I think the noble Lord, Lord Polwarth, was talking about what had been happening in the motor-car industry. What has happened since? It did not end there. We now have Yarrow's engineering at Govan, 350 jobs; Leyland in Bathgate, 920 jobs; Lemax in the Borders, 200 jobs; and just today Hoover have announced 400 jobs lost in Cambuslang; another 300 in Merthyr and 200 in Perivale. Then we have Seagull Seafoods in Lossiemouth, 140. There are nearly another 2,000 jobs since we heard about these, and it is going on day by day and the Government are not too sure as to what they will do.

I was very disappointed in the noble Earl, Lord Gowrie, himself when my noble friend Lord Sefton asked on 17th February about regional policy. I quote from what the noble Earl said (at col. 556): …the great difficulty is to distinguish between regional policy designed to help people through difficult transitions and regional policy designed to equalise the balance of opportunity and employment in the country. Speaking for myself, I must say that I think the latter is never liable to be very successful". But you have to try. We have been trying for 50 years with some success, and of course the most difficult time is when there is a recession of the gravity of the present one. But if you do not try you will never succeed.

What would the position be like in Scotland, but for what we have done? I heard the noble Lord, Lord Polwarth, talking about what had been happening there. I have heard others talk about what we have done in respect of the newer industries. We have to give that balance of effort and support to the regions, and if we do not then I am afraid the United Kingdom is going to be very much less united. This is the grave danger, and this is why the Prime Minister is so wrong in advising people, implying that you can move and that is all that can be done. We have had enough of this, and today, as far as my own home country of Scotland is concerned, we now have an unemployment figure as staggering as this—more than a quarter of a million. I used to be horrified when I was Secretary of State and I knew what was going to happen to me if we went over the 100,000 mark; but now here we have 240,000—way beyond that, 288,000—within reach of 300,000 unemployed. We have a place where we have got all the new industries in relation to oil. I heard my noble friend speaking about the number of jobs there and he suggested—what was it?—80,000?—more? I would not have put it so high. But despite that advantage, we have what I should have thought were higher unemployment figures than could be borne by the Scottish people. Then someone says "Don't march". What are they to do, if they do not march? It is far better still to have faith in being able to influence a Government to change their ways and their policies. So I hope that the noble Earl will take to heart the importance of what is being suggested.

I could recite the grim catalogue of closures and rundowns—Singer Sewing Machines, Massey-Ferguson, Goodyear Tyres, Prestcold, British Steel at Tollcross, BRS at East Kilbride, Monsanto in Ayrshire, SKF at Kilmarnock and ICI in Ayrshire in the last two years. There were over 83,000 jobs lost, to which you must add the others which I have mentioned. Still they come in daily and we are told just to wear it out.

The fact is that we are achieving new high norms in relation to unemployment. We used to think that 90,000 or 100,000 unemployed in Scotland was wearable. When, if ever, are we to get below the 200,000 mark? I once promised myself that I would retire—this was in the Parliament in which we both served, when I was Secretary of State for four or five years; I eventually did eight years as Secretary of State—if the unemployment figures rose above 100,000. It never did. But then we had a Tory Government and, by heavens! the figure very quickly went way beyond the 100,000.

But we are reaching new high norms, and this is why the Government must look at some of the suggestions that have been made today. This has been a reasonable debate from that point of view. Suggestions have been made in relation to how we should face up to this position. There have been suggestions about the 16 to 18 year-olds; about work experience not being something special, but something that is there for everyone as an extension of education. In other words, you enter the labour market later and leave it earlier, at the other end. But for some of these present schemes, the unemployment figures would be absolutely impossible. I look at what has happened, and at what is happening in Govan, Bathgate and Midlothian. Today, Hoover announced a loss of 400 jobs in Scotland, and losses in Wales and England. It just goes on and on and the Government seem complacent about it.

I am very worried about the noble Earl's attitude, because I get the impression that regional policy has just been relegated; that the Government cannot do anything about it. I am telling him, from the point of view of the unity of this United Kingdom, that he had better do something about it. The Government had better get away from their fixed lines in relation to monetary policies. The noble Baroness talked about what can be done, and what should be done, in relation to investment and the difference between current expenditure and investment expenditure by the Government. It used to be done. In fact, if the noble Earl looks back and sees what a Labour Government did, he will find that they met this difficulty. Not only that, but they sheltered, as far as they could, the areas that have been traditionally hard-hit through unpopular, and maybe necessary, measures. We have to come to that again. There is plenty to be done, if you are to prepare for any upsurge—and I hope that I am not too pessimistic—that will come.

There is plenty to be done in the field of housing. But look at the housing figures and the clamp which has been placed upon local authorities. National work needs to be done to improve the quality of life. Can we not do it? I can point to White Papers produced by the Labour Government and supported by the other side about how to use the revenues from North Sea oil. Is it not incredible that with all this wealth flowing into the Government's coffers unemployment in Scotland should be higher than it has ever been since the war? The Government do not differentiate between preparing to improve the quality of life in the country and the employment of staff by local authorities which they say is far too high. The position may become so bad that we shall be unable to get ourselves out of it. The remedy will be such that we shall be unable to survive the so-called cure. I hope the Government will listen to some of the things that have been said today.

Points have been made in relation to young people and in relation to the Special Development Agency by, I think, the noble Lord, Lord Polwarth. What difficulty we had in getting it through the House. Supporters of the Government were going to get rid of the Special Development Agency once they came to office. That is what they used to say. They said the same thing about the Highlands and Islands Development Board. The noble Lord who is tired of my quoting his speech about the Highlands and Islands Development Board is not here. It was Marxism. However, he would not now dare move that it should be abolished. The same thing will come to be said about the Scottish Development Agency and the Welsh Development Agency. There should be a little less harping on their failures and a little more publicity about their successes. Whenever there is difficulty in Central Scotland at present—and there is plenty of it—what does the Secretary of State say? He says, "I'll get on to the Scottish Development Agency right away". We created this agency because we felt that the older, traditional means of dealing with unemployment were inadequate. It may well be that we shall need to have way beyond what we have got at present.

I was interested in Lord Halsbury's speech. I did not agree with much that he said, but he quoted Robert Burns. I do not know whether he knew he was doing so. But he spoke about man's inhumanity to man. Does he know that the verse after that is: See yonder poor, o'er labour'd Wight, So abject, mean, and vile, Who begs a brother of the earth To give him leave to toil"? Of course, his petition was spurned.

Should I quote the next verse in the House of Lords? If I'm design'd yon lordling's slave— By Nature's law design'd— Why was an independent wish E'er planted in my mind? If not, why am I subject to His cruelty or scorn? Or why has Man the will and pow'r To make his fellow mourn? The line which the noble Earl quoted was about an unemployed man.

The Earl of Halsbury

My Lords, I am greatly obliged to the noble Lord for giving me the origin of that quotation. I took it from the title of a book by Wynwood Reid.

Lord Ross of Marnock

My Lords, there are a number of books with titles which come from Burns. I will give the noble Earl a few of them, if he likes. He should come to my next Burns' Supper in Kilmarnock. "Of Mice and Men" is one of them: The best-laid schemes o' mice an' men Gang aft agley". And the schemes of the present Government in relation to their monetary policies have gone. They can call it U-turns, or a change of mind, or meeting the circumstances of the hour, as they like, but the Government have got to change their mind and they have got to change their way of doing things.

The noble Lord opposite has not been here very long; if he is a bit tired then he can go. We would not miss him, because we did not miss him when he was not here.

When the present Prime Minister says: "I have heard it said that Conservatives have been associated with unemployment—well that is absolutely wrong. We would be drummed out of office if we had this level of unemployment", that was when the unemployment figure was 1,400,000. It is nearly double that today. Well, I can tell her that if she goes to the Merseyside area, if she goes to Wales, if she goes to Scotland, she will begin to hear the drums being tuned up. We never voted for this Government in Wales or in Scotland or in the North, but we got them—

Several noble Lords

Neither did we!

Lord Ross of Marnock

I cannot even say that I was using the royal "we", can I?

Several noble Lords

No!

Lord Ross of Marnock

The people of Scotland did not vote for them. I hope the Government will listen to what the people of Scotland are now saying, that it is time to change their policies. They can disguise it with whatever words they like—U-turns or anything else. The same goes, I am perfectly sure, for the people of the regions of the North, for Wales and the West Midlands and even the South-East and Yorkshire and Humberside. The Government can afford to do it. They have got to do it, because if they destroy the faith of the people of this country in democracy then they will be doing inestimable damage to the future of this country.

So I am very grateful indeed to all those noble Lords who have made this an interesting and fascinating debate. It is clear that practically everyone who has spoken has put forward suggestions in relation to youth unemployment, in relation to the regions, that mean that the Government will have to make changes. Let them have the courage to face that fact and make the changes.

10.33 p.m.

The Earl of Gowrie

My Lords, it is a pleasure to start with the easy bit of the evening, which is to congratulate the right reverend Prelate the Bishop of Liverpool on his maiden speech. I had said that I was looking forward to it and it would be a misstatement to say that any of us were disappointed; we were thrilled by the brevity, the succinctness, the expertise, the compassion and concern which he showed. I was particularly grateful for the tribute paid by the right reverend Prelate to the Government's special programmes, and particularly to the special programmes staff of the MSC. I should like to reciprocate by expressing our warm appreciation of all that the right reverend Prelate has done in his capacity as chairman of the Merseyside Special Programmes Board. He and the chairmen and members of all those boards are doing a splendid job in very difficult circumstances. I can best illustrate that by saying that at the end of January special employment measures as a whole were keeping 331,000 people off the registers, compared with 229,000 the year before.

I shall have to go at a great lick, and I apologise to any noble Lords if they get somewhat short-changed at the end of what I think has been a particularly fascinating debate. My knowledge of economics, which received, I think, a reasonably complimentary gamma from the noble Lord, Lord Kaldor, and something from the end of the Greek alphabet that I hardly know how to describe, from the noble Lord, Lord Ross, really has been formed over the last 10 years by assiduous attendance at all economic debates in your Lordships' House. I can honestly say that there has not been one where I have not learned something new. In a more serious personal vein, it is of course true that the Government are attending very carefully to any suggestions being made to them to ease what I described in my opening speech as an acute manpower crisis in this economy.

I have to say, however, that while I listened to noble Lords of the official Opposition, the old guard as it were, I kept thinking, putting myself perhaps vain-gloriously in the role of Hamlet, "Alas, poor Healey, and alas, poor Roy Jenkins". It is the most assiduously cultivated myth, first, that monetarism is principally responsible for unemployment in this country, and, secondly, that it was introduced by this Government, and notably by my right honourable friend the Prime Minister and my right honourable friend the Secretary of State for Industry. In fact the first Government really to apply the quantity theory of money in terms of macro-economic direction were the previous Government, and they also introduced the cash limit system. They did this under the aegis of the IMF, though it started to come in shortly before that. I am grateful to the noble Lord, Lord Kaldor, for pointing out where in his view they originally went astray.

I like to think of monetarism as nothing more revolutionary than the theory that, particularly in periods of low demand in the world, it is difficult for Governments any more, as Mr. Callaghan put it, to spend their way out of recession. But of course they have to spend money during recessions and they try to ease the pain as best they can. I mentioned heresy. Our much respected and erudite Table reminded me that it was Mr. Healey, in the noble Lord, Lord Kaldor's interpretation, who fell victim to the Churchill disease, because Churchill said when he met General de Gaulle, Quand je me trouve en face de la vieille dame de Threadneedle Street je me trouve tout à fait impotent". Maybe the same affliction came over the late Chancellor.

The noble Lord, Lord Kaldor—and I refer to him first because I think it gives some frame to the debate—did say something with which I totally agreed. Indeed, I often in a heretical and perhaps treacherous way tend to side with him by arguing his case with his former pupil my right honourable friend the Secretary of State for Energy. We have quite a lot of fun over that and indeed a lot of enlightenment. The point where I could not agree with him was when he asked how Britain could isolate herself from the OPEC effects simply because she had North Sea oil. That is peanuts, if I may put it vulgarly, in comparison with our other trading activities and our position in world trade. Of course we are affected by the recycling problem, as I am sure he would really agree.

I was glad that he was one of the few speakers who mentioned the 1930s to speak with some affection and indeed pay some compliments to that decade. It is one of the rather damaging myths in our economy that that was an unsuccessful decade in economic terms, because the appalling slump and the social deprivation engendered in the late 'twenties and early 'thirties were followed by a remarkable recovery, and one of the most persuasive parts of the noble Lord's thesis has always been that British industry reformed very well under some import protection during that decade.

Lord Davies of Leek

My Lords, of course we are all aware that it was followed by a remarkable recovery, but, as in all economic systems that work on these economic principles, the only way you get full employment is by either preparing for war or rearmament, or by having a war.

The Earl of Gowrie

My Lords, I disagree with the noble Lord because the rearmament of this country did not take place—hence the troubles within the Conservative Party at the time and the isolation of Winston Churchill—until a much later time. I am talking about the period up to 1938 and before the rearmament took place.

I always thought that one of the more cogent aspects of the noble Lord, Lord Kaldor's, arguments was that one could re-group with some protection. The difficulty now is that our position in the world has changed very much and the successful parts of our economy could easily be retaliated against—I am thinking not only of manufactured goods, but of export financial services, overseas investment and the like—if we took those kinds of action. I am not doctrinaire on this subject and I shall, of course, continue to look at it.

The noble Lord, Lord Ross of Marnock, quoted quite a lot of poetry at me. I think that my only poetic contribution is to say that perhaps we could adapt a quotation to say that "the evil that Governments do lives after them; the good is oft interred with their bones". I think that our charge against the previous Government was that they did have a good policy on inflation, they did bring down inflation, they did, as a result, see unemployment rise very heavily, but unemployment was starting to fall when they panicked, reflated hard, and stirred up a lot of problems for themselves—and indeed for us—and that U-turn, as it were, did not even win them the general election. It is that kind of example that we are trying not to follow.

The noble Baroness, Lady Seear, gave me a great deal of pleasure by mentioning something that I had meant to speak of in my original speech, but which I omitted to mention. I am referring to the problem for young people of there being now too narrow a differential between young persons' pay and adult pay and, in fact, that the age at which a young person ceases to become young has been going down steadily and that has been damaging to young people in employment terms. It is fundamentally a matter for collective bargaining, but we are anxious about it, keeping an eye on it and trying to persuade unions and employees wherever we can.

I am glad that the noble Baroness reiterated the need not to price young people out of jobs at the start of their working life. I think that this problem should be much more widely recognised. Between benefit at, say, around £15.50, the Youth Opportunities Programme at £23.50 and the rate for the job, there is quite a gap which a lot of young people could fill. Obviously we and the Manpower Services Commission—as the right reverend Prelate will be aware—have to be very sensitive to the issues of substitution and to union feeling, at a time of recession and high unemployment, that young people might be "drafted", as it were into the jobs which they might reasonably hold. I think that the MSC performs a very difficult task in keeping that balance going and, of course, we monitor the situation most carefully ourselves.

One of the rather gloomy things about modern economic management is that so many of our arguments really are about one issue, which is the problem of funding Government debt—not usually an issue to get everybody on their feet and shouting, or even taking to the barricades. It is, I think, the key and central issue of our time. Of course the Government could initiate expenditures and spending programmes—and to some degree they have—which could improve the unemployment situation a great deal. A number of noble Lords—too many perhaps to mention individually, so I hope that they will forgive me—have asked the question: when will the Government grow up and start to try to distinguish between capital expenditure and revenue expenditure? They say: "Let us have some good, solid capital investment for the future which will get some jobs and get some training into this economy and let us, if we must squeeze, squeeze on revenue".

Of course I feel very sympathetic towards that view, but the problem is that all Government expenditure has to be funded and Governments have to go onto the money markets to get their money, regardless of whether they are getting it for sensible long-term purposes or for short-term purposes. It is that tendency of Government expenditure to rise and to drive Governments onto the money markets which, of course, squeezes resources, keeps interest rates high and crowds out money for industry. That is why—and, again, I am talking rather personally here—I am convinced that Governments of both colours will increasingly have to look at different methods of funding their debt, and this may be the key issue before us. I hope that we will return to this; for, this being a slightly less contentious House, it is often a good way to put pressure on Governments to put pressure on their Ministers to raise matters here. So I hope that we might return to that another time.

Mention was made about the fact—in particular by my noble friend Lord Watkinson, and the noble Lord, Lord Ross of Marnock, ended his remarks with it—that we must start thinking of trying to take some people off the labour market at the youth end and also towards the end of the working life. Of course, I agree with that. It is an extremely expensive thing to do. We do it and we should like to do more. Again, it goes back to the question of funding and interest rates. However, I am sure that this is the way to proceed.

I am very glad to be able to say that I do not think that we think in class terms in this country nearly as much as we used to, but I do not think it is contentious to say that middle-class and professional folk are not used to seeing their children go on the labour market at the age of 16. This is really a direction in which perhaps all of us are moving, or should be moving. But, of course, there are transitional problems and expenses, as we know in the large funding that we give to the MSC.

I take the criticism of the noble Lord, Lord Ross of Marnock, that I have not dwelt as much as I might have done on purely regional aspects; from where I sit in the Department of Employment obviously there are different effects, but, as my opening remarks tried to make clear, this is now really a national and international phenomenon; and although there are obvious differences, in fact, some of the things that we might have expected to happen have not happened. For instance, as my noble friend Lord Polwarth reminded us, Scotland has not fared—due no doubt to off-sea technology and oil-related industries—as badly in this recession as she traditionally fares, and the West Midlands, which normally is relatively immune from recession, as the noble Baroness, Lady Fisher of Rednal, reminded us, has really fared worst of all.

However, the point that I wanted to make in my opening remarks is that now that unemployment is so pervasive, it is not so much a matter of getting the regional policy right as getting the central economic policy right, and that will then allow us to reform somewhat in the regions. We are, of course, particularly worried about Liverpool, which has now such an endemic and chronic record of high unemployment. I shall not weary the House by reading out the enormous amount of money that it receives and has received from public funds, or the very high status in terms of aid which it still, of course, retains. I would rather say that we are open to almost any ideas about Merseyside. We hope for action in the enterprise zone and so forth, but if noble Lords connected with that region care to meet me or my colleagues on any inner-city partnerships, or informally, we should be delighted to try to oblige them.

The noble Lord, Lord Davies of Leek, and my noble friend Lord Thorneycroft added to my schizophrenia by saying that the employment side of me should speak sternly to the energy side of me. I am glad to be able to report that, ever anxious to obey the dictates of the House, I have given myself this lecture and the Government have accepted the NEDO report that some energy prices are higher to industrial users than they are to our competitors, who may not always play the rules. This applies particularly to large users, such as paper and board manufacturers and the steel industry. My right honourable friend will be considering this urgently. I cannot say more than that at the moment.

The noble Baroness, Lady Fisher of Rednal, apologised for not being here, but I want to get this point on the record because it is important. She was one of the few people who, in their anxiety about unemployment levels, also mentioned shortages and vacancies, and she was talking about the shortage of engineers. That certainly exists. One of our problems is that we have an immense demand for maths and physics teachers and an immense surplus of supply of non-maths and non-physics teachers, and we are in negotiation with the unions, and so forth, to try to see how we can correct that balance. She also asked a question about the Employment and Training Bill, which is largely an enabling Bill. My right honourable friend the Secretary of State is much exercised about the state of training in this country and has made a number of speeches about it, and when we have more time I am happy to debate how our training policy might develop, because it is a subject of interest to many people in this House.

I have some specific questions to answer from my noble friend Lord Balfour of Inchrye, who expressed general support for the direction that the Government are taking on inflation, but echoed a number of people in wondering whether the price was not very high. I would remind my noble friend that the price is not simply as a consequence of the fight against inflation. The extra oil price rises and the world recession have taken quite a toll as well, but I never doubt that counter-inflation policy is an unpleasant one. It is always a race as to which is more unpopular—inflating your currency or trying to get all the fat off again.

It is true that some firms may not arise again, but in any battle there are liable to be corpses. Nevertheless, I think that the portrait given to us by the noble Lord, Lord Kaldor, and the noble Lord, Lord Ross of Marnock, from somewhat different positions in point of analysis, is not quite so gloomy as they say. We feel that those who are surviving this fearsome squeeze are going to be in much better competitive shape than British industry has been for a long time. I take my noble friend's point that now may be the time to ease the pressure a little, if we are able to do so.

When inflation is overcome interest rates will of course be lower. The noble Lord, Lord Jacques, put to me a question about the relationship of interest rates to inflation. Obviously you store up enormous economic problems for yourself if you lower interest rates so that there is no real rate of return, and then all the money in an economy will rush into areas which are not productive because they will be looking for investments that beat inflation, rather than those which put capital into industry. Again the problem of getting industry new capital, and capital outside the banking system and capital outside these problems of Government funding, will be a central preoccupation of Ministers in the coming months.

I am not going to forecast levels of unemployment. We have usually been wrong about these. So far we have erred on the side of optimism. It was worse than we expected it to be. That of course is a stern corrective and the Government have, without any talk or anxiety about U-turns, changed tack and responded to the rise in unemployment. Certainly we have had to stretch the medium-term financial plan to accommodate it. My noble friend Lord Balfour asked me a somewhat technical question about GATT. I have the answer here, but if he will forgive me I should prefer to write it to him, as the hour is rather late.

As your Lordships know, and as I said at the beginning, I have some sympathies towards protectionism, but we are trying to continue to compete in world markets and I am not convinced that most parts of British industry would enormously benefit from a further period of protection, than having been protected so far by central Government subsidy and funding, and protection of that kind. If they are going to compete in a competitive world, they are going to have to do so on the terms of everyone else.

Another anxiety that I want to register, though he is not here, is Lord Jacques' wishes for us to put every pressure we can to ease sterling. We are taking this anxiety on board and the pound has fallen some- what. I must repeat that if the pound comes down the RPI will go up, and it is no good people then trying to compensate themselves for the consequences of a policy which they have asked us to impose.

My noble friend Lord Caldecote mentioned the problems facing Germany. When the noble Lord, Lord Ross of Marnock, was talking about the potential for instability in this country, I thought I must remind him that, as the Minister concerned with overseas affairs in my department, I go to the continent a great deal, and my labour Minister colleagues and opposite numbers on the continental mainland are in a state of complete panic, something one does not see here on either side, yet they are twice as rich as we are. So I think our social and political stability is still a major factor in getting us through what is undeniably a difficult time.

My noble friend Lord Caldecote wondered whether we did not play too much by the Queensberry rules, and I have heard it said that where the French are concerned we play cricket and they play rugger. The difficulty is that we have such institutions as parliamentary ombudsmen and uncorruptible officials, and if my noble friend were an importer, say, of French goods—which he would be perfectly entitled to be—I do not know how he would feel if we instructed Customs to hold up all his goods at Dover.

I was grateful for the remark of the noble Viscount, Lord Rochdale, about the Manpower Services Commission. As he knows, I have had an opportunity to watch them at work in his region in Cumbria. I take the point of my noble friend Lord Mottistone about youth national service. The Youth Opportunities Programme is now a national service open to every young man or woman who is unemployed. We have had calls to make it compulsory and not to allow young people to enter the labour market until they are rather older; but that would, I believe, be an illiberal policy and anyway, as I said, even at the trough of a recession the vast majority of young people actually go into real work.

I will end with a few phrases which came out of the debate and which struck me very much. I agreed with so much of what the noble Lord, Lord Taylor of Gryfe, said that I will not embarrass him by reading it out. The noble Lord, Lord Taylor of Mansfield, said that behind the collective figure lies the individual, and of course we are acutely conscious of that. Even if the macro-economic policies, right or wrong—and we have been subject to criticism are fairly tough, I do not think the policies dealing with the effects of recession and unemployment on individuals could be called that at all. But we cannot do this alone, and for instance the labour unions measure of sincerity, care and concern about unemployment must be measured in the responses they make during the wage round.

My noble friend Lord Boardman said the Government in a short period were attempting to break out of an environment which had brought us lower and lower in this country in each cycle, an environment inimical to our national character. I entirely agree with him on that, and that is why I feel it would be fatal to change overall direction, though I acknowledge the need for courage and compassion, as he put it, to see us all through.

10.58 p.m.

Lord Peart

My Lords, I thank noble Lords for what I think has been one of the best debates we have had in this House—and indeed in another place—for a long time. It has been a good debate, with some great arguments being adduced. I will read carefully the Official Report of what was said, and I believe that it will become a memorable debate in which we shall all be glad we participated. I beg leave to withdraw the Motion.

Motion for Papers, by leave, withdrawn.